The Role of Regional Agreements in Trade and Investment Regimes

Two themes have been central to recent work on international trade and investment agreements; the scope and legitimacy of the WTO, in particular with regard to the so-called behind the border issues, and the growth of regional agreements. Whilst much has been written on the trade creating and diverting effects of regional agreements, there has been much less work on the role of regional agreements in rulemaking in trade and investment.This paper argues addresses the question of how rulemaking at the multilateral and regional level interact. After outlining the two central themes in the current trade and investment debate, it then offers a framework for analyzing the relatively neglected question of how developments at the regional (or bilateral level) shape the evolution of the international trade and investment regime. The paper draws on a number of recent case studies theevolution of rules for behind the border issues, the findings of which are summarized. The paper argues that it is necessary to view rulemaking (or regime formation) in trade and investment as a multi-level process. It suggests that in this process the regional level played a broadly benign role in the period between the mid 1980s and mid 1990s, but that recent developments suggest that some more malign features of regional initiatives are now creeping in. To overcome this there is a need for meaningful negotiations on new rulemaking within the WTO even if this may require a plurilateral approach.