Politics of preferential trade agreements

De Baripedia

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 labour, 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[modifier | modifier le wikicode]

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 relationship 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[modifier | modifier le wikicode]

German Customs Union[modifier | modifier le wikicode]

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[modifier | modifier le wikicode]

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.

British imperial preference[modifier | modifier le wikicode]

British imperial preference was a system of tariffs and trade agreements that was established by the United Kingdom in the early 20th century. The system was designed to provide preferential treatment to the countries of the British Empire, which included countries in Africa, the Caribbean, and Asia, as well as Canada and Australia.

British imperial preference was established at the Ottawa Conference in 1932, which representatives of the British Empire attended. The conference resulted in the creation of the Imperial Economic Conference, which was responsible for coordinating economic policy among the member countries of the British Empire.

Under the system of British imperial preference, member countries of the British Empire were granted preferential access to each other’s markets, with lower tariffs on their exports to the UK and other imperial countries. The system’s goal was to promote trade and economic cooperation within the British Empire and boost the economies of the participating countries.

British imperial preference remained in place until the UK acceded to the European Economic Community (EEC) in 1973. After joining the EEC, the UK became part of the common market and was required to reduce tariffs on imports from other EEC countries. This effectively ended the system of British imperial preference, as the UK could no longer provide preferential treatment to the countries of the British Empire.

GATT article XXIV[modifier | modifier le wikicode]

Article XXIV of the General Agreement on Tariffs and Trade (GATT) is a provision that allows countries to form customs unions or free trade areas. Customs unions are agreements between two or more countries to eliminate tariffs and other trade barriers and adopt a common external tariff on imports from non-member countries. Free trade areas are agreements between two or more countries to eliminate tariffs and trade barriers. Still, each country maintains its own tariffs on imports from non-member countries. Article XXIV of the GATT allows countries to form customs unions or free trade areas as long as certain conditions are met. These conditions include: The member countries must eliminate tariffs and other trade barriers between them. The member countries must adopt a common external tariff on imports from non-member countries. The member countries must not discriminate against non-member countries in applying their trade policies. Article XXIV of the GATT has played an important role in facilitating the formation of customs unions and free trade areas worldwide. It has allowed countries to reduce trade barriers and create larger economic blocs that can be more competitive in the global economy. However, the proliferation of customs unions and free trade areas has also led to a fragmentation of the global trading system. It has been criticised for creating imbalances and distorting trade.

Enabling clause (1979)[modifier | modifier le wikicode]

The enabling clause, also known as the ‘Enabling Clause of 1979,’ is a provision in the World Trade Organization (WTO) that allows developing countries to be granted special treatment in trade negotiations. The enabling clause was adopted in 1979 at the General Council of the WTO to address developing countries’ concerns about their participation in the international trading system.

Under the enabling clause, developing countries can negotiate trade agreements and commitments more flexibly than developed countries. This allows them to take into account their specific economic and development needs and adopt trade policies better suited to their circumstances.

The enabling clause has played an important role in promoting the participation of developing countries in the international trading system and in helping them to benefit from trade and economic growth. It has also helped to ensure that the interests of developing countries are taken into account in trade negotiations and that they can participate more fully in the global economy.

Rise of new regionalism[modifier | modifier le wikicode]

Stages in rise of new regionalism[modifier | modifier le wikicode]

The 1950s[modifier | modifier le wikicode]

The rise of new regionalism can be traced back to the 1950s. The first steps towards European integration were established by establishing the European Coal and Steel Community (ECSC) and the European Economic Community (EEC). These early efforts at regional integration were motivated by a desire to promote economic cooperation and to reduce the risk of conflict in post-war Europe.

In the 1960s and 1970s, regional integration efforts expanded beyond Europe to other parts of the world. This included forming regional trade agreements, such as the North American Free Trade Agreement (NAFTA) between the United States, Canada, and Mexico.

Despite its commitment to multilateralism, the United States has often supported the development of regional trade agreements, as they can provide economic benefits to the participating countries and can serve as a stepping stone towards broader global trade liberalisation. However, the proliferation of regional trade agreements has also been criticised for creating a fragmentation of the global trading system and for potentially undermining the multilateral trading system.

In recent decades, there has been a significant increase in the number and significance of regional trade agreements worldwide. This trend, known as ‘new regionalism,’ has been driven by a variety of factors, including technological change, economic globalization, and changes in the global political landscape. The rise of new regionalism has significantly impacted the global trading system. It has led to a proliferation of trade barriers and a fragmentation of the global economy.

The 1980s[modifier | modifier le wikicode]

In the 1980s, regional integration efforts continued to deepen and expand, with the European Union (EU) adopting the Single European Act (SEA) in 1986. The SEA was a major step towards creating a single market within the EU and aimed to remove barriers to trade and investment within the EU. It also established the principle of ‘subsidiarity,’ which holds that decisions should be taken at the lowest possible level of government.

The 1980s also saw the conclusion of several important regional trade agreements in North America. The Canada-United States Free Trade Agreement (CUFTA) was signed in 1988 and came into effect in 1989. It was the first free trade agreement between the United States and a foreign country and was a significant step towards creating the North American Free Trade Agreement (NAFTA), which was signed in 1992 and came into effect in 1994.

NAFTA was a comprehensive free trade agreement between the United States, Canada, and Mexico that eliminated tariffs and trade barriers between the participating countries. It was a major step towards regional economic integration in North America and significantly impacted the global trading system.

The 1980s marked a significant turning point in the evolution of regional trade agreements, as they became increasingly comprehensive and covered a wide range of economic sectors. The conclusion of these agreements marked a shift towards a more integrated and interdependent global economy.

The 1990s[modifier | modifier le wikicode]

In the 1990s, regional integration efforts continued to deepen and expand, with the European Union (EU) moving towards the creation of a single currency through the establishment of the Economic and Monetary Union (EMU). The EMU was launched in 1999 and involved the adoption of a common currency, the euro, by participating countries.

