Abstract

There is great potential for increases in the number of regional integration arrangements in Europe, the Western Hemisphere, Africa, Asia-Pacific, and the Middle East—and in their overlap in terms of membership. (Tables 1–4 list existing as well as prospective arrangements.)

There is great potential for increases in the number of regional integration arrangements in Europe, the Western Hemisphere, Africa, Asia-Pacific, and the Middle East—and in their overlap in terms of membership. (Tables 14 list existing as well as prospective arrangements.)

In Europe, the completion of the single market program (“EC 1992”) is scheduled for the end of 1992 (Table 1). The EC and the European Free Trade Association (EFTA) aim to form a European Economic Area (EEA) covering 19 countries and 380 million people, which will extend the provisions of EC 1992 to EFTA countries. The EC may also negotiate a similar agreement with Israel. Partly because the EEA will involve some loss of sovereignty for EFTA members without offering all of the advantages of the single market, Austria and Sweden have applied to become full members of the EC and other EFTA members may follow.8 The EC and the Gulf Cooperation Council (GCC) are also discussing formation of a free trade area.

Table 1.

Regional Trade Arrangements in Europe

article image

FTA: free trade area; CU: customs union; CM: common market.

Years of accession to the EC: Denmark, Ireland, and the United Kingdom (1973); Greece (1981); and Portugal and Spain (1986). Austria and Sweden currently have membership pending. The program (EC 1992) is to be completed by the end of 1992.

Finland was an associate member until its accession in 1986. Liechtenstein became a full EFTA member in 1991.

The agreement was signed October 1991 and will enter into effect in April 1992.

The European Economic Area (EEA) is currently being negotiated.

The EC may negotiate an agreement with Israel similar to the agreement it is negotiating with EFTA countries to form an EEA.

Bulgaria has requested preliminary discussions toward negotiation of an association agreement involving establishment of a free trade area.

Association agreements, including the establishment of free trade areas between each of the countries and the EC, are being negotiated.

The countries concerned have agreed to examine conditions for gradual establishment of free trade areas.

Currently being negotiated.

Gulf Cooperation Council (GCC) members include Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates.

The Czech and Slovak Federal Republic, Hungary, and Poland have concluded Association Agreements with the EC, which, among other things, will involve free trade agreements between each of the countries and the EC. Further agreements are in prospect between the EC and other East European countries and the former Baltic republics of the Soviet Union.9 Finally, the EFTA is negotiating free trade agreements with three East European countries (Czechoslovakia, Hungary, and Poland), and with Israel.

In the Western Hemisphere, recent initiatives involve North, Central, and South America, as well as the Caribbean (Table 2). In North America, the United States, Canada, and Mexico are negotiating to form a North American Free Trade Zone (NAFTA). The Enterprise for the Americas Initiative (EAI), which U.S. President George Bush launched in June 1990, envisages an eventual move to free trade in the hemisphere.10 As an intermediate step, separate free trade areas between the United States on the one hand, and groups of countries and possibly single countries on the other appear likely. To date, 29 countries (including Bolivia and Mexico, which signed agreements prior to the EAI) have signed framework agreements with the United States.11 To negotiate free trade agreements with the United States, countries in the region need to meet certain criteria.12 Most countries in Latin America and the Caribbean are currently showing a renewed interest in regional integration. This is partly a response to the U.S. Enterprise for the Americas,13 but it may also be a defensive reaction to EC 1992 and to the failure to conclude the Uruguay Round on schedule.

Table 2.

Regional Trade Arrangements in the Western Hemisphere1

article image

Does not include unilateral trade preferences and exclusive countries with no arrangement.

FTA : free trade area; CU: customs union.

Revived in 1990; aims to establish a common market by 1992.

Effectivein October 1991.

Aims to achieve a common external tariff by 1994.

Organizationof East Caribbean States.

Aims to establish a common market by 1995.

Efforts are under way to revive AP and create a common market by 1994.

The Enterprise for the Americas Initiative aims to achieve hemisphere free trade zone. As of October 1991, the United States had signed framework agreements with 29 countries including the 13 CARICOM countries, the 4 MERCOSUR countries, Chile, Colombia, Costa Rica, Ecuador, El Salvador, Honduras, Panama, Peru, Nicaragua, and Venezuela.

These countries aim to form a Central American/Mexican free trade zone by 1996.

Signature of the trade and investment agreement occurred in 1991, and trilateral limited free trade is expected by end-1993.

The agreement aims to phase out tariffs on trade in the area.

In Central America, in June 1990, members of the Central American Common Market (CACM) renewed their efforts to implement a free trade agreement by 1992 and, in December 1990, these countries began drafting a framework agreement for the establishment of a regional common market. In July 1991, the timetable for liberalizing trade among CACM members was formally approved.14 Panama participated in the July 1991 discussions as a full member of the CACM for the first time. In January 1991, Mexico and the Central American countries agreed to establish a free trade area by 1996. In September 1991, Chile and Mexico signed a free trade agreement.15 Venezuela has also signed a trade agreement with Central American countries (see below).

