The modern history of the world trading system, and in particular international trade agreements, is evidenced by shifts among bilateralism, regionalism and multilateralism. In the late nineteenth century and early twentieth century, bilateralism was clearly dominant. Trade agreements were negotiated on a bilateral basis between individual countries. In the 1860s and 1870s, England initiated much of this activity, pushing its trading partners to sign trade agreements that reciprocally lowered tariff rates. In the 1930s, it was the United States (US) that made a big push in this area through its Reciprocal Trade Agreements programme, although a number of other countries were also active in negotiating bilateral agreements to lower tariff rates.

However, immediately after World War II, multilateralism and regionalism replaced bilateralism as the dominant approach. From the late 1940s to the mid-1990s, multilateralism grew in strength as more and more nations joined the GATT or its successor, the WTO. The GATT, which began with 23 countries, unquestionably came to dominate the world trading scene. It did not, however, completely replace regional and bilateral trade agreements. Regionalism remained a competing model, as nations in Europe, North America, South America and elsewhere all formed trading blocs during this period. East Asia was the only region to eschew regionalism, while Western Europe was the clear leader in terms of both the timing and the scope of its economic integration, with other regions following behind. Bilateralism, on the other hand, diminished considerably during this period. Such agreements were extremely rare, and where they did exist could usually be explained mostly by political, rather than economic, factors.

More recently, though, bilateralism has returned with a vengeance. The initial return to bilateralism can be traced to the breakup of the Soviet Union and collapse of Communism in the early 1990s. The newly formed nations, along with several Eastern European economies in transition from a centrally planned to a market-based economy, led a mini-revival of bilateralism in the mid to late 1990s. Bilateralism, however, only significantly gained momentum following the failed WTO negotiations at the 1999 Seattle Ministerial Conference.

I. Introduction

A. Trade and social issues

International trade agreements have numerous – but also sometimes conflicting – effects on the ability of countries to protect social values, including labour and environmental standards and human rights. The preamble of the WTO Agreement claims as one of its primary objectives the ‘raising [of] standards of living’, and it is widely recognized that, as said by the World Commission on the Social Dimension of Globalisation, ‘wisely managed, [the global market economy] can deliver unprecedented material progress, generate more productive and better jobs for all, and contribute significantly to reducing world poverty’. But as this very statement recognizes, the potential of trade liberalization to improve social protections does not always translate into actual improvements.

This is for several reasons. At a general level, trade can lead to increased efficiencies, with benefits for the environment, governments and consumers. But increased export opportunities can also put pressure on local environments and people living on land coveted by exporters. There are also costs for any country pursuing a policy of trade liberalization. Liberalization leads to unemployment and reduced income in inefficient sectors and, while this is supposed to be only a short-term problem, structural adjustment has proven to be a challenge even for the wealthiest of countries. Legally, it is relevant that these negative effects can disproportionately affect minorities and women, who are specially protected by international human rights treaties. The trilateral relationship between intellectual property, trade and social protection is also complex. Intellectual property protections can promote trade in goods and services containing intellectual property, thereby enabling individuals to enjoy the fruits of their labours. But the very same protections can also hinder a country's ability to meet its social objectives, as the debate on TRIPS and essential medicines has amply demonstrated.

Government efforts to achieve social protection in other countries can also impact on trade. Market access restrictions, whether unilateral or agreed (and this by no means excludes some degree of coercion), are frequently applied to products from countries involved in human rights abuses, as well as to products from countries that do not comply with environmental or public morals norms. They may also be applied to protect high domestic standards of social protection (to prevent so-called ‘social dumping’).