The Return of the Bilateral Deal
Multilateral negotiation has stalled, so states are cutting agreements one pair at a time. The arithmetic of that is worse than it looks.
Multilateral trade rounds have not produced a comprehensive agreement in a very long time, and the institutional machinery for resolving disputes has been allowed to degrade. States that still want liberalized trade have responded by negotiating one on one.
A bilateral deal is faster to conclude and easier to sell domestically, because the concessions can be described narrowly and the beneficiaries named. Those are real advantages and they explain the volume.
The problem is combinatorial. Fifty states with bilateral agreements generate a web of overlapping rules of origin, standards, and dispute procedures that a firm has to navigate separately for each destination. Compliance cost rises with the number of agreements, which means the benefits accrue disproportionately to large firms with legal departments.
The states with the least negotiating leverage do worst under this arrangement, because in a bilateral room there is no coalition to join. That was the specific problem multilateral bodies were built to address, and it is the one nobody has replaced.
Thomas Rennick writes for The 13th Bell on world. This piece was edited and fact checked before publication.
Get The 13th Bell in your inbox.jpg?width=900)
