Free Trade Target Date Essential to Remove “Spaghetti Bowl” of Barriers

From Professor Jagdish Bhagwati, Professor Arvind Panagariya  and others.

Sir, Recently the idea that the World Trade Organisation should have a target, such as 2015, to achieve worldwide free trade has been proposed independently by many. among them principally by Martin Wolf in your newspaper. It has been endorsed by Mr Donald Johnston. OECD's secretary general, and by the UK's trade secretary, lan Lang. There have also been indications of interest in the proposal by Mr Renato Ruggiero, director general, WTO.

As economists deeply interested in the future of the world trading system, and keeping in view the first WTO ministerial in December in Singapore and the opportunity it presents for undertaking a significant initiative on trade, we and a group of economists worldwide would like to lend our support to the idea and to urge the member states of the WTO to make the endorsement of such a WTO target their first priority. Among its advantages, a few are significant.

While consistent with Article 24 of the General Agreement on Tariffs and Trade, there are now so many preferential trade arrangements (PTAs) such as North Amprican Free Trade Agreement and the European Union's numerous free trade areas with other countries, that a virtual "spaghetti bowl" of criss-crossing preferential trade barriers has arisen, with different duties applying depending on which country the product being imported is assigned to.

We are therefore in danger of reproducing the chaos created by the absence of most favoured nation status during the 1930s, produced then by protectionism but now, ironically, by free-trade intentions. Given the politics that often drives these PTAs, any attempts at reducing their spread do not seem to be likely to succeed. While some of us have indeed suggested reforms in Article 24 and in disciplines such as the use of anti-dumping duties on non-members, as ways of minimising the adverse effects of the preferences that the PTAs inherently imply, the worldwide achievement of free trade appears to be the most effective remedy. The reason is that preferences relative to zero duties are zero: preference would be effectively killed at source.

Then again a principal advantage of PTAs, which seems to attract trades-oriented businesses in particular, is that they have target dates that will lead on schedule to ultimate free trade, albeit within a limited area. By contrast, the GATT/WTO lurches from one round of multilateral trade negotiation to another, the end of a round never linked for sure to the start of another, as is in fact the case again with the end of the Uruguay Round.

A WTO target would thus cut through this fundamental weakness and simultaneously eliminate multilateralism's chief disadvantage vis-a-vis the inherently discriminatory PTAs, contributing to the current efforts at restoring the primacy of the WTO in the world trading system.

It would also set the WTO firmly on to the task of completing the agenda of the worldwide free trade, an objective which GATT pursued diligently through successive rounds of multilateral trade negotiations and whose advantages have been demonstrated by nearly half a century of experience.

 Financial Times, June 25 1996