Regionalism and Regional

Trade Agreements

The terms
Regionalism
- actions by governments to liberalise or facilitate trade on
a regional basis, sometimes through free trade
agreements(areas) or customs unions
Regional Trade Agreements(RTAs)
- any types of trade agreements between two or more
customs territories (countries) within or across regions
where the trade barriers are reduced or eliminated

Similar words to RTAs

Preferential Trade Agreements (PTAs)
Regional Integration Agreements (RIAs)
Bilateral Trade Agreements (BTAs)

The Importance of RTAs

in International Trade
Before the WTO system (1988-1992)
- Preferential Trade under RTAs represented 40% of world
Trade
During the period of the WTO (1993-1997)
- 42%
In 2005
- 52. 5%

MTAs vs. RTAs

MTAs

RTAs

based on
- economic liberalism
- multilateralism

based on
- economic regionalism
- bilateralism

To build a unified and

integrated global system

To be a exclusive club
- them versus us

The motivations for RTAs

Slow progress of the Doha Round stimulised countries to take
RTAs
- the insurance option

Deeper integration can be done by RTAs, not by the WTO

- without the MFN principle-driven liberalisation

Smaller or developing countries see RTAs as a defensive

necessity
Political considerations
- The US-Israel FTA

The effect of RTAs

Sovereignty issue
- gradations of statehood and citizenship by RTAs
Functions of laboratories
- especially, for developing countries
Erosion of the MFN principle of the WTO system
- threat to the Multilateral Trade Agreements

Different Stages of
Regionalism
Types of RTAs

Different Stages of Regionalism 1

Free Trade Area (Free Trade Agreement)
- The form of freer access to a market
- keeping the original tariffs against third countries

Customs Union
- the form of freer trade agreement
- with common external trade policies

CU members build simpler internal border formalities.

FTAs leave external trade policies to members

- facing a problem trade deflection

Different Stages of Regionalism 2

Common Market
- the form of a unified economic market
- removing tariff and non-tariff barriers
Monetary Union
- common currency
Political Union
- the merging of governments

Break Time!

Negative and Positive opinions

on Regionalism

Two opinions on Regionalism

spaghetti-bowl theory
- negative opinion
- RTAs makes the world trade system more complicated
situation
- overlapping RTAs and the complex of trade barriers
- deadly threat to the multilateral system
- undermining the MFN principle
- distorting the role of the WTO

Two opinions on Regionalism

carrot theory
- positive opinion
- RTAs can serve as carrots to encourage the economic and
political freedom by breaking down trade barriers.
- providing broader negotiations, particularly in sensitive
sectors such as labours and environmental standards
- alternative of the MFN principle

Opportunities and challenges

Both opinions are partially true.

The promotion of free trade through RTAs can foster trade

liberalisation.

The complex networks of non-MFN relations in RTAs may increase

discrimination.

The key is to ensure that RTAs are designed in order to not

undermine the multilateral regime.

Possible option - Multilateralising Regionalism?

WTO Forum
Are RTAs stepping stones or
obstacles to the trading system?

The two speakers discuss whether regional

trade deals are stepping stones or
obstacles to a better functioning of the
Multilateral trading system

Video
http://www.wto.org/english/forums_e/debates_e/debate3_e.htm

Thank you!