Preferential Trade Agreements with Special Reference to Asia

Preferential Trade Agreements (PTAs) are agreements among a set of countries involving preferential treatment of bilateral trade between any two parties to the agreement relative to their trade with the rest of the world. Preferences, however, need not extend to all trade between the two, and the coverage could depend on the type of PTAs. Customs unions and the so-called free trade areas are common forms of PTAs. Members of most PTAs belong to a well-defined geographical area, such as for example, the European Union (EU), North American Free Trade Area (NAFTA) and Association of Southeast Asian Nations (ASEAN). For this reason regional PTAs are called Regional Trade Agreements (RTAs). The most common form of RTAs are the euphemistically named Free Trade Areas (FTAs), with few Customs Unions (CU) which require the partners to maintain a common external trade policy, in addition to free trade with each other (WTO, 2001a, p.37). Historically, barriers to internal trade existed in many countries (and still do in some developing countries such as India) and their abolition is the equivalent of creating a customs union among the constituent units of the country. For example, barriers to internal trade were abolished in France after the revolution; the colonies which became the United States of America did so after they adopted the constitution in 1787 which, through its interstate commerce clause, prohibited such barriers; in the 19 th century Russia led the creation of the German Zollverein.