The 1990s also saw the conclusion of several important regional trade agreements in other parts of the world. For example, in 1991, the Southern Common Market (MERCOSUR) was established as a regional trade agreement between Argentina, Brazil, Paraguay, and Uruguay. MERCOSUR was designed to promote economic integration and cooperation between the participating countries and reduce trade and investment barriers.

In 1992, the Association of Southeast Asian Nations (ASEAN) established the ASEAN Free Trade Area (AFTA), which aimed to promote economic integration and cooperation among the member countries of ASEAN. AFTA was designed to reduce tariffs and other trade barriers between the participating countries and to create a single market within ASEAN.

In addition to these regional trade agreements, the 1990s also saw a significant increase in the number of bilateral trade agreements between countries worldwide. These agreements, typically between two countries, have been used to facilitate trade and investment between the participating countries. The proliferation of bilateral trade agreements in the 1990s contributed to further fragmentation of the global trading system and has been a source of concern for proponents of the multilateral trading system.

Types of economic cooperation[modifier | modifier le wikicode]

There are several different types of economic cooperation that countries can engage in, including:

  1. Partial economic cooperation: This refers to economic cooperation between two or more countries that is limited to specific sectors or issues. It may involve the exchange of goods or services, the sharing of technology or knowledge, or the joint development of projects or initiatives.
  2. Free trade area: A free trade area is an agreement between two or more countries to eliminate tariffs and other trade barriers between them, but each country maintains its own tariffs on imports from non-member countries. Free trade areas are designed to promote trade and economic cooperation between the participating countries.
  3. Customs union: A customs union is an agreement between two or more countries to eliminate tariffs and other trade barriers between them and to adopt a common external tariff on imports from non-member countries. Customs unions are designed to create a common market within the member countries and to facilitate trade and investment between them.
  4. Single market: A single market is an economic area in which goods, services, capital, and people can move freely. The four freedoms of the single market are the free movement of goods, the free movement of services, the free movement of capital, and the free movement of people. These freedoms are designed to promote economic integration and cooperation among the member countries.
  5. Economic and monetary union: Economic and monetary union (EMU) is an economic and monetary integration of two or more countries that involves adopting a common currency and coordinating economic and monetary policies. The EMU is designed to promote economic stability and cooperation among the member countries and to facilitate trade and investment.

Forms of economic cooperation[modifier | modifier le wikicode]

There are several different types of economic cooperation, which can be classified based on the geography and number of participating countries:

  1. Regional economic cooperation refers to economic cooperation between countries that are located in the same region of the world. Examples of regional economic cooperation include the European Union (EU) in Europe and the Association of Southeast Asian Nations (ASEAN) in Asia.
  2. Interregional economic cooperation refers to economic cooperation between countries that are located in different regions of the world. Examples of interregional economic cooperation include the North American Free Trade Agreement (NAFTA) between the United States, Canada, and Mexico and the Trans-Pacific Partnership (TPP) between countries in the Asia-Pacific region.

Economic cooperation can also be classified based on the number of participating countries:

  1. Bilateral economic cooperation refers to economic cooperation between two countries. Examples of bilateral economic cooperation include free trade agreements between two countries and economic partnerships between two countries.
  2. Multilateral economic cooperation refers to economic cooperation between three or more countries. Examples of multilateral economic cooperation include the World Trade Organization (WTO), which is a multilateral organisation that promotes global trade and economic cooperation, and regional trade agreements that involve multiple countries.

Economic cooperation can also be classified based on the economic development of the participating countries:

  1. North-North economic cooperation refers to economic cooperation between countries that are classified as developed countries.
  2. South-South economic cooperation refers to economic cooperation between countries that are classified as developing countries.
  3. North-South economic cooperation refers to economic cooperation between developed and developing countries. This type of cooperation often involves the transfer of resources and technology from developed countries to developing countries in order to promote economic development and reduce poverty.

Debates[modifier | modifier le wikicode]

There has been a significant debate about the effects of preferential trade agreements (PTAs) on the multilateral trading system. PTAs are agreements between two or more countries that provide preferential treatment to certain countries or industries, often in the form of lower tariffs or other trade barriers.

PTAs have been criticised for potentially undermining the principles of non-discrimination and equal access to markets that are central to the multilateral trading system. When countries enter into PTAs, they may provide preferential treatment to certain countries or industries, creating imbalances and distorting trade. This can lead to a fragmentation of the global trading system and make it more difficult for non-member countries to access markets.

However, PTAs can also have positive effects on the multilateral trading system. PTAs can serve as a stepping stone towards broader global trade liberalisation and help build capacity and promote economic development in participating countries. In addition, PTAs can help facilitate trade and economic cooperation between countries and provide a forum for addressing trade-related issues.

The effects of PTAs on the multilateral trading system are complex and depend on various factors, including the specific terms of the agreements and their impact on trade flows. While PTAs can have both positive and negative effects, countries need to ensure that they are consistent with the rules and principles of the multilateral trading system and do not undermine the broader goal of global trade liberalisation.

Some argue that PTAs can be ‘stumbling blocks’ that undermine the multilateral trading system by creating imbalances and distorting trade. For example, when countries enter into PTAs, they may provide preferential treatment to certain countries or industries, leading to a fragmentation of the global trading system and making it more difficult for non-member countries to access markets. This can lead to a proliferation of trade barriers and undermine the principles of non-discrimination and equal access to markets central to the multilateral trading system.

Others argue that PTAs can be ‘building blocks’ that contribute to the development of the multilateral trading system. For example, PTAs can serve as a stepping stone towards broader global trade liberalisation and help build capacity and promote economic development in participating countries. In addition, PTAs can help facilitate trade and economic cooperation between countries and provide a forum for addressing trade-related issues.

The effects of PTAs on the multilateral trading system are complex and depend on various factors, including the specific terms of the agreements and their impact on trade flows. While PTAs can have both positive and negative effects, countries need to ensure that they are consistent with the rules and principles of the multilateral trading system and do not undermine the broader goal of global trade liberalisation.

International politics[modifier | modifier le wikicode]

Traditional explanations[modifier | modifier le wikicode]

Demand side[modifier | modifier le wikicode]

Neofunctionalism is a perspective that emphasises the role of demand-side factors in shaping global economic relations. According to neo-functionalism, the integration of regional economies can lead to the development of transnational networks and the emergence of supranational institutions that can shape global economic relations.

