Ever-growing number of trade pacts poses new challenges, says UN-backed report

The growing number and complexity of trade pacts between countries and within regions pose new challenges to the multilateral trading system, says a new United Nations-backed report, which also highlights the role of the World Trade Organization (WTO) in creating coherence.

According to the WTO’s flagship publication, the World Trade Report 2011, almost 300 preferential trade agreements (PTAs) were in force in 2010. On average, a WTO member is party to 13 such agreements.

Countries’ participation in preferential trade agreements has accelerated over time, become more widespread and transcended regional boundaries, the report found. Half of the PTAs currently in force are not strictly “regional” as the growth of cross-regional PTAs has become particularly pronounced in the last decade.

Not only are the PTAs increasing in number, but they are evolving towards deeper integration that goes beyond tariffs and other measures at national borders – they increasingly include domestic policies such as regulations on services and investment, intellectual property protection and competition policy, which the report calls “deep PTAs.”

“These trends raise vital questions about the focus and reach of the WTO, and the value assigned by governments to globally-based trade relations,” said the Director-General of the WTO, Pascal Lamy, who launched the report in Geneva today.

In his foreword to the report, Mr. Lamy says he believes that to the extent that PTAs are motivated by a desire for deeper integration rather than market segmentation, there could be a role for the WTO to promote greater coherence among non-competing but divergent regulatory regimes that in practice cause geographical fragmentation or raise trade costs.

“There is no doubt that we need to build towards a more stable and healthier trading environment, where alternative trade policy approaches are mutually supportive and balance equitably the needs of all nations,” he writes.

The report identifies a number of options for increasing coherence between PTAs and the multilateral trading system, including fixing deficiencies in the WTO legal framework, developing a set of non-binding good PTA practices that members could follow, and extending existing preferential arrangements in a non-discriminatory manner to additional parties.

The WTO, which is headquartered in Geneva, deals with the global rules of trade between nations and seeks to ensure that trade flows smoothly, predictably and freely as possible.