Next-Generation Agreements & the WTO



Kathleen Claussen | World Trade Review

This paper reviews the trade agreement landscape and argues that the conventional understanding of trade agreements as encapsulated in the WTO Agreements is now outdated. This misperception about trade agreements is not just an institutional insufficiency. Concentration on those agreements has led many practitioners and commentators to underestimate the variable texture of the global trade agreement fabric. But these shortcomings have not inhibited states from concluding innovative alternatives to regulate and manage the cross-border movement of goods and services. As this paper shows, trade-related agreements that do not fit the perceived traditional mold have proliferated. Given these advances, more policy and scholarly attention is required. Accordingly, this paper serves as a roadmap for the accommodation of trade agreements within the WTO and as an agenda for additional research.

Peaks and Valleys in the Trade Agreement Topography

When the WTO was born, there were fewer than 100 free trade areas, preferential trade agreements, or customs unions. Today, trade-related agreements have grown in number, breadth, and scope. The WTO Regional Trade Agreements Committee acknowledges 351 agreements that have been reported to it. These 351 agreements are the ‘peaks’ in the trade agreement topography. They dominate the landscape and often track the specifications of the WTO Agreements. But there are also agreements in the ‘valleys’ that rarely get reported or discussed. This section takes up each with an eye to their evolution and contributions.

The most traditional trade instrument outside the WTO continues to be what many call the ‘free trade agreement’ (FTA). Defined by its commitment to reduce tariffs and non-tariff regulatory barriers between the parties to zero on substantially all the trade between them, the FTA is now a staple among trade institutions. Where FTAs have regional scope, they are sometimes called regional trade agreements (RTAs). Such agreements that now include many parties are often referred to as ‘mega-regionals’, as well. These have received considerable political attention among major economic players in the last decade. The term ‘preferential trade agreements’ (PTAs) is sometimes used to refer also to these same agreements or still others that likewise give preferences to states parties. These three acronyms – FTA, RTA, PTA – are imperfectly applied. For simplicity, I will refer to all of these agreements as FTAs. What links them all is attention to reducing tariffs and often non-tariff barriers among or between the parties and their conclusion and application outside of the WTO.

Putting aside the discrepancies in their titles, FTAs have continued to grow in popularity as evidenced by their exponential increase since 1994. The United States is party to 14 free trade agreements currently in force, all but two of which have entered into force since 2000. The European Union (EU) reports 44 FTAs to the WTO with several more soon to be completed. Trading under the Africa Continental Free Trade Agreement commenced on 1 January 2021, bringing together many of the countries on the continent while also working closely with the several African regional economic partnerships. In the Asia-Pacific region, since the conclusion of the Association of Southeast Asian Nations Free Trade Area of 1992, intra-regional and inter-regional agreements have grown in number including the recent Regional and Comprehensive Economic Partnership, which entered into force on 1 January 2022, and the Comprehensive and Progressive Transpacific Partnership Agreement (CPTPP). China and India are party to or are negotiating 62 FTAs between them.

FTAs have grown also in scope, expanding to many chapters covering not just tariff barriers and customs facilitation and not just non-tariff barriers covered by the WTO Agreements but also social policies that may have an effect on trade such as labor and environment. Recent academic volumes have tried to cover their many facets, including their attention to so-called ‘trade-plus’ areas. These deals have been subject to praise for these expansions by civil society actors seeking inclusion of enforceable binding trade-plus obligations and to critique by some states and private actors pushing back on these inclusions as overreach.

Taken together, this rapid expansion in number, geographic reach, content, and depth has led commentators to refer to the present generation of FTAs as a ‘spaghetti bowl’ – a mass of agreements concluded without consideration for their varying policy promotions or their potential distortions in conditions of competition for traders. Under this view, the ‘spaghetti bowl’ garbles the coherence of the trade law system and directs attention away from multilateral efforts toward greater trade liberalization. Some evidence indicates convergence within the spaghetti bowl rather than divergences in legal norms, however. Textual analyses suggest that the apparent race to conclude FTAs has led to a normative cascade in certain areas with similar language appearing in FTAs from different parts of the world. For example, some European and Asian FTAs have adopted language and chapter ideas from US FTAs. In recent years, some commentators saw these trends as indicating a constitutionalization of trade norms through which multilateral advances are made even in the absence of a multilateral instrument.

Next-Generation Agreements and the WTO

Kathleen Claussen is Professor at Georgetown Law. Her work has appeared in the Yale Law Journal, the Stanford Law Review, the Columbia Law Review, the University of Chicago Law Review, and the Virginia Law Review, among others, as well as in leading international law journals. To read more about Professor Claussen, please click here.