What are mega-regional trade agreements?

• Mega-regionals are deep integration partnerships between countries or regions with a major share of world trade and foreign direct investment (FDI)

• Beyond simply increasing trade links the deals aim to improve regulatory compatibility and provide a rules-based framework for ironing out differences in investment and business climates

• The two most significant mega-regional trade agreements currently under discussion are the Trans-Pacific Partnership (TPP) and the Trans-Atlantic Trade and Investment Partnership (TTIP)

• Both agreements would affect at least a quarter of world trade in goods and services (TPP: 26.3%; TTIP: 43.6%) and of global FDI

In Brief

Who’s involved

Trans-Pacific Partnership (TPP)

• Originally a four-way free trade agreement between Brunei, Chile, New Zealand and Singapore, the TPP now encompasses eight additional countries: the US, Australia, Canada, Japan, Malaysia, Mexico, Peru and Vietnam. South Korea might also join the group

Trans-Atlantic Trade and Investment Partnership (TTIP)

• The TTIP negotiations, launched in June 2013, aim for a far-reaching trade agreement between the US and the EU. It includes plans to remove trade barriers as well as improve alignment, compatibility and possible harmonization of regulations and standards

• Research suggests it could boost the EU’s economy by €120 billion and the US economy by €90 billion annually

The optimisits’ case…

“[Mega-regionals] provide a means for facilitating existing patterns of commerce and building new ones. They enable businesses and governments to respond proactively to competitive challenges and create higher common denominator trade agreements. And if designed with open architecture, they hold open the option of building out eventually to a healthier multilateral outcome.”

- Susan Schwab and Karan Bhatia

…but risks remain

“If regional trade agreements and their power asymmetries take over, there is a risk that the World Trade Organisation would go down in future history books as a 70-year experiment where world trade was rules-based instead of power-based. It would, at least for a few more years, be a world where the world’s rich nations write the new rules-of-the-road in settings marked by vast power asymmetries. This trend should worry all world leaders.”

- Richard Baldwin

Mega-regional Trade Agreements - Game-Changers or Costly Distractions for the World Trading System?

Read the full report here:

http://www3.weforum.org/docs/GAC/2014/WEF_GAC_TradeFDI_MegaRegionalTradeAgreements_Report_2014.pdf