The asymmetry of North–South Regional Trade Agreements

Abstract

It is notable that this surge in RTAs is largely driven by developed countries. Since the failure of the Seattle Ministerial of WTO in 1999, the European Union and some developed countries, notably the USA, have initiated negotiations on a large number of bilateral and regional Trade Agreements. Traditionally developed countries have always been big markets for exports from developing countries and the prospect of preferential access to such markets have induced many developing countries to seek Preferential or Free Trade Agreements (PTA/FTA) with developed countries. The motivation to go for a PTA with a developed country becomes particularly strong for a developing country if other countries, with which it is competing to supply goods to the developed market, are preferential trade partners of the developed country. In such cases the motivation comes from a defensive necessity against a possible exclusion from these markets. But preferential market access comes at a cost. As a quid pro quo, developing countries are expected to accept certain commitments to make the trade agreement attractive to the developed country partner. There are apprehensions that these commitments may reduce the policy space available to developing countries. Therefore, from the point of view of a developing country, the tradeoff is essentially between possible better market access in developed countries vis-àvis accepting stricter rules imposed by the developed country partner. As there is such a huge increase in the number of North-South RTAs4 it tends to indicate that developing countries feel that overall North-South RTAs will be beneficial, as costs arising from new commitments will be more than offset by increased trade and market access in the developed country markets. As market access plays such an important role in the formation of RTAs, it is important to investigate whether North-South RTAs have indeed given developing countries increased market share in the developed country markets. Using data from a number of North-South RTAs, this chapter seeks to find out whether there is any clear pattern between the signing of RTAs and an increase in market share in developed countries. This chapter also analyzes the possible factors which can prevent a developing country from gaining market access in a developed country even when they are part of a PTA. © 2011 Selection and editorial matter, Syed Mansoob Murshed, Pedro Goulart and Leandro A. Serino. All rights reserved.