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Nov 16, 2009

IDB study provides roadmap for promoting convergence among regional trade agreements

New book identifies common features that could help countries use regional trade agreements to foster further integration

The Inter-American Development Bank (IDB) is publishing today a new book that offers countries a roadmap to use their existing regional trade agreements to foster greater integration and trade liberalization.

The book Bridging Regional Trade Agreements in the Americas reveals that liberalization in the regional agreements is similarly sequenced, and that these accords share common regulations in areas such as rules of origin, investment, services, customs procedures, and competition policy rules.

The study comes as policymakers are increasingly concerned about the proliferation of regional trade agreements (RTAs) as the world prepares for another Doha trade talks in December. RTAs could lead to excessive and overlapping rules, hurting the world’s ultimate goal to increase trade and investments. At the regional level, the issue was in the agenda of APEC leaders in Singapore last week and it will be discussed next week in Mexico during the Trade Ministerial of the ARCO of the Pacific Initiative.

Some 200 deals have been notified to the World Trade Organization (WTO), and many more are under negotiation. Practically all countries around the world belong to a free trade agreement, and several countries in the Americas such as Chile, Mexico or Peru among others have inked numerous deals, often across oceans.

“The study identifies common features among these deals that could serve as the starting points for connecting the agreements together,’’ said Antoni Estevadeordal, head of the IDB’s integration and Trade Department and one of the authors of the book.  “It is vital for countries to foster convergence of such agreements because it can make their companies more competitive in the global market.”

The study includes the results of an IDB survey where Latin American companies say they could significantly cut trade-related costs from such “convergence”. For example, in Colombia, 54 percent of small and medium-sized firms and 34 percent for larger firms report that cost-savings from connecting the various FTAs would be “high” or “very high”. In Mexico, the figures are 50 percent SMEs and 52 percent for large firms, and in Panama 73 percent and 67 percent, respectively.

The IDB’s latest book complements the findings of another book the Bank produced in collaboration with the WTO earlier this year. The book Regional Rules in the Global Trading System said, despite some protectionist measures in certain sensitive sectors,   regional trade agreements are deeply liberalizing, freeing more than 90 percent of the traded products by the tenth year they are implemented. 

IDB economists Estevadeordal, Kati Suominen, Jeremy Harris and Matthew Shearer are the authors of Bridging Regional Trade Agreements in the Americas, which has been published by the IDB. Estevadeordal and Suominen together with Robert Teh are the editors of the book Regional Rules in the Global Trading System. This book, a joint IDB and WTO publication, has been published by Cambridge University Press.

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