Trade, development and developmental 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 The 1992 Blair House Accord was an agreement between the US and EU to reduce agricultural subsidies to exporters and domestic producers.

2 See for example Joseph E. Stiglitz, Fair Trade for All: How Trade Can Promote Development (Oxford University Press, 2005)

3 The ‘spaghetti bowl effect’ is a term coined 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). Rules of origin are meaningless under the WTO, which applies equal tariffs to all imports from WTO member states. However, they operate with FTAs and RTAs that seek to reduce or eliminate tariffs only on particular imports from specific countries. This can work against the formation of the most economically efficient production network.

4 See http://www.statista.com/statistics/268830/unemployment-rate-in-eu-countries/; and http://www.statista.com/statistics/266228/youth-unemployment-rate-in-eu-countries/.

5 Mark Weisbrot, Stephan Lefebvre, and Joseph Sammut, ‘Did NAFTA Help Mexico? An Assessment After 20 Years’, Center for Economic and Policy Research, Washington DC, 2013.

6 See the World Bank's World Development Indicators, http://data.worldbank.org/country/mexico.

7 MERCOSUR consists of five full members, five associate members and two observer countries. Argentina, Brazil, Paraguay, Uruguay and Venezuela are full members. Bolivia, Chile, Colombia, Ecuador and Peru are associate members. New Zealand and Mexico have observer status.

8 Paraguay was suspended after it impeached President Fernando Lugo in June 2012, in what regional powers described as a parliamentary coup. Its membership was reinstated after a subsequent presidential election in April 2013.

9 Twelve-member UNASUR brings together the five full-time MERCOSUR members – Argentina, Brazil, Paraguay, Uruguay and Venezuela – with the four full-time members of the Andean Community of Nations (CAN) – Bolivia, Colombia, Ecuador and Peru – with Chile, Guyana and Suriname. Modelled after the EU as a forum for political interaction and interregional trade promotion, its collective GDP exceeds US$4 trillion.

10 The Pacific Alliance has its genesis in the 2011 Lima Declaration, in which Peru, Chile, Colombia and Mexico agreed to form a free-trade region focused on Asia, and to take other steps towards economic integration including facilitating visa-free travel and establishing a common stock exchange. In February 2014, the four countries signed an agreement to eliminate tariffs on 92% of commerce between them. Costa Rica has taken steps towards full membership. For more, see ‘Pacific Alliance trade bloc eyes global role’, Strategic Comments, IISS, 8 April 2014.

11 The ten members of ASEAN are Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar (Burma), the Philippines, Singapore, Thailand and Vietnam.

12 Asia-Pacific Economic Cooperation Policy Support Unit, APEC's Bogor Goals Progress Report, APEC, Singapore, August 2012.

13 The Honolulu Declaration – Toward a Seamless Regional Economy, 19th APEC Leaders’ Declaration, Honolulu, US, 12–13 November 2011 was followed by a list of 54 environmental goods attached to the Vladivostok Declaration – Integrate to Grow, Innovate to Prosper, 20th APEC Leaders’ Declaration, Vladivostok, Russia, 8–9 September 2012. In 2014, the WTO launched negotiations for an environmental-goods agreement, building on the list drawn up in Vladivostok; see WTO, ‘Azevêdo welcomes launch of plurilateral environmental goods negotiations’, WTO 2014 News Items, 8 July 2014.

14 Begun in 2005, the ‘Tripartite’ aims to help the African Union (AU) goals of accelerating the economic integration of the continent and achieving sustainable economic development. Encompassing a population of more than 527 million and with a GDP of some US$624 billion, the Tripartite's 26 member states account for 57%–58% of the AU's population and GDP.

15 The cost of borrowing increased after the (voluntary) set of Basel III reforms tightened lending rules, among many other things; see Basel Committee on Banking Supervision, ‘International regulatory framework for banks (Basel III)’, (Basel, Switzerland: Bank for International Settlements, 2011 and 2013).

16 Ensuring that countries do not apply their technical regulations and standards to goods in transit is another way of ensuring cost savings for producers in landlocked countries.