Edited by John Linarelli
Chapter 4: Regional trade agreements and the poverty agenda
Regional trade agreements (RTAs) comprise customs unions and free trade agreements (FTAs). The difference lies in the absence of a common customs border in the case of customs unions. Thus, countries A and B, which are FTA partners, will nonetheless impose different duties on third-country imports, while at the same time granting preferential treatment to each other. A major criticism is that all RTAs, customs unions and FTAs alike, discriminate against non-parties. In contrast, most favoured nation (MFN) treatment operates in the multilateral system to extend concessions made by any member of the World Trade Organization (WTO) to any other economy to all members. RTAs are not, however, the only kinds of selective trading arrangement. At the height of the Cold War, the developing countries secured two temporary waivers before finally securing a permanent GATT (General Agreement on Tariffs and Trade) decision (the so-called “Enabling Clause”) to allow developed nations to offer better terms of trade to the developing nations than they would offer to other developed nations – i.e. preferential market access. The developing countries had sought two conceptually distinct modifications to global trade rules – (a) non-reciprocity and (b) preferential market access. Both these concepts have become contemporary features of the trading system. But while non-reciprocity continues to be contentious in global trade policy debate and in the current Doha Round multilateral negotiations, preferential market access for developing and least-developed countries (LDCs) has become a widespread, well- established feature of the global trading system.
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