Explaining rising regionalism and failing multilateralism: consensus decision-making and expanding WTO membership / Euan MacMillan

The beleaguered progress of the Doha Development Agenda of the World
Trade Organisation (WTO) presents something of a puzzle for economic theory: if
multilateralism is an effective forum for liberalisation (as it has been in the past), then
why have the current round of talks faltered amid the proliferation of preferential trade
agreements (PTAs)? This paper builds a ‘hub and spoke’ version of the Maggi (Am
Econ Rev 89(1):190–213, 1999) model of trade negotiations to shows that the combination
of the WTO single-undertaking and consensus decision-making principles with
an expanded and more diverse membership can render multilateralism less desirable for
hub countries than bilateralism. It is argued that these principles give spoke countries de
facto veto power meaning that their threat point during WTO negotiations is a reversion
to PTA negotiations between all parties. Accordingly, spoke countries with relatively
less to gain from the WTO can use their veto power to extract gains from those that
would benefit substantially. If an expanding WTO membership has increased the
number of such countries, then the benefits of multilateralism versus regionalism from
the perspective of hub counties may have been diminished to such an extent that they
are no longer willing to wait for the conclusion of the Doha round before engaging in
PTA negotiations.

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