Introduction

On 15 August 2004, Mongolia signed a Trade and Facilitation Agreement (TIFA) with the US, a precursor to a Bilateral Trade Agreement (BTA). Prior to this, Mongolia was the only country that had not signed either a TIFA or BTA with another country, or joined a regional or plurilateral trade agreement (PTA). Every country in the world today is a member of at least one PTA and BTA, and most are members of multiple BTAs. ¹ If PTAs were considered the main threat to the world trading system in the 1990s, the concern has since shifted towards BTAs. BTAs have been proliferating at an astounding pace recently.

What are the underlying factors driving the proliferation of BTAs? Why are Japan and Korea, countries that had had long resisted the worldwide trend to join or form PTAs, now pursuing BTAs with a vengeance? Can we explain why Singapore is currently negotiating a BTA with Kuwait, or why Sri Lanka has signed one with Iran, or Taipei,China with Nicaragua, for that matter? Indeed, what are the motivations behind the 176 BTAs currently being proposed, negotiated or implemented involving at least one country from the Asia-Pacific region, or the 300 or so BTAs world-wide?

This paper attempts to provide an answer to these questions by providing a taxonomy of BTAs, identifying the underlying motivations behind them in terms of both economic and non-economic factors. Apart from trying to understand why BTAs have been proliferating, identifying the factors driving them is important because they may reveal the impact that they are having on the world trading system. Depending on why countries form BTAs, they could be working as either building blocks or stumbling blocks in terms of a more integrated and successful international economy.

The paper is in 5 parts. Section 2 provides some facts and figures relating to BTAs, including their proliferation, to provide the backdrop for the ensuing analysis. Section 3 provides a taxonomy of BTAs, identifying the different reasons that motivate countries to form them. The impact that BTAs are having on multilateralism and the world trading system is the subject of Section 4. A final section provides a summary of main points, and considers likely scenarios for the future landscape of world trade, and possible responses.

Download this Discussion Paper [ PDF 180KB| 25 pages ].

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