THE recent world recession put WTO activities on hold. Many would say that trade agreements under the WTO are now in suspended animation. Despite many attempts, closure of the Doha round of trade negotiations (begun in 2001) has still not been achieved. But work on free-trade or preferential-trade agreements (FTAs and PTAs) seems to be in full swing. As of 2008, 421 RTAs had been notified to the WTO mostly under article XXIV of GATT. If one includes RTAs not yet notified, being negotiated or at proposal stage, about 400 FTAs would come up for implementation in 2010. Again, about 90% of RTAs are proposals for free trade among members but do not extend to customs unions (CUs). The difference is that in CUs at least some country would have to lower its existing global (MFN) tariff levels. In other words, countries are not willing to give up their policy space as far as tariff setting is concerned. Most RTAs are also between developing countries indicating that politics is an important component of this proliferation of FTAs. In most developing countries it is politically easier to sell tariff concessions to other developing country partners. Also, remember the acrimony over extension of the US-Canada FTA to Mexico in Nafta? Yet it is not clear that FTAs actually work. Some recent surveys of traders in the Asian region indicate that while in the case of countries like South Korea about 45% of traders availed of preferential trade, the figure is only around 20% for traders from Indonesia, Singapore and Thailand. At the macro level, the question that still remains unanswered is whether any trade gains witnessed can be attributed to the RTA itself or may in case have happened due to supply or demand-side factors. Contracting an FTA implies expending considerable political and administrative capital. For small countries this may be an important cost. Two questions need some answers. First, why are countries scrambling to negotiate these trade instruments? Second, why then do traders often not use the preferential trade route? One possible answer to the first question may lie in the not inconsequential need to firm up international political alliances. This is probably most important for developing countries who feel particularly vulnerable in global fora like the WTO. In this context small developing economies have the greatest fears and are normally quickest to get off the block in negotiating FTAs. The complicated