The Neo-Liberal Turn in Regional Trade Agreements

This paper makes two primary arguments. First, that the increased resort to bilateral and regional trade agreements has taken a neo-liberal 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 and 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 neo-liberal 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 neo-liberal economic ideals in the periphery of the global trading system. In other words, emulation by small developing countries of neo-liberal economic policies in developed countries is a significant driver of economic reform. Developing countries adopt neo-liberalism not simply because it is imposed as many accounts suggest. Rather, neo-liberalism is also voluntarily adopted for a variety of reasons: (i) because there has been a convergence in the thinking of policy makers 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 neo-liberal 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 neo-liberal 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 neo-liberal 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 neo-liberal ideals or their alternatives. In short, this paper argues that the increased number of regional and bilateral trade agreements represents an important opportunity for the further diffusion of neo-liberal 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 neo-liberalism 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 neo-liberalism are more than less likely to be exercised.