Bilateralism, multilateralism, and the quest for global free trade

We develop an equilibrium theory of trade agreements in which both the degree and the nature (bilateral or multilateral) of trade liberalization are endogenously determined. To determine whether and how bilateralism matters, we also analyze a scenario where countries pursue trade liberalization on only a multilateral basis. We find that when countries have asymmetric endowments or when governments value producer interests more than tariff revenue and consumer surplus, there exist circumstances where global free trade is a stable equilibrium only if countries are free to pursue bilateral trade agreements. By contrast, under symmetry, both bilateralism and multilateralism yield global free trade.     

ASEAN between globalization and regionalization

ABSTRACT

The purpose of this article is to test the hypothesis that the ‘ASEAN way’ is different from other regional integration schemes, as measured by the relative importance of its de facto regionalization patterns, the importance of its ASEAN+ frameworks, and its globalization-regionalization nexus. A set of indicators using intra- and extra-regional flow data of various sorts are explored and used to compare the ASEAN integration experience with some benchmark cases worldwide. Four aspects are thereby considered: (1) globalization and economic openness, (2) trade liberalization, (3) regional production sharing, and (4) foreign investment promotion.     

The ‘ASEAN Way’ and ASEAN’s development gap with Cambodia,Laos, Myanmar and Vietnam: a critical view

ABSTRACT

The ‘ASEAN Way’, as an approach to interstate relations within ASEAN, is analysed in relation to the ‘reduction of the development gap’ (RDG) with Cambodia, Laos, Myanmar and Vietnam (CLMV). It is found that convergence of income per capita and development levels of CLMV is only to a limited extend the result of RDG and its pace is too slow. With the help of the Asian Development Bank and other regional and multilateral financial institutions, the development cooperation funds thus assembled, could leverage a multitude of loans and funds from donor organizations and countries, including the EU and its member countries.     

ASEAN’s science,technology and innovation policy: tension and integration between intergovernmentalism and sub-regional cooperation

ABSTRACT

In this paper, we research the role of the ASEAN level for science, technology and innovation (STI) in Southeast Asia. The key question is how the intergovernmental STI system relates to the diversity and traditional linkages in the region. Empirically, we address this question with data on STI inputs and outputs as well as qualitative evidence from interviews and participatory observation. We highlight a mismatch between national and intergovernmental dynamics in STI. Intra-ASEAN STI cooperation remains weak. We discuss multilateral research funding and increased cooperation in patent regimes as examples of new types of regional cooperation.     

Charting the pacific: an empirical assessment of integration initiatives

Trade negotiations after Uruguay may well be dominated by the Pacific Rim, where two free trade areas (ASEAN Free Trade Agreement, or AFTA; and North American Free Trade Agreement, or NAFTA) already exist and larger agreements are under active discussion (involving the Asia Pacific Economic Cooperation, or APEC, area and an East Asian Economic Group). This article analyzes several initiatives using a simple global general equilibrium model that incorporates conventional welfare gains as well as benefits derived from firm level economies of scale, induced changes in foreign investment, and dynamic increases in productivity. Broad Pacific liberalization—i.e., East Asia, North America, and Australasia—is shown to be superior for each participant to liberalization limited to individual countries or East Asia, but not by much. Most favored nation liberalization is shown to be superior for each participant to preferential liberalization—if the actor is East Asia, but not the Pacific as a whole. These estimates will need to be refined, but they suggest that the benefits from Pacific liberalization could exceed $100 billion per year.     

The clash of liberalizations: Preferential vs. multilateral trade liberalization in the European Union

Preferential trade agreements (PTAs) are characterized by liberalization with respect to only a few partners and thus they can potentially clash with, and retard multilateral trade liberalization (MTL). Yet there is almost no systematic evidence on whether the numerous existing PTAs actually affect MTL. We provide a model showing that PTAs hinder MTL unless they entail accession to a customs union with internal transfers. Using product-level tariffs negotiated by the European Union (EU) in the last two multilateral trade rounds we find that several of its PTAs have clashed with its MTL. However, this effect is absent for EU accessions. Moreover, we provide new evidence on the political economy determinants of trade policy in the EU.     

