Trade Winds Blow, While Congress Sits Becalmed, Sargassolike

By September 4, 2008Trade

From AFP, “Singapore says free trade talks with China concluded“:

SINGAPORE (AFP) — Singapore and China have successfully concluded negotiations on a bilateral free trade agreement, the city-state said in a statement Thursday.

It said the bilateral deal builds on a free trade agreement already reached between China and the 10-member Association of Southeast Asian Nations (ASEAN), to which Singapore belongs.

Granted, regional trade agreements complicate the global trading systems, introducing protections and complications even as they lower other trade barriers. The Economist comments in “A second best choice“:

On August 28th India agreed a free-trade agreement with the ten fast-growing countries in the Association of South-East Asian Nations. ASEAN also announced a second big regional deal, with Australia and New Zealand. Coming so soon after Doha’s collapse, the two agreements sent a powerful message. The global trade talks may have stumbled, but regional pacts are pushing ahead, particularly in the fastest-growing part of the world economy. According to the World Trade Organisation (WTO), over 200 regional and bilateral agreements are in place with many more under negotiation. More than 100 came into force during Doha’s seven exasperating years.

That is disturbing. Every trade deal should be measured on its own merits. But, for all their political appeal, bilateral and regional deals are never a substitute for progress at the WTO. Multilateral trade rounds are the foundation of the trading system because they are based on the “most favoured nation” principle—that any tariff cuts offered to one country must be offered to them all. Regional and bilateral deals are based on discrimination.

And here’s the third best choice, which equals the BAD choice: Do nothing, as so many in Congress — especially the House leadership — have decided is the best course of action on FTAs with Colombia, Panama and Korea.

UPDATE (4:15 p.m.): From today’s Asian WSJ, “Bilateral Trade-Off,” a column by trade thinker Bernard K. Gordon that takes the criticisms pretty darn far:

The latest sign that the postwar era of “multilateral” trade liberalization has ended came last week in Singapore. The event was an Association of Southeast Asian Nations ministerial meeting, where the 10-member grouping and India formally agreed to a “free trade” deal to take effect in January. At the same meeting, Asean leaders also agreed to establish yet another so-called “free trade agreement,” this one with Australia and New Zealand.

That brings to roughly 400 the number of regional and bilateral trade agreements that have been notified to the World Trade Organization. Meanwhile, another try to keep the Doha Round of world trade talks alive will be made in Geneva later this month. But the prospects are not bright, and all of this has been very predictable. Scores of observers — not only academics — have regularly warned that bilateral and regional trade pacts, which are in fact preferential rather than free trade agreements, are both a cause and a consequence of a breakdown of the WTO system.

 

 

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