| THE COMPLEX AGENDA OF GLOBAL TRADE GOVERNANCE:
Opportunities for an active and assertive Latin American strategy?
by Félix Peña
English translation: Isabel Romero Carranza
Seventy years after its founding the multilateral
trading system is experiencing problems. For many protagonists and observers,
it is losing effectiveness, efficiency and social legitimacy, which are
essential attributes of institutional quality and, thus, for the strength
of a system of international governance. Current trends are moving away
from it as the main playing field of institutions and ground rules of
world trade. One of such trends is the negotiation of mega-interregional
preferential agreements, which aim to set new rules for global international
trade. Will they aim to replace the current multilateral system?
The risks of fragmentation of the multilateral trading system are
becoming apparent. Its implications for global governance may be illustrated
by what happened in the 20s and 30s last century. The lack of a common
framework for international trade relations is recognized as one of the
factors that ultimately led to war. That experience later contributed
to the momentum that the US gave to the process that ended with the creation
of the GATT.
Hence the concern regarding the trend to negotiate mega-interregional
trade agreements, conceived as part of a process leading to the formulation,
by a small group of countries, of new ground rules for world trade.
Knowing which country or countries have sufficient capacity and power
to lead the process of creating the rules that affect global economic
competition and, therefore, world trade, is one of the basic questions
that needs to be answered in order to achieve an international order that
is sustainable. The gradual erosion that the institutions and rules of
the multilateral world trading system have been suffering in recent years
makes this question ever more current.
The agenda of the preparatory period of the WTO Ministerial Conference,
to be held next year in Buenos Aires, should be regarded in this perspective,
as should the next two G20 summits, the first to be held in Germany and
the second in Argentina. These two countries will form part next year
of the troika of the G20, alongside with China, which chaired the Summit
in Hangzhou last September. These events will reflect a complex agenda
of global trade governance. Latin American countries will have the opportunity
to develop an assertive and active negotiating strategy within their sphere.
The September edition of this Newsletter ended with the following question:
How to adapt the rules and institutions of the global trading system to
the realities of trade and investment, on the one hand, and to the current
distribution of world power, on the other hand? This will be a key item
on the agenda of global governance in the coming years (http://www.felixpena.com.ar/).
We now return to the subject, remembering that the institutional framework
and some of the main ground rules that shape the global multilateral trading
system originated in a global environment that has experienced radical
and profound changes in the last decades, both politically and economically.
Moreover, this transformation is not over yet, nor has it produced all
The founding moments of such a system were those of the final and following
years of World War II. They reflected a world in which the victors -especially
the US-understood that they had sufficient power to set the rules of global
order. They knew this and acted in consequence.
This was made evident in the Bretton Woods Conference (1944) and later
in the Havana Conference (1947), from which the International Trade Organization
emerged, eventually leading to the GATT (1948). These were the years when
the power of the US to create rules would only be disputed from outside
the system, then called "Western", by what was known as the
"Eastern bloc", in which the unquestioned power was the Soviet
The multilateral trading system arising in the post-war and "Cold
War" context became institutionalized in the GATT. Originally, there
were 23 contracting parties. Few belonged to the category of developing
countries. In 1994, the system became institutionalized in the WTO. Today
it has 164 member countries.
Seventy years after its founding, the multilateral trading system is
experiencing problems, some of them serious. For many protagonists and
observers, it is losing effectiveness, efficiency and even social legitimacy,
which are essential attributes of institutional quality and, thus, for
the strength of a system of international governance.
There are certain trends that would indicate its abandonment as the main
sphere of institutions and ground rules of international trade. One of
such trends is the negotiation of mega interregional trade agreements
that, being conceived as "WTO plus", aspire to set new standards
and rules for global international trade. This is the case of the Trans-Pacific
Partnership, known by its acronym TPP (this agreement has been signed
but has not yet entered into force and there are doubts about this happening
within a reasonable time or in its current version).
Although the TPP is presented as an agreement between countries belonging
to a regional geographical area -that of the Pacific Ocean-, the provisions
of chapter 30, article 4, paragraph b, state that, if conditions are met,
any other country in the world can become a member and submit its claim
for approval of the member countries, in accordance with the legal procedures
applicable in each case. The text states that the agreement is open to
accession by "(b) any other State or separate customs territory as
the Parties may agree, that is prepared to comply with the obligations
in this Agreement, subject to such terms and conditions as may be agreed
between the State or separate customs territory and the Parties, and following
approval in accordance with the applicable legal procedures of each Party
and acceding State or separate customs territory (accession candidate).".
For the full text, refer to https://ustr.gov/).
The risks of fragmentation of the multilateral trading system are becoming
apparent. Its potential implications for global governance evoke what
happened in the 20s and 30s last century. The lack of a common framework
for international trade relations is recognized as one of the factors
that ultimately led to war.
It was precisely this experience that led the US to promote the process
for the creation of the GATT. Preventing discrimination in international
trade, at least in appearance, and therefore its fragmentation effects
was one of the central ideas of the negotiating process that culminated
in the Havana Conference. The idea was embodied in Article I of the GATT
and in the resistance to "imperial preference" promoted by Great
Britain through the Imperial Economic Conference of Ottawa (1932).
