The Myth Of Preferential Trade Arrangements: Are PTAs Good for Global Free Trade?

The number of preferential trading arrangements (PTAs) approved under the General Agreement on Tariffs and Trade (GATT) and the World Trade Organization (WTO) has increased significantly, from just one in 1949 to more than 100 today. In fact, PTAs such as the European Union and North American Free Trade Agreement (NAFTA) have more power than the United Nations. In a 1995 study, the WTO Secretariat concluded that, " To a much greater extent than is often acknowledged, regional and multilateral integration initiatives are complements rather than alternatives in the pursuit of more open trade. " However, I raise an opposite point of view in this paper that PTAs actually detract from true liberalization and fragment the global trading system. In this paper I'll first discuss what will stop the PTAs from upgrading to global free trade, where PTAs of similar and dissimilar countries are analyzed respectively. Second, I'll look into why global free trade (multilateral) cannot be achieved just by merging all the existing PTAs into one, as is the thought of many scholars. Third, we'll see whether the WTO in itself is powerless in promoting global free trade. Fourth, a weakness of PTAs will be outlined to show that there might be a solution to this paradox. First, we analyze with voter theory the case in which countries to integrate into a PTA are similar in labor-to-capital ratio, productivity and price patterns. As we all know, the European Union (EU) is a PTA of similar countries, and voting is widely adopted in the course of the integration of EU.