Introduction: The Future of the Multilateral Trade System—What Role for the World Trade Organization?

Abstract

Global governance through multilateral institutions has fallen on hard times in the twenty-first century. Whereas intergovernmental multilateralism was the dominant form of international collective action in the second half of the twentieth century, today international cooperation through multilateral institutions is facing severe challenges. Over the past five years or so, contributors to Global Governance have grappled with these difficulties, particularly in relation to the problems confronting the World Bank, the International Monetary Fund (IMF), and the United Nations and its associated bodies. This special issue seeks to contribute to these ongoing debates through an examination of the World Trade Organization (WTO) and the future of the multilateral trade system. The articles in this issue appear at a particularly important time in the future of the governance of the global economy more generally. As we come to the end of the first decade of the twenty-first century, we live in a period of acute economic crisis--by common agreement, the worst since the Great Depression of the 1930s. The attention of global leaders is focused on providing the necessary fiscal stimuli to reboot the world's major economies and securing the necessary level of global institutional reform to both underwrite and regulate the global banking system. But the WTO is under duress. Its problems were identifiable prior to the eruption of the financial crisis, but they have been exacerbated by the current crisis as much as they are part of the current crisis--notwithstanding that, for once, no one thinks that trade is a contributory factor. The dramatic problems in the financial sector are accompanied by a dramatic decline in cross-border trade; indeed, the first such decline since 1982. This has affected all of the world's major economic powers including the wealthy countries of the Organisation for Economic Co-operation and Development (OECD) and the emerging economies, including Brazil, Russia, India, and China (BRIC). In 2008, global trade grew by 2 percent in volume, but the WTO expects it to fall by 9 percent in 2009--the biggest contraction in trade since World War II. (1) Whereas most members of the WTO appear to have kept the worst domestic protectionist pressures under control, there is growing evidence of countries adopting, or threatening to adopt, trade-restricting or trade-distorting measures to protect key national business and jobs. Since the beginning of the financial crisis, governments have enacted scores of trade-restricting measures, including tariff increases, new import licensing requirements and new agricultural export subsides. Antidumping cases are also on the increase and bailouts to car and automotive component manufacturers in many countries can also have a trade-distorting effect. (2) These activities have taken place across a range of countries including the United States, the members of the European Union (EU), China, Russia, India, Indonesia, and Argentina. The financial crisis also inhibits trade expansion through the negative effects of reduced liquidity on access to and sharp increases in the cost of trade credit for exporters. This problem is particularly acute for developing country exporters. The cost of trade credit has tripled in the six months between the November 2008 and April 2009 G-20 summits. (3) For some scholars and practitioners, the current financial crisis questions the utility of the WTO in addressing its elements. While recognizing the primacy of the financial crisis, the articles in this special issue resist the assertion of irrelevance. Rather, we would suggest that the financial crisis throws into sharp relief some of the issues that the WTO needs to address if it is to remain relevant in the twenty-first century. Specifically, are WTO rules sufficient to withstand the pressures for retaliation that will ensue if domestic protectionist policies are enacted? This is particularly important given the increasingly hidden or murky nature of much contemporary protectionism. …