UNITED NATIONS CONFERENCE ON TRADE AND DEVELOPMENT

POLICY ISSUES IN INTERNATIONAL TRADE AND COMMODITIES

STUDY SERIES No. 27

SWIMMING IN THE SPAGHETTI BOWL: CHALLENGES FOR DEVELOPING COUNTRIES UNDER THE

"NEW REGIONALISM"

by

Luis Abugattas Majluf

Senior Expert Division on International Trade in Goods and Services, and Commodities

United Nations Conference on Trade and Development Geneva, Switzerland

UNITED NATIONS

New York and Geneva, 2004

ii

NOTE

The purpose of this series of studies is to analyse policy issues and to stimulate discussions in the area of international trade and development. The series includes studies by UNCTAD staff, as well as by distinguished researchers from academia. In keeping with the objective of the series, authors are encouraged to express their own views, which do not necessarily reflect the views of the United Nations.

The designations employed and the presentation of the material do not imply the expression of any opinion whatsoever on the part of the United Nations Secretariat concerning the legal status of any country, territory, city or area, or of its authorities, or concerning the delimitation of its frontiers or boundaries.

Material in this publication may be freely quoted or reprinted, but acknowledgement is requested, together with a reference to the document number. It would be appreciated if a copy of the publication containing the quotation or reprint were sent to the UNCTAD secretariat:

Chief Trade Analysis Branch

Division on International Trade in Goods and Services, and Commodities United Nations Conference on Trade and Development

Palais des Nations CH-1211 Geneva

Series Editor: Sam Laird

Officer-in-Charge, Trade Analysis Branch DITC/UNCTAD

UNCTAD/ITCD/TAB/28

UNITED NATIONS PUBLICATION Sales No. E.04.II.D.38 ISBN 92-1-112649-5

ISSN 1607-8291

© Copyright United Nations 2004 All rights reserved

iii

CONTENTS

INTRODUCTION................................................................................................................ 1 I. THE NEW REGIONALISM .................................................................................. 3 II. CHALLENGES FACING DEVELOPING COUNTRIES................................. 11 A. Building on quicksand .................................................................................... 11 B. Swimming in a spaghetti bowl ....................................................................... 14 C. The imperative of innovative thinking ........................................................... 15 D. Getting the act together: Institutional requirements to confront the new trading environment ....................................................... 16 III. SERVICES PREFERENTIAL TRADE LIBERALIZATION AND THE GATS.................................................................................................... 17 IV. CONCLUSIONS .................................................................................................... 23 REFERENCES................................................................................................................... 24

iv

ABSTRACT

Simultaneous developments in the WTO system and under regional integration initiatives

are dramatically changing the trading environment for developing countries. The interface between these processes brings new and enormous challenges for those countries, with profound implications for their development prospects. These arise from key features of the "new regionalism", which reaches far beyond borders. Further challenges arise from the interface between developments in the WTO system and the new regionalism. A particular concern is the issue of preferential liberalization of trade in services, including the compatibility of the new regional integration agreements with the provisions of GATS Article V.

1

The 1990s witnessed the resurgence ofinterest in regional trade agreements (RTAs)1

throughout the world, with old schemes beingrevived and new ones emerging in an attempt toharness the forces of globalization for economicgrowth and development. Some 250 preferentialtrade agreements of different types have beennotified to the GATT/WTO, almost 52 per centof them were notified after January 1995. Of allnotified agreements, over 170 are currently inforce. An additional 70 agreements are estimatedto be operational, although not yet notified. Bythe end of 2005 if all agreements planned orcurrently under negotiation come into effect thetotal number of RTAs might well approach 300(WTO, 2003). More than half of world trade isnow taking place within actual or prospectiveRTAs. In the case of the Western Hemisphere,for example, by the year 2004 some 86 per centof total trade will be free of duty as the result ofthe implementation of those RTAs already ineffect, without taking into account the futureimpact of the new agreements currently undernegotiation. Nearly every country in the worldis now a member of one or more RTAs. Evencountries traditionally committed to MFNliberalization, such as Japan and the Republic ofKorea, have shifted their long-standing policiesand are now actively pursuing the regional option.

The overarching motive for this newdrive towards regionalism among developingcountries is the search for effective policyinstruments to achieve sustainable developmentthrough the insertion of national economies intothe globalization process. Also, a certain “dominoeffect” has been identified as playing an important

role in promoting the new regionalism, withcountries increasingly engaging in new RTAs asa means of counteracting perceived negativeeffects of discrimination and marginalization asothers form RTAs. Developed countries, for theirpart, are increasingly engaged in “competitiveregionalism”, in part to secure their trade interestsas well as to establish spheres of influence thatinclude but also go beyond trade policy. Regionalagreements continue to proliferate as an idea aswell as a political-economic fact, and are likelyto remain an enduring feature of the tradingsystem.

The relationship between multilateralismand regionalism has been widely discussed in theliterature.2 Our purpose in this paper is not toengage in the traditional debate on regionalismas a “stepping stone or stumbling block” tomultilateral efforts. Rather, it is to present somepreliminary reflections, as food for thought, onthe current challenges confronting developingcountries as a result of the simultaneous processestaking place both in the multilateral tradingsystem (MTS) and in the context of the “newregionalism” evolving in all regions of the world.In the MTS there are some new developmentsand contradictory forces at work creating acomplex environment in which this newregionalism, radically different from that of the1960s and 1970s, is being actively promoted bythe majority of developing countries as a centralinstrument of their development efforts. Theinterplay between the events taking place in theMTS and the particularities of the newregionalism has brought enormous challenges fordeveloping countries, having concrete expression

INTRODUCTION

1 The expression “regional trade agreements” refers throughout this text both to economic integration agreements andto trade preferential agreements of a different nature. When relevant, the distinction is made.

2 See, for example, Laird (1999) for a review.

2

in ongoing trade negotiations, as well as in theevolution and functioning of existing RTAs. Theoutcome of the interface between these processescould have profound implications for thedevelopment prospects of developing countries.

This study analyses some of thechallenges confronting developing countries withthe purpose of identifying areas for further workand reflection in order to address issues that haveemerged as a major area of concern for thosecountries. The first section offers a brief

discussion of the main features characterizing thenew regionalism, attempting to present thebroader picture that should inform any discussionof its systemic and developmental implications.The second section highlights some of the majorchallenges confronting developing countries,which emerge from the interface between the newregionalism and events taking place in the MTS.The final section focuses on the issue ofregionalism and trade in services, analysing someof the main issues that should be addressed inthe ongoing negotiations in the WTO.

3

There is an emerging consensus in theliterature that the recent proliferation of RTAsconstitutes a new phenomenon with potentiallyprofound implications for the trading system. Itis recognized that the “third wave of regionalism”,or the “new regionalism” as it is called, is radicallydifferent from that of the post-war period. Theconcept of new regionalism goes beyond that of“open regionalism”, usually utilized to portrayintegration efforts in the context of open andmarket-oriented economies. However, there aredifferent interpretations regarding the drivingforce behind this process, with different authorshighlighting distinct features of currentregionalism as those conferring its novelty.3 Someof the main characteristics of the “newregionalism” have been discussed elsewhere,4 anda recent report by the Inter-AmericanDevelopment Bank (IDB) presents an interestinganalysis of this phenomenon in the WesternHemisphere.5 A comprehensive discussion of thenew regionalism goes beyond the purpose of thispaper. However, it is important to highlight themajor features identified as conferring novelty onthis process as they are relevant for the discussionof its possible systemic and developmentalimplications. Each of the features of the newregionalism opens up an interesting field forfurther analysis and research.

In the 1960s and 1970s, regionalismnormally involved countries at more or lesssimilar levels of development, usually in closegeographical proximity and focusedpredominantly on the liberalization of trade ingoods by dismantling tariffs and border measuresaffecting trade between the parties. Regionalism

was conceived of basically as an instrumentsupporting national developmental policies, as itwas mainly oriented to overcoming market-sizelimitations faced by import-substitutingindustrialization policies at the national level.Today, South-South regionalism is no longerconceived of as an instrument that is primarilyintended to support national developmentstrategies and policies, but as a developmentaloption in itself, promoting competitiveness andthe effective insertion of economies into theinternational economy as the means to increaseoverall welfare in all members of the RTA. Fromthis perspective, one might expect thatdevelopmental strategies and policies would beembodied in the norms and disciplines of theRTAs, but the absence of any such ideas in mostregional agreements highlights the lack of clarityon what such strategies and policies should be.This is critical because the modern regionalagreements, by locking in a wide range of policiesand instruments, may well preclude policyoptions or policy space available for adoptingadequate development-oriented policies. This isperhaps one of the more significant differenceswith earlier regionalism, and one of the mainchallenges currently confronting developingcountries.

Debate on regionalism has mostlyconcentrated on its possible impact on the MTS.The analysis of the relationship betweenregionalism, as expressed in South-Southagreements, and development has not yet receivedall the attention it deserves. According to theWorld Bank, although South-South agreementscan be made to work, a number of regional

I. THE NEW REGIONALISM

3 For a recent discussion of the motivation and characteristics of the new regionalism, see for example Sampson andWoolcock (2003) and Okamoto (2003).

4 Luis Abugattas, Presentation on Regional Integration and the Global Economy at the High-level Segment of theForty-seventh Session of the UNCTAD Trade and Development Board, 16 October 2000.

5 IDB (2002).

4

integration agreements have had negative orambiguous effects on income, and agreementsbetween richer and poorer developing countriesare likely to generate losses for the poorer oneswhen their imports are diverted towards the richermember whose firms are not internationallycompetitive.6 An OECD study, analysing theeconomic effects of RTAs, suggests that theirimpact on economic growth is quite limited.7 Forthe IDB, the developmental promise ofregionalism would only be realized to the extentthat regional integration is an integral part of thestructural reform process itself.8 According tosome studies, the overall economic effects of someSouth-South agreements are likely to be smalland may even be negative for some members.9

Other studies, on the contrary, conclude that insome cases there may be significant welfare gainsfor members of RTAs.10

Despite this lack of clarity about thewelfare impact of RTAs and how to design themto ensure that they are welfare-enhancing, manydeveloping countries are now investingconsiderable political capital in maintaining andattempting to foster their own economicintegration schemes despite significant domestic,and even international, opposition to theseendeavours. Clarity regarding the developmentalimpact of South-South regionalism, and on howto foster it and make it effective, is crucial tomaintaining the political impetus for these efforts.

