Defragmenting World Trade

Cho, Sungjoon | January 1, 2006

The global trading community is in a state of deep crisis. Its main system, multilateralism, has recently been clogged by viscous trade barriers created by a proliferation of bilateral, regional trading blocs. Globalization offers a worldwide “production value chain” which enables even small economies to take part in the global commerce by offering raw materials or labor. In fact, small economies hold a comparative advantage at certain stages of the international manufacturing process.1 However, the current pattern of regional trading blocs militates against such participation by erecting new barriers against non-members and thus compartmentalizing the global market.2 This is not what globalization and free trade are meant to be. It is the contention of this article that the current proliferation of regional trade agreements (“RTAs”) has disrupted the original equilibrium between multilateralism (globalism) and regionalism that was established in the 1940s under the General Agreement on Tariffs and Trade (“GATT”). In the absence of such equilibrium, world trade becomes fragmented. Such fragmentation ultimately impedes the fulfillment of the raison d’ĂȘtre of the World Trade Organization (“WTO”): the simultaneous promotion of free trade, adequate regulation, and development. To remedy this crisis, the previous equilibrium must be restored by defragmenting world trade through both institutional and judicial strategies.