International political economy Trade Agreements

Regional Trade Agreements (RTA) have gained more prominence in the recent years which have  massively contributed to the growth of Multilateral Trading System (MTS). RTAs are further supported by the guidelines  of General Tariffs Agreement on Trade (GATT) and World Trade Organisation (WTO) . Upto July 2007, 380 RTAs have been reported to GATT Article XXIV  (1994) /WTO. RTAs promote free and globally liberalized trading  system paving the way towards multilateral trading system (MTS).

Successful RTAs enable growth and volume of business among trade partners relatively to both the countries and to the entire world as a region. Further in the period of 1990s there were several successful RTAs (NAFTA, MERCOSUR, SAPTA and SADC) . This has further lead to the development of substantial growth in GDP and intra-regional trade. There are 400 RTAs which are yet to be implemented by 2010 which once again reinstate, how important RTAs are in promoting global development of business which further enhance the under-developed nations an opportunity and privilege to make progress in economy.

According to APEC, year 2006 proved good for RTAs in introducing six sets of model measures viz. ,   trade in goods, barriers to trade, transparency, procurements of government,  dispute settlement and cooperation were adopted by Ministers of APEC. The paper opines that RTAs are contributing to the success and growth of Multilaterial Trading System with strong supportive reasons that the international progress is being made having access to technology, reforms in global trade policies  and strong business principles of WTO and GATT guidelines which are protecting RTAs.

NAFTA trade rose from 35 per cent to 50 per cent for the period 1980-1999. Some of the characteristics of efficient national economies in global market are : “Societies, like individuals, that prove must be able to take advantage of market opportunities created by a more liberalized and global market environment are those that are adept at moving resources and changing economic activities with changing market opportunities. Economists normally associate several features or characteristics with societies that are best able to adjust to the global market”. (Roman Grynberg, 2006)

“The first of these a pool of freely traded and specialized land, labor and capital that are mobile, with low transaction costs when involved in inter-sectoral mobility. Second, for a market to function efficiently an efficient information system that disseminates relevant market information rapidly and at low cost is essential. The third feature is a physical infrastructure that permits efficient movement of goods, services, resources and natural persons. A final feature is a social and political infrastructure conductive to predictable legal outcomes”.

(Roman Grynberg, 2006) 2. History of RTA The history and success of RTA is dependent on WTO principles of the trading system which in turn work to the development of multilateral trading system (MTS) . Some of the WTO principles are : (1) MFN (Most-favoured-nation) which means that nationals have to treat each other equally in terms of trading activities (2) National Treatment which means that equal treatment must be provided for both domestic and imported goods and there should not be any discrimination of goods.

(3) Free Trade with appropriate negotiations and to encourage economic reforms from time to time. RTA has been  an effective tool in achieving WTO principles of trading system which laid the foundation for MTS  and it has been growing for the past decade. Doha 2001 has also contributed to further growth of MTS, although developing nations consider that WTO agreements are producing problems. Article XXIV:5 of GATT 1994 is  also playing a pivotal role in development of MTS especially after DOHA round of discussions and negotiations with regard to Regional Trading Agreement.

With the above discussion, it is evident that RTAs have lead to Multilateral Trading System (MTS) and in a way APEC, OECD, WTO, GATT  organizations aim for regional economic integration, free trading areas and in lifting the trade barriers for free availability and access to goods and services. Ever since the emergence of RTA, there has been constant growth on MTS and the number of  RTAs are increasing which is an identical event that RTAs have proved to be building blocs for MTS with various reasons in spite of the fact there are debates about negative impacts of MTS with the implementation of RTAs.