Mega‐Regional Trade Agreements and the Future of the WTO
| Published date | 01 February 2017 |
| DOI | http://doi.org/10.1111/1758-5899.12391 |
| Date | 01 February 2017 |
| Author | Chad P. Bown |
Mega-Regional Trade Agreements and the
Future of the WTO
Chad P. Bown
Peterson Institute for International Economics
Abstract
Major economies such as the United States, European Union, Japan, and even China have shifted trade negotiating emphasis
toward ‘mega-regional’agreements, including the Trans-Pacific Partnership (TPP), the Transatlantic Trade and Investment Part-
nership (TTIP), and the Regional Comprehensive Economic Partnership (RCEP). This paper explores why countries have chosen
to pursue mega-regionals, what is likely to be contained in the agreements, and some of their potential implications for the
multilateral trading system under the World Trade Organization (WTO). I call for revisiting the historical approach of introduc-
ing plurilateral and critical mass agreements –that would cover some of the mega-regionals’new provisions –into the WTO
so as to avoid a more substantial, long-run erosion of the relevance of the nondiscriminatory system. I also highlight potential
reforms to the WTO’s dispute settlement procedure that are required to strengthen its already prominent role.
The major economies have shifted trade negotiating empha-
sis toward mega-regional agreements. The emergence of
three sets of negotiations –the Trans-Pacific Partnership
(TPP) agreement among Australia, Canada, Japan, Mexico,
the United States, and seven other countries; the Transat-
lantic Trade and Investment Partnership (TTIP) negotiations
between the United States and the European Union (EU);
and China’s pursuit of the Regional Comprehensive Eco-
nomic Partnership (RCEP) negotiations –raises a host of
short and long-term questions for the multilateral trading
system and the World Trade Organization (WTO).
The General Agreement on Tariffs and Trade (GATT) and
WTO established a multilateral system for trade that has
remained largely unchanged since 1995. The desire to write
new rules to address potential nontariff barriers to trade –
covering public health and product safety standards, labor
and the environment, international investment, digital trade
and e-commerce, and state-owned enterprises –is an
important driver of both the TPP and TTIP negotiations.
1
These new regional trade agreements (RTAs) pose some
potential threats to the multilateral system. First, they are
discriminatory agreements that provide preferences to insid-
ers at the expense of outsiders, and this could lead to eco-
nomic distortions or a fracturing of global trade into
competing blocks. Second, many of these issue areas are
being brought into a trade agreement for the first time. The
full consequences of this policy decision –including for the
WTO –are still largely unknown.
However, direct steps can be taken to help mitigate such
concerns. One is to return to plurilateral and critical mass
agreements to bring some of the mega-regionals’important
new disciplines into the WTO. However, reforms to the
WTO’s dispute settlement procedures are also needed to
further strengthen and sustain its most prominent, day-
to-day function.
The multilateral trading system
The GATT was established in 1947, and it shepherded the
multilateral trading system until it was replaced by the WTO
in 1995. Over their history, the GATT and WTO have pro-
vided three critical functions to the international system.
First, they have established a forum for countries to rou-
tinely convene, write basic rules, and negotiate over coun-
try-specific commitments to improve market access. Second,
they have established a forum to resolve disputes. The WTO
legal process allows for each interested country to make its
case, and the WTO provides impartial, third-party adjudica-
tors that generate legal rulings and determine compensa-
tion in the event of noncompliance. Third, they have
established a technical administrative forum by which coun-
tries make and then report changes to their policies that
affect trade. This reporting standardization provides
transparency and leads to more globally efficient informa-
tion dissemination.
These fundamental institutional pillars of the current WTO
evolved over decades, but they have received little updating
since 1995. The second and third functions have worked
well over the WTO’sfirst 20 years. However, even a rela-
tively modest attempt to negotiate some rules changes
multilaterally –through the Doha Round established in 2001
–failed and the effort was abandoned in 2015. The break-
down of the WTO’s legislative function, despite a number of
new issue areas of interest arising from the trading system’s
major actors, contributed to these countries shifting their
negotiating efforts toward the mega-regionals.
Global Policy (2017) 8:1 doi: 10.1111/1758-5899.12391 ©2017 University of Durham and John Wiley & Sons, Ltd.
Global Policy Volume 8 . Issue 1 . February 2017 107
Special Section Article
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