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Special and differential treatment

Bilateral and regional free trade agreements: some critical elements and development implications

Developing countries should avoid bilateral FTAs or at least assess their costs and benefits properly

Authors: M. Khor
Publisher: Third World Network , 2007

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This brief examines free trade agreements (FTAs) between a developing country and a developed country with regard to issues such as:

  • market access in goods
  • market access in services
  • specific services sectors such as the financial and telecommunications sectors
  • intellectual property rights
  • the “Singapore Issues”, i.e. investment, government procurement and competition policy
  • labour standards
  • environment and food standards
FTAs are found to reduce developing countries' policy space:
  • agreements on tariffs remove an important instrument of industrial and agricultural policy
  • negative lists reduce a countries' freedom to choose which sectors to liberalise
  • chapters on Singapore issues curtail developing countries' ability to regulate the establishment of foreign enterprises
  • they also make it more difficult to provide assistance to domestic enterprises
In general, developing countries should strive for multilateral agreements as bilateral agreements between a developing country and a developed country usually:
  • lead to trade diversion
  • are based on reciprocity and therefore do not apply the principles of special and differential treatment
  • are more extensive and less flexible than WTO rules
  • put pressure on developing countries' personnel and financial resources
As FTAs are nevertheless being pursued, developing countries should assess their benefits and costs before embarking on negotiations. Decisions should be based on:
  • a national development policy framework
  • a framework to assess the benefits and costs of FTAs
  • an institutional base for assessing whether or not to enter negotiations