Ahead of the WTO’s 13th ministerial conference, scheduled for February 2024, the organization’s 164 members will focus on the need to deliver tangible outcomes concerning food and energy security, climate change and development challenges.
At the 12th ministerial conference, in June 2022, WTO members also agreed to work on reforming the organization – including addressing long-standing issues related to ‘special and differential treatment’ for developing countries, and improving transparency of trade measures introduced by members. Perhaps most importantly – and ambitiously – they expressed their intention to address concerns regarding the WTO’s dispute settlement system and work towards securing a fully functioning system by 2024. The US’s ongoing block on appointments to the WTO Appellate Body has meant that the body has been in paralysis since December 2019. With the next US presidential election scheduled for November 2024, it is highly unlikely that this issue will be resolved anytime soon.
The WTO’s function as a negotiation forum has faced multiple challenges, and negotiations of multilateral agreements involving all members have stalled. Most action has been among like-minded subgroups of members in plurilateral initiatives.
The WTO’s function as a negotiation forum has also faced multiple challenges, and negotiations of multilateral agreements involving all members have stalled. Meanwhile, most action has been among like-minded subgroups of WTO members in plurilateral initiatives, such as the e-commerce negotiations discussed in greater detail later in this paper. In the absence of any breakthrough in multilateral talks, bilateral and regional FTAs have also proliferated over the last two decades.
But more recently, the US in particular seems to have abandoned the route of bilateral and regional FTAs, and is now focusing on non-traditional and flexible cooperation mechanisms such as the Indo-Pacific Economic Framework for Prosperity (IPEF) or the US–EU Trade and Technology Council (TTC).
This US turn away from decades of trade policy reflects the view that FTAs in many developed countries have reached the point of diminishing economic returns. FTAs are primarily designed to reduce tariffs, which have mostly been eliminated or reduced over the years, and thus the scope for further tariff reductions is limited. Trade liberalization has increasingly focused on tackling non-tariff measures (such as rules, regulations and standards), and has therefore come under greater public scrutiny. Combined with concerns around distributional effects and job losses, FTAs have become domestically unpopular in the US and in Europe. At the same time, specific issues with regard to supply-chain disruptions and the growing importance of regulatory aspects concerning digital economies are not readily covered in the negotiation forums that FTAs represent. Rather, these issues can be more easily addressed in cooperation forums, including the new cluster of platforms like the IPEF or the TTC.
But while the US has seemingly turned its back on new bilateral and regional FTAs, the UK and the EU are still keen to advance this agenda. The UK is in the process of acceding to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Talks have advanced more slowly than anticipated because of issues related to market access, and also because the UK is the first country to accede. Since this accession process will set the precedent for future negotiations with countries wanting to join the agreement, it is being pursued with extreme care – and even more so since China and Taiwan have also expressed an interest in joining the CPTPP.
While the US has seemingly turned its back on new bilateral and regional FTAs, the UK and the EU are still keen to advance this agenda.
The move to deepen regional cooperation across Asia and the Pacific via the CPTPP and the Regional Comprehensive Economic Partnership (RCEP) in recent years can support inclusive and sustainable growth. However, it also entails complexity in navigating overlapping (and sometimes contradictory) provisions within these mega-regional and other existing bilateral arrangements. Countries outside the region are interested in strengthening trade and investment ties with the Asia-Pacific because it is the world’s fastest-growing economic region and is projected to be home to two-thirds of the global middle class by 2030.
Meanwhile, the stalled trade deal between the EU and Mercosur states – Argentina, Brazil, Paraguay and Uruguay – stands a good chance of moving forward in 2023. While both sides reached a political agreement in 2019, trade protection and environmental issues have prevented ratification. The return to office of Luiz Inácio Lula da Silva as Brazil’s president may now accelerate the ratification process on the EU side. Moreover, Sweden and Spain each hold the EU presidency in 2023 (Sweden in January–June, and Spain in July–December); the former’s traditionally pro-free-trade stance and the latter’s close ties with Latin America add a favourable dynamic to the EU–Mercosur deal.
Regional integration in Africa has received a boost via the entry into force of the African Continental Free Trade Area (AfCFTA) in 2019. With Africa’s population expected to double by 2050, the continent will play an increasing role in global trade – beyond the current focus on its large quantity of natural resources. The EU and the US want to increase trade and investment with Africa, with a focus on green energy and digital technologies; part of current engagement efforts is to provide a counterweight to China’s engagement in Africa.
