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, the World Bank and the WTO. The impacts of globalization are being questioned while disruptive technologies continue to change the economic landscape. 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 representing a landmark achievement. While the organization plays a major role in enhancing the Future of the transparency of trade policies and enforcing the rules of the game that have been agreed by Members, it has not been successful at negotiating new rules. The private sector is frustrated with the WTO, as are civil society groups seeking to address Global Trade Order issues of interest to them. There is a general perception that WTO disciplines and modus operandi are outdated and have not kept pace with globalization. Governments have increasingly Edited by turned to preferential trade agreements (PTAs) that are better attuned to the changing dynamics of international trade and Carlos A. Primo Braga and Bernard Hoekman investment flows. The papers in this volume focus on some of the major critical issues that confront the WTO Membership. They review developments in trade policy and technology and regulation. They make clear that PTAs are at best a partial solution to the global governance gap. Regulation of the “Internet of things,” e-commerce, cross- border services, digital trade and data flows will become ever more important. Global rules of the game are required. The same is true for old fashioned protectionism. The future of the WTO is an important topic for the health and expansion of global trade in the 21st century. ISBN: 978-92-9084-411-2 doi:10.2870/207184 Catalogue number: QM-01-16-444-EN-C 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 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 Future of the Global Trade Order ISBN: 978-92-9084-410-5 doi:10.2870/560499 Catalogue number: QM-01-16-444-EN-N © European University Institute, 2016 Editorial matter and selection © editors, 2016 Chapters © authors individually, 2016 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 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). Contents About the Contributors vi Foreword xi 1 Future of the Global Trade Order 1 Carlos A. Primo Braga and Bernard Hoekman 2 A New Architecture for the WTO? 15 Miguel Rodríguez Mendoza 3 Why Engage in Trade Negotiations and the Relevance of the WTO 31 Alejandro Jara 4 The Future of the WTO Dispute Settlement System: Consolidating a Success Story 45 Giorgio Sacerdoti 5 “Behind-the-Border” Policies: Regulatory Cooperation and Trade Agreements 69 Bernard Hoekman 6 The WTO’s Next Work Program – as if the Crisis Really Mattered 97 Simon J. Evenett and Johannes Fritz 7 Regional Trade Agreements and the WTO 113 Clemens Boonekamp 8 What Is the “Networked Economy”? 133 Nick Ashton-Hart 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 seven of those. He is currently an Associate Fellow of the Geneva Centre for Security Policy. Prior to founding IDEA, 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 an Associate 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, and Co-Director of the CEPR Programme in International Trade and Regional Economics. Evenett taught previously at Oxford and Rutgers University, and served twice as a World Bank official. He was a non-resident Senior Fellow of the Brookings Institution in Washington. In addition he served as a Member of the High Level Group on Globalisation established by the French Trade Minister Christine LaGarde, Member of the Warwick Commission on the Future of the Multilateral Trading System After Doha, and was Member of the the Zedillo Committee on the Global Trade and Financial Architecture. In addition to his research into the determinants of international commercial flows, he is particularly interested in the relationships between international trade policy, national competition law and policy, and economic development. He obtained his Ph.D. in Economics from Yale University. About the Contributors vii Johannes Fritz is a Ph.D. candidate and a member of the Global Trade Alert team at the Swiss Institute for International Economics and Applied Economic Research, University of St. Gallen, Switzerland. He studied International Affairs in St.Gallen, Geneva and Barcelona, and is currently enrolled in the Ph.D. Program in Economics and Finance at St.Gallen. 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. He worked as an economist in the GATT Secretariat during the Uruguay Round of negotiations. His research focuses on trade and development, international trade agreements, trade in services and international regulatory cooperation. He is a graduate of the Erasmus University Rotterdam, holds a Ph.D. in Economics from the University of Michigan and is a Senior Associate of the Economic Research Forum for the Arab Countries, Iran and Turkey. Alejandro Jara, a Chilean national, is Senior Counsel with King & Spalding in Geneva. He joined the Chilean Foreign Service (1976) specializing in trade policy, and served in the Chilean Delegation to the GATT in Geneva (1979- 1984). From 1993 to 2000 he served as Director for Bilateral and Multilateral Economic Affairs, and Director General for International Economic Relations; as well as Senior Official to APEC and negotiated several Free Traded Agreements (Mexico, Canada, Colombia, Central America). While Ambassador of Chile to the WTO (2000-2005) he chaired the Services Negotiations of the DDA.