Let’s keep it between us: the bilateral and regional approach to international trade law amidst a crackdown of the multilateral trade system

The fragmentation of the multilateral trade regime is not a new phenomenon and was not originated with Donald Trump’s imposition of tariffs on the United States’ long-lasting trade partners,[1] considering that the existence of ‘winners’ and ‘losers’ of the globalized world has been discussed and suggested for a while.[2] 

A reconfiguration of the international trade outlook already demonstrated evidence, for instance, back in 2009, when the BRICS held its first summit,[3] in 2016, when the United Kingdom decided to leave the European Union,[4] in 2019, when the WTO Appellate Body became inoperable after the United States blocked the appointment of new members,[5] or after the Covid-19 pandemic and the disruption of global value chains caused by the changes in trade flows.[6]

Amidst this scenario of reformulation of the global order, although the multilateral trading system under the auspices of the World Trade Organization may seem to be losing its strength and support from its Members, as mainly observed in the ‘failure’ of the Doha round of trade talks,[7] international trade flows have not diminished. In fact, as provided by the UNCTAD’s Global Trade Update, published in December 2024, global trade reached nearly US$ 33 trillion in 2024, expanding US$ 1 trillion in comparison to 2023.[8]  As for 2025, predictions published by the WTO pointed to a 3.3% growth in the year, pushed especially by the services sector.[9]

International trade, therefore, as provided by the available data, is not facing a reduction in number, but a change in its legal structure. While the Contracting Parties of the GATT 1948 established the agreement with the objective of entering “into reciprocal and mutually advantageous arrangements directed to the substantial reduction of tariffs and other barriers to trade and to the elimination of discriminatory treatment in international commerce”[10], adopted under a multilateral perspective, trade alliances are increasingly being based on bilateral and regional legal arrangements, constructed with new or old trade partners as a strategy to promote economic growth.

This option is currently adopted for ensuring effective, resilient, and predictable global value chains, based in a safe and stable legal structure,[11] while additionally considering a world where digital transformation and climate change require fast-pacing adaptation.

This not entirely new phenomenon has been observed, for instance, in the almost surprising adoption of the latest version of the EU-Mercosur Association Agreement, as presented in December of 2024.[12] The European Union, already facing threats of and the actual imposition of tariffs by Trump’s administration,[13] may find, in an agreement with the Mercosur, a predictable legal instrument for promoting trade and investment, and a large consumer market for main sectors that have been facing the challenges of the shift from human to automated jobs, such as the automobile sector.[14]

Similarly, by threatening to impose a 20% tariff on all products coming from Canada and Mexico, the United States also found a way of negotiating bilateral arrangements with these countries,[15] although maintaining its threat to disarticulate the operability of the USMCA.[16]

Alternative arrangements, such as the BRICS, even though facing opposition due to the reaction upon the Russian invasion of Ukraine, also shed light on new partnership opportunities to economies that seek to escape from the Global North rule on trade flows and on the trade and financial legal systems, while additionally encountering the challenge of an expected appreciation of the United States dollar.[17] The relationship built within the BRICS, therefore, may be strengthened as a strategy to overcome such challenges and potentialize trade relations, technological cooperation, financing, and further monetary integration among its members.[18]

The strategy of pursuing bilateral agreements or new limited economic arrangements instead of supporting a multilateral legal trade system that has been in place for 30 years now may seem unprecedented and outrageous for those who support free trade and understand it as one of the main forces to impulse transnational economic growth and development.

Nevertheless, despite the adoption of unilateral and bilateral legal approaches to international trade, through the imposition of tariffs or unilateral regulations, trade, and the current capitalist organization of the global economy will not cease but will rearrange itself, even if facing a less legally stable environment in which the weakest might eventually get excluded from the profits.[19]

In this context, when capitalism, as we know, face challenges, regulation will play its part in seeking for new predictable scenarios and solutions, as it has done before when facing other breakdowns, such as the 2008 financial crisis.[20] Therefore, even though the rules set forth in the GATT and operationalized by the WTO might seem to be put aside by some countries, facing an era of distrust and backlash,[21] new legal arrangements, negotiated between a smaller number of partners with common interests, already play their part in ensuring predictable legal instruments for promoting international trade.

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[1] On the adoption of tariffs under Donald Trump’s terms: Erica York, ‘Trump Tariffs: tracking the economic impact of the Trump Trade War’ Tax Foundation, 07 March 2025 https://taxfoundation.org/research/all/federal/trump-tariffs-trade-war/ accessed 09 March 2025.

