The proliferation of major regional trade agreements, including the recently agreed Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP) being negotiated by the US and the European Union, has undeniably played a critical role in expanding global trade and the exports of member countries.
But critics say such regional agreements pose a threat to multilateral trading system by discriminating against non-member countries, many of which are smaller and poorer. At the same time, they sap the energy of the multilateral negotiations carried out under the World Trade Organization (WTO), which in recent years has progressed slowly in delivering substantial results.
Figures from the Geneva-based organisation showed that 265 regional trade agreements (RTAs) are in force. More than one third of these pacts involve the Asia-Pacific region. All of WTO's current 162 members are involved in at least one such agreement.
"So far, I've seen a lot more activities on the bilateral level than multilateral. We are now in a situation here at the WTO where the members have focused their activities on bilateral or regional agreements," said Karl Brauner, the WTO's deputy director-general.
Karl Brauner, the WTO deputy director-general, is confident that regional trade deals can help strengthen the multilateral system in the long term.
However, he expressed optimism that regional agreements can help the global trading system in the long run.
"When you negotiate on the bilateral or regional level, you have to overcome resistance [against free trade agreements] in your own home constituencies. Once you can overcome those [disagreements] on the regional or plurilateral levels, it's easier to multilateralise it eventually," Mr Brauner told a group of journalists in Geneva recently.
"I was hoping that with the multitude of these agreements, the best practices will be the ones that shape what we are going to do on the multilateral level."
However, Xavier Carim, the South African ambassador to the WTO, has concerns about the growing number of regional agreements.
"What we are seeing is less attention and interest in trying to pursue negotiations in the multilateral context and more effort being put into these plurilateral and regional arrangements," he said. "That has significant impact on the amount of energy and effort that members put into negotiations under at WTO.
"When there is no agreement on the main issues on the multilateral level, the likelihood is that plurilateral [agreements] will become more prevalent in the future."
For African nations, he said, a fragmented approach to resolving issues among small groups should not be the "main option" but rather the focus should be on strengthening the multilateral system.
"This is not the option we prefer," said Mr Carim. "We should work harder to find common ground on the multilateral level rather than move into these smaller groups of plurilateral discussions."
Mr Brauner acknowledged that the rapid pace of change in the nature of economic activity, most notably involving the internet, posed another challenge to the WTO.
"The internet gives a lot of opportunities to tap into the global market. Without big investment you can make yourself visible and reachable," he said.
"The reality is that business moves much faster than the regulatory setting so we are actually running behind the reality. We are not creating the opportunity by opening up chances for businesses, but businesses take chances and the regulatory body has a certain time lag behind it."
MAJOR ACHIEVEMENTS
Despite well-publicised differences among developed and developing country members, WTO executives say the organisation has achieved some big breakthroughs in the past few years. Most noticeable was the agreement in Nairobi last December to abolish agricultural export subsidies.
As of January 2016, export subsidies in developed countries are prohibited for all forms of agricultural products. Developing country members are to eliminate export subsidy entitlements by the end of 2018, though they have until 2030 for specific types of products.
"This was the biggest reform of agricultural trade rules in the last 20 years," said WTO director-general Roberto Azevedo. "There is much more to do in order to reduce distortions in the agricultural markets, but there's no doubt that this is a major step forward."
Replacing the General Agreement on Tariffs and Trade (GATT), the WTO officially came into being in January 1995 to regulate trade among participating countries by providing a framework for negotiating trade agreements and a dispute resolution process.
Another recent signature achievement by the WTO has been the Information Technology Agreement. It will eliminate tariffs on 201 new-generation IT products involving trade worth around US$1.3 trillion, a value bigger than the global automotive sector.
"The IT agreement was the first in 17 years in which we at the WTO agreed to lower tariffs, so it is something we have never done before," said Michael Punke, the US Ambassador to the WTO.
Two and a half years ago in Bali, the WTO also completed a trade facilitation agreement which independent economists believe will contribute more than $1 trillion to the global economy with the majority of the benefits going to developing economies, he added.
By streamlining, simplifying and standardising customs procedures, the trade facilitation agreement can help cut the time and cost of moving goods across borders.
According to Mr Azevedo, studies show that when fully implemented, the agreement could reduce trade costs of members by an average of 14.5%. This could increase global merchandise exports by up to $1 trillion per year.
"It could have a range of connected benefits in helping SMEs (small and medium enterprises) to trade, helping economies to diversify their exports, providing a better climate for investment, and enabling countries to join global value chain," he said.
"These outcomes are economically very significant. And I think they illustrate the importance of pursuing a different track in trade negotiations."
