1. www.fordschool.umich.edu The Changing Landscape of Trade Negotiations Alan V. Deardorff University of Michigan For presentation at 2015 Seoul Conference on Trade & Industry: A New Paradigm for the World Trading System November 10, 2015

2. www.fordschool.umich.edu How Trade Negotiations Have Changed 1945-1994 – Under GATT, 8 Rounds of Multilateral Trade Negotiations Reduced tariffs to about 1/10 what they were before On MFN (Most Favored Nation) basis Among all GATT Signatories – 15 countries in 1945 – 128 countries in 1994 2

3. www.fordschool.umich.edu 1945-1994 – Culminated in the 1995 creation of the World Trade Organization, which included GATT GATS TRIPs 3 How Trade Negotiations Have Changed

4. www.fordschool.umich.edu 1995-2015 – Under WTO, only one Round of multilateral negotiations covering broad trade policy: The Doha Round Began 2001 Still has not finished, and may never – Only multilateral success has been the 2014 “Bali Package” dealing primarily with Trade Facilitation 4 How Trade Negotiations Have Changed

5. www.fordschool.umich.edu 1995-2015 – Other negotiations under WTO have been “plurilateral” Involve a subset of WTO members in agreements that others may or may not not join – Instead, Free Trade Agreements (FTAs) have proliferated Mostly zero tariffs within only a group of 2 or more countries 5 How Trade Negotiations Have Changed

6. www.fordschool.umich.edu Plurilaterals negotiated under WTO – Information Technology Agreement 1996, 29 countries but grew to 81 Updated in ITA-II, but not yet adopted – Financial Services Agreement 1997, 70 countries – Agreement on Basic Telecommunications Services 1998, 90 countries – Anti-Counterfeiting Trade Agreement 2012, 37 countries 6 How Trade Negotiations Have Changed

7. www.fordschool.umich.edu FTAs – Started with NAFTA in 1994 US, Canada, & Mexico Prodded the GATT Uruguay Round negotiations to completion – NAFTA was followed by other FTAs by other countries 7 How Trade Negotiations Have Changed

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9. 9 South Korea’s FTAs 2003 Chile2010 EU 2005 EFTA2011 Peru 2005 Singapore2012 Turkey 2006 ASEAN2014 Australia 2007 US2014 Canada 2009 India How Trade Negotiations Have Changed

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17. Mega-FTAs in the Past – European Union (grew from 6 to 28 countries) – Customs Union – MERCOSUR (Grew from 4 to 5 S. American countries) – ASEAN FTA (10 countries) 17 How Trade Negotiations Have Changed

18. www.fordschool.umich.edu Mega-FTAs in the Present – Trans-Pacific Partnership - TPP 12 countries Negotiations completed Oct 5, 2015 Yet to be ratified Intended to be open to additional countries – Indonesia – S. Korea? 18 How Trade Negotiations Have Changed

19. www.fordschool.umich.edu Mega-FTAs in the present – Regional Comprehensive Economic Partnership – RCEP 10-member ASEAN plus 6 countries with which ASEAN has FTAs: – Australia – China – India – Japan – S. Korea – New Zealand 19 How Trade Negotiations Have Changed

20. www.fordschool.umich.edu Mega-FTAs in the present – Trans-Atlantic Trade and Investment Partnership – TTIP US 28-member EU 20 How Trade Negotiations Have Changed

21. www.fordschool.umich.edu Preferential tariff cuts – Pro: trade creation Similar to the classic “gains from trade” – Cons: Trade diversion Rules of origin (ROOs) Exemption of sensitive sectors 21 Pros and Cons of FTAs

22. www.fordschool.umich.edu Other aspects of actual FTAs – Pros: Extension to trade in services Harmonization of regulations – Cons (?): Extension of IP protection Trade enforcement of labor standards Trade enforcement of environmental standards Investor-State Dispute Settlement 22 Pros and Cons of FTAs

23. www.fordschool.umich.edu Preferential tariff cuts – Pros: Larger potential for trade creation If ROOs cumulative, less distorting Potential for adding members – Cons: Though there are fewer outsiders, each may be harmed more by trade diversion 23 Additional Pros and Cons of Mega-FTAs

24. www.fordschool.umich.edu Other aspects of actual Mega-FTAs – Pros: May contribute to broader and more uniform standards – Cons: Their use as weapons of geopolitics 24 Additional Pros and Cons of Mega-FTAs

25. www.fordschool.umich.edu May create pressure to complete Doha Round. – Possible, just as NAFTA motivated Uruguay Round (but not likely) – Further multilateral trade liberalization as was done under the GATT is unlikely in the foreseeable future 25 Implications of Mega-FTAs for the WTO

26. www.fordschool.umich.edu By lowering trade barriers regionally, Mega-FTAs will – Hasten the decline of uncompetitive industries, – Thus gradually reduce political forces for protection – This may reduce the need to use WTO- sanctioned administrative protection (anti-dumping, etc.) 26 Implications of Mega-FTAs for the WTO

27. www.fordschool.umich.edu Trade disputes will have alternative fora in which to be settled: Choice between WTO panels and FTA panels – This may lessen the role of the WTO Dispute Settlement Mechanism – But it will remain relevant 27 Implications of Mega-FTAs for the WTO

28. www.fordschool.umich.edu WTO will continue to be important for plurilateral negotiations on issues that transcend the Mega-FTAs Some issues that lend themselves neither to plurilateral agreements not to Mega-FTAs will remain unresolved – Most important: Subsidies 28 Implications of Mega-FTAs for the WTO

29. www.fordschool.umich.edu If S. Korea does not join – Will suffer from trade diversion in countries without Korea FTA Japan Others – Will suffer from trade diversion due to ROOs even in countries with Korea FTAs United States 29 Implications of TPP for S. Korea

30. www.fordschool.umich.edu If S. Korea does not join – Will not be subject to other requirements of TPP But most of these are already part of KORUS 30 Implications of TPP for S. Korea

31. www.fordschool.umich.edu If S. Korea does join – I can’t see much harm, and considerable benefit. 31 Implications of TPP for S. Korea