THE strongPOLITICAL ECONOMYstrong OF TRADE LIBERALIZATION.pdfVIP

Asia-Pacific Development Journal Vol. 11, No. 1, June 2004 THE POLITICAL ECONOMY OF TRADE LIBERALIZATION Linda Low* The paper advances the view that while free trade and trade liberalization under the multilateral framework is the first best policy on purely theoretical grounds, the theory of the second best in the form of regional, plurilateral and bilateral free trade arrangements is at work in the real world. The methodology of economics is an important discipline; however, dysfunctional and power-structured multilateralism, heterogeneous economic structures and diverse development paths and levels render a political economy approach based on strategic pragmatism more realistic. In addition, empirical results have demonstrated that regional, plurilateral and bilateral free trade agreements can offer benefits to complement and supplement multilateralism provided these arrangements are consistent with the rules of the World Trade Organisation. The main objective of this paper is to reinforce the view that while free trade and trade liberalization under the multilateral framework is the first best policy, in the real world, the theory of the second best in regional, plurilateral and bilateral free trade arrangements is at work. A brief overview is germane to capture prevailing trends and developments in trade liberalization, related investment facilitation and other factor flows and economic integration, as the paradigm appears to have moved from multilateral and regional to plurilateral and bilateral trade agreements (see Radtke, and others, eds., 2002). After