Regional Trade Agreements Vs. Multilateral Trading System

Ideally, multilateralism is the best strategy for actually liberalizing trade. But the WTO`s Doha Round has stalled and a small economy like Australia may lack the strength to move the talks forward wisely. In particular, agreements should help to make trade between ATR countries freer without barriers to trade with the outside world. In other words, regional integration should complement, not threaten, the multilateral trading system. There are many ways for governments to advance free trade; Trade liberalization can be negotiated through multilateral, bilateral or regional mechanisms. Each strategy has a mix of benefits and costs. Australia participates in two regional trade agreements currently being negotiated in Asia: the US-led TPP and the RCEP, which targets ASEAN. Regional free trade agreements are the third option. Halfway between multilateralism and bilateralism, they are linked to a group of countries within a geographic region negotiating a free trade area.

The main appeal of bilateral free trade agreements is their ease; With only two parties, agreements can be negotiated effectively. But as a quick and simple option, they often fall short of promoting true free trade. THE WTO agreements recognize that ATRs can benefit countries as long as their objective is to facilitate trade between their contracting parties. They also recognize that, in certain circumstances, these agreements could harm the commercial interests of other countries. Normally, the creation of a customs union or free trade area would be contrary to the principle of non-discrimination of all WTO members (“the most favoured nation”). However, Article 24 of the General Agreement on Tariffs and Trade (GATT), Article 5 of the General Agreement on Trade in Services (GATS) and the Enabling Clause (paragraph 2, point c) allow WTO members to enter into ATRs as a specific exception, provided that certain strict criteria are met. Bilateral free trade agreements became popular in the early 2000s. The Howard government has launched free trade agreements with eight trading partners, three of which were concluded during its mandate. It has also begun bilateral trade negotiations with five of its major economic partners, China, Japan, Korea, Indonesia and India.

It is a very busy trade policy agenda, characterized by complex, overlapping – and sometimes competitive – initiatives. Given the limited bureaucratic and diplomatic resources, it would be both difficult and undesirable to allocate efforts equitably among all proposals. The Abbott government has again issued and promised to restart talks with Japan and Korea and conclude a free trade agreement with China within 12 months. Important but sensitive trade issues (for example. (B) agriculture and services are often excluded from bilateral free trade agreements and very few are primarily concerned with trade-related measures. With the WTO deadlocked, attention is focused on bilateral free trade agreements. These agreements, which were virtually unheard of before the mid-1990s, have grown exponentially over the past decade as governments attempt to deepen trade relations with important economic partners. Whether it is bilateral trade pacts, major unions or continental trade agreements, all WTO members will have some kind of regional trade agreement in force from June 2016.

Historically, multilateralism has been the dominant approach embodied in the World Trade Organization. The WTO currently has 159 members who exchange tariff preferences in accordance with the non-discriminatory principle of the “most favoured nation”. But putting the commercial farm on the TPP would be a high-risk strategy for the Australian government. Negotiations are still in their infancy and, as a small player, Australia may not be in a