Proliferation Of Preferential Trade Agreements Research Articles

Preferential Trade Agreements

The WTO stifles the possibility of developing countries to utilize trade as a means to economic growth and development. Requirements to implement WTO rules are at odds with development ideals- and countries simply try to implement these rules in such way that can give them more opportunities, profits and contribution to the attainment of development goals. One important trend in recent years in the field of trade policy is the proliferation of preferential trade agreements (PTAs). Normally, PTAs provide for greater levels of liberalization among the parties than what the countries may have committed to at the WTO in terms of tariffs or services liberalization. The new generation of PTAs tend to contain disciplines which go beyond relevant WTO disciplines, or regulate issues in respect of which there are no WTO disciplines. One example is the agreement that the European Union has signed with South-East European countries. This agreement deviate from the purely trade-focused purpose but it includes other broader intentions. But still many developing countries are addressing the fact that they are not benefiting from the WTO system and they are claiming that the cost of adjustment to its rules is higher than the advantage of being part of the WTO. One of the main problems addressed by developing countries is the reciprocity of the market access concession. The WTO should face this problem and try to find suitable solutions with minor costs for the members. DOI: 10.5901/ajis.2015.v4n3s1p436

Renewables, Preferential Trade Agreements and EU Energy Security

A major aim of the international community is to decarbonize the economy. With renewables, international trade in energy is likely to increase. In turn, the international trading system can be a major vehicle towards moving away from fossil fuels to renewable energy. To this end, it can provide fair competition, economies of scale and knowledge transfer. This article analyzes the impact of European Union (EU) preferential trade agreements (PTAs) in addressing climate change mitigation and energy security by promoting renewables. Currently, there is a proliferation of PTAs; this trend seems irreversible and is likely to persist, given the current crisis in the multilateral trading system. We argue that the EU can, through its network of PTAs, move towards greater energy independence as renewable energy becomes increasingly economically viable. This article provides a thorough review of the renewable energy-related provisions in the EU’s current PTAs and recommends three tangible ways through which the EU could capitalize its vast network of PTAs to boost the renewable energy market.

Dial PTAs for Peace: The Influence of Preferential Trade Agreements on Litigation between Trading Partners

Preferential trade agreements (PTAs) are en vogue both as policy tool, as well as research subject. We do not beg to differ. In this article, inspired by the behaviour of the European Union (EU), we ask whether the proliferation of PTAs and the negotiation of mega-regionals, like the Trans-Atlantic Trade and Investment Partnership (TTIP) between the EU and the United States (US), risk undermining the WTO Dispute Settlement Mechanism (DSM), 'the crown jewel of the WTO system'. The EU is the world's biggest participant in PTAs. It is also, after the US, the most active participant to WTO disputes. Yet, in the twenty years since the creation of the WTO, it has only been involved in a tiny number of disputes with PTA partners. We find that, despite appearances to the contrary, the US has also been involved in very few WTO disputes with its PTA partners. Moreover, without assigning causal relationship to the signature of a PTA and the amount of litigation between preferential partners, we show that there is inverse correlation between the two. We find it likely therefore that the number of WTO disputes is likely to continue decreasing as WTO Members, including the EU and the US, continue signing PTAs. It remains to be seen whether the WTO system will profit or suffer from the likelihood of fewer WTO disputes.

Between Theories of Trade and Development: The Future of the World Trading System

This article traces the role of developing countries in the GATT/WTO trading regime, and the evolving legal framework for their participation. It then maps onto this framework evolving schools of thought amongst development economists on strategies for economic development. It goes on to argue that the paralysis in the current Doha Round of the WTO, primarily reflecting fault-lines between developed and developing countries, and paralleled by the dramatic proliferation of preferential trade agreements and bilateral investment treaties, requires fundamental rethinking of the orientation of the multilateral (WTO) trading system, in particular the need to be more accommodating of plurilateral agreements amongst sub-sets of members that are open to subsequent accession by other members, primarily on a conditional most-favored-nation basis.

Unfair Trade? Preferential Trade Agreements, Human Rights and Inequalities

This article examines the implications for social inclusion, equality and the fulfillment of human rights of the recent proliferation of preferential trade agreements (PTAs). It considers the impact that PTAs have had on small and medium-sized enterprises, smallholder farmers and women. It also considers the limits on domestic policy space mandated by PTAs, and the implications this has for the ability of governments’ to regulate in the public interest.

