RTA R1 E Print PDF

Course Guide
WTO E-Learning
RTAs and the WTO

Copyright WTO, October 2013
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WTO E-Learning
RTAs and the WTO
Course Guide
WELCOME to the Online Course on Regional

trade agreements and the WTO
This Course Guide section provides an overview of
the organization of your course, as well as of the
main functions of the E-Learning platform.
This WTO E-Learning course gives you the flexibility
to combine your training and professional
responsibilities. You will be able to benefit from
interactive activities such as the Chat Session with
WTO experts. WTO E-Learning is available for
government officials.
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While the WTO E-Learning material is freely

available on the WTO E-Learning website, you will
need to register and submit the nomination form in
order to access the course exams and obtain a
WTO certificate. Once your registration process is
complete, a username and password will be sent to
you by email. Your access codes are available for a
two-month period. During this period, you will
have to complete AND submit all exams. A Trainer
will be available to assist you with any questions
you may have.
The estimated study time for this course is
20 hours. Therefore, you decide the rhythm you
want to follow.
WTO E-Learning
Course Objectives
After successfully completing the elements of the
E-Learning course on Regional trade agreement
and the WTO, you will:
Be able to relate WTO terminology about

regionalism with the concepts behind it;
Be able to consider regionalism in its

global economic, and geopolitical context;
Be able to discuss the substantive WTO

rules governing RTAs;
Have practised navigation through the

WTO website, and in particular the RTA
database.
WTO E-Learning
Structure of the course
Interactive tools
Training
material
Each module contains training

material on a specific issue,
including explanatory texts and
examples,
The E-Learning website offers interactive tools to

foster the exchange among course participants, as
well as between participants and WTO experts.
Please refer to the Online tutorial for more detailed
information on:
Exercises
Self-assessment exercises are

available in most modules. They
allow you to measure your
progress in the course.
Internal
Email
Service
End-ofmodule
Exams
Please note that you may take

the end-of-module exam only
once and it will count towards
your
final
average.
Once
submitted, your answers cannot
be modified.
Your own E-Learning email

account. Use it to contact
your Trainer, Help Desk, other
participants, etc, and build-up
your network.
News
Forum
Final Exam
The Final Exam is at the end of

the last module of your course.
This exam covers all the issues
addressed during the course.
Take your time to complete and
submit it, since you will only be
able to do it once. The result of
the final exam counts double in
the calculation of your final
average.
This is the place to discuss the

latest WTO news of interest to
you by exchanging comments
and
views
with
other
participants and trainers.
Chat
Sessions
Chat sessions with WTO

experts and special guests will
be organized during the
course. An invitation will be
sent to you with the date and
time of the Session.
WTO E-Learning
Evaluation
At the end of each module, you will have to
complete an exam and submit it to the E-Learning
team in charge of the course. These exams contain
multiple-choice
questions
addressing
the
substantive content of each module. Should you
have questions on the evaluation of your exams,
please remember to first carefully read the
reasoning for correct answers, which you will see
together with your test results. The results of each
exam will be taken into account for the calculation
of your final average. After completing the last
module, you will have access to a Final Exam,
which counts double in the calculation of your final
average.
Certificate
Upon successful completion of the course, the WTO
Institute for Training and Technical Cooperation will
send you a Certificate, signed by the Director
General of the WTO, if:
You achieve a final average of at least 60% of
correct answers;
You scored more than 50% in each exam
except in one (this means: if the course has 6
modules, you need to have 5 exams above
50%); and
You have taken part in the interactive activities
(chat session and/or forum).
Participants with outstanding results (i.e. with a
final average above 90% and no exam below 50%)
will be awarded a Certificate with Distinction.
WTO E-Learning
When clicking on these
icons you will navigate
through modules
Course sequence
The six modules have
been designed to
introduce
progressively key
concepts, allowing
you to build up
knowledge leading to
a better
understanding of the
various aspects of
regional trade
integration.
Module 1 Introduction to RTAs

What are preferences? What are RTAs ?
And what they are not
Module 2 The evolving world of
regionalism
Through facts and figures, the past and
present landscape defining the
phenomenon of regional trade
integration and the various motivations
behind the conclusion of RTAs.
Module 3 WTO rules on RTAs
Right into the heart of the WTO rules
governing the establishment of RTAs.
Module 4 DDA & Transparency
Mechanism
How it came to life and how it works.
Module 5 WTO RTA-IS

How to get info on regional initiatives
and navigate through the WTO
Database on RTAs.
Module 6 Recap and conclusion
WTO E-Learning
User Agreement
The use of the E-learning platform, the training materials and interactive features is subject to the terms and
conditions contained in the User Agreement. You have automatically agreed to the User Agreement by using the login details (username and password) that were sent to you. The User Agreement reads as follows:
1. The E-learning platform is property of the World Trade Organization. It is managed by the E-learning Unit of the
Institute for Training and Technical Cooperation and its objective is to deliver online courses on the WTO and its
Agreements, while taking full advantage of the internet and the latest multimedia technologies.
2. The User is a trade official from a developing country or economy in transition, nominated by his/her respective
government. The User enjoys access to the platform during the duration of the course, under the following terms
and conditions:
a. The WTO is the copyright holder of the content of the E-learning platform. Training materials and other tools
available online shall not be disseminated without prior written authorization from the WTO E-learning Unit;
b. During the course, the User may print the training materials and documents available on the E-learning platform
for his/her personal use only;
c. Citations and references to the course materials available on the E-learning platform shall fully acknowledge the
source (i.e. WTO E-learning course);
d. Only authorized Users (i.e. participants, nominated by their governments, who have received a username and
password) are entitled to use the E-learning platform;
e. The User is responsible for maintaining the confidentiality of the username and password to access the E-learning
platform. If you become aware of any unauthorized use of your account, you shall notify the E-learning Unit
(elearning@wto.org) immediately;
f. The utilization of the E-learning platform and its contents shall be exclusively in relation to the course that is being
followed by the User;
g. Communications through email and the Discussion Forum may be monitored by the WTO to ensure civility and
compliance with the User Agreement;
h. If the User breaches the terms and conditions of this User Agreement, his/her right to access the E-learning
Platform will be revoked unilaterally by the WTO.
MODULE 1
Introduction to RTAs
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Module 1
INTRODUCTION
Regional trade agreements (RTAs) have become
a dominant feature of contemporary global
trade.
The increase in the number of RTAs has not
weakened since the early 90s. The development
of these regional trade agreements took place
against the background of a multilateral trading
system based on fundamental principles such as
the most-favoured-nation principle.
The relationship between regionalism, in its
various forms, and multilateralism, symbolized
by the rules applicable between the Members of
the WTO continues to be a critical question for
the development of both international trade and
the multilateral trading system.
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Click on TV
screen to
see a short
introductory
video
TRADE UNDER PREFERENTIAL REGIME
The abundant literature addressing the
phenomenon of regional trade integration
refers often indistinctly to regional trade
agreements (RTAs) or to preferential trade
arrangements (PTAs). However, for this
course, as often with the WTO, RTAs and
PTAs are acronyms covering distinct types of
preferential regimes. RTAs and PTAs are
subject to different legal requirements, and
different procedures are attached to them.
Therefore we need to know what, for the
purpose of this course, is defined as an RTA.
We will then briefly address other forms of
preferential schemes, which are not the
principal focus of this course.
RTAs are AGREEMENTS on TRADE;
RTAs establish a PREFERENTIAL regime; and
RTAs are RECIPROCAL.
These three elements are detailed below
REGIONAL TRADE AGREEMENTS

(RTAs)
RTAs are reciprocal trade agreements
between two or more partners (not
specifically in the same region). They
include partial scope agreements
(PSAs), free trade agreements (FTAs)
and customs unions (CUs). The latter
two are legally defined in WTO texts
detailed in Module 3.
Active RTAs
Active RTAs are still in
force. They produce
effects on the parties
and the text of these
RTAs are currently
binding between them.
Physical RTAs
The term physical RTA
regroups RTAs for which
goods and services aspects
are notified separately. The
establishment of an RTA
and further accession to it
are also counted as one
RTA.
Inactive RTAs
Inactive RTAs were
concluded in the past
and are no longer in
force. They may still
appear in some
statistics but they do
not produce any effect.
RTAs ARE AGREEMENTS
RTAs are negotiated and signed by the
authorities of countries / territories. In that
regard, an RTA is not fundamentally different
from the WTO Agreement(s), which also
establishes
legally
binding
obligations
between the governments parties to the
agreement.
on TRADE
RTAs are regulating TRADE matters, initially
in relation to trade in goods, but increasingly
also in relation to trade in services. More
recent RTAs also contain provisions on other
trade-related aspects. However, the core of
RTAs remains trade liberalization.
The traditional objective of an

RTA is to eliminate or reduce
tariffs in relation to trade in
goods. In the case of trade in
services, RTAs aim at
eliminating or reducing
restrictions to trade in
services.
A number of RTAs however
stretch well beyond to areas
such as standards,
intellectual property,
competition, environment or
even labour law.
RTAs are PREFERENTIAL and therefore
DISCRIMINATORY REGIMES
By agreeing to grant each other preferential
treatment to goods and/or services traded
between the parties to the RTA, an element of
discrimination is introduced into international
trade. This is in contradiction with one of the
cornerstones of the WTO.
The preferential nature of RTAs goes against
the non-discrimination principle. It introduces
discrimination and is therefore incompatible
with the MFN principle! Under the rule on MFN,
a WTO Member is in breach of its WTO
obligations
when
it
grants
preferential
treatment to products (or services) originating
only in one or a selected group of countries.
Nevertheless, the WTO rules (for goods and
services), like the GATT rules (only for goods),
allow WTO Members to enter into RTAs under
certain conditions. Module 3 goes into the
details of the relevant provisions.
MFN
In the legal framework of the WTO,

NON-DISCRIMINATON is considered to be a
BASIC PRINCIPLE.
It finds its expression in Article I of the GATT of
1994 (for trade in goods), and in Article II of the
GATS (for trade in services).
These two legal
provisions concretize the idea that the most
favourable treatment granted to a product imported
from any country should be given (immediately and
unconditionally) to a product (a like product) from
any Member of the WTO. Through this mostfavoured-nation (MFN) treatment, each WTO
Member has the guarantee that its good (or
service) exported to another WTO Member will
benefit from the best available treatment.
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to learn more
about the history
of MFN
The MFN principle through time
The MFN rule, in one form or another, can be traced back to the sixteenth century or even earlier. Typical of these
older provisions is the formulation contained in the Treaty of Peace and Friendship between Great Britain and
Spain of 1713, part of the instruments making up the Treaty of Utrecht. This says that the subjects of each
kingdom shall have the like favour in all things as the subjects of France, or any other foreign nation, the most
favoured, have, possess and enjoy, or at any time hereafter may have, possess or enjoy.
An MFN clause was included in the Cobden-Chevalier Treaty between England and France of 1860. This is thought
to be the ancestor of its modern application. At any rate, the MFN rule was then copied into many other European
trade agreements.
In the years before the First World War, the MFN rule suffered a decline. These years led to its virtual demise.
In the third of his fourteen points, President Wilson called in January 1918 for the removal, as far as possible, of all
economic barriers and the establishment of an equality of trade conditions among all the nations consenting to the
peace and associating themselves for its maintenance. This is deemed by some to have been the equivalent of a
call for MFN.
The Versailles peace conference did not discuss trade barriers, but in the Peace Treaty Germany and the other
central powers were required to extend unconditional MFN for three years to the trade of the allied powers.
The Covenant of the League of Nations only referred to equitable treatment of commerce of other League
members. This fell well short of an MFN clause.
The Geneva World Economic Conference of may 1927 pronounced strongly in favour of the widest possible
interpretation of the MFN clause, and it stressed that its use in commercial treaties ought to be normal. In 1933,
the League of Nations published a 300-word model text of an MFN clause. By that time, economic conditions had
been very difficult for several years, and the MFN principle was not able to attract broad support.
The Atlantic Charter of 1941 revived the MFN principle and made it the cornerstone of the post-war multilateral
trading system as exemplified by the GATT.
RTAs ARE RECIPROCAL
Reciprocity is intrinsic to, and constitutes
an important feature of, RTAs (as defined in
the WTO context).
As reciprocal trade agreements, RTAs
result from a give-and-take NEGOTIATION
between the RTA partners (Parties). In order
to enter into an RTA (whatever form the RTA
may take), each Party grants some
preferential treatment to the other. For
Parties that are WTO Members, this means
that they agree to introduce a specific trade
regime inconsistent, by nature, with the MFN
principle.
The nature of the reciprocity may vary from
one RTA to another.
RECIPROCITY DOES NOT

