Proliferation of regional trade agreements “breeding concern” — Lamy

"Good morning. I would like to welcome you to this two-and-a-half day conference, jointly organized by the WTO Secretariat and our near neighbours, the Graduate Institute of International Studies. I would particularly like to welcome Philippe Burrin, Director of the Institute, who will say a few words in a minute, and Professor Richard Baldwin, who has played a very large role in realizing this event. Last and by no means least, I should like to thank all those who have made financial and contributions to the conference. I believe this conference has the makings of a very interesting event and am pleased to be able to participate.

We hear so much about regionalism these days, which is hardly surprising, considering that well over 200 of these agreements are operating and dozens more are in the making. There has been a veritable flurry of negotiating activity around regional trade deals in the last several years. And there has also been a vast quantity of recent writing on the subject, including last weeks UNCTAD annual report.

One might well ask what yet another conference on this subject can add. My answer to this is that I believe this conference is asking a number of questions that have not previously been addressed, notwithstanding the proliferation of scholarly literature.

We are not really asking here why so many regional agreements have sprung up — that question has dominated many a debate, and many interesting explanations have been offered. Rather, this conference looks forward and asks questions about how policymakers, traders and businesses think about, and react to, the explosion of regionalism.

Are we in a world where preferential agreements will continue to multiply, eventually reaching some high number after which we will find ourselves in a kind of stable equilibrium? I believe most people think not. I think that it would be fair to say that proliferation is breeding concern — concern about incoherence, confusion, exponential increase of costs for business, unpredictability and even unfairness in trade relations.

I do not wish to be misunderstood. I am certainly not saying that regionalism is all bad. On the contrary, I believe many regional initiatives have made important contributions to economic welfare and doubtless to political stability as well. What I am talking about is the downside of an exponential expansion in RTAs. Where is the proliferation leading us in terms of trade and international economic relations more generally? Do we need to rethink our approach a bit to trade cooperation?

A key idea underlying this conference is that the tangle of overlapping trade agreements will increasingly generate an interest in multilateralizing regional arrangements, in expanding them — or in other words, collapsing them into larger entities that bring us much closer to a multilateral system of trade arrangements. The question, then, is what forces and interests might push trade relations in a multilateralizing direction.

And what forces and interests might push in the contrary direction — where the discrimination inherent in regional arrangements is viewed favourably by interest groups that benefit from it? If the latter interests prevail, we may expect continuing pressure upon governments to establish more RTAs, or at the very least to defend existing ones against greater inclusiveness. I hope this conference will throw further light on these fascinating issues.

As I have already suggested, I find the debate about whether regionalism is a good or bad thing sterile. This is not the point. We need to look at the manner in which RTAs operate, and what effects they have on trade opening and on the creation of new economic opportunities. This is as much true for North-South regional trade agreements as it is for South-South ones. We also need to reflect on whether regionalism is causing harm to multilaterally-based trading relationships. We know there are many different kinds of agreements and much will depend on their design and intent. These self-same questions will also be relevant when we consider the prospects for multilateralizing regionalism.

We often think and talk about how regionalism might be hurting multilateralism, either by bolstering discriminatory interests, or perhaps by fostering an anti-trade-openness posture, if regionalism is seen as a way of building protectionist structures behind enlarged closed markets. We also might worry about how focusing on building up the stock of RTAs might distract attention from multilateral processes.

But in ending what I would like to do is turn the question around. I would like to ask what the WTO might do to help avoid a situation in which these negative aspects of regional agreements prevail, and ultimately to promote multilateralization.

Top of my list, you will not be surprised to hear, would be for us to bring the Doha Round to closure. A successful Doha Round would help to refocus governments' attention on their broader global trade interests. It would also further reduce the scope for discriminatory trade policy, not to mention all the other benefits from trade cooperation that induce governments to enter into these kinds of negotiations.

Secondly, I think the decision to fast-track the transparency decision negotiated in the Doha Round and make it operational on a provisional basis is a significant potential contribution to helping us understand what really is going on in so many different RTAs. I also think that the decision to move ahead with the transparency mechanism reflects what I was saying earlier about a growing level of concern regarding the consequences of RTA proliferation.

Thirdly, we should not forget that we have a negotiating mandate under Doha to look at the WTO rules governing regionalism. Now I know we have been doing this for a long time in different contexts and to very little effect, so my argument here would be that if we are concerned about the impact of burgeoning regionalism we should redouble our efforts here as well.

My final point is a derivative of the last one. I think it would be useful to look systematically at the characteristics and design of RTAs not only in terms of legal compliance questions, but also in terms of whether their architecture is more or less likely to foster multilateralization in the future. Perhaps we could think in terms of best practices in this regard.

I wish you every success with the conference over the next two days and look forward to participating in the closing discussion panel on Wednesday morning. Thank you very much."
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