If reducing barriers to trade is such a good thing, why are the members of the WTO having such a hard time doing it?
Aaditya Mattoo and Arvind Subramanian explain, in "Why Prospects for Trade Talks are Not Bright" (March 2005 issue of the IMF magazine, Finance & Development).
In the past, "multilateral trade liberalization has been driven by corporate interests..." However, these interests have not been energized for the current round. Part of the reason is that they have weak incentives to pursue market openings in other countries.
- Many developing countries have been reducing trade barriers unilaterally under the influence of the "Washington Consensus", and of World Bank and IMF prodding. Barriers have also been dropping because of regional and bilateral trade agreements. With trade barriers in developing countries dropping as for these reasons, corporations in developed countries have less incentive to pursue agreements through the WTO.
- Barriers have also been dropping because of regional and bilateral trade agreements.
- Developed countries have a lot to gain by reductions in barriers to trade in services. However, countries are often reluctant to make the "deep [domestic - Ben] legislative and regulatory changes needed to open services markets" "More importantly, scope for reciprocity within service sectors has been drastically curtailed by industrial countries’ unwillingness to consider greater openness where developing countries have a comparative advantage—notably, in the supply of services through the movement of persons."
- Corporate interests find the multilateral approach slow compared to alternative approaches ("Nongovernmental routes to securing market access and standard setting - as well as the call of regional intergovernmental sirens...")
- Many corporate goals with respect to intellectual property were accomplished in the Uruguay Round, or are being obtained through regional or bilateral agreements.
On the other hand, were the corporate interests fully engaged, they would have little to offer in exchange for concessions by developing countries. The developing countries would like "market access in four areas: agriculture, textiles, labor mobility, and cross-border supply of services.", but
- Vested developed country agriculture and textile interests are politically powerful, and won't give up their trade privileges easily.
- "In negotiations on services, labor mobility has always been a difficult issue... Notwithstanding the large mutual gains that would be derived from allowing greater labor mobility, immigration policy has yielded only grudging concessions so far. And with traditional political difficulties compounded by a new fear of terrorism, greater openness seems elusive."
- "Industrial countries account for over three-fourths of all cross-border trade in services. But Brazil, Costa Rica, India, and Israel are among the 20 developing countries whose exports of business services have grown by more than 15 percent annually in the last decade. This growth and the outsourcing of service jobs have provoked deep concerns in many industrial countries—obscuring their own comparative advantage in services. A fuller reckoning of the forgone benefits by the United States and other countries might still occur in the future, leading to a more enlightened strategy. But for the moment, industrial countries, far from seeking greater openness abroad, seem reluctant to lock in current openness of cross-border trade."
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