AUTOMATICALLY MEAN SYMMETRY
RTAs may be symmetrical, when
each
Party gives as much as the other(s), or
asymmetrical, when some Parties agree to
make substantially more concessions, or
liberalize over a shorter transition period,
than the other(s). The latter is often (but not
systematically) observed where the level of
economic development of the Parties differs
considerably.
PTAs ARE NOT RTAs
In
WTO
parlance,
preferential
trade
arrangements (PTAs) are unilateral decisions
under which a (usually a developed country)
party decides unilaterally to accord one or
more other parties (usually developing
countries,
including
least
developed
countries - LDCs) preferential treatment in
trade.
Click here
to learn
more about
PTAs
Click here
to consult
the list of
PTAs
PTAs are
outside of the
scope of this
course
PREFERENTIAL TRADE AGREEMENTS

(PTAs)
PTAs
do
not
refer
to
reciprocal
preferential agreements per se but rather
to PREFERENTIAL TREATMENT granted
UNILATERALLY to certain products (such
as under GSP Schemes).
Generalized System of Preference
(GSP)
First proposed at UNCTAD II in 1968.
Entered into force in 1971. It gives
developing
countries
a
margin
of
preference in the tariff rates their goods
face in the markets of developed countries
and
in
this
way
increases
their
competitiveness.
The
massive
tariff
reductions since 1971 as a result of
multilateral
trade
negotiations
and
unilateral actions, as well as changes in
productivity, have reduced the importance
of the GSP to many developing country
exporters, but it remains an important
plank in the trade policies of many
developing countries. UNCTAD is the main
forum for discussion of GSP issues.
DATA & STATISTICS
Throughout this course, we will make
reference to various sources of data and
statistics. When counting RTAs, we will, in
principle, refer to the number of NOTIFIED
RTA, which are currently ACTIVE RTAs.
Nevertheless, readers should be conscious of
the difficulty in capturing the reality of
economics and trade through numbers and
percentages.
As an illustration of the challenge facing
those who collect and compile trade-related
statistics, today, companies spread their
operations across the world, from the design
of the product and manufacturing of
components to assembly and marketing,
creating international production chains.
More and more products are Made in the
World rather than Made in China or Made
in France.
The analysis of RTAs presents a number of

statistical challenges. WTO Members have
the obligation to notify their RTAs, yet a
number of RTAs are in force, but have not
been notified. Non-WTO Members have no
such obligation. Thus, the information on
notified RTAs presented in this course is an
incomplete picture of the true extent of
preferential trade. In addition, few countries
collect detailed data on the actual use of
preferences, so it is difficult to determine to
what extent preferences are used.
In services, data collection systems are still
being refined and there is often a lack of
detailed services trade statistics, particularly
on a bilateral basis.
DUTY FREE NON-PREFERENTIAL TRADE:
NO ROOM FOR PREFERENCES
In practice, a rather large proportion of world
trade is crossing borders without payment of
customs duties. This is the case for trade
benefiting from duty free treatment when
granted to all trading partners. It should
therefore be discounted when calculating the
share of trade performed under preferential
conditions. Preferences (for example through
an RTA), can then only be granted for the
remaining portion of trade (at the maximum).
Still, this may represent an important potential
for discrimination.
PREFERENTIAL TRADE:
In a sample covering imports of the 20 largest
importers from all their trading partner
countries, accounting for 90% of world
merchandise trade in 2008, only 16% qualified
as preferential trade, assuming full utilization
of preferences.
Sources: WTO World Trade Report, 2011
The WTO and preferential trade agreements: From
co-existence to coherence
50%
Duty-free MFN
trade.
It is generally
estimated that
approximately half of
world trade of goods
(in value) is crossing
borders without
having to pay customs
duty.
16%
.
Preferential
Trade
Trade in goods
conducted under more
favourable conditions
for RTA partners than
for the non-RTA
partners.
Click here to
access the
2011 WTR
NO PREFERENCES BETWEEN THE BIG 4
While 16% represents a relatively low share
for preferential trade (globally), a number of
actors in international trade have invested
in developing network of RTAs, and, as a
result, some have concluded a long list of
RTAs. Others are in preferential business
with fewer but important partners for them,
resulting in a large share of their trade being
conducted under preferential regimes.
It is remarkable to note that none of the

trade between the four biggest traders (EU,
China, USA, and Japan) is, yet, conducted
under preferential regimes; thus partly
explaining why the overall percentage of
preferential trade is only 16%. If and when
the big four start concluding RTAs between
themselves, the overall share of preferential
trade will automatically rise.
The attached chart shows the situation of

some of the G20 countries. The vertical axis
shows the percentage of merchandise
exports conducted with RTA trading partners
with and thus preferential trade is probably
overstated as: (i) RTAs do not always have
full coverage of products); and (ii) not all
trade covered by the RTA is carried out
under the preferential regime. The size of
the bubbles indicate the importance of each
countrys exports in global terms.
Sources: UNSD Comtrade / WTO Statistics / WTO RTA-IS
Click on the
Graph to
enlarge it
% of exports to RTA partners
Participation in RTAs, Share of World exports

& Exports to RTA partners
100
90
80
70
60
50
40
30
20
10
0
0
10
20
30
40
Number of RTAs concluded and ratified to the the WTO
Sources: UNSD Comtrade / WTO Statistics / WTO RTA-IS
EU
China
USA
Japan
Korea
Russia
Canada
India
Saudi A.
Mexico
Australia
Brazil
Chile
HOW PREFERENTIAL IS
PREFERENTIAL TRADE?
Despite the proliferation of RTAs, as already
indicated, only a relatively small part of
global trade appears to have been conducted
between RTA partner countries (in 2008,
16% of the trade between the G-20
countries).
In the example below, products imported

from countries A, B, C, and D each represent
25% of Country Es total imports.
Example
It may be that part of the preferential trade

is actually granted less preferential access
than it may seem.
This may for instance be the case when a
country has concluded different RTAs with
partners that export the same product into
its domestic market. We will assume, for the
sake of simplification, that the same
preferential treatment is granted to the
same products.
A
B
COUNTRY
Assume the following sequence of events:
First country E concludes a RTA granting

preferential
treatment
to
products
originating in A. At this stage, the
statistics may show that, if they qualify
under the RTAs rules of origin, 25% of all
imports to E benefit from preferential
treatment.
Later, country E concludes an identical
RTA granting preferential treatment to
products originating in B. The statistics
will show that 50% of all imports to E
benefit from preferential treatment.
However, the products from A have lost
the advantage of preferential treatment
compared to similar products from B.
However they keep this advantage when
competing with products from countries C
and D in the market of country E.
Assume now that country E concludes

RTAs with countries C and D. Statistics
may now show that preferential treatment
is granted to 100% of countrys E
imports. However, none of the imported
products enjoy an advantage over the
other competing imported products!
PREFERENCE EROSION
In our example, the preferences (initially
granted to products from A, and then to
products from B, and finally to all imported
products) have been progressively eroded.
Our example does not take into account the
dynamic effect the initial RTA (between E
and A) may have had (i.e. the increase of
the imports share from country A). However,
it helps to make the point. The multiplication
of preferential schemes may lead both to an
increase of discriminatory treatment and, in
a second stage, to a reduction of such
discrimination.
IMPERFECT RTA COVERAGE
Taking the same example, it may be
reasonable to assume that:
The RTAs concluded by Country E with its
different partners exclude some products
or groups of products from the coverage of
tariff liberalization agreed. In such cases,
the RTA coverage would be less than full
and, consequently, not all the trade
between the RTA partners would be
preferential.
PREFERENTIAL RULES OF ORIGIN:

a tool to SCREEN preferential trade
Still using the same example, it has to be
remembered that:
A set of (sometimes complex) preferential
rules of origin accompanies each RTA.
These rules assist the RTA partners in the
administration of the preferential regime.
LESS PREFERENCES AS IT MAY SEEM.
Such preferential rules of origin may

establish certain conditions relating to the
origin of bilaterally traded products. This
can sometimes be engineered in a way
that makes it difficult for certain products
to
comply.
As
an
illustration,
a
requirement for a high regional content
ratio could, in some cases, significantly
restrict the volume of bilaterally trade
goods
benefiting
from
preferential
treatment under the RTA.
Imperfect RTA coverage and/or restrictive

preferential rules of origin can limit the
degree of preferential treatment agreed
by the RTA partners. Paradoxically, for the
third parties, this would reduce the level
of discriminatory treatment introduced by
a RTA (in relation to the products
excluded from preferential treatment).
MODULE 2
The evolving world of

Regionalism
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The evolving world of regionalism
Module 2
* Note
A BRIEF HISTORY OF
CONTEMPORARY REGIONALISM
To understand the most recent
developments of regionalism, it
may be useful to look at how the
phenomenon of regional economic
integration has evolved over the
years.
The next section goes back in time
and walks through the decades
during
which
the
multilateral
trading systems and regional trade
integration
schemes
have
coexisted, from the early years of
GATT to the present.
European
reconstruction
and Soviet Bloc
Fifties
Sixties
EEC, EFTA and
Central America
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A total of 124 agreements

were notified to the GATT
between 1948 and 1994.
Of these, however, only 38
remained in force in 1995
when the WTO was
established. This reflects
in
most
cases
the
evolution
of
the
agreements themselves, as
they were superseded by
more modern ones between
the same signatories
(most often involving
deeper integration), or by
their consolidation into
wider groupings.
Seventies
CARICOM
Eighties
249
2013
RTAs in force
(notified by the end of July 2013)
100
approx.
not notified and/or
in the pipeline
Since 2000
Proliferation of RTAs
Nineties
Explosion of regional
trade initiatives
LAIA, Andean Community

and ANZCERTA

Regionalism at GATTs birth
The place of regionalism in the world economy
in the mid-fifties was very different from its
place now. At that time, the international
community was trying to reorganize itself after
the Second World War. Economies had to be
rebuilt or redirected to civilian use of scarce
resources. The war had brought new powers
into play (in the West, the USA, and in the East,
the Soviet Union). France and the United
Kingdom were about to face decolonization,
leading many nations to gain (or regain)
independence. As the international community
was trying to build cooperation around the
newly born United Nations, with international
institutions like those of Bretton Woods, on the
international trade front, a trade agreement
was negotiated and entered into force on
1.1.1948 pending the establishment of the
International Trade Organization. The ITO never
came into being until but the trade agreement
(the GATT) remained in force "provisionally" for
about 50 years, before the WTO was
established in 1995.
We will see in Module 3 that the rules governing

regional trade agreement that were adopted in
1947 still govern the multilateral trading system
today (with some amendments).
It is important to remember this historical
context because when the rules on RTAs were
adopted, very few RTAs were in force.
The Benelux and some other regional
agreements were in place or being negotiated,
in Southern Africa and Central America (the
first real "poles of regional integration"). The
Soviet area of influence was being cemented
around an agreement (the COMECON) that was
not an RTA per se but that had some
similarities. The Soviet Union, though, was not
a Party to the GATT. So-called imperial
preferences, inherited from colonial schemes
(about to collapse) were still in place.

Plans for the constitution of the European
Economic Communities (EEC) were on the
table and that was why, at least partly, an
exception to the MFN principle was about to
be included in the original text of the GATT.
The establishment of the EEC in 1957:
the
real
commencement
of
the
GATT/RTAs relationship
The signature, in March 1957, of the Treaty
of
Rome
establishing
the
European
Economic Community of Six (Belgium,
France, Germany, Italy, Luxemburg, and the
Netherlands) followed by its notification to
the GATT in April 1957, marked the real
commencement of the GATT/RTAs rich, yet
troubled, relationship. The Treaty of Rome is
at the origin of todays European Union
(EU), comprising 28 Member States. The
EEC evolved over-time*, inter alia in the
context of successive enlargements and
deepening EEC integration.

Regionalism during the sixties and
seventies
In the sixties, the European states not
members of the EEC constituted the European
Free Trade Association (EFTA); the EEC, in turn,
established its first association with some of its
member States former colonies and associated
territories (Yaound I and II Conventions),
pushing regional trade beyond geographical
boundaries. In Latin America, a Latin American
Free Trade Association (LAFTA/ALALC) was
established and a Central American Economic
Integration Agreement was becoming effective.
The seventies were marked by the first
enlargement of the EEC to include Denmark,
Ireland and the United Kingdom, followed by
the replacement of the Yaound Agreement by
a wider cooperation agreement between the
EEC and 46 countries in Africa, the Caribbean
and the Pacific (the Lom Convention with the
ACP countries). Also the f CARICOM was
established between the Caribbean States.
The eighties: regionalism picks up

During the second part of the eighties, regional
integration started to interest a number of
countries, in parallel with the launch of
multilateral trade negotiations (the Uruguay
Round started in 1986). The EEC gained three
new member States.
The replacement of LAFTA by the Latin
American Integration Association (LAIA/ALADI)
established a new framework for economic
integration initiatives in the region. One
realization
(though
legally
immediate
independent from LAIA) was the setting up of
the Andean Community.
On the other side of the globe, Australia and
New Zealand were consolidating their close
economic relations with the signing of the
ANZCERTA.
Further,
in
the
mid-eighties,
another
non-regional partnership occurred with the
conclusion of the US/Israel Free Trade
Agreement.

