Policy Watch - February 2016
"TPP, RCEP, FTAAP...are they really good for developing countries?"
Let me start with a few general observations on whether regional trading agreements (RTAs) are good for developing countries, before moving specifically to the
First, RTAs are not as good for developing countries as multilateral liberalization under the WTO. Although they are often inappropriately called "free trade agreements," these RTAs are really preferential trading agreements, and subject to the usual problems of trade diversion and complicated rules of origin. While individual developing countries may benefit from the preferential access offered by RTAs, developing countries collectively as a group would be much better served by greater progress in multilateral liberalization.
Second, recent RTAs like the
Third, by design, developing countries typically have much less bargaining power under RTAs than multilateral agreements. The TPP is no exception. As Jagdish Bhagwati has noted, the US managed to obtain better terms by sequentially bargaining with smaller countries first before essentially offering a “take it or leave it” deal with larger countries such as Japan. The asymmetry in bargaining power is reflected in the very language of the agreements. In the side agreement on labor standards between the US and Malaysia under the TPP, for example, the words "Malaysia shall" appeared 34 times while the words the "US shall" appeared zero times. Perhaps in the spirit of partnership, the words "Malaysia and the US shall" did manage to appear together once, in the context of securing funding for some technical assistance.