World trade has been an ever evolving phenomenon and the agreements made to govern this have also been evolving. In order to stabilise and centralise trade agreements, multilateral trading system came into being and people thought that this is an ultimate solution to facilitate trade among different nations and take care of any issues emerging thereby. As the time passed by, many countries started to feel the need to have a close agreement within a concentrated setting and as a result regional trade agreement (RTA) and preferential trade agreements (PTA).
With mushrooming number of RTAs and PTAs, it became essential to assess the extent to which these agreements have been capable of changing economic scenario around the world. The proliferation of these agreements, the experts have started to debate whether these agreements are taking over the multilateral trading systems, especially of WTO. A number of studies have been carried out in this direction as well in order to find out the extent to which these agreements have positive or negative effect on the economic activities in the countries where these agreements have been preferred over multilateral trading system (Lloyd, 2002).
The evolutions of these agreements have accelerated in the recent past and an average WTO member has agreement with more than 15 countries (Schaefer, 2007). The proliferation mainly aims at making trade relations more cohesive and more rewarding. Trade liberalisations may have paced up the economic activities; it has adverse effect on multilateral trading system. The trend towards regionalism can hamper the very aim of the multilateral trading system in the long-run. The very idea behind introducing such a system was to facilitate economic development across the world and making trade relation a way to establish a good relationship among countries (Hudec, & Southwick, 1999).
This paper aims at measuring the effect of Regional and Preferential Trade Agreements on multilateral trading system, particularly WTO. Furthermore, it will examine the effect of these agreements on the goals and objectives of the WTO. The idea is to assess whether RTAs/PTAs result in a more effective international trade or the multilateral system in more effective.
Understanding Trade Agreements
Regional Trade Agreements (RTAs) are the formed as by a group of countries in order to reduce barriers of trade between the member countries. In contrast to its name, these groups are formed between countries around the world, not necessarily belonging to the same geographical region. There are a number of RTAs around the world that have changed the very nature of the trade between the countries (Crawford, & Laird, 2001).
On the other hand, PTA is nothing but a union wherein members impose lower barriers in trade on the goods produced within the union, with having some flexibility for each of the member countries on the extent of reduction. A PTA is nothing but the part of RTA only (Hudec, &...