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Since the end of World War II, the multilateral trading system, embodied in the GATT-WTO, has allowed a gradual and significant liberalization of trade mainly by lowering tariff barriers among its members. In addition to the WTO system, today a growing number of bilateral and regional trade agreements play an essential role in trade relations. Bilateral and regional trade agreements can play a complementary role to the WTO and further promote international trade liberalization without undermining the multilateral trade agenda.

Bilateral and regional trade agreements allow the parties to pursue a more ambitious liberalization agenda than in the WTO, where progress is inevitably slower since decisions must be agreed to by the full membership. The EU pursues free trade agreements that are WTO+ both in terms of deeper liberalization and the inclusion of trade-related issues that are not fully covered in the multilateral system, such as investment, government procurement, trade facilitation, competition and sustainable development.

Cutting import tariffs is still important but the bulk of trade barriers today lies elsewhere. This is why the EU believes that the most effective trade agreements should remove regulatory barriers, which means market access for services and investment, opening up public procurement, better protection of intellectual property, and more reliable supplies of raw materials and energy. In the EU´s experience, these are the agreements with a better chance of really developing trade, fostering economic growth and ultimately improving peoples' standards of living.

The benefits of comprehensive and balanced Free Trade Agreements (FTAs) are twofold: on the one hand, experience shows that countries can seek a more ambitious agenda by including these new issues in bilateral and regional agreements. On the other hand, WTO members experience how these new "best practices" disciplines can promote trade and see the benefit of incorporating them in the multilateral system.

This is why bilateral and regional trade agreements can be complementary with the multilateral trading system and prepare the ground for further multilateral trade liberalization.

However, this positive effect on multilateral trade liberalization can be achieved by bilateral and regional trade agreements only to the extent that they liberalize substantially all trade among the parties. When countries decide to selectively liberalize different goods and services with different partners, the effect of these trade agreements will be mainly to entrench distorted trade flows without any incentive to consolidate the liberalization level into the multilateral system.

Thus, to produce the best results, bilateral and regional free trade agreements should liberalize substantially all trade, without excluding entire sectors and product categories. The EU has therefore always argued that bilateral and regional trade agreements should provide for the liberalization of substantially all trade (which is also a WTO condition) and lead to real economic integration.

This does not mean that sensitivities could or should not be taken into account. A bilateral agreement can be designed to take into account these sensitivities, for instance through appropriate transition mechanisms. Bilateral and regional agreements should also take account the level of development of its parties. For instance, specific asymmetries can be incorporated, allowing less developed countries longer liberalization schedules. The EU, in its free trade agreements with developing partners, always includes mechanisms and tools such as longer transition phases, cooperation provisions, impact assessments, etc. aimed at identifying and addressing possible adjustment costs and at facilitating the implementation of the commitments by our partners. That being said, the degree of asymmetry that can be included in the agreements will necessarily depend on the level of development of the partners. Least Developed Countries, for instance, cannot be compared with emerging countries which are already well inserted in global trade flows and take advantage of international trade.

Finally, we should not underestimate the value that regional trade agreements may have for peace and political stability. As a prime example, the EU - but also the MERCOSUR (the common market and political agreement of Argentina, Brazil, Paraguay, and Uruguay) - experience shows how a regional arrangement that started as a free trade area and gradually involved greater economic integration among its parties while opening to its neighbours, can provide invaluable political stability at the same time as it contributes to improving the quality of life of its citizens.

Gaspar Frontini is Head of the Latin America Unit at the Directorate General for Trade (DG Trade) at the European Commission, where he oversees all trade relations and negotiations with this region. Mr. Frontini holds a PhD in Economics from the Fondation Nationale de Sciences Politiques.

December 21, 2011

Ben Osborn, Lewis & Clark College, Bronze Contributor (14)

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I am in agreement with your assessment that the more liberalized the global economy, the more we can maximize the benefits of economic transactions. But I lament the fact that this point is made as such a direct statement of truth. If it were self-evident that all tariffs inhibit overall economic growth, why do they still exist?
The other day I saw a bumper sticker that read "Jobs: America's Leading Export." While I scoffed at the excessive simplicity of the statement, I do feel that this sentiment goes far in explaining the persistence of various forms of protectionism. Standard liberal economics would assert that this "export" of jobs results in a comparative advantage in labor or capital overseas, thus allowing for the creation of cheaper goods that we all benefit from, regardless of where they are designed or manufactured. But to the workers at an auto manufacturer in Detroit or farmers in France, outsourcing does not read as part of a natural move towards efficiency. To them, outsourcing means losing a job, at whatever benefit to the global economy. Yes, we who are removed from the harsher realities of trade liberalization can objectively see that the process has been a (if not the) major contributor to the unprecedented global economic growth in the past century. But our perspective may benefit from considering the more subjective, but still very real, costs imposed on those who lose out.
Without considering these costs, and devising means to smooth the transition (unemployment subsidies, skills-training that better suits what comparative advantage should be sought, aggressive pursuit of the competitive edge, and more) we will continue to be baffled by the persistence of protectionist barriers to trade. And especially now, with the global recession, states and their citizens are ever more likely to view the global economy as zero-sum, with atomistic actors, rather than positive-sum, with a collective of mutually benefiting partnerships. Just look towards the EU, whose brave new cooperative is imperiled by the tough choices necessitated by hard times.

