Development and Regional Trade Agreements: Entrenching Structural Inequities

• Citation: Vol. 46 No. 3
• Publication year: 2018

DEVELOPMENT AND REGIONAL TRADE AGREEMENTS: ENTRENCHING STRUCTURAL INEQUITIES

Antonia Eliason^*

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Table of Contents

I. Introduction...............................................................................636

II. Structural Inequities in Bilateral and Regional Trade Agreements.....................................................................637

III. Sustainable Development and the WTO Agreement Preamble-Genuine Commitment or Lip Service?.................643

IV. Reconciling the Concerns of the Global South and Global North..............................................................................645

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I. Introduction

Multilateralism has the power to engender positive economic benefits through international trade, both for countries that participate in the system and for individuals that may benefit from lowered costs. Nevertheless, as any student of introductory trade theory knows, with economic gains from trade come economic losses. How multilateral rulemaking institutions and individual countries address those losses will shape the outcomes for individual participants in the system.

Regionalism and the plurilateral trade agreements arising from the consequent fragmentation of international trade, in contrast to multilateral agreements, are unlikely to result in improvements in living standards on a global level. Particularly where developing country issues are at stake, regional trade agreements, at least as currently being negotiated, will stand to increase the divide between developed and developing countries—between the Global North and the Global South. This Article offers a critique of the trend toward regionalism and challenges the idea that continued trade liberalization is either necessary or desirable, at least at this juncture. Rather than negotiating regional trade agreements, the focus should be on shoring up multilateralism by refocusing the World Trade Organization (WTO) on the goals in its Preamble, especially the goals related to sustainable development.

Regionalism marginalizes developing countries in several ways. In particular, developing countries are marginalized because they lack the ability to join many of the regional trade agreements being negotiated, either because the agreements are closed to additional membership, like the Transatlantic Trade and Investment Partnership (TTIP), or because, like the Trans-Pacific Partnership (TPP) and its rebranded successor, the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP), they contain capacity-building-related hurdles that make it extremely difficult, if not impossible, for developing countries to join.

With the current backlash against trade liberalization and globalization, which has impacted not only multilateral negotiations but also the negotiation of regional trade agreements, it seems that additional trade liberalization will be unlikely to add anything to the global landscape.¹ One

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has only to look at the response to TPP from constituents in the United States and elsewhere to see how further liberalization is likely to play out. In the United States, some Democrats, like Chuck Schumer, have taken a very hostile position toward the North American Free Trade Agreement (NAFTA) renegotiations and other trade issues, while Republicans have pivoted away from a historically pro-trade position to adopt an isolationist approach predicated on the threat of trade wars to achieve American economic domination.² In such an environment, additional agreements seem not only superfluous, but arguably dangerous to the effectiveness of existing multilateral trade rules.

Reimagining a new multilateral trading system that would position the Global South on equal footing with the Global North is a necessary endeavor, for it is clear that what exists is inadequate. However, such an endeavor is far beyond the scope of this Essay, which is firmly rooted in the realities of the existing structures. Such a focus should not be viewed as an ideological commitment to the current institution but, rather, as a pragmatic awareness that it is better to operate within a framework of multilateral rules, however flawed, than to have a breakdown of global trade rules and a dissolution of the WTO's dispute settlement system.³

II. Structural Inequities in Bilateral and Regional Trade Agreements

Whatever profound flaws the multilateral trading system may have, the members of the WTO are, on paper at least, equal participants. In the past few years, Global South members have had greater success in shaping the WTO's agenda than in the early years of the General Agreement on Tariffs and Trade (GATT) and the WTO. In the successful negotiation of the Trade Facilitation Agreement, which concluded in 2013, the Global South members took an active role in ensuring that somewhat fairer special and differential

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treatment (S&DT) terms be included in the agreement.⁴ These S&DT provisions go beyond those found in the other WTO agreements, recognizing the necessity of providing assistance and support for capacity building to developing countries through a mechanism whereby developing countries may opt into obligations arising from certain provisions of the agreement if and when they feel ready.⁵ The Trade Facilitation Agreement also provides for developed countries to act as donors in supporting developing and least developed country members to build capacity to implement the provisions of the Agreement.⁶ Although the impact of these measures remains to be seen, the S&DT provisions in the Trade Facilitation Agreement provide an example of an effort to help balance economic power and benefits between the Global North and the Global South through multilateralism, driven by greater participation of members from the Global South in the negotiation process.

India has been a strong voice for the Global South in the WTO. In particular, it has pushed for the inclusion of a food stockpiling exception to the general WTO rules, which is of particular concern to Global South countries.⁷ India has also been critical of plurilateral initiatives in the WTO, including those on environmental goods and e-commerce, viewing these as a way for the Global North to push an agenda for which consensus is lacking.⁸ Most recently, in January 2017, a protocol amending the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement) to allow countries to export generic medicines produced under a compulsory license to the least developed countries finally came into effect. This was the first amendment to the multilateral WTO agreements.⁹ In contrast, bilateral and regional trade agreements offer little room for Global South countries to have their voices heard. The structural inequities in the negotiation process,

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as well as in the final agreements, further marginalize these developing nations.

Bilateral trade and investment agreements are generally negotiated between large economic powerhouses—the Transatlantic Trade and Investment Partnership (TTIP), between the European Union and the United States,¹⁰ for instance, or the Comprehensive Economic and Trade Agreement (CETA), between Canada and the European Union.¹¹ With these bilateral agreements, the exclusion of other participants is understandable. These are closely negotiated agreements and include the liberalization of bilateral trade and investment rules with a focus on specific areas that would provide a mutual advantage for both parties. Where these bilateral agreements are meant to move beyond and develop upon the trade rules in the WTO to advance trade liberalization and to cover areas that are not otherwise covered in existing trade agreements, it seems fundamentally misguided to ignore some of the goals enshrined in the preamble to the WTO Agreement, particularly those relating to sustainable development, the environment, and developing countries. Since the WTO has yet to fully realize these goals, incorporating provisions that go beyond the WTO agreements in these areas would seem a sine qua non for bilateral Free Trade Agreements (FTAs). Otherwise, by allowing the largest economic powers to dictate the evolution of trade and investment rules through norm-setting in their own agreements, Global South countries will yet again find themselves accepting rules that fail to address their concerns and instead impose onerous conditions on participation in what should be a global system of trade. Repeating the conditions that arose with the creation of the WTO after the Uruguay Round and gave rise to the consequent imposition upon Global South countries of controversial rules such as TRIPS as a condition for continued participation in the GATT is unacceptable.

Even more problematic are the megaregional agreements, such as CPTPP and the Regional Comprehensive Economic Partnership (RCEP), where the parties include a diversity of nations and the agreements are intended to be open to additional membership, even once the agreements come into effect. If we are to view these agreements as potential models for the future, as advocates for such megaregional agreements have ably argued in the context of norm-setting, then the treatment of developing countries in such

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agreements is particularly important.¹² TPP, for example, which despite the withdrawal of the United States will continue as...