{ "title": "The Rise of Discriminatory Regionalism", "sourceUrl": "https://www.imf.org/en/publications/fandd/issues/2023/06/the-rise-of-discriminatory-regionalism-michele-ruta", "canonical": "https://www.imf.org/en/publications/fandd/issues/2023/06/the-rise-of-discriminatory-regionalism-michele-ruta", "overlayPath": "/en/publications/fandd/issues/2023/06/the-rise-of-discriminatory-regionalism-michele-ruta/index.md", "summary": "At a time of growing global tensions, regional trade alliances may be less about integration and more about discrimination", "sections": [ { "heading": "Overview", "content": "- Author: MICHELE RUTA, division chief in the IMF’s Strategy, Policy, and Review Department.\n- Publication: F&D Magazine, June 2023.\n- Central thesis: In an era of growing global tensions, regional trade alliances may shift from promoting integration toward building discriminatory barriers against nonmembers." }, { "heading": "Evolution of regional trade agreements (RTAs)", "content": "- Count and scale:\n - Fewer than 50 RTAs in 1990.\n - More than 350 RTAs today.\n - The 2018 African Continental Free Trade Agreement (AfCFTA) covers more than 1.3 billion people and is the world’s largest regional trade agreement.\n- Depth and scope:\n - Pre-1990s typical agreements focused mainly on tariff liberalization and border issues (customs).\n - Since the 1990s, RTAs have become “deeper,” addressing regulations and nontariff measures and broadly regulating three overlapping policy areas:\n - Integration of goods, services, and factor markets and rules regulating areas such as tariffs, services, investment, and intellectual property rights.\n - Restrictions on governments’ ability to take action that could reverse economic integration, including regulatory barriers, sanitary measures, subsidies, and rules governing competition.\n - Protection of rights that could be diminished by market integration if regulations governing areas such as labor or environmental standards are not upheld." }, { "heading": "Effects on trade and nontrade outcomes", "content": "- Trade integration:\n - Deep RTAs increased trade between members by 40 percent on average (study cited).\n - Many recent RTA provisions are nondiscriminatory and have reduced costs for members and nonmembers alike.\n - Rules that increase competition, regulate domestic subsidies, or support adoption of international regulatory standards have been found to boost exports by nonmembers.\n- Nontrade outcomes:\n - Provisions on investments, visa and asylum issues, and intellectual property protection have reduced the cost of cross-border activities, stimulating foreign direct investment, migration, and technology flows.\n - One study found that environmental provisions in RTAs prevented about 7,500 square kilometers of deforestation during 2003–14.\n - Unintended effects: RTAs without child labor provisions can reduce child employment and increase school enrollment; RTAs with child labor bans can shrink children’s wages and sometimes lead poorer households to send more children into the labor market to recoup lost income." }, { "heading": "Complementarity between regionalism and multilateralism", "content": "- Mechanisms of complementarity:\n - Societal supporters (for example, exporting firms) often favor both multilateral and regional integration.\n - WTO laws and dispute mechanisms form the foundation of many RTA laws; many RTAs restate existing WTO commitments and rely on WTO adjudication for enforcement.\n - Nondiscriminatory RTA commitments can promote both regional and multilateral integration.\n- Implication:\n - In times of conflict, regionalism may be weaker because RTA laws would rest on shakier WTO laws and anti-integration domestic forces would oppose both regional and multilateral integration." }, { "heading": "Risks of discriminatory regionalism", "content": "- Historical precedent:\n - In the 1930s, discriminatory regionalism and protectionist measures reshuffled trade patterns; for the UK, imports from the British Empire rose from less than 30 percent at the beginning of the period to more than 40 percent at the end.\n- Contemporary manifestations:\n - Surge of protectionist measures, such as local content requirements in subsidy programs and export restrictions targeting non-regional partners.\n - Use of stringent rules of origin to increase regional value content at the expense of extraregional inputs.\n - Leveraging RTAs for nontrade objectives: higher labor and environmental standards, adoption of domestic rather than global standards, or redirection of supply chains for national security reasons.\n - Example cited: an agreement signed at the end of March between Japan and the United States on certain critical minerals, characterized as limited in scope and different from deep RTAs of prior decades.\n- Consequences:\n - Discriminatory practices are contrary to the spirit, if not the letter, of multilateral trade rules and could increase integration costs, hinder efficiency, and make regionalism less effective." }, { "heading": "Scenarios and outlook", "content": "- Continued deep, nondiscriminatory RTAs:\n - Would preserve integration between members and continue experimentation with new forms of integration.\n - Deep trade agreements that reduce market fragmentation should be encouraged, particularly in regions such as Africa with large development gains from a continental market.\n- Shift toward discriminatory regionalism:\n - RTAs could weaken and grow more discriminatory if multilateral anchors erode, erecting protectionist walls against nonmembers.\n - Regionalism without multilateralism may be more exposed to disintegration forces.\n- Conclusion:\n - There is no choice between regionalism and multilateralism; only a choice between integration and disintegration. A revival of multilateralism is necessary to complement RTAs in an age of conflict.\n\nSource: F&D Magazine, “The Rise of Discriminatory Regionalism,” Michele Ruta, June 2023.\n\n---\n\n Content in this bundle\n\n- The Rise of Discriminatory Regionalism\n - The Rise of Discriminatory Regionalism (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n - The Rise of Discriminatory Regionalism (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/fandd/issues/2023/06/the-rise-of-discriminatory-regionalism-michele-ruta" } ], "bullets": [ "[Markdown version](/en/publications/fandd/issues/2023/06/the-rise-of-discriminatory-regionalism-michele-ruta/index.md)", "[Structured JSON version](/en/publications/fandd/issues/2023/06/the-rise-of-discriminatory-regionalism-michele-ruta/index.json)", "[Bundle manifest](/en/publications/fandd/issues/2023/06/the-rise-of-discriminatory-regionalism-michele-ruta/bundle-manifest.json)", "Authors: MICHELE RUTA", "Published: June 1, 2023", "Author: MICHELE RUTA, division chief in the IMF’s Strategy, Policy, and Review Department.", "Publication: F&D Magazine, June 2023.", "Central thesis: In an era of growing global tensions, regional trade alliances may shift from promoting integration toward building discriminatory barriers against nonmembers.", "Count and scale:", "Depth and scope:", "Trade integration:", "Nontrade outcomes:", "Mechanisms of complementarity:", "Implication:", "Historical precedent:", "Contemporary manifestations:", "Consequences:", "Continued deep, nondiscriminatory RTAs:", "Shift toward discriminatory regionalism:", "Conclusion:", "**The Rise of Discriminatory Regionalism**" ], "related": [ { "title": "The Rise of Discriminatory Regionalism", "role": "document", "sourceUrl": "https://www.imf.org/-/media/files/publications/fandd/article/2023/june/ruta.pdf", "summary": { "path": "/-/media/files/publications/fandd/article/2023/june/ruta.pdf.md", "mime": "text/markdown" }, "binary": { "path": "/-/media/files/publications/fandd/article/2023/june/ruta.pdf", "mime": "application/pdf" } } ], "alternates": { "markdown": "/en/publications/fandd/issues/2023/06/the-rise-of-discriminatory-regionalism-michele-ruta/index.md", "json": "/en/publications/fandd/issues/2023/06/the-rise-of-discriminatory-regionalism-michele-ruta/index.json", "bundleManifest": "/en/publications/fandd/issues/2023/06/the-rise-of-discriminatory-regionalism-michele-ruta/bundle-manifest.json" }, "generatedAtUtc": "2026-09-15T18:39:03.482Z" }