Feel that whiplash? Trade has gone from zero to 60 in the White House's agenda just weeks after Barack Obama's second inauguration. Two blockbuster deals -- the Trans-Pacific Partnership, which Japan will soon join, and a free trade agreement with the European Union -- could finally leave the World Trade Organization's ill-fated Doha Development Round in the dust. In fact, these deals offer more hope for world trade than the WTO ever did.
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At its founding in 1995, the WTO was the first global mechanism for lowering barriers to commerce. Since then, it has done very little to fulfill its primary mission. The Doha Round, projected by the World Bank to raise global economic activity by $500 billion, has dragged on for a dozen years without agreement. In the meantime, estimates of its potential economic gains have dropped as low as $84 billion -- about 0.1 percent of global output -- with just $16 billion going to poor countries.
Any deal now would be lucky to generate even that amount. The Doha Round is a failure because of its complexity and the WTO's negotiating system. Everything except military hardware is on the table, and it has been impossible to reconcile every country's views on agriculture, services, and manufactured goods. Yet because every country has a veto, that reconciliation is exactly what is required for a deal.
Throughout the past 12 years, the WTO's most ardent supporters have urged countries big and small to stay committed to the Doha Round, resulting in a massive waste of resources. This has been especially tragic for poorer countries that have only small teams of diplomats and lawyers responsible for pursuing bilateral, regional, and global trade deals around the world. Dozens of them, from Belize to the Gambia, don't even have permanent representatives at the WTO's headquarters in Geneva, and have to rely on semi-annual "Geneva Weeks" to touch base with their colleagues.
Yet in spite of the futility engendered by perennially lower expectations, negotiators have kept on meeting because, as one put it, "the problem is no one knows what Plan B is." Now there is a plan B: the formation of big trade blocs including big and small countries, which will eventually find it in their mutual interest to negotiate with each other.
This is a huge step forward. In global trade talks, a few countries -- notably France and India -- have relished the role of spoiler. Deals that don't insist on being global don't have that problem; these big trade blocs are essentially coalitions of the willing. Their members are the leaders, and the laggards will have two choices: join, or get the short end of the stick.
When Japan signaled its intent to sign onto the Trans-Pacific Partnership (TPP) last week, it joined Australia, Brunei, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam, and the United States in negotiations. The most important aspect of this bloc is its diversity, which will result in big gains from trade. Together, these countries will lower trade barriers -- and get richer.
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