Tuesday, May 31, 2011

21st century regionalism and the WTO

Richard Baldwin argues that:

  • today regionalism is qualitatively different to that of the 1990s;
  • the traditional building-stumbling-block approach and Vinerian economics on which it is premised are not up to the job of analysing this new regionalism; and
  • 21st century regionalism has quite different ramifications for the world trading system than 20th century regionalism did.

In a nutshell, 21st century regionalism is not primarily about preferential market access as was the case for 20th century regionalism; it is about disciplines that underpin the trade-investment-service nexus. This means that 21st century regionalism is driven by a different set of political economy forces; the basic bargain is “foreign factories for domestic reforms” – not “exchange of market access”. As 21st century regionalism is largely about regulation rather than tariffs, regulatory economics is needed rather than Vinerian tax economics. Finally, 21st century regionalism is a serious threat to the WTO’s centrality in global trade governance, but not for the reason suggested by the old building-stumbling-block thinking. 21st century regionalism is a threat to the WTO’s role as a rule writer, not as a tariff cutter.

Here is a link to Baldwin’s paper 21st Century Regionalism: Filling the gap between 21st century trade and 20th century trade rules