Thursday, December 6, 2012

International supply chains and the irrelevance of the WTO

I had earlier blogged about Richard Baldwin's presentation at the Public Forum at WTO titled WTO 2.0. In an article explaining what international supply chains is all about and what impact it has for international trade rules as well as the WTO, he emphasizes:
"The world of trade politics and trade governance also changed. If a high-tech firm is to locate production stages in a developing nation, the nation’s government must ensure the necessary free movement of goods, services, information and the protection of tangible and intangible property rights. Old-fashioned protection, anti-FDI policies, or lax property rights almost guarantee that the offshored stages will go somewhere else. 
Developing nations that got the offshored factories became hyper-competitive and wiped out the exports of developing nations that clung to import-substitution industrialization. In the world of supply-chain industrialization, protectionism has become destructionism. 
Having learned this lesson, developing nations unilaterally lowered tariffs and eagerly signed up for deep disciplines in regional trade agreements and bilateral investment treaties. It happened regionally, rather than multilaterally, since most supply chains are regional, a tendency that the WTO’s decade-long preoccupation with 20th-century trade issues (tariffs and agriculture) exacerbated."

He has predicted that the WTO would lose its centrality in international trade rules if it does not address this fundamental shift in trade pattern from old mercantilist exports and imports to supply chain industrialization. How severe is the impact of these changes going to be on international law and internternational trade rules? Will the WTO Agreements become irrelevant? Will bilaterals define the parameters and contours of supply chain trade? Will the role of the dispute settlement mechanism of the WTO move into oblivion in the coming years? Or will the WTO adapt to the changed reality and negotiate on new trade rules keeping in mind the reality of international supply chains? Will Doha be resurrected due to the inevitability of trade? What changes will the rules have to take care of the new trade world?

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