PTAs would Balkanize the global trade system with overlapping members and diverse rules

Arvind Panagariya / T N Srinivasan Indian Express: Sunday, July 09, 2006

In choosing our PTA partners, we should look for the most efficient suppliers of our imports. This ensures that we continue to buy our imports from the most efficient suppliers. This criterion points to China as the most attractive PTA partner. Paradoxically, it is the one country we have ruled out in our PTA game plan in part on the specious argument that China is a non-market economy. But the gains from trade accrue from trading with a non-market economy just as much as from trading with market economies...An India-China FTA also has the advantage that it will help promote an alternative FTA template that focuses on trade integration rather than non-trade subjects including labor standards, intellectual property rights and even restrictions on the use of capital controls.

These subjects are integral parts of the US FTA template that it eventually plans to turn into the WTO template. An India-China “trade only” template will be an effective instrument of countering the US template. Our ultimate goal has to be to move from PTAs to global trade liberalization. While PTAs are almost sure to inflict injury on non-members even if they benefit the member countries, global liberalization is far less prone to this shortcoming. And it is not enough to adhere to the current PTA rules within the WTO: those rules must themselves be improved to minimize the discrimination promoted by the PTAs. (The authors are professors at Columbia University and Yale University, respectively.) editor@expressindia.com