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Symposium 2014

Background Paper - Shaping a Free and Fair World Trade Order

The Challenge

Regional trade agreements have increased dramatically over the last twenty years. Since 1995, the founding year of the World Trade Organization (WTO), more than 400 regional trade agreements have be ...

Regional trade agreements have increased dramatically over the last twenty years. Since 1995, the founding year of the World Trade Organization (WTO), more than 400 regional trade agreements have been registered under the General Agreement on Tariffs and Trade (GATT). In the previous 45 years, only 124 regional trade agreements were registered. Moreover, recent initiatives like the Trans-Pacific Partnership (TPP) or the Transatlantic Trade and Investment Partnership (TTIP) aim to go far beyond the size and depth of traditional trade agreements. By taking on contested issues such as government procurement and private litigation, they form a new generation of trade agreements. As a result, a patchwork of regional free trade zones has emerged, which calls into question the multilateral trade regime under the auspice of the WTO and its languishing Doha Development Round (DDR) This trend has important distributional and political ramifications. Due to their comprehensiveness, the planned regional free trade agreements potentially offer immense benefits for the participating economies. However, the resulting trade diversion effects are detrimental to non-participating countries. As rich economies are more likely to profit from trade than developing ones, the divide between the two will probably grow. Consequently, there may be a potential shift in the balance of power in the global economy that could systematically discriminate against mostly southern, developing nations.

Looking at the last two decades, we can observe an economic phenomenon that will have a unique and essential impact on the way we internationally trade and do business in the future. Since 1995, the founding year of the World Trade Organization (WTO), more than 400 regional trade agreements have been registered under the General Agreement on Tariffs and Trade (GATT), up from only 124 from 1948 to 1994. This trend has particularly escalated within the last 10 years after the failure of the Doha development round. Those new agreements include Tariff Agreements (TAs) – like Customs Unions (CUs) and Free-Trade Areas (FTAs) – as well as a growing number of Economic Partnership Agreements (EPAs). They form a new generation of agreements because they go beyond traditional trade negotiation issues like tariff reduction and market access for goods, and instead aim to create broader and deeper market integration in particular by reducing nontariff trade barriers.