Is there anything stopping countries negotiating trade agreements step-by-step?

Question

There have been so many big trade agreements in the news recently, that one of the striking things about all of them is how long they have taken to be agreed, and how complex the negotiations seem to be.

My question is really about why countries don't get the simple stuff done first, implement them, and then carry on with the other 'complex' things (which themselves may take various stages to implement and negotiate?.

For example, let's say country A and country B wish to negotiate. There is a general understanding that country A will gain from free trade for products X and Y to country B (and country B will get the same rights too), and that country B will gain a similar level of gain from free trade for exporting product Z to country A.

Although I am describing an idealised scenario, the reality is surely that countries would still benefit from a similar scenario since they can benefit some of their most important industries quickly, and then look at the other, more complex stuff, later.

Are there important reasons, such as maybe legal reasons, for why this could not be done?

Answer 1

That's basically what happened, with some nuances. After WW2, several countries led a push to increase and facilitate trade globally through the GATT. The idea was that it is easier to reach ambitious agreements through multilateral trade negotiations dealing with many issues at once than through piecemeal bilateral agreements.

And it was widely successful, average tariffs between GATT countries went from over 20% to below 5% between 1947 and 2001. Global trade grew steadily during this period. The Soviet empire collapsed and joined the system, China eventually did too. So the easy stuff has been dealt with, what you are hearing about now is in fact the complex stuff that was initially kept for “later” (agriculture too has proven difficult but that's another issue).

Specifically, the big agreements in the news, the TPP, the TTIP, the CETA, etc. are all “new generation” trade agreements between countries that are already members of the World Trade Organisation and trading manufactured goods more-or-less freely. These agreements are an attempt to deal with the collapse of the Doha round of the GATT and the difficulties of the WTO and are mostly about things like patents or services, which are inherently very complex.

Answer 2

Negotiation strategy

International trade agreements are so complex because no side wants to be exploited. That's why countries think very carefully about what kind of free trade to allow and what regulations apply. This sometimes means to make concessions: "You may underbid our domestic producers with this good, and in exchange you introduce our safety standards for producing that good so you can no longer underbid us on the world market".

When parts of an agreement are already implemented, those parts are already set in stone and are hard to re-negotiate (not without causing trouble for the companies which made business decisions based on these new regulations). That means the negotiators give up flexibility by pre-ratifiying parts of the agreement.

Lobby meddling

When there is news of a new trade agreement being negotiated, both industry and citizen lobbies will be on high alert. They will seek the opportunity to get their agenda into the agreement, or at least try to prevent the agreement from totally undermining it. All of them will approach the delegations and try to get their clauses in. Some of them will be successful, which will bloat the agreement text ("Yes, we start free-trading widgets, but only if we both make them without child labor and respect each others patents and produce them carbon-neutral and make them compatible with each others widget-holders").

You might remember the TTIP agreement which was designed with a lot of influence by industry lobbyists. The citizen lobbyists were not invited and reacted by rallying the European public against it.

Legislative processes

When one of the parties to the agreement is a democratic country, then the negotiation delegation will not actually be authorized to agree to the agreement. They will have to pass it through the parliament first. It's usually easier to push one large free-trade bill through the legislative process than dozens. This is especially relevant for agreements with the EU, because these can usually be shot down by any of the parliaments of the member-states.

This was the situation last year when the regional parliament of Wallonia blocked the CETA agreement for a while. In this case the situation was resolved by the Belgian parliament overruling them. But if it would have been a national parliament, it wouldn't have been so easy. With piecemeal-introduced agreements, this problem would be worse, because each individual piece might be the one thing which is really bad for one single EU country and cause them to block it.

Answer 3

Additional detail: One primary purpose of trade agreements is to forestall tariff wars. That's what happens when countries don't think out trade situations in advance. Those trade situations devolve into a commerce stifling set of protectionist taxes on both sides, until enough constituents complain to enough legislators in all countries involved to resolve the situation amicably. For every person that is helped by a protectionist tariff, someone else in that country gets hurt.

Agreeing on trade situations in advance is far less disruptive to economies than letting dueling tariffs take their course. This has become standard practice for most countries today, which is why most of the easy trade situations have already been resolved - the alternative is expensive for both countries.

Consider the Chicken Tax War, when the US, France, and Germany got into a trade war over chickens in 1963. France and Germany imposed taxes on imported chickens, which the US could produce in greater numbers at a lower cost, so that France and Germany could protect their local chicken farmers from being driven out of business. The US retaliated with 25% taxes on imported food and light trucks.