WTO vs Free Trade Agreements

International trade is an important force for supporting economic growth. Expansion of trade among countries need supportive laws and consensus. Here, the concept of multilateral trading system become important. A multilateral trading system is the one where each country – small to the big is getting equal and fair treatment in conducting international trade.

The present multilateral trading system is led by WTO and its rules and administrative guidelines regulates international trade. At the same time, powerful trade blocs or Regional Trade Blocs are emerging across the world. We are witnessing mushrooming of Regional Trade Blocs (RTBs) and Several powerful RTBs like the EU, APEC and the proposed TPP etc are making conflicting trade laws vis a vis the WTO. In this sense, the RTBs are in conflict with WTO.

Regional Trade Blocs extending from Free Trade Agreements to Economic Unions are attempts for promotion of free trade and economic integration. But they are promoting free trade within a region only. They discriminate against the rest of the world while promoting free trade within. On the other hand, WTO stands for global free trade. RTBs stands for regionalism whereas the WTO stands for multilateralism.

Most of the advanced countries would like to make higher trade liberalization and they see WTO less fit to fulfill their ambitions. This is why the developed countries are engaging in RTB formulation. Since most of the members of the RTBs are big advanced countries, the WTO itself is compelled to tolerate the conflicting approach of the RTB.

The emerging world trade order thus indicate conflict between the RTBs which practice regionalism and the WTO which propagates multilateralism

In the last two decades, two important developments have provided a setback for the WTO led Multilateral Trading System.

(i) Failure of the WTO members to give a conclusion to the Doha as well as to go ahead with trade enhancing measures by accommodating each other’s interest.

(ii) Rise of RTBs as serious trade liberalization forum

The risk that the present booming of RTBs pose to the WTO led multilateralism is that the latter may just fade away if key countries are highly engaged in regionalism.