Globalisation means worldwide trade pacts needed

The Trans-Pacific Partnership agreement and the Transatlantic Trade and Investment Partnership negotiations are two of the most prominent trade deals that have been in focus in recent years.

In the meantime, the global talks in the World Trade Organization (WTO) have made little headway in breaking down global trade barriers.

And after the WTO’s ministerial conference in Nairobi, Kenya, in December failed to break an impasse between member countries, the focus has remained squarely on super-regional trade deals, rather than global, multilateral agreements.

But given the relentless process of globalisation and the inter-connectedness of markets, researchers say future global-level agreements will still be necessary.

‘From a medium-term perspective, both industrialised and developing countries are going to need a multilateral (global) regime,’ said Dr Suparna Karmakar, who studied the outlook for regional and multilateral trading systems under the EU's Marie Skłodowska-Curie fellowship program at the Bruegel economic think tank in Brussels, Belgium.

‘Countries are more interested in bilateral (between two countries) or plurilateral (super-regional) agreements at present, because that is what they see as possible,’ she said. These could help in achieving progress in global trade rule-making, but only if they are structured in a way that they could be extended more broadly in future.

‘These can potentially act as building blocks rather than stumbling blocks,’ she said, adding: ‘Multilateral agreements are still going to be important.’

Given the process of globalisation, those involved in talks needed to recognise the need for a different approach to the past – negotiations need to catch up with changed dynamics.

EU mediation

Dr Karmakar said that from her studies, which consist of developing models, she saw a potential role for the European Union as a mediator in multilateral negotiations – a role it had not yet fully explored in the Doha Round of trade talks.

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‘We need political structures that are flexible enough to react to important changes.’

She said that in the medium term, the EU can try to understand what developing countries and emerging markets need. ‘Trade negotiations are just like a marketplace – you get some things, and you give something back.’

Another contribution to the debate on Europe’s role in creating wealth in future trade regimes is research by the GOPG project, funded by the EU’s European Research Council to develop theoretical models that can analyse the links between globalisation and advances in technology.

This relationship presented new challenges to the European Union and its policies, said GOPG project leader Dr Gino Gancia, of Barcelona’s Centre de Recerca en Economia Internacional, Spain.

‘Both globalisation and technological progress are among most important forces shaping the world economy now, and they also have an effect on each other,’ Dr Gancia said.

Opportunities and threats

Given that context, his research also showed that the European Union faces a major challenge in how to reconcile the opportunities and threats offered in the balance between competition policy and the protection of intellectual property rights.

‘Intellectual property protection is needed to encourage innovation and thus growth, but there are pros and cons to this. If we want innovators to reap the fruits of their investment, it is also optimal to facilitate or speed up the diffusion of their technologies,’ he said.

For example, 3D printing enthusiasts can scan objects and upload the digital files so that others can download and print them. If intellectual property rights were applied too stringently, it could stifle this activity, while if they are too lax, it could mean that designers don't get to profit from their creations.

Dealing with such issues would need to be addressed at a policy level within the European Union, but given the global nature of the challenge there is a crucial need for this to be addressed on a multilateral basis too.

There remains a clear role for high-level agreements and structures, such as the World Trade Organization, the researcher said. But at the same time there is a trend towards greater local autonomy.

‘What we see is that most domestic policies have some effect on other countries,’ he said. ‘Almost all domestic policies, in one way or another, have some kind of impact on the world economy.’

That could have implications in future for what could be delegated at the European Union level and what would need to be decentralised.

‘We need political structures that are flexible enough to react to important changes, and globalisation is changing many things,’ Dr Gancia said.