Preferential trade agreements (PTAs) are emerging as a means to tackle emerging social and environmental challenges and as potential blueprints for future global trade arrangements. . PTAs have undergone significant transformation over the past fifty years, shifting from a focus on enhancing market access to increasingly include disciplines aimed at achieving non-trade objectives: promoting FDI, technology transfers, workers’ movements, but also improving labour conditions, environmental quality and achieving other broader social goals.
This new CEPR-World Bank eBook, edited by Ana Fernandes, Nadia Rocha and Michele Ruta, brings together leading experts in international trade from academia and policy institutions to provide the first empirical assessment of the effectiveness of non-trade disciplines in PTAs, and asks: have PTAs delivered on their promise?
Key takeaways include:
- The eBook highlights the positive effects of PTAs on FDI flows, cross-border firm ownership linkages, and patenting activity among members. However, it also notes that non-trade provisions do not always improve indicators on labour rights, workers’ protection, democracy, or political rights. In some cases, labour provisions in PTAs can even lead to a deterioration of worker protection.
- PTAs that include strong intellectual property rights (IPR) provisions and investment-related disciplines are found to be more effective in promoting patent flows and FDI. However, overly complex provisions or overly simplistic approaches can have adverse consequences.
- The impact of non-trade provisions in PTAs depends on the countries involved and the power relations among members. China and the United States benefit most from PTAs in terms of outward FDI, while countries including Chile, Peru, Singapore, and Thailand benefit most from inward FDI.
- Official development assistance can influence the implementation of non-trade provisions, with high-income PTA members allocating more aid to countries that agree to non-binding provisions in areas such as the environment and human rights.
Overall, the research presented in this eBook offers a vital evaluation of the efficacy of non-trade disciplines within PTAs. The evidence points to some successes but also to the limits of regulating non-trade policy areas in trade agreements.
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