Regionalism and Multilateralism

Abstract

The ratification of the North American Free Trade Area (NAFTA) agreement in the US Congress was seen by many as a further sign that the new wave of regionalism was turning the world away from the multilateral trading system established by the GATT. It is certainly true that the renewed interest in regionalism of the 1980s and 1990s has its roots in the weakening of the multilateral trading system. The length and complexities of the preparatory phase of trade negotiation following the Tokyo Round indicated that the GATT-based trading system might be losing its vitality and momentum. The multilateral trade negotiating game has changed significantly. The number of players involved has increased substantially over the years: more than 120 countries participated in the Uruguay Round. With such a large number of players the extent of free-riding and the likelihood of not reaching an agreement was quite high. The leading player in the multilateral negotiations, the USA, changed its stance from being strongly in favour of the multilateral approach to one which is only mildly supportive. In fact, as many commentators in this area claim, the US official position with respect to multilateral trade negotiations has helped to establish the view that regionalism may be seen as an alternative to the multilateral trading system rather than a complement to it. Moreover, regionalism is seen as inextricably linked with the global integration of foreign direct investments and production (see also Balasubramanyam and Greenaway, 1993 and Box 17.1, p. 513).