WTO多边投资规则对中国企业“走出去”的影响

国际直接投资已成为全球经济增长的重要动力,因此,就投资问题制订相关的国际投资规范是世界各国和众多国际组织一直以来努力的方向。本文在对WTO框架下的投资规则进行解读认为,WTO多边投资规则虽然在一定程度上促进贸易与投资自由化,并便利国际投资,但其协议范围的有限性和协议之间缺乏协调性约束了该职能的发挥。WTO多边投资规则在为中国企业"走出去"提供了国际制度保障同时,抑制作用不可忽视。     

Market presence, contestability, and the terms-of-trade effects of regional integration

This paper examines the impact of market presence and contestability on the price behavior of US exporters in Brazil’s market when MERCOSUR and MFN trade liberalization take place. Using detailed panel data on trade and tariff rates, we find that both the preferred supplier’s market presence and threat of entry lower (raise) the US price reaction to MFN (preferential) trade liberalization, with similar quantitative effects. Thus, presence in, or threat of entry into, partners’ markets implies lower optimal MFN tariffs, and regional agreements can have pro-competitive effects in contestable markets. We also examine the ‘symmetry’ hypothesis between the effect of tariffs and exchange rates.     

The Rules for Foreign Investment in NAFTA

Abstract

The North American Free Trade Agreement (NAFTA) produced a new set of rules for foreign direct investment (FDI). These applied the principle of national treatment, with the exception of a set of explicitly excluded sectors such as energy and automobiles. NAFTA also increased transparency and applied dispute settlement provisions for FDI disputes. The improved, rules-based climate for FDI can help increase FDI in NAFTA and stimulate growth and competitiveness. The rules for FDI in NAFTA can also serve as a model for other agreements such as the OECD's multilateral agreement on investment and the emerging investment liberalization of APEC.

El tratado de libre comercio (TLC) de America del Norte produjo un nuevo conjunto de reglas para la inversión directa extranjera (IDE) en la region. En particular, en esta nueva regulación se da el tratamiento de nacional a la IDE con la excepcion de algunos sectores como la energia y los automobiles. Adicionalmente, el TLC mejoro la transparencia y los mecanismos de negociacion para la resolucion de disputas y diferencias en materia de inversión directa extranjera. Con esta nueva regulación, tambien se puede esperar un incremento en la IDE y un nuevo crecimiento y competitividad en toda la region del TLC. La nueva regulación del TLC en America del Norte, puede servir como modelo para otros acuerdos como los de inversion multilateral de la OECD y los de liberalizacion de la inversion de la APEC.

O Acordo de Livre Comércio Norte-Americano (NAFTA) produziu um novo conjunto de regras para o investimento direto estrangeiro (IDE). Essas regras aplicaram o principio do tratamento nacional, com a exceção de um conjunto de setores explicitamente excluídos tais como os setores de energia e automobilistico. O NAFTA também aumentou a transparência and aplicou provis[otilde]es para a resolução de disputas às disputas relativas ao IDE. O clima de IDE melhorado, baseado em regras, pode ajudar a aumentar o IDE no NAFTA e estimular o crescimento e a competitividade. As regras para FDI no NAFTA também podem servir de modelo para outros acordos como o acordo multilateral sobre investimento da OCDE e a para a emergente liberalização de investimentos na área da APEC.     

Issue linkage and issue tie-in in multilateral negotiations

We describe a model of international, multidimensional policy coordination where countries can enter into selective and separate agreements with different partners along different policy dimensions. The model is used to examine the implications of negotiation tie-in — the requirement that agreements must span multiple dimensions of interaction — for the viability of multilateral cooperation when countries are linked by international trade flows and transboundary pollution. We show that, while in some cases negotiation tie-in has either no effect or can make multilateral cooperation more viable, in others a formal tie-in constraint can make an otherwise viable joint multilateral agreement unstable.     