Neofunctionalism suggests that integration can occur through a bottom-up process, in which the economic benefits of integration lead to increased demand for cooperation and further integration. This process is known as spillover, in which the economic benefits of integration in one sector or area spill over into other sectors or areas, leading to a more integrated global economy.

For example, neo-functionalism suggests that the integration of regional economies through trade and investment can lead to the development of transnational production and distribution networks, which can facilitate the flow of goods and services across borders. This integration can also lead to the emergence of supranational institutions, such as the European Union (EU), that can shape global economic relations and promote further integration.

There are a variety of actors that can shape global economic relations, including:

  1. Interest groups: Interest groups are organisations that seek to promote the interests of a specific group or sector. They can include businesses, trade unions, environmental groups, and other organisations. Interest groups can shape global economic relations by advocating for specific policies or by lobbying governments and international organisations.
  2. Firms: Firms are business enterprises that produce and sell goods and services. They can shape global economic relations by engaging in international trade and investment, facilitating the flow of goods and services across borders and promoting economic integration.
  3. Citizens: Citizens are individuals who live within a particular country and are subject to its laws and policies. They can shape global economic relations by participating in the political process and expressing their preferences through voting and consumption patterns.

These actors can play a significant role in shaping global economic relations and influence governments’ and international organisations’ policies and practices.

There are a variety of motivations that can drive actors to engage in global economic relations, including:

  1. Economic gains: One of the main motivations for actors to engage in global economic relations is the potential for economic gains. This can include the opportunity to access new markets, to benefit from economies of scale, and to take advantage of lower production costs.
  2. Transaction costs: Transaction costs refer to the costs associated with conducting business, such as the costs of negotiating contracts, enforcing agreements, and protecting property rights. Actors may be motivated to engage in global economic relations to reduce transaction costs and facilitate the flow of goods and services across borders.
  3. Uncertainty: Actors may also be motivated to engage in global economic relations to reduce uncertainty. This can include the uncertainty associated with changes in domestic economic conditions and the uncertainty associated with global economic conditions. Engaging in global economic relations can help actors to diversify their risk and to access new sources of demand.

These motivations can influence the decisions of actors to engage in global economic relations and can shape the nature of these relations.

Supply side[modifier | modifier le wikicode]

Intergovernmentalism is a perspective that emphasises the role of supply-side factors in shaping global economic relations. According to intergovernmentalism, the integration of regional economies is driven by the actions of governments and is shaped by intergovernmental bargaining and negotiation.

Intergovernmentalism suggests that integration occurs through a top-down process in which governments negotiate and agree to integrate their economies. This process is known as bargaining, in which governments negotiate the terms of economic integration and the distribution of costs and benefits.

For example, intergovernmentalism suggests that the integration of regional economies through trade and investment is driven by the actions of governments and is shaped by intergovernmental bargaining and negotiation. Governments may negotiate the terms of economic integration and the distribution of costs and benefits to promote the interests of their own domestic industries or achieve other policy objectives.

In the context of intergovernmentalism, the main actors that shape global economic relations are national governments and policymakers. National governments are the primary actors responsible for shaping economic policy and negotiating the terms of economic integration with other countries. They can shape global economic relations by negotiating trade and investment agreements, by setting tariffs and other trade barriers, and by adopting economic policies that promote or inhibit economic integration.

Policymakers are individuals within national governments who are responsible for developing and implementing economic policy. They can play a significant role in shaping global economic relations by negotiating trade and investment agreements, setting economic policies that promote or inhibit economic integration, and influencing national governments’ decisions.

There are a variety of motivations that can drive national governments and policymakers to engage in global economic relations, including:

  1. Political gains: National governments and policymakers may be motivated to engage in global economic relations to achieve political gains. This can include the opportunity to shape the rules and institutions of the global economy, influence other countries’ policies, and enhance their own country’s reputation and influence.
  2. Leadership: National governments and policymakers may also be motivated to engage in global economic relations to demonstrate leadership and shape the direction of global economic developments. This can include the opportunity to set the agenda for global economic discussions and shape the global economy’s rules and institutions.
  3. Geopolitics: National governments and policymakers may also be motivated to engage in global economic relations by geopolitical considerations. This can include the desire to enhance their own country’s economic and strategic position relative to other countries, secure access to natural resources, or respond to security threats.

Overall, these motivations can influence the decisions of national governments and policymakers to engage in global economic relations and can shape the nature of these relations.

Recent explanations[modifier | modifier le wikicode]

Economic[modifier | modifier le wikicode]

There are a variety of recent explanations for the role of international politics in shaping global economic relations that focus on economic factors. These explanations include:

  1. Capital-labour ratio: The capital-labour ratio refers to the amount of capital (e.g., machinery, equipment, and infrastructure) relative to the number of workers in an economy. The capital-labour ratio can influence the competitiveness of an economy and can shape global economic relations. For example, economies with a higher capital-labour ratio may be more competitive in capital-intensive industries. In comparison, economies with a lower capital-labour ratio may be more competitive in labour-intensive industries.
  2. Economies of scale: Economies of scale refer to the cost advantages that firms can achieve by producing goods and services at a larger scale. The ability to achieve economies of scale can influence the competitiveness of firms and can shape global economic relations. For example, firms that can achieve economies of scale may produce goods more efficiently and at a lower cost, making them more competitive in global markets.
  3. Rise of intra-firm trade and global value chains (GVCs): The rise of intra-firm trade and global value chains (GVCs) has also shaped global economic relations. Intra-firm trade refers to trade between affiliates of the same multinational corporation, while GVCs refer to the networks of firms that produce goods and services that are traded globally. The growth of intra-firm trade and GVCs has facilitated the integration of global production and distribution networks, shaping global economic relations.

These economic factors can influence the nature and direction of global economic relations and can shape the competitiveness of firms and economies in global markets.

