Preferential Agreements Research Articles

Doha Development Round: Why Its Success is Essential for the World?

The Doha Development Round (DDR) has been in the doldrums for more than 10 years. Trade negotiations are at a stand-still, resulting in a revival of trade protectionism and preferential agreements in the name of ‘new regionalism,’ This leads to a dismantling of the multilateral trading system. The World Trade Organization (WTO) was created for the very purpose of increasing multilateral trade in 1995. It is vital to preserve gains from the world trade. The success of multilateral trading system relies in part on the completion of the DDR. The concepts and practices of free trade are at risk of being reduced in favor of trade protectionism and new regionalism. If it happens, then the future of global trade is uncertain. Such an occurrence would result in a major loss of economic potential, which no country can afford. Doha is stuck. Where do we go from here? This paper discusses the issues relating to the closure vs. success of the DDR.

A Hierarchy of Preferences

Bilateral trade agreements have proliferated rapidly within the last two decades, growing into a dense network of multiple ties between countries. The spread of preferential trade agreements (PTAs), however, is not uniform: some countries have signed a multitude of deals, while others remain much less involved. This article presents a longitudinal network analysis method to analyze the patterns of the formation of trade agreements, based on the mutual codetermination of network structure and agreement formation. The findings suggest that PTAs spread endogenously because of structural arbitrage effects in the network, and that they establish a hierarchy among countries. Rich countries form ties with each other and middle-income countries, who themselves create a horizontal layer of PTAs, but least-developed countries are left behind and do not form many ties. Supplanting the multilateral trade regime with preferential agreements therefore creates a system of highly asymmetrical relationships of weaker spokes around a few hubs.

M2KMIX: Identifying the Type of High Rate Flooding Attacks using a Mixture of Expert Systems

High rate flooding attacks such as SYN flood, UDP flood, and HTTP flood have been posing a perilous threat to Web servers, DNS servers, Mail servers, VoIP servers, etc. These high rate flooding attacks deplete the limited capacity of the server resources. Hence, there is a need for the protection of these critical resources from high rate flooding attacks. Existing detection techniques used in Firewalls, IPS, IDS, etc., fail to identify the illegitimate traffic due to its self-similarity nature of legitimate traffic and suffer from low detection accuracy and high false alarms. Also, very few in the literature have focused on identifying the type of attack. This paper focuses on the identification of type of high rate flooding attack with High detection accuracy and fewer false alarms. The attack type identification is achieved by training the classifiers with different feature subsets. Therefore, each trained classifier is an expert in different feature space. High detection accuracy is achieved by creating a mixture of expert classifiers and the ensemble output decisions are identified by our proposed Preferential Agreement (PA) rule. Our proposed classification algorithm, M2KMix (mixture of two Multi Layer Perceptron and one K-Nearest Neighbor models) differs from the existing solutions in feature selection, error cost reduction, and attack type identification. M2KMix was trained and tested with our own SSE Lab 2011 dataset and CAIDA dataset. Detection accuracy and False Alarms are the two metrics used to analyze the performance of the proposed M2KMix algorithm with the existing output combination methods such as mean, maximum, minimum, and product. From the simulation results, it is evident that M2KMix algorithm achieves high detection accuracy (97.8%) with fewer false alarms than the existing output combination methods. M2KMix identifies three types of flooding attacks, viz., the SYN Flood, UDP flood, and HTTP Flood, effectively with detection accuracy of 100%, 93.75%, and 97.5%, respectively.

Assessing the Trade Impact of the European Neighborhood Policy on EU-MED Free Trade Area

The goal of this paper is to provide an ex ante assessment of the long-run effect of ENP on EU-MED Free Trade Area. Supplementary objectives are the presentation of new up-to-date in-sample estimates of the actual trade potential in the Pan-European Common Market as well as more robust estimates of the trade enhancing of EU policy. The novel aspect of this work is twofold: i) to present nonparametric matching estimators along with gravity estimates; ii) to assume, as a counter-factual (i.e., the hypothetical situation of ENP implementation), the ex-post long-run average treatment effect of the Europe Agreements, which are the unique experience to date of full partnership without membership. Our empirical outcomes show a likely strong and robust on EU-MED trade of the new deep integration efforts made by the EU. This is confirmed by both the applied dummy strategy and the non parametric matching technique. This result seems to be linked to other factors than simply trade preferences alone. Our empirical evidence is relevant both to policymaking, since it provides an ex ante assessment of the efficacy of under the EU-MED regional cooperation framework, and to the methodological point of view, since it contributes to improvements in empirical estimates of the policy impact of EU preferential agreements.