A relevant research and policy questionis the following one: are the political capitalinvested and the efforts undertaken by developingcountries in strengthening South-South RTAsprofitable from a developmental and welfare-enhancing perspective? Available evidence tendsto suggest that regional integration betweendeveloping countries has promoted trade andexport diversification allowing for increasing

exports of manufactured goods to regionalmarkets, and that inter-industry trade haveevolved in the context of regionalism.11

Furthermore, South-South RTAs have tended tobe more trade-creating than trade-diverting.12

Nevertheless, the developmental impact ofregionalism should not only be evaluated in therealm of trade from a Vinerian perspective. Eachagreement has to be evaluated in the light of thestated objectives of the grouping, which todayoften go far beyond increasing and diversifyingtrade, and incorporate a wide number of othersocial, economic, political and even securityobjectives. Also, there is the issue of regionalismas a possible provider of regional public goods(RPG) in a number of areas, for exampledemocratic stability and consolidation throughthe incorporation of the “democratic clause” inthe agreements.13

A comprehensive developmental audit ofRTAs between developing countries raises variouscomplex issues. First, it will require the definitionof success indicators on the basis of the particularobjectives of each agreement. A secondmethodological challenge is to isolate the impactof integration from other intervening variableson the observed results. And, finally it is necessaryto confront the question: what would havehappened in the absence of the RTA?Nevertheless, this is an area in which further workis urgently required in order to adequately informpolicy makers in developing countries.

A novel development in the MTS is theemergence of North-South RTAs radicallyredefining the nature of the relationship betweentrading partners. The traditional relationshipbased on unilateral preferences granted for tradein goods to developing countries is beingprogressively transformed into reciprocalagreements encompassing a wide range of areas,

6 World Bank (2002).7 OECD (2001).8 IDB (2002).9 Scollay (2001).10 Gilbert, Scollay and Bora (2001).11 IADB, 2002. op.cit. Also, Cernat (2003).12 Flores (1997).13 Devlin and Estevadeordal (2001).

5

and involving deep integration measures. This isthe case, inter alia, of the North American FreeTrade Agreement (NAFTA) incorporatingMexico, the United States and Canada; theagreements signed by the European Communities(EC) with a number of developing countriesunder the New European Mediterranean Policy;and the agreements reached by the EC withMexico and Chile.14 Currently, there are veryambitious processes being undertaken in the formof the creation of the Free Trade Area of theAmericas (FTAA), covering all the 34 countriesof the Western Hemisphere, except Cuba; thenegotiations under way between the EuropeanCommunities and the 79 ACP countries on thebasis of the Cotonou Agreement; andnegotiations for the establishment of a FTAbetween the EC and MERCOSUR.Furthermore, a growing number of bilateralagreements between developed and developingcountries have been signed and put into effect,or are waiting domestic ratification.15 Asignificant number of initiatives involvingdeveloped and developing countries are in thepipeline.

The emergence of RTAs betweendeveloped and developing countries is perhapsthe new development in the trading system thatis raising more concerns regarding systemicimplications, the possible trade-diverting effectson non-members and the implications for thedevelopment prospects of developing countries.As can be deduced, at least from the current LatinAmerican experience, most developing countriesare increasingly participating in RTAs withdeveloped countries, fundamentally motivated bythe “fear of exclusion”, including throughuncertainties about the future of unilateral

preferences, in particular those which provideadditional preferences for sub-groups of countries(often linked to social programmes, labourconditions or the war against drugs). Recentchallenges to discriminatory preferences grantedto some developing countries under the EnablingClause furthered concerns of preference-receivingcountries, increasing their interest inconsolidating market access conditions within theframework of RTAs.16 There is a clear trendtowards the establishment of at least twodistinctive hub-and-spoke systems within theMTS – one based on the constellation ofagreements promoted by the United States, andthe other with the European Union as the hub.It remains to be seen whether another hub-and-spoke system would evolve around Japan as aresult of its new regionalism activism. Thepossible systemic implications of hub-and-spokesystem configuration have been widely analysedin the literature, and there tends to be agreementthat this configuration is less conducive topromoting system-wide liberalization.17

North-South agreements raise a numberof new and highly relevant issues for developingcountries. There are relevant questions regardingthe real negotiating leverage of developingcountries in that context, and the developmentalimplications of those agreements. The questionof special and differential treatment in North-South agreements is a matter of particular concernfor developing countries in the light of the trendthat can be perceived emerging from thoseagreements already negotiated, and also fromthose currently being negotiated, andsurrounding the compatibility parametersimposed by Article XXIV of the GATT on RTAs.There are also concerns with respect to the future

14 Agreements signed by the EC with Jordan, Tunisia, Algeria and Morocco.15 For example, the agreements between the United States and Chile, Viet Nam, Jordan and Singapore. Also the EC,

have signed, are negotiating or are considering a number of association agreements with developing countries, for examplethe agreement with South Africa. Canada has been active also in signing an agreement with Chile, and is currentlynegotiating a FTA with CARICOM. Japan, traditionally foreign to RTAs is now showing a new activism in this regard,being involved in talks with Asian and other countries such as Mexico.

16 Preferences granted by special programmes both by the United States and the EC have been challenged by India andBrazil in the WTO. The Appellate Body in a recent ruling reversed the conclusions of the Panel in the case presented byIndia against the preferences granted by the EC to the Andean countries, establishing that they can be maintained by theEC.

17 For a review of the literature on the possible effects of a hub-and-spoke system, see Hoekman and Kostecki (2001).

6

of existing subregional agreements. Will they beabsorbed by agreements with developedcountries, or they will be able to maintain aseparate identity and play a developmental rolein the future? The extent to which North-Southnegotiations will become a forum for exertingpressure on those issues where developingcountries are “demandeurs” or are facing demandsat the WTO with implications for multilateralnegotiations is also a matter of growing concernfor developing countries.18

The burden of trade in goodsliberalization in North-South RTAs weighsasymmetrically on the developing countries.There is an argument, notably by the World Bank(but still subject to empirical testing), that North-South agreements are more likely to improvewelfare, in comparison with South-Southagreements, because they result in lower tradebarriers with less trade diversion, fewer behind-the-border measures, and greater security (lesslikelihood of reversals) in the liberalizationimplemented by the developing countries.19 Also,it has been suggested that North-South RTASwill generate higher productivity gains indeveloping countries.20 However, some studiestend to show that all their developmentalpromises might not materialize. For example, astudy commissioned by the Secretariat of theAndean Community, even though it cannot betaken as conclusive, suggests that Andeancountries cannot expect welfare gains from tradein goods within the FTAA context, while mostcountries would experience a net welfare loss,coupled with significant fiscal revenue losses.Some activities would also be significantlyharmed by import competition.21 Elsewhere,studies need to be carried out regarding thepossible developmental impact of North-Southagreements.

Concerning possible gains for developingcountries, an issue that deserves analysis is to whatextent these RTAs, besides conferringpredictability on market access conditions, willin effect improve the overall conditions enjoyedby developing countries in developed countriesmarkets. In the case of the FTAA, for example,there would not be much change in terms ofcurrent tariff preferences enjoyed by most of theregion in acceding to the United States marketunder the CBI, the ATPA and the GSP. Themarginal benefit in this regard of the future RTAsis limited to a reduced number of productscurrently excluded from the preferential schemes,with tariff peaks and affecting only some of thecountries in the region. On the contrary, there isthe concern that trade rules, in particular the rulesof origin to be adopted, could in practice limitcurrent market access opportunities of countriesof the region to the United States market. Thereis also a real possibility that South-South tradewill be affected more by North-South agreementsthan by South-North trade because of marketliberalization in favour of products originatingin developed countries, generating net welfarelosses. Even though there has been wide concernregarding the issue of the possible impact oferosion of preferences as a result of multilateralliberalization in the WTO, much less attentionhas been paid to the possible impact ondeveloping countries’ trade and welfare of theerosion of regional preferences resulting fromliberalization in the framework of RTAs withdeveloped countries.

The participation of developing countriesin North-South agreements is also promoted onthe basis of potential dynamic benefits expectedfrom the comprehensive set of third-generationdisciplines incorporated in those agreementsanchoring structural reform, and providingcredibility being grounded in international

18 There is strong evidence supporting the assertion that the United States Government exerted pressure on LatinAmerican countries participating in the G-21 during the Cancún Ministerial Meeting on the basis that bilateral initiativescould be jeopardized as a result of such participation. A number of Latin American countries announced their dissociationfrom that Group after Cancún.

19 World Bank (2000).20 Lopez-Cordova and Mesquita (2002).21 Andean Community Secretariat (2003).

7

commitments. Nevertheless, no comprehensiveevaluation has yet been undertaken of thesealleged benefits. Perhaps the most publicizedexpected dynamic benefit for participatingdeveloping countries in North-South agreementsis increasing inflows of FDI, in goods-producingactivities and in services, with all the positiveexternalities. In this respect, current analysiswithin the Americas of the effect of North-SouthRTAs on FDI is strongly influenced by theexamination of the Mexican experience in theNAFTA. However, this experience might notbe comparable with that of other developingcountries because of a number of factors that havebeen highlighted in the literature. Increasing FDIinflows might not necessarily be the case for allmembers of a RTA, and the recent process ofinvestment running away from Mexico to otherlocations needs to be factored into the analysis.Moreover, while RTAs may bring more FDI, thebenefits may not be evenly distributed: such FDIis often concentrated in the larger partners,allowing the realization of economies of scale inthat market (e.g. Brazil within MERCOSUR),which becomes a platform to export to othermembers of the RTA. As the IDB points out, thebig losers could be medium-size countries, assmall countries are more likely to be supplied bytrade rather than by FDI, with or without aRTA.22 Trade liberalization in Latin America isalready generating a pattern of relocation of tariff-jumping FDI to the detriment of some countriesof the region. Thus, the issue of the distributionof benefits among participating countries inNorth-South RTAs deserves further analysis.Also, the impact of the policy constraintsregarding the treatment of FDI incorporated inthese agreements, in particular regarding policiesto promote positive externalities, needs a fullevaluation. Regarding FDI and North-Southagreements, an issue that deserves specialattention is the treatment of investmentincentives. In the context of RTAs, competitionfor FDI by developing country members maybecome intensive, resulting in subsidy warsamong members, providing disproportionalbenefits to foreign investors and eliminating or

reducing the potential gains for developingcountries. A matter of concern is the resistanceshowed by developed countries to incorporatedisciplines on investment incentives in theframework of the different RTAs negotiated orunder consideration.

