The global trade paradigm is shifting with the multilateral trade system supported by the World Trade Organization about to be replaced by a new system involving overlapping trade deals of regions and sectors, according to a new report of the Korea International Trade Association on Sunday.
“The multilateral trade system -- in which 164 countries follow a unified trade order through the WTO -- has steadily been weakening,” said Je Hyun-jung, a senior researcher at KITA.
“If the US refuses to appoint a new member of the Appellate Body of the WTO in December, this will further weaken the function of international dispute resolution and bring significant changes to the global trade paradigm,” the report said.
As the US is not very favorable to the WTO and continues to refuse to appoint a new member, there are currently only three members necessary to form a minimum panel. The terms of two of them expire in December this year and the other ends in December 2020. If the US does not appoint a new member, the WTO’s ability to resolve disputes will, in fact, become paralyzed from December.
“As the demand for new trade rules increases due to changes in trade patterns and the growth of emerging markets, a new era of a multilayered trade system will begin with regional trade agreements and sectoral agreements among various nations,” the report said.
Mega free trade agreements, which include massive economies such as the US, China, the European Union and Japan, have recently been concluded or entered into force. In December last year, the Comprehensive and Progressive Pacific Rim Partnership Agreement, involving 11 countries, including Japan and Singapore, came into effect. Earlier this month, leaders from 15 Asia-Pacific countries, including South Korea, China and Japan, reached an agreement on the Regional Comprehensive Economic Partnership Agreement.
“With the weakening of the multilateral dispute resolution process through the WTO, trade remedies are likely to be abused and protectionism based on national security is likely to continue,” the report noted.
Je said South Korea, which is highly dependent on trade, should focus on developing strategies to read and respond to changes in the global trade paradigm.
“Korea should strengthen its trade status and promote high-quality FTAs with key emerging economies by establishing solidarity with midsized nations and lead the creation of new trade rules,” she said.
By Shin Ji-hye (email@example.com)