The nineties
The nineties started with the disintegration of
the Eastern European bloc and of the Soviet
sphere of influence, leading the way for the
later development of a myriad of RTAs. This
involved:
(i) the conclusion of RTAs between, on one
side, the EEC or EFTA and, on the other
side, individual
Central and
Eastern
European countries; and
(ii) the constitution of a series of RTAs around
the Commonwealth of Independent States
(CIS) formed by the newly independent
States resulting from the collapse of the
Soviet Union.
In Latin America a powerful Customs Union

between Brazil, Argentina, Paraguay, and
Uruguay (the MERCOSUR) was established.
In Africa, numerous regional economic cooperation institutions (partly inspired by efforts

by the UN) had been set up and transformed
into economic integration agreements: the
Economic Community of West African States
(ECOWAS), the Common Market for Eastern
and Southern Africa (COMESA), and the
Economic and Monetary Community of Central
Africa (CEMAC).
In addition to the constitution of these poles of

regional integration, the number of bilateral,
often cross-regional RTAs exploded during the
nineties. In parallel, a number of regional
integration processes were deepening, such as
the EU.
In Asia the ASEAN Free Trade Area entered into

force.
In North America, the conclusion of the NAFTA,
in 1992, set a new template for regional
integration as two major trader (Canada and
the US), joined by Mexico entered into the race
for RTAs.
In the Arab world, the Pan-Arab Free Trade
Area was also notified to the GATT as an FTA.

On the multilateral front, it was also during this
decade that the Uruguay Round was concluded.
The GATT was being de facto replaced by the
WTO, with greater coverage, and a considerably
larger country base.
Regionalism since 2000
Since 2000, RTAs have
sustained rhythm.
proliferated at a
Africa complemented its network of regional

hubs with the establishment of the West African
Economic and Monetary Union (WAEMU /
UEMOA, the East African Community (EAC), the
Southern African Development Community
(SADC), and the Southern African Customs
Union (SACU).
Central and eastern European countries
consolidated the Central European FTA (CEFTA),
while progressively the EU was absorbing a
large number of countries through successive
enlargement processes (reaching 28 Members
in 2013).
In Asia, the ASEAN network densified and

expanded to develop progressively closer ties
with the three large traders, Korea, Japan, and
China (ASEAN+3).
The Gulf Co-operation Council GCC (Cooperation Council for the Arab States of the
Gulf), signed in 2001, was notified to the WTO
and became one of the poles of regional
economic integration for the Arab region.
More than half of the RTAs currently in force
have been concluded and notified to the WTO
since 2000.

In the pipeline
Many more RTAs or regional economic
integration initiatives are "in the pipeline.
Often these initiatives are led by poles of
regional integration in North America (NAFTA),
Central America (CACM), South America
(MERCOSUR, the Andean Community, and
LAIA); in Africa (principally around EAC, SADC,
and COMESA, with the Tripartite Agreement); in
Europe (essentially around the EU and the
EFTA); around the CIS (now complemented by
the EurAsec - customs union between Russia,
Belarus, and Kazaksthan); in the Asia Pacific
region (around the ASEAN+3 and the pole led
by Australia and New Zealand); and in
connection with the two poles of regional
cooperation constituted by Arab countries (i.e.
the Greater Arab Free Trade Area (GAFTA) and
the development of the GCC).
A number of major cross-regional trade
integration initiatives, which are currently being
negotiated, may fundamentally change the
panorama of international trade.

Facts and Figures
RTAs on GOODS and
RTAs on SERVICES
On 31 July 2013, 249
(notified) RTAs were in
force. Of these, 135 were
on goods only and 114
included both goods and
services provisions.
Note: the EEA is the only RTA
notified on services only.
Bilateral or plurilateral
RTAs?
As of 31 July 2013, 201
(notified) RTAs had been
concluded between two
parties (bilateral), while
19% of all RTAs were
plurilateral
(constituted
by more than two parties
but not extended to all
WTO Members).
46%
Goods +
Services
54%
Goods only
Intra-regional or crossegional RTAs?

Also in July 2013, intraregional
RTAs
still
represented 53% though,
more cross-regional RTAs
are being concluded.
19% 81%
plurilateral
July 2013 figures
FTAs, PSAs, or CUs?

Most of the active RTAs
have been notified (to the
GATT or the WTO) as freetrade agreements (FTAs).
Only a handful of RTAs have
been presented by the
parties as
customs
unions (CUs) or partial
scope agreements (PSA).
bilateral
Click here to
get an
update on
key figures
relating to
notified
RTAs
7%
6%
87%
CU
FTA
47%
Crossregional
53%
Intra-regional
PSA

Why regionalism?*
On 13 December 1996, in the Singapore
Ministerial Declaration, the Ministers of all the
WTO Members reaffirmed
the primacy of the multilateral trading
system, which includes a framework for
the development of regional trade
agreements. They also renewed their
commitment to ensure that regional
trade agreements are complementary
to (the multilateral trading system) and
consistent with its rules.
Five years later, when they agreed to launch
the DDA, on 20 November 2001 and enshrined
in the text of the Doha Ministerial Declaration,
the Ministers of the same Members, again,
stressed their
commitment to the WTO as the unique
forum for global trade rule-making and
liberalization, while also recognizing
that regional trade agreements can play
an important role in promoting the
liberalization and expansion of trade and
in fostering development.
Still, at the end of July 2013, more than 200

physical regional trade agreements were in force,
with WTO Members showing no signs of slowing
their involvement in negotiating new RTAs and/or
deepening or expending existing ones.
The following section briefly explains why
countries officially committed to give priority to
the multilateral forum (WTO) for negotiating and
monitoring trade rules, choose, time and again, to
use the regional approach to design an almost
limitless series of intertwined preferential trade
legal frameworks.
Most elements of this section are extracted from

WTO World Trade Report, 2011:
Click here to
access the
2011 WTR

Why regionalism?
ECONOMIC MOTIVES FOR RTAS
Numerous authors have identified
economic rationales for RTAs.
various
Neutralizing beggar-thy-neighbour
trade policies
Economists have long recognized that trade
policy can have beggar-thy-neighbour
effects. That is, protectionist trade measures
can be unilaterally attractive but multilaterally
destructive. Specifically, the beggar-thyneighbour problem is based on the idea that
trade policy decisions of one country affect the
welfare of another country through a crossborder effect (i.e. an international externality).
Independently of how one countrys trade
policy affects its trading partners, an RTA
may be a means of neutralizing negative
cross-border effects.
Gaining credibility
Aside from avoiding the temptation to adopt

beggar-thy-neighbour trade policies, RTAs may
also serve as instruments to stop governments
from implementing beggar-thyself policies. This
is where a government chooses to tie its hands
and commit itself to trade openness through an
international agreement in order to prevent future
policy reversal that might be convenient in the
short run, but inefficient in the long-term. In
other words, the government understands that a
RTA (the argument also applies to a multilateral
trade agreement) may help it to make more
credible policy commitments than it would
otherwise make.

Why regionalism?
Increasing market size
This may be a reason for establishing RTAs since

it enables firms from parties to exploit
economies of scale and to gain a relative
advantage over excluded competing firms. In
addition, preferential access to a larger market
may increase a countrys attractiveness as a
destination for foreign direct investment (FDI) or
relocation of enterprises. Both reasons are
particularly valid for small economies, which
may help to explain why these countries agree
to
make
concessions
on
other,
more
controversial issues, such as intellectual
property rights or environmental standards,
when negotiating RTAs with larger economies.
Other motives
Various other economic reasons why may lead

countries to form RTAs, some are referred to
as non-traditional motives. These include,
but are not limited to:
a) increasing policy predictability;
b) signalling openness to investors;
c) achieving deeper commitments; and
d) political considerations.

Why regionalism?
OTHER MOTIVES
a)
Increasing policy predictability

An RTA may be signed to reduce uncertainty on
future trade policy, thus sending an important
signal to investors. Since future administrations
might have policy preferences that differ from
those of the current administration, a government
may sign an RTA in an attempt to lock-in its policies
(for example, a pro-open trade policy) and to
diminish the likelihood that they might be reversed.
In this way, the government addresses the issue of
policy predictability rather than policy credibility .
b)
Signalling openness to investors

A country with a reputation for protectionism might
find it particularly valuable to signal its willingness
to shift towards a more liberal and businessfriendly policy. In this case, the precise provisions
of an RTA are less relevant than demonstrating to
investors that the government is open to business.
Alternatively, a country might want to enter into

an RTA to signal that its economy, or a particular
sector, is competitive.
c)
Achieving deeper commitments

A final argument for signing an RTA is related to
the need for deeper form of integration that goes
beyond traditional trade (i.e. border) measures
such as tariffs. This deeper integration may
require institutions and policy coordination more
easily achieved at the regional level than the
multilateral level.
d)
Political considerations
The creation of RTAs cannot be fully understood
without considering the political context within
which they are formed.

Why regionalism?
WHY STATES MIGHT ENGAGE IN RTAS?
Political
science
has
provided
additional
explanations for why states might engage in
RTAs, focusing in particular on the role of political
integration,
domestic
politics,
forms
of
government, institutions, diplomacy or the
influence of power and ideas.
The spill-over effect
Some authors have postulated that a policy spillover effect would incrementally drive integration
from low politics (trade integration) to high
politics (political integration). This functionalist
school of thought was challenged by political
scientists who marshalled empirical evidence that
cast doubt on the extent of the spill-over effect.
Pooling resources
In a number of cases, RTAs may have been, at
least partly, by the desire motivated to increase
influence in international negotiations by pooling
resources between relatively small states.
Grouping forces to resist threats

Other strategic motives include a common goal to
resist the threat of falling under the zone of
influence of powerful neighbouring countries,
where political and/or economic regimes are
constructed on fundamentally different ideologies.
Counteracting the growth of other regional
arrangements might also be considered as
another strategic motive for forming a RTA.
Power games
The decision to negotiate and sign RTAs may also
be affected by the extent to which countries use
trade policy to reinforce wealth and empower
relations. If governments distrust one another
they may form bilateral treaties to try to limit or
control the growth of other powers (e.g. to serve
as counter-balances). The design of RTAs may
also be indicative of power relations. Stronger
states can more easily dictate the terms of
agreements in a bilateral or regional context
(than in a multilateral context). Other diplomatic
and foreign policy considerations may also
influence the decision to form RTAs.

Domino Theory
Domino Theory
Changes in the underlying dynamic of trade
relationships across the globe may prompt
countries to sign RTAs. The Domino Theory of
Regionalism, refers to the potential loss of
market share inducing countries not party to
an RTA (third parties) to join existing RTAs or
to negotiate parallel RTAs with each party to
an existing RTA. This illustrates a process of
action and reaction (or contagion). Exporters
in third parties push their governments to join
or create RTAs to counteract the potential
damage
caused
by
preferential
trade
liberalization. This may be linked to a race to
conclude an RTA with an economic partner that
has concluded an RTA with a competing
country.
Regionalism vs
Multilateralism ?
RTAs instead of multilateral deals?
Finally, some suggest a relationship between the
formation of RTAs and the multilateral system,
either reflecting a lack of progress at the
multilateral level or a strategy to improve
governments leverage in the WTO. Gridlock or
stagnation in multilateral negotiations, for
example, may create incentives to pursue
preferential trade liberalization.
Read more about it:
WTO World Trade Report, 2011
A domino theory of regionalism
Baldwin, R. (1995).
TEST
YOUR
BRAIN
Without going back to

your notes, try to
elaborate on each of
the keywords listed
below, which
correspond to elements
discussed in the
previous section
Keywords
Proliferation of RTAs
Bilateral vs plurilateral RTAs
Intra-regional vs Cross-regional
RTAs
Keywords
Beggar-thy-neighbour policies
Beggar-thyself policies
Economies of scale
Gain of relative advantage
Locking-in policies
Signal to investors
Deep integration
Non-economic motives for RTAs
Domino theory
EXERCISE
YOUR
Match the following events with their associated date.
Chronological SKILLS
Sixties
Establishment of the EFTA
Seventies B
Development of the ASEAN+3
Eighties C
Entry into force of the NAFTA
Nineties D
Enlargement of the EEC to 9
Signature of the ANZCERTA (Aus-NZ)
Since 2000
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check if your
results corresponds
to ours
EXERCISE
YOUR
Chronological SKILLS
Sixties
Match the following events with their associated date.
OUR RESPONSES
A1, B4, C5, D3, E2
Establishment of the EFTA
Seventies B
Development of the ASEAN+3
Eighties C
Entry into force of the NAFTA
Nineties D
Enlargement of the EEC to 9
Signature of the ANZCERTA (Aus-NZ)
Since 2000
MODULE 3
WTO Rules on RTAs

