How to Address Trade Policy Challenges: Insights from PTA Side Letters

• In Event: The Design of Trade Agreements

Abstract

The global trade regime was designed to weather change by creating certainty about countries’ policy settings. Yet in an age of global challenges, countries—and especially democracies—face demands for novel rules that address emergent policy challenges and that reflect the broader aspirations of domestic groups. From climate change to new security concerns; from digital rules to indigenous rights, a changing world demands novel ideas—new text for new times. This raises a puzzle: in the context of institutional ‘stickiness’, how can policymakers develop new legal language to address tricky policy problems? And under what conditions do new formulations get taken up by others in the trade regime? I argue that countries exploit ‘low-stakes’ negotiating contexts, away from fierce public scrutiny, to innovate. Negotiations with smaller or less-important partners provide opportunities for lower-risk experimentation. Similarly, addressing new ideas in side agreements or side-letters allows for a measure of experimentation outside of the formal negotiating framework of a preferential trade agreement (PTA). I present the case of the Agreement on Climate Change, Trade and Sustainability (ACCTS), involving an unlikely group of six small countries. The impact of this agreement alone is likely to be small, yet it is envisaged by its members as a ‘pathfinder’ to support further multilateral action. I then present and leverage an original dataset of over 550 PTA side letters. I show that side letters are disproportionately likely to address novel topics in the trade regime. Such texts offer negotiators a means of introducing and clarifying new ideas and developing new frameworks for cooperation. While our spotlight is, rightly, on global challenges, novel solutions to these challenges may be most likely outside of the spotlight’s glare.

Author

• Matt Castle, Victoria University of Wellington