Undermining the WTO : the case against 'open sectoralism'

Abstract

With challenges mounting to the World Trade Organization's agenda of broad-based multilateral trade liberalization, many U.S. trade analysts are arguing for a less ambitious approach. They extol the virtues of reducing barriers to trade along sectoral lines, citing past successes in telecommunications, financial services, and information technology. But this sector-by-sector approach to liberalizing trade (termed open sectoralism in this paper) is fraught with political and economic hazards. Open sectoralism has actually reduced political support for multisector trade negotiations that would benefit a significantly broader group of industries and consumers. Moreover, by liberalizing only highly competitive sectors, it bolsters the least efficient sectors of the economy. Ironically, at the same time that open sectoralism is the subject of unadulterated praise, protectionist sectoral measures are derided. Yet by buying off narrow and powerful protectionist interests, these arrangements have often cleared the way for comprehensive multilateral trade negotiations of the kind so clearly needed now.