WTO and Regional Trade Agreements

“In the last years, we have seen the WTO being stuck, while regional & bilateral trade agreements gained ground, so how would you assess the role of the WTO in the upcoming decade and do you think that the WTO will need to adjust to this new environment, if so, how?”

Global trade liberalization occurs through a variety of channels and not all of them appear to be in harmony with one another. Though every major nation is now a member of the World Trade Organization (WTO) and a participant in its complex process of multilateral trade liberalization; an average WTO member also belongs to six Preferential Trade Agreements (PTAs) (World Bank, 2005). WTO is now facing growing ‘irrelevance’ in bringing multilateral trade agreements palatable to all the members on the table, amidst the growing popularity of Regional Trade Agreements (RTAs) and PTAs.

RTAs on one hand can further the process of globalization through expanding the scope of trade cooperation, whereas, on the other hand, their trade diverting effects may contribute negatively to the process of international economic integration. Their proliferation could create competing blocs, eroding the viability of Multilateral Trading System (MTS). Regional groupings like ASEAN are nothing but a reflection of spaghetti -bowl effect. With the growing number of RTAs and PTAs the WTO needs to change gears and come up as a stronger organization to prevent the harmful effects of regionalism on International Trade and MTS.

The challenge is to ensure greater coherence among PTAs and between PTAs and MTS. The prolonged Doha negotiations suggest that the interest in multilateral agreements have been seriously weakened. Such a situation offers more room for bilateral deals. DDA should be concluded sooner than later, as implementing free trade within RTA is becoming increasingly difficult. From the perspective of normative economics, countries and WTO should work towards removing domestic distortion in Agriculture Sector. An effective competition policy, with an idea to remove market imperfection is needed. There is also a need for conducting joint exercises by the relevant ministries among the partner countries to understand whether the reasons for restricting market access are genuine or not. Predatory pricing is difficult to practise; therefore, anti-dumping measures on presumptions for stopping that have to be verified. RTAs pose a potential risk to the multilateral system, which gives rise to the need for an internationally financed Advisory Centre on Regional Trading Arrangements to provide training, negotiating advice and accreditation to private providers based on an agreed analytical framework.

The world trading system is far from perfect; and many reforms and changes in rules should be under discussion. But to further the cause of trade liberalization, much remains to be done including a defence of what has already been accomplished.

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About Vaibhav Gupta

Strategy Consultant, Open Source Enthusiast, Cooking Hobbyist, Photography Enthusiast. View all posts by Vaibhav Gupta

3 responses to “WTO and Regional Trade Agreements

  • Akanksha Gupta

    Well, even if some of these suggestions are take into account, there are issues of implementation. Though agriculture is a paralysed sector when it comes to policy making, but the sectors that have been taken care of have not been benefitting properly from the policies passed under the DDA. The developing countries claim that they have not realized certain benefits that they expected from the Round, like more access for their textiles and apparel in developed countries’ markets. So the point is, WTO is losing its relevance by the day, giving way to more and more of RTAs and segregated groupings. Ulterior motives of superpowers win against trade unification and a smooth flow of it(the basic motive of WTO). But the formation of an Advisory Centre on Regional Trading Agreements is like directly asking to rename WTO which will further face the implication of implementation issues.

    • Vaibhav Gupta

      I agree to you Akanksha. But when we say an advisory council it could be formed to train people as well about the RTAs and related things. Whole idea was not to replace WTO , but make it more relevant in the current context.

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