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WTO rules on RTAs

Module 3
WTO AND REGIONAL RULES RESULT FROM

NEGOTIATIONS BETWEEN GOVERNMENTS
Trade rules, either multilateral or regional, are the
result of negotiations between representatives of
governments (WTO Members for multilateral rules,
and parties for RTAs). Though trivial, this should
not be forgotten, at least for two reasons:
The process leading to the establishment of

rules and disciplines on trade is the result of a
complex,
not
always
rational,
process
involving economic, political, legal, and
behavioural components. The economic theory
usually constitutes the logical foundation of the
process.
The negotiating process leading to the

rules is conducted by Members. In the context
of the multilateral trading system, as in most
Click on this icon
to move to the
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regional trading systems, the participants in the

negotiations are usually governments, competent
to regulate, inter alia, commerce and economic
matters within a defined territory. Consequently,
the
rights,
obligations,
and
commitments
undertaken in the negotiation, which become
legally binding when the rules (multilateral as well
as regional) enter into force, can only bind those
who have made the commitments. In other words,
the multilateral rules and most regional rules on
trade remedies, the rights and obligations have a
direct effect only on measures taken by those who
have negotiated, i.e. Governments. The actions
and behaviour of most economic actors
(producers,
sellers,
buyers,
consumers)
cannot be addressed directly by the WTO
rules or rules negotiated in the context of,
say, a free trade agreement. However, although
only measures taken by government must conform
to the negotiated rules, these measures may, and
do, have a direct impact on various economic
operators. This should be recalled when analysing
the rules.
WTO rules on RTAs

ARCHITECTURE OF PRINCIPLES AND
EXCEPTIONS UNDER THE WTO
At this stage, it is useful to understand the
architecture of multilateral rules, as they apply to
RTAs. These rules are the result of multilateral
negotiations, which progressively established the
legal framework under which RTAs are regulated
under WTO law.
STARTING WITH THE MFN PRINCIPLE
Under WTO law, a Member must guarantee that the
most preferential market access is immediately and
unconditionally granted to all other WTO Members.
The objective is to prevent any discrimination
based on origin or nationality. This principle is
carved in stone for trade in goods through Article I
of the GATT, for trade in services through Article II
of GATS, and for holders of intellectual property
rights through Article 4 of the TRIPS Agreement.
The WTO Agreements nevertheless grant Members

the right to derogate from these fundamental
obligations, in certain circumstances and under
certain conditions. These derogations some might
even consider that they constitute exceptions are
therefore CONDITIONAL RIGHTS granted to WTO
Members to take measures that may be inconsistent
with one or more basic principles.
To exercise
their rights, WTO Members must be in a situation
that justifies the derogation, satisfy the conditions
established by the legal provisions, and follow the
required procedures.
WTO rules on RTAs

CONDITIONAL EXCEPTIONS TO MFN
ALLOWING REGIONAL TRADE AGREEMENTS
The provisions on Regional integration constitute
major derogations to the MFN principle.
For TRADE IN GOODS, the main provisions
governing the use of these conditional derogations
are GATT Article XXIV (and the Understanding on
its Interpretation enacted in 1995), and a Decision,
dated 1979, entitled Differential and more
favourable treatment, reciprocity and fuller
participation of developing countries, generally
referred to as the Enabling Clause.
For TRADE IN SERVICES, the key provision is
contained in GATS Article V. The concept
contained in GATT Article XXIV has been essentially
retained but adjusted for the intrinsic difference
between goods, on one side, and services and
services providers, on the other side.
For TRADE-RELATED INTELLECTUAL PROPERTY

RIGHTS, Article 4(d) exempts, from MFN
obligations, international agreements related to the
protection of intellectual property which entered into
force before 1 January 1995. This provision has
never been the object of interpretation.
WTO rules on RTAs

THE EVOLUTION OF MULTILATERAL RULES ON
RTAs
Although the core principles of the multilateral
trading system have, in essence, remained
relatively untouched since the conclusion of the
GATT in 1947, the rules have evolved over time to
respond to the transformation of world trade and
the development of international relations.
Some key dates mark the path of multilateral rules
on RTAs.
2006
Adoption of the New

Transparency Mechanism
for RTAs
1996
Establishment of the Committee on

Regional Trade Agreements (CRTA)
1995
Entry into force of the Marrakech Agreement

establishing the WTO:
Understanding on the
interpretation of Art. XXIV
GATS Art. II (MFN principle for
services), and GATS Art. V
(exception for Economic
Adoption of the Enabling Clause (Exception
Integration Agreements)
for, inter alia, preferential trade
arrangements between developing countries)
1979
1948
Entry into force of the GATT, including Art. I

(MFN principle) and Art. XXIV (Exception for
Customs Unions and Free-Trade Areas)
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Multilateral rules on RTAs through time

Sources: GATT and WTO Analytical Index, GATT BISD, and WTO World Trade Report 2011.
The origins of the RTA rules in the GATT

The first RTA rules were included in the 1947 GATT text, provisionally applied from 1 January 1948 until 31
December 1995, when it ceased to exist. As of 1 January 1995, the WTO and the new GATT 1994 entered into force.
During the negotiations held in 1946-47, some countries aimed to dismantle certain preferential trade
arrangements, such as the preferences between territories belonging to the British Commonwealth. While the first
drafts referred only to customs unions and interim arrangements leading to customs unions, the exception was
widened to include free trade areas (FTAs).
From the early GATT years to the Tokyo Round

The European Economic Community (EEC now EU) and its agreements were the principal focus of Article XXIV
discussions during the early years of the GATT. In 1957, the examination by a GATT Committee of the compatibility
of the Treaty of Rome with the requirements of Article XXIV was inconclusive: The Committee felt that it would be
more fruitful if attention could be directed to specific and practical problems, leaving aside for the time being
questions of law and debates about the compatibility of the Rome Treaty with Article XXIV of the General
Agreement. Eventually the GATT contracting parties opted for resolving some of the tariff issues surrounding the
formation of the EEC as part of the Dillon Round. That experience made clear that the GATT was not fully equipped
to deal with Article XXIV notifications such as the one presented by the EEC.
Agreements notified as FTAs, e.g. EEC agreements with third parties and the European Free Trade Association
(EFTA), were also the subject of intense debate, in particular as regards the absence of a clear plan and schedule for
liberalization (as required by Article XXIV) and the exclusion of agriculture and fisheries.
An approach was developed progressively to examine notified RTAs in working parties in the light of the relevant
GATT provisions. However, reports on these examinations showed that there remained some questions of a legal
and practical nature which it would be difficult to settle solely on the basis of the text of the notified RTA, and that
these questions could be more fruitfully discussed in the light of the application of the Agreement. The working
parties were often not in a position to judge the compatibility of the RTA, and accordingly did not find it
appropriate to make recommendations to the parties to the RTA pursuant to paragraph 7b of GATT Article XXIV
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The GATT practice had been that reports on the evolution of the RTA be submitted periodically by RTA parties, as
stipulated in working party reports. To counter a lack of consistency in the reporting procedure, the CONTRACTING
PARTIES adopted a Decision in 1971 according to which the Council was to establish a calendar fixing dates for the
examination, every two years, of the reports on the preferential agreements.
From the Tokyo Round up to the launch of the Uruguay Round (1973-1986)
The 1979 the Enabling Clause was adopted as a Tokyo Round result. The first notifications under it included the
1971 Protocol on Trade Negotiations among Developing Countries, the 1975 Bangkok Agreement, and the 1978
ASEAN Agreement. All were previously under the legal cover of waivers. No changes were made to Article XXIV.
Biennial reports on RTAs were received regularly; from the early 1980s, they gave rise to very little discussion and
by the time of the Uruguay Round, the practice of submitting them had been discontinued.
Throughout the years, divergences of view on how to handle the relationship between RTAs and the relevant GATT
provisions (in particular GATT Article XXIV) were becoming increasingly apparent. The report of an eminent persons
group created by GATTs Director-General (the Leutwiler Report) proposed that GATT rules on customs unions and
free trade-areas should be examined, redefined so as to avoid ambiguity, and more strictly applied, so that this legal
cover is available only to countries that genuinely use it to establish full free trade among themselves. These issues
were finally addressed in the Uruguay Round constituting an early prelude for future controversial debates on the
question of the coexistence of regionalism and multilateral trading rules.
RTAs in the Uruguay Round
The Round resulted in the adoption of the Understanding on Article XXIV and the inclusion in the GATS of a
provision on RTAs relating to trade in Services (Article V); no changes were made to the Enabling Clause.
Negotiations on Article XXIV took place in the Negotiating Group (NG) on GATT Articles and as from April 1991 in
the NG on Rule Making and Trade Related Investment Measures. Substantive discussions on the Article were held
as from May 1987; the final text was ready by the Brussels Ministerial Meeting of December 1990.
Despite reservations regarding certain parts of the Brussels text on the provisions relating to paragraphs 6 and 12
of Article XXIV and on the lack of measures aimed at countering a perceived trend away from multilateralism and
towards RTAs the Chairman of the NG forwarded the text to the TNC, on his own responsibility, which in his view
represented a reasonable balance between the interests involved. The final text of the Understanding only differs
from that of the Brussels Ministerial as regards legal drafting.
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The 1992 notification under the Enabling Clause of the MERCOSUR (comprising Argentina, Brazil, Paraguay, and
Uruguay) is also of relevance. Though RTAs under this provision were not, at that time, subject to examination in
working parties, MERCOSUR was treated sui generis, being subject to an in-depth examination by a working party
in the light of the relevant provisions of the Enabling Clause and of the GATT, including Article XXIV, with the
examination report being submitted to the CTD with a copy to the Council.
Discriminatory treatment under RTAs became a topic of increasing concern over the years.
CRTA - Committee on Regional Trade Agreements
The CRTA, established by the General Council in February 1996 (WT/L/127) following a proposal by Canada made in
November 1995, is mandated to carry out the examination of RTAs (instead of individual working parties), to deal
with the reporting on the operation of RTAs, to develop procedures to facilitate and improve their examination
process, to provide a forum for the consideration of the systemic implications of RTAs and regional initiatives for
the multilateral trading system and to carry out any additional functions assigned to it by the General Council.
Despite the establishment of the CRTA in 1996, the examination of RTAs resulted in stalemate. From 1996 until
2013, not one examination report was adopted by the CRTA, mainly due to continuing disagreements over the
inherent ambiguities in GATT Article XXIV, the absence of consensus on the format and content of examination
reports under the WTO, the lack of information submitted by RTA parties, and the fact that the consistency of
determination was to be made by all WTO members, including those whose RTAs were under examination.
In 2004, celebrating the 10th anniversary of the WTO, the report from an eminent group of persons - the
Sutherland Report proposed a dual solution to counter the proliferation of RTA: attacking them indirectly
through effective reduction of MFN tariffs and non-tariff measures in multilateral trade negotiations and a
clarification of Article XXIV and a better-organized means of administering its provisions [by] entrusting the [WTO]
Secretariat with the factual presentation of their agreements.
RTAs and the Doha Development Agenda (DDA), launched in 2001
These are developed in Module 4 of this Course.

In December 2006, the WTO members adopted a new Transparency Mechanism for Regional Trade Agreements
(WT/L/671) on a provisional basis. Work on systemic issues has continued but as of 2013 no result has been
achieved.
Keywords (Derogations)
Keywords (Basic principles)
MFN
GATT Art. I (Trade in goods)
GATS Art. II (Trade in services)
TRIPS Art. 4 (TRIPS)
GATT Art. XXIV (Trade in goods)

Enabling Clause (Trade in goods)
RTAs between developing
countries only
GATS Art. V (Trade in services)
GATT XXIV
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Enabling
Clause
TEST
YOUR
BRAIN
Without going back to

your notes, try to
elaborate on each of
the keywords listed
below, which
correspond to elements
discussed in the
previous section
GATS V
WTO rules on RTAs
GATT XXIV
WTO rules on RTAs

GATT Article XXIV
Understanding
Ad Notes
GATT XXIV
At the time of the establishment of the WTO, in

1995, the provisions of the GATT 1947 were
incorporated into the GATT 1994, and made part of
the legal texts governing the trade relationships
between the WTO Members. In addition the
Understanding on the Interpretation of GATT
Article XXIV was adopted, clarifying certain
notions contained in the original text.
GATS V
Enabling
Clause
The initial legal foundation

The main, and longest-standing legal rule lies in
Article XXIV of the original text of the GATT (GATT
1947). It entered into force on 1 January 1948.
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This Chapeau therefore establishes that free-trade

areas (FTAs) and customs unions (CUs) may
derogate from the MFN principle.
It also sets the forms of regional integration that
are authorized (FTAs and CUs), though without
defining the conditions to be fulfilled to qualify as
an FTA or a CU (this is set out later in the
paragraph and in subsequents paragraphs).
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GATT Article XXIV, 5:

(...) the provisions of [GATT] shall
not
prevent,
as
between
the
territories of contracting parties*,
the formation of a customs union or a
free-trade area or the adoption of an
interim agreement necessary for the
formation of a customs union or of a
free-trade area; Provided that: ...
*Replace the term contracting parties, (original
GATT text) by WTO Members.
GATS V
The principle
The first sentence (the Chapeau) of Paragraph 5
of Article XXIV presents the principle: The rules
contained in the GATT (in particular its Article I
establishing that trade measures adopted by
governments may not discriminate on the basis of
the origin of imported goods) shall not prevent
WTO Members from creating(or entering into)
free-trade areas or customs unions.
GATT XXIV
GATT Article XXIV
Enabling
Clause
WTO rules on RTAs
Intra-RTA impact
First, the purpose is defined in relation to the
expected impact within the RTA: to facilitate trade
between the constituent territories.
Extra-RTA impact
Second, the purpose is defined in relation to the
possible impact of the RTA for WTO Members that
are not parties (third parties): not to raise barriers
to the trade of other [Members] with such
territories.

