Future of the Global Trade Order
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2nd Edition Future of the Global Trade Order The world economy is going through major economic and geopolitical shifts, fostering tensions in the global economic governance structure centered on the IMF, World Bank and the WTO. The impacts of globalization are being questioned while disruptive technologies continue to change the economic landscape. Populist politicians advocating for greater sovereignty and policy autonomy are attracting increasing shares of the vote in many OECD countries. The election of Donald Trump on a protectionist platform and the UK referendum in favor of Brexit may signal that the peak of globalization has been reached. This collection of papers focuses on one of the pillars of global governance: the multilateral trade system, anchored by the WTO. Membership of the WTO is now close to universal, with the accession of China in 2001 Future of the representing a landmark achievement. While the organization plays a major role in enhancing the transparency of trade policies and enforcing the rules of the game that have been agreed by members, it has not been Global Trade Order successful at negotiating new rules. The private sector is frustrated with the WTO, as are civil society groups seeking to address issues of interest to them. There is a general perception that WTO disciplines and modus Edited by operandi are outdated and have not kept pace with globalization. Carlos A. Primo Braga and Bernard Hoekman The chapters in this volume focus on key critical issues that confront the WTO membership. They review developments in trade policy and technology and regulation. They make clear there is an important global governance gap. The “internet of things”, e-commerce, cross-border services, digital trade and data flows all call for global rules of the road. They also make clear that pressures for old-fashioned protectionism are rising in some parts of the world. The future of the WTO is under serious threat. Safeguarding and bolstering the rules-based trading system is critical for the health and expansion of global trade in the 21st century. ISBN: 978-92-9084-574-4 doi:10.2870/169287 Catalogue number: QM-04-17-945-EN-N 2nd Edition European University Institute (EUI) Badia Fiesolana, Via dei Roccettini 9, I-50014 San Domenico di Fiesole (FI), Italy www.eui.eu Future of the Global Trade Order 2nd Edition European University Institute (EUI) Badia Fiesolana Via dei Roccettini 9 I-50014 San Domenico di Fiesole (FI) Italy www.eui.eu IMD Ch. de Bellerive 23 P.O. Box 915 CH-1001 Lausanne Switzerland www.imd.org Fundação Dom Cabral (FDC) Av. Princesa Diana, 760 Alphaville, Lagoa dos Ingleses 34.018-006 - Nova Lima/MG Brazil www.fdc.org.br Future of the Global Trade Order (2nd Edition) ISBN: 978-92-9084-574-4 doi:10.2870/169287 Catalogue number: QM-04-17-945-EN-N © European University Institute, 2017 Editorial matter and selection © editors, 2017 Chapters © authors individually, 2017 This volume may be downloaded for personal use only. Any additional reproduction, whether in hard copy or electronically, requires the consent of the authors and publisher. If cited or quoted, reference should be made to the full name of the author(s), the editors, the title, the year and the publisher. The information and views set out in this publication are those of the authors and do not necessarily reflect the official opinion of the European University Institute. Responsibility for the information and views set out in this publication lies entirely with the authors. Future of the Global Trade Order 2nd Edition Edited by Carlos A. Primo Braga and Bernard Hoekman European University Institute (EUI) The European University Institute (EUI), located in Florence, Italy, was founded in 1972 by the European Community Member States to provide advanced training to Ph.D. and LL.M. researchers and to promote research in the social sciences at the highest levels. An international organisation with a European focus, doctoral and post-doctoral scholars from all over the world pursue academic research in its four departments of Law, History, Economics and Social and Political Science and at the Max Weber Programme for Post- doctoral Studies. The Institute is also home to the Robert Schuman Centre for Advanced Studies (RSCAS), which is devoted to high-quality research on the dynamics of European integration, broadly defined, and Europe’s global role. The RSCAS hosts dozens of international research projects focusing mainly on the areas of Integration, Governance and Democracy; Regulating Markets and Governing Money; and 21st Century World Politics and Europe. The EUI is also home to the Historical Archives of the European Union, the official repository for the EU institutions. IMD IMD is a top-ranked business school, recognized as the expert in developing global leaders through high-impact executive education. The school is 100% focused on real-world executive development; offers Swiss excellence with a global perspective; and has a flexible, customized and effective approach. More than 8,000 executives