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Spaghetti Bowl Phenomenon

Spaghetti Bowl Phenomenon and the Complexity of Free Trade Agreements (FTAs)

Context:

Ongoing global turmoil over regional trade policies and the proliferation of Free Trade Agreements (FTAs) has reignited concerns about the Spaghetti Bowl Phenomenon.
This issue is particularly relevant as India navigates new FTAs and revisits old ones under its renewed foreign trade policy (FTP 2023–28).

What is the Spaghetti Bowl Phenomenon?

Definition:

According to the World Bank, the Spaghetti Bowl Phenomenon refers to the confusing, overlapping, and tangled network of bilateral and regional FTAs, making trade processes more complicated rather than facilitating smoother trade flows.

Origin of the Term:

Coined by: Jagdish Bhagwati, eminent economist and trade theorist, in 1995.
Metaphor:
- Compares the messy interconnections of different trade rules to a bowl of spaghetti, where intertwined strands represent overlapping FTAs.

Why Does the Spaghetti Bowl Occur?

Rules of Origin (RoO):
- Every FTA comes with its own criteria to define which goods qualify for preferential treatment (reduced tariffs).
- Problem:
  - Producers dealing with multiple FTAs must comply with different RoOs, increasing administrative burden and compliance costs.
Diverse Tariff Schedules:
- Different FTAs offer varied tariff concessions and schedules, leading to confusion about which agreement offers the best trade terms.
Fragmentation of Supply Chains:
- Multinational companies find it difficult to optimize supply chains when different FTAs impose different origin and compliance standards.

Impacts of the Spaghetti Bowl Phenomenon

Aspect Impact Trade Costs Increases compliance costs for exporters and importers. Trade Flows Discourages smaller businesses from utilizing FTAs, leading to stagnant or lower trade volumes despite more agreements. Inefficiency Creates inefficiencies in global and regional supply chains. Legal and Bureaucratic Complexity Increases the burden on customs and trade authorities to manage multiple overlapping agreements. Stagnation in Regional Trade For example, South Asia and East Asia, despite having multiple FTAs, see relatively low intra-regional trade compared to regions like the EU or NAFTA (now USMCA).

Global Examples Illustrating the Phenomenon:

Asia-Pacific Region:
- Over 400+ FTAs either signed, under negotiation, or proposed (as of 2025).
- Example: ASEAN countries often have bilateral FTAs both with each other and with external partners (like China, Japan, South Korea), creating significant overlaps.
Latin America:
- Proliferation of FTAs among MERCOSUR, Pacific Alliance, and individual countries like Chile and Peru further complicates regional trade.
India's Experience:
- India is part of multiple agreements (like ASEAN-India FTA, India-UAE CEPA, India-Australia ECTA) — leading to challenges in harmonizing trade compliance and maximizing FTA utilization.

Efforts to Overcome the Spaghetti Bowl Effect

Solution	Explanation

Mega-regional Agreements

Initiatives like RCEP (Regional Comprehensive Economic Partnership) or CPTPP (Comprehensive and Progressive Agreement for Trans-Pacific Partnership) attempt to unify rules under a larger umbrella.

Harmonization of Rules of Origin

Simplifying and standardizing RoO criteria across agreements.

Trade Facilitation Agreements

WTO's Trade Facilitation Agreement (TFA) encourages simplification of customs procedures.

Digital Tools

Creation of FTA portals for exporters/importers to easily navigate different rules (e.g., India’s FTA Utilization Portal under the DGFT).