The Regional Integration Agreements: A New Face of Protectionism

The regional integration agreements can be a strategy of trade diversion and thus we can say that there is a violation of the rules of free trade. By creating preferential rules which are inconsistent with the principles of the WTO, the strategy of regional integration can increase the risk of trade disputes with third party countries and can therefore generate a commercial environment full of threats and reprisals. Third countries, especially developing countries have small markets, may find themselves marginalized further when the members of the regional group adopt the principle of discrimination. The philosophy of the WTO paves the way for a transition from regional integration towards a multilateral integration. The question that arises is whether regional integration agreements meet this conception of the WTO or they represent a new form of protectionism hindering free trade. We know that the regional groups hold private information about the actions and decisions they adopt in the intra-group. The uncertainty and hidden information can cause conflicts internationally. The WTO, we can assume as the Principal, should create incentives that can guide regional groups that can be assumed as Peripheral Agents, to comply with Article XXIV and the elimination of regional protectionism. Control actions and trade policies of regional groups should be done on a regular basis to make the game of international trade more fair.