UNILATERAL DISAGREEMENT

When GATT was established in 1947-48, all regional trading agreements RTAs should have been prohibited, since they violate MFN. However, there were several of these floating around and, realistically, they couldn8217;t have been scrapped. They were, therefore, factored into the multilateral system, through Article XXIV and a separate 1979 clause for developing countries. If one includes all RTAs those implemented, notified and being negotiated, there are almost 400 of them and have led to the world trading system being compared to a spaghetti an expression that originates with Bhagwati bowl. There are gradations within RTAs 8212; from classic FTAs free trade agreements to customs unions FTA plus common external tariff, common markets customs union plus free cross-border capital and labour flows and economic unions. However, rarely do RTAs transcend the first two categories. These days, for several economists, it is impossible to separate economics from mathematics and with rigor offshoot of mathematics has come mortis. Bhagwati is an exception and his prose, with its wit, humour and sarcasm, is a delight, particularly when he produces a popular book, as this one is. Bhagwati uses the expression PTA preferential trade agreement rather than RTA, since several agreements are no longer regional.

While the point is valid, it is doubtful if the usage of PTA will ever catch on, since there is a different sense in which the term is used. So let8217;s stick to RTAs. This is a slim book in four chapters, documenting the literature and Bhagwati8217;s views on these termites that are eating away at the multilateral trading system. And it8217;s an extremely good book, almost like a four-lecture series delivered by Bhagwati the teacher. The first two chapters document how deeply ingrained the termites are. The third chapter brings in theory, but without a single Greek letter of algebra brought in. Some more theory is inserted in the appendix, ignoring the oft-neglected question of time-path followed by RTAs, for instance, whether RTAs are a stepping-stone towards or a retreat from the eventual goal of multilateral free trade. The fourth chapter brings in the policy question of what one should do about these termites. A glossary, select bibliography and an index add to an extremely good book.

India has figured in several RTAs now. Not long ago, there was nothing beyond the Bangkok agreement to show. Consequently, India has also jumped onto the termite bandwagon, notwithstanding considerable transaction and negotiating costs this imposes on the Commerce Ministry. RTAs interpreted as classic FTAs in manufactured products are irrelevant now. Such duties are low and once Doha revives, they will be reduced further. Most new RTAs are WTO-plus in the sense of including services. RTAs proliferate when multilateralism stagnates, as is the case now. However, in addition, RTAs seek to include issues not covered by WTO. Bhagwati has strong reservations about incorporating WTO-plus elements in labour or environmental standards or intellectual property. In this context, though he doesn8217;t mention services directly, the argument there too would probably be exactly the same. However, looking beyond the book, what future does WTO have, beyond administering the Uruguay Round agreements? We are stuck in an impossible situation, with 150-odd countries, each with the right to block an agreement through a veto, but with several countries absolved of responsibilities though they have rights. While this book isn8217;t meant to address that issue, without that being resolved termites won8217;t go away. Bhagwati8217;s book only prescribes part of the medicine. But on the prescription given, there is no better popular book I can think of.