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Does Trade Multilateralism have a Future?: Reviving the WTO’s Credibility as the premier Multilateral Trade Negotiating Forum

Final Report Summary - MULTITRADE (Does Trade Multilateralism have a Future?: Reviving the WTO’s Credibility as the premier Multilateral Trade Negotiating Forum)

In the present climate of weak economic prospects, the developed countries have seen a growing disenchantment with globalisation and trade liberalisation. Irrespective of their stated interest in enhancing export revenue to bridge fiscal gaps, strong protectionist tendencies are surfacing. Also, the focus seems to be shifting from multilateralism, made evident from the failure to conclude the on-going Doha Round of WTO negotiations and the recent spurt in FTA negotiations worldwide. On the other hand, developments since the recent financial crisis indicate that the WTO is yet to lose its relevance as the multilateral referee of global trade relations, as least insofar as its rule-making and dispute-settlement roles are concerned. The laudable resilience of the global trading system and WTO institutions notwithstanding, recent experience with Doha Development Round negotiations has highlighted the need for systemic changes in WTO, in the interest of making the organisation more credible and efficient.

It is in this context that this project analyses possible contours of a reinvigorated multilateral trade negotiation system and trade liberalising philosophy, one that can meet the trade challenges and political-economy realities of the 21st century. To do this, the project looks at the contours of a more constructive engagement and leadership by emerging economies (and in particular Brazil, India and China) in the international trade negotiations, especially given that the major industrialised countries have now reduced their leadership in the WTO-led multilateral trade negotiations. The project also evaluates the acceptability of a developing-country-led negotiating template that might emerge as result. Finally, we discuss how the WTO may be reformed to institutionalise systems and governance modalities that foster/boost dynamic comparative advantages for all Members, and the specific role of emerging markets in restoring WTO’s supremacy.


A description of the work performed since the beginning of the project
The work performed in the Phase I of the project has focused on how super-RTAs (Regional Trade Agreements) may emerge as game changers in the multilateral trading system as promulgated by the WTO, and the implications for China and India; and on examining the future of the WTO as the world’s premier multilateral trade negotiating forum.

• RULEMAKING IN SUPER-RTAS: IMPLICATIONS FOR CHINA AND INDIA- Working Paper (Deliverable 1)

The paper analyses the new economic governance system that is likely to emerge given the renewed interest in regionalism, and argues that while the super-RTAs will not be entirely benign in their impact on China and India, rather than forcing these economies to accept the higher new regulatory standards enshrined in the super-RTAs, a distinct possibility in the medium-term is the emergence and entrenchment of a dual regulatory regime in these economies.

The full working paper is available on:
http://www.bruegel.org/publications/publication-detail/publication/820-rulemaking-in-super-rtas-implications-for-china-and-india/

• MULTILATERALISING 21ST CENTURY REGIONALISM: NEW TRADE GOVERNANCE RULES, THE WTO AND EMERGING ECONOMIES- Policy Contribution (Deliverable 2)

The paper examines the potential implications for the emerging markets of the recent global turn to regionalism, given that they are not party to the negotiations setting the initial rules. Comparing the impact of the mega-regional agreements vis-à-vis WTO-led multilateralism, and qualitatively assessing the credible threat and viability of a 21st century NAFTA (North American Free Trade Agreement) effect from these mega-regionals under negotiation, the paper analyses how the different regional agreements under negotiation may be made compatible with the WTO regime and the role of key emerging markets therein.

The full paper is attached to this report.

Following the course of events on the global stage, Dr. Karmakar delivered several extra papers during her fellowship:
• Prospects for Regulatory Convergence under TTIP, policy contribution published on 4th November 2013
• Life after Bali: renewing the world trade negotiating agenda, policy contribution published on 4th December 2013
• The ISDS hurdle in TTIP: Promise or Predicament, policy brief not public
• Memo to the New Commissioner for Trade, published in August 2014. Co-authored by Andre Sapir, Bruegel Senior Fellow and Supervisor of the Marie Curie Fellow

A description of the main results achieved so far
The research carried out in the first deliverables (working paper), “Rulemaking in Super-RTAs: Implications for China and India”, is particularly relevant, improving that market fragmentation is provoked by imbalances due to not opening the Trans-Pacific Partnership (TTIP) and the Transatlantic Trade and Investment Partnership (TPP) to the wider international community. Consequently, the stated objective of global regulatory harmonisation is not achieved because the large emerging economies choose not to move up to the higher standards because of the lack of effective demand in their domestic markets and other high-growth emerging economy markets. The changing demand patterns may in fact encourage multinational corporations in industrialised economies to produce products with differing standards targeting different markets. A healthy dose of realism about what can be achieved and by when is therefore necessary to manage expectations and retain the credibility of the new super-RTAs.

The research carried out in the second deliverable (Policy contribution) “Multilateralising 21st Century Regionalism: New Trade Governance Rules, the WTO and Emerging Economies” is directly relevant for the political economy, as the policy contribution qualitatively analysis different aspects of it to map the challenges that the WTO needs to identify in going forward highlighting which are the institutional reforms imperative for change and market adaptation. These findings are, obviously, relevant from the wider EU integration perspective as it calls for deeper multilateral engagement between Member States.

The findings presented in the final policy contribution were reality-checked during the Final Workshop “The future of trade multilateralism” organised by Bruegel with the coordination of Dr. Karmakar. In order to assure a challenging and realistic discussion and quality outcomes, the workshop respected “Chatham House” rules and featured high-level representatives as speakers and panellists: Yang Yanyi, H.E. Ambassador of China to the EU; Manjeev S. Puri, H.E. Ambassador of India to the EU; MxolisiNkosi, H.E. Ambassador of South Africa to the EU; Marc Vanheukelen, Head of Cabinet of Commissioner for Trade; Elena Bryan, Senior Trade Representative at the US Mission to the EU; Rohini Acharya, Chief of Section Regional Trade Agreements, WTO; Hugo Paemen, former EU ambassador to the US and EU negotiator at GATT, to name a few.

The expected final results and their potential impact and use
• To deepen the understanding in the EU and other developed-country markets about emerging market concerns on multilateral trade governance, extending the discussion to a wider and more diverse audience of stakeholders, thereby helping to improve cooperation between the EU and its emerging market trade negotiator counterparts in the WTO in promoting the cause of trade multilateralism.

• To stimulate action by respective governments and their agencies on appropriate and WTO-consistent regulatory reform in their home countries that would, in turn, contribute to a rapid conclusion of the now comatose Doha Round and further deepen multilateral trade liberalisation.

• To influence policymakers in the EU, trade negotiators and administrators in the capital/Geneva offices of the economies under study and the WTO secretariat, as well as academics, business groups and industry associations and civil society organisations and change their thinking in Europe and in emerging markets.

Highlights
Dr. Karmakar was contacted by the European Union External Action- Geneva to take part in the Geneva Symposium WTO on 9th May 2014. In the session entitled “Multilateralism at multiple speeds: what place for plurilaterals in the global trading system?” to present the working paper 1. She also met on 24th June 2014 the Ambassador Pangratis in Geneva to discuss/ get his perspective on her second paper, the policy contribution “Multilateralising 21st Century Regionalism: New Trade Governance Rules, the WTO and Emerging Economies”.