| FRAGMENTATION IN TRADE NEGOTIATIONS:
Mega interregional agreements and their potential impact on global governance
by Félix Peña
English translation: Isabel Romero Carranza
The negotiations of mega interregional agreements
now have a central place on the agenda of international trade relations.
These are negotiations that are inserted in a framework of strong uncertainties
regarding their future evolution. They can have the potential to fragment
the international trading system and affect its governance.
The fact that the WTO Conference in Bali did not restore
the expectations of a global multilateral negotiation that can be concluded
within a reasonable time frame would seem to be an incentive to move forward
through mega interregional agreements. However, it is possible to argue
that the time that these partial scope negotiations would demand would
weaken the political and technical effort that would be needed to untie
some of the major knots that hinder global multilateral trade negotiations.
The problem would not arise from the interregional
mega agreements themselves but from the fact that they could be realized
without having restored the strength and efficacy of the global multilateral
system. The main reason for this is that all the mega agreements that
are being negotiated-and many others that have been concluded or with
ongoing negotiations, such as those between the EU and India and also
with Mercosur- are of a preferential nature. This means that they include
commitments that generate benefits only for the participating countries
and are therefore discriminatory towards non-participating countries.
Consequently, they have a significant potential to fragment the international
trading system. It is here precisely where we could find the potential
for negative effects of a network of mega preferential trade agreements
inserted in a weakened global multilateral trade system. It would mean
introducing a debilitating factor in the conditions for global governance.
In this perspective the idea of promoting the convergence
of the global multilateral and preferential agreements, whether regional
or interregional, within common frameworks becomes ever so important.
It is an idea that maybe central so that the many agreements being negotiated
help to achieve the necessary goal of reaching reasonable guidelines for
global and regional governance. It implies reconciling the approaches
of partial scope with a joint vision that is essential for promoting global
trade in a context favorable for peace and political stability and, at
the same time, for the economic and social development of all countries.
The negotiations of mega interregional agreements now have a central
place on the agenda of international trade relations. They seem to have
come into fashion and it is likely that this will continue to be so for
a while. Despite the results of the WTO Ministerial Conference in Bali,
the attention of those seeking to understand the future of international
trade will continue to focus on what will eventually be, in a still uncertain
time frame, the agreements that result from two major partial scope negotiations,
due to the number of countries involved: the Trans-Pacific Partnership
(TPP) and the Trans-Atlantic Trade and Investment Partnership (TTIP).
These negotiations are inserted within a context of strong uncertainties
regarding their future evolution which have been made evident recently
in both the TPP and the TTIP. These uncertainties are related to the resistance
that has been shown by some of the main protagonists, particularly the
United States and some countries of the European Union. However, they
are also related to the broader uncertainties that exist in relation to
the evolution of the global international system and some of its main
regions. The trends towards fragmentation and confrontation seem, at times,
to prevail over those of cooperation and convergence. The long history
offers a glimpse of what can result from such trends.
Currently, there are other international trade negotiations under way.
However, the two we have mentioned draw more attention perhaps because
they encompass the US and the EU, on the one hand, and the US and a group
of still undefined countries of the Pacific Rim, on the other hand. If
added together, these countries still represent a significant share of
world product and trade. Moreover, those who promote them seem to expect
that the contents of the agreements that are reached set the standards
for the ground rules of world trade in the future. This means that they
are pursuing goals that include, but at the same time transcend, the scope
of trade promotion.
The fact that the Bali Conference did not restore the expectations of
a global multilateral negotiation that can be concluded within a reasonable
time frame -through the current Doha Round or some of the variations that
have arisen within the framework of the WTO- would seem to be an incentive
to move forward through mega interregional agreements. However, it is
possible to argue that the time that these partial scope negotiations
would demand would weaken the political and technical effort that would
be needed to untie some of the major tangles that hinder global multilateral
At the same time, what can be seen quite clearly is that these major
hindrances are similar in all fronts, either the global multilateral or
the interregional. They have to do, among other things and not always
with the same overtones, with the sensitive aspects of the trade of agricultural
products; with key industrial sectors such as the automotive, information
technology and capital goods; with the different regulatory frameworks;
with government procurement; with intellectual property and with the treatment
of investments and the settlement of disputes that these may originate
between investors and host countries.
There may be two interpretations as to the motives that lead countries
that are relevant protagonists in world trade and investment -who not
only have been so for many years but who have played the role of rule-makers
in the creation of GATT and later of the WTO- to favor now, in practice
though not always in theory, the sphere of interregional agreements above
the global multilateral.
