New partners for Canada : Alberta perspective on bilateral trade

Abstract

There can be no question that regional and bilateral free trade agreements (FTA) are becoming increasingly important in the global international trade regime. While multilateral trade negotiations under the World Trade Organization (WTO) are inherently difficult because of the need to achieve consensus between all of the now 151 member states of WTO, bilateral FTAs seem quicker to negotiate and offer more flexibility for partner countries. This is not to say that bilateral FTAs are preferable to progress in multilateral trade negotiations. Multilateral trade liberalization has the benefit of bringing down trade barriers globally and dealing with all aspects of trade, including agriculture. The disadvantage of bilateral FTAs is that they create a ‘spaghetti bowl’1 of trade preferences and the necessity of complex ‘rules of origin’ to determine applicable tariff rates. However, the increasing prevalence of regional and bilateral FTAs is a trend that has become impossible to ignore in determining a country’s trade policy. Even Japan, which long argued that the growth in bilateral FTAs threatened the overall global progress in trade liberalization by drawing resources away from the multilateral process of the WTO, reversed its policy and has become an enthusiastic negotiator of FTAs in the Asian region and as far away as Mexico and Chile. The risk for countries left behind in the race to accumulate FTAs is that their export products will be disadvantaged in foreign markets by higher tariffs than are applied to exports from competitors which benefit from FTAs.