[2] Nicolas Lamp, ‘How should we think about the winners and losers from the globalization? Three narratives and their implications for the redesign of international economic agreements’ (2020) 30(4) The European Journal of International Law 135.

[3] Oliver Stuenkel, ‘Emerging power and status: the case of the first Brics Summit’ (2014) 38(1) Asian Perspective http://vlex.com/vid/emerging-powers-status-brics-summit-494287502 accessed on 09 March 2025.

[4] Janez Kren, Martina Lawless, ‘How has Brexit changed EU-UK trade flows?’ (2024) 161 European Economic Review 104634 https://www.sciencedirect.com/science/article/pii/S0014292123002623 accessed on 09 March 2025.

[5] Matteo Fiorini, Bernard M. Hoekman, Petros C. Mavroidis, Maarja Saluste & Robert Wolfe, WTO Dispute Settlement and the Appellate Body Crisis: Insider Perceptions and Members’ Revealed Preferences, (2020) Journal of World Trade 667; The Appellate Body is responsible for reviewing reports issued by Panels in the dispute settlement mechanism of the WTO and issuing a final decision, which is binding to the Parties of the dispute. See WORLD TRADE ORGANIZATION, Understanding on rules and Procedures Governing the Settlement of Disputes (1994) article 17.

[6] Willy C. Shih, ‘Global Supply Chains in a Post-Pandemic World’ 2020 Havard Business Review https://hbr.org/2020/09/global-supply-chains-in-a-post-pandemic-world accessed 09 March 2025.

[7] Veijo Heiskanen, ‘The regulatory philosophy of international trade law’ (2004) 38(1) Journal of World Trade 1.

[8] UNCTAD, ‘Global Trade Update (December 2024) UNCTAD/DITC/INF/2024/3’ (2024), available at: https://unctad.org/publication/global-trade-update-december-2024 accessed on 05 March 2025.

[9] World Trade Organization, ‘Global Trade Outlook and Statistics – Update: October 2024’ (2024), available at: https://www.wto.org/english/res_e/booksp_e/stat_10oct24_e.pdf accessed on 05 March 2025.

[10] See ‘Text of the General Agreement on Tariffs and Trade’ (1948), preamble.

[11] Richard Baldwin, ‘The World Trade Organization and the Future of Multilateralism’ (2016) 30(1) The Journal of Economic Perspectives 95 https://www.jstor.org/stable/43710012 accessed 02 February 2025.

[12] Alessandra Lehmen, Geraldo Vidigal, ‘Trade and Environment in EU-Mercosur Relations: Negotiating in the Shadow of Unilateralism’ (2025) 30 European Foreign Affairs Review 87.

[13] European Parliament, ‘EU-US trade: how tariffs could impact Europe’ (2025), https://www.europarl.europa.eu/topics/en/article/20250210STO26801/eu-us-trade-how-tariffs-could-impact-europe accessed 07 March 2025.

[14] Federico Steinberg, ‘What are the implications of the EU-Mercosur Free Trade Agreement’ Center for Strategic & International Studies (06 December 2024) https://www.csis.org/analysis/what-are-implications-eu-mercosur-free-trade-agreement accessed 07 March 2024.

[15] The White House, ‘Fact Sheet: President Donald J. Trump Adjusts Tariffs on Canada and Mexico to minimize disruption to the automotive industry’, March 6, 2025 https://www.whitehouse.gov/fact-sheets/2025/03/fact-sheet-president-donald-j-trump-adjusts-tariffs-on-canada-and-mexico-to-minimize-disruption-to-the-automotive-industry/ accessed 09 March 2025.

[16] Shannon K. O’Neill, Julia Huesa ‘Trump and the Future of the USMCA’, Council on Foreign Relations, 17 January 2025 https://www.cfr.org/expert-brief/trump-and-future-usmca accessed 07 March 2025.

[17] UNCTAD, ‘Global Trade Update (December 2024) UNCTAD/DITC/INF/2024/3’ (2024), available at: https://unctad.org/publication/global-trade-update-december-2024 accessed on 05 March 2025.

[18] Daniel Azevedo et al, ‘An evolving BRICS and the shifting world order’ BCG, 29 April 2024 https://www.bcg.com/publications/2024/brics-enlargement-and-shifting-world-order accessed 09 March 2025.

[19] Richard Baldwin, (n 11).

[20] Peter Drahos, ‘Regulating capitalism’s processes of destruction’ in: Peter Drahos (ed.), Regulatory theory: foundations and applications (ANU Press 2017) 761-783.

[21] Richard Baldwin, (n 10).