Opposition to Proliferation of Preferential Trade is Welcome

From Professor Jagdish Bhagwati and Professor Arvind Panagariya:

  Sir, The article by Stephen Fidler and Nancy Dunn on “Slow Track to Latin Market” (May 5) presumes that the move to hemispheric free trade in Latin America by 2005 is obviously desirable and cites only those who share that view and lament the lack of progress towards that goal because of divisions over the renewal of fast track authority for trade initiatives in Congress.

            But this presents a one-sided view of the matter.  By now, there are many serious scholars of trade, all free traders, who openly question whether such regional trade agreements, which are inherently discriminatory, are desirable in the first place.  For the many among us who oppose the further proliferation of preferential trade arrangements such as free trade agreements (FTAs), the refusal by the Asian members of the Pacific Economic Cooperation so far to convert it into an FTA, and the transformation of the original transatlantic Tafta proposal into a non-FTA, non-discriminatory initiative, have therefore been welcome developments.

            And so is the slowing down of the progress of the goal of FTAA (an FTA of the Americas), the last of the “big” FAT initiatives still remaining on the political agenda.  Even if this is largely because of the divisions among Democrats and Republicans over the issue of the linkage of trade treaties with labour and environmental demands, we are grateful for dividends from unexpected sources.

            In fact, this provides an opportunity for Washington, and indeed the South American governments, to re-think the issue and to convert the original goal of free trade only for the Americas inot a co-operative regional agreement instead that (like Apec) is not an FTA, and simultaneously to pressure trade liberalization multilaterally, on a most favored nation basis, at the World Trade Organization.  That is the model, also of President Kennedy’s celebrated, but premature, Alliance for Progress for South America; it pursued regionalism and objectives such as security and support of democracy without sacrificing non-discriminatory trade.

Financial Times, May 8 1997