The WTO – Myths and Realities of the Role of the Multilateral Trading System

Abstract The WTO plays a central role in multilateral trade governance – both reflecting and reinforcing underlying structural trends towards increasing global economic integration. Launched as a limited tariff agreement among 23 members—the 1947 GATT—it has grown into a multi-issue economic agreement among 164 members—the modern WTO. Embedding commitments on goods, services, and intellectual property trade in a unified and mutually reinforcing framework of rules, the WTO provides the indispensable foundation of stability and security on which today's highly integrated and interdependent global economy has been constructed. But success in achieving today's global trading system is paradoxically the result of adopting flexible, pragmatic and variable-geometry approaches. The history of the GATT and WTO negotiations is largely a story of like-minded countries reaching multi-speed agreements – which have been continuously improved, expanded and upgraded - rather than seeking to design a grand and definitive 'one-size-fits all' solution. In particular, the system has sought to strike a creative balance between the principal of non-discrimination – as embodied in MFN and National Treatment - and the principle diffused reciprocity, resulting in a more wide-ranging, complex, but mutually beneficial 'grand bargain' than could ever have been achieved by simply matching tariff levels between countries. While the multilateral trading system is only one factor explaining the remarkable post-war expansion of global trade, it is an indispensable factor. Falling trade costs help increase trade, but so do many other factors. We discuss the role of the WTO, trade agreements, and other factors driving trade to clarify the role of the WTO and separate it from the many myths surrounding it, and suggest that the solution to many of the current challenges facing the WTO lie in more, not less, global trade co-operation - and in even more flexible and creative ways.