Regional Trade Agreements under World Trade Organisation (WTO) rules
Within the WTO, regionalism is viewed as `actions by governments to liberalise or facilitate trade on a regional basis, sometimes through free-trade areas or customs unions'. A trading arrangement among a subset of countries in which members trade on preferential terms with discriminatory removal of trade barriers among themselves broadly describes an Regional Trade Agreement (RTA). RTAs usually begin with tariff preferences but often extend into services, intellectual property rights, government procurement and other areas. These may take the form of:
Free trade areas - where reciprocal preferences for goods or services are exchanged but members retain their own tariff rates
Customs unions - where a common external tariff is implemented in addition to the exchange of reciprocal preferences
Asymmetrical agreements - where preferences are not strictly reciprocal, for example one party may be allowed longer than another to implement certain goods or services preferences
The North American Free Trade Area (NAFTA) is an example of a free trade area, the European Communities (EC) is an example of a customs union and many EC Association Agreements (such as those with North African countries) are examples of asymmetrical agreements.
Regional Trade Agreements play an ever-increasing role in world trade, accounting for an estimated 60 percent of global transactions today. Regional Trade Agreements are expanding in both number and scope. Currently, 197 RTAs notified with the WTO are in force; the number exceeds 300 if those being negotiated, those in the proposal stage, and ones that are signed but not yet in force are counted.
The Most Favoured Nation (MFN) clause under Article I of the GATT enshrines the fundamental principle of non-discrimination. This implies that in the trade of goods and services (under the GATS), all imported products should receive the same tariff or non-tariff treatment irrespective of their country of origin. Under WTO rules, WTO Members are allowed to enter into RTAs provided those Agreements meet certain criteria about their coverage of trade, implementation periods and so on. Article XXIV of GATT permits signatories to set up regional FTAs and Customs Unions (CUs) for trade in goods, Article V of the GATS for services, and the Enabling Clause provides legal cover for preferential trade agreements among developing countries.
The WTO has a clear brief to monitor the spread of RTAs and review their consistency with prescribed regulations. At the WTO Ministerial Conference held in Doha in 2000, it was agreed that there should be negotiations to clarify and improve disciplines and procedures under the existing WTO provision applying to regional trade agreements. The Committee on RTAs (CRTA) has the primary responsibility to conduct the review of RTAs, aided by other WTO bodies, and examines members’ agreements to ensure they comply with WTO rules.
The review process is to examine whether a given agreement is in harmony with the criteria prescribed. Effectively, trade barriers must not be raised against non-members; they must be eliminated on "substantially all trade" among members; and formalities leading to RTAs must be completed within 10 years. In this context, a new WTO transparency mechanism has been developed, aimed at facilitating the process of notification of RTAs, and also to expedite reviews of RTAs and examine their consistency with WTO prescriptions.
Further details can be found at the WTO website see external links section on right.
Contact:
Eoin Parker
e-mail: eoin.parker@berr.gsi.gov.uk