Asymmetric Regional Trade Agreements

The most obvious examples of asymmetric RTA are the north-south bilateral agreements between the United States, the EU and Japan, as well as China`s bilateral free trade zones (FTAs). Under these agreements, the dominant partners have good reason to expect a number of additional benefits. First, the limited number of parties to the negotiations allows heads of state and government to achieve more than they can hope for in the Doha Round, where the countries of the South tend to coordinate their positions and form coalitions. Second, dominant partners benefit from additional benefits if they are hubs in Hub and Spoke alliance networks. Third, they can minimize the cost of preparing new agreements by using them earlier as a model. They are negotiating a new RTA, in accordance with the standard approach, with minor adjustments to address some of the concerns of the „junior“ partners. As Peter Drahos and John Braithwaite say, however, it is „like cooking an elephant and rabbit stew. No matter how ingredients are mixed, it ultimately tastes like an elephant.“1 The fact that commodity-exporting countries prefer CUs, while exporters of manufactured goods in South and Southeast Asia tend to abide by free trade agreements, may be a coincidence. However, we must recognize that CUs offer more opportunities to protect domestic industry from competing imports versus free trade agreements. In particular, with the ability to remove almost all barriers between Member States, CUs offers better opportunities to promote division of labour, economies of scale and regional cooperation.

It is common knowledge that free trade agreements only eliminate import duties, while border registration procedures are maintained and rules of origin are a major problem. For example, according to Sergey Glazev, CEO of CU RBK, waiting times and cross-border procedures account for up to half of the period of import of goods into the CIS, despite free trade among most alliance members.2 With import duties now low, trade facilitation has become a new priority worldwide. In this context, it is worth broadening Jacob Viner`s traditional approach to regional integration analysis, namely that the removal of institutional and physical non-tariff barriers to trade has the effects of trade creation and reorientation. It is likely that countries of similar size will enter into a preferential trade agreement. Juniors, on the other hand, could also view asymmetric agreements as win-win agreements. They are more interested in better access to the markets of dominant partners than the other way around. Smaller countries could hope to succeed in the face of external competition because of the potential trade effect of bilateral preferences. Another potential benefit for „juniors“ is the hope of loyalty of dominant partners in other areas of interaction, such as financial assistance and investments. In conclusion, asymmetric alliances generally confer diversity on the larger RTA community. From this point of view, they may well be seen as another example of what Jagdish Bhagwati called „termites in the trading system“. At the same time, it remains to be seen whether the development of a specific preferential agreement, up to the ec as a whole, tends to narrow the gaps between regional and global trade liberalization.

With TTIP, free trade has entered the public debate in Europe.