Going Beyond the 0/1 Dummy: Estimating the Effect of Heterogeneous Commitments on Services Trade

The proliferation of preferential trade agreements in services (STAs) and improved availability of data on bilateral services trade flows has resulted in a growing literature on the theoretical and empirical assessment of services trade effects. However, this literature has not considered the different types of provisions found in STAs while estimating the trade effects. We address this issue taking into account the heterogeneity of provisions found in STAs using the Design of Trade Agreements (DESTA) database (Dur et.al, 2014). Our results suggest that not accounting for this heterogeneity lends an upward bias to the magnitudes of the estimated trade effects. This finding is robust to estimations involving only positive and those incorporating zero trade flows as well as to sample coverage (all, EU, non-EU, North-North, North-South).

Trade-Diverting Free Trade Agreements, External Tariffs, and Feasibility

There has been a proliferation of preferential trade agreements within the last two decades. This paper analyzes the effects of free trade agreements (FTAs) on external tariffs in small economies where protection decisions are made politically. Our model determines tariff rates endogenously instead of assuming they are fixed during or after the formation of FTAs as commonly done in the literature. We show that when an FTA is established, the tariff rates that apply to non-members essentially decline. More importantly, we investigate the interaction between endogenous tariff determination and the feasibility of an FTA. We find that the expectation of tariff reductions under endogenous tariffs could make an otherwise feasible FTA if tariffs were fixed become infeasible. However, if domestic import-competing sectors are relatively smaller and the government places a significant weight on political contributions relative to social welfare, an FTA with endogenous tariffs may be more likely to be feasible than ...

Trade-diverting free trade agreements, external tariffs, and feasibility

There has been a proliferation of preferential trade agreements within the last two decades. This paper analyzes the effects of free trade agreements (FTAs) on external tariffs in small economies where protection decisions are made politically. Our model determines tariff rates endogenously instead of assuming they are fixed during or after the formation of FTAs as commonly done in the literature. We show that when an FTA is established, the tariff rates that apply to non-members essentially decline. More importantly, we investigate the interaction between endogenous tariff determination and the feasibility of an FTA. We find that the expectation of tariff reductions under endogenous tariffs could make an otherwise feasible FTA if tariffs were fixed become infeasible. However, if domestic import-competing sectors are relatively smaller and the government places a significant weight on political contributions relative to social welfare, an FTA with endogenous tariffs may be more likely to be feasible than an FTA assumed to fix external tariffs.

Os efeitos do novo regionalismo sobre o comércio

A partir de 1990 ocorreu um “boom” na formação de blocos econômicos no mundo, e este trabalho procurou identificar se o regionalismo propiciou criação ou desvio de comércio. Para isto, utilizou-se o modelo gravitacional com dados em painel para o período de 1990 a 2009. Os resultados sugerem que houve criação de comércio e desvio de exportação no Mercosul. Além disso, percebe-se o efeito antecipação sobre os fluxos de comércio intrazona e sinais de criação de comércio com a formação do NAFTA. De forma distinta, há indícios de que o Asean e o PAFTA desviaram comércio. Por fim, a forma como evoluíram os fluxos de comércio intrazona (ex ante e ex post) decorrentes da constituição dos blocos analisados foi diferente não somente em termos de volume, mas também na velocidade em que eles responderam a sua formação.

The Coevolution of Trade Agreement Networks and Democracy

The proliferation of preferential trade agreements (PTAs) and the wave of democratization are among the most significant developments in international relations during the past three decades. The correlation between these is well noted. The causal link between these phenomena, however, remains unclear. On one hand, democracies have been found to be more likely to join PTAs. On the other hand, trade agreements should foster democratization because they undermine the ability of governments to distribute rents to maintain an autocratic regime. If PTAs and democracy coevolve through a selection and a contagion effect, then conventional statistical techniques can produce wholly misleading results. This article presents a new approach based on recent advancements in longitudinal network analysis. Our findings confirm that historically, democratization indeed made states more likely to sign PTAs, but that trade agreements also encourage the democratization of a country, in particular if the PTA partners are themselves democracies.

