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The political economy of PTAs
Abstract
Introduction: Re-thinking the paradigm of Bilateral/Regional Trade Agreements Why do countries conclude bilateral/regional trade agreements? Numerous researchers have sought to answer this question, most often through creating a typology of the agreements. Such efforts, however, have been in vain. A bilateral/regional trade agreement is rarely, if ever, based on a single motive, and two or more parties to an agreement can often have different and sometimes even conflicting objectives (e.g., one seeking market access and the other political support). In fact, different actors within each country itself can also have different objectives (e.g., one sector seeking trade creation whilst another trade diversion). Thus, any typology is bound to create artificial categories, and would not necessarily give a proper or accurate answer to the original question. Sometimes, countries fall into a similar trap by trying to explain the rationale behind their bilateral/regional trade policy. For example, the European Commission recently acknowledged that it had been predominantly motivated by political considerations in concluding trade agreements with countries that were candidates for European Union (EU) membership (with the exception of Mexico, South Africa, and Chile). Although such a policy is in line with the EU's neighbourhood and development objectives, it does little to serve the EU's central trade interests.
... Whatever the drivers may be, the policy bias in favour of FTAs has significant (but hidden) cost to the economy: in a country with limited technocratic and institutional capabilities. There is always the possibility of a costly trade-off between signing FTAs and undertaking much needed supply-side reforms (Cattaneo, 2009). ...
... The proponents of FTAs may ask why countries are so enthusiastic in signing FTAs if the actual trade flow effect is very low. This issue has been well addressed in the recent literature on FTAs (Cattaneo, 2009;Irwin, 2008;Krishna, 2014;Rodrik, 2018a). First, countries sign FTAs as much for foreign policy and security reasons as for economic reasons. ...
Over the past three decades, free trade agreements (FTAs) have become an integral and enduring part of the global trading system. The number of FTAs notified to the World Trade Organization increased from 19 in 1990 to 292 by January 2019. ¹ However, debate on the economic case for following the FTA path as an alternative to multilateral and unilateral trade liberalisation is far from settled. The purpose of this note is to assess key themes of this policy debate. The focus is solely on the economic rationale of FTAs, even though political considerations play a key role in the proliferation of FTAs.
JEL Codes: F13, F15, F55
... However, contemporary research on the issue of the proliferation of free trade agreements (known also as a domino regionalism [Baldwin 1993;Baldwin 1997]) proves that not only economic reasons are usually taken into careful consideration as it comes to selection of potential new trading partners. Equally important are also various geopolitical interests 1 anchored in the priorities of domestic and foreign policies [Cattaneo 2009;Estevadeordal, Suominen 2009], e.g. the issue of international security in particular regions [Fijałkowski 2010;Grabowski 2012]. ...
The paper addresses the issue of a new generation trade agreement between the United States and the Republic of Korea which entered into force in March 2012. The author takes a closer look at the strategic motives of this accord, as well as its first trade effects from the standpoint of the South Korean economy. Because of high competitiveness of both trading partners, par-ticular emphasis is also put on the clusters of high-tech products and identification of the most important tendencies in this area. In order to provide a broader outlook, the author uses trade data of the International Trade Centre covering the period 2001–2014, which serves as a back-ground for an identification of possible roots of contemporary phenomena.
This paper analyses how the EU's new Artificial Intelligence (AI) Act impacts global economic governance. A prominent feature of the Act is that it is grounded in hard law-style regulation, with an emphasis on a risk-based approach. However, this unilateral measure is difficult to evaluate in the context of current World Trade Organization (WTO) agreements, as the WTO rules are not suited to governing this new emerging technology. In addition, the EU does not promote AI governance in its free trade agreements (FTAs) or its digital economy agreements (DEAs), although other countries are starting to expand the rules related to AI. Despite its reluctance to incorporate AI issues in its FTAs/DEAs, facets of the EU AI Regulation may permeate other countries via the so-called 'Brussels Effect'. It remains to be seen whether this phenomenon happens; if not, global AI governance will continue to be fragmented. Existing AI governance frameworks seem to be too large to come to a consensus on detailed rules regarding AI regulation. Moreover, a coordination mechanism across frameworks is lacking. In this situation, bilateral or plurilateral frameworks, such as FTAs and DEAs, have advantages in that they can encompass detailed discussions and mutual understanding among the participating countries, hopefully with the realisation of sufficiently flexible rules and mechanisms to address rapidly developing technologies. Countries, including those in the EU, are encouraged to promote the incorporation of AI regulation and cooperation within the scope of FTAs/DEAs.