External tariffs under a free-trade area

How do free-trade areas affect the tariffs that member countries impose against non-members? There is no consensus in the literature regarding this important question. In this study, we use a political-economy model of endogenous protection to show that if individual preferences exhibit loss aversion or if the government's objective is characterized by diminishing marginal political support, a free-trade area can lead member countries to increase their external tariffs and thus act as a stumbling block to unilateral liberalization. We also argue that the stumbling block result is more likely to arise under loss aversion than under diminishing marginal political support and confirm this using a simulation. Finally, we show that the stumbling block effect can also take place under multilateral liberalization. Our results highlight a new type of mechanism through which preferential trade agreements may affect external tariffs.     

Understanding Trade Balances and Reciprocity in Global Telecom Between Asia and the United States (1984–2000)

ABSTRACT

From 1982 to 1997, the balance of trade deficit for U.S. telecommunications services increased tenfold. In the years since that time, the increase became less dramatic and eventually began to decline due to global deregulation and privatization efforts, as well as to multilateral agreements forged by most major countries. The countries of Asia contributed greatly to this increase and have also been examples of the reversal of the balance of trade deficit in recent years. Our analysis identifies partner reciprocity as a core issue of the international long-distance industry. We integrate various literature streams to better understand the issue of international reciprocity in service industries. Furthermore, we identify the trends in global telecom that explain the historical imbalanced reciprocity period between 1984 and 1997 and the more recent period where a more balanced reciprocity has existed between the United States and the Asian region.     

Endogenous free trade agreements and the multilateral trading system

I evaluate in this paper the impact of free trade areas (FTAs) on the world trading system. I use an oligopolistic-political-economy model where the external tariffs of FTA members, as well as the decision to form FTAs, are endogenously determined. In this context, I show that FTAs are primarily beneficial to the multilateral trading system. This conclusion is based, first, upon the finding that FTAs induce their member governments to lower their external tariffs, and to do so deeply enough to enhance trade even between FTA members and non-members. While this ensures gains for the latter, in general FTA members may not gain. I show, however, that governments will endorse only welfare-improving arrangements, in spite of their political motivations; as a result, FTA members benefit from ratified arrangements as well. Finally, I find that FTAs, by reducing the role of special interests criteria in governments' trade regime decisions, also tend to enhance support for further liberalization at the multilateral level.     

Regionalisation of Trade and Regionalism in Trade Policy – Patterns, Strategies and Impact

Against the backdrop of the stalled Doha Round the emphasis in the trade policies of nations and country groupings is widely expected to shift further away from multilateral trade negotiations and towards the conclusion of preferential trade agreements (PTAs). This article sketches the network of international trade flows and shows how it has increasingly been matched by a worldwide web of PTAs, the nature of which has changed over time. PTAs are discussed in their regional context and assessed with a view to their economic impact and their implications for the multilateral trading system.     

Understanding the ASEAN economic community: pragmatism versus conceptualism

ABSTRACT

The ASEAN Economic Community, born in 2003 and developed over the next 12 years, aims to build a ‘single market’ whilst ‘enhancing the production base’ in ASEAN for global and regional value-chains. The paper attempts to understand the AEC via a conceptual as well as a pragmatic approach. It summarizes achievements up to 2015 and assesses the 2025 Blueprint in some detail. At times the latter reads like a Roadmap full of details but measures often remain open-ended or somewhat vague, a typical ASEAN characteristic. What ultimately matters to ASEAN is economic growth and the AEC may well serve as a handmaiden to sustained high growth.     

