TTIP's New Global Trade Rules May Be Bad for Development
The secretly negotiated Transatlantic Trade and Investment Partnership (TTIP) between the US and EU, the world's two biggest economies and leading rule-makers in international trade, is poised to reshape the global trade rules in accordance with developed countries' priorities and raise the standards developing and emerging economies need to adhere to if they want to reap benefits from preferential access to Northern markets. This may be bad for development.
The Transatlantic Trade and Investment Partnership (TTIP) negotiated between the US and EU is poised to become a new quality regional trade agreement (RTA) in the wake of the recent proliferation of such agreements that have increased five-fold during the last quarter century. The proliferation of RTAs has reshaped the regional trade rules, introducing WTO-plus trade-related measures that have widely been argued to have circumscribed the policy autonomy in developing countries, limiting their options for effective policy interventions to spur economic development.
Notwithstanding their adverse effects on policy autonomy in developing countries, RTAs – especially North-South – have expanded because developed countries have largely been efficient in exploiting North-South power asymmetries and furthering their interests in RTAs and shaping new trade rules in accordance with their priorities. Because most Southern countries cannot afford to be left out of Northern markets, especially if their peers and competitors enjoy preferential access to them, they have been forced to undergo "competitive liberalization" to adhere to standards envisioned by the North.
Because of the inherent discriminative nature of RTAs, these agreements "trigger membership requests from countries that were previously happy to be non-members" through what Richard Baldwin of the Graduate Institute, Geneva has termed a "domino effect." The trade-diverting effects of the TTIP have been predicted to leave a myriad of third countries worse-off, which will be compelled to join the bandwagon and seek regulatory alignment with the ambitious TTIP provisions. Thus, the TTIP looks poised to become a benchmark of WTO-plus deep and beyond-the-border liberalization for the rest of the world to follow. This may be bad for development, as the countries of the global South, which have successfully resisted deeper liberalization in the Doha Round in favor of more gradual liberalization that will allow national government to retain larger policy autonomy for sustainable economic development, will eventually have to succumb to discriminative pressures and liberalize contrary to their prior policies.
On the one hand, the TTIP is a bilateral initiative between two parties, and it is nothing but natural that its signatories seek to maximize their gains. From the viewpoint of the US and EU, the TTIP is an important opportunity to set new global trade rules in line with the priorities of developed countries. If other countries want accession to the TTIP, they will have to embrace the rules set by the EU and US and give up a lot of policy autonomy (one thing they have been successfully resisting during the Doha Round) they still retain under the WTO. On the other hand, however, the TTIP is poised to emerge as an initiative that is going to reshape trade rules worldwide and create a new global trade order. Hence, a more inclusive approach that takes into consideration a wider range of interests might be more desirable.
Davit Sahakyan is a PhD candidate at the School of International Studies, University of Trento (Italy). He has been a researcher at Columbia University (New York) and has an MSc degree in Development Management from the London School of Economics and Political Science.
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