The Sovereign Remedy?

Abstract

Preferential trading arrangements (PTAs) have arisen to become one of the most important phenomena in today's global economy. The number of PTAs notified to the World Trade Organization (WTO) surged to 200 by the end of 2007, and will soar to 400 by 2010. The wave of enthusiasm for PTAs has swept throughout the world. Some one-half of global trade is carried among partners to a trade agreement; for some countries that have formed PTAs with the main trading powers, the bulk of foreign trade flows with their trade agreement partners. The content of PTAs has become more complex and encompassing. Most agreements have advanced beyond market access for goods to so-called ‘behind-the-border’ issues, such as investment, intellectual property rights, competition policy, and government procurement. Sub-regional pacts have taken collaboration even further to issues ranging from macroeconomic cooperation and labor mobility to coordination of positions in multilateral trade negotiations. Why do countries keep forming PTAs? What are the most constructive ways to harness the good and pre-empt the bad of the rapidly growing trade agreement network? Can PTAs be the ‘Sovereign Remedy’ that will fuel economic exchanges and perpetuate peace, as Winston Churchill surmised at the dawn of the post-war era? The purpose of this book is to open avenues to answering these questions. The book is about the systemic issues surrounding PTAs — the contours, characteristics, and implications of the now global web, or ‘spaghetti bowl’, of PTAs. It examines PTAs in a historical context, maps out their key contents, analyzes their effects, and proposes ways to make more of them for the benefit of global free trade and welfare. The main argument is that in the presence of right designs and sound accompanying domestic, regional, and multilateral policies, PTAs can be conducive to global trade, further the development of multilateral trade rules, cut costs for global companies, and engender international cooperation in non-trade policy areas.