International politics[modifier | modifier le wikicode]

There are a variety of recent explanations for the role of international politics in shaping global economic relations that focus on international politics. These explanations include the following:

  1. WTO stagnation: The stagnation of the World Trade Organization (WTO) has shaped global economic relations in recent years. The WTO is a multilateral organisation that promotes global trade and economic cooperation. Still, it has faced significant challenges recently, including disputes over trade rules and the inability to reach consensus on new trade agreements. The stagnation of the WTO has led to a proliferation of regional and bilateral trade agreements and has shaped the nature of global economic relations.
  2. Geopolitics: Geopolitical considerations have also shaped global economic relations in recent years. This can include the influence of major powers on the global economy, the impact of conflicts and tensions on trade and investment flows, and the role of natural resources in shaping economic relations.
  3. Standard setting: The setting of standards and regulations can also shape global economic relations. Standards and regulations can affect the flow of goods and services across borders and influence firms’ competitiveness in global markets.
  4. Exporter discrimination: Exporter discrimination refers to the practice of providing preferential treatment to certain exporters in order to promote economic development or to achieve other policy objectives. Exporter discrimination can shape global economic relations by influencing the flow of goods and services across borders and affecting firms’ competitiveness in global markets.

These international politics factors can influence the nature and direction of global economic relations and shape the global economy’s rules and institutions.

Development[modifier | modifier le wikicode]

There are a variety of recent explanations for the role of international politics in shaping global economic relations that focus on political risk, commitment to openness, macroeconomic credibility, and the lock-in of liberal economic reforms. These explanations include the following:

  1. Political risk: Political risk refers to the risk that political factors, such as changes in government, conflicts, or instability, will disrupt economic relations or affect the economic performance of a country. Political risk can shape global economic relations by influencing the flow of trade and investment and by affecting the competitiveness of firms and economies in global markets.
  2. Commitment to openness: The commitment of countries to openness, or the degree to which they are open to trade and investment, can also shape global economic relations. Countries that are more open to trade and investment may be more attractive to investors and may be more competitive in global markets. In contrast, less open countries may be less attractive and less competitive.
  3. Macroeconomic credibility: The macroeconomic credibility of a country, or the degree to which it is perceived as having stable and predictable economic policies, can also shape global economic relations. Countries with high macroeconomic credibility may be more attractive to investors and competitive in global markets, while countries with low macroeconomic credibility may be less attractive and less competitive.
  4. Lock-in of liberal economic reforms: The lock-in of liberal economic reforms, or the degree to which a country has committed to liberal economic policies, can also shape global economic relations. Countries committed to liberal economic reforms may be more attractive to investors and competitive in global markets. In contrast, countries that have not committed to these reforms may be less attractive and less competitive.

These factors can influence the nature and direction of global economic relations and can shape the competitiveness of firms and economies in global markets.

WTO stagnation[modifier | modifier le wikicode]

WTO evolution[modifier | modifier le wikicode]

The World Trade Organization (WTO) is an international organization that aims to promote and facilitate international trade. It was established in 1995, following the conclusion of the Uruguay Round of negotiations, as a successor to the General Agreement on Tariffs and Trade (GATT). The WTO had 123 member countries at its inception, but this number has since grown to 164.

The WTO operates on the principle of consensus decision-making, meaning that all member countries must agree on any decisions or changes to the organization's rules and agreements. This can sometimes lead to stalemates or slow progress on certain issues, as all members must be consulted and their concerns addressed. However, the consensus-based approach also ensures that all members have a say in shaping the organization and its rules and promotes cooperation and inclusiveness among its member countries.

The membership of the World Trade Organization (WTO) is quite diverse, comprising a mix of developed and developing countries and countries in transition. In addition, there is also a wide range of economic structures and development levels among its member countries. As a result, the WTO has several mechanisms in place to address the specific needs and concerns of different groups of members.

The WTO addresses this diversity by establishing regional trade agreements and associations. These are agreements between countries within a particular region to reduce barriers to trade and increase economic cooperation. Some examples of regional trade agreements that are WTO members include the European Union, the African Union, and the North American Free Trade Agreement (NAFTA).

The WTO also has sectoral associations and groups focusing on specific economic sectors, such as agriculture, textiles, and services. These associations provide a forum for member countries to discuss trade-related issues and negotiate agreements related to their specific sectors.

Finally, the WTO has several initiatives and programs that focus on the specific needs of least-developed countries (LDCs) and transition/emerging markets. These include the Enhanced Integrated Framework for Trade-Related Technical Assistance to LDCs, which provides technical assistance to LDCs to help them integrate into the global trading system, and the Trade Facilitation Agreement, which aims to simplify and streamline customs procedures to reduce the cost of trade for all WTO members, particularly developing countries.

The global trading system has become increasingly complex over time, with more countries participating and more sectors of the economy being brought under the purview of international trade agreements. This complexity is reflected in the range of issues that the World Trade Organization (WTO) deals with, including traditional trade barriers such as tariffs and non-tariff barriers (NTBs) such as quotas, regulations, and standards.

Intellectual property rights (IPRs) are another important issue in international trade, as they can affect the ability of companies to access and protect their technological and creative assets. The WTO's Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) establishes minimum standards for protecting IPRs and aims to balance the interests of intellectual property holders with the public interest.

The institutional procedures of the WTO are also a source of complexity. As mentioned earlier, the WTO operates on the principle of consensus decision-making, which means that all member countries must agree on any changes to the organization's rules and agreements. This can sometimes lead to protracted negotiations and disputes, as different countries have different priorities and concerns. However, the consensus-based approach also ensures that all members have a say in shaping the organization and its rules and promotes cooperation and inclusiveness among its member countries.

Doha Round[modifier | modifier le wikicode]

The Doha Round of negotiations was launched in 2001 to liberalise global trade further and address poorer countries' specific development needs. The negotiations were named after the city of Doha, Qatar, where the round was launched at the WTO's Fourth Ministerial Conference.

Over the course of the Doha Round, nine ministerial conferences were held in various locations around the world, where WTO member countries met to discuss and negotiate the terms of the agreement. The negotiations were complex and multifaceted, covering various issues including agriculture, industrial goods, services, intellectual property, and trade and development.

