Chapter 1 The WTO and The World Economy: A Welfare-Theoretic Perspective

Purpose − This chapter reconsiders the role of the WTO in the world economy, where regional free trade agreements have proliferated to threaten its basic rule of multilateral and non-discriminatory tariff reduction and the deepening of globalization has developed international concern about labor and environmental standards to challenge its conventional practice of tariff negotiation. Methodology/Approach − This chapter employs the general equilibrium approach of welfare economics in its analysis. Findings − It is shown that the WTO should reconfirm its target of expanding and securing the market access property rights of member countries and engage in the international coordination of tariffs and other trade policy instruments to achieve this target, while leaving other policy targets such as propagating labor and environmental standards to other appropriate international organizations. Practical implications − The steady move towards multilateral free trade has come to an end. This chapter offers a clear argument for economists and policy makers to regain confidence in the traditional role of the WTO/GATT.