International agreements: a sprinkle of optimism

International agreements: a sprinkle of optimism

Global headlines tend to focus on an increasingly free hostile trade environment and withdrawals from trade agreements. However, this article examines the lesser known progress being made across the globe, which can foster a positive tone for international cooperation.

What went wrong

Since 2016, the world has seen a few major cases of trade and cooperation being reversed. With Donald Trump’s presidential campaign focusing on America being worse off in most deals, his administration pulled out of the 12-nation strong Trans-Pacific Partnership (TPP) shortly after entering office. Similarly, he also called a stop to the EU-US Transatlantic Trade and Investment Partnership (TTIP). Along with devising trade tariffs and seemingly ending two major worldwide trade agreement, there appeared to be an increasingly more global protectionist atmosphere. Moreover, the US administration decided that the North American Free Trade Agreement (NAFTA) needed renegotiation, and after reportedly bitter negotiations, the relations between the now United States-Mexico-Canada Agreement (USMCA) nations have worsened. The European Union (EU) experienced some deep internal upsets in 2016 after its second largest economy, the UK, triggered Article 50 to leave the Political and Economic Union. Many nations’ anti-EU parties have grown since then. However, none managed to gain the critical mass to also withdraw from the Union. An aura of anti-internationalism was rooted in most of these movements which caused the EU to dedicate a core goal of the Union to enhance economic, social and territorial cohesion and solidarity among EU countries.

Nevertheless, behind the scenes of a few large breakups and trade disputes, there are multiple ongoing negotiations and completed agreements. These hold great promise for international cooperation and even out scale the implications of the failings.

European trade beyond Brexit

The EU, although dealing with Brexit, has been negotiating for trade deals and economic partnerships with many individual nations and other international groups. The EU-Japan Economic Partnership agreement was finalised in December 2017. A Comprehensive Economic and Trade Agreement (CETA) with Canada has provisionally entered into force September 2017. EU negotiations with the Association of Southeast Asian Nations (ASEAN) are ongoing, but two Free Trade Agreements, based on ASEAN negotiations, have already been agreed with Singapore and Vietnam. Talks with Australia and New Zealand began this year, too. South America is not left behind either, as in September the latest round of talks took place with the lead trade-bloc of the continent, MERCOSUR. More negotiations between the EU and nations closer to the continent are ongoing.

Canadian trade beyond US

The Canadians have been very active too. Having not being disheartened by the US withdrawal from TPP, they adapted and negotiated to form the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). CPTPP has now been agreed and is pending ratification of all the nations involved: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam. Once fully fledged, it will be the largest free trade agreement in the world. The absence of the US allowed it to remove some unpopular requirements. Along with the aforementioned CETA, Canada has also initiated formal negotiations with MERCOSUR this year. This activity makes Canada the only nation with agreements with each of the G7 nations.

Promising insights from Africa

A momentous trade block in Africa passed an important milestone in March 2018. The African Continental Free Trade Area (AfCFTA), the result of three years of talks with the African Union’s (AU) 55 members, was signed by 44 African States. It will take ratification by half these states as well as agreement on multiple protocols pertaining to free trade of goods before the trade area is legally a comprehensive partnership agreement. Since March, more nations have signed, most noticeably South Africa. Nigeria, as the largest GDP nation in Africa, still holds put. The potential of a $3 trillion trade bloc in Africa is very promising for regional cooperation and to build on what the AU has achieved. The future of the fastest growing continent will benefit from a greater level of regional integration primarily to increase inter-Africa trade from a very low 16% of continent total. With AfCFTA and the AU, the continent will have increased negotiating prowess when it comes to dealing with the rest of the world. If some form of investment provisions are agreed, there would be likely be huge interest from external investors.

Optimism in the future

With an increase in free-trade agreements providing boosts in international trade as well as cooperation, the outlook for the international society is positive. More nations in international economic partnerships and trade agreements allow for a common understanding and the establishment of clear channels of communication and relationships between national leaders. These forms of agreements add another layer of protection if international relations strain. The share of benefits from cooperation and its economic advantages make falling into diplomatic breakdown or anything worse far less likely. The economic link these agreements guarantee has a greater incentive for maintenance. Seemingly far greater than political alliances. As total global GDP grew over the 2016-2018 period and the International Monetary Fund forecast it to remain positive, the future looks good for international trade and cooperation. The more of these that can be achieved the better for world stability.

Categories: Economics, International

About Author

Fabian Bak

Fabian is an International Political Economy Master graduate from the Rijksuniversiteit Groningen, in the Netherlands. He has undergone academic stints in Germany, the Republic of Korea, the Russian Federation, and holds a Bachelor degree in International Relations from the University of Leicester, in the United Kingdom. Fabian has worked for a European Union Institute in Luxembourg and in Consulting and Banking in London. His interests lie in Central Banking, International Finance, EU affairs, Maritime and Aviation, European, Russian and East Asian Political Economy.