The
[Members]
recognize
the
desirability of increasing freedom of
trade by the development, through
voluntary
agreements,
of
closer
integration between the economies of
the
countries
parties
to
such
agreements. They also recognize that
the purpose of a customs union or of
a
free-trade
area
should
be
to
facilitate
trade
between
the
constituent territories and not to
raise barriers to the trade of other
[Members] with such territories.
Relationship between multilateralism
and regionalism
In 1947, through the first sentence of the
paragraph, the possibility (and even the
desirability) of the coexistence ofregionalism
and the multilateral trading system was
recognized.
GATT XXIV
Purpose of FTAs and customs unions

The purpose of the two types of RTAs authorized
under the GATT is identified in paragraph 4 of
Article XXIV.
Enabling
Clause
GATT Article XXIV
GATS V
WTO rules on RTAs
FTA
For the purposes of (GATT):

b)
a free-trade area shall be

understood to mean a group of two
or more customs territories in
which the duties and other
restrictive regulations of
commerce (except, where necessary,
those permitted under Articles XI,
XII, XIII, XIV, XV and XX) are
eliminated on substantially all
the trade between the constituent
territories in products
originating in such
territories.
Enabling
Clause
Paragraph 8(b) determines the

Intra-FTA conditions.
The parties must:
1. ELIMINATE CUSTOMS DUTIES on
SUBSTANTIALLY ALL THE TRADE*
(meaning the trade between the parties).
GATS V
Free Trade Area (FTA)

The conditions to be fulfilled to qualify as a free
trade area are contained in GATT Article XXIV
paragraph 8(b), as well as paragraph 5(b). Other
paragraphs also set similar procedural conditions
for FTAs and CUs.
GATT XXIV
WTO rules on RTAs
Paragraph 8 (b) determines the

Intra-FTA conditions.
The Parties must:
2. ELIMINATE OTHER RESTRICTIVE
REGULATIONS OF COMMERCE* (with certain
exceptions) on SUBSTANTIALLY ALL THE
TRADE (between the parties).
*Note
There seem to be diverging views
about what exactly is covered by the
terms Other restrictive regulations
of commerce. In particular, the
nature of the list of exceptions
contained in the parenthesis
(exhaustive or illustrative) remains
open for discussion.
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For the purposes of [GATT]:

b)
a free-trade area shall be

understood to mean a group of two
or more customs territories in
which the duties and other
restrictive regulations of
commerce (except, where necessary,
those permitted under Articles XI,
XII, XIII, XIV, XV and XX) are
eliminated on substantially all
the trade between the constituent
territories in products
originating in such
territories.
WTO CASE LAW
In 2000, the Appellate Body, in the case
Argentina-Footwear, while inconclusive on the
issue of the imposition or maintenance of
safeguard measures between the parties to an
RTA in relation to Article XXIV, stressed the need
for a parallelism between the scope of a safeguard
investigation and the scope of the application of
safeguard measures.
GATT XXIV
Free Trade Area (FTA)

In GATT Article XXIV, the conditions to be fulfilled
to qualify as a free trade area are contained in
paragraph 8(b), as well in paragraph 5(b). Other
paragraphs also set similar procedural conditions
for FTAs and CUs.
Enabling
Clause
FTA
GATS V
WTO rules on RTAs
Paragraph 5(b) determines

extra-FTA conditions.
The parties must:
3. Ensure that the CUSTOMS DUTIES and the

OTHER REGULATIONS OF COMMERCE*
applicable to the trade between the parties to
an FTA and WTO Members not parties to the
FTA (third parties) do not increase as a result of
the establishment of a free trade area.
This condition is to be understood in relation to the
purpose of a FTA that should not be to raise
barriers to the trade of other Members
(See paragraph 4 of Article XXIV).

b)
with respect to a free-trade area,

(...) the duties and other
regulations of commerce maintained
in each of the constituent
territories and applicable at the
formation of such free-trade area
to the trade of [third parties]
shall not be higher or more
restrictive than the corresponding
duties and other regulations of
commerce existing in the same
constituent territories prior to
the formation of the free-trade
area (...);
GATT XXIV
Paragraph 5(b) sets a limit as to how much third

parties (WTO Members not parties to an FTA) may
be affected by the establishment of the FTA.
Enabling
Clause
FTA
GATS V
WTO rules on RTAs
CU
The parties must:

1. ELIMINATE CUSTOMS DUTIES on
SUBSTANTIALLY ALL THE TRADE
(meaning the trade between the parties).
2. ELIMINATE OTHER RESTRICTIVE
REGULATIONS OF COMMERCE (with certain
exceptions) on SUBSTANTIALLY ALL THE
TRADE (between the parties).

a)
a customs union shall be

understood to mean the
substitution of a single customs
territory for two or more customs
territories, so that
i. duties and other restrictive
regulations of commerce
(except, where necessary,
those permitted under Articles
XI, XII, XIII, XIV, XV and XX)
are eliminated with respect to
substantially all the trade
between the constituent
territories of the union or at
least with respect to
substantially all the trade in
products originating in such
territories (...)
Enabling
Clause
Paragraph 8 (a)(i) determines the

intra-CU conditions.
GATS V
Customs Union (CU)

The conditions to be fulfilled to qualify as a
Customs Union are contained in GATT Article
XXIV paragraph 8(a), as well as paragraph 5(a).
Paragraph 6 is also relevant. Other paragraphs set
similar procedural conditions for FTAs and CUs.
GATT XXIV
WTO rules on RTAs
CU
Country
A
Country
B
Country
C
Country
D

a)
a customs union shall be

understood to mean the
substitution of a single customs
territory for two or more customs
territories, so that (...)
ii. substantially the same duties
and other regulations of
commerce are applied by each
of the members of the union to
the trade of territories not
included in the union (...)
Enabling
Clause
In essence it implies that :

3. a Common External Tariff (CET) (substantially
all the same duties applied to third parties),
and a common external regulatory trade regime
(substantially all the same regulations of
commerce applied to third parties) must be
established.
GATS V
Paragraph 8(a)(ii) also contains an

extra-CU condition.
GATT XXIV
WTO rules on RTAs
CU
What has to be assessed, therefore, is the

overall impact the CU has on market access for
third parties. This allows that, for some
products or in some CU member countries, the
formation of the CU may have raised new
barriers (for example: an increase of a customs
duty as a result of the adoption of the new CU
Common External Tariff (CET). However, at the
same time, the adoption of the CET may also
have lowered barriers (possibly for other
products or in other CU member countries).
Therefore, the question is : Has the CET
provoked, on the whole, an increase of tariffs
for products imported by the CU from third
parties?

a)
with respect to a customs union,

(...) the duties and other
regulations of commerce imposed at
the institution of any such union
(...) in respect of trade with
[Members] not parties to such
union (...) shall not on the whole
be higher or more restrictive than
the general incidence of the
duties and regulations of commerce
applicable in the constituent
territories prior to the formation
of such union (...)
Enabling
Clause
The parties must:

4. Ensure that the CUSTOMS DUTIES and the
OTHER
REGULATIONS
OF
COMMERCE
imposed by customs union to the trade of WTO
Members not parties to the FTA (third parties)
do not ON THE WHOLE increase as a result of
the establishment of a Customs Union.
GATS V
Paragraph 5(a) contains an additional extra-CU

condition:
GATT XXIV
WTO rules on RTAs
CU
In particular:
calculation is based on applied duties;
calculation is based on trade-weighted values;
data shall be provided by the CU;
the methodology used during the Uruguay

Round to assess the tariff offers shall be used
to perform the assessment.
The Understanding also gives a mandate to the
WTO Secretariat to do the calculation.
...
Article XXIV:5
The evaluation (...) of the
2.
general
incidence
(...) shall in
respect of duties and charges be
based upon an overall assessment of
weighted average tariff rates and of
customs
duties
collected.
This
assessment shall be based on import
statistics
for
a
previous
representative period to be supplied
by the custom union, on a tariff-line
basis and in values and quantitates,
broken down by WTO country of origin.
... The Secretariat shall compute the
weighted average tariff rates and
customs
duties
collected
in
accordance with the methodology used
in the assessment of tariff offers in
the Uruguay Round of Multilateral
Trade Negotiations. (...)
Enabling
Clause
In particular it defines more precisely how the

GENERAL INCIDENCE of the duties and other
regulations of commerce applicable before and
after the formation of a CU should be calculated.
Understanding on the Interpretation

of Article XXIV of GATT 1994
GATS V
The Understanding on the Interpretation of

Article XXIV of GATT 1994 is part of the results
of the Uruguay Round. The Understanding
complements and clarifies some aspects of Article
XXIV.
GATT XXIV
WTO rules on RTAs
However, two aspects are specific to CUs:

1. in providing for compensations, due account is
taken of compensation that may already have
been given (to the same third party) through a
reduction of a tariff on the same tariff line by
another party to the CU. Frequently, the
establishment of a CET means, for some
countries a reduction of the tariff, and for others
an increase of the tariff);
2. the compensation, if any, shall be given by the
CU (and not by individual countries), as the CU
territory has substituted the single customs
territory of the CU members.

If, in fulfilling the requirements of
subparagraph
5(a),
a
[Member]
proposes to increase any rate of duty
inconsistently with the provisions of
Article II, the procedure set forth
in Article XXVIII shall apply. In
providing
for
compensatory
adjustment, due
account
shall be
taken of the compensation already
afforded by the reduction brought
about in the corresponding duty of
the other constituent of the union.
GATT XXIV
If, in the process of forming the CU, a WTO

Member that is party to the CU, has to increase a
tariff above the corresponding bound rate (for this
Member), it would be in violation of its tariff
concessions (Article II of GATT). In that case, the
procedure contained in Article XXVIII of GATT
(Modification of Schedules) applies*, as provided
for by paragraph 6 of Article XXIV and clarified by
the Understanding, applies.
Enabling
Clause
CU
GATS V
WTO rules on RTAs
Interim Agreements
(...)
c) any interim agreement referred to
in subparagraphs (a) [CU] and (b)
[FTA] shall include a plan and
schedule for the formation of such
a customs union or of such a freetrade area within a reasonable
length of time.

Article XXIV:5
3. The reasonable length of time
referred to in paragraph 5(c) of
Article XXIV should exceed 10 years
only in exceptional cases. (...)
Enabling
Clause
The rules applicable to an interim agreement

leading to the formation of an FTA are the same as
those applicable to an FTA; and the rules applicable
to interim agreement leading to the formation of a
CU are the same as those applicable to a CU.
However, in paragraph 5 c) of Article XXIV, the
parties are required to provided for a plan and
schedule for the formation of the FTA or the CU.
The duration of such a plan is not mentioned in
Article XXIV. However, the Understanding on the
Interpretation of GATT Article XXIV, clarifies that is
should exceed 10 years only in exceptional cases.
GATS V
A concept largely obsolete

The original text of Article XXIV refers to Interim
Agreements* necessary for the formation of a
customs union or of a free trade area.
GATT XXIV
WTO rules on RTAs
Free-Trade Area (FTA)

Customs Union (CU)
Interim agreement (leading to
FTA or CU)
FTAs & CUs
To facilitate trade between parties

Not to raise barriers to the trade of
third parties
Without going back to your notes, try to

elaborate on each of the keywords listed
below, which correspond to elements
discussed in the previous section
CUs
FTAs
Eliminate customs duties

Eliminate other restrictive
commercial regulations
Substantially all the trade
Barriers (tariff & other
regulations of commerce) not
higher after than before the
formation of a FTA
Eliminate customs duties

Eliminate other restrictive
commercial regulations
Substantially all the trade
Common external trade regime
(tariff and other regulations)
General incidence ,on the whole ,not
higher after CU than prior to the
formation of the CU
Renegotiation / compensation
GATT XXIV
Enabling
Clause
TEST
YOUR
BRAIN
Keywords (GATT XXIV)
GATS V
WTO rules on RTAs
GATT XXIV
WTO rules on RTAs

Enabling Clause
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GATS V
Enabling Clause
Enabling
Clause
1979: Special and differential treatment for

