Bilateral and Regional Free Trade Agreements, and Their Relationship with the WTO and the Doha Development Agenda

Abstract

The Doha Round differs from previous multilateral rounds since a number of participating countries are negotiating and implementing bilateral and regional free trade agreements (FTAs) at the same time as they are negotiating multilaterally. The standard arguments against FTAs involve that they create trade diversion, are difficult to administrate, involve complex rules of origin that impost added costs on firms, and attract the attention and political capital of policy makers away from the multilateral negotiation. This paper poses other arguments about FTAs being beneficial to the multilateral process. For instance, they have allowed some countries to achieve zero tariffs with all their main trading partners, and therefore a large majority of their trade, and often involve reforms in sensitive issues that, once undertaken, allow governments to assume a more offensive position at the WTO. Most importantly, by creating trade diversion away from countries that act as laggards in all negotiation fronts, they generate the competitive pressure that can move those nations to assume a more constructive position in the multilateral negotiations; also, it may be easier to harmonize existing FTAs than to seek comprehensive plurilateral and multilateral agreements from scratch. Beyond the discussion of whether FTAs help or hinder multilateral progress, the paper discusses changes in the multilateral rules, and best practices in bilateral negotiations, that can help make both fronts better complements. The issues mentioned include guidelines among rules of origin, origin accumulation, harmonization of standing agreements, bilateral trade facilitation and solutions to preference erosion. Alberto Trejos is a Professor at INCAE in Costa Rica. From 1994-1998, he was Dean of INCAE, and General Director of its Latin American Center for Competitiveness and Sustainable Development from 1999-2002. He was a professor in the Economics Department of Northwestern University from 1994-98. He has also been a visiting professor and researcher at the Institut d’Anàlisi Econòmica de Barcelona, the Federal Reserve Bank of Minneapolis, Fundaçao Getulio Vargas of Rio de Janeiro, and the University of Texas. As Minister of Foreign Trade of Costa Rica in 2002-04, he was responsible for the negotiation of CAFTA and of the CARICOM-Costa Rica FTA. He was in charge of Costa Rica´s ratification of its FTA with Canada and its entry into the Central American Customs Union. Trejos is a consultant for several companies, governments, and international organizations, President of CINDE (Costa Rican Investment Board), and a board member of several corporations and organizations. He has published extensively in leading journals, and he has been a National Science Foundation grantee and a Fulbright scholar. He received a PhD from the University of Pennsylvania in 1994.