21 February 2020

The case for Concerted Open Plurilateralism

Originally published by Global Vision.

Traditionally, trade power has been understood in terms of size. Large economies use the threat of closing their market in order to coax smaller economies into opening up theirs. Think Trump’s tariffs. When this approach spirals, trade wars happen.

But there’s good news: leverage is not the only game in town. A number of smaller countries have been quietly and successfully practising another strategy: “Concerted Open Plurilateralism”.

Never heard of it? Don’t blame you. But it’s the story of the formation of some of the most ambitiously liberal trade agreements in the world.

In short, a few countries club together to agree deeper trading terms between themselves, but in such a way that others can join at a later stage. As trade expert Hosuk Lee-Makiyama explained in an IFT podcast on the subject: “it’s almost like building a house and making sure that the rooms are big enough to fit a major power” (in this case, it was the US and Japan).

This is the story of the CPTPP. In the early 2000s, the multilateral system (the Doha Round, in particular) wasn’t moving fast enough for certain countries, so they took the initiative. With a combined population of only 29 million, and GDP of around $900bn, New Zealand, Brunei Darusallem, Chile and Singapore came together in 2005 to agree the Transpacific Strategic Economic Partnership Agreement (TPSEP).

Being both radically liberal and carefully constructed to appeal to other larger countries, the same framework eventually led to the CPTPP: the world’s gold-standard, and third largest trade agreement, encompassing a population 500 million people, and 13.4% of global GDP.

New Zealand, in particular, has been an exemplar of this approach. Beyond CPTPP, their application of Concerted Open Plurilateralism has also been responsible for the recently conceived Agreement on Climate Change, Trade and Sustainability (ACCTS); and the new cutting-edge E-Commerce agreement, DEPA (Digital Economic Partnership Agreement) – UK membership of which a number of UK-based trade experts have come together to endorse today.

As well as clever economic diplomacy and considered political entrepreneurship, this strategy also requires a certain disposition within trade departments. As goes the motto of New Zealand’s Chief Negotiator Vangelis Vitalis to their civil servants: “be constructive and creative, interesting and interested”.

After Brexit, the United Kingdom should avoid reverting to traditional levers of trade power – to threats of protectionism, which are anyway self-harming. Instead, we should renounce leverage by unilaterally reducing tariffs, and instead rely on learning from the agility, initiative and intelligence exemplified by the practitioners of Concerted Open Plurilateralism.

Jonathan de Leyser

Director of the Initiative for Free Trade