Over 300 integration agreements have already been signed throughout the world at bilateral or sub-regional level, and another 100 are currently being negotiated. This search for alliances is a growing trend in spite of warnings from the World Trade Organization (WTO) on the negative effects that these agreements would presumably have on the liberalization of world trade.

The interest of countries in ensuring lasting trade advantages in the long term, and for these in turn to become a doorway to international markets, has helped to consolidate the way in which free trade agreements (FTAs) are concluded, by partly abandoning multilateralism as a means of achieving trade liberalization.

One of the most active regions in this regard is Latin America, where Mexico stands out as one of the countries which has concluded the most trade partnerships. To date, Mexico has a network of 11 FTAs with 32 countries on three continents and represents a unique opportunity to attract investment flows and to expand the market because it has preferential access to over 870 million people.

Like Mexico, the countries of the Caribbean have followed this new fashion and have signed bilateral agreements among themselves such as the CARICOM and the Dominican Republic agreement, or with its regional partners such as those between CARICOM and Costa Rica and CARICOM and Colombia and others, which provide an excellent opportunity to guarantee commercial ties and mobilize investment throughout the region.

This trend towards bilateralism has been accentuated by a number of factors, such as the difficulties faced by countries in achieving concerted action in multilateral fora on sensitive issues such as agriculture, as occurred at the Meeting of the World Trade Organization in Cancun, and leading to the paralysis of the Free Trade Area of the Americas (FTAA) process. This new trend has had such an impact that the United States and the European Union have initiated several bilateral trade agreements. Recently, the United States and the European Union began rounds of negotiations on a free trade agreement with the Andean countries (Colombia, Ecuador and Peru), while the European Union has strengthened negotiations with MERCOSUR, and has raised the possibility of a similar agreement with the Central American and Andean States, given that the latter have completed their own internal integration processes.

Critics of this trend contend that these types of agreements make it difficult for true trade liberalization to take place in the world and that instead of increasing trade flows, they create distortions, which in the end hinder insertion of small economies into trade. According to experts, south-south integrations (those consolidated between relatively small economies) do not generate large benefits in the long term because they are usually complementary, not competitive economies, and limits internal adjustment processes of national industries.

In spite of the criticisms, there are factors which favor integration based on bilateral trade agreements. In some cases they serve as a mechanism for preparing for international negotiations in large fora, while in others, they seek to form negotiating blocks with common positions seeking to arrive at a stronger position and obtain better benefits in multilateral negotiations.

In conclusion, it can be said that regionalism as a mechanism of trade integration is not only a trend which has spread rapidly but is also viewed as a sophisticated way of achieving multilateralism. In turn, the success of bilateral agreements depends not only on the scope of negotiations, but also on the asymmetries and economies of scale which can be created by industries and the achievement of high levels of competitiveness.

Ms. Paola Andrea Vacca is the Trade Adviser of the Association of Caribbean States. The views expressed are not necessarily the official views of the ACS. Feedback can be sent to mail@acs-aec.org

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14 July, 2004