The EU and India in Search of a Partnership
Chapter 2: Preferential Trade Agreements and the Global Trading Environment
The expansion of international commercial relations has been an important and consistent engine of economic growth in the second half of the twentieth century. There has been a general acceptance of the proposition that the liberalisation of international trade and commerce provides economic benefits. (Yeung et aI., 1999, p. ix) 2.1 WHY PREFERENTIAL TRADE AGREEMENTS? Trade liberalization facilitates the capture of benefits arising from trade due to specialization and the more efficient allocation of resources, regardless of the mechanism used to achieve it. Trade liberalization occurs multilaterally and also via preferential trading agreements. I Both are effective although historically, multilateral negotiations have been pursued as the preferred means of trade liberalization via the WTO and its predecessor the General Agreement on Tariffs and Trade (GATT), due to acknowledged widespread welfare gains. However, political, cultural and economic realities have ensured that preferential trading agreements (PTA) are still actively pursued (Yeung et aI., 1999). These take many forms but two motivations drive countries to pursue PTA - economics and politics. Although trade liberalization is pursued on a multilateral basis at the WTO, with fewer participants, agreement is easier to reach by pursuing PTAs, providing the parties with 'first off the mark' status in gaining market access for competitive producers, service providers, workers, and investors. That access is also secured with balanced, mutually advantageous rules. In return, nations open their own markets to the same extent, to the benefit of their firms and consumers who gain access to capital, goods and 13 14...
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