Preferential Trade Agreements, Geopolitics, and the Fragmentation of World Trade

Uri Dadush and Enzo Dominguez Prost

World Trade Review, 2023, vol. 22, issue 2, 278-294

Abstract: Failure to reestablish an effective World Trade Organization (WTO) dispute settlement procedure, stop the erosion of multilateral rules and end the China–US trade war causes capitals to rethink trade policy. One response is to redouble efforts to strike trade agreements with major trading partners. Already countries accounting for about 78% of world Gross Domestic Product (GDP) are members of mega-regional agreements, and based on our computations, preferential trade agreements (PTAs) will soon cover about two-thirds of world trade. Can PTAs replace a fading WTO or mitigate its effects? Amid deepening geopolitical rifts, how will trade relations among China, the EU, and the US, each a hegemon in their respective regions, evolve, and what will be the impact on smaller economies? In short, how will a trading system based increasingly on PTAs and weak multilateral rules look, and how will nations adapt? Absent reforms, the trading system is likely to fragment progressively into regional blocks organized around the hegemons. Trade within the regional blocks, mainly conducted under a mega-regional agreement, will likely remain quite open and predictable, but without strict multilateral rules and where PTAs are absent (as they are among the hegemons), interregional trade relations will become increasingly uncertain and unstable.

Date: 2023
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.cambridge.org/core/product/identifier/ ... type/journal_article link to article abstract page (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cup:wotrrv:v:22:y:2023:i:2:p:278-294_5

Access Statistics for this article

More articles in World Trade Review from Cambridge University Press Cambridge University Press, UPH, Shaftesbury Road, Cambridge CB2 8BS UK.
Bibliographic data for series maintained by Kirk Stebbing ().