2
Japanese firms that NAFTA was damaging Japanese interests in North America, the Japanese
government added a bilateral dimension to its trade liberalization strategy.
2
Some analysts such as former Singaporean diplomat Barry Desker argue that the trend
toward FTAs in East Asia will hasten the liberalization of global trade as the major proponents of
such agreements are all nations with an interest in open markets.
3
However, most economists
remain skeptical of FTAs. Jagdish Bhagwati contends FTAs are a damaging diversion from
nondisciminatory trade that undercut the principle of most favored nation in the WTO while
creating a “spaghetti bowl” of trade regulations that increase transaction costs for firms and
governments.
4
While acknowledging the shortcomings of static economic models that focus only
on merchandise trade, Edward Lincoln agrees that FTAs are a second-best outcome to global free
trade.
5
Political scientists have also found fault with FTAs. John Ravenhill argues that the weak
discipline imposed by GATT Article 24 makes bilateral FTAs particularly problematic. Article
24 requires that preferential trade agreements liberalize “substantially all” trade within a
“reasonable time frame.” Yet, the WTO has not clearly defined the meaning of this restriction
and so it has been unable to rule on whether specific FTAs conform with treaty requirements. As
a result, nations are able to negotiate pro-liberalization FTAs that avoid imposing adjustment
costs–“a liberalization without political pain.”
6
Bilateral FTAs offer protectionist groups an
opportunity to maximize their political leverage in fighting painful economic adjustment because
external pressures come from only one party, and so are much weaker than in multilateral trade
negotiations. Moreover, larger economies, such as Japan, have greater leverage than smaller
Convention