Politics of preferential trade agreements

International political economy examines the interactions between countries on the global stage. It studies the effects of policy decisions on the global economy and the impact of international relations on economic stability. One of the most important topics in international political economy is the politics of preferential trade agreements. Preferential trade agreements are agreements between two or more countries that reduce trade barriers and promote economic integration. These agreements allow countries to increase trade and investment opportunities, leading to economic growth and stability. They also provide a platform for countries to negotiate better terms on different issues such as labor, environmental standards, and intellectual property protection. The politics of preferential trade agreements can be complex, as countries must balance their own interests with the interests of their partners. Understanding how these agreements are negotiated and how they impact countries is essential for understanding international political economy.

Multilateral vs preferential trading

Multilateral trade is between three or more countries and is governed by international organisations such as the World Trade Organization (WTO). Multilateral trade is based on the principle of non-discrimination, meaning that all WTO member countries are treated equally and have the same market access.

Preferential trade refers to trade between two or more countries governed by a preferential trade agreement (PTA), such as a free trade agreement (FTA) or a customs union. PTAs are often formed between countries with a close economic relationships and seek to reduce trade barriers. Unlike multilateral trade, PTAs are discriminatory and provide preferential treatment to the countries that are party to the agreement.

The General Agreement on Tariffs and Trade (GATT), the precursor to the WTO, played a significant role in liberalising international trade and reducing trade barriers. The GATT and the WTO have helped to increase global trade and economic growth by promoting trade liberalisation and reducing tariffs and other trade barriers.

However, over time, the effectiveness of the GATT/WTO in reducing trade barriers has declined. This is partly due to the proliferation of PTAs, which have increased in number and significance in recent decades. PTAs have often been used as a means to circumvent the rules of the GATT/WTO and provide preferential treatment to certain countries or industries. This has led to a proliferation of trade barriers and a fragmentation of the global trading system.

In general, the proliferation of PTAs has had a negative effect on global trade, as it has led to a proliferation of trade barriers and a fragmentation of the global trading system. This has made it more difficult for countries to access foreign markets and has led to a decline in global trade over time.

The General Agreement on Tariffs and Trade (GATT), the precursor to the World Trade Organization (WTO), played a significant role in liberalising international trade and reducing trade barriers. The GATT and the WTO have helped to increase global trade and economic growth by promoting trade liberalisation and reducing tariffs and other trade barriers.

In the past, colonialism significantly impacted international trade and the global economy. During the era of colonialism, many countries were dominated by colonial powers, which often exploited the resources and labour of these countries for their economic benefit. This led to a significant imbalance in the global economy and a concentration of wealth and power in the hands of a few colonial powers.

The GATT and the WTO have helped mitigate some of the adverse effects of colonialism by promoting trade liberalisation and reducing trade barriers. This has allowed countries previously dominated by colonial powers to participate more fully in the global economy and benefit from increased trade and economic growth.

However, the proliferation of preferential trade agreements (PTAs) in recent decades has hurt global trade. It has tended to undermine the principles of non-discrimination and equal access to markets that are central to the GATT/WTO. Moreover, PTAs often provide preferential treatment to certain countries or industries, creating imbalances and distorting trade. In this way, PTAs may reinforce some of the negative effects of colonialism and contribute to a fragmentation of the global trading system.

Historical background

German Customs Union

The German Customs Union, also known as the Zollverein, was a trade coalition of German states that was established in 1834. The Zollverein was created to reduce tariffs and trade barriers between the participating states, including Prussia, Bavaria, Saxony, and other German states. The goal of the Zollverein was to create a common market within Germany, facilitating trade and economic growth.

The establishment of the Zollverein played a significant role in the economic development of Germany and was an important precursor to the unification of Germany in 1871. The Zollverein helped reduce trade barriers and facilitated the development of a common market within Germany, which facilitated the growth of industry and commerce. Moreover, the economic success of the Zollverein was a major factor in the eventual unification of the German states, as it demonstrated the benefits of economic cooperation and integration.

After the unification of Germany in 1871, the Zollverein continued to function as the main economic institution of the newly-formed German Empire. However, the Zollverein was eventually dissolved in 1890 after introducing the German Empire's first customs tariff, establishing a common tariff system for the entire German Empire.

Franc zone

The Franc zone, also known as the French franc zone or the CFA franc zone, is a group of countries in West and Central Africa that have adopted the CFA franc as their official currency. The CFA franc is a currency pegged to the euro and used as a common currency in these countries. The franc zone was established in 1901 and was originally limited to a few countries in West Africa. In 1938, the franc zone was expanded to include most of the former French colonies in West and Central Africa.

The franc zone has played an important role in the participating countries' economies, as it has provided a stable currency and facilitated trade and investment. However, the franc zone has also been the subject of criticism, as it has been seen as a vestige of colonialism and a means for France to exert economic influence over its former colonies.

The franc zone is still in existence, although it has undergone some changes over the years. In 1994, the CFA franc was revalued, and the franc zone was renamed the "Francophone Africa Monetary Union" (UEMOA). The UEMOA comprises eight West African countries and is overseen by the Central Bank of West African States (BCEAO). In addition to the CFA franc, the UEMOA also includes the Central African CFA franc, used in six Central African countries.