Regional Trade Agreements Proliferate
During 2000, the realization grew that multilateral trade negotiations were unlikely to proceed in the near future. Countries nonetheless faced the need to further liberalise their trading arrangements. Since Seattle, trade liberalisation has depended largely on initiatives to create or expand bilateral and regional agreements. For example, despite public assurances of supporting new round agenda building in 2001, APEC and ASEAN are committed to pursuing regional trade arrangements.
Following the APEC Leaders Summit, ASEAN convened an informal summit 22- 25 November to discuss the future of the aspiring economic zone. The APEC meeting concluded with leaders waffling on support for a new round of multilateral trade negotiations, and the main theme at the ASEAN gathering was regional collaboration.
ASEAN countries welcomed discussions on the possibilities for extending regional free trade to China, Japan and South Korea, the so- called ASEAN plus three. However, some fear that implementation of bilateral and regional trade agreements will undermine and destabilise the multilateral system.
Other Pacific countries, including Singapore, Australia, and Japan are proceeding with negotiations on new trade agreements outside the multilateral framework.
Meeting with CARICOM nations on 8 November, Japan proposed to aid Caribbean integration into the global economy. The proposal follows the first-ever ministerial meeting between Japan and Caribbean countries. Described as the start of "a new era of Japan-CARICOM relations," Ministers approved a new Framework for Japan-CARICOM Cooperation for the 21st
Century. Under the framework, Japan and the Caribbean will cooperate in multilateral settings such as at the UN and the WTO.
Some arrangements were concluded in 2000 based on negotiations initiated earlier, such as the Mexico - EU FTA, the EFTA free trade agreement with Mexico, the EFTA Declaration on Trade and Investment Co-operation with MERCOSUR, and the Singapore - New Zealand Closer Economic Partnership, to name only a few.
Singapore is planning bilateral agreements with Japan, Canada, Australia and Mexico. More recently, the US Trade Representative Charlene Barshefsky announced the US intention to negotiate a deal with Singapore, which she said would include both environment and labour provisions. USITC is now engaged in preparing an economic impact statement on a US FTA with Singapore which is due to be submitted to USTR by January 12, 2001.
This explosion of regional trade agreements might reflect a preference for such negotiations in the absence of any WTO round. It also suggests a growing trend toward trade diversion, at the expense of low cost producers outside the agreements being concluded. Some studies indicate quite strongly that regional agreements such as NAFTA have significant trade diversion effects, which have a negative impact on developing countries.
There are no assurances that regional agreements do not now and will not in the future present contending and conflicting approaches to multilateral liberalisation under the WTO. Indeed, the manner in which regional agreements are negotiated and tabled, as fait accompli at WTO and previously under GATT, has always been a matter of concern. The backlog of agreements being examined by the Regional Agreements Committee is just one more indication that the multilateral system has not yet come to terms with the place of regional agreements in a multilateral framework.
In this regard, it is curious that developing countries have not spoken more assertively on the role and purpose of regional agreements. It is mainly they who are likely to be left out of the growing urge to merge regionally. Even in cases where the developing world can partake of regional liberalization, decision-making in a bilateral or regional agreement may not offer the solace of the consensus requirement at WTO.
Following Chile's announcement that it was beginning to negotiate a bilateral free-trade agreement with the United States, Mercosur, at Brazilian urging, suspended trade talks with Chile. Though Chile will remain an associate member of Mercosur, the reaction to its bilateral talks with the US suggests there is considerable reluctance to further US influence in the region. This could well lead to rising tensions in US - Brazil trade relations as Mr. Bush seeks to advance the FTAA.
It is noteworthy that during this year's WTO Trade Policy Review of Brazil's trade regime, Brazil agreed it was necessary to continue trade liberalising reforms. However, Ambassador Jose Alfredo Graca Lima, head of the Brazilian delegation, said, "the priority is in sustaining [trade] liberalisation through successful regional and multinational negotiations." The Brazilian government has also suggested that further integration of Mercosur countries could involve developing a common market with the ultimate goal adoption of a single currency.
As a preview of the coming year, Brazil's position is firmly fixed on avoiding an early resolution to many FTAA negotiation issues. In effect, the April 2001 FTAA meeting may well have less than an agreed upon text for ministers to review in Canada.
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