RTAs
The
Tokyo
Round
of
multilateral
trade
negotiations ended, in 1979, with the adoption of a
Decision entitled Differential and More Favourable
Treatment, Reciprocity and Fuller Participation of
Developing Countries. This Decision was later
called the ENABLING CLAUSE because, inter alia, it
enables developing countries to grant each other
preferences without having to apply the MFN
treatment to the other WTO Members. The Enabling
Clause has contributed to make SPECIAL AND
DIFFERENTIAL TREATMENT in favour of products
from developing countries a permanent part of the
legal framework of the multilateral trading system.
DIFFERENTIAL AND MORE FAVOURABLE

TREATMENT RECIPROCITY AND FULLER
PARTICIPATION OF DEVELOPING COUNTRIES
Decision of 28 November 1979
(L/4903)
1. Notwithstanding the provisions of

Article
I
of
the
[GATT],
[Members] may accord differential
and more favourable treatment to
developing
countries,
without
according such treatment to other
[Members].
Paragraph 2 of the Enabling Clause lists

four types of preferential treatment that
may be applied to developing countries and
that derogate from MFN treatment.
(a) covers tariff preferences granted by
developed countries to developing countries
in accordance with the Generalized System
of Preferences (GSP). GSP schemes are
unilateral, and therefore are not considered
as RTAs.
(b) covers non-tariff preferences governed
by multilateral instruments negotiated
under
the
GATT.
Such
multilateral
instruments do not take the form of RTAs.
(c) See next slide
(d) covers special treatment in favour of
LDCs granted in relation togeneral or
specific measures in favour of developing
countries. ...
GATT XXIV
The principle
Paragraph 1 (the Chapeau) of the Enabling
Clause presents the principle: Despite Article I of
the GATT (the MFN principle) developing
countries may benefit from PREFERENTIAL
TREATMENT.
Enabling
Clause
Enabling Clause
GATS V
WTO rules on RTAs

(L/4903)
2.
The provisions of paragraph

apply to the following:
(...)
(c) regional or global arrangements

entered
into
amongst
lessdeveloped [Members] for the
mutual reduction or elimination
of tariffs and, in accordance
with criteria or conditions
which may be prescribed by the
[Ministerial Conference], for
the
mutual
reduction
or
elimination
of
non-tariff
measures, on products imported
from one another;(...)
GATT XXIV
(c) covers RTAs ENTERED INTO ONLY BY

DEVELOPING COUNTRIES.
Specific conditions are attached to the RTAs
covered by the Enabling Clause.
Enabling
Clause
Enabling Clause
GATS V
WTO rules on RTAs
intra-RTA impact
First, the purpose is defined in relation tothe
expected impact within the RTA: to facilitate and
promote the trade of developing countries.
extra-RTA impact
Second, the purpose is defined in relation tothe
possible impact of the RTA for WTO Members that
are not parties to the RTA (third parties): not to
raise barriers to or create undue difficulties for the
trade of any other [Members].
In addition, the RTA shall not constitute an
impediment to future multilateral tariff or non-tariff
reductions (through future rounds of negotiations).

(L/4903)
3: Any differential and more
favourable treatment provided under
this clause:
a) shall be designed to facilitate and
promote the trade of developing
countries and not to raise barriers
to or create undue difficulties for
the trade of any other [Member].
b) shall not constitute an impediment
to the reduction or elimination of
tariffs and other restrictions to
trade on a MFN basis; (...)
GATT XXIV
Purpose of RTAs covered by the Enabling

Clause
Paragraph 3 of the Enabling Clause describes the
purpose and characteristics of RTAs concluded only
between developing countries (paragraph 2(c)).
Enabling
Clause
Enabling Clause
GATS V
WTO rules on RTAs
THE PARTIES MUST MUTUALLY REDUCE or

ELIMINATE TARIFFS *.
*Note
Unlike in GATT Article XXIV, a simple
reduction of tariffs, as opposed to an
elimination, is possible under the Enabling
Clause. Compared to GATT Article XXIV, the
terms Substantially all the Trade are
ABSENT in the Enabling Clause*
Whether the parties must also MUTUALLY

REDUCE or ELIMINATE NON-TARIFF
MEASURES is an open question**.

(L/4903)
2. (...)
(c) regional or global arrangements
entered
into
amongst
lessdeveloped [Members] for the
mutual reduction or elimination
of tariffs and, in accordance
with criteria or conditions
which may be prescribed by the
[Ministerial Conference], for
the
mutual
reduction
or
elimination
of
non-tariff
measures, on products imported
from one another; (...)
...
**Note
WTO Members have not adopted or prescribed criteria or
conditions for the preferential reduction or elimination of NTMs,
as foreseen in the Enabling Clause. It is thus an open question
whether such RTAs may introduce discrimination on NTMs.
GATT XXIV
RTAs covered by the Enabling Clause

The conditions to be fulfilled to qualify as a
regional or global arrangement are contained in
the Enabling Clause paragraph 2(c).
Enabling
Clause
Enabling Clause
GATS V
WTO rules on RTAs

1979
Exception to MFN
GSP schemes
GATT compatible preferential
treatment on NTMs
RTAs between developing
countries
Special treatment for LDCs
Main features
Between developing countries only

Mutually reduce or eliminate
tariffs (i.e. reciprocity)
Mutually reduce or eliminate
NTMs (point open for discussion)
Conditions MAY be established
by Ministerial Conference
Conditions
To facilitate trade between

developing countries
Not to raise barriers to the trade
of third parties
GATT XXIV
TEST
YOUR
BRAIN
Enabling
Clause
Keywords (Enabling Clause)
GATS V
WTO rules on RTAs
Like under the GATT, provisions to derogate from

the MFN principle (Article II of the GATS) were also
introduced (in Article V). To a large extent, these
rules mirror the provisions of GATT Article XXIV.
GATS Article V also included an element of special
and differential treatment (essentially covered for
trade in goods through the Enabling Clause).
It is important to remember that

services are different from goods, and
that the GATS rules were drafted almost
half a century after those of the GATT.
This partly explains some of the
differences between Article V of GATS
and Article XXIV of GATT.
GATS V
Rules on Services: mirroring GATT rules

The creation of the General Agreement on Trade in
Services (GATS) was one of the landmark
achievements of the Uruguay Round, whose results
entered into force in January 1995, almost 50
years after the GATT had entered into force. The
GATS was inspired by essentially the same
objectives as its counterpart in merchandise trade,
and mirrored to a large extent the same basic
principles applicable to trade in goods (including
the MFN principle).
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GATS V
GATS Article V
Enabling
Clause
GATT XXIV
WTO rules on RTAs
GATS Article V
This
Chapeau
therefore
establishes
that
agreements
liberalizing
trade
in
services
(Economic Integration Agreements EIAs)
may derogate from the other rules of the GATS (in
particular the MFN principle in Article II of GATS).
The conditions to be fulfilled follow the chapeau
of paragraph 1.
GATS Article V
1: [GATS] shall not prevent any of

its Members from being a party to or
entering
into
an
agreement
liberalizing
trade
in
services
between or among the parties to such
an agreement, provided that such an
agreement: (...)
Enabling
Clause
Economic Integration
GATS V
The principle
The first sentence (the Chapeau) of Paragraph 1
of Article V presents the principle: the GATS (in
particular its Article I establishing that trade
measures adopted by governments may not
discriminate on the basis of the origin of imported
goods) shall not prevent any of its Members
from being a party to or entering into an
agreement liberalizing trade in services
between or among them.
GATT XXIV
WTO rules on RTAs
GATS Article V
Note that the overall level of barriers shall not be

raised; and that the benchmark, in respect of third
parties, is the level applicable prior to the
establishment of the EIA.
4: Any agreement referred to in
paragraph 1 shall be designed to
facilitate trade between the parties
to the agreement and shall not in
respect of any Member outside the
agreement raise the overall level of
barriers to trade in services within
the respective sectors or subsectors
compared
to
the level
applicable
prior to such an agreement.
Enabling
Clause
Intra-EIA impact
First, the purpose is defined in relation tothe
expected impact with the EIA : to facilitate trade
between the parties to the agreement
Extra-EIA impact
Second, the purpose is defined in relation to the
possible impact of the EIA for WTO Members that
are not parties to the EIA (third parties): shall not
... raise the overall level of barriers to trade in
services compared to the level applicable prior to
such an agreement.
GATS Article V
GATS V
Purpose of EIAs
The purpose of EIAs (authorized under the GATS) is
identified in paragraph 4 of Article V.
GATT XXIV
WTO rules on RTAs
EIA
The EIA must:

1. have SUBSTANTIAL SECTORAL
COVERAGE*.
1: [GATS] shall not prevent any of
its Members from being a party to or
entering
into
an
agreement
liberalizing
trade
in
services
between or among the parties to such
an agreement, provided that such an
agreement:
Enabling
Clause
Paragraph 1 (a) determines the necessary

coverage.
GATS Article V
a) has substantial sectoral

coverage(1), and (...)
GATS V
Economic Integration Agreement (EIA)

The conditions to be fulfilled to qualify as an EIA
are contained in GATS Article V paragraph 1(a) and
1(b). Other paragraphs also set procedural
conditions for EIAs.
GATT XXIV
WTO rules on RTAs
Footnote 1 provides some precision on substantial

sectoral coverage.
Footnote
This condition is understood in terms

of number of sectors, volume of trade
affected and modes of supply. In
order
to
meet
this
condition,
agreements should not provide for the
a priori exclusion of any mode of
supply.
GATT XXIV
WTO rules on RTAs

EIA
Paragraph 1(b) determines the necessary level of

Intra-EIA liberalization.
The term discriminatory measures is used in

reference to Article XVII of GATS, which guaranties
national treatment (in the sectors inscribed in each
WTO Members Schedule of Specific Commitments).
The discriminatory measures permitted under
Articles XI (payments and transfers), XII
(restriction to safeguard the balance of payments),
XIV (general exceptions), and XIVbis (security
exceptions) are however reserved.
that
such
an
(...)
b) provides for the absence or
elimination of substantially all
discrimination, in the sense of
Article XVII, between or among the
parties, in the sectors covered
under subparagraph (a), through:
i.elimination of existing
discriminatory measures, and/or
ii.prohibition of new or more
discriminatory measures,
either at the entry into force of
that agreement or on the basis of a
reasonable time-frame, except for
measures permitted under Articles
XI, XII, XIV and XIV bis.
Enabling
Clause
...
provided
1:
agreement:
GATS V
The EIA must:

2. provide for the ELIMININATION of EXISTING
DISCRIMINATORY MEASURES and/or the
PROHIBITION OF FUTURE
DISCRIMINATORY MEASURES.
GATS Article V
EIA
1. be constituted as a JURIDICAL PERSON,

under the law of a party to the EIA (usually
through registration of the company); and
2. ENGAGE
IN
SUBSTANTIVE
BUSINESS
OPERATIONS* in the territory of the other
party(ies) to the EIA.
6: A service supplier of any other
Member that is a juridical person
constituted under the laws of a party
an
agreement
referred
to
in
to
paragraph 1 shall be entitled to
treatment
granted
under
such
agreement, provided that it engages
in substantive business operations in
the territory of the parties to such
agreement.
Enabling
Clause
In the case of trade in services, to benefit from the

preferential treatment, a foreign service supplier
shall:
GATS Article V
GATS V
Service suppliers benefiting from preferences

Paragraph 6 of GATS Article V clarifies which
services providers are entitled to benefit from the
preferential treatment granted through an EIA.
GATT XXIV
WTO rules on RTAs
EIA
In such a case:
1. ADVANCE NOTICE should be made (at least 90
days); and
2. RENEGOTIATION*,
possibly
leading
to
COMPENSATION, should take place, in
accordance with the relevant provisions of GATS
Article XXI.
GATS Article V
If,
in
the
conclusion,
5:
enlargement
or
any
significant
modification of any agreement under
paragraph 1, a Member intends to
withdraw
or
modify
a
specific
commitment inconsistently with the
terms and conditions set out in its
Schedule, it shall provide at least
90
days
advance
notice
of
such
modification or withdrawal and the
procedure set forth in paragraphs 2,
3, and 4 of Article XXI shall apply.
Enabling
Clause
GATS V
Modification / Renegotiation of Schedules

It may happen that, in the process of forming an
EIA (or acceding to an existing EIA), a WTO
Member which is party to the EIA, has to
(re)introduce limitations (to market access or
national treatment) against services or service
providers from third parties, while such access or
treatment was guaranteed through the Members
WTO Schedule of Specific Concessions.
GATT XXIV
WTO rules on RTAs
EIA
3 (...):
developing
countries
are
a) where
parties to an agreement of the type
referred
to
in
paragraph
1,
flexibility shall be provided for
regarding the conditions set out in
paragraph
1,
particularly
with
reference
to
subparagraph
(b)
thereof, in accordance with the
level
of
development
of
the
countries concerned, both overall
and
in
individual
sectors
and
subsectors.
Enabling
Clause
1. the notion of FLEXIBILITY* is introduced in

sub-paragraph (a). Flexibility is to be provided
to developing countries in particular in relation
to the elimination of existing discriminatory
measures and/or the prohibition of new or more
discriminatory measures. Variable geometry
may be introduced, in accordance with the level
of development of the countries concerned; and
GATS Article V
GATS V
Special and differential treatment

