The WTO and the Rise of Plurilateralism—What Lessons can we Learn from the European Union’s Experience with Differentiated Integration?

Abstract

The de facto failure of the Doha Round has shaken the confidence in multilateral trade negotiations and governance. Policy-makers increasingly turn to plurilateralism—in the form of Plurilateral and Critical Mass Agreements—as a new strategy for global trade governance. The World Trade Organization (WTO) may develop into a ‘club of clubs’. The rise of plurilateralism creates opportunities and risks. Plurilateralism may reinvigorate world trade and modernise the WTO. But it may also fragment the global trade regime and disenfranchise countries. The article advances two arguments. First, the turn to plurilateralism is timely and promises to be welfare-enhancing as trade liberalization evolves from negative integration through tariff cuts to positive integration through rule convergence. Plurilateralism is often better suited to govern rule convergence. The article builds on the theory of club goods to underpin this claim. Second, the turn to plurilateralism nonetheless requires a carefully crafted governance approach to succeed. The article thus evaluates the rich experience of the European Union with so-called ‘differentiated integration’ to inform the policy debate in the WTO. It highlights that inter alia transparency, trust and institutional embedding are key to ensure that the WTO and her members benefit from the rise of plurilateralism.