The Challenges of Trade Negotiations in the 21st Century

Since its inception twenty years ago, the WTO has not been able to successfully conclude a single round of negotiations. The Doha development Round, which was launched in November 2001, is now suspended, and although WTO member states managed to adopt a modest agreement on trade facilitation (less bureaucracy at the borders) in Bali in December 2014, it took them almost year to finalize this agreement. Yet multinational regional or sectoral trade agreements continue to bloom on all continents. In a rapid transformation the trading system has become more complex and fragmented and much more of a focus for political debate. How has this happened? At first impression it would appear that everything that could have gone wrong with the world trading system has done. However, the picture becomes quite different if one pays less attention to WTO ministerial declarations. First, even though it has not been applied consistently in all cases, the WTO system of [...] multilateral cooperation has expanded in scope from 123 members to 160. In 2001, China, strongly supported by the U.S., and Taiwan acceded to the WTO, followed by Saudi Arabia in 2005 and Russia in 2012, the latter after almost 20 years of “off and on” negotiations. The WTO is also better prepared today to prevent, manage and resolve conflicts than it was two decades ago. About a dozen WTO meetings are held on a daily basis, most of which address implementation issues and try to resolve technical problems within panels and subsidiary bodies, working groups or groups of government experts. In the last twenty years, nearly 500 legal proceedings over trade rule violations have been initiated, and while most have resulted in a negotiated settlement, others have been concluded by dispute settlement rulings which cover tens of thousands of pages of jurisprudence documents. Second, groups of like-minded members now achieve real progress during specific sectoral negotiations held within the WTO itself or within the framework of the WTO system. For instance, members with compatible views on the service sector have negotiated the Trade Services Agreement (TISA, 23 signatories)which aims to increase the liberalization of trade in services, i.e., from finance to transport. Fourteen members are currently negotiating an Environmental Goods Agreement that would liberalize trade in goods and services that contribute to “green growth”. Negotiations on the expansion of the coverage of the Information Technology Agreement (ITA), which involve 80 members, are also underway, and while these consultations are conducted only within sub-groups of WTO member states concessions made within them will be extended to all WTO members under the most-favored-nation principle. Third, a wide range of regional trade agreements (RTAs), have been concluded outside the WTO, but using the same rules, over the last twenty years. There are now close to 400 of these currently in force. For instance, since the creation of the WTO Switzerland has signed 25 RTAs, the most recent being with leading trade powers like China and Japan. Asian and Pacific countries region have also initiated negotiations for the conclusion of the Trans-Pacific Partnership (TPP), a “mega” regional agreements which involves 12 countries (including the U.S., Japan, Australia, Chile, Malaysia and Vietnam). For their part, The U.S. and the European Union (EU) are currently busy negotiating the Transatlantic Trade and Investment Partnership (TTIP), a regional trade agreement which would have been absolutely out of the question not long ago. A transatlantic free-trade bloc would be responsible for 60% of global GDP, 33% of the world’s trade in goods and 42% of the world’s trade in services. So despite the apparent lack of achievement of the WTO itself, trade negotiations are anything but in crisis; on the contrary, they are thriving wherever you choose to look. But this complex and fast-changing mosaic of negotiations and trade agreements presents three major challenges, one institutional, the second has to do with their internal mechanism and the last political. At the institutional level, the centricity of the WTO to the world’s trade system is drawing to a close. As it now has 160 member countries, only a certain number of problems (i.e. discrimination, export subsidies and transparency) are regulated at the multilateral level. A great number of other important issues will have to be discussed at the regional level. Yet some issues or questions can best, or even only, be addressed effectively bilaterally or at the national level and take the form binding treaties or flexible guidelines. We will therefore be seeing a proliferation of flexible agreements (variable geometry, as it is called) in which different countries will make different forms of trade commitments to each other. These will be determined by the issues involved rather than the cleavage between developed and developing countries. New task allocation systems and interaction rules will thus have to be laid down to make the world trade system work more effectively. Moreover, trade regulations, notwithstanding the level at which they are implemented, will have to be adjusted to the new trade realities and requirements, be in tune with the real concerns of companies – by lowering in trade costs, increasing regulatory predictability, facilitating data exchange and global supply chain development,  and finally, removing the artificial distinctions between commitments in trade and investments. At the political level, the trade agreements under negotiation must gather sufficient support from policymakers. Many developing countries, China in particular, are justifiably satisfied with the status quo and well positioned to ask for financial or trade compensation in return for making concessions. In Europe, the public concern over the TTIP has reached an unprecedented level, providing the opportunity to open a public debate on the benefits and limitations of trade liberalization. To rally support for it, the agreement will have to take into account health, environmental and social concerns. In the U.S., it is unlikely that a divided Congress can be made to vote for a trade agreement unless the president gets a permission called “Fast Track” (i.e., Congress can approve or reject but cannot amend or filibuster over the agreement). It is an open question whether trade issues will be one of Obama’s priorities in the remainder of his presidency. Trade negotiations are now more numerous, complex and diverse than at any time in history. They also take more time to conclude and operate at different levels and in different social and economic organizations. The global trading system is going through a profound mutation, and this provides the WTO with some room for maneuver and open the way for flexible agreements and treaties. But the real challenges will be to set up an institutional division of labor at the international level, develop modern rules appropriate for the 21st century and increase political support for the adoption of context-adapted agreements. Whether WTO has the means or inclination to meet these challenges remains to be seen.   Richard Rousseau is Associate Professor at the American University of Ras Al Khaimah, United Arab Emirates. His research, teaching and consulting interests include Russian politics, Eurasian geopolitics, international political economy and globalization.