Multilateral cooperation in a world of preferential trade agreements?

Abstract

With the establishment of the World Trade Organization (WTO) in 1995, much of the original vision of the drafters of the 1948 International Trade Organization (ITO) Charter was realized, albeit some 50 years later. The ITO was supposed to complement the World Bank and the International Monetary Fund in the area of trade policy, but as a result of a decision by the U.S. government not to submit the treaty for approval by Congress, it never entered into force. In retrospect, the agreement to create the WTO may be a high-water mark for multilateral trade cooperation. Since its creation, WTO members have not been able to agree on further liberalizing access to markets for goods and services in the long-running Doha Development Agenda (DDA) negotiations. This reflects disagreements among the largest trading powers: the United States and the EU on one side and large emerging economies such as Brazil, China, and India on the other. Instead of using the WTO as the venue to cooperate on trade policy matters, the EU and the United States have increasingly turned toward preferential trade agreements (PTAs), arrangements in which liberalization is restricted to participating countries, raising questions about the future trajectory of the world trading system.