A variety of different motives have beenidentified explaining the participation ofdeveloped countries in North-South RTAs.Obviously, there are the expected direct economicbenefits to be derived by these countries fromthose agreements. However, other objectivesweigh heavily in explaining their participation,and might be even more relevant. Some authors,for example, have highlighted security concernsas a basic motive behind the United States’ policyshift regarding regionalism.23 A closely relatedfactor is the desire to limit migration from thepoorer countries by raising living standards inthe poorer countries. This was important inNAFTA as well as in the Euro-Mediterraneanagreements.

Two objectives behind developed countryparticipation on North-South RTAs deservespecial attention in the light of their possibleimpact in developing countries that are partnersin those agreements and on the MTS. One suchexplicit objective of developed countries is toinfluence domestic policies in developingcountries through the RTAs’ binding WashingtonConsensus-based structural reforms. Fordeveloped countries, and also for the multilateralfinancial institutions, it seems that the only truedevelopmental content of this feature of the newregionalism is the possibility of locking in reformsthrough legally binding rule-based commitmentswhich the developed partner(s) can use to enforcethe terms of the agreements. Market logic, itseems, will do the rest. Some developingcountries’ governments have also participated intrade negotiations with this objective in mind,anchoring structural reforms to avoid possiblereversal by future Governments (Mexico is onesuch example). In this regard, North-South RTAsbring the risk of locking in a single approach to

22 IDB (2002, p. 232).23 Yamada (2003).

8

economic development that has proved, in thecase of many developing countries, not always toproduce the expected results.24 Also, theseagreements could seriously limit the policy spaceavailable to developing countries to define andimplement development policies in the future.

Another stated objective of developedcountries for their participation in North-SouthRTAs is to expand the trade agenda beyond whatis currently possible in the MTS, and settingWTO-plus standards with the ultimate goal ofspreading those standards worldwide, if possiblethrough the WTO. This is the case, for example,with labour rights and environmental standardsin agreements promoted by the United States,and also the case of the Singapore issues, andTRIPs-plus disciplines, on which rule-making israpidly evolving in different RTAs. North-Southagreements are not seen as competing with theMTS, but as a mechanism to foster developedcountries’ own trade agenda and as precedent-setting. Facing a “crisis of governance” in theMTS, as exemplified by the Seattle and Cancúnfailures, developed countries are giving priorityto regional efforts to promote their interests. Asa result of North-South RTAs, the rule-makingspace is progressively shifting from the WTO tothe regional agreements. This suggests a newscenario in which rule-making spreads througha bottom-up approach, with profoundimplications for the governance of the MTS, andfor the possibilities of developing countrieseffectively to influence the setting of multilateralnorms and disciplines.

Another feature of the new regionalismis the introduction of “third generationagreements” that are highly intrusive in the realmof domestic policies. The nature of the renovatedand new RTAs, both North-South and South-South, defies the sequence and the classical levelsof economic integration ranked by scope and

deepness of the commitments adopted bymembers.25 RTAs increasingly include “deepintegration” measures covering, inter alia,standards, sanitary measures, trade facilitation,liberalization of trade in services, investment andcompetition disciplines, IPRs, governmentprocurement, and also the movement of naturalpersons with a set of related disciplines. Theyincorporate also policy areas that were previouslya domestic preserve: macroeconomiccoordination, policy and regulatoryharmonization, cooperation measures in a varietyof fields and infrastructure integration; andpursue a mix of political, social and economicobjectives. Each RTA presents a different mix ofthese elements and differentiated disciplines, eventhough some harmonization is being attemptedin the context of the hub-and-spoke systems.Also, no predetermined sequence for theintroduction of elements into the agreement canbe identified.

Faced with these new realities, thetraditional analytical tools for evaluating thewelfare impact of RTAs on members, non-members and the MTS as a whole seem ratherinadequate. Indeed, the categories of RTAsrecognized by Article XXIV of GATT, FTA andCU do not today find a direct correspondencewith the realities. There are now much morecomplex phenomena, and the analytical toolsmust evolve to take into account these newrealities. In this new context, for example, theimpact of a RTA on trade of non-members mightnot necessarily derive from tariff preferencesgranted to members, but it could be theaccumulative result of a number of variables,some even not directly related to trade rules assuch. The effect of investment disciplines of RTAsin promoting FDI flows between some membershave been highlighted, for example, as one of themeasures with significant impact on tradecreation, and as explaining the direction of trade

24 See for example, Stiglitz (2003) and French-Davis (2003).25 The classical formulation was presented by Bela Balassa classifying RTAs: preferential trade agreements, free trade

areas, customs unions, common market and economic union. Article XXIV of the GATT is mostly based on this categories,recognizing in its provisions FTA and CU, or interim agreements leading to the formation of one of these types ofarrangements. Current RTAs simultaneously incorporate elements of the different categories and do not necessarily followany predetermined sequence.

9

between members of a grouping. Also,infrastructure integration, through its impact ontransport costs, or trade facilitation measuresamong members could have a greater tradeimpact than tariff preferences.

Another distinctive feature of the newregionalism is the simultaneous participation ofcountries in various RTAs, each one, in manycases, with highly differentiated trade rules(usually also being implemented over differentperiods). This phenomenon introduces newcomplexities at the systemic level, generating alsonew domestic requirements for theadministration of the multiple and variedcommitments.26 The panorama is increasinglyturning more complex because of theproliferation of agreements worldwide and theincreasing cross-cutting membership betweendifferent agreements. Even more, in someinstances parallel negotiating processes are takingplace.27 The situation emerging as result of thismultiple and simultaneous participation bycountries in RTAs, at different levels and of adifferentiated nature, and the proliferation ofagreements has been compared to a “spaghettibowl”. This panorama makes the definition ofpolicies and instruments of regionalism as adevelopment tool a very complex task, and alsointroduces significant complexity in evaluatingthe systemic and developmental impact of thenew regionalism. Evaluating compatibility withGATT Article XXIV provisions becomes even amore complex task than in the past because ofthe simultaneous participation in different RTAs.

How is it possible to evaluate intermingled andoverlapping agreements?28 How is one meant tounderstand the requirement of Article XXIV:8(a) (ii), in the case of customs unions, thatsubstantially the same regulations of commerceshould be applied by each of the members of theunion to trade of territories not included in theunion? Also, this situation impacts significantlyon the categorization of RTAs. With multiple anddifferentiated participation in RTAs by membersof a grouping, the notion of a common externaltariff, and therefore of a customs union, has littlepractical meaning as nominal tariffs are beingeroded by the differentiated preferences grantedby members of the grouping to third parties. Howis this compatible with the requirements ofGATT Article XXIV? In this new context, theevaluation of the impact of RTAs on third partiesand the extent of trade creation or trade diversionhas also become very difficult.

An interesting emerging feature of thenew regionalism is the attempts to negotiate RTAsbetween regional integration groupings. Such“bloc-to-bloc” negotiations constitute a relativelynovel exercise, bringing new challenges andadditional rule-making requirements forsuccessful integration. Bloc-to-bloc agreementswill also bring new complexities for evaluatingArticle XXIV compatibility, in particular in thecase of RTAs between two customs unions. Asyet there is no agreement of this type in full effect,but initiatives of this type include the ongoingnegotiations between MERCOSUR and the EC,CARICOM-CACM, SACU-SADC, and the

26 The case of Bolivia, for example, indicates the complexity of this issue. Bolivia is a full member of the AndeanCommunity, and at the same time is an associate Member of MERCOSUR, and full member of the Latin AmericanIntegration Association (LAIA). Each of these groupings has differentiated trade rules, is actively participating in theFTAA negotiations, and has bilateral agreements with a number of countries in the hemisphere. Bolivia is also participatingon both sides of the negotiations between the Andean Community and MERCOSUR. Being both members of theAndean Community, Bolivia and Peru have a bilateral agreement that is being currently renegotiated.

27 For example, Central American countries and the United States are actively participating in the negotiations on theFree Trade Area of the Americas (FTAA), encompassing all countries in the hemisphere except Cuba, but at the same timeparallel bilateral negotiations between them have been launched for establishing the CA FTA. In the same vein, MERCOSURis participating in the FTAA while negotiating a RTA with the European Community, and an agreement with the AndeanCommunity, while some of its MERCOSUR partners are negotiating bilateral agreements with other countries.

28 This would be, for example, the case of a future bilateral agreement between the United States and Central America,the CAFTA. This agreement will be evaluated in itself, or also taking into account the FTAA of which both will be fullmembers.

10

convergence process between MERCOSUR andthe Andean Community, close to been finalized.29

Analysis of this latter negotiation, which has beenongoing for some time, has pointed up theenormous complexities involved in attemptingto integrate two groupings with different sets oftrade rules. Also, the practical difficultiesencountered in the negotiating process itself,demanding the development first of a commonposition by members of each bloc incorporatinga variety of interests and sensitivities, beforeengaging in bloc-to-bloc negotiations.Furthermore, this experience has highlighted thepractical problems confronted in adjustingpositions as negotiations proceed.30 Bloc-to-blocnegotiations highlight the need for capacitybuilding in developing countries to engage in thistype of endeavour, and to develop a negotiatingapproach that would ease this type of negotiation.Making the rules in effect in each bloc compatibleso as to facilitate trade have also proved to be acomplex undertaking. The analysis of theseprocesses and the problematic of RTAsarticulation is a highly relevant issue to beaddressed, given that the convergence of RTAs isperceived as the preferred mechanism, in thecontext of some regional initiatives, toprogressively multilateralizing regionalism. Thesecould be, for example, the cases of the proposedArab Free Trade Area effort launched by the ArabLeague, or the African Union involving thedifferent subregional agreements already in effect.

