The ‘Demonstration Effect’ of Regional Trade Arrangements (RTAs) for the WTO Regime: Does the EU’s Inter-regional Experience Tell Us Anything?

The phenomenon of regionalism led IPE scholars to concentrate mainly on two mainstream fields of research. The first group (motive analysis) assesses questions about the political and economic factors motivating the governments to enter into regional trade arrangements (RTAs), and explores the reasons for arena switching. The second group (impact analysis) principally argue about the contradictory and/or complementary nature of RTAs and the WTO multilateralism. RTAs are formed to compensate the inadequacies of the multilateral trade regime, but they need to be set on a ‘multilateral-friendly’ base considering the fact that the regime substitution (i.e. transformation from ‘multilateral’ into ‘regional’ milieu) is a complex and costly issue. The new IPE literature, while acknowledging the efforts to theorise motive and impact analysis, and the empirical fact that RTAs will be long-standing, should deal with how to ‘multilateralise’ regionalism in order to create a synergy and coherence between the two. This study, takes a neoliberal-institutional approach to define: i) how to reflect the WTO’s MFN-based trade liberalisation experience succesfully in RTAs; and simultaneously ii) how to design RTAs in order to incorporate intermestic (domestic as well as international) issues such as services, food security, environment, competition, investment, labour standards in multilateral WTO regime. It could be argued that the EU’s own experience in deepening integration can be illustrative to provide a positive ‘demonstration effect’ for the GATT/WTO. However, this view is also open to challenges mainly because the conditions of EU members may not always reflect the global realities for developing countries. This study aims to analyse whether and to what extent the comprehensive inter-regional EU trade agreements are forerunners for the world trade order. The study explores factors that can help and/or impede the EU, in liberalising trade ‘without discriminating’ outsiders; and in dictating its regulatory trade agenda on its partners ‘without marginalising but by fortifying’ the WTO-centred trade regime.