Regional trade agreement 1

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  • 1. 1 Regional Trade Agreements: Challenges and Opportunities Dr. James H. Mathis Faculty of Law University of Amsterdam, NL. mathis@jur.uva.nl www.StudsPlanet.com
  • 2. 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? www.StudsPlanet.com
  • 3. 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 www.StudsPlanet.com
  • 4. 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 www.StudsPlanet.com
  • 5. 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 controlwww.StudsPlanet.com
  • 6. 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 www.StudsPlanet.com
  • 7. 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. www.StudsPlanet.com
  • 8. 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” www.StudsPlanet.com
  • 9. 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. www.StudsPlanet.com
  • 10. 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? www.StudsPlanet.com
  • 11. 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 www.StudsPlanet.com