Regional Trade Agreements:
Challenges and Opportunities
Dr. James H. Mathis
Faculty of Law
University of Amsterdam, NL.
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?
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
• Institutional, procedural, and substantive
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
So... why so many RTAs and so few
• The issues are “internal” - how much
free trade is required to obtain the
– “…duties and other restrictive regulations
of commerce are eliminated with respect to
substantially all the trade between the
• All terms can be settled, but parties
disagree on how much GATT controlwww.StudsPlanet.com
“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/
• role of restrictive rules of origin between
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
– that are more diverting to non member
However, dispute resolution has
affected the balance.
• Burden shifting. Is only notification
• No recommendation, no easy RTA defence
• Panels can review the trade components of
• Qualifying RTA has to be demonstrated if the
defence is raised
• “Substantially” - more than “some”, less than
“all”, but modifies the word … “all”
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
What is the development dimension
for Article XXIV?
• “How much reciprocity (flexibility)” in a
north-south agreement and,
• What relationship to the Enabling
– for both N/S
– and S/S agreements ?
• How many gradations in preference can
the system tolerate?
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