Dr. No (or, the future of multilateral trade)

As I mentioned a couple days ago (and gave updates on all last week), the "make or break" talks to save the Doha Round collapsed this week. There is a lot of doom and gloom about the WTO's future here and here and here and here and here and here... and, uh, about 3,000 other places. Without being overly repetitive, I have a few thoughts to add.

First, this is not doomsaying, this really is a big deal: in the entire history of post-war multilateral trade negotiations, we've never had a negotiating round collapse. Perhaps more notably, this was the first time that a round was negotiated under the new organizational structure of the WTO, not the more fluid and less-institutionalized structure of the GATT. Doha's collapse will fuel criticisms that the WTO's structure makes it very hard to do deals.

Second, as much as I respect China and India for playing hardball in trade negotiations, this collapse strikes me as a short-sighted and quite likely Pyrrhic victory for both of them. At the end of the day, both of these countries have relatively open economies and need the certainty of market access that the WTO and its dispute settlement procedure provide. Furthermore, despite the obvious legalistic and economic undertones, trade negotiations are still fundamentally diplomatic negotiations. I don't think this sort of behavior positions either country well in future trade talks, be they regional or otherwise, and I suspect that the perception of recalcitrance will not disappear quickly. Side note: I do still think that India's trade minister Kamal Nath has the coolest nickname of any trade diplomat ever: Dr. No, because, well, he liked to say 'no' a lot.

Third, I am rather pessimistic about the WTO's future. Failure to perform is one thing, but failure to perform when there is a perceived viable alternative in the shape of regional trade agreements (RTAs) is quite another. I have said before that RTAs (or FTAs or PTAs) are a dangerous substitute for multilateral free trade, a bit like taking infomercial diet pills instead of going to the gym every day. I understand the political economy arguments for RTAs very well, but I do not think they pass muster. This is a subject I hope to explore this weekend.

To continue with the WTO, however, I agree with Clive Crook that the most likely outcome of Doha's failure is a gradual marginalization of multilateral trade over the next 10 - 15 years. As I'm arguing in the dissertation that I hope to have done by next week, the WTO's institutional legitimacy in the next few years now hinges on litigation through Dispute Settlement Understanding (DSU). If, and this is a big if, the DSU continues to deliver quality and sophisticated resolution for trade disputes, it provides a good reason for the WTO's continued relevance and might buy negotiators enough time to reconvene in a few years and find a new way forward.

This is unlikely to be enough, however. And speaking of Dr. No, one of Mr. Bond's most famous lines from that movie probably applies to the WTO in its current state: "That's a Smith and Wesson. And you've had your six."