This document discusses regional trade agreements and exceptions allowed under the WTO. It notes that the General Agreement on Tariffs and Trade (GATT) emerged from a regional/bilateral world and questions how broadly the most favored nation (MFN) clause should apply and what is the scope of its application. It examines issues around the exceptions provided for customs unions and free trade areas under Article XXIV, including how much free trade is required to obtain the exception. It discusses the development aspects of regional trade agreements and questions around flexibility, reciprocity, and gradations of preference in agreements between developed and developing or developing countries. Ultimately, it frames the issues as political questions around state sovereignty and the appropriate reach and role of MFN

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

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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?
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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
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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
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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

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“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

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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.
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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”
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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.
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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?
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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
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