Termites in the Trading System: How Preferential Agreements Undermine Free Trade

by Jagdish N. Bhagwati

Jagdish Bhagwati, the internationally renowned economist who uniquely combines a reputation as the leading scholar of international trade with a substantial presence in public policy on the important issues of the day, shines here a critical light on Preferential Trade Agreements, revealing how the rapid spread of PTAs endangers the world trading system.
Numbering by now well over 300, and rapidly increasing, these preferential trade agreements, many taking the form of Free Trade Agreements, have re-created the unhappy situation of the 1930s, when world trade was undermined by discriminatory practices. Whereas this was the result of protectionism in those days, ironically it is a result of misdirected pursuit of free trade via PTAs today. The world trading system is at risk again, the author argues, and the danger is palpable.
Writing with his customary wit, panache and elegance, Bhagwati documents the growth of these PTAs, the reasons for their proliferation, and their deplorable consequences which include the near-destruction of the non-discrimination which was at the heart of the postwar trade architecture and its replacement by what he has called the spaghetti bowl of a maze of preferences. Bhagwati also documents how PTAs have undermined the prospects for multilateral freeing of trade, serving as stumbling blocks, instead of building blocks, for the objective of reaching multilateral free trade. In short, Bhagwati cogently demonstrates why PTAs are Termites in the Trading System.

Genres: Economics

160 pages, Kindle Edition

First published January 1, 2008

About the author

Jagdish Natwarlal Bhagwati (born July 26, 1934) is an Indian American economist and professor of economics and law at Columbia University. He is well known for his research in international trade and for his advocacy of free trade.

Reviews

[Felipe Flores Pinto · Rating 5 out of 5]

A short book but quite informative

This is a short but very well written and informative book on international trade and one of the best texts I have ever read on preferential trade agreements.

[Rahul · Rating 4 out of 5]

This book fed my desire to dork out and do more academic reading. While a small book, Bhagwati packs this book full of analysis on the current system of global trade.

He makes valuable insights into the false premise that Free Trade Agreements (FTAs) are promoting of free trade. He argues that the ubiquity of these FTAs have made trade less fair and free; they are the so called 'termites' in the system. He also harps on the role that economic unions, such as the EU, play in limited the free flow of goods and services. However, he does not take the logical step and condemn the EU in its structuring of its customs union, and it's disheartening to see him come to the edge but not make the final, logical, step.

Bhagwati provides extensive citation and further reading for those interested in knowing more. While the book is short, the writing is quite dense, and while Bhagwati thinks he's being extremely witty, at times the book is a slog. I enjoyed it very much, but caution that only those who actually find this stuff interesting should venture forth, otherwise, it's a pass.

[Alex · Rating 4 out of 5]

Not my cup of tea, but this is a complex (but easy to read) BRIEFING on free trade's benefits, how free trade today actually isn't, and what to do about it. This book was made for the everyman, so check it out if you're interested in this topic; it's short.

[Aastha · Rating 4 out of 5]

Pretty easy to understand book about the global trading system. Bhagwati writes in a manner that makes the book interesting, which is saying a lot for an economist :)

[Robyn · Rating 4 out of 5]

Very academic language (I thought) and full of opinion, but also highly informative. I agree with Mr. Bhagwati's position here.