from 98 countries come to IMD each year. IMD was established in January 1990, as the successor of two previously independent business schools: IMI, founded in Geneva by Alcan in 1946, and IMEDE, founded in Lausanne in 1957 by Nestlé. The institution provides executive education for large- and medium-size international businesses, and for individuals. It also offers a Global Leader Index where executives can see where they stand as leaders. Based in Lausanne, Switzerland with an Executive Learning Center in Singapore, IMD is ranked FIRST in open programs worldwide (Financial Times 2012, 2013, 2014 & 2015). Fundação Dom Cabral (FDC) Fundação Dom Cabral is a world-class international Brazilian business school that is present throughout Brazil through its four campuses and affiliates. FDC has set itself the mission to contribute to the sustainable development of society by educating, developing and building the skills of executives, entrepreneurs and public managers. Its excellence in Executive Education has been internationally recognized. The Financial Times executive education ranking has ranked FDC as the best business school in Latin America for the past 12 years. FDC melds academic knowledge to the business experience it has garnered in its 41-year existence. Through its constant dialogue with organizations, FDC remains true to its philosophy of working with organizations while respecting their identity, the peculiarity of their segments and the dynamics of their markets. Contents About the Contributors vi Foreword x 1 Future of the Global Trade Order 13 Carlos A. Primo Braga and Bernard Hoekman 2 The Threat of Economic Disintegration 29 Carlos A. Primo Braga 3 Back to the Future: US Trade Policy under the Trump Administration 49 Craig VanGrasstek 4 A New Architecture for the WTO? 81 Miguel Rodríguez Mendoza 5 Why Engage in Trade Negotiations and the Relevance of the WTO 101 Alejandro Jara 6 The Future of the WTO Dispute Settlement System: Confronting Challenges to Consolidate a Success Story 117 Giorgio Sacerdoti 7 “Behind-the-Border” Policies: Regulatory Cooperation and Trade Agreements 147 Bernard Hoekman 8 The WTO’s Next Work Program – As if the Global Economic Crisis Really Mattered 175 Simon J. Evenett and Johannes Fritz 9 Regional Trade Agreements and the WTO 195 Clemens Boonekamp 10 Addressing the Networked Economy in Trade Policy 215 Nick Ashton-Hart 11 International Trade and Competition Policy: Working Together for the Global Economy 247 Eduardo Pérez Motta and Ana Cristina Murra About the Contributors Nick Ashton-Hart has just concluded several years as the senior Geneva- based full-time representative of the technology sector to the UN, its member- states, and the international organisations in Geneva. He has participated in multilateral policy development since 1992, and international trade policy as it relates to the Internet and traditional industrial transformation for the last nine of those. He is currently an Associate Fellow of the Geneva Centre for Security Policy and a consultant to Fortune 50 companies and UN member-states in trade and international telecommunications policy. He was Geneva Representative of the Computer & Communications Industry Association (CCIA), Director at-Large and Senior Director for Participation and Engagement with the Internet Corporation for Assigned Names and Numbers (ICANN) and Executive Director of the International Music Managers Forum (IMMF). Clemens Boonekamp is a Partner at the IDEAS Centre in Geneva. Previously he was Director of the Trade Policies Review Division and then of the Agriculture and Commodities Division at the WTO. Before that he had been a Senior Economist at the IMF and an Assistant Professor at the University at the University of British Columbia. He holds a Ph.D in Economics from Brown University. Simon J. Evenett is Professor of International Trade and Economic Development at the University of St. Gallen, Switzerland. He is a Research Fellow of the International Trade and Regional Economics Programme of the Centre for Economic Policy Reseach and coordinates the independent trade policy monitoring service, the Global Trade Alert. Johannes Fritz is Max Schmidheiny Foundation Research Fellow at the University of St.Gallen’s Swiss Institute for International Economics. During his fellowship, Johannes Fritz manages and develops the Global Trade Alert initiative. He is currently a visiting scholar at the University of California, Berkeley. His research focuses on international commercial policy and computational text analysis. Johannes Fritz has taught history of economic thought at the University of Fribourg. He obtained his Ph.D. in Economics from the University of St.Gallen. About the Contributors vii Bernard Hoekman is Professor and Director of Global Economics in the Global Governance Programme of the Robert Schuman Centre for Advanced Studies, European University Institute, and a CEPR Research Fellow. Prior positions include Director of the International Trade Department (2008-2013) and Research Manager of the trade team in the Development Research Group (2000-2008), both at the World Bank.