As central banks begin to wind down several years of ultra-loose monetary policy and as governments start envisioning life beyond huge, budget-punishing stimulus programs, one word -forgotten in the fog of economic recession- has returned to policymakers’ lips: trade. Trade’s fashionable resurgence is to be expected: in 2012, the world economy (gross world product) grew by $2 trillion to $72 trillion, and the World Bank reports that around 40% of developing countries are now within 1% of reaching their level of potential output/income. After years of contraction, conditions once again appear ripe for a resumption in global commerce. Indeed, the spring of 2013 has been dominated by trade headlines: from the EU-China solar panels dispute to Secretary of State Kerry’s business-focused trip to India to wrangling over the French ‘cultural exception’ (in the context of a prospective U.S.-EU trade ) , there is a palpable sense that the intellectual case for freer trade is once again gathering momentum as countries look to recoup catastrophic losses of production through specialization-driven exchange.
Yet all the talk of “freer trade” as a prescription for consolidating the economic recovery is somewhat ironic given the way in which trade has rebounded as a frontline policy tool. Trade, both its practise and conceptualization, has exploded in the last two years – but with a strongly regional and bilateral bent. States are pursuing preferential trade arrangements for what appear to be self-serving or preemptive motives: to contain powerful outsider economies (as the Trans-Pacific Partnership has been accused of doing against China), counterbalance competing regional blocs (as the Pacific Alliance is believed to do with respect to Mercosur) or set global trade liberalization standards outside of the formal multilateral process (as the Transatlantic Trade and Investment Partnership, or TTIP, aims to do). Moreover, plurilateral arrangements such as the Trade in Services Agreement (TISA) appear at odds with the WTO’s nondiscriminatory ethos despite assurances of eventual multilateralization into the broader WTO framework.
Meanwhile, genuine multilateral initiatives, whether jumpstarting the Doha Development Round or transplanting select components of the process into a fresher, revitalized agenda, continue to lag behind in the general trade discourse. As the WTO prepares for its landmark Ninth Ministerial Conference in Bali in December, there is a growing sense of despair and urgency that despite the efforts of departing Secretary General Lamy at promoting a new Doha consensus, little progress will be made in the three Doha ‘deliverables’ that would break the current impasse: trade facilitation, agriculture and the so-called “LDC (least developed countries) issues”. Lamy’s incoming successor, Roberto Azevêdo, has unambiguously endorsed the Doha process and has laid out plans for a robust role for the WTO in the post-recovery , though he too acknowledges the need to navigate developing-developed country TRIPS, NAMA and services.
The new “free trade” drive framing the global economic recovery seems therefore to be based on two strands of wisdom: 1) there needs to be a new wave of trade to raise incomes and lock-in gains from the ongoing recovery, and 2) this is best achieved through targeted liberalization agreements with and among individual and groupings of states, rather than as a global collective. The historical evidence shows piecemeal trade liberalization conducted on a regional or bilateral basis to be imperfectly (the German Ifo Institute has projected that the United States stands to benefit more from a TTIP than the EU: the agreement could add up to to 13% to U.S. income per capita as opposed to only 5% of the average European’s income) , yet in 2013 many states seem to believe that these asymmetries are an acceptable cost to the . The change in thinking is raising many uncomfortable questions: did the 2007-9 global recession kill the multilateral, nondiscriminatory trade agenda? Are we witnessing a “new normal” in trade practice,
Why do states earnestly pursue regional ?
Take Japan as a . There are many potential factors coloring Shinzo Abe’s decision to take Japan into the TPP. The most obvious is economic: Japan’s GDP is projected to grow by some 2.2% by 2025
. Is this WTO: 3.3% trade growth
Political – China and Taiwan
Is the multilateral, nondiscriminatory trade agenda dead? No: it is merely dormant, in need of a . Bhagwati argues that for multilateralism to kick off, there must be an ideological and interest impetus for simultaneous, nondiscriminatory liberalization , and that these pro-trade ideas and interests must converge (Bhagwati, 1988).
Are we witnessing a “new normal” in trade? Regionals and bilaterals are springing up with , and it seems reciprocal, alacrity – if you can’t beat/join it, form your own. a subtler form of retaliation China and South Korea, both outside the TPP process, will begin FTA negotiations
Take the TTIP for instance.
The Peterson Institute’s World Trade Agenda