Analysis Of The Status Quo And Prospect Of Regional Trade Agreements

This paper provides an overview of the debate on Regional Trade Agreements as an instrument to achieve trading benefits. The proponents argue that Regional Trade Agreements could pull the regional trade as well as the global trade forward on the road to trade liberalization. However, the preferential trade arrangements tend to discriminate against nonmember countries resulting in the trade diversion effects. It is the main reason Regional Trade Agreements are criticized for. It is noteworthy that there are new extensions to concept of regionalism—open regionalism and deep integration—to be discussed in this dissertation. Open regionalism provides freedom and encouragement to member countries to further construct unilateral trade areas or agreement with non-members on a reciprocal basis. But limited by its development status, it has not completely fulfilled its commitment so far. Deep integration could be defined as coordination and cooperation of various kinds of policies such as labor standards, environmental policies, investment treaties, regulatory regimes, products standards, and competition policies and so on. Advocates comment that such deep integration could be beneficial to the member countries through improving efficiency and effectiveness in general. However, there are usually some concerns from smaller or developing countries about the uneven bargaining power during the negotiation which may influence their own welfare and interests. Since Regional Trade Agreements are so welcomed nowadays, the dissertation will then make an analysis of reasons for countries pursuing king Regional Trade Agreements. Universally, most of member countries could get traditional trade gains from such agreements. It might also be a strategic choice such as improving bargaining power and building up strategic alliances. For the domestic environment, it could help strengthen policy reform.Several suggestions are also proposed so as to offset or reduce the diversion effects of Regional Trade Agreements. Firstly, except for the existing Regional Trade Agreements, the expansion of other Regional Trade Agreements should be suspended in terms of trade diversion welfare effects. Secondly, since there are ambiguities embodied in the GATT Article XXIV so that it is should be modified. Thirdly, some changes should be made to Article XXIV so as to prevent protectionism in trade policy. Fourthly, as for those countries forming a Free Trade Agreements, they should avoid any preferential policies to minimize the trade diversion effects so that the nonmember countries could also enjoy same tariff treatment as the member countries do. Finally, it should be required that there be no rules of origin on a product in a member country with the lowest tariff in the union on that product.