Do Regional Trade Agreements Weaken the WTO and the Global Push for Free Trade?
Bacchus, James, Gordon, Bernard K., Americas Quarterly
They waste energy and political capital.
I have supported, and continue to support, all bilateral and regional deals. But Latin America, the United States and the rest of the world would benefit far more if the time, energy, human resources, and all-too-limited political capital being invested in these deals were devoted instead to achieving a much-needed global deal on trade.
While such a deal remains stalled, regional and bilateral trade arrangements continue to proliferate in Latin America. The admission of Venezuela to Mercosur is only the latest example.
In addition to the now five-member Mercosur (Argentina, Brazil, Uruguay, Paraguay, and Venezuela), Mexico, Peru, Colombia, and Chile have formed a new Pacific Alliance. At the same time, Mexico is a party, with the U.S. and Canada, to the North American Free Trade Agreement (NAFTA). And Guatemala, Honduras, El Salvador, Nicaragua, and Costa Rica-together with the Dominican Republic-are joined to the U.S. in the Central American Free Trade Agreement (CAFTA-DR).
Bilaterally, the number of agreements is almost too many to count. Chile claims to have more regional and bilateral trade agreements than any other country (59). Many of its neighbors are trying to catch up. Peru, for example, signed an agreement with Mexico that took effect in February and is now seeking another agreement with Indonesia.
The potential reach of this regionalism is expanding. Mexico has been invited to join with other countries on the Pacific Rim in the negotiations on a proposed new Trans-Pacific Partnership (TPP). Other such opportunities are emerging. Indonesia has urged the ASEAN countries of Southeast Asia to become an observer to the new Pacific Alliance as a first step to forging closer ties. Meanwhile, trade relations with China, bilateral and otherwise, loom over evolving Latin trade and investment strategies.
While I was in the U.S. Congress, I supported the Caribbean Basin Initiative, voted for NAFTA, and backed the creation of a Free Trade Area of the Americas (FTAA). I have long felt that bilateral and regional trade arrangements can, as the jargon goes, be "building blocks" for broader global successes in trade. They can be effective proving grounds for addressing issues that are not yet ready for multilateral agreement. Chapter Eleven of NAFTA, which allows governments to be sued by private companies over legislation that potentially harms the rights of investors, is a good example. There are many more.
But now I worry that the trend of Latin American and other countries to construct and cultivate bilateral and regional arrangements is increasingly making those arrangements "stumbling blocks" to global success. The time, energy and political capital being invested in the flurry of negotiation and approval of bilateral and regional deals distracts from the greater good of concluding the long-overdue global deal among the more than 150 member countries of the World Trade Organization (WTO). Moreover, the separate arrangements, procedures and exceptions contained in each of these agreements are complicating the agenda for harmonizing trade codes in any future global trade agreement.
The frustration over the prolonged impasse in the Doha Round of multilateral trade negotiations under the auspices of the WTO is certainly understandable. Countries in Latin America and elsewhere have shifted their focus to bilateral and regional deals because they believe that is the best way to achieve results. But this becomes a self-fulfilling prophecy.
The concentration on short-term individual gains comes at a cost. A failure to focus multilaterally on trade means that the benefits in terms of efficiencies of scale, more rational flow of investment and comparative advantages that come from broadly reducing barriers to trade are lost.
The more countries that are involved in a trade negotiation, the more opportunities there are for those countries to make mutual concessions that lower trade barriers for different kinds of goods and services. …