Explaining rising regionalism and failing multilateralism: consensus decision-making and expanding WTO membership

The beleaguered progress of the Doha Development Agenda of the World Trade Organisation (WTO) presents something of a puzzle for economic theory: if multilateralism is an effective forum for liberalisation (as it has been in the past), then why have the current round of talks faltered amid the proliferation of preferential trade agreements (PTAs)? This paper builds a ‘hub and spoke’ version of the Maggi (Am Econ Rev 89(1):190–213, 1999) model of trade negotiations to shows that the combination of the WTO single-undertaking and consensus decision-making principles with an expanded and more diverse membership can render multilateralism less desirable for hub countries than bilateralism. It is argued that these principles give spoke countries de facto veto power meaning that their threat point during WTO negotiations is a reversion to PTA negotiations between all parties. Accordingly, spoke countries with relatively less to gain from the WTO can use their veto power to extract gains from those that would benefit substantially. If an expanding WTO membership has increased the number of such countries, then the benefits of multilateralism versus regionalism from the perspective of hub counties may have been diminished to such an extent that they are no longer willing to wait for the conclusion of the Doha round before engaging in PTA negotiations.

Investment Discrimination and the Proliferation of Preferential Trade Agreements

The proliferation of bilateral and regional trade agreements has arguably been the main change to the international trading system since the end of the Uruguay Round in the mid-1990s. We argue that investment discrimination plays a major role in this development. Preferential trade agreements can lead to investment discrimination because of tariff differentials on intermediary products and as a result of provisions that relax investment rules for the parties to the agreement. Excluded countries are sensitive to the costs that this investment discrimination imposes on domestic firms and react by signing a trade agreement that aims at leveling the playing field. We test our argument using a spatial econometric model and a newly compiled data set that includes 166 countries and covers a period of eighteen years (1990–2007). Our findings strongly support the argument that investment discrimination is a major driver of the proliferation of trade agreements.

The WTO, the Doha Round Impasse, PTAs, and FTAs/RTAs

Beginning in 2001, the Doha Rounds afforded World Trade Organization (WTO) members the opportunity to develop equitable trade rules between the developed and developing member states. The WTO has been successful in advancing multilateral international trade; however, since the Doha Rounds stalemate, it has witnessed the development of more than 300 Preferential Trade Agreements (PTAs) and over 500 Free Trade Agreements (FTAs). This article attempts to answer two questions: (1) has the failure of the Doha Rounds contributed to the proliferation of PTAs and FTAs, and (2) are these agreements threatening the regulatory authority of the WTO, which, in turn, reduces its ability to effectively promote and govern free trade, and its mission?

The EU’s “Global Europe” Strategy and the Liberalization of Trade in Legal Services: The Impact of the EU Free Trade Agreements in Asia

The past two decades have witnessed remarkable developments in terms of the globalization of the world’s economies. As a result the legal services, which form a vital part of the infrastructure that underpins world commerce, have experienced continuous growth over the last ten years. However, foreign lawyers face restrictions in many jurisdictions. In most instances trade agreements are used to negotiate the removal of these limitations. Until recently to the exception of the EU and the NAFTA, the liberalization of trade in services took place within the General Agreement on Trade in Services (GATS). The last decade has seen a proliferation of Preferential Trade Agreements (PTAs), which contain such liberalizations. Since 2006 the EU has been negotiating PTAs with strategic trade partners. This paper aims to analyze the consequences of the PTAs that the EU has been negotiating with five Asian countries on the liberalization of trade in legal services in light of the EU’s new trade strategy and the GATS.

The direct and relative effects of preferential market access

The proliferation of preferential trade agreements has resulted in a complex system of preferences in which market access conditions are often discriminatory. In this paper we investigate how market access conditions have evolved between 2000 and 2009, and how this has affected international trade. Our results show that the proliferation of preferential access has increased bilateral trade not only due to lower tariffs but also because preferential access often resulted in higher preferential margins vis-à-vis foreign competitors. The results also indicate that the evolution of the system of preferences has been disadvantageous for countries that did not actively engage in forming new trade agreements.

