Regional Trade Agreements Versus Broader Global Trade Liberalization - Paper Example

Thesis Statement: Over the years, liberalized trade has been sought after as a way of regional trade agreements and broader global trade liberalization. The choice of policy between the two tactics has shaped up to be a controversial one eliciting arguments amongst economists and politicians regarding which is the better approach for several nations, for the worldwide economy at large, and whether the two approaches are complimentary or self-contradictory.

Annotated Bibliography

Bagwell, K. and Staiger, R. (1997). Regionalism and multilateral tariff cooperation. Cambridge, Mass.: National Bureau of Economic Research.

This research by Bagwell and Staiger seeks to understand the spread of Regional Trade Agreements, commonly known as RTAs. It also seeks to clearly define what exactly are the significances of the RTAs in multidimensional tariff collaboration. In this research, the question on if Regional Trade Agreements are beneficial or detrimental to global trade liberalization has been dealt with quite well as the authors have developed a comprehensive argument on what are the impacts of both policies as adopted in different circumstances in the world. However, the two authors do not come up with a conclusive answer to the continuous debate on which policy is ideal. Nonetheless, their analysis on the effects of the two approaches is geared towards coming up with a vivid picture of the outcomes of RTAs and global trade liberalization.

Bohara, A. K., Gawande, K., & Sanguinetti, P. (2004). Trade diversion and declining tariffs: evidence from Mercosur. Journal of International Economics, 64(1), 65-88.

This research paper largely scrutinizes the supposition made by one, Richardson in 1993 to the common knowledge that the integration of trade might to a certain extent aggravate inadequacies. The proposition clearly forecasts that trade alterations could in point of fact result to the decrease in tariffs. It is primarily held responsible to the existence of political atmospheres in governments neutral functions. The authors have keenly analyzed a rich set of data from Argentina and have drawn up comprehensive conclusions on the impacts of the integration of trade in regions across the world in the determination of tariffs.

Bond, E. W., Riezman, R. G., & Syropoulos, C. (2004). A strategic and welfare theoretic analysis of free trade areas. Journal of International Economics, 64(1), 1-27.

Bond and his co-authors did a wide-ranging research that was aimed at determining how the creation of Regional Trade Agreements RTAs, would consequently have an impact on the tariffs within the region and the trade wellbeing of the region. In so doing, the three of them came up with a 3-country model illustration that would help them conduct a well-organized research. The most fundamental outcome of this research was that, the implementation of regional trade agreements within the three countries would, as a result, encourage the bloc members to lessen their external tariffs. Normally, members of an RTA would desire to ease up trade internally either partially or implement a regional pact that suits them. The paper likewise shows just how establishing RTAs may to a certain extent prove to be detrimental to the realization of global trade liberalization.

Foroutan, F. (1998). Does Membership in a Regional Preferential Trade Arrangement Make a Country More or Less Protectionist? The World Economy, 21(3), 305-335.

Foroutan, a renowned economics enthusiast, did a research paper that was geared towards identifying whether Regional Trade Agreements, that have proliferated in the last decades or so, whether they have proved to be a challenge. The question on whether RTAs do encourage and kindle the progress of trade and investments in a region or on the other hand, the backtrack trade to unproductive avenues and destabilize worldwide trading structures was put to the test. This was as a result of the global debate on whether RTAs and global trade liberalization were conflicting or complementary. In her paper, she concludes that there is lack of concrete evidence that being in a RTA would result to a better substantial import command.

Furusawa, T., & Lai, E. L. (1999). Adjustment costs and gradual trade liberalization. Journal of International Economics, 49(2), 333-361.

In this journal of economics by Furusawa and Lai, the two authors seek to analyze the dynamics trade liberalization between two nations. According to them, when a country liberalizes trade with another nation, the import sector suffers and thus results to the rearrangement of employment amongst sectors. They got to derive one of the furthermost accommodative and self-imposing trade liberalization structure that resulted to steady liberalization of trade in general. During their research also, it dawned upon them that the adjustment of trade tariffs in a country that are made to suit bilateral trade affiliations, would, significantly, hasten and boost the speed of trade liberalization and for the nation to realize great economic strides.

Karacaovali, B., & Limao, N. (2008). The clash of liberalizations: Preferential vs. multilateral trade liberalization in the European Union. Journal of International Economics, 74(2), 299-327.

Karacaovali and Limao worked together in writing a journal of international economics that would seek to answer the long due debate on whether regionalism was conflicting global liberalization of trade and particularly in the European Union economic bloc. The two authors develop a model that shows how regional trade agreements actually hinder global trade liberalization. Nonetheless, there was no compelling evidence that shows the existence of RTAs does affect global trade liberalization. In a bid to settle the confrontation, they made use of the European Union tariffs and made up conclusive judgments that the situation does not affect many nations in Europe. In addition, they provide an in-depth analysis of factual evidence that political economies actually do prove to be vital determinants of trade in the region.