Despite significant progress on some issues, the Doha Round ultimately collapsed due to a lack of consensus on key issues such as agriculture and industrial goods. The round was considered one of the most ambitious and far-reaching attempts to liberalise global trade, and many saw its failure as a disappointment. However, some progress was made on certain issues, and the work done during the Doha Round continues to inform current trade negotiations.

Agriculture was one of the key issues under negotiation during the Doha Round of trade negotiations, launched in 2001 by the World Trade Organization (WTO). Agricultural trade is particularly concerned to developing countries, which rely on agriculture as a major source of income and employment. The Doha Round aimed to address imbalances in the global agricultural trade system and reduce barriers to trade in agricultural products, particularly for developing countries.

Services was another key area of focus in the Doha Round. Services include a wide range of activities, such as banking, telecommunications, transportation, and education, which play a significant role in the global economy. Accordingly, the Doha Round aimed to reduce barriers to trade in services and increase market access for service providers, particularly in developing countries.

The environment was another important issue under negotiation in the Doha Round. Trade and environmental policies are often seen as being in conflict, as trade liberalization can lead to increased production and consumption, which in turn can have negative environmental impacts. The Doha Round aimed to find ways to reconcile these competing interests and address the environmental impacts of trade.

Trade facilitation was another key issue in the Doha Round. Trade facilitation refers to measures that simplify and streamline customs procedures and other administrative processes related to trade. The Doha Round aimed to reduce the costs and time required for cross-border trade, particularly for developing countries, by negotiating a Trade Facilitation Agreement.

During the Doha Round of trade negotiations, which was launched in 2001 by the World Trade Organization (WTO), there were several significant divisions or "cleavages" between different groups of countries. One significant divide was between the European Union (EU) and the United States (US) on one side and the so-called BRICs countries (Brazil, Russia, India, and China) on the other. The BRICs countries, which are among the leading developing countries in the world, often took a different stance from the EU and US on a range of issues, including agriculture, industrial goods, and intellectual property.

There were also divisions within the BRICs countries themselves, as well as among other developing countries. For example, India and China, both major developing countries with significant agricultural sectors, had different priorities and concerns regarding agricultural trade.

A complex mix of interests and competing priorities marked the Doha Round among different groups of countries. This made it difficult to achieve consensus on many issues and ultimately contributed to the collapse of the negotiations.

Power competition[modifier | modifier le wikicode]

Competition for power and influence can factor in international trade negotiations as countries seek to advance their interests and protect their domestic industries. This can lead to what is sometimes referred to as "competitive liberalization," where countries seek to outdo each other in terms of opening up their markets and reducing trade barriers.

During the Doha Round of trade negotiations, which was launched in 2001 by the World Trade Organization (WTO), there were instances of competitive liberalization among different groups of countries. For example, the EU and the US, both major economic powers, often took different positions on certain issues and sought to advance their interests. Similarly, the BRICs countries (Brazil, Russia, India, and China) also sometimes took different positions and sought to protect their own industries.

Competitive liberalization can be a double-edged sword, as it can lead to a race to the bottom in terms of reducing trade barriers, which may only sometimes be in the best interests of all countries. But, at the same time, it can also drive innovation and competitiveness as firms are forced to adapt to increased competition.

There are many different motivations behind international trade negotiations and agreements. One major factor is geopolitical interests, as countries seek to advance their strategic and economic interests through trade. This can include seeking access to new markets, raw materials, or technologies and strengthening political and economic ties with other countries.

Another motivation behind international trade is pursuing a mercantilist trading strategy, which is based on the idea that a country should seek to maximize exports and minimize imports to increase its wealth and power. This approach is often associated with protectionist policies such as tariffs and quotas, which are designed to make foreign goods more expensive and domestic goods more competitive.

Discrimination against third-country exporters, where a country treats imports from one country differently than imports from another country, is another factor that can motivate international trade negotiations. This can occur when a country seeks to protect its domestic industries by imposing higher tariffs or other barriers on imports from certain countries.

For example, the North American Free Trade Agreement (NAFTA) was seen as a way for the United States, Canada, and Mexico to strengthen their economic ties and increase their competitiveness on the global stage. Similarly, the European Union (EU) has sought to use trade agreements to advance its strategic and economic interests, as have Japan and the United States.

At the same time, trade negotiations can also reflect efforts to cooperate and find mutually beneficial solutions. For example, the EU-Chile Association Agreement and the Japan-Malaysia Economic Partnership Agreement were both seen as ways to increase economic cooperation and enhance the competitiveness of the countries involved.

Standard setting[modifier | modifier le wikicode]

Standard setting refers to the process of developing and establishing technical standards, which are widely accepted and used as benchmarks for products, services, or systems. International organizations, national standardization bodies, or private sector organizations can develop these standards. International politics often plays a role in developing and adopting standards, as different countries and regions may have different priorities and agendas.

Interregional agreements are agreements between regions or sub-national entities within a country. These agreements can be bilateral (between two regions) or multilateral (among multiple regions). In addition, they may involve various types of cooperation, such as trade, economic development, environmental protection, or cultural exchange. Like standard setting, international politics can influence interregional agreements and may involve negotiations and compromises between different parties.

CETA, TPP, and TTIP are trade agreements.

CETA, or the Comprehensive Economic and Trade Agreement, is a free trade agreement between the European Union and Canada. It aims to eliminate tariffs and other barriers to trade and investment between the two regions. CETA was signed in 2016 and came into provisional effect in 2017.

TPP, or the Trans-Pacific Partnership, is a free trade agreement among a group of Pacific Rim countries, including Australia, Canada, Japan, Mexico, and the United States. The TPP was signed in 2015, but the United States withdrew from the agreement in 2017. The remaining countries have since renegotiated the agreement and renamed the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

TTIP, or the Transatlantic Trade and Investment Partnership, was a proposed free trade agreement between the European Union and the United States. Negotiations for the TTIP began in 2013, but the talks were suspended in 2016, and the agreement was not completed.

