REGIONAL TRADE AGREEMENTS

Regional Trade Agreements

Regional Trade Agreements

Introduction

The difficulty of pursuing trade negotiations at the multilateral level, for example within the parameters of the World Trade Organization (WTO), has led to a trend in recent years of an increasing regionalization of trade treaties. Rather than focusing on negotiations through the WTO's large-scale multilateralism, which is perceived as having become too cumbersome, there has been an increase in the creation of new, as well as further development of existing, regional trading blocks. The parties to a regional trade agreement (RTA) may choose to create a variety of institutions which will facilitate that treaty's functioning and ensure its proper application. This paper will focus on the importance of the dispute resolution mechanisms (DRM's) which the parties to an RTA set up within their treaty, and which those parties endow with the power and authority to enforce the obligations that they have undertaken. This selection is significant to the potential of the RTA to result in a constitutionalizing process because of the DRM's impact on the interpretation of the terms of the treaty, and through this, potentially on the level of inter-state economic integration and cooperation which results from the RTA. Thus the central interpretive role played by the DRM in applying the terms of an RTA arises as a result of the fact that, regardless of whether a DRM is judicial or arbitral in nature. The nature of the DRM of a particular RTA is dependent on the choice of the parties to that treaty. However, it will be argued here that the DRM ultimately selected by those parties will be one of the primary mechanisms by which further integration, both political and economic, between the member states is either driven or obstructed. Therefore, all the issues related to Regional Trade Agreements will be discussed in detail.

Empirical Literature on Regional Trade Agreements

When negotiating an RTA, the member states must determine which provisions and institutions will allow them to achieve the level of economic integration that they desire. The focus in selection is, as Bowman notes, on internal economic integration and cooperation. Understood in this way, regional or preferential trade agreements allow countries to select and limit the number of trading partners to whom they will extend trade concessions or benefits. Regional trade agreements are therefore inherently preferential, protectionist organizations. These organizations must set up mechanisms by which their concessions and benefits will be recognized, and allowed to take effect, in order to generate this economic integration. There can be significant variation in the level of economic integration which is provided for by an RTA. Integration may range from a basic free trade area, as exemplified by NAFTA, which involves internal trade liberalization between member states, to Customs Unions. Such as the South African Customs Union which incorporate internal trade liberalization with harmonized external tariffs which are common to all member states (Cadot, 2006, pp. 131).

An integrated common market, as the European Economic Community was at its outset, goes beyond ...