Abstract
Regional Trading Agreements in the global trading system is gaining prominence with every passing day. The Regional Trading Agreements are proving to be “parallel” regimes for trading. Initially these agreements were expected to enhance the liberalization process regionally. This in turn would facilitate the liberalization process multilaterally. Lowering the tariffs was mainly on the agenda but later it was discovered that the agreements were far more than just tariff oriented.As per the norms of the GATT or General Agreements on Tariffs and Trade and WTO or World Trade Organization, every country is required to treat another country and not discriminate any country on the basis of some parameters. These parameters may include trade barriers or extending treatment to any other country or tariffs. Irrespective of the fact whether a country is rich or poor, powerful or weak, the same treatment has to be extended. The MFN or the Most Favored Nation principle was adopted by the WTO for implementing the same. It was stated that there would be no deviation from this policy framed as per norms of the WTO.
Deviations from principles of WTO and GATT:
However, there may be deviations from this norm. This principle is said to be violated when two or more number of nations extend “preferential treatment” to the products of these countries. This deviation from the MFN or Most Favored Nation principle leads to the implementation of the RTA or the Regional Trading Agreements. This is also referred to as the Preferential Trading Agreements or PTAs.It has been observed that currently there are several nations who have moved away from the MFN principles and opted for the RTAs or the PTAs. This is indicative of the fact that the Regional Trading Agreements in the global trading system are gaining prominence.
In fact reports reveal that more than 50% of the global trade takes place through RTAs and PTAs.
Reasons for supporting the implementation of Regional Trade Agreements in the global trading system: Several eyebrows were raised when it was found that more and more nations were opting for RTAs and PTAs, opposed by GATT and WTO norms. The reason why the RTAs and the PTAs were backed was that experts were of the opinion that these agreements would serve as a tool for encouraging multilateral ism. It was also felt that if the individual nations hastened the liberalization process regionally then it would hasten the process multilaterally also. This could be achieved by making the tariffs low. It has been observed that global trade is no longer “tariff-centric”. The nations deal with issues, which cover various other areas of global trade. It has been observed that the RTAs or the Regional Trading Agreements contain more stringent norms than the norms framed by World Trade Organization and General Agreements on Tariffs and Trade. Therefore, it is being observed that the Regional Trading Agreements in the global trading system are behaving as “parallel trading regime” instead of fostering Multilateralism among nations.
