Regional Trade Agreements and the WTO

What is an RTA in the WTO?

Types of preferential trade liberalization:Concessions Members Examples RTA?

• Reciprocal Selective EU, NAFTA, Mercosur,EPAs

• Unilateral Selective Cotonou,AGOA

• Unilateral Generalized GSP

In the WTO, RTAs are thus seen as...

Reciprocal and Discriminatory (non-MFN) Reciprocal and Discriminatory (non-MFN)

Economic Union

Common Market

Customs Union

Free Trade Area

PartialScope

Lesser coverage of

economic activity

Mor

e Ec

onom

ic

and

polit

ical

inte

grat

ion

Types of RTAs

GA

TT 1

994

GA

TT 1

994

Article XXIVArticle XXIV

Understanding on the Understanding on the Interpretation of Interpretation of

Article XXIVArticle XXIV

Enabling ClauseEnabling Clause

Gen

era

l A

gre

em

en

t on

Tra

de in

G

en

era

l A

gre

em

en

t on

Tra

de in

S

erv

ices

Serv

ices

Article VArticle V

Exceptions on RTAs are embodied in the following WTO Agreements:

Overview

The purpose of an RTA is to facilitate trade among

the parties

...though without making more difficult the

parties’ trade with non-party Members

RTA exceptions are all based on the same principles*:

*GATT Art. XXIV:4; “Enabling Clause” para. 3(a); GATS Art. V:4)

How are these principles translated into specific provisions in each of the existing rules?

Overview

Art

icle

XX

IV &

Un

ders

tan

din

g

Art

icle

XX

IV &

Un

ders

tan

din

g Scope

•Customs Unions•Free-trade areas

InterimAgreements

As defined in paragraph 8

Customs unions or free-tradeareas implemented in stages, over a transition period

For both customs unions and free-trade areas:

«Deep integration» criterion

«Neutrality» criterion

Art

icle

XX

IV &

Un

ders

tan

din

g

Art

icle

XX

IV &

Un

ders

tan

din

g Substantive Criteria

Tariffs and other trade measures should be eliminatedTariffs and other trade measures should be eliminated on substantially all (originating) trade among the partieson substantially all (originating) trade among the parties

Its formation should not imply an increase in tariffs Its formation should not imply an increase in tariffs And other trade measures applied to other, non-partyAnd other trade measures applied to other, non-partyWTO Members.WTO Members.

For customs unions, in addition:For customs unions, in addition:

For interim agreements:For interim agreements:

Art

icle

XX

IV &

Un

ders

tan

din

g

Art

icle

XX

IV &

Un

ders

tan

din

g Substantive Criteria

Tariffs and other trade measures should besubstantially harmonized among the parties.

Any increase in MFN tariff bindings resulting from the establishment of a common external tariff should be negotiated with interested Members.

Lead to either a free-trade area or a customs union in a maximum of 10 years, unless exceptional circumstances are acknowledged.

Contain a plan and schedule to achieve that aim.

Dispute settlement Dispute settlement provisions may be provisions may be

invokedinvoked

Notification to the Notification to the WTOWTO

Submission of Submission of requested informationrequested information

by the partiesby the parties

Biennial Biennial reportingreporting

Art

icle

XX

IV &

Un

ders

tan

din

g

Art

icle

XX

IV &

Un

ders

tan

din

g Other Requirements / Provisions

Automatic Automatic review review

(examination) (examination) of the RTA by of the RTA by WTO MembersWTO Members

Th

e E

nab

lin

g C

lau

se

Th

e E

nab

lin

g C

lau

se

Paragraph 2(c) :Paragraph 2(c) :

Scope

WTO developing country Members are authorized to depart from the MFN clause (Article I), to enter into reciprocal regional or global arrangements with other developing countries, establishing tariff and (subject to WTO approval, in principle) non-tariff preferences in their mutual goods trade.

Submission of Submission of requested requested

information by the information by the partiesparties

Other Requirements / ProvisionsTh

e E

nab

lin

g C

lau

se

Th

e E

nab

lin

g C

lau

se

Notification to the Notification to the WTOWTO

Consultations Consultations with other with other Members, Members,

upon requestupon request

GA

TS

Art

icle

VG

ATS

Art

icle

V

«Economic Integration Agreements»«Economic Integration Agreements»

Including those

implemented on the basis of a time-frame

Paragraph 6

Scope

Agreements liberalizing

tradein services

Definition of beneficiary Definition of beneficiary service providers (rules of service providers (rules of

origin)origin)

«Neutrality» criterionGA

TS

Art

icle

VG

ATS

Art

icle

VSubstantive Criteria

«Deep integration» criterion

Substantial sectoral coverage No a priori exclusion of a mode of supply for

the sectors covered In the sectors covered, absence/elimination

of substantially all discrimination

Should not raise overall trade barriers (to other Members) compared to prior levels.

