Megaregional deals are the latest and greatest thing in the world of trade.
These sweeping agreements will eventually tie much of the planet into vast new free-trade zones, with advanced, and often overlapping, rules covering everything from investments and services to labour and environmental standards.
Canada has completed one such deal with the 28-member European Union and it's negotiating another with the 11 other members of the Trans-Pacific Partnership. Also in the works are the U.S.-EU Transatlantic Trade and Investment Partnership and the Regional Comprehensive Economic Partnership, binding China and 15 other major Asian economies.
If they all get done, these agreements would span 49 countries and a huge share of global economic output.
Forgotten in all the excitement is the awkward truth that 111 of the World Trade Organization's 160 member countries are not part of these megaregionals. Most of the developing world will be entirely shut out. India, Brazil and all of Africa aren't even at the table.
The architecture for a new world order in trade is being crafted and rolled out, and these countries will be denied a voice and a foot in the door. And that's a shame, says Harsha Singh, a long-time senior WTO official, who was deputy director-general from 2005 to 2013.
"The world is getting more interdependent, with trade and investment becoming two sides of the same coin," Mr. Singh said in an interview. "If we don't have an inclusive system, whatever system we put in place is going to create tensions and potential conflicts."
The developing world was the destination for 56 per cent of all foreign direct investment last year, pointed out Mr. Singh, now a fellow at both the Geneva-based International Centre for Trade and Sustainable Development and the Winnipeg-based International Institute for Sustainable Development. It's also home to a burgeoning middle class, which will grow by a billion people this decade.
"A young generation will grow up with the knowledge that they are not part of the system," Mr. Singh lamented. "There will be very strong resentment."
The megaregionals are designed to create business value chains, by giving preferences on tariffs and rules-of-origin to those inside, while denying them to others.
The hope of Canada and other countries involved in these megaregionals is that they will become stepping stones to a broader global free-trade deal, reviving the long-stalled Doha round of negotiations.
Mr. Singh is more pessimistic. Countries, and companies, will quickly adapt their supply chains to take advantage of the lower tariffs, rules and standards within the newly created zones. The standards that exist within these areas will become increasingly difficult for outsiders to meet, creating a barrier rather than a transition to global free trade.
"Either you meet the standard, or you start losing market share," he explained.
These megaregionals would eventually link four main hubs of economic activity – the United States, Europe, Japan and China. Countries will either be in, or out, according to Mr. Singh.
Those left outside must work now to forge links with these four powerful hubs, while modernizing their trade regimes to ensure they don't fall behind.
The rise of megaregionals was probably inevitable. WTO countries have tried without success since 2001 to reignite global free-trade talks, bogged down on issues such as agricultural subsidies. And so countries looked for other ways to expand free trade.
Megaregionals are an answer, but they are not the ultimate solution.
Canada has targeted trade expansion into lesser-developed countries as part of its 2013 Global Markets Action Plan. The plan identifies 21 emerging markets that offer the "best potential for broad Canadian commercial interests," including many of the key economies shut out of the megaregionals, such as India, Brazil, Indonesia, South Africa, Turkey and the Philippines.
For several years now, most of Canada's trade negotiating effort has been directed at agreements with advanced economies.
It would be easy to blame developing countries for torpedoing the Doha round and foot-dragging on economic reforms. But protectionist farm groups in the United States, Japan and Canada are also at fault.
A third of the world may well migrate toward a new architecture in trade.
But it won't be effective or fair if the other two-thirds are outside the fence.