The World Bank, November 24, 2004 – 2004/11/24
International trade is one of the most prominent global economic issues today. Do regional trade agreements bring greater benefits to people in developing countries in desperate need of jobs and better public services? With regional trade agreements (RTAs) having increased sixfold since the 1980s and now covering more than one-third of global trade, the World Bank's Global Economic Prospects 2005 advises countries concluding bilateral and regional trade pacts to keep them "open”, so as not to divert trade or cause market distortions that penalize other developing countries. Regional trade agreements, including North-South bilateral free trade deals as well as South-South preferential agreements, can improve prospects for rapid poverty reduction, the report says, but only if developing countries integrate them into a strategy for liberalization of trade on three fronts - unilateral, multilateral, and regional.
.To this end, Mr. Newfarmer, Economic Advisor in the International Trade Department and Prospects Group of the World Bank and the lead author of the Report, gave an explanation to journalists during an interview. According to Mr. Newfarmer, the numerous bilateral agreements that are being signed around the world today will have consequences on the multilateral system. Such bilateral and multilateral agreements, particularly regional trade agreements (RTA), which multiplied on a global scale during the 1990s, will grant preferences to certain countries, but prove to be discriminatory towards others. In addition, « the interesting question is whether this form of liberalization ultimately is a stepping stone to more liberal, multilateral agreements. Do countries learn the benefits of trade from opening up first to regional partners, and therefore support multilateral liberalization? Or do they enjoy their preferential access, and oppose multilateral agreements because they do not want to see the value of their preferences erode? The jury is still out. Doha is the first test ». Examining the commercial coverage of regional agreements in terms of trade, the author notes that « agreements with the U.S. or with the EU now constitute roughly 80 percent of all trade covered in regional trading arrangements. These are big players, indeed ». Mr. Newfarmer notes also that « developing countries are seeking agreements with the largest markets, particularly the United States and the European Union, simply because these offer the greatest opportunity for developing country exporters. If a country is able to get preferential access to the extremely large U.S. market, that offers much greater potential than signing an agreement with a smaller country somewhere else in the world ».
To the question: Does international trade reduce cultural diversity? M. Newfarmer maintains that, clearly, in some cases, it does: «the integration of the global marketplace – through communication, trade and technology - is actually reducing the number of languages spoken around the world. Many have become extinct. The same thing can happen with other elements of culture. The question that each society must ask is what is the most efficient way to maintain its key cultural elements and how can it at times use international trade to maintain or even expand those elements? » Nevertheless, he acknowledges, « the long-term impact of trade on cultural diversity is not yet clear. What is clear, however, is that the best way to preserve local cultures is not by fighting international trade, but by making the government adopt programs that will encourage, preserve, even subsidize if necessary, the maintenance of the cultural elements that are in the country’s national interest.” However, he warns, « There is another problem here. In some cases, maintaining cultural diversity has been used as a ruse to protect selected activities. Protecting family farms through hefty protection and deep subsidies is just such a case. There are ways to design programs that would address narrow cultural diversity objectives without distorting trade or prevent developing countries (…) from having access to markets ».