In the Journal of World Trade, ANU’s Peter Drahos warns that PTAs may undermine the WTO’s dispute settlement regime:

Typically, an FTA will contain a chapter on dispute settlement that establishes committees and detailed procedures for handling disputes between the parties to the agreement. The growing number of these agreements is creating, in effect, a web of bilateral trade dispute resolution fora. The purpose of this article is to draw attention to this bilateral web and in particular to focus on the role that the United States is playing in its construction…

The capacity of a strong State to choose, as it were, its legal battleground has important implications for weaker States, especially in those cases where the stronger State shifts the contest out of the multilateral setting of the WTO…

The effect of creating a web of bilateral dispute resolution fora will be to give the United States and the EU more opportunities to play for rules. If, as Palmeter and Mavroidis suggest, the DSU was the most important achievement of the Uruguay Round, then perhaps the current proliferation of FTAs represents something of a crossroads for the DSU. By constituting many possible trade courts, the United States and the EU are creating a system in which their respective influential domestic trade interests will lobby them to go to the trade court in which those interests are most likely to obtain satisfaction.

How much such a system will help to improve trade liberalization that leads to real economic gains is an open question. In the case of intellectual property rights we have seen that there is a real danger that dispute mechanisms will be used to enforce rent-seeking bargains. More generally, such a system of many trade courts may simply push the trade regime in the direction of a disorderly mixture of confusing obligations, rule uncertainty and prolonged litigation patterns, a system in which the MFN principle really does assume a ghostly interstitial presence.

Full pdf.

If Drahos is right, then the World Trade Organization needs to assert its authority and propose an appropriate framework for the evolution of bilateral dispute settlement mechanisms, lest the multilateral system be dangerously compromised.

After reading that the US-Korea FTA has caused the Japanese to talk about a FTA with the US, Tyler Cowen asks: Why are FTAs contagious?

Given the likelihood of a US-Japan deal in the near future, I think the real question is: Why are FTA rumors and press releases contagious?

See my contributions in the comments section for more detail.

Robert Wade, Andre Sapir, Fred Bergsten, Jagdish Bhagwati, and Carla Hills discuss the spaghetti bowl of preferential trade agreements at Martin Wolf’s blog. If you follow the issue, you won’t find many surprises.

[HT: Muse]

Ben Muse, the blogosphere’s chief KORUS correspondent, has posted a wealth of links and information about the impact of the agreement in terms of trade diversion and competitive liberalization.

My favorite paragraph (rhetorically, not substantively) is from a FT editorial:

Karan Bhatia, the deputy US trade representative, described the deal as a “real shot in the arm” for the US trade agenda. Maybe, but it is a shot in the kneecaps for the multilateral trading system, which remains the only way to agree and enforce workable trade deals. Unilateral reform always works, of course, but failing that, what we really need instead is some kind of “World Trade Organization”. There’s an idea.

Another paragraph worth highlighting comes from a February op-ed by Fred Bergsten.

Political developments within the United States suggest that Korea has a unique historic opportunity to achieve a preferred trade and indeed overall relationship with the United States that is unlikely to be available to any of its main competitors for a prolonged period of time. This will be realized if Korea can conclude its negotiations for a comprehensive and balanced free trade agreement (FTA) with the United States within the next two to three months so that the deal can be approved by Congress under the “fast track” provisions of President George W. Bush’s current trade promotion authority. Since that authority is unlikely to be extended when it expires next July, or even when a new administration takes office in the United States in 2009, Korea’s key competitors such as Japan and Taiwan will probably be unable to receive similar treatment in the foreseeable future and thus Korea will achieve preferred status for a considerable period.

Locking in preferential advantages for a considerable period doesn’t sound like the cascading freeing of trade that competitive liberalization is supposed to encourage.

The US and South Korea have three days left to complete their FTA negotiations.

Iana Dreyer outlines the European Union’s new PTA plans. It looks like the EU is seeking to emulate the US approach of offering a WTO-plus template to be adopted as a single undertaking. Iana also offers good reasons to be skeptical of the EU’s ambitious hopes for this strategy.

Iana Dreyer outlines the European Union’s new PTA plans. It looks like the EU is seeking to emulate the US approach of offering a WTO-plus template to be adopted as a single undertaking. Iana also offers good reasons to be skeptical of the EU’s ambitious hopes for this strategy.

Iana Dreyer outlines the European Union’s new PTA plans. It looks like the EU is seeking to emulate the US approach of offering a WTO-plus template to be adopted as a single undertaking. Iana also offers good reasons to be skeptical of the EU’s ambitious hopes for this strategy.

The South Asian Free Trade Agreement is not enjoying smooth sailing — New Delhi has decided to unilaterally withdraw tariff concessions given to Islamabad because of Pakistan’s non-compliance with SAFTA provisions. Read the Khaleej Times story.

The South Asian Free Trade Agreement is not enjoying smooth sailing — New Delhi has decided to unilaterally withdraw tariff concessions given to Islamabad because of Pakistan’s non-compliance with SAFTA provisions. Read the Khaleej Times story.