The launching of interregionalagreements, another feature of the newregionalism, challenges “geographical proximity”as a necessary element promoting and makingintegration viable that constituted a core element

of our understanding of earlier regionalism.Increasingly, RTAs are being agreed betweencountries of different regions, for example therecently finalized trade agreement between Chileand the Republic of Korea, the agreementsbetween the United States and Singapore and VietNam, and negotiations between India andMERCOSUR, Japan and Mexico, among manyother current initiatives. This is an indicator that“economic distance” is no longer perceived as afactor affecting the competitiveness of productsoriginating in distant trading partners andimpeding trade. These agreements are alsochallenging the traditional notion of region, andshould promote a revision of our understandingof the requirements for successful integration.Finally, the new regionalism is characterized byattempts by regional or subregional economicgroupings to pursue a common externaleconomic policy and to emerge as a collectiveentity in the international arena, thus bringinginteresting and complex new challenges fordeveloping countries.31 One of the perceivedbenefits of RTAs among developing countries istheir increasing leverage in the internationalarena, allowing them to promote their tradinginterests more efficiently, and emerge as validcounterparts in the different negotiatinginstances. However, there are both centripetal andcentrifugal forces acting at the same time thathave turned these attempts into very difficult,and some times even frustrating, exercises.32 Thedefinition of a common external policy and theimplementation of mechanisms allowing effectiveinternational collective action are anotherpending challenge that developing countries mustface in the near future.

29 The last meeting, the ninth one between the parties, took place in Lima from 26 to 30 April. It was not possibleto complete pending work.

30 For a discussion of the dynamics of the MERCOSUR-AC negotiations see Abugattas (1999a).31 Most integration groupings among developing countries are developing institutional arrangements for jointly

conducting international trade negotiations. However, the mechanisms that have been put in place are different betweenthe groupings, and also within the same grouping according to the different negotiating processes. In the case of CARICOM,for example, the Member States have instituted the CARICOM Regional Negotiating Machinery (RNM), which has beencreated to develop the negotiating position and strategy for the grouping. In the Andean Community and MERCOSURthe negotiating position and strategies are developed in intra-governmental meetings, with participation of the relevantnational authorities of all Member States, depending on the issue on the negotiating agenda.

32 For a discussion of some of the problems confronting Latin American and Caribbean countries in articulatinga common external policy and negotiating positions, see Phillips (2002).

11

This section briefly discusses under fourmain headings some of the interrelated challengesarising from the interface between the MTS andthe new regionalism that developing countriesare currently facing.

A. Building on quicksand

A major challenge for developingcountries is the promotion and implementationof the new regionalism as an effective instrumentof development while confronting at the sametime a MTS in constant flux. The relationshipbetween the MTS, as expressed in the WTOAgreements, and the new regionalism has threemain dimensions in which new developments aretaking place: (i) the degrees of freedom thatMembers have to engage in preferentialarrangements are defined by different provisionsof WTO Agreements which set the parametersof compatibility of regionalism with the MTS;(ii) the WTO rules and disciplines constitute thefloor, or the minimum common requirement, forall other agreements in those areas governed bythe WTO Agreements; and (iii) the space forpreferential trade liberalization at the regional orsubregional level is largely defined by marketaccess commitments, both in goods and inservices, adopted in the WTO.

Regionalism is governed by Article XXIVof GATT (1994), by Article V of the GATS andby the “Enabling Clause”. These provisionsestablish the conditions to be fulfilled by RTAsin order to be compatible with the MTS,providing therefore for the degrees of freedomallowed to depart from the MFN cornerstoneprinciple of the MTS. As provided by paragraph29 of the Doha Ministerial Declaration,

economic integration provisions in the WTOAgreements are under review. The DohaMinisterial Declaration mandated negotiations“aimed at clarifying and improving disciplinesand procedures under existing WTO provisionsapplying to regional trade agreements” and thatnegotiations “shall take into account thedevelopmental aspects of regional tradeagreements”. Discussions are being undertakenin the Negotiating Group on Rules (NGR).Initial submissions by WTO Members proposea comprehensive review of the relevant provisions,seeking clarification of key benchmarkrequirements while taking into account thedevelopment dimension of regional tradeagreements; and the improvement of the WTOoversight function with respect to regional tradeagreements in terms of procedural requirements,i.e. notification, reporting and examinationprocedures.33 Work in the NGR has been mostlyconcentrated on other issues on its agenda, andnot much progress has been achieved to date onthe review of the provisions dealing witheconomic integration. Regional integration issueswere not contentious in the Cancún preparatorystage. The Cancún Draft Ministerial Declarationsubmitted by the Chairman on his ownresponsibility, noting the progress that has beenmade in the negotiations on improvingtransparency in regional Trade Agreements,“encourage the Group to reach a provisionaldecision soon on its work on transparency andto accelerate its work on the clarification andimprovement of RTA disciplines under existingWTO provisions, taking into account thedevelopmental aspects of RTAs”.34 The draftremained unchanged during the CancúnMinisterial Meeting.

II. CHALLENGES FACING DEVELOPING COUNTRIES

33 Australia (TN/RL/W/2 and TN/RL/W/15), EU (TN/RL/W/14), Chile (TN/RL/W/16), and Turkey (TN/RL/W/32).

34 WTO. Job(03)(150)/Rev.1.

12

The review of economic integrationprovisions in the WTO Agreements is an areathat needs adequate and priority attention. Theresult of the review can seriously affect currentintegration agreements and initiatives, and at thesame time the revision of those provisions shouldprovide an adequate opportunity toaccommodate the realities of the new regionalism,discussed above, while taking into account theconcerns of non-Members. Different possibleoutcomes can be conceptually visualized from theoverall work of the NGR regarding provisionsdealing with RTAs. The optimum outcomewould be a comprehensive review of WTOprovisions dealing with economic integration,overcoming the difficulties confronted in the pastwith the application of Article XXIV, andincorporating effective SDT provisions in orderto address the new North-South Agreements andcurrent challenges to the applicability of theEnabling Clause.35 (GATS Article V has not yetbeen in practice put to the test; however, it mirrorsArticle XXIV and transmits to the case of tradein services all the problems faced in the past withthe application of Article XXIV, even increasingthe complexities in evaluating WTOcompatibility of agreements covering trade inservices. GATS Article V is discussed in the thirdsection of this study). New provisions oneconomic integration should provide a clear andpredictable framework on which regionalintegration can be adequately promoted, whiletaking into account systemic issues, the concernsof non-Members and preserving policy space toaccommodate development strategies andpolicies. Renovated WTO provisions on regionaleconomic integration should incorporate andrespond to the realities of the “new regionalism”,taking into account the new models anddimensions of economic integration, as well asNorth-South agreements carving out for thosecases the required space for the effectiveimplementation of SDT regional provisions,36

and also addressing the new complexities arisingfrom bloc-to-bloc arrangements. Also, thoseprovisions should address some other specificissues currently on grey areas, inter alia,preferential rules of origin, safeguard action, andcollective remedy undertakings.

Bearing in mind that the Enabling Clausedoes not cover North-South agreements, carvingout the required space for SDT in the context ofgeneral provisions dealing with RTAs shouldconstitute a major area of concern for developingcountries in current negotiations in the NGR.Different options could be explored forintroducing substantive SDT provisions relatedto RTAS.37 One option that has been suggestedis the review of specific provisions of ArticleXXIV, introducing flexibility in the case of RTAsin which developing countries participate, inparticular the improvement of Article XXIV(5)(c) on transitional periods, and paragraph (8)on “substantially all trade requirements”. Anotheroption could be the introduction of genericprovisions on SDT within Article XXIV in favourof developing countries. Some guidance on suchan option could be drawn from GATS Article V,which provides flexibility for developing countriesin integration agreements liberalizing trade inservices. Also, clarifying and improving theEnabling Clause by extending its scope to coveragreements between developed and developingcountry Members has been proposed. Finally,improvement of Part IV of GATT on non-reciprocity, making it enforceable and renderedapplicable to negotiations of RTAs, has beenpresented as a possible alternative for achievingthis objective. Moreover, the SDT dimension ofRTAs can be linked to the Doha negotiations ongeneric SDT provisions “with a view tostrengthening them and making them moreprecise, effective and operational” as provided inparagraph 44 of the Doha MinisterialDeclaration.

35 For a review of the issues related to RTAs generated by the work within the Committee on Regional Trade Agreementsand discussions in other WTO bodies refer to WTO (2002).

36 Compatibility benchmarks should be made sufficiently flexible to allow for meaningful SDT for developing countriesparticipating in RTAs, incorporating to some degree the Enabling Clause in the new WTO provisions on economicintegration.

37 Options for addressing this issue are discussed in Davenport (2002). See also Onguglo and Ito (2003).

13

Another possible outcome of work in theNGR, as some WTO Members have alreadyproposed, could be the introduction of somemeaningful changes in existing provisions oneconomic integration in WTO Agreements,“grandfathering” existing agreements. In this case,the review might not go as far as developing newprovisions, but clarifying the existing ones andstrengthening the compatibility benchmarks andprocedural requirements. In this case, a dual setof rules would be crystallized, differentiatingexisting from new integration agreements. Adanger associated with such an outcome wouldbe that North-South RTAs being currentlynegotiated could be subjected to more stringentrules, possibly limiting the required flexibility foreffective SDT in agreements with developedcountries or for accommodating particular needsin the context of agreements between developingcountries. A third possible outcome of the workin the NGR could simply be the introduction ofsome cosmetic changes in existing provisions,leaving the situation practically unchanged. Thiswould maintain the framework of uncertainty inwhich regionalism has evolved in the past, restingmore on the lack of action of the CRTA than onthe effective application of the relevantmultilateral provisions. Since only one agreementhas ever been approved in the last 50 years (theCzech-Slovak Customs Union) and none haveever been rejected, this would leave furtherinterpretation of WTO rules in this area open tojudicial review in dispute settlement cases, as isnow starting to happen (e.g. the India-Turkeycase on textiles and clothing).

A second dimension of the relationshipbetween the MTS and regionalism is that WTOAgreements constitute the “floor”, or a commonminimum denominator, of provisions in RTAsdealing with regulated issues under the WTO.Members of the RTAs are already bound to eachother by WTO norms and disciplines. Therefore,

any modification of WTO provisions would havean immediate impact not only on the RTAs, butalso on every ongoing trade negotiating processthat would have to take account of the changingdevelopments in the multilateral framework.38

WTO Agreements increasingly establish thepolicy space available for defining andimplementing national and sectoral developmentpolicies and programmes, setting limits to thepossible developmental content of RTAs.39 Twomain issues can be highlighted in this respect.One is the existence of conflicting trends on thepossible future direction of the MTS, includingthe potential review of existing provisions. Theother pertains to the eventual incorporation ofnew policy areas under the WTO framework.