Knowing which country or countries have sufficient capacity and power
to lead the process of creating rules that affect global economic competition
and therefore world trade is one of the basic questions that need to be
answered, if the aim is to attain an international order that is sustainable.
The gradual erosion that the institutions and rules of the multilateral
world trade system have been experiencing in recent years make this question
all the more current. It impinges on the geopolitical dimension of the
increasingly complex agenda of global trade governance.
Hence the concern regarding the tendency to negotiate mega-interregional
trade agreements, conceived as part of a process leading to the formulation
of new global ground rules.
President Barak Obama has himself pointed out that, if the US does not
set the rules for world trade, other countries will. On one opportunity,
he specifically referred to China: "We have to make sure America
writes the rules of the global economy. And we should do it today, while
our economy is in the position of global strength. Because if we don't
write the rules for trade around the world -guess what-China will. And
they'll write those rules in a way that gives Chinese workers and Chinese
businesses the upper hand, and locks American-made goods out" (For
the remarks by President Obama on May 8, 2015 refer to the Office of the
Press Secretary of the White House https://www.whitehouse.gov/).
The agenda of the ongoing preparatory period of the WTO Ministerial Conference,
to be held next year in Latin America (Buenos Aires), should be regarded
taking into account the perspective mentioned in the above paragraphs.
This conference is the continuation of a series of ministerial meetings
that took place in different developing countries and regions. The previous
ones were held in Asia (Bali) and Africa (Nairobi).
Likewise, this perspective should also be considered during the preparatory
period of the next two G20 summits, the first to be held in Germany, in
2017, and the second in Argentina, in 2018. Next year these two countries
will form part of the troika of the G20, together with China, who chaired
the Summit in Hangzhou last September.
In fact, the preparatory stage for the Buenos Aires WTO Ministerial Conference
has already begun. It runs along at least three tracks. The first is that
of the official preparation work within the WTO bodies. In this case,
the epicenter is Geneva. The second is that of the preparation in each
of the member countries, including the host. In this case, the epicenters
are the respective capitals of the 164 member countries and, especially,
of those who are most relevant in shaping decisions and rules. Finally,
the third track is the one that runs outside of the official sphere. It
typically develops in spaces of action-oriented thought, that is, of the
multiple forms of think tanks and transnational networks in which these
participate. (In this regard, see the December edition of this newsletter
The latter track provides an excellent opportunity for think tanks from
Argentina, as host country, and from other Latin American countries -especially
those of Mercosur and the Pacific Alliance, which together with Cuba have
more WTO tradition before the GATT- to interact with think tanks from
other regions and contribute to the design of a new era of global trade
governance. Incidentally, this is not an official activity, but it can
have a strong impact on the development of the official agenda of the
Conference and its results. It proves an excellent opportunity for the
region to try to have an active and assertive role in terms of the future
development of the international multilateral trading system.
In this regard, the fact that it is being acknowledged that globalization
and the multilateral system of international trade are at a turning point
towards what will be a different stage from what has prevailed since the
creation of the GATT, opens the way for a regional leadership, or at least
of those Latin American countries interested in having a constructive
Additionally, there is a certain fatigue or moodiness of the citizenships,
particularly in Europe, but also in the US, regarding trade globalization
and mega interregional agreements of the type of the Transnational Trade
and Investment Partnership and even the TPP.
As Enrique V. Iglesias noted in his rich and stimulating presentation
on the 20th Conference CAF-Latin American Development Bank, held in September
in Washington DC last month, "societies are angry." They feel
marginalized, do not understand and have no participation in international
trade negotiations, from which often originate rules that affect their
access to productive employment and other highly sensitive social issues.
The moodiness of societies, together with a confusing economy and misguided
international policies, are three factors that today have an impact on
the complex international setting. (See
the presentation by Enrique V. Iglesias on https://www.youtube.com/).
Perhaps, the fact that societies are angry should lead to place much
emphasis, during the preparatory stage of the upcoming Buenos Aires Conference,
on how to develop what could be called a "WTO of the people".
Hence, the issue of transparency in international trade negotiations and
in the WTO itself could be one of the main topics of the discussions that
may develop during this preparatory phase.
There is also concern regarding the abovementioned trends toward the
fragmentation of the international trading system due to the effect of
the erosion of the WTO rules, as a possible result of the proliferation
of mega-interregional preferential agreements.
Without overlooking other relevant issues, what to do about the Doha
Round will be again a complex issue and should also be addressed in the
discussions at the preparatory stage. Probably, what should be stressed
is the need to preserve and strengthen the link between trade and development,
being flexible as to how to approach such link in the future. Mechanisms
of variable geometry and multiple speeds would seem advisable. Thinking
of them, without dogmatic views of what the rules and institutions that
are agreed upon should be like, would seem more than necessary in the
discussions at the preparatory stage of the upcoming Buenos Aires Ministerial
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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