December 22, 2011

Raquel de Caria Patrício, School of Social and Political Sciences, Bronze Contributor (15)

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I totally agree that bilateral and regional free trade agreements can be complementary with the multilateral trading system, especially in a moment, as we live nowadays, of deep crisis of the multilateral negotiations all over the world. Those trade agreements can function as a way to get out of the crisis, both in the economic field and promoting political stability. The great problem with the EU-Latin American partnership is that the EU denies what is the most important thing for the region: the liberalization of the commodities` market. Although the countries` sensitivities may be taken into account and specific asymmetries may be incorporated in the agreements, Europe doesn`t provide what is determinant to the Latin American countries. As far as I am concerned, while the EU doesn`t make its agricultural market more flexible, through the end of the protectionism promoted by the European Common Agricultural Policy, the partnership between Europe and Latin America won`t have conditions to prosper. For this reason, if the EU wants to deepen this partnership, it will have to take effective measures to review the Common Agricultural Policy. And the true is that the EU should promote the strengthening of that partnership, because it can have a great importance to help Europe to get out of the on-going debt crisis. Nowadays, it is not Latin America that claims to improve the relationship with the EU. It is rather the EU itself that needs to refund that relation as a way to surpass its worst ever crisis.

Tags: | free trade agreements | EU | Latin America | Common Agricultural Policy |

January 10, 2012

Talha Bin Tariq, Government College University, Lahore, Pakistan, Gold Contributor (102)

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First, however, in order to forestall possible misunderstanding, attention needs to be drawn to two important points. The first point to be emphasized is that the publication gives considerably more space to the problems of low economic growth and mass unemployment in the North than it does to similar problems and that of poverty in the South. The main reason for this is not that the economic difficulties of developing countries are regarded as being any less serious. Far from it. The reason is that one of the central aims of the publication is to assess the merits of liberalization and globalization as policy options for the South. It is therefore essential to assess the experience of the advanced industrial countries which, over the last fifteen years, have taken this process furthest.


regards,
Talha Bin tariq

January 18, 2012

Thomas Sullivan Johnson, Student, (3)

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Certainly, the impact of non-trade benefits should also be factored in PTAs between the EU and developing countries and regions, as the risk of asymmetric trade benefits is a particular concern. Very often developing regions and countries lack the infrastructure to carry out market liberalization schemes, inhibiting their participation in the global economy.

The EU has shown that attaching certain requirements to the reciprocal trade policies of the Cotonou Agreement provides a useful framework for evaluating successes and punishing failures in areas like development, and a good example of how trade relationships can address asymmetrical trade concerns.

October 25, 2012

Shari Smith, New York University, (4)

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I am generally of the opinion that deeper liberalization of trade agreements especially between the greater powers of the developed world with those of the developing world, are less beneficial to developing nations.

I will go on to argue that such agreements are detrimental to their markets, economy, societies and overall development. Introducing a more liberal multilateral free trade agreement to supplement current bilateral agreements, do not take into account the position and lack of preparedness that these developing nations face when considering such a dramatic change in trade policy.

While arguments have been made concerning the potential benefits for the EU-LAC trade agreements, the argument, does not take into account the developing nations' prerogative of even wanting to encourage or be involved in even more liberal trade agreements. We also need to ask the question, "What will the real costs be to LAC?"

Clearly, the political regimes which thrive in South America, may be indicative of their ideologies on protectionism versus liberal trade policies, and that may also be one of the reasons why the region, has been able to withstand the economic crisis with a little more vigor than other parts of the world.

Yes, in the EU´s experience, these are the agreements with a better chance of really developing trade, fostering economic growth and ultimately improving peoples' standards of living, but given our recent and seemingly more frequent economic crises, we can no longer use markers such as these to predict what will happen in another part of the world.

To add to that, bilateral and regional trade agreements that provide for the liberalization of substantially ALL trade without excluding entire sectors and product categories, is definitely an action to debate. With this in mind, we can foresee a world where, no one in their own countries will be able to have complete job security, as the breakdown of protectionisms, will give even greater power to service, manufacturing and production companies to leave countries at a whim.

In summation, protectionism in my opinion, remains to be a major threat to global growth. However, global growth which is regulated by protectionism is not a negative agent in achieving sustainable global growth.

Tags: | Latin America and the Caribbean bilatéral multilateral liberalization trade |

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