Limao, N. (2006). Preferential Trade Agreements as Stumbling Blocks for Multilateral Trade Liberalization: Evidence for the United States. American Economic Review, 96(3), 896-914.

This paper by Limao looks to analyze what is the impact of many nations belonging to RTAs on global liberalization of trade. The research was a result of the enduring debate on whether the two trade policies brought a complementary effect or a contradictory impact. With the growing concern of many nations joining trade agreements in their regions, Limao found that there was no strong evidence, as such, that would support the hypothesis that RTAs are tentative to the global trade liberalization treaties. By making use of a rich set of data on the United States international tariffs, he made it known that the impact of RTAs on global trade liberalization was not complementary. Nonetheless, there was a reciprocity factor based on the decrease of trade tariffs in the global market.

Summers, L. (1991). The Move to Free Trade Zones: Comment, Federal Reserve Bank of Kansas City, Review, December

L. Summers, worked at the treasury department of the United states at a very senior position. He was on the frontline to promote the establishment of RTAs in the late 20th century. In his journal, the move to free trade zones, he provided substantial reasons as to why his sentiments were to be upheld. He remained skeptical in the confrontation of free trade zones and global trade liberalization citing that the assumption of free trade zones should not, whatsoever, be made as grounds for the justification for further trade agreements in the future, supporting the establishment of regional free trade zones that would hasten economic growth.

Regional Trade Agreements versus Broader Global Trade Liberalization.

For a very long time now, the present-day world of trade has to a very large extent revolutionized and transformed compared to previous centuries where batter exchange was the primary form of trade. In the recent past, owing to the great advancements nations of the world have realized, trade aspects of global trade liberalization, as well as regional trade agreements, have gradually emerged as strategies to make international trade more reasonable and beneficial.

The World Trade Organization defines regional trade agreements, commonly knowns as RTAs, as cooperative trade pacts that encompass two or more countries which share a common geographical bloc. The treaty could or could not include permitted trade agreements and duty unifications.

The global oversight and regulatory body, on the other hand, describe global trade liberalization as the discount or extermination of trade limitations and restrictions in the transaction of commodities and services among states across the globe. This is to a large extent achieved by doing away with trade charges like import taxes and nontariff limitations such as accrediting rights, bonds and other aspects of international trade.

Whereas these two aspects of international trade have turned out to be fundamental policies in global trade, deciding on which policy to adopt as a nation or implementing both has proved to be difficult. As a result, it has elicited a lot of debates and confrontations between economists and politicians as both seek to suit their interests. Without a doubt, the dispute on whether both strategies are either complementary or contradictory has prompted intensive research by economists across the world with an aim of bringing clarity on the issue (Foroutan, 1998).

Larry Summers, a renowned economics scholar, having done an impact study, suggested that nations ought to come up and foster RTAs that are reciprocated in all kinds of reduction of trade tariffs regardless of whether they are one-sided, multistate, or bilateral. (Summers, 1991). Trade regionalism is fated to be even better and may perhaps easily accelerate broader trade liberalization in a trading bloc as well as backtrack it in spite of global trade liberalization demonstrating to be beneficial.

Having said that, the institution of RTAs has immensely encouraged a the doing away with trade restrictions and tariffs according to (Bagwell & Staiger, 1999). It was ascertained grounding on the supposition; states in a trade treaty do set tariffs to capitalize on the well-being of a nation and in a political - economy situation relative to (Bond et al. 2004).

An inquiry performed to evaluate the impact of RTAs on trade liberalization was conducted by investigating how privileged imports would affect the trade tariffs. In light of this, whenever a government expects that advantaged rates will inspire or trigger a change in preferential imports, they may well regulate the peripheral tariffs prior to the preferential imports change relative to the findings of (Bohara et. al. 2004) as well as (Furasawa & Lai, 1999). Thus, this therefore suggests, gauging the impression and the influence of doing away with the external tariffs directly could perhaps provide a completely dissimilar but complementary depiction, according to (Bohara et al. 2004).

Studies conducted by (Limao, 2006) together with (Karacaovali & Limao, 2008) challenged what Bohara and his co-writers had suggested. Their two papers were geared towards answering the question on whether liberalization of trade by the U.S. and E.U. stalled polygonal liberalization of trade with Uruguay.

The two papers suggested that it brought about an effect that was comparatively lesser in situations that had adopted liberalization. (Karacaovali & Limao, 2008). The maxim of the postulation employed on this issue was owing...