Impact of RTA and PTA on Bangladesh’s Export: Application of a Gravity Model

As part of its growth strategy, Bangladesh instituted a trade liberalization process in the early 1990s which gained momentum in later years. Trade grew from 24.4 to 45% of GDP between 1980–81 and 2007–08, an indicator of increased liberalization as well as the growing importance of the external sector in Bangladesh. Apart from its unilateral liberalization, Bangladesh participates in three different regional trade agreements (RTAs): the South Asian Free Trade Agreement (SAFTA), the Asia Pacific Trade Agreement (APTA) and the Bay of Bengal Initiative for Multisectoral Technical and Economic Cooperation Free Trade Area (BIMSTEC FTA). In addition, Bangladesh signed preferential trade agreements (PTAs) with the member countries of the Developing 8 (D8). Because of the growing importance of RTAs, this study investigates their contribution to the export flows from Bangladesh using the gravity model that has become the primary tool for estimating the trade effects of regional integration. Regression results of bilateral exports for 40 countries from 1992–2009 indicate two crucial aspects. Firstly, all the RTAs consistently maintained statistically significant negative signs, except the BIMSTEC FTA and SAFTA, which showed insignificantly positive and insignificantly negative effects respectively. Secondly, the intensity of negative effects and the level of significance have shown a declining trend as the status of those blocs has changed from political or economic cooperation agreements to preferential agreements and from preferential agreements to free trade agreements. Thus, the intensity of tariff liberalization and the degree of sectoral coverage seem to be the important determinants of the RTAs’ performance. Therefore, experts expect that full-fledged implementation of FTA provisions and the elimination of all tariff and non-tariff barriers might result in a higher degree of integration.     

Feasible multilateralism and the effects of regionalism

Recent research shows that the GATT/WTO negotiating rules are capable of delivering a politically efficient equilibrium. Such an equilibrium is, however, economically inefficient. Global free trade, in particular, is unattainable even in a fully cooperative world, if governments have political motivations. In such a context, we show that regional trade agreements can help move the world towards a welfare-superior equilibrium. The reason is that, when members of regional trade agreements lower trade barriers against one another, they tend to reduce their multilateral tariffs as well. Once we account for these endogenous changes—and only then—we find that regionalism can raise world welfare even in a fully cooperative (but political) world. Regional integration can, however, harm outsiders.     

Does Trade Openness Promote Multilateral Environmental Cooperation?

This article puts forward a number of arguments why trade openness might promote multilateral environmental cooperation. Most of these arguments are grounded in the substantive self‐interest of the trading country. It tests the proposition using a range of proxy variables for general trade openness as well as specific export interests. The article examines whether countries open to trade are more likely to have signed three recent multilateral environmental agreements (MEAs) and are more likely to have ratified early on another three agreements with quasi‐universal membership. After controlling for income, political freedom and population size, the empirical estimations find some weak evidence in favour of a possible synergy between trade openness and multilateral environmental cooperation. World Trade Organisation membership as well as general export openness go hand in hand with greater willingness to participate in multilateral environmental cooperation in some cases. However, whether specific trade interests promote or hinder multilateral environmental cooperation depends on whether the relevant agreement is likely to threaten or accommodate the interests of exporting countries.     

Backward stealing and forward manipulation in the WTO

Motivated by the structure of WTO negotiations, we analyze a bargaining environment in which negotiations proceed bilaterally and sequentially under the most-favored-nation (MFN) principle. We identify backward-stealing and forward-manipulation problems that arise when governments bargain under the MFN principle in a sequential fashion. We show that these problems impede governments from achieving the multilateral efficiency frontier unless further rules of negotiation are imposed. We identify the WTO nullification-or-impairment and renegotiation provisions and its reciprocity norm as rules that are capable of providing solutions to these problems. In this way, we suggest that WTO rules can facilitate the negotiation of efficient multilateral trade agreements in a world in which the addition of new and economically significant countries to the world trading system is an ongoing process.     

Good global citizen? ASEAN’s image building in the United Nations

ABSTRACT

Based on role theory, the article examines the images that ASEAN member governments project of their organization. It rests on a discourse analysis of 198 speeches in the United Nations General Assembly between 1998 and 2017. Findings suggest that ASEAN does not figure as a top priority for delegates and that an overarching ASEAN role conception is missing. However, their addresses reveal parameters on which a collective role conception can be built. Individual ASEAN countries undertake great efforts to project themselves as ‘good global citizens,’ a role conception that could also be applied to ASEAN.