Many banks are on the verge of bankruptcy and have received support from the government to stay afloat. Measures taken have not sufficed, and an increasing number of economists and commentators are calling for the nationalisation of banks in the United Kingdom and United States. In their advocacy, they use Sweden as an exemplar, suggesting that massive bank nationalisation was the way it fixed its collapsing banking sector in the early 1990s. This account of Sweden’s resolution policy is erroneous and exaggerates the role of nationalisation. Sweden successfully combated a banking crisis, and two banks received full government ownership. The main example of nationalisation, however, was a financial reconstruction of a bank already controlled by the government. The only real example of nationalisation of a privately owned bank hardly offers lessons for ways to resolve the current banking crisis.

The global momentum in favour of trade liberalisation has slowed down; and there is more liberalisation-scepticism post-Washington Consensus. Chances are that the Doha Round will either collapse or deliver a very modest result. Both outcomes will leave the WTO in very serious trouble. For the WTO to have future relevance, its members must restore a market-access focus, and arrest crippling UN-style decision making. But its days as a major vehicle for liberalisation are probably over. PTAs, however, are not a serious alternative. Nearly all are bitty sectoral deals rather than comprehensive WTO-plus agreements. They distract attention from unilateral reforms and the WTO; and they are undermining non-discriminatory multilateral rules. The silver lining is that liberalisation is likely to come from a different route: from unilateral example-setting and competitive emulation. China is now the unilateral engine of freer trade, and this will reverberate elsewhere, especially in its Asian neighbourhood. That, not trade negotiations, is more important to Asia’s unfolding transformation of the global economy. Multilateralism, especially a workable WTO, has its rightful place. But only if its means and ends are suitably modest and realistic.

The collapse of the Doha Round in Cancun is symptomatic of a wider malaise in the WTO. It has an overloaded agenda, and is becoming excessively legalised and politicised. The “UN-isation” of the WTO proceeds apace. Its decisionmaking mechanism is crippled. It is therefore not surprising that attention has shifted decisively to preferential bilateral and regional trade agreements (PTAs). To prevent permanent irrelevance, the WTO must, first, rediscover its market access raison d’être; and, second, revive an effective negotiating mechanism. The alternative is an increasingly fractured world trading system governed by unbalanced, unstable, power-driven PTAs.