The first interpretation places the emphasis on the fact that within
a small group of countries -and much more so if they can be considered
as like-minded- it is more probable to reach agreements that go beyond
the currently existing commitments within the framework of the WTO (i.e.:
what is often referred to as commitments "WTO plus" or "WTO
2.0"). Such commitments could then be extended to those interested
in joining. According to those that promote them, this would be an easier
way to attain what today is seen as unfeasible within the scope of the
stalled Doha Round.
The second interpretation attaches greater weight to geopolitics. This
is closely linked to what Pascal Lamy noted by stating that "geopolitics
is back at the table of international trade negotiations." It is
an interpretation which attributes the momentum of the negotiations of
mega interregional agreements to political reasons related to the need
to counterbalance the growing importance of economies called "emerging",
not only in world trade but also in the competition for world power. According
to some analysts the weight of geopolitics would be more visible in the
TPP negotiations, especially if they conclude without having incorporated
One version of this second interpretation sees the negotiation of such
agreements as a practical method to generate rules for international trade
and investment which could not be achieved at the global multilateral
level and that, due to the economic weight of the participating countries,
could not be rejected afterwards by other countries. These would have
no choice but to join the WTO plus agreements that are concluded. Sometimes
China, Russia, India and Brazil are referred to as "the others"
(without overlooking those developing economies that have a strong potential
for international trade and investment, among which are, no doubt, Argentina
and many of the members of the G77). If this were the case, it would be
clear that the strategy of promoting mega trade agreements with a group
of countries of relevant economic dimension and longstanding tradition
as central protagonists of the international system has a fundamentally
political purpose and content. Some might argue, quite rightly, that this
could be viewed as an attempt to reframe what Bertrand Badie called the
"diplomacy of collusion" at the level of trade and investments
but with a significant impact on competition for world power.
Actually, the problem would not derive from the mega interregional agreements
themselves but from the fact that they could be realized without having
restored the strength and efficacy of the global multilateral system.
The main reason for this is that all the mega trade agreements being negotiated
-and many others that have been concluded or with ongoing negotiations,
such as those between the EU and India and also with Mercosur- are of
a preferential nature. This means that they include commitments that generate
benefits only for the participating countries and are therefore discriminatory
towards non-participating countries. Consequently, they have a significant
potential to fragment the international trading system.
And it is here precisely where lies the potential for negative effects
of a network of mega preferential trade agreements inserted in a weakened
global multilateral system. It would mean introducing a possibly debilitating
factor in the conditions for global governance. It could involve accentuating
the tendency to fragment the international system at a time when geopolitical
tensions in various regions of the world -the recent events in Crimea
are just one example- remind us of a scenario of similar characteristics
to those that led to the catastrophe of 1914 (in this regard refer to
the book by Christopher Clark, recently translated into Spanish and listed
in the Recommended Reading Section of this Newsletter and that by Margaret
MacMillan included in the same section of our Newsletter of last February).
In this perspective, the idea of promoting the convergence of the global
multilateral and preferential agreements becomes ever so important. This
was one of the main recommendations of the report produced by a panel
of experts convened by the WTO and which perhaps has not received the
attention it deserved (see the full text of the report "The Future
of Trade: The Challenges of Convergence", Geneva, 24 April, 2013
Precisely, the idea of convergence in diversity is one of the main contributions
of the Latin American strategy that will guide the new government of Chile
(see the article by Chancellor Heraldo Muñoz in El País
of Madrid from March 13, on http://elpais.com/).
While it refers specifically to the necessary articulation between Mercosur
-especially if the methodological renewal is achieved- and the Pacific
Alliance -especially if its incipient commitments are fulfilled-, its
approach focuses on the idea of differentiated commitments and speeds
that, if inserted in common institutional and regulatory frameworks such
as LAIA at the regional Latin American level or a renewed and strengthened
WTO at the global multilateral level, would neutralize the systemic fragmentation
trends observed today.
It is an idea that may be central so that the agreements that are being
negotiated contribute to the goal of achieving reasonable guidelines for
regional and global governance. It involves reconciling the partial scope
approaches with a joint vision that is essential for promoting world trade
in a favorable context for peace and political stability and, at the same
time, for the economic and social development of all countries.
Showing that this is possible might be a worthy goal to feed the agenda
of cooperation between Latin American countries. Its effects would then
transcend the regional scope. It will require, though, a good dose of
perseverance, technical imagination and political will.
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Félix Peña Director
of the Institute of International Trade at the ICBC Foundation. Director
of the Masters Degree in International Trade Relations at Tres de Febrero
National University (UNTREF). Member of the Executive Committee of the
Argentine Council for International Relations (CARI). Member of the Evian
Group Brains Trust. More