Graphic detail | Global trade, in graphics

Why everyone is so keen to agree new trade deals

Backgrounder - global trade deals

By The Data Team

INTERNATIONAL trade talks have received a shot in the arm with the conclusion of the Trans-Pacific Partnership (TPP). They certainly needed it. Growth in global trade volumes has slowed in recent years, thanks to a tepid economic recovery from the financial crisis and the changing structure of the Chinese economy. There has been a dearth of multilateral trade agreements since the Doha round of trade talks fell apart. Much of the focus has shifted to regional trade agreements (RTAs). The number of RTAs has risen from around 70 in 1990 to more than 270 today. The chart at the bottom shows some of the biggest. Of these, the TPP is among the most significant. Once ratified by its members—which is not a foregone conclusion—it would link 11 economies of the Pacific rim—including Japan and Singapore—with America. These 12 countries together account for 40% of world GDP and one-third of trade. Meanwhile, the Transatlantic Trade and Investment Partnership (TTIP) is an ambitious planned trade deal between America and the EU.

The TPP and TTIP represent a new generation of trade agreements. Their focus is less on dismantling tariff barriers and more on tackling tough issues such as intellectual property, labour and environmental standards. (Tariff rates have been steadily eroded by the growing number of bilateral free-trade agreements.) This is a wise move. Services form a bigger part of global GDP than ever before; making trade easier would boost incomes across the world. American trade negotiators predict that by 2025 the TPP will make the world $220 billion a year richer, adding roughly 1% to GDP. Negotiators dream of a world in which pharmaceuticals are subject to the same testing regimes, and standards on everything from car design to chemical labelling are harmonised or mutually recognised. Labour markets, too, stand to become loosened, and workers’ rights more accessible. The potential benefits are hard to estimate, but one reasonable guess is that TTIP could raise America’s GDP by 0.4% and the EU’s by slightly more.

Nonetheless, opposition is strong. As trade deals wade into complex regulatory waters, it is far harder to gauge their impact. Even some economists who have long been strong proponents of free trade argue that the boost to growth from the new deals will be small. In the case of TPP, Barack Obama, the American president, still faces a tough Congressional battle. Both Democrats and Republicans are wary of backing a scheme that threatens American jobs in an election year. There will be howls of protest from agricultural workers in Japan and Canada, whose protections stand to be dismantled. The promise of greater access to foreign markets is not appealing to all.

Resistance to TTIP is of a different hue. The deal, cry some, will permit American multinationals to undercut tough European standards, or to buy up parts of Britain’s National Health Service. Opposition is rather strong in Germany, not previously a bastion of anti-trade activists. Germans have focused on Chlorhühnchen (chlorine-soaked chicken), an example of the horrors that TTIP’s opponents say would be forced down European throats if doors were opened to American products. The signing of the TPP will put haters of American poultry on notice. It is possible that ratification—if smooth—will inject some new momentum into TTIP. After a period of neglect, the outlook for trade is beginning to brighten.

Discover more

Three reasons why oil prices are remarkably stable

Can it last?

Why America is a “flawed democracy”

EIU’s index plots the country’s democratic decline since 2006


Five charts compare Democrats and Republicans on job creation

Our analysis of the past eight American presidents