Supporters of the WTO also believe it deserves more credit for its dispute settlement mechanism. Before the organisation's inception, there was no international dispute settlement system but in the past 20 years, more than 500 disputes have been brought to the WTO.
"Dispute settlement cases taken by the WTO have a nice compliance rate of more than 90%," said Mr Brauner.
LIMITED ECONOMIC GAINS
However, free trade alone is not an automatic ticket to prosperity unless it is accompanied by reforms in other areas, the International Labour Organization (ILO) has pointed out. In that respect, bilateral and regional deals sometimes do more in areas such as labour and environmental protection than multilateral deals can accomplish.
According to ILO figures, the number of trade agreements has been growing steadily since 1995. As of 2014, there were 260 agreements in force, up from around 50 in the mid-1990s.
Trade agreements have also been steadily increasing in depth, not just cutting tariffs but also covering other issues such as services, investment, intellectual property rights, human rights, environmental protection, public procurement and labour standards.
Trade agreements with labour provisions are on the rise, said Christian Viegelahn, an economist with the ILO's research department.
There is a consensus that trade agreements have created economic gains and more jobs but they have not necessarily resulted in better job quality and increases in wages, Mr Viegelahn said, adding that trade tends to lead to an increase in equality and the wage premium for skills.
Eveline Herfkens, a senior fellow at the Johns Hopkins School of Advanced International Studies (SAIS), said trade preference schemes under large regional agreements, in particular the TTIP, had the potential to damage exports from low-income economies such as many in Africa.
"Obviously, when tariff and non-tariff barriers decline among participants in mega-regionals, the relative barriers faced by third countries become higher," she wrote in a paper published by the Berlin-based Friedrich-Ebert-Stiftung.
For example, the 12-member, US-backed TPP provides improved market access for Vietnamese apparel at the expense of Bangladesh, Cambodia and Nepal, she wrote, adding that the TPP at this point seems to be a done deal, although the delay in its approval by the US Congress may result in further changes.
The TTIP is likely to be of most concern for Africa because 40% of Africa's exports go to the US and EU, said Ms Herfkens.
The WTO's Mr Azevedo pointed out that RTAs are important in expanding global trade but "cannot substitute" for the multilateral trading system.
"We have to acknowledge that one reason for the proliferation of regional agreements over recent years was a lack of progress in striking trade agreements globally through the WTO," he told a recent business meeting in Manila.
While they have grown rapidly in recent years, Mr Azevedo said bilateral and regional trade initiatives are not new. They actually predate the creation of the global trading system.
"These different kinds of initiatives have long coexisted and complemented each other -- and I have no doubt that they will continue to do so," he said.
Apart from RTAs, other regional networks, such as the China-backed New Silk Road economic belt are rebuilding traditional links by concentrating on connectivity, such as improved road and rail links as well as port facilities. The initiative will also try to connect Asia with Europe.
"These are important steps that need to be taken to free up international trade and facilitate greater integration in the value chain," said Mr Azevedo. "But how does all of this regional activity fit within the global framework of the WTO?" (continue below)
World Trade Organization (WTO) Director-General Roberto Azevedo attends a news conference on the launch of the World Trade Report 2015 in Geneva, Switzerland, October 26, 2015. The benefits of a treaty that will cut red tape at borders and standardise customs procedures are much larger than previously thought and could add $3.6 trillion to annual global exports, the World Trade Organization (WTO) said in a report on Monday. REUTERS/Denis Balibouse
A bigger consideration is that such initiatives sometimes touch on areas that are not currently covered by the WTO. This creates a potential scenario where different RTAs deal with the same issues in different ways, he said.
Mr Azevedo also pointed out that some trade issues can only be solved globally.
"A healthy trading system requires progress and engagement at all levels. It is at the global level that we need to take a considered view of the evolution of RTAs and of the trade negotiating agenda," he added.
The WTO, meanwhile, forecasts that world trade will remain sluggish in 2016 with volume increasing by 2.8%, on par with 2015, as economic growth eases in developed economies and picks up in developing ones.
"Trade is still registering positive growth, albeit at a disappointing rate. This will be the fifth consecutive year of trade growth below 3%," said Mr Azevedo.
Trade growth is forecast to rebound to 3.6% next year but that would still be below the average of 5% since 1990. Downside risks remain in terms of further slowing in emerging economies and financial volatility.
Composite leading indicators from the Organisation for Economic Cooperation and Development also point to an easing of growth in OECD countries, and financial market volatility continuing. "Therefore, trade growth may remain volatile in 2016," he noted.