The proliferation of regional trade agreements in many parts of the world has raised important questions about what this trend means for multilateral trade relations and the “old/new” role of developed countries vis-a-vis developing countries.
For the past two decades, negotiations under the framework of the World Trade Organization (WTO) have not been as successful as expected until last year’s modest agreement in the Ministerial Conference in Bali where a new set of rules on trade facilitation was adopted. Cause or consequence of such “failure”, several countries are currently negotiating trade agreements that if concluded, will create a new trade order where the U.S. and the EU are taking the lead.
The key negotiations of this new trade order are the Trans-Pacific Partnership (TPP) and the Trans-Atlantic Trade and Investment Partnership (TTIP). The TPP, which began as a modest partnership among Brunei, Chile, Singapore and New Zealand, has become the way for the U.S. to build a free trade zone in the region. At its nearly final stage, the TPP now comprises 12 countries, with Japan included which is the world’s third-largest economy and one that had long resisted a free trade agreement with the U.S.
Although the U.S. and the EU had long resisted any bilateral free trade arrangement, the TTIP will now allow these two countries, that together account for nearly half of the global economy, to set the rules on critical emerging trade issues like regulatory standards and cooperation. While the negotiations will likely be harder than currently anticipated, they deal primarily with an aspect of trade where huge gains are possible.
It has been argued that the combination of TPP + TTIP + other regional trade agreements will create a major snowball effect that could leave the U.S. and the EU with greatly reduced incentives to invest serious efforts into the WTO or other multilateral initiatives and that this situation would leave other developing countries with no bargaining leverage.
It is true that it is easier to reach agreement among just a couple countries than it is among the 159 members of the WTO. However, it is not clear how the explosion of trade agreements will result in trade blocs that could negotiate with each other in the future. In any case, if these trade blocs want to negotiate with each other, it would be very helpful to have some sort of forum where they could talk about the trade that occurs not just within their region, but world-wide. This forum for multilateral negotiations might be the WTO.
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