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Over the last several decades, governments have collectively pledged to slow global warming. But despite intensified diplomacy, the world is already facing the consequences of climate…
Termites in the Trading System
How Preferential Agreements Undermine Free Trade
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- Foreign policy analyses written by CFR fellows and published by the trade presses, academic presses, or the Council on Foreign Relations Press.
In his new book, Termites in the Trading System: How Preferential Agreements Undermine Free Trade, CFR Senior Fellow for International Economics Jagdish Bhagwati argues that so-called free trade agreements (FTAs), which he maintains are in fact preferential trade agreements (PTAs) involving two or more countries, actually set back the cause of free trade and undermine the multilateral trading system.
He writes that FTAs make global multilateral agreements more, not less, difficult. "The current tide of preferences has been a result of politicians mistakenly, and in an uncoordinated fashion, pursuing free trade agreements because they think (erroneously) that they are pursuing a free trade agenda."
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Bhagwati makes the case against PTAs for several reasons, including:
- PTAs undermine multilateral trade negotiations such as the Doha Round and divert diplomats and negotiators away from attention to the World Trade Organization.
- Because every country negotiates different trading terms in each particular PTA with every other different country, each with their own loopholes, exceptions, and particular regulations, this collectively turns world trade into an indecipherable mess. "Crisscrossing PTAs, where a nation has multiple PTAs with other nations, each of which then had its own PTAs with yet other nations, was inevitable. Indeed, if one only mapped the phenomenon, it would remind one of a child scrawling a number of chaotic lines on a sketch pad…[or a] spaghetti bowl…"
Bhagwati proposes that the Doha Round be completed expeditiously and U.S. trade policy be redirected from proliferating FTAs. "Preferential trade agreements have slowed down our progress on the multilateral freeing of trade, as with the Doha Round. The Doha Round's success is essential to strengthening the multilateral trading system, which is beneficial to all."
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In the News
A Second-Best ChoiceThe Economist
Afta Doha: Should free traders applaud the rise of preferential trade deals?The Economist