Who Benefits From Regional Trade Agreements

Trade agreements open many doors. With access to new markets, competition intensifies. Increasing competition is forcing companies to produce better quality products. It also leads to greater diversity for consumers. If there are a variety of high quality products, companies can improve customer satisfaction. In collaboration with partners such as the WTO and the OECD, the World Bank Group provides information and support to countries wishing to sign or deepen regional trade agreements. In practical terms, WBG`s job is to remove barriers to trade. This is an advantage because it acts as a catalyst for more trade and growth, as states have easier access to foreign markets. RTAs are, by their nature, much smaller than mega-regional trade agreements and extremely extensive global trade agreements. This makes it much easier and quicker to successfully conclude a regional trade agreement because there are fewer parties involved. International relations and peacekeeping are another advantage of regional trade agreements.

If the common interests of countries are protected by a mutually beneficial pact, they are less likely to break the pact and come into conflict, at the risk of harming their respective economies. The EU – a regional trade agreement in the broadest sense – is a perfect example of how RTAs reduce the likelihood of war. Common economic security has been one of the foundations of the EU and has been created in a targeted way to end the ability of European nations to go back to war. In some cases, regional trade agreements can create or crystallize existing inequalities between states. This negative aspect of RTAs usually occurs when a prosperous state signs a trade agreement with a much poorer agreement. While the prosperous state has greater bargaining power, the poorest state grants rights that keep it at a comparable disadvantage. The aim is to avoid the risk of being totally excluded from the agreement. Regional trade agreements have also been cited as a limiting factor in economic globalization, as they tend to locate trade zones and effectively prevent entry from countries that are not members of the agreement, through increased tariffs and restrictions.

Full integration of Member States is the last level of trade agreements. A common market is a kind of trade agreement in which members remove internal trade barriers, adopt common policies on relations with non-members and allow members to move their resources freely among themselves.