The United States and the New Regionalism/ Bilateralism

Abstract

Current US trade policy stresses establishing free trade areas (FTA) with partners spanning the globe. Motivations include enhancing goods and services trade; stimulating investment flows; extending standards on intellectual property rights, labour, and the environment; and addressing geopolitical concerns. Simulations of FTAs with the US highlight the importance of trace complemtarity, trade diversion, and welfare losses for nonmembers. Agriculture and textiles play a central role in determining welfare outcomes. Initial improvement in market access enjoyed by participants could be eroded progressively as a global liberalization proceeds, and this preference erosion might acts as a disincentive to participate in multilateral liberalization.