Reforming the global trading system
Ignacio García Bercero is a Senior Fellow at Bruegel
An initiative to reform the global trading system, on the basis of cooperation between the European Union and the twelve nations of the Comprehensive and Progressive Agreement for Transpacific Partnership (CPTPP), took a first significant step on 20 November. Trade ministers from the two blocs met and issued a statement expressing concerns about economic coercion and market distorting practices leading to excess capacity.
This can be read as criticism of both the United States and China, though neither were named. Other shared understandings reflected in the statement include a commitment to ensure that measures impacting on trade are “implemented in a transparent manner consistent with existing rules governing trade and investment.” At a time when there is a risk of the EU adopting measures contrary to its World Trade Organization and free-trade agreement (FTA) commitments, this is an important message.
CPTPP members represent 13% of world GDP and about 15% of global trade. The EU, for which the figures are about 15% and 16%, respectively, already has FTAs with all CPTPP members except Australia, Malaysia and Brunei, and it is negotiating such agreements with the first two. The CPTPP was initially negotiated with the US and many of its rules are based on the model the US follows in its FTAs.
There are therefore major differences between the CPTPP provisions and those in EU FTAs. For the EU to join the agreement would have little added value. It is therefore fitting that the two blocs plan instead to reinforce cooperation with the common objective of strengthening rules-based trade at a particularly challenging time.
There has been some speculation that EU-CPTPP cooperation could be the basis for an alternative trading system in light of the crisis around the WTO. To counter such perceptions, much of the 20 November joint statement is dedicated to signalling support for work to reform the WTO. This is framed as reinforcing the relevance and effectiveness of the WTO in addressing challenges “including practices which distort trade and investment flows.”
The trade ministers’ 20 November statement could prove to be a first step in building a coalition to reform the global trading system. But this also requires all participants to avoid measures that contradict their WTO commitments, or those entered into in FTAs
There is also support in the statement for the incorporation into the WTO of open plurilateral agreements, in particular the Agreement on Electronic Commerce, agreed in 2024, and the 2023 deal on Investment Facilitation for Development. Because of the difficulty of reaching a multilateral agreement on reform of the WTO’s main dispute settlement mechanism – which is presently non-functioning – there are calls to avoid measures that block the resolution of ongoing disputes and to expand participation in the Multi-Party Interim Appeal Arbitration Agreement, an alternative set up in 2020 to the currently stuck WTO procedures. EU/CPTPP cooperation should be intensified in the lead up to the next WTO Ministerial in March 2026, the statement said.
The statement also identifies work streams for EU-CPTPP bilateral cooperation, beyond WTO reform efforts. These include expanding bilateral trade in goods and services, improving customs procedures, addressing non-tariff barriers and streamlining border and regulatory processes. On digital trade and supply-chain resilience, there is a suggestion that the EU and CPTPP may be open to negotiate common rules, although the language remains very cautious. Such cooperation could be discussed by trade ministers at next year’s WTO Ministerial.
In the meantime, officials working to prepare the next round of talks should focus on three initiatives:
Preparing joint proposals on WTO reform: these could include a proposal to start preparatory work on updating subsidy rules;
Evaluate the options on digital trade and supply-chain resilience: this could start with a comparative analysis of agreements that have been concluded on those issues by the EU or CPTPP members; from this, a recommendation to start negotiations could be prepared for ministers.
Commissioning a study on possible further steps to facilitate trade between the EU and the CPTPP: this could include a common protocol of rules of origin, simplification of customs procedures and/or mutual recognition of conformity assessments.
The trade ministers’ 20 November statement could prove to be a first step in building a coalition to reform the global trading system. But this also requires all participants to avoid measures that contradict their WTO commitments, or those entered into in FTAs.
This article is based on a Bruegel First Glance.
