Regional trade agreements (RTAs) have proliferated in the last decade. By the end of 1998 the World Trade Organisation (WTO) had been notified of 102 RTAs. What does this mean for the multilateral trading system? Is regionalism compatible with the WTO’s long-term global free trade aspirations? As more and more RTAs are signed, what scope exists for introducing greater consistency with WTO rules?

A report from the University of Nottingham’s Centre for Research in Economic Development and International Trade (CREDIT), looks at the consequence of the explosion of RTAs: do they pose a threat to global economic stability? RTAs do stimulate trade between members but are a second-best solution for states genuinely committed to liberalisation. The jury is still out on whether RTAs impede the growth of freer global trade.

RTAs are like street gangs: you may not like them but it is safer to belong. Modern RTAs have a wide network and stretch across countries at different levels of economic development. Asia Pacific Economic Cooperation (APEC) has some 40 percent of the world’s population. The Free Trade Area of the Americas and European Union agreements with central and eastern Europe and the Mediterranean each encompass over 500 million people. Newer RTAs have extensive product coverage and can cover services, investment and intellectual property.

With few exceptions, industrialised states belong to many. At the last count, the EU states are members of ten. Political and security considerations, rather than economic criteria, motivate European RTAs which typically call for the harmonisation of standards to EU, rather than international, standards. Increasingly, new agreements fall within the sphere of influence of the EU and the USA, raising the spectre of a world of trading megablocs.

Other key points are:

• The WTO’s Committee on Regional Trade Agreements (CRTA), set up in 1996 to examine whether RTAs are WTO-compatible, is bogged down by a backlog of unresolved cases and is unable to resolve systemic trade issues.
• The exclusion of agriculture from many European RTAs is controversial.
• Little progress has been made on defining and measuring non-tariff measures or the scope and nature of compensation for third parties claiming to be injured by the creation of RTAs.

Policymakers are urged to:

• Develop measures to address the exclusion of least developed countries from the emerging mega-blocks.
• Recognise that the CRTA is ill-suited to judge whether RTAs are WTO friendly. Only the Dispute Settlement Body (DSB) can fulfil this function.
• Develop a realistic timetable and mechanism for broad-based review and scrutiny of RTAs.

Source(s):
‘Regional trade agreements and the WTO’, CREDIT Research Paper #00/3, Centre for Research in Economic Development and International Trade (CREDIT), University of Nottingham, by Jo-Ann Crawford and Sam Laird, May 2000 Full document.

id21 Research Highlight: 2 October 2001

Further Information:
Sam Laird
E. 8075
DITC/UNCTAD
Palais des Nations
1211 Geneva 21
Switzerland

Tel: +41 22 917 5760
Contact the contributor: Sam.Laird@UNCTAD.org

UNCTAD, Switzerland

CREDIT, University of Nottingham, UK

Other related links:
'Signing up to the WTO'

'Post-Seattle Blues: whither the WTO?'

WTO

WTO Watch

The World Bank looks at International Trade