The future of world trade negotiations

The 2013 World Trade Report (henceforth WTR 2013), published in the third week of July by the World Trade Organisation, identifies as key trends the greater incidence of non-tariff measures beyond WTO disciplines, the rise of new forms of regionalism and rise of emerging markets (EMs). The report argues that these developments will pose new challenges for the WTO, especially as a significant amount of trade opening is likely taking place outside the WTO, which also calls for maintaining coherence between WTO rules and non-trade regulations in other multilateral fora. The report also stresses that the emergence of new players will surely affect global governance in ways that are not yet understood.

However, the report seems to have fallen short in identifying new and viable means of addressing these challenges, though it rightly notes that the challenges are best tackled multilaterally and in an open-economy mode, given the externalities generated by the high degree of integration among world economies across the development spectrum thanks to the emergence of global production and supply chains. This article outlines some of the inconsistencies of the WTR 2013 proposals.

To increase the WTO’s relevance, the WTR 2013 calls for further expansion of the WTO agenda, in particular by adding new issues reflecting present realities, so that major participants in the multilateral trade negotiations have sufficient reasons to engage meaningfully in the dialogue. It also hopes that the recent proliferation of the mega-regionals such as the transpacific and transatlantic trade agreements will help to bring challengers to the WTO system back into the fold. This builds on the Uruguay Round’s achievements in extending the range of issues to provide for (1) multi-issue trade-offs for key trade partners, and (2) encouragement for many of the hold-out countries to sign up to the multilateral system.  

This strategy could be frustrated, however. The experience of the Doha Round negotiations clearly indicates that the Uruguay Round principle of simultaneously negotiating a large number of issues by promoting trade-offs across subjects in a single undertaking mode may have run out of steam, if only because the new issues of interest require complex regulatory coordination and the establishing of coherent standard between economically powerful nations. Bundling such topics by expanding the WTO’s remit may thus actually impede progress in future multilateral negotiations, similar to what is feared in the ongoing transatlantic trade negotiations (Transatlantic Trade and Investment Partnership, TTIP). It is not at all obvious that an expansion of the WTO agenda, with or without a safe landing of the Doha Round, will work its magic like the previous GATT-WTO rounds. The counterfactuals are rather more convincing.

It is also not clear if the mega-regional agreements under negotiation will have any definitive influence on expanding the multilateral trade agenda. Taking the example of the transatlantic trade negotiations, even if the EU and US manage to create a ‘transatlantic (regulatory) fortress’ as a defence against competition from the rising Asian emerging markets, especially China, it is uncertain that they will be able to entice large EMs such as China and India into adopting those rules simply out of fear of exclusion. In a recent development, both China and India have ruled out joining negotiations on a US- and EU-backed proposal to expand the 1996 Information Technology Agreement (ITA), though both have benefited from the ITA in different ways.

A more likely medium-term outcome is the possibility of creation of a dual regulatory regime in EMs in key areas such as product standards and intellectual property (IP), with the export-oriented firms in these economies adopting the higher standards, while a large part of the remaining producers servicing the domestic market continue to use the old, less rigorous standards and IP regimes. If the latter group is significantly large, as is likely, the incentive for national EM governments to sign up to more rigorous multilateral regulatory standards will diminish. Even the most pro-TTIP analysts do not seem to expect that a truly ‘deep’ agreement outlining ‘gold standard regulatory cooperation’ will be operational in the medium term. Much therefore will depend on the credible threat of ‘economically meaningful discriminatory outcome’ that the new mega-regionals can actually create.