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  Félix Peña

INTERNATIONAL TRADE RELATIONS NEWSLETTER
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MEGA-TRANSREGIONAL NETWORKS OF COMMERCIAL PREFERENCES
Their impact on the global international trading system


by Félix Peña
November 2019

English translation: Isabel Romero Carranza


 

In recent years, we have observed a trend to promote mega-networks of commercial preferences of trans-regional scope that, if successful, could have a greater impact, that could be positive but also negative, on the effectiveness of the WTO as the main global institutional framework for international trade. Mega-trade agreements, with their own content and modalities, can include both developed and developing countries from different regions. Some of them may even have simultaneous participation in several agreements.

These networks are usually promoted by some of the greater powers of world trade (the US, China and the EU). This means that they can have a more concrete impact due to the size of their populations and their economies, both in terms of percentages of world trade of goods and services, of global gross product and of transnational investments, among others.

One example of this trend is the creation of the RCEP, promoted by China. Its negotiations began in 2012 and the final terms of the agreement were concluded in Bangkok, on November 4. The signing of the agreement is due to happen next year. It includes sixteen countries in the Asia Pacific region and India could eventually form part of it. However, the text of the agreement is not yet known. It could, for example, include a provision such as that of article 4 chapter 30 of the TPP.

If the agreement between Mercosur and the EU were to enter into force, as announced on June 28, it would mean a step forward in the creation of another mega-network of preferential trade agreements of trans-regional scope. It would be the result of various modalities of possible interplay between the commitments included in the bi-regional agreement and others with which they could be connected. Such could be the case, for example, of the link with the preferential trade agreements concluded by the EU with the countries of the Pacific Alliance. Without necessarily being identical, they could have an impact on the future development of bi-regional networks of productive investment and reciprocal trade between a wide variety of countries. Among other factors, the provisions referring to the accumulation of origin, included in the agreements, would need careful analysis by those operating within the scope of the network of preferential agreements.


The treaty that created the International Trade Organization (ITO) in 1947 was not ratified by the countries that signed it. Instead, the General Agreement on Tariffs and Trade (GATT), which in fact became the first global international trade agreement, was put into effect. In 1994, the GATT was incorporated into the Marrakesh agreement whereby the World Trade Organization (WTO) was created.

Since the Fourth Ministerial Conference of the WTO held in Doha (Qatar) in November 2001, efforts have been made -however unsuccessful- to broaden the scope of the commitments made in terms of development, especially in relation to agriculture. The Doha Development Round has since sought to renew the multilateral trading system. So far, this objective has not been fully achieved.

We can therefore say that the WTO is going through a crisis that questions its current and future effectiveness. Among other factors, the potential paralysis of the dispute resolution system, as a result of the questioning from the United States, has contributed to deteriorate its effectiveness and its credibility as the main institution of global international trade.

Moreover, there has been a growing trend in recent years to promote new mega- agreements of trans-regional scope that, if successful, would have a greater negative -but eventually positive- impact on the effectiveness of the role of the WTO as the main global institutional framework for international trade.

Such mega-agreements have a trans-regional scope and can include numerous countries, both developed and developing, some of which have simultaneous participation in several agreements.

They are usually promoted by the greater powers of global international trade (the US, China and the EU). These are the countries that can have the most impact, due to the size of their populations and their economies, in terms of percentages of world trade of goods and services, of global gross product and of transnational investments, among others

This trend was first expressed in the attempt to create what was called the Trans-Pacific Partnership (TPP) that was promoted by the US. The agreement was signed in February 2016. After the withdrawal of the US, the agreement became the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPA-TPP), with eleven member countries.

The second example of this trend was made manifest in the Regional Comprehensive Economic Partnership (RCEP), which has been promoted by China and which we will describe below.

The third case of this trend involves the networks of trans-regional trade agreements promoted by the European Union (EU), which would be reflected in the agreements with Japan and Canada, and with Mercosur, among others.

On November 4, the negotiations to finalize the concluded in Bangkok within the scope of the Thirty-Fifth ASEAN Summit. Negotiations began in 2012 and the final agreement is scheduled to be signed next year.

The RCEP includes fifteen countries (China, Japan, South Korea, Australia, New Zealand, and those that make up the ASEAN: Indonesia, Thailand, Singapore, Malaysia, the Philippines, Vietnam, Myanmar, Cambodia, Laos and Brunei). Still pending is the incorporation of India, that also participated in the negotiations that culminated in Bangkok. (On the topic of the RCEP, see the analysis by Alicia González, "The battle is being fought in Asia-Pacific", in "El País" newspaper of November 5, 2019 and the ASEAN website https://asean.org/rcep-leaders-agree-sign-trade-pact-2020/. For other interesting articles on the RCEP and the withdrawal of India, see https://en.wikipedia.org//; https://www.scmp.com/; https://www.indiatoday.in/; https://www.business-standard.com/; https://www.bangkokpost.com/).

If India were finally included, the RCEP would represent a population of 3.4 billion people (47% of the world's population, 32% of world GDP, 29% of world trade and 32% of global investment).

