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@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 “development–friendly” ? • 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 tradebetween 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?

11. 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