Kruсhek A. S., Kirakosyan A. A.

Oles Honchar Dnipropetrovsk National University


Since 1990 the number of preferential trade agreements (PTAs) has increased very rapidly. Now there are more than 404 agreements signed between 1945 and 2009. Only twenty new agreements were notified to the WTO in 2009 and thirteen in 2010. Almost every member of the WTO is now a member of a PTA. Many countries are under more than one agreement, for example Canada is currently negotiating 12 PTAs.

In the past few years there has been an important change in the way of providing commercial policy with developing countries. The main aspect is that non-reciprocal preferences will not be applied anymore in a discriminatory way against the third countries. There are two reasons behind these changes.

 First, the EU has been under constant pressure at the World Trade Organization (WTO) for its regional, preferential agreements. Article XXIV of the WTO allows regional, discriminatory agreements – meaning Free Trade Area but only under certain conditions. This offence of the Most Favored Nation (MFN) principle is allowed only if the compromises are mutuall between the parties of the agreement, which tolerates preferential agreements only if they are offered to all developing countries in equal way and with the same level of development. The second reason is the fact that other non-reciprocal agreements (Mediterranean Agreements) have failed to promote the exports of developing countries to the EU, which explains the presence of the political will for change.

 The preferential market gives access to liberalization. Now it is very important to encourage the pursuit of non-discriminatory liberalization and focus on the key constraints that prevent developing countries from benefiting more from trade opportunities.

 Current approaches toward PTAs with developing countries that are being pursued by the European Union (EU) are assessed in the light of these proposals. Looking at the potential sources of growth in the world during the next decades EU needs a profound change of mind and approach in its international relations because its economic weight will change and probably decline dramatically and rapidly. Its current share in the world GDP (25 percent) will have been cut by half by 2030 and by three by 2050. The cliché “the EU is the biggest global player in international trade and investment” will lose it’s credibility.

 So EU and it’s PTAs can satisfy the urgent search for growth only if the EU partner fulfills these three conditions:

· it has to be big enough to have an impact on the EU economy;

· it has to be big enough in the immediate future, not in two or three decades from now, because the EU quest for growth is urgent;

· it has to have a regulatory framework good enough to induce the EU Member States to improve their own regulations, another powerful way to buttress and boost their domestic pro-reform agendas.

 But reality is that the PTAs that the EU is currently negotiating do not meet these conditions. Almost all of them involve partners that might be an useful source of growth but only in a very distant future. This situation is due to an intrinsic flaw in the current EU approach: it focuses on negotiations with countries highly protected in the hope to get large preferences. The current EU PTA plan does not contribute to EU growth. EU needs to launch and conclude as quickly as possible PTA negotiations with Japan and Taiwan which are today the best EU partners for boosting EU domestic reforms and growth.

The main target for EU is to find the biggest markets partner, to have opportunity to change the EU relative prices of goods and services, that is, to deliver cheaper and more diverse products and services to the impoverished EU consumers.

And find the best regulated partner, because of that EU will be induced to improve its own regulations in order to offer to EU firms the same regulatory quality than the one supplied by its partner to its own firms. Better regulations are powerful instruments to change the relative prices of goods and services. This dimension is so important that PTAs can be seen as convenient “excuses” to make domestic reforms.