There has been a massive increase in global trade in the past 30 years, and economists in developing and developed nations were excited by the formation of the World Trade Organization (WTO). They hoped for global economic gains for all member nations (Hyun Chong, K. (2011). The WTO’s effectiveness in the global arena has come under severe criticism with the inability to complete the Doha agreement, leading to economists to suggest that the WTO stop and try a new approach. Given the lackluster output of the WTO, the debate regarding which liberalization method is the best, global trade liberalization or regional trade agreements, remains an open debate in the economic community. Arguments for global liberalization and regional trade agreements (RTA) are outlined below, followed with a summary of how these policies are paradoxically both in conflict and complimentary to one another.
Economists have long theorized that global trade liberalization leads to better global economy by allowing efficient use of resources and therefore creating better products at a lower cost for all involved. In a case study regarding Fiji it was found that anything less that global trade liberalization was less beneficial to the small island country; regional trade agreements were discovered as second best (Asafu-Adjaye, J., & Mahadevan, R., 2009). Economists view the increase of RTA’s as problematic in furthering global trade liberalization. Proliferation of RTA’s is creating spaghetti code situation with hundreds of RTA’s increasing complexity of international trade (Hyun Chong, K., 2011). Additionally, RTA’s do not benefit large developed nations. Hojjat’s research finds that RTA’s ha...
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...ature, 25(1), 1-14. doi:10.1111/j.1467-8411.2011.01282.x.
Asian nations began adopting regional trade agreements after Europe and the Americas. Prior to that, they focused on multilateral trade and most favored nation (MFN) policies. However, in the past decade, Asian countries have begun adopting regional trade agreements in considerable numbers. Regional trade agreements (RTA) tend to increase specialization between the countries involved in the trade agreement; governments focus on ensuring the success of the regional trade agreement and implement policies that ensure success for that RTA. The research on whether the proliferation of regional trade agreements will over team lead to global liberalization or continue to make global liberalization so complex as to doom global liberalization is inconclusive. Further research is needed to draw specific conclusions.
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