The Organization of Petroleum Exporting Countries, the World Trade Organization, and Regional Trade Agreements

Abstract

The Organization of Petroleum Exporting Countries (OPEC) and the World Trade Organization (WTO) are two of the most visible international economic institutions. But, they are often associated with two diametrically opposed players in the global economy: the WTO with the sometimes savage rules of the market and OPEC with the often demonized intergovernmental manipulation of prices. Many believe that OPEC and the WTO do not have anything in common, arguing that OPEC’s domain of oil1 resource management does not have anything to do with the WTO. Indeed, every time oil succeeds in occupying the news headlines, often because of a price hike or collapse and consequent concerted governmental intervention in the name of correcting market failures, while OPEC comes in as the embodiment of that concerted governmental intervention against market forces, the WTO is nowhere to be seen in its professed role as the guardian of those same forces. This raises the important question of whether or not the WTO has any role in the petroleum sector. Petroleum is the largest primary commodity of international trade in terms of both volume and value.2 There is also the obvious national security element involved in it for both producing/exporting and consuming/importing countries. The political stability and economic survival of both groups of countries—and hence of the entire international community—depends to a large extent on the availability and affordability of oil in the international marketplace. It is widely believed that high oil prices were responsible for several global economic recessions