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01 Dec 2005

Multilateralism or Regionalism?

Trade Policy Options for the European Union

Guido Glania / Jürgen Matthes

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Regional trade agreements play an ever-increasing role in world trade, accounting for more than 50% of global transactions today. Recently such large players as the US, Japan and many emerging countries have begun to conclude multiple bilateral trade agreements. At the same time, the EU, being a pioneer of this strategy, has declared a moratorium on new regional trade negotiations. Meanwhile, negotiations within the Doha Development Agenda are dragging along, without producing any tangible results from the EU’s perspective. This new report, by Guido Glania (Federation of German Industries) and Jürgen Matthes (Cologne Institute for Economic Research), takes up and enriches the large body of academic research to highlight the multifaceted effects of regional trade agreements and draws on the authors’ practical experience to outline the strategic options for EU trade policy. The report points out what is new about this most recent phase of regionalism and analyses the differentiated effects on economic welfare and trade transaction costs. A particular focus lies in the multiple impacts of regionalism on the WTO and the multilateral trading order. Against this background, the options for EU trade policy are examined with a particular focus on the possible merits of plurilateral approaches within the WTO.