Multilateralism and Regionalism from an American Perspective: Parallels and Contrasts with the Langhammer Vision

Abstract

The paper discusses various milestones in the process of multilateral trade negotiations, pinpoints current challenges facing the world trading order, and proposes possible ways out of the persistent impasse. Hufbauer argues that the success of the multilateral approach is at least partly because the GATT departed from the strictly unconditional definition of the most-favored nation (MFN) rule in the late 1970s already. Regional agreements such as NAFTA complemented, rather than hindered, multilateral trade liberalization in the past. The political economy of further multilateral liberalization has become increasingly complicated since countries such as Brazil, China, and India have emerged as relevant players. Against this backdrop, Hufbauer expects regionalism to become the strongest vehicle for delivering liberalization in the future. This could still leave a bright future for the WTO as a "house of plurilaterals", i.e., agreements on specific issues such as services liberalization with conditional MFN treatment of varying membership.

The Potential Effects of De-risking from China on Global Economic Growth and Trade Patterns

“…Following Goncharova et al (2023), Hufbauer (2023), andOpusunju et al, 2020), the concept of "de-risking from China" has gained momentum due to several factors, including geopolitical tensions. Additionally, concerns over supply chain vulnerabilities exposed by events like the COVID-19 pandemic, Trump's trade war tariffs in 2018, and global economic dynamics boosted its development.…”

“…Decreased foreign investment and demand for Chinese exports may cause the economy to expand more slowly, requiring structural changes to boost local innovation and consumption. The Chinese government must implement measures to increase the nation's appeal for international investment and creativity, but the country remains a vital market and manufacturing base (Hufbauer, 2023).…”

“…As investors want more security and higher returns, they are becoming more interested in alternative investment locations, including emerging markets in Asia and Latin America. However, foreign direct investment (FDI) plans take time to execute, according to Hufbauer (2023), and foreign direct investment into China was US$503 billion in the pre-Trump trade war period of 2014-2017 and US$645 billion in the post-Trump period of 2019-2022. Therefore, despite the pandemic (which interrupted the Chinese economy less than other countries), inward Chinese FDI surged following the Trump trade war.…”