Searching for a new institutional structure for the global trade system: What role for Asia in the age of US-China competition?

Abstract

After a year of record international trade in 2022, it is uncertain whether the future of the global economy is fragmentation or a new institutional structure. The challenges are to re-establish a dispute resolution mechanism, as the WTO process currently allows decisions to be appealed into oblivion, and to extend the coverage of world trade law to address changes in world trade since 1995. This paper argues that the best option for a beyond-WTO institutional order is an expanded Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) and that, absent a functioning WTO appeal system, the Multi-Party Interim Appeal Arbitration Arrangement (MPIA) is a way to resolve appeals. This could lead to a three-tier global trade system as the expanded CPTPP membership observes the highest standard world trade rules, a second group accepts WTO rules but no more, and a third group has no interest in being bound by world trade rules. On the post-2017 record, the USA could be in any of these three groups. The leading Asian trading nations have a key role to play in ensuring that the first group accounts for the majority of world trade, and to encourage countries to want to follow CPTPP standards and to be at the table when extensions to these standards are discussed.