Impact of RTA and PTA on Bangladesh’s Export: Application of a Gravity Model

As part of its growth strategy, Bangladesh instituted a trade liberalization process in the early 1990s which gained momentum in later years. Trade grew from 24.4 to 45% of GDP between 1980–81 and 2007–08, an indicator of increased liberalization as well as the growing importance of the external sector in Bangladesh. Apart from its unilateral liberalization, Bangladesh participates in three different regional trade agreements (RTAs): the South Asian Free Trade Agreement (SAFTA), the Asia Pacific Trade Agreement (APTA) and the Bay of Bengal Initiative for Multisectoral Technical and Economic Cooperation Free Trade Area (BIMSTEC FTA). In addition, Bangladesh signed preferential trade agreements (PTAs) with the member countries of the Developing 8 (D8). Because of the growing importance of RTAs, this study investigates their contribution to the export flows from Bangladesh using the gravity model that has become the primary tool for estimating the trade effects of regional integration. Regression results of bilateral exports for 40 countries from 1992–2009 indicate two crucial aspects. Firstly, all the RTAs consistently maintained statistically significant negative signs, except the BIMSTEC FTA and SAFTA, which showed insignificantly positive and insignificantly negative effects respectively. Secondly, the intensity of negative effects and the level of significance have shown a declining trend as the status of those blocs has changed from political or economic cooperation agreements to preferential agreements and from preferential agreements to free trade agreements. Thus, the intensity of tariff liberalization and the degree of sectoral coverage seem to be the important determinants of the RTAs’ performance. Therefore, experts expect that full-fledged implementation of FTA provisions and the elimination of all tariff and non-tariff barriers might result in a higher degree of integration.

Reflections on the Preferential Liberalization of Services Trade

This paper takes stock of the forces that lie behind the recent rise of preferential agreements in services trade. Its initial focus is with a number of distinguishing features of services trade that set it apart from trade in goods and shapes trade liberalization and rule-making approaches in the services field. The paper then documents the nature, modal, and sectoral incidence of the trade and investment preferences spawned by preferential trade agreements (PTAs) in services. It does so with a view to addressing the question of how preferential the preferential treatment of services trade is. Finally, the paper addresses a number of considerations arising from attempts to multilateralize preferential access and rule-making in services trade.

India-Japan FTA in Goods: A Partial and General Equilibrium Analysis

The present paper investigates the potential economic impacts of prospective India- Japan FTA in goods using partial equilibrium using SMART model and computable general equilibrium using GTAP model. The results reveal that both India and Japan’s consumer’s surplus will be increasing as result of this FTA. Hence, it is necessary that the competition policy shield consumers against possible abuse of potential dominant positions or against collusion from large importers and to ensure that the FTA delivers its potential benefits. However, the CGE analysis concludes that India-Japan FTA would result in welfare loss for India while positive welfare gains for Japan. Terms of trade improve significantly for Japan while deteriorates for India. India’s large welfare loss may also be due to ‘allocative inefficiency’ as well. Output and employment effects are mixed in both countries. This study also indicates that there is possibility of increase in bilateral exports. Further, the SSA results reveals that the welfare gains for Japan remain positive irrespective of parameter values while zero tariffs on imports from Japan may be welfare reducing for India. This study also highlights the possibility of the trade diversion in chapter 87, 84 and 48. Both countries may grant access mutually to number high tariff products without any danger of import surge. However, India may lose thirteen times more revenue compared to Japan. India must consider revenue loss and relook to alternative make up strategies. To this end, disaggregated analysis is essential to get definite response. We also note the dynamic nature of the global trading environment, with implementation of other preferential agreements likely to impact on the outcomes of India- Japan FTA in goods. Hence, the future research may be to identify non-tariff barriers, combined effect of multiple RTAs, investment opportunities and service trade in both markets.

East Asian FTAs and Their Implications for Economic Welfare and Global Trade: The Domino Theory Revisited

As the multilateral trade negotiations launched at Qatar in 2001 reeled from one collapse to another before stalling with no obvious end in sight in 2008, economies seeking new commercial opportunities turned en masse to the pursuit of bilateral and regional free trade agreements (FTAs). Indeed in the 84 months between the first hiccup in the Doha Round at Cancun in September 2003 and September 2010, 129 notifications of regional trade agreements were made to the WTO, compared to 95 in the prior history of the GATT/WTO. Of the 129 recent notifications, 38 involved an East Asian economy. As the East Asian web of trade agreements forms, the possibility of a formal pan-Asian agreement has also been raised. This chapter considers the economic and trade implications of the major East Asian economies forming a preferential agreement. On balance, the evidence suggests that once a critical mass of intra-East Asian trade is brought under preferential regimes, the pressure for a region-wide participation could well become irresistible – in short a domino effect could take off within the region. However, the same evidence points to the dynamic petering out in East Asia. As regards the potential for FTAs between the European Union and/or the United States with major East Asian economies such as Korea to trigger another set of dominos falling such that the major economies are led to form FTAs with each other, setting the stage in the fullness of time for a rationalization of the outcomes into a global (more or less) free trade area, it is far too early to tell; however, it will pay observers to watch closely the dynamic triggered by the Korea-EU FTA, if and when it comes into force.

