Between Theories of Trade and Development: The Future of the World Trading System

Abstract

This paper first traces the evolving legal status of developing countries in the multilateral trading system in the post-war years, beginning with the emergence of Special and Differential Treatment on the import side (protection of infant industries) in the 1950’s, then on the export side in the 1960’s (non-reciprocal preferences granted by developed countries on developing country exports); then the adoption of the Single Undertaking during the Uruguay Round in the 1980’s and early 1990’s; then the major fault lines that have emerged between developed and many developing countries that have largely paralyzed the current Doha Round. The paper then traces a parallel evolution in thinking in development economics in the post-war period, beginning with big push, state-led, import substitution policies in the first three post-war decades; then, in the face of disappointing results, largely superceded by the sharply opposing policy prescriptions of the Washington Consensus, with its commitment to the ubiquitous virtues of markets in the 1980’s and 1990’s; then in turn, in the light of disappointing results, largely superceded by the so-called New Development Economics which rejects universal or broadly generalizable theories of economic development and accepts that appropriate policies prescriptions will be highly country – specific, recognizing the particularities of each country’s endowments, political structure, culture and history. These shifts in thinking map closely onto the evolving role of developing countries in the multilateral trading system. The paper goes on to propose the abandonment of the single undertaking, “one size fits all approach” adopted in the Uruguay Round, and argues for a larger role for plurilateral agreements within the multilateral systems (‘coalitions of the willing’), in part as a counterweight to the dramatic recent proliferation of Preferential Trading Agreements.