Crocodile tears on regional free trade

Can you believe it? Gov­ern­ment mem­bers of the world’s most unsuc­cess­ful region­al ‘free trade’ agreement—the Asia Pacif­ic Eco­nom­ic Coop­er­a­tion (that’s it … there’s no noun)—meeting in Busan, Korea, have crit­i­cized region­al agree­ments as a threat to trade! Yet every one of this group is nego­ti­at­ing, or try­ing to nego­ti­ate at least one and prob­a­bly a hand­ful of region­al agree­ments as they issue this press release. What a bunch of wankers!

Here’s the FT’s quote from the state­ment.

Crit­i­cised by busi­ness lead­ers and alarmed by the pos­si­ble fail­ure of next month’s world trade talks in Hong Kong, Asia-Pacif­ic gov­ern­ments are acknowl­edg­ing for the first time the dan­gers of the tan­gled “spaghet­ti bowl” of bilat­er­al trade deals they have spawned in the past few years. “We’re hear­ing from our busi­ness com­mu­ni­ty that with all these dif­fer­ent FTAs [free trade agree­ments] in the region, it’s get­ting hard for them to do busi­ness,” said a senior trade nego­tia­tor attend­ing this week’s annu­al meet­ing of the Asia-Pacif­ic Eco­nom­ic Co-oper­a­tion forum (Apec).”(FT)

Of course, this is right, in prin­ci­ple. It is like­ly that busi­ness finds the maze of region­al agree­ments cre­ates new trans­ac­tion costs. Mul­ti-nation­al busi­ness­es, some of them only SME’s at most, in fact have to inte­grate this con­fus­ing mess in their sup­ply chains. That’s one of the themes of my book *Glob­al Trade Advo­cate*

But there are com­mer­cial tech­niques for man­ag­ing these costs. Also, there are often some off­set­ting ben­e­fits from region­al agree­ments that could be aug­ment­ed if all such agree­ments com­plied with “gold stan­dard” prac­tices (e.g. the Aus­tralia-US Free Trade Agree­ment or the Aus­tralia-Sin­ga­pore and US-Sin­ga­pore agree­ments). Col­lec­tive adher­ence to best prac­tice will min­i­mize the trans­ac­tion costs due to even over­lap­ping rules of ori­gin and reduce the poten­tial for trade diver­sion.

Gov­ern­ments in the APEC region must strike a bal­ance between the costs and the ben­e­fits of region­al agree­ments, with the assis­tance of busi­ness, and not con­tent them­selves with this hyp­o­crit­i­cal mor­al­iz­ing by press release that is, at best, a rot­ten decep­tion when their cur­rent trade nego­ti­at­ing pro­grams are con­sid­ered.

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