Chapter Six: World Trade Organization

VII. Regional And Bilateral Pacts And Groupings

Although the WTO has made a huge contribution to the growth of world trade over the last 50 years, a significant part has also been played by bi-lateral and regional trade agreements. At first sight these may seem to run counter to the goals of the WTO and the GATT, and in strict theory can be seen to infringe the 'Most Favoured Nation' principle; but in reality they have probably often served to 'soften up' tariff-bound economies prior to full WTO membership; and in many cases the tariff reductions in bi-lateral or regional trade agreements go beyond what has so far been achieved at a global level.

The European Union Single Market and NAFTA are the two most prominent examples of full (if local) free trade. These regions (Europe and North America) tend to have some fairly nasty protectionist instincts as regards the rest of the world, and it is here that the WTO swings into action to moderate and arbitrate in disputes with injured parties in the rest of the world, and particularly with developing countries.

These external groupings are reflected in the workings of the WTO itself. Increasingly, countries are getting together to form groups and alliances in the WTO. In some cases they even speak with one voice using a single spokesman or negotiating team.

This is partly seen as a means for smaller countries to increase their bargaining power in negotiations with their larger trading partners. Sometimes when groups of countries adopt common positions consensus can be reached more easily. Sometimes the groups are specifically created to compromise and break a deadlock rather than to stick to a common position. But there are no hard and fast rules about the impact of groupings in the WTO.

The largest and most comprehensive group is the European Union (for legal reasons known officially as the "European Communities" in WTO business) and its 28 member states. The EU is a customs union with a single external trade policy and tariff. While the member states coordinate their position in Brussels and Geneva, the European Commission alone speaks for the EU at almost all WTO meetings. The EU is a WTO member in its own right as are each of its member states.

A lesser degree of economic integration has so far been achieved by WTO members in the Association of South East Asian Nations (ASEAN) – Brunei Darussalam, Indonesia, Malaysia, Myanmar, Philippines, Thailand, Singapore and Vietnam, which joined in 2007, followed later by the two remaining members, Cambodia and Laos. Nevertheless, they have many common trade interests and are frequently able to coordinate positions and to speak with a single voice. The role of spokesman rotates among ASEAN members and can be shared out according to topic. MERCOSUR, the Southern Common Market (Argentina, Brazil, Paraguay and Uruguay, with Bolivia and Chile as associate members), has a similar set-up.

More recent efforts at regional economic integration have not yet reached the point where their constituents frequently have a single spokesman on WTO issues. An example is the North American Free Trade Agreement: NAFTA (Canada, US and Mexico). Among other groupings which occasionally present unified statements are the African Group, the least-developed countries, the African, Caribbean and Pacific Group (ACP) and the Latin American Economic System (SELA).

A well-known alliance of a different kind is the Cairns Group. It was set up just before the Uruguay Round began in 1986 to argue for agricultural trade liberalization. The group became an important third force in the farm talks and remains in operation. Its members are diverse, but sharing a common objective – that agriculture has to be liberalized – and hold a common view that they lack the resources to compete with larger countries in domestic and export subsidies.

Important regional groupings that are moving towards constituting free-trade areas include the FTAA (Free-trade Area of the Americas), which is currently comatose, the Trans-Pacific Partnership, which is currently being held hostage by Japanese agricultural interests, and the TTIP, a putative agreement between the US and the EU which is liable to be shipwrecked by the US Senate and/or the European Parliament.