The Regional Comprehensive Economic Partnership (RCEP) is a free trade agreement among a group of countries in the Asia-Pacific region. It includes the ten member countries of the Association of Southeast Asian Nations (ASEAN) and Australia, China, Japan, South Korea, and New Zealand. The RCEP aims to liberalize trade and investment, promote economic growth and development, and strengthen economic cooperation among the participating countries.

The RCEP negotiations were launched in 2012, and the agreement was signed in November 2020. It is the largest trade agreement regarding the number of participating countries and has been seen as a response to the Trans-Pacific Partnership (TPP), which did not include China. The RCEP is expected to come into force in the coming years after the participating countries have ratified it.

Trade agreements like CETA, TPP, and TTIP typically cover a wide range of topics, including trade, investment, and economic cooperation. These agreements often address tariffs and other trade barriers, intellectual property rights, and regulatory harmonization. They may also include environmental, labour standards, and governance provisions.

Investment arbitration, also known as investor-state dispute settlement (ISDS), is a mechanism that allows investors to bring disputes with governments to international arbitration. ISDS is often included in trade and investment agreements as a way to provide investors with a means of seeking redress if they feel that a host government has violated their rights.

It is worth noting that trade and investment agreements can be complex and may include provisions on a wide range of issues beyond those mentioned here.

Standard setting can be one motivation for countries to enter into trade and investment agreements. By agreeing to adopt certain standards, countries can facilitate trade and investment by reducing uncertainty and regulatory barriers. For example, a country may agree to adopt certain technical standards for products or services, or to recognize certain professional certifications, to make it easier for companies from other countries to do business within its borders.

However, trade and investment agreements can also have various motivations. For example, countries may enter into these agreements to promote economic growth, increase competitiveness, protect intellectual property, or strengthen political or strategic relationships. In some cases, trade and investment agreements may also be motivated by a desire to promote social or environmental goals, such as improving labour standards or protecting the environment.

Domino process and protection for exporters[modifier | modifier le wikicode]

International politics plays a significant role in the field of international political economy, which is the study of the intersection of politics and economics in the global system. In the field of international political economy, states and other actors seek to promote their own economic interests and shape the international economic order in ways that benefit them. This often involves negotiations and bargaining with other countries, as well as the use of various forms of economic statecrafts, such as trade agreements, sanctions, and foreign aid.

The Domino process is a theory in international relations that suggests that the collapse or success of one state can have a ripple effect on other states, potentially leading to a chain reaction of events. The idea is that events in one country can affect the stability or instability of its neighbours, which can then have an impact on other countries, and so on. For example, the Domino process is often used to describe how the fall of one communist government in a particular region could lead to the collapse of other communist governments in the area.

Protection for exporters refers to measures governments take to support their domestic industries and businesses that export goods and services to other countries. These measures can include tariffs, subsidies, and other forms of assistance that are designed to help exporters compete in international markets. Governments may also engage in trade negotiations and seek trade agreements with other countries to promote exports and protect the interests of their domestic industries.

Preferential trade agreements (PTAs) are trade agreements between two or more countries that offer preferential treatment to each other, such as lower tariffs or other trade barriers, compared to how they treat other countries. PTAs are often motivated by the desire to promote trade and economic cooperation among the participating countries.

One perspective on the emergence of PTAs is that they are often a response to the preferential trade policies of other countries. In this view, countries that are excluded from an existing PTA may seek to avoid the negative consequences of trade diversion (i.e., the redirection of trade away from non-preferential countries to preferential countries) by signing new agreements with other countries. By entering into a PTA, these excluded countries can gain access to the same preferential treatment offered to other countries and avoid being at a disadvantage in trade.

It is worth noting that PTAs can also be motivated by a variety of other factors, such as the desire to promote economic development, to strengthen political or strategic relationships, or to address specific issues or sectors.

The Domino effect, as described above, refers to the idea that the collapse or success of one state can have a ripple effect on other states, potentially leading to a chain reaction of events. In the context of preferential trade agreements (PTAs), the Domino effect could refer to the idea that the formation of a new PTA by one group of countries could have a knock-on effect on other countries, leading them also to seek out new PTAs to avoid being excluded from trade or disadvantaged in terms of access to markets.

For example, suppose a group of countries signs a PTA that excludes certain other countries. In that case, those excluded countries may feel pressure to sign their own PTA to avoid being left out of the trade flows and preferential treatment available to the original PTA member countries. This could lead to a domino effect, where the formation of one PTA prompts the formation of additional PTAs as other countries seek to avoid being left out or disadvantaged.

One example of the Domino effect in the context of preferential trade agreements (PTAs) is the Trans-Pacific Partnership (TPP) formation. The TPP was a free trade agreement among a group of Pacific Rim countries, including Australia, Canada, Japan, Mexico, and the United States. The agreement was signed in 2015, but the United States withdrew from the agreement in 2017.

The remaining countries have since renegotiated the agreement and renamed the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). In addition, the CPTPP includes a number of countries that were not part of the original TPP, including Chile, Malaysia, and Peru.

The formation of the TPP and its subsequent expansion through the CPTPP has been seen as an example of the Domino effect, as the exclusion of certain countries from the original TPP may have prompted them to seek out other PTAs to avoid being left out of trade flows and preferential treatment. For example, the formation of the TPP may have motivated Malaysia and Peru to join the CPTPP in order to gain access to the preferential treatment and expanded trade opportunities offered by the agreement.

Development[modifier | modifier le wikicode]

Strategy[modifier | modifier le wikicode]

The failure of the import substitution industrialization (ISI) strategy in many developing countries in the 1970s and 1980s contributed to a shift towards free trade and a focus on attracting foreign direct investment (FDI).

The ISI strategy involved protecting domestic industries through tariffs and other trade barriers, with the goal of making them competitive with foreign firms. However, this often led to inefficiency and stagnation as domestic firms were not exposed to international competition. As a result, many developing countries began to liberalize their trade policies and pursue free trade agreements in order to increase access to foreign markets and technology.

Attracting FDI also became an important goal for many developing countries, as it can bring capital, technology, and management expertise to a country. Competition for FDI can be intense, and countries may offer tax incentives and other perks to try to attract investment from foreign firms.

