International Trade Agreements: Laboratories of Innovation or Propellers of Fragmentation?

Abstract

The original ‘building blocks or stumbling blocks’ debate considered the positive and negative impacts on the multilateral trading system in the form of the World Trade Organization (WTO) of free trade agreements (FTAs) at a time when FTAs were primarily bilateral and/or regional. This article recasts the debate in light of modern realities. Since the collapse of the Doha Round, WTO Members have increasingly formed FTAs with more than one large economy; plurilateral as well as bilateral groupings; and agreements including WTO-plus commitments. Further, Members have pursued plurilateral subject-specific negotiations both outside the WTO such as the Trade in Services Agreement and within, in the form of Joint Statement Initiatives. The article assesses from General Agreement on Tariffs and Trade formation to the present the extent to which the full range of trade agreements have facilitated experimentation and to which such agreements have had a fragmenting impact on the WTO. While the answers to these questions are nuanced, what is clear is that Members who wish to liberalize more deeply than other Members will find a way to do so outside the WTO rather than abandoning their objectives. As such, the debate today is no longer whether bilateral or regional FTAs are good or bad for a single undertaking-based multilateral WTO. Instead, we must weigh whether it is preferable for new plurilateral initiatives to be accommodated within the WTO at the expense of strict consensus or to reject such initiatives with the understanding that powerful Members will instead to pursue their objectives in plurilateral arrangements outside the WTO.