Volume 35 (2008) / Issue 2
Despite the proliferation of regional trade agreements between nations today,academics & policy makers alike have yet to fully understand what aims trading nations have when they pursue free trade agreements. This paper provides an explanation that an RTA is a contract through which RTA partners agree to a reciprocal exchange of preferential market access. Trading nations pursue RTAs to avoid exclusionary effects on non–members by securing reciprocal market access with RTA partners. The reciprocal nature of RTA tariff negotiations contrasts with the multilateral tariff elimination agreement under the GATT, where the notion of reciprocity is ambiguous. The mercantilist nature of RTA negotiations & the resulting RTAs reduce the chance of a successful multilateral tariff reduction round under the WTO as the exclusionary effects of existing RTAs provide further incentives for non–parties to form new RTAs.
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