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The Perilous Retreat from Global Trade Rules

GENEVA – Over the last half-century, the world has been undergoing a “great convergence,” with per capita incomes in developing countries rising almost three times faster than those in advanced countries.­ But developments in 2013 revealed that the open trade regime that has facilitated this progress is now under grave threat, as stalemate in multilateral trade negotiations spurs the proliferation of “preferential trade agreements” (PTAs), including the two biggest ever negotiated – the Trans-Pacific Partnership (TPP), and the Trans-Atlantic Trade and Investment Partnership (TTIP).

The rules and norms arising from the General Agreement on Tariffs and Trade (GATT) and its successor, the World Trade Organization (WTO), have underpinned the export-led growth model that has enabled developing countries to lift millions of people out of poverty. The irony is that large developing economies’ rise to systemic significance is at the heart of the current deadlock in multilateral trade negotiations.

Advanced countries argue that emerging economies should embrace reciprocity and establish trade regimes similar to their own. Emerging economies counter that their per capita incomes remain far lower than those of their developed counterparts, and insist that addressing their enormous development challenges demands flexibility in terms of their trade obligations. The resulting stalemate has impeded meaningful discussion of the main issues – including non-tariff measures, export restrictions, electronic commerce, exchange rates, and the trade implications of climate-change-related policies – raised by an open global economy.

Against this background, mega-PTAs seem poised to re-shape world trade. The TPP negotiations involve a dozen Asian, Latin American, and North American countries, including Japan, Mexico, and the United States; the TTIP would encompass the world’s two largest economies, the European Union and the US; and the Regional Comprehensive Economic Partnership (RCEP) includes 16 Asia-Pacific countries. Japan is also developing an agreement with China and South Korea, as well as a deal with the EU.