Proliferation of Preferential Trade Agreements: A Quantification of Its Impact

Literature has frequently evaluated the proliferation of preferential trade agreement (PTAs) by counting the number of PTAs or the share of international trade covered by these agreements. But these indicators have been recently criticized. In this paper, using a CGE model, we attempt to quantify the economic impact (measured by its welfare effect) of the proliferation of PTAs. Results show that the welfare impact of PTAs is limited and often vanishes quickly because preferences are eroded by the proliferation of PTAs. This contrasts with the gains from non-discriminatory liberalization. Therefore we argue that the proliferation of PTAs is unlikely to continue. This paper also has methodological implications for CGE modeling: ignoring the proliferation of PTAs bias significantly the results; and the bias is not only potentially large but also its direction is a priori uncertain.

The International Investment Regime Since the 1980s: A Transnational 'Hands-Tying' Regime for International Investment

The papers in this collection address an important question about the institutions that govern trade and investment internationally: What explains the variance in their existence, scope and content? Most of the papers in this collection focus on trade agreements, and represent a tremendous investment coding a increasingly detailed set of provisions from a proliferating number of legal provisions. Their purpose is not only to explain variation across institutions as an end in itself, but also to find out if the variance in these agreements matters for outcomes many of us care about: economic interdependence, trade and investment flows, non-discrimination, the distribution of benefits across parties to an agreement, and more. The assumption of the project is that economic agreements represent a technology for a government to make credible commitments to market actors and to other governments. If motivates the proliferation of preferential trade agreements (PTAs), why do these agreements vary, and with what consequences? This paper focuses on the investment rather than on trade in goods or services. By international investment regime I mean the collection of often decentralized (even sometimes incoherent) rules about the promotion and protection of direct investment. I will make three points. First, the variance across the trade and the investment regimes are significant, notably in their degree of centralization but also by the nature of the rights of the central players. Second, in the absence of a centralized framework for developing rules and dispute settlement procedures, bilateral hands-tying is the outcome of dyadic bargaining. Hands-tying in this context is dependent on the relative strength of the country whose hands are most likely to be tied – the capital importing country. In the final two sections, I show that BITs don’t solve governments’ time inconsistency problems. The evidence suggests that they have under-delivered investment and served up an unexpectedly large wave of litigation. The evidence suggests that resistance to certain forms of hands-tying is growing and may augur some significant changes in the terms of the central bargain of credibility for constraint.

The New Regionalism and Policy Interdependence

Since 1990, the number of preferential trade agreements has increased rapidly. The argument in this article explains this phenomenon, known as the new regionalism, as a result of competition for market access; exporters facing trade diversion because of their exclusion from a preferential trade agreement concluded by foreign countries push their governments into signing an agreement with the country in which their exports are threatened. The argument is tested in a quantitative analysis of the proliferation of preferential trade agreements among 167 countries between 1990 and 2007. The finding that competition for market access is a major driving force of the new regionalism is a contribution to the literature on regionalism and to broader debates about global economic regulation.

Proliferation of Preferential Trade Agreements and Its Impact on Excluded Countries

Given the rapid proliferation of PTAs the aim of this text is to assess the impact of PTAs on excluded countries, with special reference to potential EU-India FTA. Such an analysis helps to identify the scope and impact of PTAs on excluded countries. The article will attempt to determine and suggest some policy measures that excluded countries can take in order minimise economic impact, if any.

Nonreciprocal Trade Agreements and Trade: Does the African Growth and Opportunity Act (AGOA) Increase Trade?

The recent proliferation of preferential trade agreements, reaching almost 400 in number, has made it increasingly important to determine their effects on trade flows. This study advances our understanding of the effect of a particular type of trade agreement, a nonreciprocal agreement between a major economic power and less developed countries often used as a foreign policy/foreign aid tool by the major power and allowable under WTO Special and Differential Treatment. The study tests the effect of a recently implemented nonreciprocal agreement between the United States and sub-Saharan Africa, the 2000 African Growth and Opportunity Act (AGOA), on trade. A traditional gravity model is employed to test whether AGOA opens market access in the United States for eligible countries’ exports. The results of this study suggest that AGOA membership and eligibility for AGOA textile benefits have no significant effect on trade, an explicit goal of this agreement. Uncertainty about the expiration of preferences, eroding preferential margins, and the inability of African producers to adequately exploit preferences are explanations for these results.