A Global Race for Free Trade Agreements : From the Most to the Least Favored Nation Treatment?
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Original versionWorking Paper, NUPI nr 653. NUPI, 2003
The article examines the currently expanding worldwide network of bilateral free trade agreements. Following regional integration in Europe and later the Americas, the process in East Asia has accelerated from 2002. A distinctive feature of the current stage is the expansion of FTAs beyond geographical regions and into global space, hence challenging WTOs supremacy on inter-continental trade rules. Setbacks in the WTO Doha Round may stimulate a further move towards "global bilateralism". While integration between geographically distant countries will have a smaller impact than integration between neighbours, countries may nevertheless gain from "global bilateralism". The more such agreements in place, the greater is the incentive for new ones. Even if political obstacles hinder some agreements, the process is currently accelerating. While it is rational for countries to pursue such agreements, the process is currently accelerating. While it is rational for countries to pursue such agreements, they should in parallel work for multilateral trade liberalisation in order to reduce the discriminatory impact of FTAs. This is needed if we are to avoud that "Most Favored Nation" treatment under the WTO actually becomes "Least Favored Nation" treatment: Rules that only apply to countries that are left outside the "free trade race".