The inconclusive outcome of the WTO’s Eleventh Ministerial Conference in Buenos Aires in December 2017 has once again strengthened calls for plurilateral or ‘critical mass’ approaches to break the deadlock in multilateral trade negotiations. The UK government, which has claimed a leadership role in the WTO for the time after Brexit, seems to wholeheartedly support plurilateral trade deals and has repeatedly highlighted the importance of these agreements for Britain’s future commercial relations.
Britain’s post-Brexit trade strategy explains that the UK wishes to remain part of the Agreement on Government Procurement (GPA), to finalise the Environmental Goods Agreement (EGA) and to resume the negotiations on the Trade in Services Agreement (TiSA). However, no two plurilaterals are alike and, consequently, challenges and opportunities for Britain vary considerably across these initiatives. Focusing on the three plurilateral agreements highlighted in the white paper, this post discusses the UK’s options and the potential benefits and risks of plurilaterals.
What exactly are plurilateral trade agreements?
Too often, the word ‘plurilateral’ is used as an umbrella term that covers the multitude of trade arrangements that go beyond two countries (bilateral) but do not cover all WTO member states (multilateral). Following this logic, the mega-regional Trans-Pacific Partnership (TPP, now CPTPP), which has recently attracted the interest of the Department for International Trade, is sometimes labelled a plurilateral agreement.
However, there is a more narrow definition based on two criteria. First, the coverage of plurilaterals in the traditional sense is more issue-specific than that of other agreements. For example, compare the contents and names of the following treaties: while the GPA focusses on government procurement, only one of the TPP’s 30 chapters deals with the issue.
Second, with few important exceptions, plurilaterals are commonly negotiated in the WTO framework between subsets of member states. This often means that under the WTO’s most-favoured nation (MFN) rules the benefits of these plurilaterals are extended to non-participating members.
How might the UK remain in the GPA?
Part of the challenge the UK faces in the WTO because of Brexit is remaining in the GPA. The UK currently enjoys access to public procurement markets estimated to be worth over £1.3 trillion annually because through its EU membership it is a signatory of the GPA. If the UK wants to retain this level of access, becoming a standalone party to the GPA is essential.
Since the liberalisation of government procurement has always been a sensitive issue domestically, the WTO’s MFN requirement is frequently set aside under the GPA. This means that members place much greater emphasis on a simultaneous exchange of equivalent benefits and that concessions are often negotiated bilaterally. In the past, this has led to criticism that the GPA “could quite accurately be described as an accumulation of preferential bilateral agreements between a limited number of parties somehow brought together under one shaky roof.”
Whether the UK will need to formally reapply to the GPA or be allowed to roll over its current rights and obligations will depend on a political decision by the GPA parties. If they agree that it is desirable for the UK to continue under current terms, it may be possible to arrange this swiftly.
However, observers predict that some GPA members could use Brexit to obtain additional concessions. An initial attempt by the UK and EU to disentangle access to their agricultural market(s) at the WTO has already faced blowback from some of the UK’s most important trading partners; the same might happen to the UK’s bid to join the GPA. If the UK faces a new accession process, it will be difficult to resist these demands. However, Brexit also frees the UK from EU-wide regulation on public procurement. This offers a chance to reshape domestic procurement laws, though it also blocks British companies from competing for European contracts outside the scope of the GPA.
Can the UK push the EGA and TiSA negotiations towards successful conclusion?
The UK’s opportunities from the Environmental Goods Agreement and TiSA are less clear, since both agreements are still at the negotiating stage. Although the UK has repeatedly announced its intention to develop a leading voice in international trade, deep scepticism about the feasibility of this idea has prevailed in the expert community. Lacking the EU’s market size and bargaining power, it seems unlikely that the UK can push the now-stalled negotiations on TiSA towards a successful conclusion.
For example, the DIT’s white paper on trade envisions “ambitious digital trade packages, including provisions supporting cross-border data flows.” But it is difficult to see how the UK could persuade Brussels to drop its resistance to addressing cross-border data flows in TiSA – a major hurdle in the negotiations – while being simultaneously forced to mirror closely the EU’s data protection regime after Brexit.
Similarly, there are currently no signs of the EGA coming to fruition between its 18 participants, including the EU. Originally intended to ease barriers to trade in environmental goods, talks collapsed in late 2016 over disagreements about what constituted an ‘environmental’ good. Remaining hopes that the WTO ministerial in Buenos Aires could lead to the EGA’s successful conclusion were clearly frustrated. Instead, one of the few outcomes of the high-profile gathering is the commitment of 70 of the 164 WTO members to engage in discussions about a new plurilateral agreement on e-commerce. This initiative was led by Australia, Japan, Singapore, the US and the EU, but has been resisted by many developing countries.
Opportunities and Risks of Plurilaterals
While the UK government enthuses about the potential benefits of plurilaterals, concluding these agreements remains difficult. Most importantly, their trade effects should not be overestimated. Even as a member of the GPA, the UK could lose some access to EU procurement markets after Brexit. Initiatives like the EGA, which cover only a small number of products, cannot compensate for leaving the much wider EU market.
Finally, a key challenge for the UK will be to ensure that plurilateral agreements complement rather than undermine the multilateral trading system. Ever broader market liberalisation outside the WTO or in subgroups erodes its fundamental principles and implies that countries will be treated less equally in the future. Yet, as a less powerful but maybe more proactive voice in international trade after Brexit, the UK’s future commercial success will depend on a robust, rules-based multilateral trading system.
This article was originally published on 16 January on the blog of the UK Trade Forum.