Regional Trade Agreements

A regional trade agreement (RTA) is an agreement that creates reciprocal trade concessions, such as the elimination of tariffs, among member nations. Some RTAs also promote regional economic integration by establishing common standards for labor rights, environmental protection, foreign investment, and fair competition. RTAs include multilateral and bilateral agreements. In 2012 there were 546 RTAs in the global economy, 354 of which were active.[1] RTAs are controversial mainly because trade and investment concessions listed in RTAs are inherently discriminatory against nonmember countries. Yet Article 24 of the WTO's charter permits trade concessions among members as long as RTAs do not impose additional trade restrictions on nonmember nations.[2] RTAs are categorized by level of economic integration.

A free trade area (FTA) is a type of RTA that eliminates trade barriers among member nations but permits individual members to devise their own restrictions on imports from nonmember nations. Examples of free trade areas include the North American Free Trade Agreement (NAFTA), the ASEAN Free Trade Area (AFTA), the European Free Trade Association (EFTA), and the Dominican Republic–Central America–United States Free Trade Agreement (CAFTA-DR). NAFTA is the world's largest FTA. It is comprised of Canada, Mexico, and the United States. The three NAFTA nations' combined gross domestic product (GDP) was about $19 trillion in 2012.[3] Trade among the NAFTA nations grew from $288 billion in 1993 to $1 trillion in 2011.[4]

A customs union creates free trade among member nations and a common external trade policy with nonmember nations. The common external tariff (CET) is a custom union's most visible external trade policy. A CET requires RTA members to levy the same import tariffs on goods entering the customs union. An example of a customs union is the Southern Common Market (MERCOSUR), which evolved from a free trade area to a customs union in the early 2000s. MERCOSUR is comprised of five full members (Argentina, Brazil, Paraguay, Uruguay, and Venezuela), along with several associate and ascending members.[5]

A common market eliminates all trade barriers among member nations, has a common external trade policy, and opens national borders to other resource flows from member nations such as cross-border flows of labor and capital. Today the Caribbean Community (CARICOM) is a common market. Revisions in the treaty binding member nations together over the past few decades increased the level of economic integration among member nations. In addition to meeting the requirements for a common market, CARICOM members also coordinate their macroeconomic policies.[6]

An economic and monetary union is the most thoroughly integrated form of RTA. An economic and monetary union includes all of the features of a common market and adds other forms of economic integration such as common currency, a unified economic and political policy, and common institutions to make and enforce the organization's rules. The European Union (EU) is the world's most highly integrated economic and monetary union. With the addition of Croatia in 2013, EU membership increased to 28 nations. The European Central Bank (ECB) coordinates the EU's monetary policy to promote price stability, economic growth, and jobs. EU institutions also develop common policies related to cross-border investment, labor standards and mobility, agriculture, energy, the environment, tourism, foreign aid, and other economic activity. By 2013 the EU's single currency, the euro, had replaced the national currencies of 17 of the 28 EU members. These 17 nations comprise the Eurozone within the larger EU. In 2012 the combined GDPs of EU nations was larger than the GDP of the United States.[7]

  • [1] WTO, WTO Annual Report, 2013 (Geneva: WTO, 2013), 17, 60.
  • [2] WTO, “General Agreement on Tariffs and Trade 1994,”
  • [3] World Bank, “Gross Domestic Product 2012,” World Development Indicators (database), July 1, 2013
  • [4] Office of the U.S. Trade Representative, “Joint Statement from 2012 NAFTA Commission Meeting,” April 2012
  • [5] Europa, “Mercosur: Common Market of the South,”
  • [6] CARICOM Secretariat, “The CARICOM Single Market and Economy (CSME),”; CARICOM Secretariat, “The Caribbean Community,” 2011
  • [7] European Commission, “What Is the Euro Area?”; Europa, “European Union: The Economy,”
 
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