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Opinion


Trade negotiations in crisis? The real challenges



By Joost Pauwelyn




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At first glance, nothing seems to work in the world of trade negotiations. Since it was created 20 years ago, the World Trade Organization (WTO) has not been able to complete a single negotiating round.

By Joost Pauwelyn

The so-called Doha development round remains pending after 13 years of ups and (mainly) downs. Although WTO members concluded a modest agreement on trade facilitation in Bali last December (cutting red tape at customs), it took them almost another year to finalise this agreement.

A different picture emerges if one looks beyond the headlines of WTO ministerial conferences. Firstly, though not deepening in substance, the multilateral WTO has broadened in membership from 123 to 160 countries. China and Taiwan joined in 2001, Saudi Arabia in 2005, Russia in 2012.

The WTO is highly active also in monitoring and dispute settlement. Every day an average of ten WTO meetings are held, most of which discuss detailed implementation issues or resolve technical requests within specialised committees. Over the last 20 years, close to 500 disputes have been filed. Most lead to a negotiated settlement. Others have spawned nearly 350 dispute rulings totalling more than 60,000 pages of jurisprudence.  

Secondly, although only one new agreement has been concluded among the full WTO membership since 1994, sub-sets of like-minded countries are currently making real progress in several sector-specific negotiations held at or in the context of the WTO. 

In the field of services, the Trade in Services Agreement (TISA, 23 parties) aims to further liberalise trade in services ranging from financial to transport. Negotiations are also ongoing on an Environmental Goods Agreement (EGA, 14 parties) to liberalise trade in goods that contribute to green growth. Finally, negotiations to expand free trade in information technology products under the Information Technology Agreement (ITA,80 parties) are pending. Although they involve only a sub-set of WTO members, the concessions in at least some of these negotiations (EGA and ITA) will be extended to all WTO members on a most-favoured-nation basis.  

Thirdly, and most spectacularly, outside the WTO, a panoply of regional trade agreements (RTAs) have been successfully concluded in the last 20 years, totalling close to 400 in force today. 

Since the WTO’s creation, Switzerland has concluded 25 RTAs, most recently with major trading nations such as Japan and China. Negotiations on “mega-regionals” have also been launched, most notably: the Trans-Pacific Partnership (TPP) involving 12 countries (including the US, Japan, Australia, Chile, Malaysia and Vietnam) and the Transatlantic Trade and Investment Partnership (TTIP), an RTA between the European Union and the United States that was completely unthinkable until a few years ago. The TTIP alone represents 60% of global GDP, 33% of world trade in goods and 42% of world trade in services. 

Core challenges 

In other words, depending on where one looks, trade negotiations are in anything but a crisis: they are booming. In this rapidly changing and complex tapestry of trade agreements and trade negotiations, three core challenges arise: one is institutional, another substantive, the last political. 

Institutionally, the WTO’s centricity, to the extent that it has ever existed, is coming to an end. With 160 countries now in the WTO, it is normal that only some generally agreed upon “public bads” (e.g. discrimination, export subsidies) and “public goods” (e.g. transparency, trade facilitation) will be regulated at the multilateral level. 

Other issues will need to be agreed regionally, yet others bilaterally or purely domestically, some in binding treaties, others in more malleable guidelines. Variable geometry, also with different commitments between countries depending on the issue area rather than the increasingly artificial developed versus developing country bifurcation, is unavoidable. Institutional divisions of labour and interactions will need to be devised to make the system work.  

Substantively, trade regulations, at whatever level they are enacted, need to be tailored to fit new trade realities and to be in sync with what businesses really need –  reduced trade costs, regulatory predictability, the facilitation of data flows and global supply chains – not the artificial distinctions we now have between commitments in trade and investment or between goods and services. 

Politically, support is needed to conclude the trade agreements now under negotiation. Many developing countries, especially China, are understandably happy with the status quo. They will need to be offered something to make concessions. In Europe, popular concern about TTIP is reaching unprecedented levels. This offers an opportunity to engage the public in a discussion on the benefits, and limits, of trade liberalisation. 

Broad support will require sensitivity to health, environmental and social concerns. In the United States, the divided Congress is unlikely to adopt trade deals without the President having trade promotion authority (legislation whereby the Congress can only vote a trade deal up or down, without amendments). Whether trade will really be a priority in the last two years of the Obama presidency remains to be seen. 

Trade negotiations are ubiquitous. They have multiplied and become more complex and diverse. They also take longer and occur at different levels in different organisations. The global trading system is shifting, with room not only for the WTO but for a variable geometry. Finding an institutional division of labour, substantive rules fit for purpose and political support to conclude deals are the real challenges.

©The Graduate Institute, Geneva
This article was published in Globe, the Graduate Institute Review

The views expressed in this article are solely those of the author, and do not necessarily reflect the views of swissinfo.ch

Joost Pauwelyn, The Graduate Institute

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