Posts Tagged ‘multi-lateral’

Bilateral is always preferable to multilateral (and the EU is not smart)

January 24, 2017

This continues my thesis that the age of global, multi-lateral agreements is counter-productive (see previous post). Multi-lateral agreements are part of a centralisation paradigm which is becoming obsolete. It is time to shift to smart, distributed, networks which build on bilateral agreements.

An agreement with the EU as a whole (28 countries, or 27 after Brexit)  is always more rigid and less flexible than making individual bilateral agreements. Over time, in a changing world, the mutli-lateral deal always ends up as a barrier to growth. It is my contention that since 2008 when the financial crisis was triggered, the rigidity of the EU has been a brake not only on the recovery of individual member countries, but has also acted as a brake on other countries having agreements with the EU.

The Canada – EU trade agreement (CETA) is an illustrative example. Negotiations started in 2004. The terms were agreed in 2014. It was signed in October 2016. It has still to be ratified by all the EU parliaments. It has taken that long because of the differences between the EU member countries. What has been signed is already obsolete since the world has moved on. But the agreement cannot be changed without all the EU countries agreeing. The possibility of renegotiation is an essential requirement for any agreement, but for CETA it is virtually impossible. Canada, and each of the EU member countries would have been far better off, with 27 bilateral trade agreements. Instead of a faceless Brussels negotiating for all 27 as a group (lowest common standards and minimum level of internal disatisfaction applying) each country could, instead, have used a common core agreement as a basis for variations for each country and being negotiated by its own representatives. It would have taken less time than the 13 years for CETA.

GATT was and the WTO is equally inflexible and unfriendly to changes. The WTO rather than allowing free trade has ensured that some countries (mainly the rich countries) can maintain high import duties and quotas in certain products, blocking imports from developing countries. The injustices are enshrined and renegotiation (for example by a country moving from developing to developed status) is virtually impossible. The WTO ensures that there is inbuilt protection of agriculture in developed countries while developing ones are pressed to open their markets. The less developed countries have neither the expertise or the money to fully participate in the negotiations which is dominated by the developed countries. The developing part of the world would have been – and still would be – far better off with making bilateral agreements only as needed with relevant partner countries, rather than being coerced to sign up to grandiose, global agreements.

It is good that Trump has withdrawn the US from the 12 country (China excluded) Trans-Pacific-Partnership (TPP). Apart from being another inflexible multi-lateral agreement it was actually just a political response to the  Asia-Pacific-Trade-Agreement (APTA) and the RCEP which China was putting together, both excluding the US. APTA started with Bangladesh, China, India, Lao PDR, Mongolia, South Korea, and Sri Lanka, but has all the disdavantages and inflexibility of multi-lateral agreements. The Regional Comprehensive Economic Partnership (RCEP) is a proposed free trade agreement between the ten member states of the Association of Southeast Asian Nations (ASEAN) (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, Vietnam) and the six states with which ASEAN has existing free trade agreements (Australia, China, India, Japan, South Korea and New Zealand)”.

There are many multi-lateral agreements in Asia Pacific and are more talking shops than any real promoters of trade:

  • ASEAN Free Trade Area (AFTA)
  • South Pacific Regional Trade and Economic Cooperation Agreement (SPARTECA)
  • South Asian Free Trade Area (SAFTA)
  • Pacific Islands Countries Trade Agreement (PICTA)
  • Bay of Bengal Initiative for MultiSectoral Technical and Economic Cooperation (BIMSTEC)
  • Commonwealth of Independent States Free Trade Agreement (CISFTA)

The divide between developing countries and the developed world is blurring. Intelligence is available at each sovereign country. Each country, individually, is best placed to know and to look after its own interests. With a bunch of “idiot” elements, there is strength in “unity”, but when each entity is intelligent, forcing the intelligences to join groups and comply with the lowest common standards is counter productive and “not smart”.

In the EU, for example, forcing the member countries to forego their sovereignty, ignore their own intelligence in favour of some bureaucratically defined “common intelligence” is definitely “not smart”.


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