18 - The TPP

Summary

A proliferation of preferential trade agreements (PTAs) has been the dominant trend in international trade arrangements since the conclusion of the Uruguay Round (World Trade Organization, 2011a). The expansion in the number of PTAs and the growing share of global trade they cover has caused increasing disquiet among many trade policy officials and academics. The principal anxieties are summarized succinctly in the words of Pascal Lamy, Director-General of the World Trade Organization (WTO): “Proliferation is breeding concern – concern about incoherence, confusion, unnecessary business costs, instability, and unpredictability in trade relations” (Lamy, 2009).

Although the WTO itself notes that the evidence of the effects of PTAs on the global trading system are far from being unambiguously negative (World Trade Organization, 2011c), the explosion of preferential agreements raises two principal sets of issues. The first is that PTAs at best distract from liberalization at the global level; at worst, the existence of preferences may hinder or complicate moves towards multilateral liberalization. Second, multiple preferential agreements, with their associated rules of origin, complicate the task of managing global supply chains and have the potential to generate economic inefficiencies; for further discussion see Baldwin (2009).