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The regionalisation of the world trade system and the influence on the WTO

Seminararbeit 2010 12 Seiten

Politik - Internationale Politik - Thema: Sonstiges

Leseprobe

Contents

1 Introduction

2 What are Regional Trade Agreements (RTAs)?
2.1 Different forms
2.2 Recent developments
2.3 Importance of RTAs for the WTO
2.4 Should the WTO encourage RTAs?

3 Future of the WTO

4 References

List of figures

Chart 1: Notified RTAs in force, as of February 2005, by type of agreement (Source: Crawford & Fiorentino, 2005, 2)

Chart 2: Notified RTAs to the GATT/WTO (1948-2005) by entry into force (Source: Crawford & Fiorentino, 2005, 2)

List of abbreviations

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1 Introduction

The World Trade Organisation (WTO) is “the hub of an international political system under which governments agree to accept commonly negotiated and enforced rules to govern world trade” (Oatley, 2008, 23).

It offers a stable system for governments to achieve their goals in the world trade. Its scope extended in the last years and this contains a lot of problems. One good example is the General Agreement on Trade in Services, briefly GATS. During the last decades, international trade in services has grown more rapidly than trade with manufactured goods (Oatley, 2008, 35). Therefore the demand of regulation increased and is now discussed since the Uruguay Round, which started 1986 (Oatley, 2008, 26). Other examples are agriculture, intellectual property rights or competition policy. This development contains a lot of capabilities, but it leads to prolonged discussion rounds like we see at the Doha Conference. The reason is a growing conflict of interests between industrial and emerging countries. An agreement within the WTO, where unanimity has to be achieved, is getting more and more difficult. That is one of the reasons why a lot of countries prefer regional trade agreements. These agreements often extend into areas of domestic disciplines or cover service sectors. Thus they regulate more than only tariff concessions.

First this paper gives an overview what Regional Trade Agreements (RTAs) are exactly, then it describes the different existing forms following the chances and risks of the current development. Then the importance of RTAs for the WTO is resolved and if the WTO should encourage them?

2 What are Regional Trade Agreements (RTAs)?

2.1 Different forms

Regional Trade Agreements have become an important feature of our current world trade system. Because of their proliferation in the last years, their role in recent trade discussions and their influence on the Doha Conference grew.

RTAs exist between two or more countries, in which each country offers preferential market access to the other. They are often located in the same area of the world, especially in Europe and the Mediterranean region (Oatley, 2008, 40).

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Chart 1: Notified RTAs in force, as of February 2005, by type of agreement (Source: Crawford & Fiorentino, 2005, 2)

There are two different forms of RTAs: customs unions (CU) and free-trade areas (FTA). With 84 per cent, chart 1 shows, that the free-trade area is the most common one. Only eigth per cent of the notified RTAs in force are customs unions. Another eight per cent are partial scope agreements, which exist between two or more countries in one area. An explanation for the dominance of free-trade agreements could be, that they are faster and easier to negotiate. Most of the countries prefer the simple way, e.g. two countries, and not three or more like in the plurilateral RTAs. Over 75 per cent of all notified and in force RTAs are bilateral (Crawford & Fiorentino, 2005, 3-4). Although one important General Agreement on Tariffs and Trade (GATT) principle is non-discrimination, both are permitted under GATT article XXIV (Nagarajan, 1998, 3). A good example for a free-trade area is the North American Free Trade Agreement (NAFTA). There every state is allowed to retain independent tariffs on goods entering from non-members, but for goods traded between the members the tariffs are completely eliminated. In customs unions it is almost the same. The only difference is that there is a common tariff for goods entering the customs unions from non-members and not an individual one as in the free-trade area. And there is another possibility to distinguish these agreements. If they exist between two countries, they are called bilateral, if they exist between three or more countries they are called plurilateral (Oatley, 2008, 40).

2.2 Recent developments

There has been an enormous proliferation in the last years. In January 2005 the WTO counted 312 notified RTAs. As you can see in cart 2 in January 2005, the WTO counted 170 notified RTAs currently in force. The increase in notifications is caused among other things by rising WTO memberships (Crawford & Fiorentino, 2005, 3). During the accession process, the new WTO members have to give notification in which RTAs they take an active part, because with the accession they committed themselves to the WTO rules (Crawford & Lair, 2000, 5). Oatley (2008, 40) says, that “there may be as many as 400 RTAs in effect by the end of 2010”. This statement shows that increasing numbers of RTAs can be expected in the next years.

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Chart 2: Notified RTAs to the GATT/WTO (1948-2005) by entry into force (Source: Crawford & Fiorentino, 2005, 2)

Except Mongolia, all WTO members are involved in one or more RTAs. The WTO estimates that about 50 per cent of the world trade is transacted within these agreements (Glania & Matthes, 2005, 7). But it is important to handle the given information with caution. Crawford and Fiorentino (2005, 2) point out, that it is important not to lose sight of the fact that it is not necessarily the number of RTAs in which a country participates that is of significance, but the proportion of world trade that such RTAs cover“. That means, it is more important which share of the world trade the RTA has, because a RTA among small or less developed countries is far less important. The share they have of the world trade is insignificant.

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Titel: The regionalisation of the world trade system and the influence on the WTO