Susan Schwab

Susan Schwab

I think that there are a variety of reasons why the Doha round failed, and some of them we could repeat if we’re not careful. Some of them were just characteristics of that particular framework that was negotiated and elements of it that need not be repeated. I think the key is to make sure that we don’t get ourselves trapped again in a behemoth negotiation that doesn’t reflect the realities of the day—reality one being that the world can’t afford to sit around waiting ten years for a negotiation that big and that massive. You can move smaller pieces of a negotiation. The notion that nothing is agreed until everyone has agreed upon it hung up the Doha round, and there are ways of constructing a negotiation that won’t get us hung up to that extent.

Second, the Doha round was launched when, in essence, there was a First World and a Third World, and it didn’t really differentiate between developed countries and developing countries. In this day and age, you can't really have a negotiation that doesn’t distinguish between the obligations that, for example, China or India or Brazil need to undertake relative to the obligations that the poorest developing countries should undertake. And so I think you need to have formulas that do a better job of calibrating levels of development and commitment.

Susan Schwab

I think one of the most appealing attributes of the WTO for me has been the extent to which developing countries have a lot of influence and have had a lot of influence almost from the beginning. India and Brazil, for example, and even China—although China left the WTO and then came back—as well as some other developing countries, were founding members of the WTO, which was originally called the General Agreement on Tariffs and Trade (GATT), and played influential roles during negotiations on topics that were going to affect them.

Now, for most of the history of the GATT and then the WTO, many of the rules didn’t apply to developing countries. But to the extent that the rules started to apply to developing countries, those countries were in the room negotiating. Unlike an awful lot of multilateral institutions, developing countries have been part of the leadership circle. And that’s a very positive attribute of the WTO.

The question then becomes: when will some of those countries take more ownership of the institution and the broader institutional mandate and responsibilities rather than just weighing in on individual parts of the negotiation? That’s a more interesting question, and I think that will evolve. But emerging economies have been in the inner circle of the negotiation right from the beginning. As you will recall, in 2003 the Doha round blew up in Cancun, in part because they felt they did not have enough of a role. That was certainly remedied, but it didn’t bring the round to a closure.

Susan Schwab

You ask a very, very compelling question when you raise the topic of bilateral deals and plurilateral or multi-country trade agreements. As an economist, I feel most strongly that we need to have a healthy multilateral trading system, and that multilateral trade agreements are by far the most important kinds of agreements we can negotiate. They’re the ones that do the most to advance economic development, particularly among the poorest developing countries. They do much more than bilateral or regional deals to address some of the rules issues, for example, subsidies and intellectual property and so on.

That said, when we have been unable to make progress on the multilateral front, just sort of sitting on or wringing your hands because you’re not making progress is not an answer. And therefore, the United States has negotiated some very fine bilateral and regional trade agreements that I hope will set precedents for more ambitious multilateral deals down the road. These are hopefully temporary substitutes for a more vibrant multilateral set of agreements.

But the proliferation of bilateral and regional deals—of which there are over 300 in existence around the world today—are uneven in quality. Not everybody is negotiating gold-standard free trade agreements the way the United States has. And for the private sector, it’s a real challenge. The so-called noodle bowl or spaghetti bowl of agreements is a real challenge. When it comes to global supply chains, you’ve got different countries with different types of rules, depending on where you produce something and where you ship it to. So it is becoming more and more complicated and unfortunately lends itself to abuse.

Susan Schwab

Yes, I have come out in support of Russia becoming a member of the WTO. One of the negotiations that I was involved in and concluded when I was U.S. trade representative was the bilateral agreement between Russia and the United States on Russia’s accession to the WTO. The accession process of a country coming into the World Trade Organization involves both the bilateral agreements with all of the WTO members that want one, plus a multilateral agreement. The multilateral agreement was concluded by the Obama administration last year. The bilateral agreement was concluded by the Bush administration in 2006.

It’s sort of a mixed bag, but I’ll give you just two points why I think it makes sense. If you look at trade protectionist actions that were taken after the fall of 2008, with the global economic recession, the most protectionist actions among the G20 countries that were taken were taken by Russia. Out of 430-some protectionist actions taken by G20 countries, 85 of them were taken by Russia. The reason for that, I think, was because Russia was not under any constraints: they were not members of the WTO. All of the other nineteen members of the G20 had WTO restrictions on them about what tariffs they could raise and what kind of import restrictions they could put on. And so those kinds of disciplines are good for the world.

Second, when Russia takes a protectionist action today, there is no recourse. No one had any means of taking Russia to dispute settlement. Russian membership would provide the WTO with that kind of resource.

It’s also in Russia’s interest to be a member of the WTO. Russia today has no recourse when another country hits Russia’s exports. This way, Russia would have recourse to dispute settlement, and its exports would be protected by the global trading rules as well.

So it just makes sense all around for Russia to be behaving like a WTO member and for Russia and other countries to have access to WTO dispute settlement mechanisms.

Susan Schwab

Well, it’s funny you should mention foreign direct investment. FDI, or investment protections, is an example of one of those elements that the United States includes in our bilateral trade agreements. There’s an investment provision in each of our recent free trade agreements that some other countries include in theirs. The Obama administration has finally, after more than three years, released its model “bilateral investment treaty," or BIT. So, presumably, that would be its position in the Trans-Pacific Partnership negotiation—the negotiation currently involving nine countries in the Asia-Pacific region—for the investment chapter.

The issue of foreign direct investment is increasingly important—not just for the United States, but for an awful lot of other countries, including emerging economies. And it seems to me that the next time there is a negotiation in Geneva under the auspices of the WTO, there may be emerging countries that are just as interested in including an investment chapter or negotiation as the United States.

Susan Schwab

Times do indeed change. But the Chinese, you know, are investing in many different countries, and I suspect they would like more investment protections. But for right now, those investment agreements have been included by the United States in our bilateral free trade agreements or just in bilateral investment treaties.