The GATT treaty's loophole for free trade areas in Article XXIV has puzzled and deceived prominent scholars, who trace its postwar origins to US aspirations to promote European integration and efforts to persuade developing countries to endorse the Havana Charter. Drawing from archival records, this article shows that in fact US policymakers crafted the controversial provisions of Article XXIV to accommodate a trade treaty they had secretly reached with Canada. As a result, the free trade area exemption was embedded in the GATT–WTO regime, even though neither the Havana Charter nor the US–Canada free trade agreement was ever ratified. Theoretically, the case is an important example of how Cold War exigencies altered the policy ideas of US officials.

The commonplace tendency is to blame the difficulties of the Doha Round of multilateral trade negotiations on the World Trade Organization (WTO) itself. In contrast, I suggest in the first section of this article that exogenous structural factors, especially changing commodity prices and trade flows, fatally undermined the Round. In the second section, I discount the significance of endogenous institutional factors such as the number of participants, the size of the agenda, or the Single Undertaking, although design failures, notably in the ‘modalities’ for negotiation, did hurt. But what hurt even more was the way the WTO, in common with most multilateral organizations, has not caught up with the shifting centre of gravity in global governance. The trading system is no longer a transatlantic bargain. The regulatory issues on the twenty-first century trade policy agenda will inevitably be negotiated in Geneva, but only after a new trans-Pacific accommodation recognizes China's central role.

Recent analyses suggest that the impact of agricultural trade liberalization on developing countries will be very uneven. The Doha Round focuses on tariff issues, but some developing countries currently have practically duty-free access to European and North American markets under preferential regimes. Multilateral liberalization will erode the benefits of these preferences, which are presently rather well utilized in the agricultural sector. While South American and East Asian countries should benefit from an agricultural agreement, African and Caribbean countries are unlikely to do so. The main obstacles to the exports of the sub-Saharan African and Least Developed Countries appear to be in the non-tariff area (sanitary, phytosanitary standards), which increasingly originate from the private sector and are not dealt with under the Doha framework (traceability requirements, etc.). An agreement in Doha is unlikely to solve these problems and open large markets for the poorest countries. While this is not an argument to give up multilateral liberalization, a more specific and differentiated treatment should be considered in WTO rules, and corrective measures should be implemented.

Using a new database on standards in China, we estimate the impact of voluntary and mandatory standards – either harmonized to international norms or purely domestic – on Chinese food exports. The dataset covers seven Chinese products over the period 1992–2008. We find that standards have a positive effect on China's export performance, as the benefits to standardization in terms of reducing potential information asymmetry and signaling enhance food safety, and quality in foreign markets seem to surpass compliance costs. Our estimation results show that the positive effect of Chinese standards is larger when they are harmonized to international measures. The results suggest that there are clear benefits to China's steps to base their domestic standards and regulations on international measures.

In the OECD countries, the decline of manufacturing and the employment implications have long been matters of concern. Recently, policymakers in several countries have set out to try and achieve reindustrialization. The servicification of firms is related to these concerns and aspirations. However, servicification, and particularly its role in trade policy, has received limited attention. I review micro-level evidence and discuss its implications. I find that imported, domestic and exported services are all important to contemporary firm competitiveness and participation in international value chains. Therefore, historic policymaking divisions between trade in manufactures and trade in services services, between export and import interests, and among modes of supply are becoming less relevant. I conclude by suggesting potential steps forward.

In 2007, the United States reversed its long-standing policy prohibiting the simultaneous imposition of anti-dumping duties (ADDs) and countervailing duties (CVDs) against nonmarket economies. Subsequently, the United States has imposed concurrent ADDs and CVDs in numerous cases against China. China challenged a number of aspects of the US practice, most notably the double-remedies issue, which occurs when a domestic subsidy is offset by both an ADD and CVD. The Appellate Body (AB) correctly ruled that double remedies are inconsistent with the Agreement on Subsidies and Countervailing Measures and that the burden was on the investigating authorities to ensure that double remedies were not being imposed; however, the AB largely limited its discussion to measurement concerns, an approach that may have inadvertently opened the door to future double-remedies disputes involving other methods for computing normal value. Two other issues that are likely to have significant long-term ramifications are (i) the scope of the term ‘public body’ and (ii) the appropriate use of out-of-country benchmarks. On both issues, we believe the AB's conclusions and analysis were correct.

In a series of controversial 2011 decisions, WTO DSM Panels sought to reconcile legitimate regulatory interests of the state with various obligations to treat imported products in an even-handed and not unnecessarily trade-restrictive manner. Among the key points of contention were which obligation pertained in each case – national treatment, limits on technical regulations, or rules governing standards. In each case, the Panel imposed significant restrictions on national regulatory practices, and in each case the Panel reasoning was challenged by the Appellate Body. This paper addresses some of the key legal and economic issues raised in the original Panel decisions, leaving the late-breaking Appellate Body decisions for future analysis. Given the unsettled nature of the terrain, the economic analysis focuses primarily on the question of national treatment, while the legal analysis deals with other interesting points that emerge from these rulings, such as the appropriate level of deference to international standards and the legitimacy of labeling requirements.

