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05 January
2015

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The impetus for broader reform


Sabina Dewan

This piece was originally published by Politico Magazine.

As the TPP inches closer to a deal, it not only will affect trade among the 12 negotiating countries but could also provide the much-needed impetus to reform the WTO and an increasingly outdated multilateral trading system. The multilateral trading rules set in the 1980s and 90s did not have to deal with countries that manage their economies through a state-capitalist model in which the government directly or indirectly controls many of the economy’s productive assets, formal financial systems and activities. The WTO is, for example, ill-equipped to deal with subsidization that takes place through state-owned enterprises in countries like China, Malaysia and Vietnam.

Nor did the rules then have to grapple with the reality of a world deeply integrated through global value chains. Today, products are designed in one place, comprised of parts manufactured in different countries and assembled in yet another location. Trade in intermediate goods constitutes almost 60 percent of total trade in goods. This reality makes issues like intellectual property protection, rules of origin and labor regulations even more pertinent than they once were. The TPP provides an opportunity to address these new concerns, such as state-owned enterprises, intellectual property, rules of origin and a minimum standard for the adoption and enforcement of labor regulations. It also reflects a desire on the part of all negotiating nations to go further and faster toward economic integration than the WTO would allow.

Despite its inadequacies, the multilateral trading system is indispensable in ensuring a fair competitive playing field. It is an enforcer of existing rules, but the existing rules need reform. TPP can help. Should the United States and the 11 other negotiating countries reach a deal, the accord will set the stage for a 21st-century trade agreement that would provide both a template and the much-needed impetus to reform the multilateral trading regime.

About the Author

Sabina Dewan is executive director of the JustJobs Network.


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