Economic instability can be a problem for developing countries because it can discourage investment and make it difficult for businesses to plan for the future. Economic instability can take many forms, such as high inflation, currency devaluation, and frequent changes in government policies.

One related issue is the "time consistency" problem, which refers to the potential for governments to renege on their commitments or change their policies in the future. If investors or businesses believe that a government is not committed to maintaining a stable economic environment, they may be less likely to invest in the country.

To address these problems, developing countries may seek to implement policies that promote stability and credibility, such as maintaining a low and stable inflation rate, respecting the rule of law, and establishing clear and predictable regulations. These efforts can help to attract investment and promote economic development.

One solution to the time consistency problem and other challenges related to economic instability is for a country to enter into international legal commitments through agreements with other countries or international organizations. These agreements can establish a framework for economic policy and provide incentives for countries to follow through on their commitments.

For example, a country may enter into a free trade agreement with other countries, which can help to establish a more stable and predictable trade environment. Similarly, a country may join an international organization such as the International Monetary Fund (IMF) or the World Trade Organization (WTO), which can provide access to financial assistance and help to promote economic stability.

International legal commitments can also help to build credibility and establish a track record of following through on agreements. This can attract investment and promote economic development.

Mexico's experience in the 1980s and 1990s provides an example of how international legal commitments can help to promote economic stability and development. In 1982, Mexico faced a debt crisis and was forced to seek financial assistance from the International Monetary Fund (IMF) and other organizations. As part of the assistance package, Mexico agreed to implement economic reforms, including liberalization of trade and investment policies.

In 1986, Mexico acceded to the General Agreement on Tariffs and Trade (GATT), the predecessor to the World Trade Organization (WTO). This helped to further open up Mexico's economy to international trade and investment.

In the 1990s, Mexico implemented additional liberalization reforms and entered into the North American Free Trade Agreement (NAFTA) with the United States and Canada. These agreements helped to "lock in" the reforms that Mexico had implemented, providing a more stable and predictable environment for investment.

Like Mexico, Thailand also experienced economic challenges in the 1990s and turned to international legal commitments to promote stability and development. However, in 1997, Thailand was hit by the Asian financial crisis, which resulted in a devaluation of the Thai baht and a sharp economic downturn.

In response to the crisis, Thailand implemented a series of economic reforms, including liberalization of trade and investment policies. The country also entered into several free trade agreements (FTAs), including with Australia, New Zealand, and Japan. These agreements helped open Thailand's economy to international trade and investment and provided a more stable and predictable environment for business.

Thailand's experience shows how international legal commitments can help to promote economic stability and development, even in the face of economic challenges.

Risks for investors and solutions[modifier | modifier le wikicode]

Expropriation and Clauses Protecting Property Rights
Expropriation Clauses Protecting Property Rights
Regulatory taking (regulations depriving owners of effective property rights) Clauses on regulatory transparency and non-discrimination for foreign investors
Local content requirement; employment of local labor; minimum export Clauses protecting property rights
Economic instability Create stake in host's economy for home country
Trade barriers Lock in zero tariffs of host country
Loss of export markets Lock in zero tariffs of home country

The table lists various factors that can potentially lead to expropriation of private property, along with clauses that may be included in laws or agreements to protect property rights in the event of expropriation.

The first row of the table, "regulatory taking (regulations depriving owners of effective property rights)," refers to a situation where the government imposes regulations that effectively deprive the owner of the ability to use their property in a meaningful way. This could potentially be considered a form of expropriation, even if the government does not physically take the property.

The second row, "local content requirement; employment of local labour; minimum export," refers to situations where the government imposes requirements related to the use of local materials, labour, or exports as a condition for doing business in the country. These requirements could potentially impact the ability of foreign investors to use their property in the way that they had intended, and may be considered a form of expropriation.

The third row, "economic instability," refers to situations where property value is adversely impacted by economic conditions such as high inflation or currency devaluation. In such situations, the property owner may suffer a financial loss that could be considered a form of expropriation.

The fourth row, "trade barriers," refers to situations where the government imposes barriers to trade that negatively impact the value of property. These barriers could include tariffs, quotas, or other restrictions on importing or exporting goods and services.

The fifth row, "loss of export markets," refers to situations where the owner of property loses access to export markets due to changes in government policies or economic conditions. This could potentially impact the property's value and be considered a form of expropriation.

PTAs and economic reforms[modifier | modifier le wikicode]

It is generally thought that economic reforms, particularly those that lead to liberalization and openness, are often accompanied by democratization. This is because liberal economic policies can lead to increased prosperity, and as people become wealthier, they may demand more say in how their countries are run. In addition, political liberalization and democratization can also be driven by trade agreements such as Preferential Trade Agreements (PTAs), which can lead to increased trade and economic integration between countries. This increased integration can create pressure for countries to adopt more open and democratic political systems to participate better in the global economy.

It is common for leaders of newly democratic states to face domestic opposition when attempting to implement economic reforms, particularly if those reforms are perceived as benefiting certain groups more than others. For example, some potential losers of economic reforms may be vested interests, such as powerful businesses or political elites who stand to lose from increased competition or reduced subsidies. Others may be ordinary citizens who stand to lose from changes to social welfare programs or reductions in protections for certain industries. It can be difficult for leaders of newly democratic states to navigate these competing interests and push through reforms, especially if they do not have a strong mandate from voters or face challenges to their legitimacy. In some cases, leaders may need to make concessions or seek to build broad-based coalitions in order to garner support for their reform agendas.

International agreements can sometimes help mobilise potential economic reform winners and suppress or compensate potential losers. By creating legal commitments, international agreements can provide a level of certainty and stability that can help to encourage investment and trade. This can be particularly beneficial for businesses that stand to gain from economic reforms, as it can provide them with the confidence they need to make long-term investments. At the same time, international agreements can also help address potential losers' concerns by providing compensation or other forms of support. For example, trade agreements often include provisions for technical assistance or capacity building to help industries and workers adapt to increased competition. Such measures can help to mitigate the negative impacts of economic reforms and make them more politically palatable.