In the MTS, two main trends can beclearly perceived. On one hand, there is the drivefor enlarging the scope and depth of multilateralnorms and disciplines, manifest already since theTokyo Round of Multilateral Trade Negotiations.The incorporation of new policy areas under theWTO and the introduction of more stringentobligations for Members are actively promotedin particular by developed countries. New issues– TRIPS, TRIMS and services – were introducedin the Uruguay Round, and the Doha WorkProgramme (DWP) contemplates the possibleaddition of other emerging issues to themultilateral agenda.40 On the other hand, as aresult of the entry into force of the WTOAgreements, opposing forces are becoming moreevident each day. In view of the growingawareness of the negative effects on developmentand welfare of some of the provisions of the WTOAgreements and of the concrete implementationproblems faced by a large number of Members, areview has been launched of some of theagreements, and the lifting of some of theobligations is being actively pursued. Examplesof these trends running counter to enlarging thescope and to deepening commitments in the

38 For example, one of the major current challenges confronting Latin American and Caribbean countries in theFTAA negotiations and in regional initiatives derives from the uncertainty surrounding future developments in the WTOin some crucial normative areas.

39 Abugattas (2002).40 Trade and environment, electronic commerce, trade debt and finance, transfer of technology, trade facilitation,

competition, and the relationship between trade and investment.

14

MTS include the following: the Declaration onthe TRIPS Agreement and Public Healthemanating from the Doha MinisterialConference; the decision to extend the transitionperiod under Article 27.4 of the Agreement onSubsidies and Countervailing Measures and themanner in which the decision is beingimplemented; waivers being sought by WTOMembers from obligations under differentagreements; the review mandate of all special anddifferential treatment provisions incorporated inthe DWP; and the strong resistance of manydeveloping countries to launching negotiationson the Singapore issues. Attempts are being madeat the MTS level to allow more policy space fordeveloping countries to autonomouslyimplement developmental policies. However, inNorth-South negotiations this trend is reversed,with strong pressures to move towards adoptingWTO-plus obligations in the same areas wheredeveloping countries are demanding a review,even a reversal, of obligations in the MTS.

Regarding the relationship betweennorms and disciplines at the WTO and regionallevels, a main issue for developing countries isthe coherence between commitments andnegotiating positions in the distinct processes.41

There is also the issue of the possible evolutionof disciplines in the MTS covering areas currentlybeing negotiated in other arenas, as is the case,for example, with investment and competitionpolicy. The challenge in this regard is twofold.On the one hand, it is important to ensure thatthe disciplines that are finally adopted in theregional initiatives effectively respond to thedevelopmental needs of the developing countries.On the other hand, it is equally important toensure that whatever disciplines might bedeveloped in the MTS do not jeopardizeachievements at the regional level. This is an areawhere developing countries might usefully try to

achieve positive cross-fertilization between theregional and the multilateral processes.

Finally, market access commitments ingoods and services agreed in WTO negotiationslimit the space available for preferential tradeagreements. The wider and deeper thecommitments in the MTS, the less space there isfor preferential trade liberalization amongmembers of RTAs, possibly diminishing theexpected returns from regionalism. Conversely,developments in the MTS could be steppingstones or stumbling blocks for regional efforts.For example, the stalemate in agriculturalnegotiations in the WTO is creating pressuresand complications in some regional initiativessuch as the FTAA and the EC-MERCOSURagreement. The issue of the erosion of unilateraltrade preferences granted by developed countryMembers as result of WTO commitments hasreceived some attention in relation to the possibleeffect on preference-receiving countries. Thepossible impact of WTO commitments onNorth-South agreements should be equallyevaluated. For example, the erosion of regionalpreferences, as a result of market accesscommitments in the WTO by developingcountries that could have a significant impact ontrade among developing countries by developingcountries, needs attention. To illustrate, there issome evidence to suggest that RTAs betweendeveloping countries have been an importantcontributing factor in their export diversification.In the new trading environment, preserving somespace for preferential liberalization in the area ofservices might be equally relevant.

B. Swimming in a spaghetti bowl

The situation emerging as the result ofmultiple and simultaneous participation bycountries in trade agreements, at different levels

41 Situations such as that concerning performance requirements on services should be avoided in the future. Forexample, Latin American countries that have joined NAFTA-type agreements have given up the right provided by ArticleXIX:2 of the GATS to attach conditions when granting market access to foreign suppliers of services, by committingthemselves, in bilateral or regional agreements, not to impose performance requirements on investors of the Parties to theagreement or on any other investors from third countries. This has seriously limited their possibilities in the currentrequest/offer process of negotiating specific commitments under the GATS.

15

and of a differentiated nature, and theproliferation of agreements described above hasbeen described by Jagdish Bhagwati as a“spaghetti bowl”. However, the situation hasbecome even more complex than that envisagedby Bhagwati as a result of the new obligationscreated in the Uruguay Round and proposals forfurther change in the Doha work programme ofthe WTO, as well as an even more rapidlygrowing web of regional agreements thatincreasingly infringe on sensitive developmentpolicy areas. In such a context, developingcountries are confronting the complex challengeof completing and perfecting the regionalintegration schemes as a vehicle for developmentwhile managing and adapting to a rapidlychanging trading environment. There is thereforea need to bring some coherence to thisoverlapping agenda and to ensure that it worksto facilitate rather than compromise thedevelopment process. The identification of thoseelements that will give the grouping itsindividuality within the changing tradingenvironment, while effectively promotingsustainable development, should be a primaryfocus of attention by developing countriesinvolved in RTAs.

The effective management of theinterface between national developmentobjectives, regional initiatives and the overalltrading environment demands the synchronizingof domestic developmental requirements andobjectives with external commitments in differentlayers of integration. This in turn requires thedevelopment of a comprehensive development-oriented trade policy, and that there be a clearpicture of the developmental implications ofnorms and disciplines being developed in thedifferent layers of integration. Additional spaceavailable for policies promoting development inthe context of RTAs must be clearly identified.RTAs will only make sense to the extent that theyincorporate a “plus” element over WTOAgreements, promoting stronger and deeper rulesand disciplines, and also differentiated specificliberalization commitments. This relation alsoholds true for agreements at other levels. Forexample, in the Western hemisphere the FTAA

will only make sense if it is WTO-plus. Equally,a subregional or a bilateral agreement, within thehemisphere, will have to be FTAA-plus, and soon. The identification of the required “plus”elements demands a comprehensive analysis ofthe different rule-making developments in thedifferent layers – multilateral, hemispheric,regional and bilateral – and identification ofadditional space available for action in each level.The real political viability of adopting furthercommitments should be evaluated, realisticallyassessing what would be possible to achieve andin what time framework. In this regard, thefollowing are relevant questions: what is thepolitically available space at each level ofnegotiation to introduce the elements that wouldconfer a developmental friendly “plus” or bonuscharacteristic on the agreements? What woulddifferentiate agreements to be implemented atdifferent levels? And what issues should beincorporated in the different layers of integration?

C. The imperative of innovative thinking

A major concern of developing countriesin the MTS is carving out the necessary policyspace for implementing developmental policies.In the context of RTAs, their objective is toidentify ways and means of turning thoseagreements into viable developmental options.Both of these goals require clarity regarding asound development policy and about thoseinstruments more adequate for achievingdevelopmental objectives. However, developingcountries are currently facing a growingdisenchantment with the “sound economicpolicies” proposed, and implemented, during the1990s, while still trying to define viablealternative development strategies and policiesallowing increasing competitiveness andachieving a effective insertion into the worldeconomy. Privatization, trade liberalization andderegulation were the common building blocksof the economic reforms implemented by a largenumber of developing countries during the1990s. This view also produced the paradigmshift regarding SDT that took place in the MTSduring the Uruguay Round. It was conceived thatWTO Agreements embodied that sound

16

economic policies, therefore SDT should not beimplemented through “cop out” provisions, butmerely through transition periods necessary foradaptation and the provision of technicalassistance to allow adequate implementation ofthe commitments. Domestic reforms supportedby commitments in the MTS were expected toaddress developmental needs of developingcountries. The old SDT approach was deemedperverse because it allowed developing countriesthe possibility of departing from sound economicand trade policies and legitimized the “free ridingon the part of developing countries.42

As noted earlier, empirical evidencesuggests that reforms implemented by developingcountries have not always fulfilled their promisesand have sometimes produced negativedevelopment effects.43 The conventional wisdomof the 1990s (the so-called Washingtonconsensus) has been questioned both by policymakers and by analysts.44 This wisdom is moreoften seen today as a “damaged brand”,45 limitingthe policy space in most developing countries.Also, there is the issue of “reform fatigue” in manydeveloping countries confronting unexpectedresults. Clarity on the policies and instrumentsthat would allow the developmental, trade andfinancial needs of developing countries to be facedis a precondition to turn both South-South andNorth-South RTAs into effective vehicles ofdevelopment, and also for carving out neededspace for development policies in the WTOAgreements. The analysis of developmentstrategies and policies should receive priorityattention in the context of the current efforts ofdeveloping countries to engage in RTAs; suchanalysis would also lift the level of the debate ofSDT in the MTS. In particular, as stated above,the relationship between regionalism and

development should receive as much attentionas that being given to the relationship betweenregionalism and multilateralism.

D. Getting the act together: Institutionalrequirements to confront the new tradingenvironment

In order to be able to adequately managethe complex interface of agreements in aconstantly evolving “spaghetti bowl”, capacitybuilding is a central challenge for developingcountries confronting the new realities of thetrading environment. As has been stated, “gettingcapacities right is at least as important as gettingprices and markets right”.46 Capacity constraintsare hampering effective participation in thedifferent negotiating processes, and also areevident in the daily administration of the existingagreements in which developing countriesparticipate. The difficulties facing developingcountries with the implementation of the WTOAgreements, and even with the notificationrequirements, and also problems facedineffectively engaging in the current negotiationsin the WTO, and in other instances, attest toexisting serious institutional weakness.47 Thiscapacities deficit is being increasingly aggravatedby the multiplicity of processes in whichdeveloping countries are simultaneouslyparticipating. In a complex trading environmentevolving on the basis of a negotiated framework,developing countries cannot expect to be able topromote their interests and obtain benefits unlessthey have the capacity both to negotiate andsubsequently to administer and participatesimultaneously in the RTAs and in the MTS.Capacity building emerges as an imperative thatdeveloping countries must address urgently.

42 Fukasaku (2000); C. Michalopoulos (2000).43 See, for example, UNCTAD (2002).44 UNDP (2003). See also the collected papers in Fine, Lapavistsas and Pincus (2001).45 Naim (2002).46 Malik (2002).47 At the time of writing, for example, only a limited number of developing countries have been able to elaborate and

present their initial requests in the services negotiations to other WTO Members.

