The RTA Exchange: Why Now?

At ICTSD, for a number of years we have been closely studying the nature and evolution of today’s global trade and investment system, which is best described using Keohane and Victor’s “regime complex” conceptualization.

The principles, norms, rules, and procedures of the quasi-universal multilateral trade system embodied by the GATT-World Trade Organization (WTO) and its agreements have been, and remain today, the spine of the global system of arrangements for economic cooperation and integration.

But in the past few years, the track of preferential trade agreements (RTAs in WTO-speak) has exploded as countries seek to add to their multilateral terms of globalization by selectively participating in deeper integration schemes in variable geographic geometry.

By 2016, 270 different RTAs had been notified to the WTO and are currently in force, and several others are under negotiation. Meanwhile, almost 3300 bilateral investment treaties (BITs) have been concluded, a large share of which contain trade-related provisions that are critical in the global economy of the 21^st century.

Many of these agreements have evolved over time and most now contain disciplines that are wider in scope, deeper in their integration, and significantly more sophisticated than the multilateral trading system — what is known in the specialized literature as WTO-plus and WTO-beyond provisions. RTAs have also served as focal points of interstate cooperation and as incubators and testing ground for new global trade rules. Over time, they have become the de facto loci for deepening integration and furthering trade liberalization.

But the proliferation of RTAs has also raised a fair share of concerns, particularly regarding the discriminatory effect of RTAs on nonparties and the extent to which they may lead to trade diversion as well as to complex and overlapping regulatory requirements, or divert attention from multilateral efforts.

More complex questions include whether deep integration initiatives encompass standards that outsiders find favorable, whether such rules are easy for developing economies to adopt, and whether they create markets that are easily contested by outsiders.

Another concern relates to the impact of such initiatives on multilateral negotiations. The rise of RTAs has created a sense of urgency among WTO members, and discussion around them was elevated to a “systemic issue” in the Doha Round.

On December 14, 2006, the General Council established a new transparency mechanism for all RTAs on a provisional basis. This mechanism, which was negotiated in the Negotiating Group on Rules, provides for early announcement of any RTA and notification for consideration by members based on a factual presentation by the WTO Secretariat.

By the end of 2015, at the 10^th Ministerial Conference in Nairobi, WTO members had agreed to work towards transforming the current provisional Transparency Mechanism into a permanent mechanism. They also instructed the Committee on RTAs to discuss the systemic implications of RTAs for the multilateral system and their relationship with WTO rules.

As RTAs emerge as the loci of international rule-making in global commerce, the question is not so much whether RTAs should be tested for compliance with GATT 1947 rules on disciplines in RTAs, but rather how the WTO must function in this complex new context of RTAs and how it should build upon them.

RTAs, in conjunction with WTO agreements, increasingly define the use and distribution of resources and therefore have a direct bearing on critical challenges such as food security, environmental sustainability, social equity, labor conditions, and income generation. Therefore, the focus should instead be on determining how to mitigate the real challenges and harness the opportunities that RTAs pose to fostering economic integration and advancing sustainable development.

This new approach should focus on high-impact initiatives aimed at:

• Harvesting gains from RTA-driven liberalization and ensuring the multilateral spread of benefits, such as through the elimination or minimization of negative spillovers towards nonparties, particularly through discriminatory elements in RTAs;
• Building on innovations in RTAs, drawing on their experience as laboratories of new trade disciplines for the benefit of the larger global trading system;
• Building on lessons learned in RTAs, including the vast body of tried and tested rules that go beyond WTO provisions (WTO-plus or WTO-beyond); and
• Multilateralizing best practices for sustainable development where significant convergence and homogeneity exist among RTA provisions.

A key step in developing this new approach to RTAs and their mutual coherence, as well as their congruity with the multilateral trade system, is through an enhanced understanding of the contents, dynamics, and experiences learned from the various RTAs themselves.

Yet, in spite of the large amount of RTA disciplines, rules, and practical experiences, existing information on RTAs remains ad hoc and uncoordinated and is dispersed across a variety of fora, including the WTO, university centers, think tanks, multilateral development banks, and regional organizations, as well as in blogs and news media. In particular, there is no one instrument or forum that systematically brings together all relevant information on RTAs on a regular basis, let alone one that encourages dialogue and the sharing of experiences between RTA and WTO negotiators or the various stakeholders involved.

More significantly, there is no one platform that encourages a structured, systematic global “mindshare” on RTAs with a view to building synergies among RTAs, and between RTAs and the multilateral trading system. The failure to tap into the wealth of existing information and experience in negotiating and implementing RTAs represents a gaping lost opportunity. This gap can be filled through the creation of an independent platform with both virtual and real dimensions in the form of an RTA Exchange.[1]

Jointly implemented by the Inter-American Development Bank (IDB) and ICTSD, the RTA Exchange will work as a first-class forum and independent clearinghouse mechanism to share information on RTAs, both existing and under negotiation, while promoting a purposeful multistakeholder dialog on the interface between RTAs and the WTO.

[1] Suominen, Kati. RTA Exchange: Organizing the World’s Information on Regional Trade Agreements. E15Initiative. Geneva: International Centre for Trade and Sustainable Development (ICTSD) and World Economic Forum, 2014. www.e15initiative.org