WTO Law and Policy presents an authoritative account of the emergence of the World Trade Organization (WTO) and the basic principles and institutional law of the WTO. It explores how political economy has shaped the WTO’s legal philosophy and policies, and provides insights into how international trade law at the WTO has developed.
This textbook examines the legal obligations of the Member States of the WTO under the multilateral trade agreements, the legal remedies available under the rules-based dispute settlement system, and incorporates the most relevant case laws from the WTO’s jurisprudence. It outlines several key contemporary issues which the WTO faces as well as areas that need reforming. Each chapter covers a specific topic in relation to the framework and functionality of the WTO, with particular focus on the legal aspects of the multilateral trade order. The book is guided by the legal pronouncements of the Dispute Settlement Body (Panels and Appellate Body), and the commentaries on the interpretation of the provisions of the covered agreements.
This book is ideal for all students studying international trade law, including those coming to international law, international trade law, and WTO law for the first time.
Why is it that every customs union has a unique set of anti-dumping rules but the deviations from WTO law that occur follow a similar pattern? This chapter answers this in two steps. First, it considers why anti-dumping measures are imposed and why RTAs generally and customs unions specifically are formed. It thereby recalls the main theories that explain anti-dumping measures on economic terms or as being protectionist tools and considers how more recent attempts to include human rights or environmental concerns in anti-dumping matters link to these. Second, it then considers how the reasons to impose anti-dumping measures change within the context of customs unions both internally and externally. It does so by linking the arguments why anti-dumping measures are imposed to the motivation why RTAs are entered into. In doing so, this chapter applies strands of argumentation of the institutional analysis research field.
The connections between trade and security are hardly new. Analysts and practitioners have clearly recognized this interrelationship since the mercantilist era of the sixteenth and seventeenth centuries. Despite the fact that economic liberals often prefer to separate the political from the economic, it is widely recognized that trade and security are fundamentally interconnected in the foreign policy of states. Over time, as new forms of trade policy have come into being and the international security environment has evolved, the nexus of these two spheres has grown more complex and scholars have struggled to understand their interconnection.
The emerging economic power of Asia has accelerated since the conclusion of free trade agreements amongst Asia nations. At the same time, the development of such regional cooperation in trade affairs has been accompanied by human rights concerns regarding labour standards and environmental protection. A predominant Western critique on the absence of these standards within regional trade agreements in Asia has been rebutted on grounds of the right of development of those Asian economies to develop and to pursue this in the interest of their peoples as a matter of their economic and foreign policy. Here, a traditional tension is exposed between sovereignty and community values but which can be overcome if a dialogue remains open to gradually reconcile human rights conditions with free trade objectives on the long-term.
Cross-Regional Trade Agreements. Trans-Pacific Regionalism as an Alternative for “Free” Trade?
Contemporary integration processes in the world economy, known as the third wave of regionalism, are more and more often taking on cross-regional dimensions. What is particularly important they are not limited only to agreements establishing free trade areas, but also cover non-trade issues (aka the WTO-plus agenda). This new type of trans-regional economic cooperation is especially growing in the Pacific Rim, and this is why discussions in the monograph are focused on this region. The author poses thus a fundamental question, what are the relations between these new phenomena and the multilateral trading regime. Opinions on whether they are complementary or alternative means of comprehensive trade liberalisation still remain divided.
The monograph is intended to be a contribution to the ongoing debate on these issues, which has emphasised their socio-political gravity. Hence, it is also a part of the discussion on the evolution of international economic relations, as well as possible developments and potential consequences of the regionalisation race. Poland, as an EU-member and an economy oriented mainly towards European markets, has an indirect impact on the directions of the common trade policy. This does not mean, however, that it is impossible to have any influence over its direction. The growing activity of the EU – be it only as a strategic imitating reaction – in new trans-border, inter-regional integration projects can significantly affect the competitive position both of the Polish economy as well as of its particular industries, not forgetting the impact of preferential and cross-regional trade agreements on EU law.