17

One of the salient features of the newregionalism is the importance that countries areattaching to the liberalization of trade in servicesin the context of RTAs. Interest in the area ofservices liberalization by developing countries isrelatively recent, having begun in the course ofthe Uruguay Round, and is linked to theincreasing awareness of the importance of havingaccess to services at world prices even to competein trade in goods, as well as to the growingcapacity of developing countries to provideservices such as tourism and labour. Now,ambitious efforts are under way to incorporateservices within the scope of many of thesubregional arrangements, and this trend is alsooccurring at the broader regional level.Agreements for the liberalization of trade inservices can be found both in South-South andin North-South RTAs. RTAs on services are builtaround a number of core elements: coverage,liberalization principles, liberalization approachand related disciplines. According to the natureand scope of commitments around theseelements, a number of different types of RTAshave been concluded, with significant differencesamong them.48 This section focuses on therelationship between the MTS and regionalismas it relates to services.

The General Agreement on Trade inServices enables WTO Members to be parties topreferential agreements aimed at the liberalizationof trade in services. One of the two MFNexemptions in the GATS is for preferentialtreatment accorded under GATS Article V on

Economic Integration, which corresponds toGATT Article XXIV for trade in goods.Preferential agreements liberalizing trade inservices must be compatible with the provisionsof GATS Article V, and are to be notified to theWTO Council for Trade in Services. These RTAsin services, as in the case of goods (notified tothe Council for Trade in Goods), are then referredto the Committee on Regional Trade Agreements(CRTA) to evaluate their consistency with ArticleV, and recommendations, if appropriate, may bemade to the parties.49

Detailed consideration of the systemicissues raised by Article V only began in late 1998,and WTO Members have reported that progressin the adoption of the reports on thecompatibility of RTAs with WTO requirementshas been impeded by the lack of consensus onthe interpretation of the rules relating to RTAs.Furthermore, many of the RTAs covering tradein services have not yet been notified to the WTOfor examination by the CRTA, and are thereforewithout any effective multilateral oversight. Thislack of compliance with one of the basicrequirements of GATS regarding RTAs is clearlya matter of concern. Several countries haveproposed the revision and, if necessary,clarification and reinforcement of Article Vbecause ambiguities surrounding crucialprovisions leave the compatibility of RTAs withArticle V largely uncertain. Without clarificationof the provisions of Article V, the systemicimplications of preferential agreements on tradein services will remain controversial, and the link

III. SERVICES PREFERENTIAL TRADE LIBERALIZATIONAND THE GATS

48 For a discussion of the different options for RTAs in services refer to Abugattas (1999b) and Abugattas and Stephenson(2003).

49 Article V 7 (a) and (b) provides that the Council may establish a working party to examine the agreements and toreport to the Council on consistency with Article V. The Council for Trade in Services is referring the notificationsreceived to the CRTA.

18

between regionalism and multilateralismimprecise and undefined. Also, because mostregional agreements covering trade in serviceshave introduced an MFN exemption to treatmentgranted to third parties under Article Vcompatible agreements, clarification of regionalintegration provisions in the GATS is necessaryin order to provide a predictable and secureframework in which regional initiatives could bepromoted. In the context of the review providedfor by paragraph 29 of the Doha MinisterialDeclaration, WTO Members need to addressthose issues affecting the evaluation ofcompatibility of RTAs with Article V.

In order to be compatible with the GATS,an agreement liberalizing trade in services mustfulfil two basic conditions: (i) it must have“substantial sectional coverage” in terms ofsectors, volume of trade affected and modes ofdelivery, and (ii) it has to provide for nationaltreatment for services providers of Memberseliminating “substantially” all discrimination.These conditions must be met either on the entryinto force of the agreement or within a“reasonable” time frame. Article V provides forflexibility on these two basic requirements in twocases: when developing countries are membersof a preferential agreement in services, bothbetween developing countries and RTAs withdeveloped countries,50 and when such anagreement is related to a wider process ofeconomic integration or trade liberalization.Flexibility should be understood to mean thatsuch agreements might cover fewer sectors, alower volume of trade and fewer modes ofdelivery, while also maintaining a wider spectrumof limitations to national treatment.

In keeping with the provisions in ArticleXXIV of GATT, from which they were basicallyderived, the provisions of GATS Article Vintroduce a high level of complexity for the actualevaluation of RTAs covering trade in services.Discussion on the issues surrounding GATS

Article V have been held in the WTO, and theWTO Secretariat has produced a compilation ofall the issues that have been raised regardingArticle V.51 Our intention here is to highlightthose issues that should be given particularattention by developing countries in the workbeing undertaken in the NGR.

The requirement for “substantial sectoralcoverage in Article V (1)(a), understood in termsof numbers of sectors, volume of trade affectedand modes of supply, has already been subjectedto different interpretations by WTO Members.Furthermore, the actual measurement of coveragewill be an enormously difficult task in the absenceof uniform classification to be utilized in all RTAs,and measurement of value of trade will be verydifficult, if not impossible, to nail down becauseof the limited statistics available in the area ofservices. With respect to the substantial coveragerequirement there are two approaches. One viewis that not all sectors necessarily have to becovered, and the other is that the flexibilityprovided by Article V (1)(a) does not allow forthe exclusion of any complete sector from anagreement. In practice, most agreements thathave come into effect to date exclude, besidesservices provided in the exercise of governmentalauthority, some specific sectors from theircoverage. In some cases, even important sectors,or modes of delivery, have been excluded, forexample financial services in the Canada-ChileAgreement, or, for all practical purposes, Mode4 in the case of the NAFTA-Type Agreements.Maritime cabotage services, air transport andaudiovisual services are, inter alia, other preferredexclusions. In this regard, an emerging problemis that countries participating in preferentialagreements are autonomously definingcompatibility standards. For example, the ECconcludes in relation to its agreement withMexico: “Although certain services sub-sectors i.e.audio-visual, air transport … as well as maritimecabotage are explicitly excluded from the coverageof the agreement, it should still be considered to

50 There is no such flexibility for RTAs in the area of goods: when there is a developed country partner, an RTA ingoods must satisfy the full rigour of GATT Article XXIV, although there has been some flexibility in practice in favour ofdeveloping country participants among agreements which, admittedly, have never been approved.

51 Major issues raised have been summarized by the WTO Secretarial in TN/RL/W/8/Rev.1, 1 August 2002.

19

have ‘substantial sectoral coverage’ in the senseof Article V:1 (a)”.52

The problem is that, instead of beingdetermined on the basis of the principles of GATSArticle V, sectoral coverage is being definedpragmatically on the basis of the specific interestsof the parties, establishing a regrettable precedentfor a multilateral understanding of the scope ofthe substantial sectoral coverage requirement.

This same problem of coverage also arisesregarding the coverage of modes of delivery, wherethe treatment of Mode 4 in North-Southagreements is of particular interest to thedeveloping countries. The issue of a prioriexclusion also brings great ambiguity surroundingcompatibility requirements. GATS Article Vestablishes that RTAs should not provide for thea priori exclusion of any mode of supply. Whatexactly should be understood as a priori exclusion?Does this mean a legally explicit exclusion fromcoverage of the agreement? Or does it imply a defacto exclusion resulting from the particularcommitments adopted by members or from theimplementation of the agreements?

Another crucial issue concerns theinterpretation of the extent of flexibility providedby paragraphs 2 and 3(a) of Article V of the GATSwhen the liberalization of trade in services is partof a wider process of economic integration ortrade liberalization, and when developingcountries are parties to an agreement. There aredifferent interpretations of the flexibility allowedby Article V. The more restrictive interpretationsuggests that the limitations to sectoral coverageand the maintenance of discriminatory measureswith respect to national treatment should beminimum. On the basis of such interpretation,RTAs should encompass the four modes ofdelivery without reservation as to nationaltreatment, while the exclusion of sectors shouldbe limited to exceptional cases. A differentinterpretation suggests that there is a significantmargin of flexibility to exclude modes of deliveryand sectors as well as to allow for the maintenance

of discriminatory measures with regard tonational treatment when developing countries areparties to an agreement liberalizing trade inservices.

This issue of flexibility goes far beyondacademic interest. In practice, some agreementsthat are already in effect appear to be attemptingto set standards for regional agreements onservices. For example, the more restrictiveinterpretation seems to be behind the EuropeanCommunities Association Agreement withJordan. The agreement itself recognizes that inits current form it does not constitute an“economic integration agreement as defined byArticle V of the GATS”. In this case the statedobjective of the parties is to develop Title III ofthe agreement “with a view to the establishmentof an economic integration agreement as definedin Article V of the GATS”.53 However, the EC-Jordan agreement incorporates significantliberalization commitments in its current formthat, according to the alternative interpretationof Article V paragraphs 2 and 3(a), would makeit fully compatible with Article V even at thisstage. At their current stage of development, itis likely to be in the interests of developingcountries to maintain some flexibility, whichseems to be precluded by this relatively restrictiveinterpretation of Article V.

The exact meaning of paragraph 2 – that“consideration may be given to the relationshipof the agreement to a wider process of economicintegration or trade liberalization among thecountries concerned” – is another issue thatdeserves clarification. Should it be understoodthat in those cases there is more flexibility todepart from provisions of paragraph 1 (b)? Whatis the extent of that flexibility? What should bethe nature of the integration agreement and thescope of trade liberalization among the partnersto such an agreement to qualify under paragraph2?

A related issue concerns the situation ofstand-alone sectoral agreements. A great number

52 European Commission, EU-Mexico Free Trade Agreement, 2000.53 Article 40 Euro-Jordan Agreement.

20

of such agreements currently cover a number ofservices activities, and the legal status of thoseagreements is unclear at present. Agreements thatprovide for statutory preferential treatment betterthan the one provided to other WTO Membersshould have been notified as part of Annex II ofMFN exemptions, or they should have been thesubject of a waiver request under Article IX (3)of the Marrakesh Agreement Establishing theWTO, under paragraph 2 of the Annex on ArticleII Exemptions. However, there have been norequests made for waivers on services measures.54

Article II exemptions should not exceed a periodof 10 years (i.e. they should not extend beyond2005) and extensions are currently subject tonegotiation as agreed in the Guidelines andProcedures for the Negotiations adopted by theCouncil for Trade in Services. Some developingcountry Members have inscribed as Article IIexemptions some measures that fall under ArticleV. If those measures are not withdrawn fromAnnex II exemptions they will have to beextended to all Members in 2005, potentiallycompromising their regional integration efforts.Current negotiations under Article XIX shouldprovide the opportunity for addressing this issue.

