Mega-FTAs and the WTO: Competing or Complementary?

ABSTRACT

Mega-FTAs involving many countries and encompassing bilateral and mini-lateral FTAs have begun to be negotiated, while the Doha Round of multinational trade negotiations under the WTO have been at a stalemate. Mega-FTAs, which are discriminatory, and the WTO, which is non-discriminatory, are not consistent, thereby leading to a view that they are competing. This article argues that mega-FTAs and the WTO can be complementary, as mega-FTAs could facilitate negotiations with a smaller number of negotiating members. It further stresses the importance of extending mega-FTAs to a global level by merging with other mega-FTAs and by accepting new members.

KEYWORDS:

• Mega-FTA
• WTO
• TPP

JEL CLASSIFICATIONS:

• F13
• F15
• F53

Acknowledgements

This article was presented at the Inaugural International Conference ‘Evolving Finance, Trade and Investment in Asia,’ Lee Kuan Yew School of Public Policy, 16–17 September 2015. The author is thankful to the participants for useful comments and suggestions.

Notes

1 WTO, ‘Elements for Political Guidance,’ Eighth Ministerial Conference, WT/MIN(11)/W/2 1 December 2011.

2 WTO, ‘Bali Ministerial Declaration’ 11 December, 2013. https://www.wto.org/english/thewto_e/minist_e/mc9_e/balideclaration_e.htm.

3 The Trade Facilitation Agreement (TFA) will enter into force when two-thirds of WTO members ratify the TFA.

4 WTO, https://www.wto.org/english/tratop_e/tradfa_e/tradfa_e.htm.

5 See Schnepf (2014) for details.

6 METI (2015).

7 Both FTAs and customs unions remove tariffs on trade between the members. The difference is that for FTAs members apply their own tariff rates on imports from non-members, while the common tariffs are applied in the case of customs unions.

8 WTO website, https://www.wto.org/english/tratop_e/region_e/regfac_e.htm.

9 GATT Article XXIV, WTO website, https://www.wto.org/english/tratop_e/region_e/regatt_e.htm.

10 Because a large number of RTAs are FTAs and because the expression ‘FTA’ is more commonly used than ‘RTA’, we use the expression FTAs instead of RTAs, unless otherwise indicated.

11 AFTA has been a core of regional economic framework for ASEAN and it became an important component of the ASEAN Economic Community (AEC), which was established at the end of 2015. AEC also consists of the ASEAN Framework Agreement on Services (AFAS) and ASEAN Comprehensive Investment Agreement (ACIA) and other components.

12 The EU is a customs union and not an FTA.

13 Urata (2014a) discusses the origins, evolution and significance of the TPP.

14 The definition of mega-FTA does not seem to exist and some researchers include the Japan–EU FTA (EPA) and China–Japan–Korea FTA in mega-FTAs.

15 http://tpp.mfat.govt.nz/text.

16 Ibid.

17 ASEAN Secretariat, Guiding Principles and Objectives for Negotiating the Regional Comprehensive Economic Partnership, August 2012. http://www.asean.org/images/2012/documents/Guiding%20Principles%20and%20Objectives%20for%20Negotiating%20the%20Regional%20Comprehensive%20Economic%20Partnership.pdf.

18 The EU website http://ec.europa.eu/trade/policy/in-focus/ttip/.

19 See Baldwin and Low (2009) and Urata (2014b) for the discussions on multilateralizing regionalism such as mega-FTAs.