Principles for international trade

Pablo Furche, Ricardo A. Lagos – Defining Progressive Principles for International Trade

International trade is an activity mainly conducted by firms or persons led by the principle of maximising their utility function. Nevertheless, there is room for public policy; we can try to define principles that should apply to the rules or the policy-making related to international trade, andparticularly to trade negotiations. In trade negotiations, every country pursues its own interests. It cannot be otherwise because there are always different sensitivities, interests and constituencies to answer to. However, a ‘progressive approach’ or ‘progressive principles’ for trade negotiations have to be more sophisticated than just pure and simple individual profit maximisation. As a starting point,this would require a vision and a clear political direction to address imbalances effectively,

The WTO is Best
For a small economy, highly dependent on trade, such as Chile, it is very important to have clear rules in order to provide some degree of certainty to our exporters. They face a rough world and fierce competition. This is true for Chile, and also for most small or developingcountries. While Chile has managed to negotiate bilateral trade agreements with most of its major trade partners, this is not the case for most developing countries. Whether because they have not conducted domestic reforms to enable them to open up their markets, or simply because other partners have been busy negotiating with someone else, the important thing is that up to now, the GATT/WTO has playedthe role of setting up the trade rules, and settling the disputes. For some people, the role of dispute settlement is enough to justify the existence of the WTO. For others, the WTO has an additional value which is to level the playing field, and allow for more balanced results because small countries create alliances that increase their leverage, with the G20 as a remarkable example of this,becoming one of the key players in the agricultural negotiations by playing a constructive role and shifting the decision-making process from the Quad to the FIPs (Five Interested Parties: Australia, Brazil, EU, India, USA). Whether WTO should focus ‘simply’ on ensuring that trade rules are respected, or if it should also pursue trade liberalisation, needs to be discussed. However, in both cases, theWTO has to have legitimacy and credibility. And so far, it has both.

Defining Progressive Principles for International Trade
Pablo Furche Ricardo A. Lagos
and hence, to achieve a better and fairer environment to negotiate trade rules and to compete. The following are some ideas on principles that should be taken into account if a progressive approach to trade negotiations is to be followed.86

progressive politics

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The WTO is one of the few institutions which show that multilateralism can still work. This is the reason why it should be supported and protected.

Defend your interests, but don’t overdo it
There are currently 148 WTO Members with huge differences among them in size, level of development, and specific interests. Hence, achieving consensus is a taskthat is becoming more difficult in each successive Round of negotiations. What should be done? Acknowledge this fact, be realistic and try to not push the line too far.

applied tariffs – on industrial markets in countries such as Brazil and India. Needless to say, Brazil and India do not have safety nets to absorb the negative impacts of trade liberalisation, as could be the case with, forexample, Japan or Norway. The differences on ‘social endowment’ should be considered when ‘efforts’ towards liberalisation are discussed in trade negotiations. Similarly, some developing countries apparently believe that as a result of this Round, developed countries will have to pay an ‘historic debt’ and therefore they will get export subsidies elimination, cuts in applied levels of domestic...