Regional Trade Agreements and the WTO
What is an RTA in the WTO? Types of preferential trade liberalization: In the WTO, RTAs are thus seen as... Reciprocal and Discriminatory (non-MFN)
Economic Union Common Market Customs Union Free Trade Area Partial Scope Types of RTAs More Economic and political integration Lesser coverage of economic activity
GATT 1994 General Agreement on Trade in Services Overview Exceptions on RTAs are embodied in the following WTO Agreements: Article V Article XXIV Understanding on the Interpretation of Article XXIV Enabling Clause
Overview RTA exceptions are all based on the same principles*: ...though without making more difficult the parties’ trade with non-party Members The purpose of an RTA is to facilitate trade among the parties How are these principles translated into specific provisions in each of the existing rules? *GATT Art. XXIV:4; “Enabling Clause” para. 3(a); GATS Art. V:4)
Scope • Customs Unions • Free-trade areas As defined in paragraph 8 Article XXIV & Understanding Interim Agreements Customs unions or free-trade areas implemented in stages, over a transition period
Substantive Criteria For both customs unions and free-trade areas: «Deep integration» criterion Tariffs and other trade measures should be eliminated on substantially all (originating) trade among the parties Article XXIV & Understanding «Neutrality» criterion Its formation should not imply an increase in tariffs And other trade measures applied to other, non-party WTO Members.
Substantive Criteria For customs unions, in addition: • Tariffs and other trade measures should be • substantially harmonized among the parties. • Any increase in MFN tariff bindings resulting from the establishment of a common external tariff should be negotiated with interested Members. Article XXIV & Understanding For interim agreements: • Lead to either a free-trade area or a customs union in a maximum of 10 years, unless exceptional circumstances are acknowledged. • Contain a plan and schedule to achieve that aim.
Notification to the WTO Other Requirements / Provisions Automatic review (examination) of the RTA by WTO Members Article XXIV & Understanding Submission of requested information by the parties Dispute settlement provisions may be invoked Biennial reporting
Scope Paragraph 2(c) : WTO developing country Members are authorized to depart from the MFN clause (Article I), to enter into reciprocal regional or global arrangements with other developing countries, establishing tariff and (subject to WTO approval, in principle) non-tariff preferences in their mutual goods trade. The Enabling Clause
Notification to the WTO Other Requirements / Provisions The Enabling Clause Consultations with other Members, upon request Submission of requested information by the parties
Scope «Economic Integration Agreements» Agreements liberalizing trade in services Including those implemented on the basis of a time-frame GATS Article V Definition of beneficiary service providers (rules of origin) Paragraph 6
Substantive Criteria «Deep integration» criterion • Substantial sectoral coverage • No a priori exclusion of a mode of supply for the sectors covered • In the sectors covered, absence/elimination of substantially all discrimination GATS Article V «Neutrality» criterion • Should not raise overall trade barriers (to other Members) compared to prior levels.
Other requirements / provisions Renegotiation of commitments: If, when entering the agreement, a Member’s WTO specific commitments are made more restrictive, negotiations should take place. GATS Article V Flexibility for developing countries in terms of: • Substantial sectoral coverage • Elimination of discrimination in the sectors covered
Notification to the WTO Other Requirements / Provisions GATS Article V Possible review (examination) of the RTA by WTO Members Submission of requested information by the parties
RTA Processes in the WTO Member notifies participation in RTA, seeking legal coverage under: GATT Article XXIV Enabling Clause GATS Article V Council for Trade in Goods Committee on Trade and Development Council for Trade in Services RTA Procedures in the WTO Examination automatically mandated Consultations, no examination (in principle) Examination may be mandated Committee on Regional Trade Agreements Proceeds to mandated examination and reports back
Factual examination in the CRTA Written exchanges of comments, and questions & replies • Oral policy statements • Oral comments, questions & replies RTA Examination Procedures • Notification by the parties • Submission of text of agreement, • annexes & protocols • Submission of preliminary information by the parties (Standard Format) RTA Procedures in the WTO • Draft report prepared by the Secretariat. • Informal consultations • Report, once agreed, sent to the relevant • body, for adoption
Summing-up When entering an RTA, a WTO Member should invoke one of the following provisions, and comply with the relevant conditions: ... Or else the Member should seek a waiver!
NOTIF: Regional Trade Agreements • Formation of a regional tradeagreement • free-tradearea • customsunion • betweendevelopingcountries • Biennialreport • Modifications • Trade in services WebpageontheTransparencyMechanismforRTAs WT/REG/16