Paragraph 3 incorporates a DEVELOPMENT
DIMENSION into GATS Article V. This special and
differential treatment is handled in two ways:
GATT XXIV
WTO rules on RTAs
EIA
This allows developing countries to extend

preferential treatment to domestically owned
juridical persons only.
3 (...):
b) notwithstanding paragraph 6, in the
case of an agreement of the type
referred
to
in
paragraph
1
only
developing
involving
countries,
more
favourable
treatment
may
be
granted
to
juridical
persons
owned
or
controlled by natural persons of
the parties to such agreement.
Enabling
Clause
In this case, preferential treatment may (note

the use of the term) be granted to juridical
persons owned or controlled by natural persons of
the parties to the EIA.
GATS Article V
GATS V
2. sub-paragraph (b) introduces another form of

pro-developing-country treatment, but only
when the Parties to an EIA are all developing
countries.
GATT XXIV
WTO rules on RTAs

discussed in the previous section.
Economic Integration Agreement

To facilitate trade between parties
Not to raise overall barriers to trade
in services with third parties
Substantial sectoral coverage
Eliminate discriminatory
measures
Juridical persons engaging in
substantive business operations
Modification / Renegotiation of
Specific Concessions
Flexibility
GATT XXIV
Keywords (GATS V)
Enabling
Clause
TEST
YOUR
BRAIN
GATS V
WTO rules on RTAs
The provisions on regional trade agreements

contain a number of procedural disciplines
beside the substantive conditions to be met in
order to constitute RTAs. These procedural
requirements have been regrouped under the
following actions:
Notifying: Members, which are parties to RTAs,
informing the other Members.
Reviewing / examining: presenting an RTA

and clarifying specific aspects of it, when
required; may be seen as a consistency test
when the object of the review is to determine if
the RTA fulfils the conditions contained in the
relevant WTO provisions, as applicable.
Monitoring: organized handling of RTAs through
a proper forum under the auspices of the (GATT)
WTO.
Reporting: keeping other Members updated on
the operation of RTAs.
R
Evolving rules
In 2001, the WTO Members launched
the Doha Development Agenda / DDA
(the first round of multilateral trade
negotiations under the WTO).
One of the intermediary results of the
DDA was the adoption of the
Transparency
Mechanism
for
RTAs (TM). It affected the practice
of the WTO in relation to the
treatment of provisions on regional
trade agreements.
O
C
E
D
U
R
E
Some of the past practices have been

modified since the entry into force, in
2006, on a provisional basis, of the
Transparency Mechanism for RTAs (TM).
The TM is presented in detail in the next
Module of this course. Procedural rules are
therefore evolving rules.
Enabling
Clause
Procedures
GATS V
WTO rules on RTAs
We have placed a visual

callout to signal
that past practice has been
affected, since 2006, by the P
adoption of the TM.
GATT XXIV
The practice has been affected

since 2006 by the
GATT Article XXIV

Paragraph 7 of Article XXIV provides for
NOTIFICATION obligations. The parties shall notify
promptly when they decide to enter into a CU or
an FTA. The (1995) Understanding on the
Interpretation of GATT Article XXIV reaffirmed that
periodical reports had to be presented on the
operation of the RTAs . Significant changes in RTAs
also had to be notified as they occurred.
...
Review of CUs and FTAs
11.Customs unions and constituents of
free-trade
areas
shall
report
periodically to the Council for
Trade
in
Goods*,
()on
the
operation
of
the
relevant
agreement. Any significant changes
and/or
developments
in
the
agreements should be reported as
they occur.
Article XXIV of GATT 1994

GATT 7 (...):
a) any [Member] deciding to enter
into a customs union or freetrade
area,
(...)
shall
promptly
notify
the
[Ministerial Conference] and
shall make available to it
such information regarding the
proposed union or area as will
enable
[it]
to
make
such
reports and recommendations to
[Members]
as
it
may
deem
appropriate.
R
O
C
E
D
Enabling
Clause
Notifying
R
E
GATS V
WTO rules on RTAs
GATT XXIV

since 2006 by the
Enabling Clause
Paragraph 4 of the Enabling Clause provides for
when action is taken to implement an RTA.
Modification (or withdrawal) of RTAs (under the
Enabling Clause) must also be notified.

PARTICIPATION OF DEVELOPING
COUNTRIES
(L/4903)
4: Any [Member] taking action to
introduce an arrangement pursuant
to paragraphs 1, 2 and 3 above or
subsequently
talking
action
to
introduce
modification
or
withdrawal of the differential and
more
favourable
treatment
so
provided shall:
a) notify
the
[Ministerial
Conference]
and
furnish
[it]
with all the information [it]
may deem appropriate relating to
such action;
R
O
C
E
D
Enabling
Clause
Notifying
R
E
GATS V
WTO rules on RTAs
GATT XXIV

since 2006 by the
GATS V
Paragraph
7
of
Article
V
provides
for
promptly any EIA. They must also notify any
enlargement or any significant modification of any
EIA. In the case of EIAs implemented on the basis
of a time-frame, the notification shall be periodical
(with no more precision on the periodicity).
GATS Article V
7 (...):
a) Members which are parties to any
agreement
referred
to
in
paragraph
1
shall
promptly
notify any such agreement and
enlargement
or
any
any
significant modification of that
agreement to the Council for
Trade in Services. They shall
also
make
available
to
the
Council
such
relevant
information as may be requested
by it. (...)
b) Members which are parties to any
agreement
referred
to
in
paragraph 1 which is implemented
on the basis of a time-frame
shall report periodically to the
Council for Trade in Services on
its implementation. (...)
R
O
C
E
D
Enabling
Clause
Notifying
R
E
GATS V
WTO rules on RTAs
GATT XXIV

since 2006 by the
GATT Article XXIV: the Consistency Test(I)

In addition to the notification obligation, paragraph
7 of Article XXIV provides for a REVIEW of the
notified RTAs. In practice, during the GATT years,
for each review, a working party was established
with the mandate to review the RTA and to make
recommendations to Members (parties) as it
deemed
appropriate.
Given
persistent
disagreements regarding the interpretation of key
concepts of Article XXIV, working parties were often
not in a position to judge the compatibility of the
RTA and thus did not make recommendations: the
rule of consensus made it impossible to conclude
definitively that an RTA was either in full conformity
or fully incompatible with GATT Article XXIV. Since
the establishment of the GATT in 1948, only one
RTA has been found to be fully compatible with
Article XXIV.
The review is often referred to
examination or consistency test.
as
an

Review of CUs and FTAs
7. All notifications (...)

examined by a working
the
light
of
the
provisions of GATT 1994
shall be
party in
relevant
(...).
C
E
D
Enabling
Clause
Reviewing / Examining
R
E
GATS V
WTO rules on RTAs
GATT XXIV

since 2006 by the
GATT Article XXIV: the Consistency Test(II)

In 1995, the Understanding clarified that the
examination
was
AUTOMATIC.
Despite
the
Understanding and the establishment of the CRTA
in 1996, the examination of RTAs resulted in
stalemate. Since the establishment of the WTO, not
a single examination report has been adopted; the
main
reasons
for
this
being
continuing
disagreements over the inherent ambiguities in
GATT Article XXIV, the absence of consensus on the
format and content of examination reports under
the WTO, the lack of information submitted by RTA
parties, and the continuing need of a consensus for
the adoption of the examination report. With the
adoption, in 2006, of the Transparency Mechanism,
the examination of RTAs has been, de facto, set
aside in favour of a procedure focusing on
transparency in relation to notified RTAs.
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the icon
to access
info on
the Case
R
O
C
E
D
Enabling
Clause
Reviewing / Examining
R
E
GATS V
WTO rules on RTAs
GATT XXIV

since 2006 by the
Enabling Clause: the Consultation

In practice, the CONSULTATION requirement of
paragraph 4 resulted in these RTAs being discussed
in the CTD, with this body taking note of the RTAs
once concluded. No examination was foreseen.

PARTICIPATION OF DEVELOPING
COUNTRIES
(L/4903)
4: Any (Member) taking action to
introduce an arrangement pursuant
to paragraphs 1, 2 and 3 above or
subsequently talking action to
introduce
modification
or
withdrawal of the differential
and more favourable treatment so
provided shall: (...)
b) afford adequate opportunity for
prompt
consultations
at
the
request
of
any
interested
[Member] with respect to any
difficulty or matter that may
arise.
R
O
C
E
D
Enabling
Clause
Reviewing /Examining
R
E
GATS V
WTO rules on RTAs
GATT XXIV

since 2006 by the
GATS Article V : the Consistency Test

In addition to the notification obligation, paragraph
7 of Article V provides for a REVIEW of notified
EIAs. Initially, a working party could be
established, if requested, for each notified EIA,
with the mandate to review the EIA and make
recommendations to Members (parties) as it
deemed appropriate. In 1996, the CRTA was
established as a permanent body to, inter alia,
proceed with the reviews. However, such
recommendations or reports have never been
adopted. The rule of consensus seems to have
made it impossible to conclude definitively that an
EIA was either in full conformity or fully
incompatible with
7 (...):
a) ... The Council [on Trade in
Services]
may
establish
a
working party to examine such an
agreement
or
enlargement
or
modification of that agreement
and to report to the Council on
its
consistency
with
this
Article.
b) ... The Council may establish a
working party to examine such
reports [periodic reports for
EIA implemented on the basis of
a time-frame] if it deems such a
working party necessary.
c) based on the reports of the
working parties referred to in
subparagraphs (a) and (b), the
Council may make recommendations
to the parties as it deems
appropriate.
P
R
O
C
E
D
Enabling
Clause
Reviewing /Examining
GATS Article V
R
E
GATS V
WTO rules on RTAs
GATT XXIV

since 2006 by the

since 2006 by the
WTO rules on RTAs

Monitoring (I)
Who monitors RTAs?

As during the GATT years, the WTO has
established a pyramid structure comprising a
Council of Representatives and various
specific
Committees
to
monitor
the
implementation of the rules and disciplines
adopted through the years to adapt the
multilateral trading system to the changing
realities of trade.
Under the GATT, the GATT Council was in
charge of monitoring the implementation of
GATT Article XXIV and RTAs notified under
this provision. Individual working parties,
reporting to the GATT Council were
established each time an RTA was examined.
From 1979, RTAs notified under the Enabling
Clause were considered in the GATT
Committee on Trade and Development. In
practice, these were inscribed in the CTDs
agenda and an oral statement was made. In
one exceptional case (MERCOSUR), a working
party was established to examine the
agreement.
1948-1994 (GATT)
CONTRACTING
PARTIES
GATT Council
GATT XXIV
(since 1948)
GATT Committee on
Trade and development
Enabling Clause
(since 1979)
Working
party *
Working
party A
Working
party B
Working
party C

since 2006 by the
WTO rules on RTAs

Monitoring (II)
In 1995, the Council for Trade in Goods

became the monitoring body for GATT
Article XXIV matters, while the newly
created
Committee
on
Trade
and
Development (CTD) was in charge of
monitoring the implementation of the
Enabling Clause. At the same time, the
new rules on trade in services (including
GATS Article V) were overseen by the
Council for Trade in Services (CTS).
1995 (WTO)
MINISTERIAL
CONFERENCE
General Council
GATT XXIV
(since 1948)
COUNCIL FOR
TRADE IN
GOODS (CTG)
Working
party A
Working
party B
GATS V
(since 1995)
COUNCIL FOR
TRADE IN
SERVICES
(CTS)
Working
party C
Enabling Clause
(since 1979)
COMMITTEE
ON TRADE &
DEVELOPMENT
(CTD)
Working
party D

since 2006 by the
WTO rules on RTAs

Monitoring (III)
A major change in the structure

took place in 1996, with the
creation of the Committee on
Regional Trade Agreements (CRTA).
The CRTA became the primary
monitoring body for matters related
to GATT Article XXIV and GATS
Article V; issues related to the
Enabling Clause remained under
the CTD.
1996 (WTO)
MINISTERIAL
CONFERENCE
General Council
GATT XXIV
(since 1948)
COUNCIL FOR
TRADE IN
GOODS (CTG)
COMMITTEE ON
REGIONAL TRADE
AGREEMENTS
(CRTA)
GATS V
(since 1995)
COUNCIL FOR
TRADE IN
SERVICES
(CTS)
Enabling Clause
(since 1979)
COMMITTEE
ON TRADE &
DEVELOPMENT
(CTD)

since 2006 by the
WTO rules on RTAs

Reporting
GATT Article XXIV

In 1971, an obligation applicable to customs unions
and constituents of free-trade areas to provide
biennial reports on the operation of their
agreements was established.
(See document BISD 18S/38)
WTO rules on RTAs
EXERCISE
YOUR
Allocate the following quotations to their respective

associated legal provision.
Legal SKILLS
Enabling Clause
A free-trade area shall be understood to mean a

group of two or more customs territories
GATS Art. V
Members may accord differential and more

favourable treatment to developing countries
GATT Art. XXIV
Customs unions and constituents of free-trade

areas shall report periodically
GATT Art. I
Understanding on
the Interpretation of
GATT Art. XXIV
This condition is understood in terms of number

of sectors, volume of trade affected and modes
of supply
... immediately and unconditionally
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check if your
results corresponds
to ours
WTO rules on RTAs
EXERCISE
YOUR
Legal SKILLS
Allocate the following quotations to their respective

associated legal provision.
OUR RESPONSES
A2, B4, C1, D5, E3
Enabling Clause
A free-trade area shall be understood to mean a

group of two or more customs territories
GATS Art. V
Members may accord differential and more

favourable treatment to developing countries
GATT Art. XXIV
Customs unions and constituents of free-trade

areas shall report periodically
GATT Art. I
Understanding on
the interpretation of
GATT Art. XXIV
This condition is understood in terms of number

of sectors, volume of trade affected and modes
of supply
... immediately and unconditionally
WTO rules on RTAs
MODULE 4
The DDA & the Transparency

