Multilateral or Regional – WTO “and/or” FTAs? An Academic’s view of the Trenches

Singapore - 6 December 2012

I. Introduction A former professor of mine was fond of telling us, “Beware of men who ask binary questions because such men already know the answers they want to get”. When Singapore first started negotiating our first free trade agreements (FTAs), there was fear and loathing from many quarters. Some felt that we were undermining the multilateral process for trade liberalisation represented by the WTO.1 Others were concerned that we were undermining the regional economies by potentially allowing Trojans into the ASEAN Free Trade Area (AFTA) by the backdoor.2 Both of these early criticisms were perhaps evidence of binary thinking about trade liberalisation. Indeed, while most neo-classical economists accept that there is a need to further the global trade liberalisation efforts, how this should be done is less clear. In 2006, former Assistant for International Economic Affairs to Henry Kissinger, Fred Bergsten, wrote somewhat presciently in an op-ed for the Financial Times that: The indefinite suspension of the Doha round of world trade talks creates big risks for the world economy. A new explosion of discriminatory bilateral and regional agreements is likely to substitute for global liberalisation. This will inevitably erode the multilateral rules-based system of the World Trade Organisation (WTO). The backlash against globalisation will generate more protectionism in the vacuum left as momentum toward wide-ranging reduction of barriers ceases, especially as the world economy slows and global trade imbalances continue to rise. Financial markets will become more unstable as international economic cooperation breaks down further.3 Bergsten called upon APEC to launch a Free Trade Area of the Asia-Pacific (FTAAP) initiative to provide: a “plan B” to get world trade policy back on track — to spur the revival of Doha, to offer an ambitious alternative to restart the process of liberalisation on the widest possible basis if that primary goal fails, and to counter the proliferation of preferential deals among small groups of countries.4 However, again, this statement perhaps evidences a binary approach to trade liberalisation with the underlying assumption that it should be multilateral in preference to regional or bilateral. Unlike many trade law academics who cut their teeth in GATT or WTO negotiations, my first introduction to trade negotiations occurred when I was appointed as a consultant for Singapore’s early FTA negotiations right after we had concluded our first one — the Agreement between New Zealand and Singapore on a Closer Economic Partnership (ANZSCEP). In particular, I became involved in the Mexico-Singapore FTA which unfortunately faced significant political hurdles when then Mexican President Vicente Fox and his Alliance for Change took over from the more trade liberal government of President Ernesto Zedillo in December 2000. Now, Singapore was not the only country to embark on FTA negotiations at that time. At the end of the 20th century, there was a surge in bilateral FTAs following the failure of the Third WTO Ministerial Conference held in Seattle in 1999 where an uneasy coalition of environmental and labour rights activists as well as protectionist lobby groups caused a collapse in trade negotiations. During this time, Singapore also embarked on a series of bilateral FTAs.5 The official position was that Singapore saw FTAs as possible complements to the multilateral trade liberalisation process offered by the WTO.6 While I had no attachment to the WTO or the GATT, like many other trade academics, I had some reservations as to the wisdom of the FTA initiative, believing that Seattle was only a blip on the road to trade liberalisation. I saw the value of having alternatives but I was somewhat concerned that we were acting prematurely and thus diverting our attention from the main game of WTO negotiations. This changed after Cancun.