All for one

Regionalism and the Multilateral Trading System
OECD Observer

Hammering out the multilateral negotiations at Cancún in September will take the present WTO trade round only halfway to its January 2005 deadline. Meanwhile, the percentage of world trade accounted for by preferential regional trade agreements (RTAs) is expected to grow from 43% at present to 55% by 2005 if all expected RTAs are realised. The EU, NAFTA, APEC and MERCOSUR are all examples of regional initiatives. Is smaller better?

Regionalism and the Multilateral Trading System makes the case that regional trade agreements are rather a complement to, not a substitute for, a multilateral system. In fact, many consequences of regional trade agreement activity bolster the case for a strengthened multilateral framework. Through an examination of 10 key areas, from services and labour mobility to intellectual property rights and environment, Regionalism and the Multilateral Trading System shows how RTAs may both help and hinder multilateral trade liberalisation.

At Doha, former WTO director general, Mike Moore, referred to the risk of an à la carte approach in RTAs, in areas such as investment and competition, as being a recipe for confusion. What emerges from this study is a more nuanced picture. RTAs may detract from multilateral efforts by stretching scarce negotiating resources and political capital, or can cause friction between systems generating potentially incompatible rules and standards between different RTAs and the multilateral rules and disciplines of the WTO.

Yet regional trade agreements foster a culture of market opening and structural reform, and frequently go beyond the WTO by either containing provisions that are more far-reaching, or by engaging countries outside of the WTO. But in some particularly sensitive areas, like agriculture and textiles, regional initiatives have been no more successful – and in some cases less successful – than activity at the multilateral level. Furthermore, all RTAs are driven in large measure by geopolitical considerations. The EU has helped Europe unite, for instance, and through NAFTA the United States has consolidated its relations with Mexico. But their role in building a global free trading system is by definition much more limited.

©OECD Observer No 238, July 2003

Economic data

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