Evolving Trade Agreements and the Future of Multilateralism

Context

Recent “Agreements on Reciprocal Trade” (ARTs) signed by the United States, including discussions with India, signal a shift away from traditional WTO-based trade governance. This development raises concerns about the weakening of multilateralism and the rise of bilateral, power-centric trade diplomacy.

Q1. How has the global trade architecture evolved from WTO-centred multilateralism to emerging reciprocal trade frameworks?

1. The post-1947 GATT system institutionalised non-discrimination through the Most-Favoured-Nation (MFN) principle.
2. The WTO (1995) expanded trade governance by:
   1. Covering services and intellectual property
   2. Establishing a binding dispute settlement mechanism
3. Multilateral negotiations gradually slowed due to consensus deadlocks.
4. Regional and bilateral FTAs proliferated under Article XXIV exceptions.
5. In recent years, major powers have preferred transactional bilateral arrangements.
6. ART-style deals reflect a shift from rule-based to leverage-based trade engagement.

Q2. What distinguishes Agreements on Reciprocal Trade (ARTs) from WTO-compliant Free Trade Agreements (FTAs)?

1. FTAs are notified to the WTO and operate within recognised legal exceptions.
2. ARTs reportedly function outside formal WTO notification procedures.
3. FTAs typically eliminate tariffs on substantially all trade, whereas ARTs may involve selective concessions.
4. ARTs may include conditional clauses such as:
   1. Alignment with national security-related trade actions
   2. Restrictions on digital trade measures
5. WTO mechanisms allow neutral dispute resolution; ARTs may lack such oversight.
6. ARTs emphasise bilateral reciprocity rather than universal non-discrimination.

Q3. What risks do non-notified or power-driven trade agreements pose to developing countries like India?

1. Reduced transparency limits external scrutiny.
2. Asymmetric bargaining power may pressure smaller economies.
3. Policy space for industrial protection could narrow.
4. Digital sovereignty may be affected if data regulation flexibility is curtailed.
5. Fragmented trade rules increase compliance complexity.
6. Weakening multilateral forums reduces collective negotiating strength.

Q4. How should India respond strategically to the changing global trade environment?

1. Preserve tariff autonomy in sensitive sectors.
2. Safeguard digital governance frameworks.
3. Diversify trade partnerships to reduce dependency.
4. Strengthen domestic competitiveness to enhance negotiating leverage.
5. Advocate reform of WTO dispute settlement to restore credibility.
6. Balance pragmatic engagement with commitment to rule-based trade order.

Conclusion

The emergence of ART-style agreements signals a reconfiguration of global trade governance. While multilateralism faces challenges, India must combine strategic pragmatism with protection of policy sovereignty to navigate an increasingly fragmented trade landscape.