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Regional Trade Arrangements

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Regional Trade Arrangements

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  • May 2008
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Page 1 of 17
Regional Trade Arrangements

Table of Contents:

Types of Regional Trade Arrangements
Free Trade Agreement
Customs Union
Common Market
Economic Union
Regional Trade Arrangements: Case Studies
NAFTA
EU
GCC Union
Benefits and Costs of Regional Trade Arrangements
Welfare Effects of Regional Trade Arrangements
Static Effects of RTAs
Dynamic Effects of RTAs
Conditions inducing Regional Trade Arrangements
World Trade Organization and Regional Trade Arrangements
Multilateralism vs. Regionalism
The RTA and WTO Relationship
References

I- Types of Regional Trading Arrangements
A- Free Trade Agreement:
The main functions of a free trade agreement are eliminating tariffs on goods, abolishing of trade barriers such as restrictive regulation on trade in services. For the free trade agreement, member countries don’t establish common tariffs of outside signatories, so that each member country establishes certain trade restraints to outsiders independently. Moreover, one of the most important functions of the free trade agreement is establishing a stiff political and cultural relationship among member countries. The free trade agreement is provided by GATT (The General Agreement on Tariffs and Trade) article 24 of general agreements regarding customs and trading and GATS (The General Agreement on Trade in Services) article 5 of general agreements regarding trade in services. By 2002, more than 130 of schemes for the free trade agreements are reported to the WTO. Major examples of the free trade agreements are the following: NAFTA (The North American Free Trade Agreement), CEFTA (Central European Free Trade Agreement), and SAFTA (The South Asia Free Trade Agreement). In addition, the free trade agreements are usually established among 2 nations; however, there are some multinational free trade agreements.

B- Customs Union
In general, the functions of a customs union are based on free trade agreement -- eliminating tariffs on goods, abolishing...