Explaining the role of the Asia-Pacific Economic Cooperation (APEC) in ensuring free trade In order to model asymmetry in the multilateral trading system, Bowen (2013) introduces random political shocks in each country`s import-competitive sectors, which are characterized by the policy parameters λi in section 2.2.1. These shocks are random but publicly observable, which avoids information problems in the application of trade agreements analyzed in the previous subsection. However, such shocks may provide a greater incentive for governments to deviate if they have to tolerate a less favourable set of bilateral tariffs that depend on the realization of political shocks requiring asymmetric tariffs. If the discount factor is not high enough to apply the most cooperative conditional tariffs under the multilateral punitive system, the mechanism may set the maximum number of less favourable bilateral tariffs that each government must tolerate. Governments are then allowed to impose their static Nash tariffs when they are in a bilateral trade relationship in which at least one of the countries is subject to political shocks that result in less favorable bilateral tariffs exceeding such a maximum number. Bowen (2013) qualifies this maximum number as leniency and characterizes the leniency allowed in a multilateral cooperative political equilibrium (characterized by q) for a given discounting factor, and shows that this q is approximated to the number of countries by an increasing linear function. Such an outcome has been interpreted as an additional advantage of multilateralism. Bowen also shows that the abstention factor calculated by dividing q by the number of countries increases with the discount factor and the volume of bilateral trade, suggesting that the stability of the multilateral trade agreement improves with the increase in the volume of bilateral trade. All agreements concluded outside the WTO framework (which grant additional benefits beyond the WTO`s most-favoured-nation level, but apply only between signatories and not to other WTO Members) are considered preferred by the WTO. Under WTO rules, these agreements are subject to certain requirements such as notification to the WTO and universal reciprocity (preferences should also apply to each of the signatories to the agreement), with unilateral preferences (some of the signatories enjoying preferential market access to the other signatory States without reducing their own customs duties) being allowed only in exceptional circumstances and as a temporary measure.  Criticisms of bilateral and regional approaches to trade liberalization have many additional arguments. They suggest that these approaches could undermine and replace the WTO`s multilateral approach, rather than supporting and complementing it, which is preferable for non-discriminatory global activity. Therefore, the long-term outcome of bilateralism could be a deterioration of the global trading system into competing and discriminatory regional trading blocs, resulting in additional complexity that would complicate the flow of goods between countries.
Moreover, the reform of issues such as agricultural export subsidies cannot be effectively addressed at the bilateral or regional level. Not surprisingly, financial markets see the other side of the coin. Free trade is an opportunity to open up another part of the world to domestic producers. As a general rule, the benefits and obligations of trade agreements apply only to their signatories. Governments with free trade policies or agreements do not necessarily relinquish all control over imports and exports or eliminate all protectionist policies. In modern international trade, few free trade agreements (FTAs) lead to full free trade. Taken together, these agreements mean that about half of all goods imported into the U.S. are duty-free, according to government figures. The average import duty on industrial goods is 2%.
We believe that the design reflects the goal. So we discuss the purpose of a trade agreement as a tool to prepare the ground for our discussion on design.b that is, we first try to catalog the «problems» that a trade agreement can «solve» in the different formal models of trade agreements, where problems lead to inefficiencies, the solutions of which can then lead to an increase in the common surplus, which allows for a mutually beneficial trade agreement. Given the problems identified and the inefficiencies characterized, we are then in a better position to assess whether the trade agreement is well designed under these formal models to provide mutual benefits to member governments […].