The Rudd/Gillard government has taken a tougher stance and has only signed free trade agreements that are comprehensive and truly reduced trade barriers in areas of interest to Australia. This has proved problematic and, with the exception of two minor agreements with Malaysia and Chile, the Labor Party has not been able to conclude a major free trade agreement during its mandate. The main difference between multilateral and bilateral free trade agreements is the number of participants. Multilateral trade agreements cover three or more countries, without discrimination between the parties concerned, while bilateral trade agreements exist between two countries. Both countries, for example, have certain privileges; they have favourable import quotas that are not available to other trading partners and only to the two nations that have signed the bilateral treaty. Examples include the Australia-New Zealand-New Zealand Free Trade Agreement and Canada (Dictionary of Political Economy, 2006). Onpulson, 2006). Regional free trade agreements are the third option. Halfway between multilateralism and bilateralism, they are linked to a group of countries within a geographic region negotiating a free trade area. Since Frankel`s relatively positive analysis in the mid-1990s, ATRs have multiplied, while WTO negotiations have largely atrophied.
This gives more importance to the political economy than RTAs are stumbling blocks rather than building blocks of the non-discriminatory, rules-based multilateral trading system. Baldwin and Thornton. 5. For more information on the rules governing global supply chain trade in the 21st century, see Richard Baldwin (2011) `21st Century Regionalism: Filling the Gap between 21st Century Trade and 20th Century Trade Rules`, WTO Staff Working Paper, No. ERSD-2011-08, Geneva: WTO. Another form of competitive liberalization can occur when outsiders try to compensate for trade discrimination by joining an RTA from which they were initially excluded. It has been suggested that this process could, at least in theory, lead to global free trade, as new countries are gradually trying to join. “Open regionalism,” which allows third parties to join ATRs relatively easily, has also been proposed as a way to promote this form of competitive liberalization and to transform the “spaghetti shell” into a “lasagna plate”. However, some economic models show that this process falls well short of global free trade and instead ends with a handful of competing blocs that together reduce global well-being. 28 In practice, memberships of existing ATRs or non-EU membership unions were relatively rare.
The two key questions of regionalism, therefore, are whether it leads to freer (online) global trade and whether it complements the WTO or whether it competes with the WTO. The answers depend to a large extent on why it occurs. Are RTA laboratories experimenting with rules in new areas that allow for further economic integration and the basis for a multilateral agreement in the future? Or is this trend mainly due to the frustration of the stagnation of WTO negotiations and are regional negotiations seen as an alternative to the multilateral system? These “deep integration agreements” aim to go beyond WTO rules, open services markets and protect intellectual property and foreign investment, and negotiate issues that have not yet been addressed in the WTO, such as competition policy, digital trade, regulatory cooperation, labour standards and environmental protection. The 2011 WTO Report on World Trade shows that previous issues, known as the WTO, are increasingly being used in the ATR and are often applicable. ATRs increasingly include WTO-class issues, often referred to as WTO X, but are more often hortatory and focus on cooperation rather than being legally applicable.