Argument: Regional free trade agreements limit small country trade

Issue Report: Free trade

Supporting Evidence

  • “The Pros and Cons of Pursuing Free-Trade Agreements” , Economic and Budget Issue Brief, July 31, 2003 “Some critics worry that FTAs might divert the world away from multilateral trade liberalization and lead to the development of large, competing trading blocs–the United States and the Western Hemisphere, the EU and nearby countries, and Japan and its trading partners in Asia and the Pacific Rim–a result that would be inferior to multilateral free trade. Critics also note that the large size of the U.S. economy and its consequent desirability as a market give the United States a great advantage in negotiations with individual countries, especially small developing ones. The same is true for FTAs negotiated by the EU or Japan. The result of such unequal bargaining power can be that significant trade restrictions by the large countries remain in place that would more likely be eliminated under circumstances of more-equal negotiating power. Further, if small countries individually negotiate disproportionate concessions in FTAs, it may be difficult to rectify the situation multilaterally in WTO talks because the small countries will no longer have anything of substantial interest to trade away to the large countries in exchange for the latter eliminating their remaining significant barriers. Critics argue that if negotiations were instead to remain in the WTO with no free-trade agreements, the small countries could band together to increase their bargaining power. The result would be a more equal–and quite likely closer to total–elimination of trade barriers, which would benefit all countries. That argument assumes that progress in multilateral trade talks will eventually occur.”