PTAs and political risk[modifier | modifier le wikicode]

Preferential Trade Agreements (PTAs) can potentially create political risk for the countries involved. This risk can arise from a variety of sources, such as changes to domestic policies or regulations that are required to comply with the terms of the PTA, or from the potential for domestic industries or workers to be negatively affected by increased competition or changes in the allocation of resources. Political risk can also arise from the possibility that the terms of the PTA may not be fully implemented or that one or more parties to the agreement may not live up to their commitments. This can create uncertainty and instability that can deter investment and trade. Therefore, it is important for countries entering into PTAs to assess the potential political risks carefully and to take steps to mitigate them where possible. This may involve engaging in extensive domestic consultations, providing support to affected industries or workers, or seeking to negotiate more favourable terms in the agreement.

There is evidence that the design of Preferential Trade Agreements (PTAs) can affect both political risk and foreign direct investment (FDI) flows. Some researchers have found that PTAs that are more comprehensive and cover a wider range of issues are associated with lower political risk and higher FDI flows. This may be because more comprehensive PTAs create greater certainty and stability, which can encourage investment and trade. On the other hand, PTAs that are more narrow in scope or do not address key concerns of potential investors may be perceived as less reliable and may be associated with higher political risk and lower FDI flows. It is also worth noting that other factors, such as the overall business climate and economic conditions in the countries involved, can significantly impact FDI flows and political risk.

It is generally thought that Preferential Trade Agreements (PTAs) can provide commitment and enforcement mechanisms that domestic reforms may not. By creating legally binding commitments, PTAs can ensure that countries follow through on their reform commitments and provide a mechanism for addressing disputes or non-compliance. This can create greater certainty and stability, which can be attractive to investors and businesses. On the other hand, domestic reforms may be less reliable and more vulnerable to reversal or modification, especially in the absence of strong institutional frameworks or broad-based support. PTAs can provide an additional layer of protection for economic reforms and help create a more predictable and stable investment environment.

Evidence suggests that Preferential Trade Agreements (PTAs) with stronger investment clauses may be associated with greater foreign direct investment (FDI) inflows. Investment clauses in PTAs often provide protections for foreign investors, such as guarantees of fair and equitable treatment, protection against expropriation, and access to international arbitration. These provisions help create a more predictable and stable investment environment, which can attract investors. At the same time, it is also important to consider the institutional diversity of the countries involved in the PTA. Countries with strong institutions, such as well-developed legal frameworks and effective regulatory systems, may be more attractive to investors and more able to implement the terms of the PTA effectively. As such, institutional diversity may be an important factor in determining the impact of PTAs on FDI inflows.

EU acquis as seal of approval[modifier | modifier le wikicode]

The EU acquis, which refers to the body of European Union (EU) laws and regulations that member states must adopt, can be seen as a seal of approval for domestic economic policy reforms. By closing negotiation chapters on domestic economic policy, the EU approves the reforms that an accession country has implemented. This can have several benefits for the accession country, including decreasing perceptions of default risk. Default risk is the risk that a country cannot meet its financial obligations, which can be a significant concern for investors. By receiving a seal of approval from the EU, accession countries may be perceived as being more creditworthy and may therefore be able to attract more investment. This decrease in default risk may operate independently from the specific policy reforms implemented, as the EU acquis is a broad set of rules and standards covering a wide range of areas.

The EU acquis, or the body of European Union (EU) laws and regulations that member states must adopt, can signal a decrease in investment risk and stimulate the inflow of capital. By adopting the EU acquis, accession countries are demonstrating their commitment to a stable and predictable investment environment, which can attract investors. The EU acquis covers a wide range of areas, including market access, competition policy, and state aid, and is designed to create a level playing field and ensure that all member states adhere to the same standards. As such, it can give investors confidence that their investments will be protected and treated fairly. The EU acquis can also provide access to the EU single market, one of the largest and most integrated markets in the world. It can therefore offer significant opportunities for investment and trade. Overall, the EU acquis signals to investors that an accession country is committed to creating a stable and supportive business environment, which can stimulate the inflow of capital.

Conclusion[modifier | modifier le wikicode]

Several challenges are associated with using regionalism as an alternative to multilateralism in the World Trade Organization (WTO) system. One challenge is that regional trade agreements (RTAs) can be partial and discriminatory, as they often exclude some countries or sectors and may provide preferential treatment to certain partners. This can create a divide between countries included in RTAs and those not, leading to a fragmentation of the global trading system. In addition, RTAs can also have both trade-creating and trade-diverting effects. On the one hand, they can facilitate trade between participating countries by reducing barriers and creating a more seamless market. However, on the other hand, they can also divert trade away from non-participating countries by creating preferential access for participating countries. This can create a competitive disadvantage for non-participating countries and potentially lead to a reduction in their exports. Overall, the use of regionalism as an alternative to multilateralism in the WTO system can pose several challenges and may require careful management to maximize the benefits and minimize the negative impacts.

There is a concern that the pressure to attract investment can lead to a race to the bottom regarding regulatory standards, as countries may feel the need to lower their standards to compete with each other. This can result in lowering the common denominator of standards as countries seek to differentiate themselves and attract investment. Such a race to the bottom can threaten national standards and regulatory traditions, as countries may feel pressure to abandon or weaken their own standards to remain competitive. Therefore, countries must strike a balance between attracting investment and maintaining appropriate levels of regulation to protect the public interest and preserve the integrity of their regulatory systems. In some cases, it may be necessary to adopt international standards or coordinate with other countries to ensure that regulatory standards are maintained.

There is a concern that the competition among developing countries to attract foreign direct investment (FDI) can lead to asymmetrical bargains, in which some countries can secure more favourable terms and conditions than others. This can be especially problematic for smaller or less developed countries, which may have less bargaining power and be more reliant on FDI. Asymmetrical bargains can also negatively affect South-South integration, as countries may prioritize their own interests over regional or global cooperation. This can lead to a fragmentation of the developing world and can undermine efforts to build stronger economic and political ties between developing countries. It is, therefore, important for developing countries to carefully consider the terms and conditions of FDI agreements and to ensure that they can negotiate mutually beneficial arrangements that take into account the interests of all stakeholders.

Annexes[modifier | modifier le wikicode]