Termites in the Trading System | Council on Foreign Relations

In his new book, Termites in the Trading System: How Preferential Agreements Undermine Free Trade, CFR Senior Fellow for International Economics Jagdish Bhagwati argues that so-called free

trade agreements (FTAs), which he maintains are in fact preferential trade agreements (PTAs) involving two or more countries, actually set back the cause of free trade and undermine the

multilateral trading system.

He writes that FTAs make global multilateral agreements more, not less, difficult. "The current tide of preferences has been a result of politicians mistakenly, and in an uncoordinated

fashion, pursuing free trade agreements because they think (erroneously) that they are pursuing a free trade agenda."

Bhagwati makes the case against PTAs for several reasons, including:

Bhagwati proposes that the Doha Round be completed expeditiously and U.S. trade policy be redirected from proliferating FTAs. "Preferential trade agreements have slowed down our progress on

the multilateral freeing of trade, as with the Doha Round. The Doha Round's success is essential to strengthening the multilateral trading system, which is beneficial to all."

Mr. Bhagwati is a rare academic who has the great ability to communicate his ideas to a more general audience. ... [His] concise book of just 100 pages of text should be read by all who care

about the world trading system today. ... [W]ritten with a light touch, with many amusing stories, examples, and effective argumentation that make it, above and beyond its policy

significance, a genuine pleasure to read.

The founding fathers of the postwar trading system wisely chose nondiscrimination as its central principle. But the last fifteen years have witnessed its erosion due to the proliferation of

preferential trading agreements. Jagdish Bhagwati, the leading trade economist of our time, rang first the alarm bells about the resulting spaghetti bowl of discriminatory rules and

regulations. Now, with his usual blend of brilliance, wit, and bluntness, he describes the rise of PTAs and analyzes why it has occurred and how it threatens the multilateral trading system.

This book is essential reading not only for economists and trade diplomats, but for anyone concerned with the design of the institutions that are central to our prosperity.

The world's foremost trade policy scholar explains why what he calls 'preferential trade arrangements' are not a path towards global free trade, but a dangerous step away from it. A

long-standing and brave opponent of these arrangements and particularly of those between hegemonic powers and developing countries, Jagdish Bhagwati explains how they promote costly trade

diversion, interfere with the efficient operation of global business, and allow great powers to extract unjustified concessions from weaker countries. This book underlines the abiding wisdom

of nondiscrimination, the now almost completely forgotten founding principle of the world trading system, and concludes that the only way to return to sanity is by movement towards free

market access for all.