In the light of the events surrounding the Seattle Ministerial in December 1999 and the fate of the Multilateral Agreement on Investment, increasing attention is being paid not only to the substance of trade policy but to the processes through which it is effected. Growing realization of the need to enhance transparency and legitimacy in trade policy decision-making is reflected in debates on the openness of the multilateral processes most obviously represented by the World Trade Organization. Somewhat less attention has been paid to ways in which national trade policy processes are adapting to these pressures. The article argues the need to redress the balance and suggests that it is possible to analyse the development of at least some national trade policy environments in terms of a shift from a ‘club’, through an ‘adaptive club’ to a ‘multistakeholder’ model. These are examined with specific reference to the development of the latter in the Canadian and European Union contexts.

Conventional wisdom tells us that in Korea–Beef, the Appellate Body interpreted the word ‘necessary’ in GATT Article XX to require a cost–benefit balancing test. The Appellate Body is supposed to have applied this test also in EC–Asbestos, US–Gambling (involving GATS Article XIV), and Dominican Republic–Cigarettes. In this article I demonstrate, by detailed analysis of the opinions, that the Appellate Body has never engaged in such balancing. They have stated the balancing test, but in every case they have also stated the principle that Members get to choose their own level of protection, which is logically inconsistent with judicial review by cost–benefit balancing. And they have decided every case by reference to the ‘own level of protection’ principle. The Appellate Body is right not to balance. Balancing is not authorized by the treaty texts, and it is not needed to prevent inefficient harm to foreign interests.

Border tax adjustments in the form of carbon taxes on products from countries with lax environmental production standards or in the form of a required participation in an emissions allowances' trading system have become a heavily debated issue under WTO law. Such an adjustment might be permissible if energy taxes as indirect taxes are applied on inputs during the production process. Compliance with the Most Favoured Nation principle has less practical importance than the not-yet settled likeness discussion under the National Treatment principle. Consequently, since the compatibility of carbon-related border tax adjustment measures is partly contested, potential justifications such as the conservation of exhaustible national resources or the protection of health (Art. XX GATT) become relevant. The application of the necessity and proportionality test requires that carbon measures are tailored so as to substantially contribute to the achievement of environmental objectives and do not create any arbitrary or unjustified discrimination.

This article introduces a special issue that examines the effects of strategic competition on the future of the global trade regime. We argue that traditional work in economics and the current set-up of global economic regimes ignores economic statecraft as a key element in understanding trade conflict. Specifically, we outline three examples of contemporary economic statecraft – industrial policy, trade restrictions, and new investment rules – that have been used to block foreign direct investment on the basis of national security claims. Based on this analysis, we explore how the WTO and other economic regimes might address the global economic governance of economic statecraft. In concluding, we outline the theoretical and empirical work in the subsequent case studies that examine the use of economic statecraft in the United States, China, India, Japan, and South Korea.

Following years of silence, the WTO Appellate Body (AB) issued almost simultaneously three reports dealing with issues coming under the aegis of the WTO Agreement on Technical Barriers to Trade (TBT). The three Panel reports were hard to reconcile, and this feature in and of itself made the task of the AB quite onerous. Some progress has been made and some clarifications have been introduced, but overall the AB has yet to come to grips with a coherent approach regarding the understanding of the TBT Agreement. The main argument in this paper is that the AB, in designing its test for consistency with the TBT Agreement, did not do any different than it would have done had no TBT Agreement existed. It is, nevertheless, response to the question ‘what has the TBT added to the pre-existing legislative arsenal’ that should point to the elements that must be included in developing a test of consistency against which disputes coming under the aegis of the TBT Agreement should be discussed. The suggested approach consists of a two-tier test whereby Panels would first inquire into the innate characteristics of a measure coming under the aegis of the TBT Agreement, before asking the question whether it has also been applied in non-discriminatory manner.

Subsidies to the fishing sector have trade and ecological consequences, especially for fisheries that are over-exploited. In response, WTO members are negotiating to clarify and improve the Agreement on Subsidies and Countervailing Measures. Yet significant legal challenges constrain this ongoing effort because fisheries conservation and management matters are often addressed by the United Nations Convention on the Law of the Sea, instruments of the Food and Agriculture Organization, and other legal regimes to which some WTO members have not consented. This article analyses modes of learning and information exchange within the WTO regime, and compares the proposed use of standards, benchmarks, and peer review in the draft fisheries subsidies rules with existing arrangements between the WTO and organizations such as the OECD and product standard-setting bodies. It argues that novel deliberative strategies of regime interaction are more important in resolving the challenges posed by international law's fragmentation than adherence to strict mandates or legal hierarchies.

This paper reviews psychological reasons why the enthusiasm of the general public for free international trade might be less than that of the economist. Six specific reasons are advanced: (1) lay views of utility emphasize employment over consumption; (2) status quo bias results from loss aversion; (3) people think altruistically but parochially; (4) people often consider fairness in bargaining situations; (5) people may hold inappropriate fixed pie beliefs; and (6) people may misunderstand Ricardo's principle of comparative advantage. The reasons vary in their apparent rationality and appear to operate in concert rather than independently.

