Global Policy Forum

By Shalini Mundra-Rathi

Regional trade agreements, such as the North America Free Trade Agreement, could serve as a stepping stone towards multilateral trade agreements such as those in the World Trade Organization (WTO), according to top UN officials on trade. The merits of regional trade were discussed during the 47th session of the Trade and Development Board, which meets annually in Geneva to review the United Nations Conference on Trade and Development's (UNCTAD) work and to examine global economic trends from a trade and development perspective.

"Ever since Seattle, there has been an increased trend to view regionalism as an alternative, and no longer as a complement, to the multilateral trading system," said UNCTAD Secretary General Rubens Ricupero. "But regionalism is the only path available for many developing countries to integrate into the world economy." He added, urging that "the best way to learn to compete is by competing. Initially competition should be between neighboring states that understand the needs of weaker states."

Inadequate national capacity to produce and sell on world markets was the real reason for the increasing importance of regionalism, said Tanzania's Minister for Industry and Trade, Iddi Simba. He argued that Tanzania, like other African countries, had succumbed too quickly to pressures for opening their markets without making the corresponding adjustments to domestic production.

"For weak economies," he said. "The pooling of regional resources such as land, livestock and agricultural products and development of intraregional trade was the only practical method for building the required capacity. We are not opposed to multilateralism, and we follow the WTO rules to the extent that we can," Simba added. "But we cannot be reliable members of the organization if we are unable to produce and sell."

Speaking on behalf of the Southern African Development Community (SADC), whose Trade Committee he chairs, he said that a higher level of cooperation would enable countries in the region to cope with development problems and with a complex business environment. The restructuring of productive sectors would be more feasible on a regional than on a national basis. At the same time, however, countries needed to address disparities in the performance of individual States as the only way of fulfilling the principle of equity, which was the basis for regionalism.

WTO Director General Mike Moore took a more cautious approach, observing that, while regionalism had much to contribute, it was not an easy substitute for multilateralism. In some instances, regional trading arrangements could even "impede or divert, rather than promote, trade," he warned. Drawbacks included the heavy administrative burdens of membership in several regional forums and the potential for malpractice and corruption.

Regional forums could enhance dialogue and coordination on macroeconomic policy by working with market forces to promote regional trade and investment liberalization, argued China's Vice Minister of Trade, Long Yongtu. In China's case, there were many obstacles to accession to the WTO, and 80 percent of its trade and investment activities were conducted with the other members of the Asia-Pacific Economic Cooperation forum (APEC). China nonetheless values WTO accession because "economic globalization must emphasize the multilateral trading system" and because "in this global economy, we need just one set of rules," he said.

The European Union (EU) also believes that regionalism and multilateralism are complementary notions that reinforce each other as long as regionalism is open. "There is no contradiction between greater regional integration and fully taking part in global trade liberalization," said Carlo Trojan of the European Commission. However, Trojan disagreed with concerns that regional groupings were obstacles to progress in multilateral trade liberalization. He argued that contractual trade relations between neighboring countries, strengthened political ties and exchanges between civil society could all bolster the multilateral process and reinforce political stability. He added that, in order for regional economic integration to be a useful tool in economic development, it must not be used as an excuse for protectionism.

FAIR USE NOTICE: This page contains copyrighted material the use of which has not been specifically authorized by the copyright owner. Global Policy Forum distributes this material without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. We believe this constitutes a fair use of any such copyrighted material as provided for in 17 U.S.C íŸ 107. If you wish to use copyrighted material from this site for purposes of your own that go beyond fair use, you must obtain permission from the copyright owner.