Regional Trade Agreements:

Challenges and Opportunities

Dr. James H. Mathis

Faculty of Law
University of Amsterdam, NL.
mathis@jur.uva.nl
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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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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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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 control
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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 6
 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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 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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