The British Import Duties Act of 1932 and the Ottawa Preferential Agreements

The British Import Duties Act of 1932 and the Ottawa Preferential Agreements

The Multilateral Trading System and Preferential Trade Agreements: Can the Negative Effects Be Minimized?

Preferential trade agreements pose a big challenge for the multilateral trading system. Throughout the first decade of the twenty-first century, their number has grown significantly. However, these agreements have a range of disadvantages compared with the multilateral regime, for example, in trade facilitation and in dispute settlement. Whereas it will be difficult to stop the further spreading of this wave of preferential agreements, attempts can be made to reduce the negative effects of trade agreements that do, by definition, discriminate against other countries. In this article, a range of potential remedies are discussed, from a moratorium to the better enforcement of World Trade Organization rules on preferential agreements as well as improved monitoring.

Termites in the Trading System: How Preferential Agreements Undermine Free Trade by Jagdish Bhagwati Oxford University Press, Oxford, 2008

Termites in the Trading System: How Preferential Agreements Undermine Free Trade by Jagdish Bhagwati Oxford University Press, Oxford, 2008

Book Reviews

Richard Baldwin of Graduate Institute, Geneva, and CEPR reviews “Termites in the Trading System: How Preferential Agreements Undermine Free Trade” by Jagdish Bhagwati,. The EconLit Abstract of the reviewed work begins “Examines how the rapid spread of preferential trade agreements may endanger the world trading system. Discusses proliferating preferential trade agreements; why the pandemic has broken out; whether preferential trade agreements are a pox on the world trading system; and what we should do now. Bhagwati is University Professor of Economics and Law at Columbia University and Senior Fellow in International Economics at the Council on Foreign Relations. Glossary; select bibliography; index.”

The bandwagon of preferential agreements: why should South Asia join them more aggressively?

Preferential Trading Arrangements (PTAs) have become the order of the day. A significant portion of global cross-border trade is now being carried out on preferential terms. In a similar vein, seven of the eight member states of the South Asian Association for Regional Cooperation (SAARC) have recently concluded the South Asian Free Trade Agreement (SAFTA). Despite that, so far, the progress of subregional trade cooperation in South Asia appears to be rather bleak. The purpose of this paper is to explain why the subregional countries should join in this wave of PTAs more earnestly and strengthen the SAFTA.

What is really in the economic partnership agreements for the Southern African region? A perspective from Botswana's beef export markets

The signing of the Economic Partnership Agreements (EPAs) between the European Union (EU) and the African Caribbean Pacific (ACP) nations dominated the multilateral trade agenda in late 2007 and early 2008. While the Caribbean nations signed the full EPAs, some of the African countries only singed interim agreements with the EU and a number of West African countries chose not to sign any EPA. Using the case of Botswana's export markets, especially in agriculture, it is argued that the interim Southern African Development Community (SADC) EPA, which was signed by Botswana and her neighbours, with the exception of South Africa, may have been economically sensible in protecting Botswana's rural poor, at least in the short run. By tracing trade flows from the border to specifically poor sectors of the country, the importance of the beef exports sector to the poor and rural communities was found. The potential effects on the most significant exports of tariff bands associated with preferential agreements with the EU were found to be most beneficial in comparison to the Most Favoured Nation (MFN) and the South Africa-EU Trade Development and Cooperation Agreement (TDCA) tariff bands. But it is also argued that the EPA will most likely have far reaching long run costs on regional economic development and institutional integration, within the SADC and Southern African Customs Union (SACU).

On Carrots and Sticks: The Social Dimension of EU Trade Policy

This article assesses the social dimension of EU trade policy. First, the essence of the ‘trade and labour debate’ is recalled. Then, the EU’s practice of promoting decent work conditions through unilateral (GSP), bilateral or regional trade instruments is explored. EU support for corporate social responsibility is touched upon briefly. It is demonstrated that the EU essentially relies on its GSP to pursue objectives of decent work, whereas the social provisions of EU preferential agreements seem to be included as objectives to be achieved rather than as legal commitments to be enforced.

