American Free Trade Area And Customs Unions example essay topic

Introduction In an era of globalization when states are becoming increasingly interdependent, regionalism is seen as an intermediary stage for further multilateral trade liberalization. There are, however, two types of regionalism. One is discriminatory where there is free trade amongst the members of the region but non-members are excluded as in the case of free trade areas, such as the North American Free Trade Area (NAFTA) and customs unions, such as the European Union (EU), and the third type are preferential trading areas. The other, which is compatible with the most-favoured nation (m. f. n.) rule of the World Trade Organisation (WTO), is "open regionalism" which allows non-discriminatory trade between members and non-members of the region. In other words, the gradual elimination of internal trade barriers within a region will be implemented at more or less the same rate and on the same timetable as the lowering of trade barriers towards non-members (Ruggiero 1996).

Hence, paving the way for greater multilateral trade liberalization. The Asia Pacific Economic Cooperation (APEC) belongs to the second grouping. It emanated at a time of rising economic liberalism (Gill 1994). It is based upon the neo-classical notion that the state should play a minor role in the economy and let market forces lead towards economic growth, hence, the idea of market-led integration within the Asia-Pacific region. One of the reasons prompting the establishment of APEC was fear of the emerging geographically discriminatory arrangements in Europe and North America. Furthermore, the possibility of collapse of the Uruguay Round of the GATT (General Agreement of Tariffs and Trade) added with the growing conflict between the US and Japan exacerbated the idea of open regionalism and market-led integration in APEC (Higgott and Stubbs 1995: 519; Higgott 1996: 4).

Therefore, to maintain a liberal multilateral trading order these two concepts had become pivotal to APEC. This essay will constitute of three parts. The first section will concentrate on the theoretical perspective in the evolution of APEC and how the ideas of "open regionalism" and "market-led integration" became entrenched within it. Such concepts were of great importance at achieving a quicker liberalization which was required for the fast-growing countries of the region.

Hence, applying a discriminatory free trade area (FTA) or customs union (CU) was not a pragmatic alternative as in the case of the EU, where a de jure institutional or policy-driven economic integration is in place. In the East Asian context, consisting of Japan, the Northeast Asian newly industrializing economies (NIEs) and the ASEAN (Association of Southeast Asian Nations) states, de facto structural re gionalisation has been taking place. This excludes the legal conundrums of the institutional ist approach and is, therefore, less time-consuming. Further factors, such as the extension of trade links with non-APEC members and the avoidance of unnecessary costs of trade diversion which prove "open regionalism" to be the preferred alternative, will also be tackled in this section.