There is much debate concerning regional trade agreements and global trade liberalization. Pros and cons can be found for each trade policy. After looking at several arguments for and against regional trade agreements, it seems that overall regional trade agreements are more beneficial when compared to global trade liberalization.
A regional trade agreement is “where member nations agree to impose lower barriers to trade within the group than trade with nonmember nations,” (Carbaugh, p 529). Regional trade agreements don’t affect each nations domestic policies, it only creates increased trade and relations among certain nations. This type of trading system complements multilateral trading.
Even though there are numerous positives to regional trade agreements, there are negatives as well. “Regional trading groups strengthen trade and the benefits thereof with groups but at the same time may serve to undermine free trade globally by implicitly and explicitly discriminating against trade with countries outside the groups (Colorado State University-Global Campus).” Carbaugh also notes this in his textbook, International Economics. He states that discrimination against other nations, not in the trade agreement, strays from the principles of normal trading relations, a major initiative of the World Trade Organization.
On the flip side, there are numerous positives that outweigh the negatives found with regional trade agreements. In the article, Regional trade agreements versus global trade liberalization: implications for a small island developing state, by Asafu-Adjave and Mahadevan, found that full trade liberalization created the best outcomes when it comes to r...
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...posed against non-member nations. While her study was unable to give a definite answer as to whether preferential trade agreements help or hurt un-associated countries, she did determine that goods having large deductions in preferential tariffs to participating countries impose the highest tariffs to non-participating countries.
Zeng, K. (2010). Multilateral versus bilateral and regional trade liberalization: explaining China's pursuit of free trade agreements (FTAs). Journal Of Contemporary China, 19(66), 635-652. doi:10.1080/10670564.2010.485400
Zeng discusses how China used the regional approach to trade liberalization by creating free trade agreements with their trading partners. This resulted in China experiencing greater influence in the Asia-pacific region. In addition, China’s choice to utilize FTAs created alternative bargaining over trade issues.
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