The agreement contains twenty chapters, including among others those related to trade in goods, services, investments, economic and technical cooperation, intellectual property, competition, dispute resolution, electronic trade, and small and medium-sized businesses.

At the same time, if the agreement between Mercosur and the EU entered into force, as announced on June 28, it would mean a step forward in the formation of a new mega-network of preferential trade agreements of trans-regional scope. (On the topic of the Mercosur-EU agreement, see the July and September 2019 editions of this newsletter on http://www.felixpena.com.ar/).

Such mega-network would be the result of the several forms of connections between the commitments included in the different agreements concluded by the EU, for example with the countries of the Pacific Alliance, which without necessarily being identical could have an impact on the future development of productive investment and reciprocal trade networks between a wide variety of Latin American countries. In this regard and among other factors, the provisions referring to the accumulation of origin would need to be carefully analyzed by those who operate within the scope of the corresponding network of preferential mega-agreements.


Recommended Reading:


  • Anderson Perry, "Brazil Apart - 1964-2019", Verso, London-New York 2019.
  • Arana, Marie, "Silver, Sword & Stone. The Three Crucibles in the Latin America Story", Simon & Schuster, New York 2019.
  • Barbosa, Rubens, "Um diplomata a serviço¨ do Estado. Na defesa do interesse nacional. Depoimento ao CPDOC", FGV Editora, Rio de Janeiro 2019.
  • Bartesaghi, Ignacio; Calvelo, Natalia de María; Melgar Alassio, Natalia; Pereira, María Eugenia, "La nueva generación de acuerdos de la Unión Europea y sus implicancias en el sistema internacional", en Eric Tremolada Álvarez (editor), "Gobernanza, cooperación internacional y calores democráticos comunes", Universidad Externado de Colombia, Bogotá, Octubre 2019.
  • Berman, Sheri, "Democracy and Dictatorship in Europe. From the Ancien Régime to the Present Day", Oxford University Press, New York 2019.
  • Blanchflow, David G., "Not Working. Where Have All Jobs Gone", Princeton University Press, Princeton and Oxford 2019.
  • Cabestan, Jean-Pierre, "China Tomorrow. Democracy or Dictatorship?", Rowman & Littlefield, Lanham 2019.
  • Carciofi, Ricardo; Gayá, Romina; Campos, Rosario, "Acuerdo con la UE. Mercosur necesita revitalizar su agenda interna", CECE, Buenos Aires, Octubre 2019.
  • Chor, David, "The end of global supply chains as we know them?, East Asia Forum, 14 October 2019, en https://www.eastasiaforum.org/.
  • Figes, Orlando, "The Europeans. Three Lives and the Making of a Cosmopolitan Culture", Metropolitan Books - Henry Holt and Company New York, New York 2019.
  • Gao, Henry, "China developing country status bring it few benefits in the WTO", East Asia Forum, 15 October 2019…
  • Giridharadas, Anand, "Winners Take All. The Elite Charade of Changing the World", Alfred A. Knoff, New York 2018.
  • Gilley, Bruce; O'Neill, Andrew (editors), "Middle Powers and the Rise of China", Georgetown University Press, Washingon DC 2014.
  • Holland, Tom, "Dominion. How the Christian Revolution Remad the World", Basic Books, New York 2019.
  • Job, Brian, "Canada´s middle power dilemma", East Asia Forum, 17 October 2019, en https://www.eastasiaforum.org/.
  • Marmorato, Pablo, "Nenuca. La Historia de Graciela Fernández Meijide", Sudamericana, Buenos Aires 2019.
  • Marozzi, Justin, "Islamic Empires. Fifteen Cities that Define a Civilization", Penguin Books, Penguin Random House, 2019.
  • Milanovic, Branko, "Capitalism Alone. The Future of the System That Rules the World", The Belknap Press of Harvard University Press, Cambridge - London 2019.
  • Ministério das Relacoes Exteriores, "Zona de Livre Comércio na América Latina", Rio de Janeiro 2019.
  • Reid-Henry, Simon, "Empire of Democracy. The Remaking of the West since the Cold War -1971-2017", John Murray Publishers, London 2019.
  • Sáenz Quesada, María, "1943. El Fin de la Argentina Liberal. El surgimiento del Peronismo", Sudamericana, Buenos Aires 2019.
  • Solnit, Rebecca, "Wanderlust", Penguin Books, New York-London 2001.
  • Stuenkel, Oliver, "Post Western World", Polity Press, Cambridge 2016.
  • Stuenkel, Oliver, "Libealismo Latinoamericano sob Pressão", Folha, 28 out.2019.
  • Straumann, Tobias,"1931. Debt, Crisis, and the Rise of Hitler", Oxford University Press, Oxford 2019.
  • Tamir, Yael, Why Nationalism", Foreword by Dani Rodrik, Princeton University Press, Princeton and Oxford,2019.
  • Vargas Llosa, Mario, "Tiempos recios", Alfaguara, Buenos Aires 2019.
  • Walsh, Katleen, "The gradual internationalization of the RNB", East Asia Forum, 23 October 2019, en https://www.eastasiaforum.org//

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 information.

http://www.felixpena.com.ar | info@felixpena.com.ar


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