In South America, the Latin American Integration Association (LAIA) announced new tariff reductions and trade liberalization measures in 1990. At its December 1989 summit, the Andean Group, a subgroup of the LAIA, targeted 1995 for the establishment of a free trade area, and 1997 for the establishment of a common market. At its November 1991 summit these deadlines were subsequently accelerated to 1992 and 1993, respectively. In July 1990, Argentina and Brazil agreed to establish a bilateral common market by the end of 1994. In March 1991, Argentina, Brazil, Paraguay, and Uruguay agreed to form a common market (MERCOSUR)16 by 1995. These countries aim to share a common external tariff; to coordinate fiscal, foreign exchange, and customs policies; and to permit free movement of goods, services, capital, and labor throughout the region. (Bolivia and Chile may also join this group.) In December 1989, the Rio Group agreed to eliminate nontariff barriers to reciprocal trade and to improve the regional tariff preference system. In 1991, Colombia, Mexico, and Venezuela signed an agreement on trade and investment involving trilateral trade liberalization by the end of 1993. In January 1991, Venezuela signed an agreement with Central American countries to create a free trade area by 1996.

In the Caribbean area, the Caribbean Community (CARICOM) members, at their 1990 summit, outlined a new schedule for phasing in the common external tariff, beginning in January 1991 (this date has since been postponed), with completion targeted for January 1994. The summit also targeted July 1991 for the removal of remaining trade barriers. The seven members of the Organization of East Caribbean States (OECS), a subgroup of CARICOM, are undertaking subregional implementation of CARICOM’s common external tariff ahead of schedule; in early 1991, they agreed to implement a phased removal of quantitative restrictions on all intraregional imports.17

In Africa, although no new arrangements are being formed, efforts continue to complete the Lagos Plan of Action. The Lagos Plan is intended to provide a unifying framework for existing arrangements and to create a common market in sub-Saharan Africa (Table 3).

Table 3.

Regional Trade Arrangements in Africa

article image

FTA: free trade area; CU: customs union; EU: economic union.

In effect since 1974.

In effect since 1984.

In effect since 1966.

In Asia and the Pacific, a number of proposals have been advanced to increase regional cooperation and, in some cases, to liberalize regional trade (Table 4). Following the suspension of the Uruguay Round negotiations in December 1990, Malaysia proposed an East Asian Economic Grouping (EAEG) to represent the views of Asian countries in multilateral negotiations.18 The potential role that such a group might play has been evolving; at the recent meeting of the Association of South East Asian Nations (ASEAN), the name of the EAEG was changed to the East Asia Economic Caucus (EAEC), with its role defined as that of a “consultative” forum on global trade issues. Several other initiatives have been advanced within the ASEAN. For example, proposals by Thailand to create an ASEAN Free Trade Area (AFTA) within 15 years, and by Indonesia for common effective preferential tariffs on selected products, have been endorsed by ASEAN Ministers.19

Table 4.

Regional Trade Arrangements in Asia-Pacific and the Middle East

article image

FTA: free trade area; CU: customs union.

The purpose of this group is bilateral trade promotion and cooperation in industrial planning.

Thailand proposal endorsed by ASEAN Ministers in 1991.

This grouping was initially proposed by Malaysia in 1990.

Regional grouping to represent members’ views in multilateral negotiating fora.

No new arrangements are currently envisaged in the Middle East area (Table 4).

8

Cyprus and Turkey have also applied for EC membership.

9

The former German Democratic Republic became a member of the EC as a result of German unification.

10

The Enterprise for the Americas Initiative (EAI) aims to promote economic cooperation with Latin American nations in trade, investment, and debt relief.

11

Formal negotiations are unlikely to begin until after the NAFTA negotiations are agreed.

12

These criteria require that countries: eliminate tariff and non-tariff barriers on trade between the negotiating parties according to a specified schedule; provide market access for trade in services; provide standards for treatment of investment, including the elimination of local content and performance requirements; take measures to protect intellectual property rights; and restrain government activities such as subsidies, state trading, and the use of foreign exchange restrictions and controls.

13

Under the EAI, the United States has encouraged Latin American countries to integrate among themselves before seeking to form free trade areas with the United States.

14

This involves a phased elimination of duties on intra-area trade for most agricultural products by December 31, 1991, with most remaining duties on agricultural products to be phased out by June 1992. Effective December 31, 1992, maximum tariffs on most nonagricultural products are to be reduced to 20 percent; these products will have a minimum tariff of 5 percent with intermediate tariff rates of 10 and 15 percent.

15

The agreement between Chile and Mexico involves the phased elimination of tariffs on 90 percent of goods traded by 1995; the phased elimination of tariffs on petrochemicals, synthetic textiles, glass, meat, poultry, eggs, tobacco, and some timber products by 1998; the reduction of tariffs for motor vehicles from 1996; the creation of a list of exceptions, involving 46 Chilean products (including agricultural products receiving subsidies, such as sugar and wheat, as well as grapes and apples) and 59 Mexican products (including oil and oil derivatives); the immediate abolition of all nontariff barriers; the establishment of an “open skies” and “open seas” policy for the transport of goods and passengers; the introduction of new rules to avoid double taxation and to harmonize investment rules; and a safe-guards provision allowing each country to increase tariffs temporarily for balance of payments reasons.

16

These countries signed an EAI framework agreement with the United States in June 1991—the first such multilaterally negotiated agreement.

17

Of the seven OECS members, only Dominica and St. Vincent have implemented the common external tariff; other members have experienced some reluctance to move ahead with full implementation of the agreement.

18

This is similar to the role envisaged for the Asian-Pacific Economic (APEC) Forum, which also includes Australia, Canada, New Zealand, Japan, and the United States.

19

The AFTA and the CEPT mechanism were endorsed by an ASEAN summit meeting in January 1992. Other proposals discussed by the ASEAN have not been formally adopted.