Introduction — Why Regional Trade Agreements (RTAs)

It is a seeming paradox that along with the accelerated trend towards globalization over the last two decades, there has also been a new wave of regionalism. In the decade since 1996 alone, when the WTO agreement was signed, almost a hundred regional agreements have been negotiated. Several explanations have been offered for this trend. None of them is complete in itself but, together, they form a fairly convincing body of opinion about the usefulness of regionalism. Simply put, if so many countries are embracing it, there must be something to regionalism, whatever its critics may say.

We have already discussed the political, institutional and security aspects of regionalism. Here we discuss its economic aspect. We also discuss which drives which: political and security aspects the economic or the other way around. Opinion is divided on this and it is hard to arrive at a firm judgement. But there is one thing that can be said with certainty: regionalism is here to stay as much as globalization is.

It might even be argued that regionalism is on the increase because of increasing globalization. It is, if you will, a form of defence against globalization. In that sense, the only issue, as in the case of globalization, is of managing it. We should note, though, that while in the case of globalization, managing has connotation of containing or slowing down, in the case of regionalism, it is the opposite. This is inherent in the defensive use of regionalism.

To the extent that the perceived threat from globalization is mainly economic, preferential trade arrangements (PTAs) are the pillars on which regionalism rests. The essence of these, as the name suggests, is to treat some countries on a preferential basis so that they can help each other in the face of the “threat” from global capital. Multilateralism or globalism, on the other hand, often ignoring politics, takes a dim view of such preferences. It believes in the equal treatment for all countries.