Having said that, the research was based on four hypotheses:
H1: The principles of WTO trading regime are not an effective mechanism of establishing new fields of international cooperation, which is the factor for members states to find better alternatives, also in the form of cross-regional initiatives.
H2: The contemporary trade regionalism is rooted in non-economic rationales and despite its systemic tensions remains for the countries involved the cheaper solution when contrasted with multilateral negotiations and agreements.
H3: The insufficient authority and power of the WTO mechanisms result in an advantage gained by the United States in the process of agenda setting. Securitising their own priorities of foreign policy, including these of a (geo)economic nature, this country makes an effective use of the WTO-plus issues to promote and to implement provisions which are legally and symbolically anchored in the American system.
H4: Transnational corporations are an important factor accelerating the proliferation of deepened cross-regional trade agreements. In contrast to the sector of small and medium-sized enterprises they have sufficient resources, competences and political power to have a constant impact on negotiated trade agreements, thereby securing their own position, especially in the field of protection of intellectual property rights.
Research was concentrated mainly on broad institutional (political and economic) circumstances and the consequences of cross-regional trade agreements covering selected WTO-plus issues (provisions on competition policy, investment, protection of intellectual property rights, labour and environmental standards) and on the identification of integration effects in trade of goods.
Having defined the main goal of the research and hypotheses the monograph was structured as follows. In the first chapter the contemporary state of the art, an extensive review of literature and the main issues forming the pillars for the debate on the multilateralism and regionalism were presented. There were also characterised the economic and political factors shaping trade liberalisation processes after WWII, which were accompanied at the same time by efforts to institutionalise multilateral trade relations and proliferation of PTA/RTA (three waves of regionalism). Resulting tensions within the world trading system give rise to heated discussions and divergent opinions on the comprehensiveness of both the preferential trade agreements’ regime and that of the WTO. The latter is thus under a constant pressure to re-adjust or be re-designed to address these new emerging challenges more effectively.
Chapter two is an attempt to theorise cross-regional trade agreements (trans-regionalism). The author makes a synthesis of the classical economic integration theory with the elements of political economy and international politics, putting also a special emphasis on ideational aspects creating regionness, essential for the concept of the social construction of reality. He also embarks upon the theoretical attunement of key elements defining a model trade agreement based on a deepened approach (reduction of tariffs together with the above-mentioned WTO-plus issues).
Chapter three consists of a comprehensive description of regionalism in the Asia-Pacific. It covers the evolution of geopolitical and geoeconomic rationales for the Asia-Pacific Economic Cooperation (APEC), followed by the most important trade ties having a catalysing impact on the proliferation of trade agreements in the trans-Pacific sphere. Attention is also paid to the political and economic conditions specific to East Asian regionalism (aka the Asian noodle bowl) as well as that of the Americas, with special regard to relations with the U.S., intra-Latin competition for the status of regional trading hub, the reasons for and consequences of the failed idea of the Free Trade Area of the Americas (FTAA).
The fourth chapter covers the empirical part of the research based on the selected sample of deepened cross-regional agreements (U.S.-Chile, U.S.-Singapore, U.S.-Australia, U.S.-Peru, Canada-Chile, Canada-Costa Rica, Canada-Peru, Nicaragua-Taiwan, the Trans-Pacific Strategic Economic Partnership). In every case the main political and economic motives for completing trade accords were identified and a concise analysis of trade creation/expansion effects was conducted, with special attention being paid to the less developed parties. Fundamental for this section is the conceptual framework of the U.S. competitive liberalisation policy. Canadian trade policy responses to the new reality in the region shaped by the powerful neighbour are also examined, as is the case of Taiwan, where demonstration effect aiming at enhancing its credibility and re-affirming its role at the global/regional level remains a strategic issue. Consideration is also given to the first cross-regional, plurilateral agreement, which has the potential to strengthen and deepen the comprehensive trade liberalisation in the trans-Pacific region.
