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Regional trade agreements (RTAs) cover more than half of international trade and operate alongside global multilateral agreements under the World Trade Organization (WTO). The first eleven years (1995-2005) of the WTO were paralleled by a tripling of RTAs officially notified to the WTO and in force, from 58 to 188*.
However, regional trade agreements can have both positive and negative effects.
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They can be attractive, for example, because it may be easier for a small group of neighbouring countries with similar concerns and cultures to agree on market opening in a particular area than to reach agreement in a wider forum such as the WTO. They can also offer new approaches to rule-making and so act as stepping stones on the way to a multilateral agreement.
But regional agreements also risk making it harder for countries outside the region to trade with those inside and may discourage further opening up of markets, ultimately limiting growth prospects for all. Moreover, broad-based multilateral negotiations, with more players and more sectors, will offer greater potential for mutual gain than limited bilateral or regional deals.
Two broad policy lessons can be drawn from OECD work on regional trade agreements.
The first lesson is that many consequences of regional trade agreements activity bolster the case for a strengthened multilateral framework. This applies particularly to the contribution of regionalism to divergence from the rules of the multilateral system, to the effects which the patchwork of regionalism can have on non-members of those agreements and to the role of regionalism in raising transaction costs for business.
These elements are compounded by the fact that regionalism has often failed to crack the hardest nuts. In some particularly sensitive areas, regional initiatives have been no more successful – and in some cases less successful – than activity at the multilateral level. It needs to be acknowledged, however, that even were multilateral disciplines to be strengthened, RTAs, and the provisions embodied in them, would not disappear. The question then arising is how regional arrangements might impinge upon, or co-exist with, any multilateral disciplines.
The second lesson we can draw from experience with regionalism is that while some consequences of RTA activity contribute to the case of strengthening the multilateral framework, there are features of regional approaches that may nevertheless complement such strengthening or even be drawn upon in designing strengthened multilateral rules.
The scope for complementarity arises from the contribution which regional initiatives can make towards harmonisation of rule making; the scope for drawing upon arises from the extent to which RTAs go beyond the WTO. Together, these two elements have yielded highly effective synergies between approaches at the regional and the multilateral levels.
* These figures include RTAs notified under the Article XXIV of the GATT 1994 covering goods (including agriculture), the Enabling Clause covering RTAs between developing and least developed economies, but not those notified under GATS Article V regarding services.
Latest OECD papers on regional trade agreements
- Regional Trade Agreements - Treatment of Agriculture (OECD Food, Agriculture and Fisheries Working Paper No. 44)
South-South and Latin American regional trade agreements (RTAs) have progressed most in eliminating agricultural trade tariffs, according to this study of over 50 RTAs. However, traditionally sensitive sectors such as dairy, meat, sugar and cereals are still often protected by exemptions such as tariff rate quotas (TRQs).
- The Political Economy of Services in Regional Trade Agreements (OECD Trade Policy Working Paper No. 112)
How do services commitments in RTAs influence multilateral negotiations? Through 4 case studies of the RTAs of Chile, Japan, the EU and the US, this paper looks at political economy issues underlying RTAs in general, as well as the specific concessions that countries make on trade in services.
- Multilateralising Regionalism: How Preferential Are Services Commitments in Regional Trade Agreements? (OECD Trade Policy Working Paper No. 106)
This report examines services schedules of commitments in 56 regional trade agreements (RTAs) where an OECD country is a party. It confirms that on average RTAs in services go beyond GATS with commitments in about 72% of sub-sectors, among which 42% correspond to preferential bindings (GATS-plus commitments). In addition, the report provides an overview of rules of origin for services providers and MFN clauses in services chapters in order to see whether commitments granted might be extended to non-parties to minimise discrimination among foreign services suppliers.
- Multilateralising Regionalism: The Case of E-Commerce (OECD Trade Policy Working Paper No. 99)
An increasing number of RTAs have adopted specific provisions and rules for e-commerce, yet WTO negotiations in this area have yielded very little progress so far. This study suggests bottom-up multilateralisation extending RTA e-commerce undertakings and provisions to a larger number of trading partners, as wells as top-down multilateralisation which can advance e-commerce provisions, commitments and common learning at the WTO level.
Further reading
Bookmark this page: www.oecd.org/trade/rta
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