Flexibility for developing countries in terms of:

Renegotiation of commitments:

Other requirements / provisionsG

ATS

Art

icle

VG

ATS

Art

icle

V If, when entering the agreement, a If, when entering the agreement, a Member’s WTO specific commitments are Member’s WTO specific commitments are made more restrictive, negotiations should made more restrictive, negotiations should take place.take place.

Substantial sectoral coverageSubstantial sectoral coverage Elimination of discrimination in the Elimination of discrimination in the

sectors coveredsectors covered

GA

TS

Art

icle

VG

ATS

Art

icle

VOther Requirements / Provisions

Notification to the Notification to the WTOWTO

Submission of Submission of requested requested

information by the information by the partiesparties

PossiblePossible review review

(examination) (examination) of the RTA by of the RTA by WTO MembersWTO Members

Member notifies participation in RTA,Member notifies participation in RTA,seeking legal coverage under:seeking legal coverage under:

GATT Article XXIVGATT Article XXIV Enabling ClauseEnabling Clause GATS Article VGATS Article V

RTA Processes in the RTA Processes in the WTOWTO

Examination automatically mandated

Council for Trade Council for Trade in Goodsin Goods

Council for Trade Council for Trade in Goodsin Goods

Consultations, no examination (in principle)

Committee on Trade Committee on Trade and Developmentand Development

Committee on Trade Committee on Trade and Developmentand Development

Examination may be mandated

Council for Trade Council for Trade in Servicesin Services

Council for Trade Council for Trade in Servicesin Services

Proceeds to mandated examination and reports Proceeds to mandated examination and reports backback

Committee on Regional Trade Committee on Regional Trade AgreementsAgreements

Committee on Regional Trade Committee on Regional Trade AgreementsAgreements

RTA

Pro

ced

ure

s in

th

e

RTA

Pro

ced

ure

s in

th

e

WTO

WTO

• Draft report prepared by the Secretariat. Draft report prepared by the Secretariat. • Informal consultationsInformal consultations• Report, once agreed, sent to the relevant Report, once agreed, sent to the relevant • body, for adoptionbody, for adoption

• Notification by the partiesNotification by the parties• Submission of text of agreement,Submission of text of agreement, annexes & protocolsannexes & protocols• Submission of preliminary information by Submission of preliminary information by

the parties (Standard Format)the parties (Standard Format)

RTA Examination RTA Examination ProceduresProcedures

Written exchanges Written exchanges of comments, and of comments, and questions & repliesquestions & replies

• Oral policy statementsOral policy statements• Oral comments, Oral comments,

questions & repliesquestions & replies

Factual examination in the CRTA

RTA

Pro

ced

ure

s in

th

e

RTA

Pro

ced

ure

s in

th

e

WTO

WTO

Summing-up

When entering an RTA, a WTO Member should When entering an RTA, a WTO Member should invoke one of the following provisions, and comply invoke one of the following provisions, and comply with the relevant conditions:with the relevant conditions:

... Or else the Member should seek a waiver!... Or else the Member should seek a waiver!

RTA parties

Developed only

Developing onlyDeveloping &

developed

Trade in goods

GATT XXIVGATT XXIV

Enabling ClauseGATT XXIV

Trade in services

GATS V GATS V GATS V

Column 1

List of notified RTAs 

Column 2 

RTAs for which an early announcement has been made

Armenia - Russian Federation Free Trade Agreement between members of the Commonwealth of Independent States (CIS)

Common Economic Zone (CEZ) Russian Federation - Montenegro

Commonwealth of Independent States (CIS) Russian Federation - Serbia

Eurasian Economic Community (EAEC) EFTA - Russian Federation / Belarus / Kazakhstan

Georgia - Russian Federation Russian Federation - New Zealand

Kyrgyz Republic - Russian Federation

Russian Federation - Azerbaijan

Russian Federation - Belarus

Russian Federation - Kazakhstan

Russian Federation - Republic of Moldova

Russian Federation - Tajikistan

Ukraine - Russian Federation

20

NOTIF: Regional Trade Agreements

• Formation of a regional trade agreement– free-trade area

– customs union

– between developing countries

• Biennial report

• Modifications

• Trade in services

Webpage on the Transparency Mechanism for RTAs

WT/REG/16