The Proliferation of Free Trade Agreements: Bane or Beauty?

Abstract

This article explores the policy foundations behind regional and bilateral trade agreements and their application in practice. Critically examining the arguments in support of them, it highlights the virtues and deficiencies of each. It concludes by arguing that international standards should be developed to guide the development of bilateral trade agreements in the future. The proliferation of bilateral trade agreements has helped to fill a gap in a multilateral trade process that is impeded by the impasse of negotiations in the World Trade Organization (WTO). At the same time, the development of bilateral trade agreements arguably has discouraged some States from engaging in multilateral negotiations. The result is a new genre of trade relations in which bilateral and regional mechanisms are increasingly adopted in substitution for multilateral trade processes. While, bilateral trade agreements diverge significantly in their form and substance, they are having an important, albeit disparate impact upon multilateral trade. This article examines different arguments for asserting that bilateral trade agreements have advanced multilateral trade relations. It poses a variety of questions. To what extent is the development of bilateral trade agreements founded on sound trade principles? Have bilateral trade agreements added value to or detracted from the perceived needs of multilateral trade? Are States subject to suitable guidelines in negotiating bilateral agreements? To what extent are States subject to obligations to redress the practices of recalcitrant States, such as by resort to trade boycotts and other sanctions, in responding to violations of the law governing international trade? Overriding all these questions is a potential tension between policies over the liberalization of trade. One policy is grounded in principles of laissez faire: that States should be comparatively unrestrained in concluding bilateral trade agreements in the interests of promoting the unchecked exchange of goods and services. Another policy holds that States are bound to respect their bilateral agreements and that violating them ought to lead to the censuring of offending States. In support of this latter policy is the claim that States that consent to bilateral agreements both surrender their sovereignty and territoriality bilaterally and subject themselves to international standards of compliance not limited to those embodied in the GATT and its WTO successor. The first two sections of this article evaluate the reasoning behind the liberalization of trade and the assumptions in favor of bilateral trade agreements. The third section critically evaluates different arguments in favor of negotiating and concluding bilateral trade agreements. The fourth section proposes legal principles and standards to guide the application of bilateral free-trade agreements in the twenty-first century.