The NeoLiberal Turn in Regional Trade Agreements

Abstract: This Article makes two primary arguments. First, that the increased resort to bilateral and regional trade agreements has taken a neoliberal turn. As such bilateral and regional trade agreements are now a primary means through which greater investor protections, commodification of social services, guaranteed rights of investor access to investment opportunities, privatization of public service goods, and generally the diminution of sovereign control are being realized. These trade agreements make the foregoing goals possible not just in developing countries, but in industrialized economies as well. I show that these agreements provide business interests with opportunities to exercise concerted pressure to influence the adoption of neoliberal economic policies in both developed economies and developing economies. Second, this Article argues that bilateralism and regionalism in trade are contemporary fads that are spreading neoliberal economic ideals in the periphery of the global trading system. In other words, emulation by small developing countries of neoliberal economic policies in developed countries is a significant driver of economic reform. Developing countries adopt neoliberalism not simply because it is imposed, as many accounts suggest. Rather, neoliberalism is also voluntarily adopted for a variety of reasons: (i) because there has been a convergence in the thinking of policymakers and academic thinkers in developing and developed countries in part as a result of socialization through education or professional associations and contacts; (ii) as a result of persuasion that neoliberal reforms are important preconditions for goals such as increased economic growth or the efficiency of public sector institutions, developing country officials have adopted them; (iii) public officials in developing countries are strategically adopting neoliberal reforms since they are regarded as a signaling device that their country is 'safe' for investment or because bilateral and regional trade agreements come with budget support that is otherwise unavailable to these developing country officials in their home country; (iv) officials in developing countries are passive imitators who in the absence of solid evidence as to the efficacy of neoliberal ideals on their own account or in relation to alternative reform ideas are rationally bounded actors who find it impractical to assess the efficacy of neoliberal ideals or their alternatives. In short, this Article argues that the increased number of regional and bilateral trade agreements represents an important opportunity for the further diffusion of neoliberal economic ideals, an insight often missing in leading accounts that have emphasized how this trend conforms or departs from the norms of the World Trade Organization. This paper does so using a constructivist account of the circumstances under which neoliberalism arises in the turn towards regionalism and bilateralism. It shows how ideas about market governance and the institutions and experts that generate and perpetuate these ideas impose an incentive structure within which choices in favor of neoliberalism are more than less likely to be exercised. INTRODUCTION 422 I. THE TREND TOWARD TRADE REGIONALISM AND BILATERALISM 427 A. The Long Litany of U. S. Regional and Bilateral Trade and Investment Agreements 427 1. Bilateral Trade Agreements 430 2. Regional Initiatives 432 3. Trade and Investment Framework Agreements (TIFAs) 432 4. Bilateral Investment Treaties (BITs) 432 5. …