Regulating Trade in the Asia-Pacific – Part I
The Asia-Pacific region has experienced dramatic economic growth since the early 20th century, leading to the creation of regional economic forums and free trade agreements. Within these forums, the principles of free trade and sovereignty play a complex role in balancing relations between states.
Legislation in Southeast Asian countries developed rapidly to accommodate new aspects of trade. As a general rule, governments of developing economies are best advised to respond to rapid growth such that “the legislative and regulatory development in the transition economies must keep pace with, or anticipate, the unprecedented rate of political, economic and social change taking place.”[1] By contrast, trade systems and legislation in Western countries developed over a much larger period of time, with ample opportunity to draw upon examples set by neighboring countries. For example, trade laws and institutions developed in the Netherlands in the 17th century were heavily influential in the development of modern stock exchanges.[2]
The prospect of increased trade between countries motivates the reduction of trade barriers, such as tariffs and quotas. As trade becomes more efficient and widespread, economies may experience a greater level of integration. However, increasing integration inevitably leads to more stakes in the ground, complicating further negotiations to improve trade efficiency. In this case, the negotiation of free trade agreements becomes a classic coordination problem.[3]
In negotiations, despite a need to coordinate, there is no guarantee, a priori, that all parties will have equal power in the bargaining process. Yet, for states, in particular, relative power plays an important role in “determining the solution of coordination problems when the distribution of benefits is at stake.”[4] For example, the stance and goals of a dominant participant may determine whether a cooperative, mutually beneficial outcome is reached, or alternatively, an outcome that is considerably inefficient.
To ameliorate the process of regulating multilateral trade, the World Trade Organization (WTO) was established in 1995, as the successor to the 1947 General Agreement on Tariffs and Trade (GATT). In 2001, WTO members initiated negotiations as part of the Doha Development Agenda, also known as the Doha Round. The focal point of the Doha Round was economic development of transitional and developing countries. By 2008, progress towards the Doha agenda had stalled. Although the WTO continues to conduct so-called plurilateral negotiations, the failure of the Doha Round surfaced many institutional inefficiencies and limitations of the WTO in conducting multilateral negotiations.[5]
In the absence of the successful negotiation of a multilateral trade agreement within the WTO, many countries in Asia are still able coordinate successful negotiations of their own, the most prominent of which being the Trans-Pacific Partnership (TPP). The TPP is set to come into force on December 30th 2018 with eleven signatories, seven of whom have ratified.
This post is the first in a series on trade regulation in the Asia-Pacific.
Part II (January '19) will review a short history of recent trade agreements in the Asia-Pacific, the regional associations and forums involved, and the role of sovereignty in diplomacy.
1. Waelde, T. W., and J. L. Gunderson. "Legislative Reform in Transition Economies: Western Transplants: A Short-Cut to Social Market Economy Status?". International and Comparative Law Quarterly 43 (1994): 347-78.
2. The Amsterdam Stock Exchange, established in 1602, became part of the Euronext stock exchange in 2000.
3. Noonan, Chris. The Emerging Principles of International Competition Law. Oxford New York (2008).
4. Op. cit. Noonan.
5. McBride, James. "What's Next for the WTO?". Council on Foreign Relations, March 23, 2018, www.cfr.org/backgrounder/whats-next-wto.