How the EU and CPTPP can preserve global trade

IN RECENT months, governments across the world have looked for ways to respond to America’s turn from liberal trade to aggressive mercantilism.

One idea that is gaining momentum should be pursued more urgently: bringing two of the world’s great trading regions into closer alignment.

In global trade, as in many other areas, there is no good substitute for American leadership.

But until the US again decides that liberal trade serves its interests, others are left to make the best of it.

The new protectionism will not just hobble US trade; it also threatens wider economic fragmentation.

To avoid that outcome, third countries must cooperate more closely and – above all – affirm their commitment to rule-based multilateralism.

Separately, Canadian Prime Minister Mark Carney and European Commission President Ursula von der Leyen have suggested one way to do so – by forging a new pact between the European Union and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

Canada is a member of the CPTPP (along with Japan, Mexico, Australia and eight other countries, including the UK since 2024), and it concluded a trade deal with the EU’s 27 members in 2017.

Carney said it can be a bridge between the two groups.

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In her recent State of the Union speech in Strasbourg, France, von der Leyen had talked about building a “coalition of like-minded countries to reform the global trading system – like the CPTPP”.

Creating a “deep” free trade area to span both partnerships would be difficult, if not impossible, because the EU and the CPTPP are organised on different principles that cannot easily be reconciled.

Still, the EU already has limited trade agreements with nine of the 12 CPTPP members – and even a shallow pact uniting the two groups would still be valuable.

In particular, the partners could adopt procedures for adjudicating disputes and ensuring that tariffs and other trade policies do not discriminate among members of their respective trade alliances.

The World Trade Organization (WTO) once performed this service for its much bigger global membership. In principle, this remains the best such arrangement.

But in recent years, the WTO has failed to work effectively, partly thanks to lack of support – and often outright obstruction – from the US and others.

Today, the body is all but defunct. In many ways, its critics were right: Its procedures were too slow and its rules, narrowly focused on trade in goods, did not keep pace with new kinds of commerce.

Believers in liberal trade should be the first to admit that the WTO needed to be repaired.

Growth and prosperity

An EU-CPTPP partnership could start that process. If 39 like-minded, pro-trade governments launched what would serve, for now, as a supplement to the WTO, they could show that rule-based trade promotes growth and prosperity.

And if they opened these arrangements to other countries willing to commit to the same dispute settlement and non-discrimination principles, the initiative could gradually evolve into a new, improved WTO.

Granted, for as long as the new mercantilism prevails, the US will not join such an undertaking.

With luck, it will eventually have second thoughts.

In the meantime, the group’s members should make it clear that they would welcome the US as a partner on the same terms, emphasising that the purpose of any such initiative is not to confront or embarrass the current administration, but merely to preserve and expand trade among the participants.

Rebuilding the global economic order without the US will be impossible. For America’s once and future partners in trade, closer cooperation is the next best thing. BLOOMBERG