The tension in the WTO between adaptation to globalization and integration of developing countries is illustrated by one of the central norms of the regime, transparency. Experts believe democratic governance and efficient markets are both enhanced when autonomous administrative agencies are open about what they doing. WTO requirements for regulatory transparency may prove to be more straightforward for OECD countries than developing countries. The future of the WTO as a legitimate and effective international organization depends on finding modes of regulation accessible to all its Members. A review of how Canada, Brazil, South Africa, Thailand, and Uganda implement the transparency requirements of the agreements on basic telecommunications, and sanitary and phytosantitary measures found that regulatory independence and transparency are increasingly prevalent in telecommunications, but much less so in food safety. Transparency between countries appears easier than transparency within countries, and economic regulation seems easier to adapt to international norms than social regulation.

Technology is transforming global trade. The global trading system, however, has struggled to keep up with changes in technology. One of the major challenges for the trading system is that the issues raised by digitally enabled commerce are largely regulatory in nature. The issues that are at the forefront of digital trade increasingly relate to citizens’ most fundamental interactions, including speech, finance, energy, and transportation. This paper argues that resolving these international regulatory issues will require reforming the approach that has been taken to global trade negotiations. International discussions around the most challenging issues in the digital economy ought to move away from the ‘horse-trading’ nature of traditional trade negotiations and towards a strategy focused on regulatory cooperation. Failure to achieve regulatory cooperation could further fragment digital services based upon national borders. The Internet has the potential to positively impact the global economy precisely because it is global, decentralized, and bottom-up in nature. International policymaking through regulatory cooperation can maintain those principles, while protecting fundamental national concerns such as stability, privacy, and security.

This paper attempts to model trade facilitation in a multi-regional and multi-sectoral computable general equilibrium (CGE) model, MIRAGE. It follows Decreux and Fontagné (2009) in modeling trade facilitation and in assuming that administrative barriers are an iceberg cost. I extend their model using more comprehensive measures of ad-valorem equivalents (AVEs) of red tape costs, which are computed from a gravity model, and are introduced in the CGE model. The novelty in using those AVEs is that they take into account the effects of bureaucracy, internet coverage, corruption, and geographical barriers on the time to trade. The paper has four major findings. Gains derived from trade facilitation are more significant for developing economies (especially for the Middle East and North Africa region and Sub-Saharan countries) than for developed ones, whether in terms of welfare gain (either in the short or long run) or increase in trade. Second, long-run welfare effects of trade facilitation are much higher than in the short run. Third, trade facilitation helps boost both intra-regional trade and inter-regional trade. Fourth and most interestingly, it also helps improve export diversification, leading to an expansion in those sectors that are more sensitive to time, such as food, textiles, and electronics.

In this article, we review the literature on the measurement of trade costs in international trade with a special emphasis on non-tariff measures and in particular on standards and technical regulations. We distinguish ‘direct’ from ‘indirect’ approaches. The direct approach collects observable data or proxy variables on trade cost components which are then typically used as regressors in a gravity equation of trade. Instead, the indirect approach infers the extent of trade impediments from trade flows. It compares actual trade flows to the trade flows predicted by a hypothetical frictionless benchmark scenario based on a micro-founded trade model, attributing the deviation of actual from predicted trade flows to trade frictions. We argue that economists and policy-makers can gain useful insights from both approaches.

The negotiation of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) greatly expands the purview of the World Trade Organization (WTO) into domestic regulatory standards. This evolution immediately raises the question of whether other regulatory standards, including competition policy, environmental standards, and worker rights, should be added to the WTO agenda. Indeed, the Doha Declaration opened the door for negotiations on the environment and competition policy but not labor standards. In this paper I review the logic and evidence for this decision based on economic arguments for multilateral management of market externalities, policy coordination problems, and systemic trade issues. The review concludes that, conditional upon the protection of intellectual property rights in the WTO, a strong case may be made for including competition rules. The case is weaker for environmental regulation (if by that is meant a set of WTO rules on permissible standards) and quite weak for core labor standards.

This essay examines the effect of power asymmetries and imperfect markets on US trade policy, two issues often neglected in the conventional literature. We suggest that when the distribution of power is skewed and markets do not conform to the world of standard trade theory, open international markets will not exist unless the disproportionately most powerful state can make a credible commitment to free trade. We suggest that these two conditions characterized the post-World War II trade environment and partially explain why the United States encouraged the formation of the postwar international trade regime. To demonstrate this argument, we examine the voting rules, dispute settlement procedures, and regional trading arrangements that characterized the three postwar trade organizations: the stillborn International Trade Organization, the General Agreement on Tariffs and Trade, and the World Trade Organization. We argue that the rules of these institutions empowered their member states to punish any US attempts to ‘cheat’. In so doing, it made free trade their welfare-maximizing strategy choice.