Regional Trade Agreements: Challenges and Opportunities

1
Regional Trade Agreements Challenges and
Opportunities

• Dr. James H. Mathis
• Faculty of Law
• University of Amsterdam, NL.
• mathis_at_jur.uva.nl

2
Why are there regional trade exceptions in the
WTO ?

• GATT emerged from a regional / bilateral /
  colonial world
• Question for the drafters
• Given a general MFN clause,
• how broadly should MFN apply
• What is the scope of application of MFN?

3
An architectural (and systemic) issue

• Broad exception to MFN, then less MFN.
• Narrow exception to MFN, more MFN.
• How important was MFN then,
• How important is MFN now ?
• The question is political, legal, economic and
  social.
• Institutional, procedural, and substantive

4
Is Art. XXIV developmentfriendly ?

• Pre-Havana drafts only provided for completed
  customs unions
• Free-trade Areas added in Havana on developing
  country issues
• Intensely drafted provisions
• definitions, CUs and FTAs
• notification plan and schedules
• review requirements, recommendations

5
So... why so many RTAs and so few
recommendations?

• The issues are internal - how much free trade
  is required to obtain the exception ?
• duties and other restrictive regulations of
  commerce are eliminated with respect to
  substantially all the trade between the
  territories
• All terms can be settled, but parties disagree on
  how much GATT control

6
Internal Trade - technical issues

• What is substantially?
• Quantity. Tariff benchmarks and indicators
  (existing trade, potential trade)
• Quality. What is a major sector not to be
  excluded. Agriculture, sugar?
• What are other regulations of commerce?
• Use of safeguards and anti-dumping in an RTA
• ORRCs and regulations- harmonisation/ recognition
• role of restrictive rules of origin between
  members

7
Overall, the bi-polar nature of Article XXIV

• Purpose to facilitate trade between members
  and not to raise barriers to the trade of
  non-members (para.4)
• The XXIV paradox (Haight)
• non members are requested to approve complete
  formations
• that are more diverting to non member trade.

8
However, dispute resolution has affected the
balance.

• Burden shifting. Is only notification enough ?
• No recommendation, no easy RTA defence
• Panels can review the trade components of RTAs
• Qualifying RTA has to be demonstrated if the
  defence is raised
• Substantially - more than some, less than
  all, but modifies the word all

9
What does Doha para 29 require ?

• 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.

10
What is the development dimension for Article
XXIV?

• How much reciprocity (flexibility) in a
  north-south agreement and,
• What relationship to the Enabling Clause ?
• for both N/S
• and S/S agreements ?
• How many gradations in preference can the system
  tolerate?

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Ultimately, the issues are political - states /
sovereign power, and MFN

• To what degree should MFN govern global trade ?
• What should be the reach of GATT and GATS
  most-favoured nation ?
• Question for states and for stakeholders