Undermining the WTO? The Rise of Preferential Trading Arrangements

Vinod K. Aggarwal

Building a Northeast Asian Community, Volume II, 2006

In the post-World War II era until the early 1990s, the General Agreement on Tariffs and Trade (GATT) remained the primary approach to trade liberalization, with the most significant exception being the formation and evolution of a customs union in Europe. By contrast, trade protection has taken a variety of forms, with unilateral, bilateral, minilateral, and multilateral restrictions both on a sector specific and multiproduct basis. My objective in this paper is to look at the new trend toward preferential liberalizing trading arrangements around the globe. To this end, Section II of this paper begins by more systematically categorizing the different types of arrangements that have increasingly populated the trade landscape. The objective of this exercise is both conceptual and empirical. From a conceptual standpoint, I argue that a more detailed specification of different types of trade accords helps us to clarify what we are seeking to explain. From an empirical standpoint, the categorization allows us to understand the origins and evolution of different types of arrangements. Section III of the paper then presents an institutional bargaining game approach to examine the evolution of trade arrangements. In Section IV, I explore how this approach might help us to understand the implications of the rise of preferential trading arrangements in both Northeast Asia and on East Asia and these might link up to Europe and the United States through ASEM and APEC, respectively. I conclude in Section V with an assessment of the implication of the rise of preferential agreements.

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