WHY DO COUNTRIES FORM REGIONAL TRADE AGREEMENTS – INSIGHTS FROM THE LITERATURE

B.P. SARATH CHANDRAN

Abstract


The world trading system witnessed rapid rise in the formation ofRegional Trade Agreements (RTAs)particularly in the post WTO period. Despite large number of studies conducted on this area by the trade economists, there are divergent views on the outcome of RTAs on world trade as well as there is no unanimity on the desirable mechanism of trade liberalization. The paper looks in to various theoretical arguments and empirical explanations that supports or opposes RTAs. Careful review of the studies identified the underlying conditions that are required for the successful functioning of the RTAs.Even though regionalism is discriminatory in nature, it enjoys as a preferred method of trade liberalisation among nations as it provides immediate results to the trade policy initiatives. The paper concludes that for the successful functioning of the RTAs it should be carefully calibrated by identifying trade creating partners and accommodating the interests of the local stakeholders. Also successful regional cooperation agreements should stimulate multilateral initiatives.

Keywords


Regionalism, Free Trade Agreements, Multilateralism, WTO

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