Even if several such large FTAs were to be agreed, their potential contribution to world economic welfare would remain only a fraction of what is potentially achievable via a similar degree of tariff cuts under a multilateral agreement. Furthermore, these FTA studies take no account of the dampening effect of the rules of origin that almost invariably constrain the extent to which firms can take advantage of any FTA’s removal of bilateral tariffs (Krueger 1999).

Similarly, studies of Europe’s proposed Economic Partnership Agreements (EPAs) with the poor countries of the African, Caribbean and Pacific (ACP) Group almost all anticipate zero gains or actual economic loses from them, at least in static terms.<sup>19</sup> In those studies their authors felt the effects on economic growth generally were too difficult to model formally. One of the very few studies that does offer empirical estimates of the effects of FTAs on economic growth, by Vamvakidis (1999), finds either zero or negative effects.

Of course there is more motivation to forming preferential FTAs than just economic welfare, but that is also true of multilateral agreements. Moreover, the latter have the virtue of being non-discriminatory, of involving much less negotiating cost per dollar of benefit, and of having a far higher probability of no country, nor any significant group of households within each participating country, losing from the agreement – in part because multilateral reform encourages each country to move resources to activities in which the country has its stongest comparative advantages, whereas preferential FTAs may encourage resources to move to now-more-profitable activities which subsequently become uncompetitive following the next FTA or WTO agreement. All this implies the costs of adjusting to an FTA per dollar gained is likely to be far lower for a WTO agreement than for an FTA. And since the probability of an FTAA forming looks even less promising than for concluding a DDA agreement during the next few years, there is no point in formally calculating a benefit/cost ratio for this opportunity.

# **_Removing developed country barriers to exports from least-developed countries_**

The EU’s initiative to extend market access preferences to least developed countries (LDCs) provides duty- and quota-free access to the EU for exports of ‘everything but arms’ (EBA). That initiative received in-principle, best-endeavours endorsement at the WTO Ministerial in Doha in November 2001, but without any specific timetable. A similar initiative has been put forward for providing free market access for all African products (Collier 2007).

Liberal though that proposal sounds, note that it does not include trade in services (of which the most important for LDCs would be movement of natural persons, that is, freedom for LDC laborers to work on temporary visas in the EU or other high-wage countries). Also, a number of safeguard provisions are included in addition to the EU’s normal anti-dumping measures. Furthermore, access to three politically sensitive agricultural markets, bananas, rice and sugar, is being phased in by the EU only gradually over this decade – and they are subject to stricter safeguards.

Several empirical studies of the initiative have already appeared. A World Bank study by Ianchovichina, Mattoo and Olarreaga (2001) compares the EU proposal, from the viewpoint of Sub-Saharan Africa (SSA), with recent initiatives of 19 A small selection of the literature includes: Gasiorek and Winters (2004), Milner, Morrissey and McKay (2005), and UNECA (2007). All find fault with specific aspects of the EPAs but none suggests that correcting these faults would make a dramatic difference to the conclusions.

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