Under Article V, the compatibilityconditions must be met either upon the entryinto force of the agreements or “on the basis of areasonable time-frame”.55 Contrary to the caseof trade in goods, for which the reasonable lengthof time of Article XXIV has been established bythe WTO Understanding on the Interpretationof Article XXIV as not exceeding 10 years, savein exceptional cases, Article V does not set anyreference for the time in which an agreementliberalizing trade in services for compliance.What is to be considered to be reasonable timeframes is left to evaluation on a case-by-case basis

in the CRTA, leaving some uncertainty as to theoutcome of the evaluation. Regarding timeframes, as reference it may be noted that in thecase of recent agreements intended to liberalizetrade in services among developing countries, forexample the Andean Community andMERCOSUR, the time frame for achievingsubstantial sectoral coverage and full liberalizationof trade in services has been set at 10 and 8 years,respectively. In the EU agreements, a 10-yearperiod has been considered a reasonable period.However, for many developing countries, the 10-year time frame of GATT Article XXIV may beinsufficient in the case of services, in particularin North-south agreements, because of the needto establish a satisfactory regulatory andinstitutional capacity as a precondition forliberalization of services trade.

Interestingly enough, GATS Article Vdoes not envisage any obligation to eliminatemarket access limitations in the sense of GATTArticle XVI. This raises all the same questionsregarding those cases where a measure defined inArticle XVI also denies national treatment whichhave been extensively discussed in the Committeeon Specific Commitments and in the Councilfor Trade in Services in relation to the schedulingof specific commitments. There is ambiguity asto how to interpret this provision. Does it meanthat there is no obligation to eliminate ArticleXVI limitations? Are discriminatory measuresagainst foreign providers limiting market accessto be considered denial of national treatment? Isthere in fact the possibility of progressivelyeliminating market access limitations underservices regional integration agreements as thereis for goods under GATT Article XVI? In thiscase, does the requirement of “reasonable timeframe” also hold?

54 For a discussion of this issue, refer to Stephenson (2000).55 According to some interpretations – not shared by the author – Article V(1)(b) might only set a time constraint on

the elimination of discrimination between parties through eliminating existing discriminatory measures, and/or prohibitionof new and more discriminatory measures in the sense of Article XVII, that is regarding national treatment. No timeconstraint would exist on achieving substantial sectoral coverage. A flexible interpretation of these provisions would allowArticle V compatibility of agreements with very limited initial sectoral coverage. An alternative, more rigid, interpretationwould require agreements to have substantial sectoral coverage from their entry into effect. In practice, the majority ofRTAs covering services contemplate a progressive sectoral incorporation into the liberalization commitments.

21

Another condition included in Article V(4), and derived from the equivalent provisionsof Article XXIV of the GATT, is that the RTAsin services shall not in respect of any Memberoutside the agreement raise the overall level ofbarriers to trade in services within the respectivesectors or sub-sectors relative to the level existingprior to the agreement. It would be useful toclarify whether this requirement applies to allsectors or sub-sectors covered by RTAs regardlessof whether a country has made a specificcommitment in its schedule in the GATS withrespect to that sector or sub-sector. Aninterpretation that it applies to all sectors coveredby the RTA independently if Members of theRTA have made commitments in the GATSwould imply the binding in favour of all WTOMembers of all existing limitations in thecountries members of the RTAs. As the onlybarriers to trade in services that exist in the legalframework of GATS are those bound byMembers in their national schedules, thisinterpretation would be very fragile one. As inthe case of goods, this provision introduces certaincomplexities when evaluating the compatibilityof RTAs with Article V. Besides the enormousdifficulties associated with measurement in thecase of services of “the overall level of barriers totrade” ex ante and ex post to the integrationagreement, there is the problem of defining theevaluation period for those agreements withmandates to liberalize trade in servicesprogressively.

In the case of an agreement involvingonly developing countries, paragraph 3(b) ofArticle V allows the granting of more favourabletreatment to juridical persons owned orcontrolled by natural persons of the parties. Thatis, it leaves open the possibility of introducing ormaintaining discrimination on the basis ofnationality, even though those juridical personscould be constituted under the laws and in theterritory of one of the parties. This provisioncould allow, for example, the limiting of thebenefits of liberalization of trade in services forcompanies owned and controlled by nationals ofthe parties to an agreement. Notwithstanding this

possibility granted to developing countries, thedifferent agreements in operation for theliberalization of trade in services amongdeveloping countries have not as yet introducedprovisions of this kind. Although paragraph 6seems to contradict the provisions of paragraph3 (b), paragraph 6 should be understood as thegeneral rule, while the provisions of paragraph 3(b) may be regarded as an exception in favour ofdeveloping countries.

The issue of recognition of education,experience, requirements to be met, and licencesor certifications of services providers is ofparticular importance for developing countries,especially in relation to the prospects forexporting services through Mode 4. Article VIIof GATS provides that Members recognizingqualifications of suppliers from other Membersshall afford adequate opportunity to any otherinterested party to negotiate their accession toany existing agreement or arrangement, or if aMember accords recognition autonomously itshall afford adequate opportunity to any otherMember to demonstrate that qualifications of itsservices providers should be also recognized. Morethan 28 notifications have been presented underArticle VII, mostly by developed countries. Therelationship between Article VII and Article Vneeds further clarification. A number ofrecognition arrangements have been included ingeneral notifications under Article V, and thequestion arises whether recognition arrangementsnotified in the context of RTAs are in fact subjectto the disciplines of Article VII. There aredifferent interpretations in this regard. One viewis that Article V, providing for an exception tothe non-discrimination requirement of Article II,also covers similar obligations in other Articles,including Article VII. An opposite view arguesthat recognition agreements are covered by ArticleVII regardless of whether they are between partiesto a RTA or under which Article they werenotified to the WTO. It has been noted that thefirst interpretation may reflect the desire of someMembers to avoid the obligations under ArticleVII.2.56

56 This issue is discussed in OECD (2003).

22

Another question that is not clear inrelation to GATS Article V concerns the possibleimplications of the recommendations by WTOMembers emanating from the examination of aparticular agreement on services. Although thismight seem rather academic, given the almost

complete lack of progress in reviewing agreementsin the CRTA, the issue was clarified for ArticleXXIV in the Understanding reached in theUruguay Round, but there are no similarprovisions for Article V in the GATS.

23

The new wave of regional tradeagreements is raising a number of issues fordeveloping countries that need some seriousresearch and considerable technical support sincethe development impact is far from clear and itseems that a number of policy options are beingforeclosed without due consideration of theconsequences. This derives from the fact thatthese new agreements, particularly those that arebeing established on a North-South basis, seemintended to pre-empt discussions within theWTO as well as reducing policy space for thedeveloping countries. Another issue is the

complex web of agreements, within and acrossregions, that are being negotiated in parallel withthe WTO’s post-Doha work programme.Nowhere are the issues more complex than inthe area of services, where there is no road mapcomparable to that which has been sketched outin the area of goods over the last 50 years (wherethe signposts still seem rather confusing). Thisstudy has attempted to set out a number of theissues that require more attention by researchersand policy makers as they seek to reconcile theirdevelopment agenda with the new demands thatare being made of them.

IV. CONCLUSIONS

24

Abugattas, L. (1999a). The Andean Community and the Process of Integration in the Hemisphere, inRegualr e Democratizar o Sistema Global: una parceria para o Século XXI. Institute of Strategicand International Studies, Cascais, Portugal.

Abugattas, L. (1999b). “Liberalization of trade in services: Options and Implications for Latin Americanand Caribbean Countries”, paper presented at the Second Meeting of the Latin American TradeNetwork, Buenos Aires (16-18 June 1999).

Abugattas, L. and S. Stephenson (2003). “Liberalization of Trade in Services: Options and Implications”,in D. Tussie (ed.), Trade Negotiations in Latin America: Problems and Prospects, Palgrave Macmillan,New York.

Abugattas, L. (2002). “Politica Industrial en el Peru: Balance y Margenes de Acción”, in Alan Fairline(ed.) El Sector Industrial Peruano en el Nuevo Contexto Internacional, Friedrich Ebert Stifund,Serie Cuestion Peru, Lima.

Andean Community Secretariat (2003). Free Trade of the Americas Agreement: Economic Impact forthe Andean Community. Executive Summary, COM/CXIV-E/di 6, 20 June.

Cernat, L. and S. Laird (2003). North, South, East, West: What’s best? Modern RTAs and theirImplications for the Stability of Trade Policy, mimeo. UNCTAD, Geneva

Cernat, L. (2001). Assessing Regional Trade Arrangements: Are South-South RTAs More Trade Diverting?UNCTAD, Policy Issues in International Trade and Commodities Study series No. 16, Geneva.

Cernat, L. (2003). Assessing South-South Regional Integration: Same Issues, Many Metrics, UNCTADPolicy Issues in International Trade and Commodities Study Series No. 21, Geneva.

Davenport, M. (2002). “Preliminary Analysis of Certain Issues for an ACP Position in post-CotonouNegotiations, in Particular WTO-Compatibility and the New EU GSP Scheme”, study preparedfor the Economic Affairs Division of the Commonwealth Secretariat, mimeo. September.

Devlin, R. and A. Estevadeordal (2001). What is New in the New Regionalism in Latin America, inV.Bulmer-Thomas (ed.), Regional Integration in Latin America and the Caribbean, Institute ofLatin American Studies, London.

Fine, B., C. Lapavistsas and J. Pincus (2001). Development Policy in the Twenty-First Century: Beyondthe post-Washington Consensus, Routledge Studies in Development Economics, London andNew York.

Flores, R. (1997). The Gains from Mercosur: A General Equilibrium, Imperfect Competition Evaluation,Journal of Policy Modeling, No. 19.

REFERENCES

25

French-Davis, R. (2003). Reforming the Reforms of the Washington Consensus: For Achieving Growthand Equity, CSIS, 23 June.

Fukasaku, K. (2000). Special and Differential Treatment for Developing Countries: Does it Help thoseWho Help themselves, United Nations University WIDER.

Gilbert, J, R. Scollay and B. Bora (2001). Assessing Regional Trade Agreements in the Asia Pacific,UNCTAD, Policy Issues in International Trade and Commodities Study Series No. 15, Geneva.