Termites in the trading system: how preferential agreements undermine free trade

Jagdish Bhagwati, an internationally renowned economist known for his insightful analyses and elegant writing, here shines a critical light on Preferential Trade Agreements, revealing how the rapid spread of PTAs endangers the world trading system. Preferential Trade Agreements, many taking the form of Free Trade Agreements, now number over 300 and are rapidly increasing. Bhagwati reveals how these agreements have recreated the unhappy situation of the protectionist 1930s, when world trade was undermined by discriminatory practices (today, ironically, as a result of a misdirected pursuit of free trade). The world trading system is definitely at risk again, the author argues, and the danger is palpable. Indeed, PTAs have created a chaotic system of preferences that has destroyed the principle of non-discrimination in trade. The trading system today is characterized by a blizzard of discriminatory barriers, each designed to favor some specific trading partner, so that we have what Bhagwati has called the spaghetti bowl problem. And while the big firms in the big countries can cope with the chaos, though at a cost, the author shows that small countries and small exporters are seriously handicapped. He also examines how FTAs are typically tied to extraneous issues such as openness to capital flows and inappropriate labor standards, so that the weaker nations, negotiating one-on-one with stronger nations, are forced to accept harmful demands unrelated to trade. Finally, the book warns that getting to multilateral free trade from the morass of PTAs will be almost an impossible task--like building a mansion from different-sized bricks. Preferential trade agreements, Bhagwati concludes, are not building blocks but stumbling blocks on the road of free trade. In Termites in the Trading System, he illuminates this growing threat to the world trading system. Acclaim for In Defense of Globalization: If Mr. Bhagwati doesn't get a much deserved Nobel Prize for economics, he should get one for literature. His writing sparkles with anecdotes and delightful verbal pictures. --New York Sun One of the world's leading international trade theorists.... Accessible and clearly argued. There is, one might say, a wealth of material on every page. --The Wall Street Journal An outstandingly effective book.... Until further notice In Defense of Globalization becomes the standard general-interest reference, the intelligent layman's handbook, on global economic integration. --The Economist Available in OSO: http://www.oxfordscholarship.com/oso/public/content/economicsfinance/9780195331653/toc.html

Are regional trading agreements beneficial?: Static and dynamic panel gravity models

This paper evaluates the effects of preferential agreements on trade between trade group members and non-members using a static and a dynamic gravity model. The gravity model is estimated using recent panel data techniques which account for the endogeneity of the integration effects and the existence of dynamic effects. We incorporate into the static model the time-varying, multilateral resistance terms to obtain unbiased estimates. In addition, we estimate a dynamic version of the gravity model using a number of GMM estimators. The results show that dynamics are significant and robust and that the new wave of regionalism in the 1990s has had larger positive effects on intra and extra-bloc trade on developed countries (EU and NAFTA) than on developing countries.

A Theoretical Perspective on Multilateral Agreements on Investment*

AbstractWhy do we observe some developing countries objecting to the prospect of a Multilateral Agreement on Investment (MAI), even though they have been keen to liberalize investment in preferential agreements in recent years? In this paper, we analyze the issue of MAI implementation and assess the welfare consequences of such kind of agreements. In our model, participation to MAI involves a tradeoff between less rent extraction from multinational firms (MNEs) and more abundant FDI inflows. At equilibrium, either all countries enter MAI, or all countries stay out, or only some of them enter. Coordination problems may induce multiple equilibria: the three types of equilibria may coexist. So, the implementation of MAI may depend not only on structural factors but also on the general “political climate.” When all countries join MAI, world welfare is maximized because this minimizes the hold‐up problem faced by MNEs and stimulates investment. However, in an asymmetric world, welfare gains are not guaranteed for all countries.

Assessing Applied Protection across the World*

AbstractThis paper presents MAcMap–HS‐6, a database providing a consistent, ad valorem equivalent measure of tariff duties and tariff rate quotas for 163 countries and 208 partners, at the six‐digit level of the Harmonized System (5111 products), accounting for all preferential agreements. We describe the methodology used to compute and aggregate an ad valorem equivalent of applied protection. Emphasis is placed on minimizing the endogeneity bias in the aggregation procedure, while acknowledging structural differences in export specialization. The resulting quantitative assessment is illustrated by giving an overview of applied protection across the world in 2001, in terms of average as well as distribution.

Challenges to Multilateral Trade: The Impact of Bilateral, Preferential and Regional Agreements

Challenges to Multilateral Trade: The Impact of Bilateral, Preferential and Regional Agreements