Is trade multilateralism being threatened by regionalism?

Abstract

As economic powers from the developing world, particularly China, have emerged in the past few decades, their weight has altered the balance in the global trading system. This has presented challenges in the World Trade Organisation (WTO), where the Doha Round of multilateral negotiations has dragged on for more than a dozen years. Frustrated by this stalemate, many countries have sought alternatives. Among these are ‘mega-regional’ trade agreements such as the proposed Transatlantic Trade and Investment Partnership (TTIP) between the US and EU, and a 16-member Trans-Pacific Partnership (TPP).

In this volume, leading commentators – including two former heads of the WTO – examine the possible consequences of this shifting trade landscape. Is globalisation in reverse, and have countries been retreating from liberalisation since the world financial crisis of 2008– 09? Are the ‘mega-regional’ deals an existential threat to the WTO regime, or can they be used as building blocks towards wider multilateral agreement on a broad range of issues, from industrial standards to intellectual property rights. And what does it all mean for the balance of geopolitical power between the developed and developing world?

Notes

1 Hiau Looi Kee, Cristina Neagu and Alessandro Nicita, Is Protectionism on the Rise? Assessing National Trade Policies during the Crisis of 2008 (Washington DC: The World Bank, April 2010); and Matthieu Bussière, Emilia Pérez-Barreiro, Roland Straub and Daria Taglioni, ‘Protectionist responses to the crisis: global trends and implications’, Frankfurt, European Central Bank, Occasional Paper Series, no. 110, May 2010.

2 Global Forum on Trade, Paris, OECD, February 2014.

3 The difference between bound ceiling tariffs and applied tariffs is called ‘water’ in the WTO jargon.

4 World Trade Report 2011 – The WTO and preferential trade agreements: From co-existence to coherence (Geneva: World Trade Organisation, 2011).

5 The term ‘spaghetti bowl effect’ was first used by Jagdish Bhagwati, in ‘US Trade Policy: The Infatuation with Free Trade Agreements’, in Claude Barfield (ed.), The Dangerous Obsession with Free Trade Areas (Washington DC: American Enterprise Institute, 1995).

6 Cross-retaliation describes a situation where the complaining country retaliates by suspending concessions or other obligations under a sector or an agreement that has not been breached by the defending country.

7 World Trade Report 2011, p. 54.

8 Madhur Jha, Samantha Amerasinghe, Chidu Narayanan, John Calverley and Achilleas Chrysostomou, ‘Global Trade Unbundled’, Special Report, Standard Chartered Bank, 9 April 2014, p. 5, https://www.sc.com/en/resources/global-en/pdf/Research/2014/Global_trade_unbundled_10_04_14.pdf.

9 WTO, ‘The Future of Trade: the Challenges of Convergence’, Report of the Panel on Defining the Future of Trade convened by WTO director-general Pascal Lamy, Geneva, 2013, p. 22.

10 Joseph Francois (ed.), Reducing Transatlantic Barriers to Trade and Investment. An Economic Assessment (London: Centre for Economic Policy Research, 2013), p. vii.

11 Elvire Fabry, Giorgio Garbasso and Romain Pardo, ‘The TTIP Negotiations: A Pirandello Play’, Synthesis Report for the Notre Europe – Jacques Delors Institute/ European Policy Centre, January 2014.

12 Pascal Lamy, The Geneva Consensus: Making Trade Work for All (Cambridge: Cambridge University Press, 2013).

13 Ibid., p. 177.

14 For an estimation of the trade-diversion impact of the TTIP on third countries, see Francois, Reducing Transatlantic Barriers to Trade and Investment; and Gabriel Felbermayr, Benedikt Heid and Sybille Lehwald, ‘Transatlantic Trade and Investment Partnership (TTIP): Who benefits from a free trade deal?’, Report for the Bertelsmann Foundation, published by Global Economic Dynamics, 2013.

15 Aaditya Mattoo, ‘An EU–US trade deal: Good or bad for the rest of the world?’, Vox (the Centre for Economic Policy Research's policy portal), 13 October 2013.

16 WTO, ‘The Future of Trade: The Challenges of Convergence’.

17 Ibid., p. 6.

18 Global Forum on Trade, February 2014.

19 Richard Baldwin and Phil Thornton, Multilateralising Regionalism: Ideas for a WTO Action Plan on Regionalism (London: Centre for Economic Policy Research, 2008).