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IS REGIONALISM STEPPINGSTONE OR MILLSTONE TO MULTILATERALISM
Transcript of IS REGIONALISM STEPPINGSTONE OR MILLSTONE TO MULTILATERALISM
What is Multilateralism?
Multilateral agreements regimes and organizations emerge in the 19th century
The conduct of the IMF, World Bank and the General Agreement on Tariffs and Trade (GATT) before the 1980s / WTO
- Multilateralism (WTO system)
- Regionalism (Why Regionalism?)
- How can Regionalism be legal under GATT/WTO system
- Regionalism as a millstone to multilateralism
- Studies by OECD and WB
- Trade creation than Trade diversion
- A Case Study - ASEAN
Table of Contents
Created at the end of the Uruguay Round negotiations. It became operational in 1995
What is the role of the multilateral system with an international economic organization at its center?
-> the dominant economic theory suggests that institution assist in lowering barriers to trade by addressing the temptation of important trading nations to free-ride (Bagwell and Staiger 2002)
to avoid or resolve conflicts / reduce gradually obstacles to trade
What is Regionalism?
Multilateralism was dominant until the early 1990s, today, however, regionalism is well acknowledged together with multilateralism
Regional Trade Agreement (RTA) is defined as "Groupings of countries which are formed with the objective of reducing barriers to trade between member countries"
RTA can be divided into five categories
Preferential Trade Agreements (PTAs), Free Trade Agreements (FTAs), Customs Unions (CUs), Common Markets and Economic Unions
Since the end of Uruguay Round, the world trading system has experienced the emergence of a large group of regional blocs: NAFTA, Mercosur, APEC and the enlargement of the EU
The main reason for WTO member's preference of bilateral FTAs before multilateral FTA -> easier to conclude
Small developing economies are often constrained in participating in the negotiation
'regionalism' can be defined broadly as preferential trade agreements
the principle of nondiscrimination is central to the final conception of the GATT, signed on Oct 30, 1947 by 23 countries
Article 1 embodies the strong support for nondiscrimination
Article XXIV permits CUs and FTAs, therefore sanctions preferential trade barrier reductions among GATT members
Initially, WTO encouraged the growth of RTAs -> regional integration initiatives can complement the multilateral trade regime
However, high proliferation of RTA is becoming a cause for concern for the multilateral trading system under WTO
According to WTO rules, countries within a RTA can trade among themselves using preferential tariffs and easier market access condition
How Regionalism can be legal in GATT/ WTO system?
WTO system (2)
WTO Annual Report 2003 "RTAs can complement the multilateral system, help to build and strengthen it"
As of 31 Jan, 2014, some 583 notifications of RTAs had been received by GATT/WTO
Of these, 377 were in force
Trade creation vs Trade diversion
will proliferation of RTAs be a "building block" or a "stumbling block"
Stumbling block Perspective
Trade Diversion> Trade Creation
Detrimental effect on welfare and allocation of resources
Contraction to the philosophy of the GATT
- Policy makers' attention
- Less time and motivation for multilateralism
- Confrontation between regions and countries
- Regional Organization vs Global organization
Stepping Stone Perspective
Trade Diversion < Trade Creation
Summer (1991) "Natural Trading Partners"
Expanding Horizons of Free Trade Domino Effect
Exporters in nonmember countries
- Adopted under the GATT in 1977
- More favorable to developing countries
Potential Contributor to Detente
- France vs Germany in EU
- Argentina vs Brazil in Mercosur
the 1st phase
the 2nd phase
Reason for the 1st phase of regionalism
Security and Defense
The North Atlantic Treaty Organization (NATO) in 1948
The European Union (EU) in 1958
The North American Free Trade Agreement (NAFTA) in 1985
Reason for the 2nd phase of regionalism
US is no more "guardian of multilateralism"
Demise of Cold war
Difficulties in multilateral negotiations
RTA's helping Multilateralism
Internal Political Process
A Case Study - ASEAN as stepping stone
ASEAN Free Trade Agreement
ASEAN Free Trade Agreement
ASEAN as stepping stone
A tool to increase trade and investment
A tool to create job opportunities
A tool to revolutionize manufacturing sector
Export and import led economic growth
6 members are negotiating TPP
ASEAN centrality in RCEP
ASEAN countries are making individual FTAs
Both intra-regional and inter-regional trade has increased manifolds in the FTA regime
ASEAN-Australia/NZ Free Trade Area (ANZCERTA) effective from Jan 2010
ASEAN-China FTA effective from 2010
ASEAN-India FTA effective from 2010
ASEAN-Japan FTA effective from 2010
ASEAN-Korea FTA effective from 2010
6 Southeast Asian countries
Brunei, Indonesia, Thailand, Malaysia, Philippines and Singapore
Vietnam joined in 1995
Laos and Myanmar joined in 1997
Cambodia joined in 1999
Thank you :D
Bhagwati, J. (1993). Regionalism and multilateralism: an overview. New dimensions in regional integration, 22, 51.
Panagariya, A. (1999). The regionalism debate: an overview. The World Economy, 22(4), 455-476.
Sung-Hoon, P. (2006). Increasing FTA Initiatives of East Asia and the World Trading System: Current State of Play and Policy Options for the 21st Century. ASIEN, 100, 44-48.
Urata, S., & Okabe, M. (2010). Trade Creation and Diversion Effects of Regional Trade Agreements on Commodity Trade. Discussion papers, 10007.