Hoekman, B. and M. Kostecki (2001). The Political Economy of the World Trading System, OxfordUniversity Press.

Inter-American Development Bank (IDB) (2002). Beyond Borders: The New Regionalism in LatinAmerica, Economic and Social Progress in Latin America, Inter-American Development Bank,Washington DC.

Laird, S. (1999). Regional Trade Agreements – Dangerous Liaisons? The World Economy, 22:9, pp.1179-1200.

Lopez-Cordova, E. and J. Mesquita (2002). Regional Integration and Productivity: The Experience ofBrazil and Mexico, paper presented at the IDB-INT/ITD NetAmericas Conference on“Integrating the Americas”, Washington, 20-21 November.

Malik, K. (2002). Development, Trade Liberalization and Development: Some Issues, paper presentedat the IDB/.INT/ITD NetAmericas Conference on “Integrating the Americas”, Washington,20-21 November.

Michalopoulos, C. (2000). The Role of Special and Differential Treatment for Developing Countries inGATT and the World Trade Organization. Working Papers on International Economics. TradeCapital Flows, No. 2388, World Bank, Washington DC.

Naim, M. (2002). The Washington Consensus: A Damaged Brand, Financial Times, 28 October.

OECD (2001). Regional Integration: Observed Trade and Other Economic Effects, Working Party ofthe Trade Committee, TD/TC/WP/(2001)19/rev.1.

OECD (2003). Services Providers on the Move: Mutual Recognition Agreements, TD/TC/WP(2002)48/FINAL.

Okamoto, J. (ed). (2003). Whither Free Trade Agreements? Proliferation, Evaluation andMultilateralization, Institute of Developing Economies, Japan External Trade Organization,Tokyo.

Onguglo, B. and T. Ito (2003). How to Make EPAs WTO Compatible: Reforming the Rules on RegionalTrade Agreements, European Centre for Development Policy Management, Discussion paperNo. 40.

Phillips, N. (2002). “Regionalising Multilateralism?: Hemispheric Integration in the Americas and theGovernance of World Trade”, paper presented at the Meeting of the Latin American TradeNetwork (LATN), Santiago, Chile, 12-13 December.

26

Sampson, G. and S. Woolcock (2003). Regionalism, Multilateralism and Economic Integration: The RecentExperience, United Nations University Press.

Scollay, R. (2001). Regional Trade Agreements and Developing Countries: The Case of the PacificIslands’ Proposed Free Trade Agreement, UNCTAD, Policy Issues in International Trade andCommodities Study Series No. 10, Geneva.

Stephenson, S. (2000). “Regional Trade Agreements on Services in Multilateral Disciplines: Interpretingand Applying GATS Article V”, in P. Sauve and R. Stern (eds.), GATS 2000: Liberalization ofServices, Brookings Institution Press, Washington, DC.

Stiglitz, J. (2003). El Rumbo de las Reformas: Hacia una Nueva Agenda para America Latina, Revista dela CEPAL, No. 80, August.

UNCTAD (2002). Economic Development in Africa: From Adjustment to Poverty Reduction – Whatis Next?, United Nations, New York and Geneva.

UNDP (2003). Making Global Trade Work for People, UNDP, Heinrich Boll Foundation, RockefellerBrothers Fund, Wallace Global Fund, Earthscan Publications, London.

World Bank (2000). Trade Blocks, Washington, DC.

WTO (2002). Compendium of Issues related to Regional Trade Agreements: Background Note by theSecretariat (TN/RL/W/8/rev.1 of 1 August 2002).

WTO (2003). World Trade Report, Geneva.

Yamada, A. (2003). “The United States Free Trade Agreements: From NAFTA to the FTAA”, inOkamoto, op. cit.

27

UNCTAD Study Series on

POLICY ISSUES IN INTERNATIONAL TRADEAND COMMODITIES

No. 1 Erich Supper, Is there effectively a level playing field for developing countryexports?, 2001, 138 p. Sales No. E.00.II.D.22.

No. 2 Arvind Panagariya, E-commerce, WTO and developing countries, 2000, 24 p.Sales No. E.00.II.D.23.

No. 3 Joseph Francois, Assessing the results of general equilibrium studies of multi-lateral trade negotiations, 2000, 26 p. Sales No. E.00.II.D.24.

No. 4 John Whalley, What can the developing countries infer from the UruguayRound models for future negotiations?, 2000, 29 p. Sales No. E.00.II.D.25.

No. 5 Susan Teltscher, Tariffs, taxes and electronic commerce: Revenue implicationsfor developing countries, 2000, 57 p. Sales No. E.00.II.D.36.

No. 6 Bijit Bora, Peter J. Lloyd, Mari Pangestu, Industrial policy and the WTO, 2000,47 p. Sales No. E.00.II.D.26.

No. 7 Emilio J. Medina-Smith, Is the export-led growth hypothesis valid for develop-ing countries? A case study of Costa Rica, 2001, 49 p. Sales No. E.01.II.D.8.

No. 8 Christopher Findlay, Service sector reform and development strategies: Issuesand research priorities, 2001, 24 p. Sales No. E.01.II.D.7.

No. 9 Inge Nora Neufeld, Anti-dumping and countervailing procedures – Use orabuse? Implications for developing countries, 2001, 33 p. Sales No. E.01.II.D.6.

No. 10 Robert Scollay, Regional trade agreements and developing countries: The caseof the Pacific Islands’ proposed free trade agreement, 2001, 45 p. Sales No.E.01.II.D.16.

No. 11 Robert Scollay and John Gilbert, An integrated approach to agricultural tradeand development issues: Exploring the welfare and distribution issues, 2001,43 p. Sales No. E.01.II.D.15.

No. 12 Marc Bacchetta and Bijit Bora, Post-Uruguay round market access barriersfor industrial products, 2001, 50 p. Sales No. E.01.II.D.23.

No. 13 Bijit Bora and Inge Nora Neufeld, Tariffs and the East Asian financial crisis,2001, 30 p. Sales No. E.01.II.D.27.

28

No. 14 Bijit Bora, Lucian Cernat, Alessandro Turrini, Duty and quota-free access forLDCs: Further evidence from CGE modelling, 2002, 130 p. Sales No.E.01.II.D.22.

No. 15 Bijit Bora, John Gilbert, Robert Scollay, Assessing regional trading arrange-ments in the Asia-Pacific, 2001, 29 p. Sales No. E.01.II.D.21.

No. 16 Lucian Cernat, Assessing regional trade arrangements: Are South-South RTAsmore trade diverting?, 2001, 24 p. Sales No. E.01.II.D.32.

No. 17 Bijit Bora, Trade related investment measures and the WTO: 1995-2001, 2002.

No. 18 Bijit Bora, Aki Kuwahara, Sam Laird, Quantification of non-tariff measures,2002, 42 p. Sales No. E.02.II.D.8.

No. 19 Greg McGuire, Trade in services – Market access opportunities and the ben-efits of liberalization for developing economies, 2002, 45 p. Sales No. E.02.II.D.9.

No. 20 Alessandro Turrini, International trade and labour market performance: Majorfindings and open questions, 2002, 30 p. Sales No. E.02.II.D.10.

No. 21 Lucian Cernat, Assessing south-south regional integration: Same issues, manymetrics, 2003, 32 p. Sales No. E.02.II.D.11.

No. 22 Kym Anderson, Agriculture, trade reform and poverty reduction: Implica-tions for Sub-Saharan Africa, 2004, 30 p. Sales No. E.04.II.D.5.

No. 23 Ralf Peters and David Vanzetti, Shifting sands: Searching for a compromise inthe WTO negotiations on agriculture, 2004, 46 p. Sales No. E.04.II.D.4.

No. 24 Ralf Peters and David Vanzetti, User manual and handbook on AgriculturalTrade Policy Simulation Model (ATPSM), 2004, 45 p. Sales No. E.04.II.D.3.

No. 25 Khalil Rahman, Crawling out of snake pit: Special and differential treatmentand post-Cancun imperatives, 2004, 25 p. Sales No. E.04.II.D.8.

No. 26 Marco Fugazza, Export performance and its determinants: Supply and de-mand constraints, 2004, 57 p. Sales No. E.04.II.D.20.

No. 27 Luis Abugattas, Swimming in the spaghetti bowl: Challenges for developingcountries under the “New Regionalism”, 2004, 30 p. Sales No. E.04.II.D.38.

29

United Nations publications may be obtained from bookstores and distributors throughout the world.Please consult your bookstore or write to:

United Nations Publications

All orders from North America, Latin America, the Caribbean and Asia and the Pacific shouldbe sent to:

United Nations PublicationsRoom DC2-853, 2 UN PlazaNew York, NY 10017, USATelephone: (212) 963-8302, Toll Free 1-800-253-9646 (North America only)Fax: (212) 963-3489E-mail: publications@un.org

Customers in Europe, Africa and the Middle East should send their orders to:Section des Ventes et CommercialisationBureau E-4, CH-1211Geneva 10, SwitzerlandTelephone: 41 (22) 917-2613/2614Fax: 41 (22) 917-0027E-mail: unpubli@unog.ch

QUESTIONNAIRE

UNCTAD Study Series onPOLICY ISSUES IN INTERNATIONAL TRADE

AND COMMODITIES(Study series no. 27: Swimming in the Spaghetti Bowl:

Challenges for Developing Countries Under the “New Regionalism”)

Readership SurveySince 1999, the Trade Analysis Branch of the Division on International Trade in Goods and

Services, and Commodities of UNCTAD has been carrying out policy-oriented analytical workaimed at improving the understanding of current and emerging issues in international trade ofconcern to developing countries. In order to improve the quality of the work of the Branch, itwould be useful to receive the views of readers on this and other similar publications. It wouldtherefore be greatly appreciated if you could complete the following questionnaire and return to:

Jenifer Tacardon-MercadoTAB/DITC, Rm. E-8076

United Nations Conference on Trade and DevelopmentPalais des Nations

CH-1211 Geneva 10, Switzerland

1. Name and address of respondent (optional):

2. Which of the following describes your area of work?

Government Public enterprisePrivate enterprise institution Academic or researchInternational organization MediaNot-for-profit organization Other (specify) _________________

3. In which country do you work? _________________________________________

4. Did you find this publication Very useful Of some use Little useto your work?

5. What is your assessment of the contents of this publication? Excellent Good Adequate Poor

6. Other comments: