Regional trade agreements and wto legal system

Regional trade agreements.

Regional trade agreements (RTAs) have risen in number and reach over the years, including a notable increase in large plurilateral agreements under negotiation. Following the notification of the RTA between Mongolia and Japan in June 2016, all WTO members now have an RTA in force.

Non-discrimination among trading partners is one of the core principles of the WTO; however, RTAs constitute one of the exemptions and are authorized under the WTO, subject to a set of rules. In line with these rules, and also recognizing the need to enhance transparency and increase understanding of RTAs' impact on interests of WTO members, the WTO Secretariat was instructed by WTO members to gather information on RTAs. The organization also provides a forum for discussions on the implications of RTAs for the wider multilateral trading system.

What all RTAs in the WTO have in common is that they are reciprocal preferential trade agreements between two or more partners. Information on RTAs notified to the WTO is available in the RTA Database. The WTO also receives notifications from WTO members regarding preferential trade arrangements (PTAs). In the WTO, PTAs are unilateral trade preferences. Information on PTAs notified to the WTO is available in the PTA Database.

Introduction.

Explanation from “Understanding the WTO”, the introduction to the WTO.

Facts and figures.

As of 20 June 2017, 279 RTAs were in force. These correspond to 445 notifications from WTO members, counting goods, services and accessions separately.

Access the most up-to-date information on Regional Trade Agreements notified to the GATT/WTO. Map of RTAs by country/territory.

Select a country or territory on the map to see its participation in regional trade agreements.

Transparency Mechanism for RTAs.

WTO members agreed in 2006 to implement a provisional mechanism to enhance the transparency of RTAs and understand their effects on the multilateral system. Under this process, members notify the WTO about their RTAs and these are discussed by the wider WTO membership on the basis of a factual presentation prepared by the WTO Secretariat.

At the 10th Ministerial Conference in Nairobi in 2015, WTO members agreed to work towards the transformation of the provisional mechanism into a permanent mechanism without prejudice to questions related to notification requirements.

Committee on Regional Trade Agreements.

The Committee on Regional Trade Agreements considers individual regional agreements and is also mandated to hold discussions on the systemic implications of the agreements for the multilateral trading system. The Committee on Trade and Development also implements the Transparency Mechanism for RTAs between developing countries.

> See also Transparency Mechanism communications (early announcements of RTAs, notifications of changes, etc.)

Negotiations on RTAs.

Negotiations to clarify and improve WTO disciplines on RTAs fall under the work of the Negotiating Group on Rules, which reports to the Trade Negotiations Committee.

WTO rules on regional trade agreements.

The WTO’s rules on regional trade agreements:

Text of the 1979 GATT decision allowing preferential trade in goods among developing countries. Text of GATS Article V Find decisions of WTO bodies concerning the regional trade agreements in the Analytical Index — Guide to WTO Law and Practice The Doha negotiating mandate.

Bridges.

Friend or Foe? Regional Trade Agreements and the WTO.

Reams of paper and hours of discussion have focused on whether regional trade agreements are building blocks or stumbling blocks to the.

multilateral system. This approach, however, is too simplistic in view of the diverse economic and political dimensions of individual agreements.

There are certain realities that must be accepted at this stage in international trade:

Regional trade agreements (RTAs) are here to stay and it is likely that the next decade will continue to see an exponential widening and deepening of this architecture.

In the past ten years we have seen a mutation of traditional RTAs into extra-regional agreements covering a large number of areas beyond simple tariff reduction.

The multilateral system of trade negotiations is still generally viewed as the most effective approach to negotiating tariff reductions, market opening, trade rules and settling disputes.

This does not dilute the argument that the WTO should seek, as far as possible, to ensure coherence and compliance between the rules negotiated at the multilateral level and those at the inter-regional, sub-regional and extra-regional levels, but rather that the work of the WTO in the area of RTAs should be tempered by the recognition that they are an important species in the global trading ecosystem.

Many have argued that the failure of the Doha Round negotiations to reach an acceptable resolution is to blame for the increased movement of countries towards establishing RTAs. This is yet another flawed argument.

For a start, a comparison of the Uruguay and the Doha Rounds shows that the former was completed in a longer timeframe than the timelines originally envisaged for Doha and that the current round contains more areas for negotiation and has, thankfully, been characterised by enhanced awareness and participation by developing countries. It is only rational to assume that the Doha Round could take longer to conclude.

Second, the move towards RTAs has been a steady one over the last 10 years and evidence does not indicate any obvious link between a perceived lack of progress at the multilateral level and a move towards bilateral or regional arrangements. In many respects the new RTAs are governed by strategic interests beyond just dollars, and often entail ‘WTO-plus’ provisions. The move towards RTAs is a natural progression that can be equated to the more traditional establishment of diplomatic, or bilateral politico-economic relations; they are a natural and essential component of multilateral trade relations.

This does not mean that RTAs are without problems. In fact, the characteristics that make RTAs attractive – manageable negotiations, WTO-plus features and political dimensions – are the very ones that potentially threaten the multilateral trading system and could possibly have a negative impact on some developing countries.

Nevertheless, regionalism is a necessary and important policy option for some countries, especially the small and vulnerable amongst us. The Caribbean is a perfect example of this as can be seen by the creation of CARICOM and other representative regional processes and institutions of a geographically distinct union with both political and economic pillars. An increasing number of trade agreements seek to deepen economic relations, either because of political strategic interests or economic potential, or a combination of both. A customs union may seek an arrangement with other similar entities, or with individual countries. Some RTAs aim primarily to lower tariffs, some seek to maintain historical and traditional political and trade linkages, while others aim to incorporate non-WTO issues, and yet others are created as a conduit to garner greater market access into a non-party or to place pressure on a non-party. The different possibilities and computations are endless.

Some RTAs are created with the aim of going beyond the discussions in the WTO. Hence issues such as investment, trade facilitation, government procurement, environmental and labour standards, intellectual property rights and competition policy often feature in modern arrangements with provisions which can be termed WTO-plus. This may occur either because the multilateral system has not agreed to negotiate (or to conclude) one or more of these issues, or as a result of partner A requiring such benefits from partner B rather than from the entire membership of the multilateral system.

The WTO/RTA relationship thus becomes a two-way street where the multilateral system often provides the ‘floor’ denominator for the RTA’s trade dimension while the regional agreement acts as a laboratory for the testing and application of new measures that may or may not be adopted at a later stage at the multilateral level. The inherent dilemma of this scenario is (i) whether it creates a form of ‘forum shopping’ that could undermine the viability of the multilateral system and promote a raft of plurilateral agreements that do not require universal accession, but do have universal implications or (ii) whether it establishes a propitious environment for countries to enhance measures – such as technical and environmental standards, transparent border processes and simplified rules of origin – that make them better prepared for integration into the multilateral trading system.

Trade Creation vs Trade Diversion.

The principal riddle to be solved is whether an RTA creates or diverts trade. The simple answer is that it depends on the genesis, composition and impact of the agreement in question. The risk of actual or potential trade diversion and trade distortion as a result of an RTA is a valid concern, especially if a country outside of the arrangement has a production structure similar to one or more parties involved in the RTA, or if the country’s demand constitution corresponds to the product or service base of the RTA members. Conversely, particularly with regard to geographically concentrated countries, an enhanced regional economic structure can allow for principles of comparative advantage to kick in. This may create more realistic market structures and production patterns that may help the participants to enhance their integration into the global production and trade system.

Some RTAs are not created with the primary objective of advancing the WTO’s concept of trade liberalisation. Indeed, they may have opt-out or asymmetrical treatment clauses, which could be perceived as contrary to the tariff-reduction/market-access orientation of the multilateral trading system. This, however, does not make them ‘bad’ agreements, especially if the developmental externalities are positive. We need enhanced and more sophisticated criteria for determining an RTA’s compliance with WTO rules beyond just dollars and cents.

Contribution to the Multilateral Negotiating Process.

Although the WTO-plus component of some RTAs may have an impact on the future areas for negotiation at the multilateral level, it can also be an important contribution as it allows some Members, especially developing countries, to gain experience from negotiating and participating in regional or extra-regional processes, which could in turn improve their level of understanding and engagement at the WTO.

One major negative repercussion, however, is whether parties to an RTA, especially developing countries involved in North - South agreements, may not be ‘locking in’ certain levels of contribution and inadvertently minimising their domestic policy space or undermining their negotiating leverage at the multilateral stage. And then there is the question of negotiating legitimacy. If, for example, a developing country has taken a strong stance in the WTO negotiations against a Member (or against an issue championed by it) and then undertakes an RTA with that same Member, it can severely undermine the integrity and legitimacy of the developing country on that particular issue at the multilateral level.

Although it is not simple to define what constitutes an ‘acceptable’ RTA under the WTO, one thing is clear: the WTO should not seek to micro-manage the specifics of every existing or potential agreement. The key for the institution is to ensure that an architecture is put in place to measure coherence with multilateral rules, and that there are mechanisms to seek appropriate redress if an RTA is blatantly out of conformity with the expectations under the WTO agreements. The first task to be undertaken is a clarification of WTO rules governing RTAs to ensure that there is certainty as to the exact meaning and intention of the key terms used in the agreements – such as ‘substantially all the trade’ and ‘other regulations of commerce’, etc. – and, most importantly for developing countries, that the elaboration of rules and concepts does incorporate the developmental dimension of regional agreements. A revision that seeks to tighten only the econometric and quantitative requirements without incorporating appropriate ‘special and differential treatment’ and other flexibilities would be counterproductive and against the spirit of both the Doha Round mandate and the developmental aspects of RTAs.

WTO Members have achieved some success with regard to enhancing the level of transparency of what is expected of RTAs by the multilateral system and revitalising the procedures for ‘examining’ notified RTAs. The provisional RTA transparency mechanism, adopted by the General Council in 2006, has already been ‘tested out’ and discussions continue on a similar mechanism for Generalised Systems of Preferences (GSP) schemes.

The other track of WTO discussions on RTAs concerns the so-called ‘systemic issues’. Under this heading, Members have addressed many of the legal terms and requirements of RTAs notified under GATT Article 24.

The African, Pacific and Caribbean (APC) Group, for instance, has requested that the development dimension and flexibilities be incorporated into the rules, but positions have not really coalesced on this issue. In contrast, Australia and others have sought to tighten the disciplines. It is generally recognised within the ACP that Australia’s position on ‘substantially all the trade’ (SAT, i. e. the proportion of two-way trade that must by covered by free trade agreements concluded outside the WTO) may be too ambitious and does not take into account the significant political and developmental dimensions of certain RTAs.

Some other important trade actors do not necessarily appear to want any major changes to the current GATT Article 24, and the danger of the ACP trying to push for such changes is that it may induce the more liberalisation-oriented WTO Members to push in the opposite direction. The core concern of some of these countries is that granting ‘development concessions’ to ACP countries would also mean extending them to larger developing countries – a scenario that many developed WTO Members are not comfortable with.

The EU had floated some interesting ideas on how to define ‘substantially all the trade’ based on both trade volume and tariff lines, cumulative measurement of SAT rather than individual country measurement and development benchmarks. However, any assessment of this proposal must take into account the EU’s demands in its ongoing negotiations on Economic Partnership Agreements with ACP countries. Some delegations have already begun to modulate the expected level of ambition regarding the systemic aspect of the RTA negotiations and are questioning whether the existing ‘uncertainty’ in the current Article 24 would not be better than the stricter rules that could be imposed by some Members if the negotiations continue.

Nevertheless, special and differential treatment for developing countries should be a major component of any revised rules, and should indeed be a critical component of any RTA where the playing field is uneven. While no RTA can be a substitute for the engagement of all WTO Members in multilateral trade regulations, completing the Doha Round in a manner that fully takes into account the interplay between liberalisation and development is essential.

Matthew Wilson is First Secretary at the Permanent Mission of Barbados in Geneva. The author adapted this article from his presentation at the ‘Roundtable for the Orientation and Preparation Discussion for the 2008 Regional Trade Policy Course for Caribbean Countries’, held on 29 November, 2007.

Regional Trade Agreements and the WTO Legal System.

Edited by Lorand Bartels and Federico Ortino.

International Economic Law Series.

Discusses the proliferation of regional trade agreements which represent a significant challenge to WTO law The co-existence of RTAs and the WTO raises critical issues of fragmentation of international trade law and jurisdictional competition Contributors include scholars, government officials, and experts from international organizations, offering practical, conceptual, institutional, and official perspectives.

Regional Trade Agreements and the WTO Legal System.

Edited by Lorand Bartels and Federico Ortino.

International Economic Law Series.

Description.

The proliferation of regional trade agreements, including both free trade agreements and customs unions, over the past decade has provoked many new legal issues in WTO law, public international law, and an emerging law of regional trade agreements. The various Parts of this book chart this development from a number of perspectives. Part 1 introduces the economic and political underpinnings of regional trade agreements, their constitutional functions, and their role as a locus for integrating trade and human rights. Part 2 examines the WTO rules governing regional trade agreements, focusing on a number of areas in which regional trade agreements prove problematic, such as trade remedies, regulatory standards and rules of origin. Part 3 investigates areas in which regional trade agreements go beyond WTO rules, in areas such as intellectual property, investment, competition, services, sustainable development and mutual recognition, while Part 4 is devoted to the dispute settlement mechanisms of regional trade agreements, and includes illuminating case studies. Part 5 explores the interrelationship between regional trade agreements and the WTO system from the perspective of public international law, involving questions with significance beyond the trade community.

Regional Trade Agreements and the WTO Legal System.

Edited by Lorand Bartels and Federico Ortino.

International Economic Law Series.

Table of Contents.

Preface, John Jackson.

1: Introduction, Lorand Bartels and Federico Ortino.

Part I Framework Issues.

2: The Economic Dimension of Regional Trade Agreements and their Relation to the Multilateral Trading System: A Survey of the Literature, William Watson and Viet Dung Do.

3: The Political Economy of Regional Trade Agreements, Chad Damro.

4: Constitutional Functions of the WTO and Regional Trade Agreements, Thomas Cottier and Marina Foltea.

Part 2 WTO Regulation of Regional Trade Agreements.

5: Regional Trade Agreements and Domestic Regulation: What Reach for 'Other Restrictive Regulations of Commerce', James Mathis.

6: Mandatory Abolition of Antidumping, Counterveiling Duties and Safeguards in Customs Unions and Free-Trade Areas Constituted Between WTO Members: Revisiting a Long Standing Discussion in Light of the Appellate Body's Turkey - Textiles Ruling, Angela Gobbi Estrella and Gary Horlick.

7: Do Rules of Origin in Free Trade Agreements Comply with Article XXIV GATT?, Jose Antonio Rivas.

Part III WTO-plus Issues in Regional Trade Agreements.

8: Services Liberalisation in Regional Trade Agreements: Lessons for GATS 'Unfinished Business'?, Markus Krajewski.

9: International Agreements Covering Foreign Investment : Patterns and Linkage, Federico Ortino and Audley Sheppard.

10: TRIPS-Plus Provisions in Regional Trade Agreements, Bryan Mercurio.

11: Competition Law and Regional Trade Agreements, Melaku Desta and Naomi Barnes.

12: Is Mutual Recognition an Alternative to Harmonisation? Lesson on Trade and Tolerance of Diversity from the EU, Gareth Davies.

13: The WTO, Regional Trade Agreements and Human Rights, Ernst-Ulrich Petersmann.

14: Sustainable Development in Regional Trade Agreements, Marie-Claire Cordonier Segger.

