June 7, 2000 | News Releases on Foreign Aid and Development

Benefits Seen In Regional Trade Pacts

WASHINGTON, June 7, 2000-The United States should encourage regional trade agreements, even ones it isn't party to, because they let nations liberalize their economies at their own pace, experiment with customized structures and timetables that might be impossible through the World Trade Organization, and ultimately promote freer trade worldwide, a new Heritage Foundation paper says.

Indeed, country-to-country pacts can also lead to multilateral agreements that might otherwise never occur, writes Franklin Lavin, a former official with the U.S. Department of Commerce. The second in Heritage's new "Economic Freedom Project" series, Lavin's paper examines the main objections to bilateral agreements and says they rest more on theory than real-world experience.

In their zeal to promote global free trade, some economists claim that regional trade agreements detract from the broader deals brokered by the WTO. Some even say such bilateral pacts create a type of regional "country club" that discriminates against other nations. But there is little evidence to support this all-or-nothing approach to trade, Lavin says.

Regional pacts can be a good first step for nations that aren't ready for global free trade, Lavin says. "They train the government bureaucracies to recognize that liberalization is healthy," he writes. "They show the general public that increased trade is an economic good."

Still, regional pacts need some ground rules, Lavin says. For example, they should take all comers and not unfairly exclude other nations once a deal has been struck. They should close loopholes that allow non-member nations to "transship" their goods through the member country with the lowest external tariff. And new members should be admitted on an equal footing and receive all the rights and privileges enjoyed by current members.

About the Author

Related Issues: Foreign Aid and Development