It is estimated that more than half of world trade
is now conducted under agreements of this kind. They are found in every continent.
Among the best known are the European Union, the European Free Trade Association
(EFTA), the North American Free Trade Agreement (NAFTA), the Southern Common
Market (MERCOSUR), the Association of Southeast Asian Nations (ASEAN) and its
ASEAN Free Trade Area (AFTA), and the Common Market of Eastern and Southern
From its inception, GATT — and now the WTO — has allowed
member countries to conclude customs unions and free-trade areas, as an exception
to the fundamental principle of non discrimination set out in the most-favoured-nation
clause of GATT’s Article 1.
Conditions for trade in goods within these agreements
were set in GATT Article 24. Essentially, a regional trade agreement should
aim to boost trade between its member countries and not to raise barriers
against the trade with other WTO members. During the 1986–94 Uruguay Round
negotiations, Article 24 was clarified to some extent and updated.
on goods between developing-country members are regulated by an “Enabling
from 1979. These arrangements are not subject to examination by the Committee
on Regional Trade Agreements but are notified to the Committee on Trade
For trade in services, economic integration agreements
by GATS Article 5.
Non-reciprocal preferential agreements generally involve
selected developing and developed countries. WTO members that have signed
an agreement of this kind have to seek a waiver from WTO rules. Among
known examples of such agreements are the US-Caribbean Basin Economic
Recovery Act and the Cotonou Agreement signed by the EC and the ACP countries
replace the Lomé Convention.
Non-reciprocal schemes under the Generalized
System of Preferences — when developed countries allow imports from developing
countries to enter duty-free or at low duty rates — are regulated by
Work in the Regional Trade Agreements Committee back to top
In February 1996, the WTO General Council
set up a single committee to oversee all regional trade agreements,
replacing separate working parties, each dealing with a separate agreement.
The Regional Trade Agreements Committee also looks at the broader,
systemic implications of the agreements for the multilateral trading
system, the relationship between them, and encourages adequate reporting
by countries that have signed these agreements.
Up to July 2005, over 300 regional trade agreements
had been notified to the WTO and before it to GATT. Of these, 128 agreements
notified under GATT Article 24, 21 agreements under the Enabling Clause
and 31 under GATS Article 5 are still in force today. The committee
has currently under examination more than 150 agreements.
Trade Agreements Committee has developed procedures to examine the
agreements, including compiling information. These procedures are for
assessing whether each agreement is consistent with WTO provisions.
However, since there is no consensus among WTO members on how to interpret
the criteria for assessing this consistency, the committee now has
a lengthening backlog of uncompleted reports. In fact, consensus on
consistency with Article 24 has been reached in only one case so far:
the customs union between the Czech Republic and the Slovak Republic
after the break up of Czechoslovakia.
As the number of regional agreements
increases, so does the need to analyze whether the WTO’s rules on these
agreements need to be clarified further. WTO members differ on whether
regional agreements help or hinder the multilateral trading system — whether
they function as “building blocks” or “stumbling blocks”. One view
is that the regional agreements strengthen the multilateral system
because they can move faster, and because they can help integrate developing
countries into the world economy. Other countries believe that the
WTO’s rules should be revised— and not just reinterpreted — so that
the two systems can work together better, particularly since the number
of agreements has increased, and their membership has increasingly
What’s at stake? back to top
Issues raised by the regionalism debate are
Some are primarily legal. For example, GATT
Article 24 requires that a regional trade agreement should cover “substantially
all the trade” in goods between its members. Similarly, GATS Article
5 calls for a “substantial sectoral coverage” in services. But there
is no agreement among members on what this means, and in practice many
leave out large and sensitive areas such as agriculture and financial
services. This poses difficulties for assessing whether the agreements
are consistent with WTO rules.
Other issues are more institutional in nature. They highlight possible discrepancies between the regional
agreements’ rules and those of the WTO. The focus in negotiations has
shifted over time from tariff reductions to rules and regulations,
both at the regional and at the multilateral level — for instance,
rules on anti-dumping, subsidies, or product standards. Some recent
regional agreements include provisions not covered by the WTO at all,
such as investment or competition policies.
Finally and most importantly,
there is the economic dimension. Today, this goes far beyond the effects
of tariff preferences on members and non-members of regional agreements.
Rather, this is now a question of the regional agreements’ impact on
the shape and development of world trade itself — given their large
and increasing number and their overlapping membership. Over the next
few years, this will be one of the most important challenges facing
trade policymakers in all continents.
The Doha Declaration back to top
The relationship between regionalism and multilateralism
has become a critical systemic issue, reflected in the WTO Regional Trade
Agreements Committee’s increasing backlog of unconcluded reports and
its lack of consensus on the broader question of the consistency between
regional agreements and WTO rules.
At the Doha Ministerial Conference
in November 2001, WTO members agreed to give a political push to this
question and to negotiate a solution, giving due regard to the role that
these agreements can play in fostering development.
The ministerial declaration
mandates negotiations aimed at “clarifying and improving disciplines
and procedures under the existing WTO provisions applying to regional
trade agreements. The negotiations shall take into account the developmental
aspects of regional trade agreements”.
Since then: the Rules Negotiating Group back to top
While the Regional Trade Agreements Committee
has continued its examination of specific agreements, members decided
that the Doha mandate should be fulfilled through a specific negotiating
channel. A Rules Negotiating Group was set up in 2002 to clarify and
improve disciplines on implementation on dumping, subsidies and countervailing
measures, fishery subsidies, and regional trade agreements.
group’s work has progressed substantially. Identifying the issues could
be completed quickly because they had already been debated extensively
in the Regional Trade Agreements Committee.
Good progress on procedural issues
The Group has made good progress on developing
draft procedures that would promote greater “transparency” of RTAs.
In September 2005, the Group was working on a draft text from the chairman,
containing elements on the early notification of the RTAs, and improving
the information provided by members on their agreements. The Secretariat
is expected to play an increasing role in presenting factual reports
on individual agreements, as a way to make the review of regional agreements
more efficient and coherent. As an experiment, the Committee on RTAs
used a Secretariat factual report in its examination of the Chile-Korea
Free Trade Agreement in July 2005 to the general satisfaction of delegations.
issues in this area include how to deal with RTAs presently under examination
in the RTA Committee, and whether the new procedures
would apply to RTAs notified under the Enabling Clause.
Issues to do with the trading system
Discussions on “systemic issues” have
gained momentum with the recent tabling of several proposals. However,
positions continue to be expressed on issues such as:
- how to interpret the phrase “substantially
all the trade”
- regulations that could restrict trade such as
rules of origin under preferential schemes
- how regional agreements relate
- the primacy of the multilateral trading system
and the negative effect regional agreements can have on other countries.
For Hong Kong back to top
The negotiating group has no intermediate deadlines
in the area of RTAs. However, the Group has agreed on an intensive work
programme aimed at submitting a draft transparency agreement to ministers
and to advancing as far as possible discussions on the systemic issues.