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Conflict, Chaos and Confusion

Conflict, Chaos and Confusion

The Crisis in the International Trading System

William A. Kerr

After 15 years the WTO is not functioning as envisioned and is faced with many new trade challenges − climate change, terrorism, pandemics, genetically modified organisms, food safety − which it is ill-equipped to handle. Conflict, Chaos and Confusion sheds light on this deep and acute crisis, focusing on contentious and complex new trade issues and how they will affect international trade in the future.

Chapter 13: Too Smart for Their Own Good! Complexity, Capacity and Credence in Trade Negotiations

William A. Kerr

Subjects: economics and finance, international economics


So here’s a radical thought to discard if you choose: Would it in fact not be better to use a different approach entirely: drop the tiered approach, drop the complicated flexibilities, two-third proportionalities, all the special debates etc. etc. all of which threatens to amount to an ever more complicated and ever-cascading exercise in stalemate negotiation and counterbalancing complications. And just go to something more simple and straightforward and, above all, clear: where everybody knows what they are doing and which, quite frankly, most developing Members could probably reasonably manage given what is going on in the real world. Ambassador Crawford Falconer, Chairperson of the Agriculture Negotiations Doha Round, 30 April 20071 1. INTRODUCTION In the New Institutional Economics paradigm, information plays an important role.2 Unlike neoclassical economics, where all economic actors are assumed to have prefect information and, hence, are not able to use information to strategic advantage, New Institutional Economics recognises that asymmetric and incomplete information lead to situations where parties can behave opportunistically to secure an advantage, and resources must be expended – transaction costs incurred – to limit vulnerability (Hobbs, 1996). Obtaining information can be a costly activity and these costs factor into decisions. If transactions are complex they are often governed by closely specified contracts that attempt to reduce information asymmetry and provide for contingencies when information is incomplete. Goods that undergo transactions can be classified according to the information that is available to buyers at the time a decision to purchase must be made (Nelson, 1970;...

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