Part IV Dispute Settlement in Regional Trade Agreements.

15: Dispute Settlement in Regional Trade Agreements and the WTO, Bill Davey.

16: NAFTA Dispute Settlement: Creative Experiment or Confusion?, Armand de Mestral.

17: Bilateral Dispute Settlement in EU Free Trade Agreements: Lessons Learned?, Ignacio Garcia Bercero.

18: Dispute Settlement in Bilateral Free Trade Agreements: The EFTA Experience, Andreas Ziegler.

19: Dispute Settlement in the Proposed East Asia Regional Trade Agreements: What Can We Learn From the EU and NAFTA?, Yan Luo.

Part V Interfaces Between the WTO and Regional Trade Agreements.

20: The EU and its Member States in the WTO: Issues of Responsibility, Piet Eeckhout.

21: Overlaps and Conflicts of Jurisdiction Between the WTO and RTA's, Kyung Kwak and Gabrielle Marceau.

22: Applicability of WTO Law in Regional Trade Agreements: Identifying the Links, Locknie Hsu.

23: What Role is there for Regional International Law in the Interpretation of the WTO Agreements?, Isabelle Van Damme.

Regional Trade Agreements and the WTO Legal System.

Edited by Lorand Bartels and Federico Ortino.

International Economic Law Series.

Author Information.

Edited by Lorand Bartels , Lecturer in International Economic Law, University of Edinburgh, and Federico Ortino , Reader in International Economic Law, Kings College London.

Contributors:

Thomas Cottier and Marina Foltea.

Angela Gobbi Estrella and Gary Horlick.

Jose Antonio Rivas.

Marie-Claire Cordonier Segger.

Armand de Mestral.

Ignacio Garcia Bercero.

Kyung Kwak and Gabrielle Marceau.

Isabelle Van Damme.

Also of Interest.

Good Faith and International Economic Law.

Andrew D. Mitchell, M Sornarajah, Tania Voon.

Climate Governance at the Crossroads.

Matthew J Hoffmann.

The BRIC States and Outward Foreign Direct Investment.

Judicial Decisions on the Law of International Organizations.

Cedric Ryngaert, Ige F Dekker, Ramses A Wessel, Jan Wouters.

Development at the WTO.

Sonia E. Rolland.

Judicial Decisions on the Law of International Organizations.

Cedric Ryngaert, Ige F Dekker, Ramses A Wessel, Jan Wouters.

The Trade Policy Review Mechanism.

Electronic Documents in Maritime Trade.

International Harmonization of Economic Regulation.

The Oxford Handbook of International Human Rights Law.

Evidence, Proof, and Fact-Finding in WTO Dispute Settlement.

Michelle T. Grando.

Blame it on the WTO?

Human Rights in International Investment Law and Arbitration.

Pierre-Marie Dupuy, Ernst-Ulrich Petersmann, Francesco Francioni.

The Collected Documents of the Group of 77.

Human Rights in International Investment Law and Arbitration.

Pierre-Marie Dupuy, Ernst-Ulrich Petersmann, Francesco Francioni.

The Oxford Handbook of International Organizations.

Jacob Katz Cogan, Ian Hurd, Ian Johnstone.

Related Categories.

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Oxford University Press is a department of the University of Oxford. It furthers the University's objective of excellence in research, scholarship, and education by publishing worldwide.

Regional Trade Agreements and the WTO Legal System.

Lorand Bartels and Federico Ortino.

This book is concerned with the legal aspects of regional trade agreements — free trade agreements and customs unions. There are currently around 300 regional trade agreements, and these continue to proliferate. As a result, this is becoming an increasingly important part of WTO law. This book investigates these agreements, and examines their regulation under WTO rules. It also looks at the relationship of these agreements to the WTO from the perspective of public international law.

Bibliographic Information.

Affiliations are at time of print publication.

Lorand Bartels, editor.

Lecturer in International Economic Law, University of Edinburgh.

Federico Ortino, editor.

Reader in International Economic Law, Kings College London.