PRESS RELEASE 
 
PRESS/635 
27 July 2011 
 
(11-3829) 
WORLD TRADE REPORT 2011 
Asia is at the leading edge of new trade pacts, says WTO report 
Burgeoning bilateral and regional trade agreements meet the need to regulate global production 
and can benefit non-members, but the WTO’s multilateral system also has a role in reducing the 
resulting complexity, according to the latest edition of the organization’s flagship publication 
released on 20 July 2011 in Geneva.  
The World Trade Report 2011,  which was presented to United Nations Economic and Social 
Commission for Asia and the Pacific (UNESCAP) members on 27 July 2011 in Bangkok, observes that Asian countries have become some of the most active in signing preferential trade 
agreements (PTAs). They have been party to almost half the PTAs concluded in the last 10 years. 
This has contributed to the increased concentration of trade within the region — second only to Europe in 2009.  
 
But more significantly preferential agreements ar e evolving towards deeper integration that goes 
beyond tariffs and other measures at national borders — they increasingly include domestic 
policies such as regulations on services and investment, intellectual property protection and 
competition policy, which the report calls “deep PTAs”.  
“These trends raise vital questions about the focu s and reach of the WTO, and the value assigned 
by governments to globally-based trade relations,” Director-General Pascal Lamy said.  
The report argues that deep PTAs reflect important changes in the world economy such as the 
growth of global production networks. The spread of these networks, in sectors such as electronics and motor vehicle manufacturing, has been particularly pronounced in the Asian region. The 
networks require better regulation and supervision in a range of areas, and deeper PTAs may be 
addressing this need.   
The result is that the deeper agreements can also benefit other countries rather than 
discriminating against them. The report highlights the case of the Association of Southeast Asian Nations (ASEAN). The evidence shows that ASEAN countries used their group’s free trade 
agreement as a vehicle to work together to cut red tape and streamline other aspects of trade 
(known as “trade facilitation”). Improved customs administration cut the costs of trading for members and non-members alike. On the one hand , lower preferential tariffs within these free 
trade agreements no longer offer much of an advantage because non-preferential tariffs (“most-
favoured nation” or “MFN” tariffs in WTO jargon) are already low. 
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 At the same time, if deep integration provisions require broader regulation, then these could apply 
to goods, services and investment from all countries, not just the members of the preferential 
agreements.  
The World Trade Report 2011  describes PTAs’ historical development and their current landscape. 
It examines why they are established, their econom ic effects, their contents and the relationship 
between the agreements and the multilateral trading system.  
 
Director-General Pascal Lamy says in his foreword : “I believe that to the extent that PTAs are 
motivated by a desire for deeper integration rather than market segmentation, there could be a 
role for the WTO to promote greater coherence among non-competing but divergent regulatory 
regimes that in practice cause geographical fragmentation or raise trade costs. There is no doubt that we need to build towards a more stable and healthier trading environment, where alternative 
trade policy approaches are mutually supportive and balance equitably the needs of all nations.”  
Main points 
Trends in PTAs 
Countries’ participation in preferential trade agreements has accelerated over time, become more 
widespread and transcended regional boundaries. Half  of the PTAs currently in force are not strictly 
“regional” as the growth of cross-regional PTAs has become particularly pronounced in the last 
decade. Free trade agreements are far more common than customs unions. At the same time, a 
number of products continue to be excluded from preferential access.  
Preferential trade and margins 
The explosion of PTAs is not being matched by an expansion in the trade flows that receive 
preferential treatment. This should not be surprising since tariffs have been reduced considerably since the end of the Second World War, reducing th e significance of the preferential tariffs (the 
“preferential margins”). 
 PTAs can also be complicated by rules of origin (how authorities determine where a product 
originates and therefore whether it is eligible for preferential treatment). The costs that companies 
face in meeting the requirements can be higher than the benefit they perceive from the lower tariffs.  
 
Preferential margins are also small when they ar e adjusted to account for the preferential access 
enjoyed by competing exporters. The proliferatio n of PTAs means that the difference between the 
basic non-preferential (“MFN”) rate and the PTA rate overstates the competitive advantage of a 
PTA member, since increasingly its competitors will also enjoy preferential access to the market.  
Explanations of why countries enter into  PTAs have to look beyond tariffs. 
Deep PTAs 
More and more PTAs are deep rather than shallow agreements. They include a wide range of 
issues beyond tariffs, such as services, investment, intellectual property protection, and 
competition policy. These policy areas involve domestic regulations (or behind-the-border measures). 
 
Therefore the analysis may need a framework distin ct from the more conventional assessments of 
trade creation and trade diversion because changes to domestic regulations are difficult to tailor so 
that they favour only selected trade partners.  PRESS/635 
Page 3 of 4 
 
 
 
Deep integration is likely to occur for severa l reasons. First, as trade becomes more open, 
countries’ policies increasingly depend on each other. As a result, unilateral decision-making is inefficient compared with decisions taken collectively. 
 
Secondly, deep integration agreements may be ne cessary to promote trade in certain sectors and 
economic integration more broadly. This applies to international production networks which require 
a governance structure beyond low tariffs.  
Coherence between PTAs and the WTO 
Deep PTAs present a new challenge to the multilateral trading system. The view that these agreements may be building-block or stumbling-blocks for the global system was based on the 
underlying question of whether preferential tariff opening would eventually lead to multilateral opening. That does not fit well with deep PTAs.  
 
The report identifies a number of options for increasing coherence between PTAs and the multilateral trading system. They include: 
 
 fixing deficiencies in the WTO legal framework (i.e. a “hard law” approach) 
 adopting a more nuanced and non-litigious approach to considering PTAs in the context of the 
WTO’s transparency and information exchange work — trying instead to understand better 
how countries’ interests in PTAs might also be multilaterally based (a “soft law” approach) 
 accelerating a multilateral non-preferential (“MFN-driven”) agenda on trade opening and 
regulation 
 multilateralizing regionalism, i.e. extending existing preferential arrangements in a non-
discriminatory manner to additional parties.  
Key facts 
 Almost 300 preferential trade agreements (notified and not notified) were in force in 2010. On 
average, a WTO member is party to 13 PTAs.  
 
 Despite the surge of PTAs in recent years, on ly 16% of global merchandise trade receives 
preferential treatment. In addition, less than 2% of world trade is eligible for preference 
margins above 10 percentage points.  
  Non-preferential (MFN) tariffs are low, equal to 4% on average in 2009. Most “sensitive” 
sectors remain “sensitive” in PTAs: approximately 66% of tariff lines (products defined by their 
customs codes) with MFN rates above 15% have not been reduced in PTAs.  
 
 If the preferential access enjoyed by other exporters is taken into account, less than 13% of 
preferential trade benefits from a competitive advantage exceeding 2 percentage points. 
 
 Signing deep integration PTAs increases trade in production networks by almost 8% on 
average. In addition, a high level of trade in production networks raises the likelihood of signing deep agreements. 
 
 A large number of disputes between PTA members are brought to the WTO dispute settlement 
system. On average, about 30% of WTO disputes  are between members who are parties to the 
same PTA.  
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The World Trade Report can be downloaded free of charge from the WTO web site: www.wto.org  
 
Printed copies in English, French and Spanish can be purchased from the WTO online bookshop: 
http://onlinebookshop.wto.org  
 
  
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