Regional trade agreements: challenges and opportunities; Proliferation of trade accords has potential to increase trade-and make trade relations more complex.

• Author: Acharya, Rohini
• Position: SPECIAL REPORT

In sharp contrast to only 25 regional trade agreements (RTAs) notified to the General --Agreement on Tariffs and Trade (GATT) and still in force (*), today there are 290 RTAs notified and in force around the world. RTAs have also become more ambitious over time, frequently including not just tariff liberalization between the parties but also other issues. Today over half of all RTAs notified contain commitments to liberalize trade in goods, services and investment. Moreover, World Trade Organization (WTO) members remain actively involved in negotiating new RTAs, suggesting the rapid growth of such agreements since the early 1990s is set to continue.

While RTAs are permitted exceptions to multilateral rules, the proliferation of such agreements raises new challenges for international trade. By liberalizing trade in goods and services, RTAs can increase trade between parties but also result in increased discrimination against all other WTO members. In addition, they introduce rules and regulations in related issues, such as standards, trade defence and rules of origin to name just a few. These have the potential to also increase discrimination against non-RTA partners and make international trade more complex for exporters and importers.

RTAs increasingly go beyond market access in goods or services. They include provisions not traditionally associated with trade agreements such as competition, government procurement, environment and labour. Among RTAs notified to the WTO, 50% contain provisions that liberalize investment, over 70% have provisions on competition, 66% on government procurement, 57% on the environment and over 30% on labour.

DIVERGENCE

'Thus, such agreements are increasingly defining new rules that govern trade between their parties and are not extended to all other WTO Members. Furthermore, for some of these issues, there are no existing WTO rules governing international trade. The inclusion of these provisions suggests there is increasing divergence between existing WTO and RTA rules. This is another challenge for the multilateral trading system, first because it makes WTO rules less relevant for some trading partners and second because WTO members that are not part of the network of RTAs are increasingly excluded from these rules.

With regard to the first challenge, recent research by the WTO Secretariat suggests that for some provisions, the divergence may be less marked as RTAs generally tend to reiterate WTO rules. In...