The Changing Landscape of RTAs and PTAs: Analysis and Implications

This paper traces the evolution of “discriminatory” international trading arrangements: (i) regional trade agreements (RTAs), which offer their members better access to each other’s markets; and (ii) preferential trade agreements (PTAs), which offer developing and least developed countries (LDCs) nonreciprocal access to certain markets. The number, coverage, and depth of RTAs have increased tremendously in the last 25 years, potentially leading to even deeper integration among dynamic economies. However, countries on the margin of RTA activity may be in danger of not benefitting from the growth in international trade. The number of countries offering PTAs has also increased with many developing countries now providing LDCs with nonreciprocal market access. This significant level of RTA and PTA activity raises serious challenges for countries such as Pakistan, which remain on the margins. Efforts to rectify this should, in the short term, focus on negotiating RTAs with selected countries to build the required capacity for such negotiations and improve Pakistan’s visibility on the RTA landscape. The country must aggressively seek and defend nonreciprocal market access under PTAs, with particular focus on such GSP schemes as offer additional benefits. Medium-term actions should aim to improve competitiveness by investing in infrastructure, energy, and human resources; adopting a coherent and supportive macroeconomic policy framework; and improving law and order. This will help Pakistan enter into and benefit from RTAs with dynamic economies while substantially reducing its dependence on PTAs.