The last part draws some conclusions and presents expected scenarios for the nearest future and areas of further research.
The methodological perspective of the book is rooted mainly in the new institutional economics and international political economy (British school), together with elements characteristic for neo-realist and neo-liberal thinking. This interdisciplinary approach offers a great deal of promising new insights into the issue of contemporary regionalisation processes, especially when taking into account their social, political, legal and economic contexts determining various ways, forms and intensity of cooperation.
Events of the past two decades have generated increasing concern about the direction of the world trading system. While the General Agreement on Tariffs and Trade (GATT) helped orchestrate the substantial reduc-tion in tariffs after World War II, the multilateral approach to trade liberalisation has encountered difficulty in stemming the proliferation of non-tariff trade barriers and in extending international rules to new areas of trade. Meanwhile, the appearance of bilateral or regional trade arrangements in Europe, the Americas, and elsewhere provides an alter-native track for expediting trade reform, but also risks deteriorating into exclusionary, trade-diverting blocs that possibly may bring harm to world welfare. The loss of momentum in the multilateral system and the movement toward bilateral agreements have sparked renewed debate over the rela-tive merits of the two approaches to trade liberalisation) This chapter aims to provide some historical insight into this debate by examining whether multilateral or bilateral trade policies have been more effective in promoting trade reforms in the past. How has trade liberalisation been achieved in the past, and which types of policies have proved constructive or detrimental to multilateral cooperation on trade policy? Throughout the chapter the focus will be almost exclusively on trade policies in Europe, not only because Europe accounted for the bulk of international trade during these periods but because trade policies set much of the agenda for the rest of the world. Historical analysis is useful for a related reason. Because most econo-mists and policy analysts agree that multilateral free trade should be the ultimate objective of international commercial diplomacy, concern is often expressed that bilateral agreements may divert attention away from this goal, and thus substitute for rather than complement efforts at multi-90 Multilateral and bilateral trade policies 91 lateral reform. This deep-seated support for the multilateral framework and critical caution about the bilateral approach is derived in part from a common generalisation about two historical episodes in which inter-national trade policies differed sharply. In the late 19th century, a network of treaties containing the most favoured nation (MFN) clause spurred major tariff reductions in Europe and around the world. These treaties ushered in a harmonious period of multilateral free trade that compares favourably with – and in certain respects was even superior to – the recent GATT era. In the interwar period, by contrast, discriminat-ory trade blocs and protectionist bilateral arrangements contributed to the severe contraction of world trade that accompanied the Great Depression. The disaster of the interwar period strengthened the resolve of policymakers during World War II to construct a sound multilateral trading system that would prevent any return to discriminatory bilater-alism in trade policy. These two periods have indelibly shaped our ideas about multilateral and bilateral trade policies. The architects of the postwar world trading system, who lived through both periods, concluded that the 19th century exemplified the virtues of non-discriminatory multilateralism and the interwar experience demonstrated the vices of preferential bilateralism. These conclusions continue to underlie the trade-policy debate about whether bilateral or regional agreements contribute to or detract from the ultimate objective of multilateral free trade. In probing these conclusions by focusing on these two key historical episodes, this chapter finds that these generalisations are somewhat inaccurate. The 19th-century liberali-sation was attained entirely through bilateral agreements, with an utter absence of multilateral cooperation. In the interwar period, multilateral institutions and negotiations failed to reverse the spread of protectionism and promising bilateral attempts at trade reforms were actually dis-couraged by these multilateral gatherings. This chapter first discusses the formation of customs unions (CUs) within a sovereign state as an important prelude to trade negotiations between nations, negotiations that had their European origins in the 1780s. Then the growth, maintenance, and decline of the 19th-century multilateral treaty network is described, along with a comparison of its strengths and weaknesses in relation to the current GATT system. Finally, the contribution of bilateralism to the unravelling of the world economy during the interwar period is analysed, with particular attention being paid to the forms of bilateralism that emerged and the obstacles they posed to multilateral cooperation in trade policy. A conclusion draws together the themes and lessons that emerge from this retrospective look at the world trading system.
