Richard Pomfret has a great article in this month’s edition of The World Economy discussing how to think about the prevalence of preferential trade:

The main problem with using counts of RTAs as measures of the increasing importance of regionalism is that, while some agreements are important, many RTAs are inconsequential. Clearly, all notified RTAs should not carry equal weight…

The numbers are inflated because RTAs which cover both trade in goods and trade in services (Australia-Thailand, Japan-Mexico and Panama-El Salvador) require MFN waivers under both GATT and GATS; such double-counting only occurs after 1995 when the GATS came into effect, which biases comparison of the numbers notified before and after the establishment of the WTO…

Counting RTAs is not just a poor measure of the extent of regionalism; it can lead to nonsensical conclusions about trends in the global economy due to the treatment of regional disintegration and integration. The replacement of a regional bloc by a web of bilateral or plurilateral agreements increases the number of RTAs, and by the counting criterion indicates an increase in regionalism. Conversely, the replacement of a network of minor RTAs by a single RTA can be interpreted as a decline in regionalism…

The main reason for the rapid increase in the number of RTAs during the 1990s was the proliferation of bilateral and plurilateral free trade agreements among countries of the former Council for Mutual Economic Assistance and among successor states to Yugoslavia, the USSR and Czechoslovakia… In sum, the increased number of RTAs in the 1990s and early 2000s was largely driven by a decline in regionalism and shift towards multilateralism on the part of two dozen formerly centrally planned economies…

Despite the increased attention being paid to regional arrangements, the hold of multilateralism is stronger than ever as practically all trading nations have now acceded to the WTO, with lower trade barriers and stronger trade dispute settlement procedures than ever before. Perceptions of WTO enfeeblement reflect a tendency of news reporting to highlight conflict rather than accord.

Full article (Blackwell Synergy journal access required).