Mechanism on RTAs
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DDA & Transparency Mechanism

Module 4
DDA
In December 2001, in Doha (Qatar), the WTO

Members launched a new Round of multilateral
trade negotiations, the first under the auspices
of the WTO. An element of the negotiating
package relates to regionalism.
NEGOTIATING MANDATE
The Doha Ministerial Declaration defines, in
paragraph 29, the specific mandate related to
regionalism.
The
paragraph
mandated
negotiations
aimed
at
clarifying
and
improving disciplines and procedures
under the existing WTO provisions applying to
regional trade agreements. It also clarifies
that the negotiations shall take into account
the developmental aspects of regional trade
agreements.
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Doha Ministerial Declaration

November 13 November 2001
29: We [the Ministers] also agree to

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.
WTO Document: WT/MIN(01)/DEC/1
DDA
2001(WTO & DDA)
Negotiating Group
on Rules
MINISTERIAL
CONFERENCE
Negotiations on issues related to

regionalism are taking place within
the Negotiating Group on Rules*
(NGR), one of the negotiating bodies
placed under the Trade Negotiations
Committee (TNC), which has the
overall responsibility for piloting
the DDA negotiations. The ad hoc
negotiating structure established in
relation to the DDA should, in
principle, disappear at the end of the
Round.
General Council
DDA Negotiations
TRADE NEGOTIATION
COMMITTEE (TNC)
COMMITTEE
ON REGIONAL
TRADE
AGREEMENTS
(CRTA)
COMMITTEE ON
TRADE &
DEVELOPMENT
(CTD)
NEGOTIATING
GROUP ON
RULES
DDA
2001 to 2006
From the outset, and thanks to exploratory work done by the CRTA, two main issues were easily identified:
procedures and transparency for RTAs; and RTA/WTO systemic issues. The NGR decided to give priority to
RTAs transparency. At the Hong Kong Ministerial Conference in December 2005, the Group was instructed to
aim at reaching a provisional decision by April 2006. This was accomplished by December 2006.
During this period, work on systemic issues also took place, and the Hong Kong Declarations spelled out that
progress was dependent on text-based proposals by Members.
2007 up to 2013
Negotiations were "dormant" from 2007 until end 2010, when a "window of opportunity" was captured by the
TNC. In RTAs, work sped up once more onthe two main issues of: transparency of RTAs (now embodied in an
in-built review of the Transparency Mechanism) and systemic issues. But this led to a new impasse.
2005
Hong Kong MC
2001
DDA launch
Dec 2006
Adoption of the TM
Dec 2010
window of opportunity
April 2011
RTAs texts
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Developments in the DDA RTAs negotiations
The exploratory work of the CRTA has been summarized by the WTO Secretariat in a working document
(WT/TN/RL/W/8/Rev.1) that served as the basis for identifying issues for negotiations.
As noted by one of the NGR Chairmen, the reality of the RTAs negotiations is unusual in the WTO system: there are
no demandeurs per se; rather, while almost every WTO Member was party to at least one RTAs, all Members were
third parties to an increasing number of RTAs.
Among the main players in this negotiation, were Australia; Brazil; Chile; the EU; Hong Kong, China; India; Korea;
Malaysia; New Zealand; and the United States. Participation from some other developing countries, e.g. Bolivia,
China, Mexico, ACP countries, has been sporadic.
From the very early stages, improving the procedures for the consideration and the transparency of RTAs became a
priority in the NGR. Systemic issues were considered equally important, but more controversial. Members
recognized that improving transparency resulted in a win-win situation.
Transparency of RTAs
The initial debate evolved, as of mid 2002, along the Four Ws of transparency, building upon issues raised by
Chile (TN/RL/W/16): (i) when to notify, (ii) where to notify, (iii) what to notify, and (iv) whether to notify.
One of the last issues to be resolved has been the scope of the TM Decision. In particular, some developing
countries (led by Brazil and India) insisted that if RTAs under the Enabling Clause were to be subject to such
enhanced transparency, then GSP schemes should also be subject to it, i.e. either the entire universe of Enabling
Clause arrangements is subject to enhanced transparency or none of them.
A compromise was found and, at the same General Council meeting where the RTA Transparency Mechanism was
adopted, another Decision was adopted providing for the CTD to consider the question of transparency of
preferential trading arrangements (PTAs). This initiative was concluded four years later, and, on 14 December 2010,
the General Council adopted the Decision for a Transparency Mechanism for Preferential Trade Arrangements
(WT/L/806). The TM for PTAs mirrors that for RTAs; the notifying member is to submit detailed information on the
PTA, the WTO Secretariat is to prepare a factual presentation of the PTA, and a PTA database has been established.
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Developments in the DDA RTAs
negotiations

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Systemic Issues
Very broad in scope. Since 2001, 24 submissions have been made by Members.
Issues addressed include the definition of "substantially all the trade" ("SAT"), the length of the transition period,
criteria to measure the incidence of "other regulations of commerce" on third parties, preferential rules of origin,
flexibility for developing countries (S&D), and the coherence of rules for RTAs involving developing countries.
Two broad issues have been the subject of intense scrutiny:
SAT: criteria for measuring SAT, including the setting of a minimum benchmark for SAT
S&D: incorporation of additional flexibilities for developing countries in Article XXIV, the Understanding,
and/or the Enabling Clause.
Since the 2010 impetus, a late addition to the negotiations has been discussion on the adoption of a forwardlooking, post-Doha work programme on all systemic issues.
From December 2010 to April 2011 RTAs texts (TN/RL/W/252, N/RL/W/253)
Discussions were launched on the TM review foreseen in paragraph 23 aimed at making the Mechanism
permanent. They included issues such as dual notifications, i.e. RTAs notified under both Article XXIV and the
Enabling Clause , time-frames involved in various stages of the TM; and providing for a periodical review of the TM.
The need for the legal review was also underlined, but not dealt with. This involves the relationship of the TM with
existing texts, including the current absence of reports on examinations of RTAs by the relevant WTO body
On systemic issues, the S&D debate has regained momentum following a submission made in early 2011, but
remains inconclusive. As summarized by the NGR Chairman in April 2011:
To conclude, it is clear that notwithstanding the mandate in Doha and the Ministerial Declaration in Hong
Kong, China: (i) in essence, the objectives of various Members in these negotiations remain conceptually
different; and (ii) gaps persist in Members' positions on all elements proposed. I reaffirm my advice to
Members that unless they adopt a pragmatic, flexible and less doctrinaire approach to these negotiations it
is unlikely that this impasse will be overcome.
TM
NEW TRANSPARENCY MECHANISM for RTAs

While it has been difficult for the participants in the
negotiations to make progress on substantial
aspects of the RTA-related disciplines, they
struckan agreement to significantly improve
procedural aspects of the handling of RTAs under
the auspices of the WTO.
As a consequence, on 14 December 2006, the WTO
General
Council
decided
to
establish
a
Transparency Mechanism for RTAs (TM), on a
provisional basis. The TM provides, inter alia, for
early announcement of any RTA and clarifies
certain modalities for the notification of RTAs to
the WTO. Members will also consider the notified
RTAs on the basis of a factual presentation
prepared by the WTO Secretariat.
The Transparency Mechanism is implemented on a
provisional basis. Members are to review, and if
necessary modify, the decision, and replace it by a
permanent mechanism adopted as part of the
overall results of the Doha Round.
2006 Decision on
Transparency
Mechanism for
RTAs

access each legal text
TM
EARLY ANNOUNCEMENT
NOTIFICATION
Members participating in new negotiations aimed at

concluding an RTA shall endeavour to inform the
WTO Secretariat of such negotiations, on a
voluntary basis. Members that are parties to a
newly signed RTA shall send to the Secretariat
information on the RTA, including its official name,
scope, date of signature, any foreseen timetable for
its entry into force or provisional application,
relevant contact points and/or website addresses,
and any other relevant unrestricted information.
The notification of an RTA by Members shall take

place as early as possible, in general no later
than the parties' ratification of the RTA or any
party's decision on the application of the relevant
parts of an agreement and before the application
of preferential treatment between the parties.
The parties shall specify under which provision(s)
of the WTO Agreements the RTA is notified (GATT
XXIV, Enabling Clause, and/or GATS V) and provide
the full text and any related schedules, annexes
and protocols, in one of the WTO's official
languages. Electronic format is preferable for these
submissions,
where
possible.
Members
are
encouraged to use the notification format for RTAs,
as provided for the relevant bodies (documents
G/L/834, WT/COMTD/63, and S/L/310). References
to related official internet links should also be
supplied.
Click here to
get an update
on early
announcements
Click here to
get an update
on notifications
TM
PROCEDURES TO ENHANCE TRANSPARENCY

The consideration by Members of a notified RTA
shall normally be concluded within one year after
the date of notification. The process follows a
logical sequence.
1
2
Notification by the parties

The notification triggers the process.
Submission of data by the parties
The parties to an RTA provide data (described in
detail in the Annex to the Transparency Decision)
to the Secretariat, if possible in electronic
format, as soon as possible, but normally within
10 weeks (or 20 weeks in the case of RTAs
involving only developing countries) after the
date of notification of the agreement.
Drafting of a factual presentation by the wto

secretariat
The
WTO
Secretariat
drafts
a
factual
presentation, based on the information
available, the text of the RTA, and the data
submitted by the parties. A draft is submitted
first to the parties, which are invited to submit
their (preferably joint) comments. The factual
presentation is prepared under the sole
responsibility of the WTO Secretariat but in
cooperation with the parties. The final text is
circulated to the Members in all WTO official
languages not less than ten weeks in advance of
the (CRTA or CTD) meeting that will consider the
RTA, to allow the Members to submit written
questions to the parties. The Members' written
questions or comments on the RTA under
consideration are transmitted to the parties
through the Secretariat at least four weeks
(but preferably 6 weeks) before the CRTA, to
allow the parties to prepare written responses.
TM
Written questions and answers

The Members written questions and the parties
corresponding responses are circulated to all
Members at least three days before the meeting
during which the RTA is considered.
The
relevant
information
related
to
the
consideration of each RTA may be consulted and
downloaded from the database on RTAs, which is
presented in detail in the next module of this online course.
Consideration by the members

Consideration of RTAs takes place in the CRTA
with regard to RTAs falling under GATT Article
XXIV and GATS Article V and in the Committee
on Trade and Development, convened in a
dedicated session, with regard to notifications
falling under the Enabling Clause.
For each RTA, visitors to the public database will be

able to access the notification of the RTA, the
factual presentation prepared by the Secretariat,
the Members questions and parties written
answers, and the Notes on the meeting. Additional
information, such as trade data, tariff profiles, and
relevant statistics may also be accessed for each
RTA through the same database.
As a rule, a single formal meeting is devoted

to consider each notified RTA; any additional
exchange of information (in particular follow-up
questions) takes place in written form.
Record of the consideration

Shortly after the meeting, the WTO Secretariat
prepares an informal Note on the meeting.
TM
TIMELINE BETWEEN NOTIFICATION AND CONSIDERATION OF A RTA (indicative)
Notification of the RTA
Submission of trade and tariff line information as

specified in Annex I of the Transparency Mechanism
+10 weeks / 20 weeks*
Draft of the factual presentation sent to the parties
+6 weeks
Jointly agreed comments received from parties
+4 weeks
Comments integrated into factual presentation
+2 weeks
Factual Presentation circulated in all three languages
+3 weeks
Written questions received from Members
+4 weeks
Written responses received from parties
+4 weeks
Q&Rs circulated to the Members
+2 weeks
(at the latest 3 days before meeting)
Total time lapsed since notification

* For RTAs involving only developing countries.
35 weeks / 45 weeks *
TM
SUBSEQUENT NOTIFICATION & REPORTING

Any changes affecting the implementation of an
RTA, or the operation of an implemented RTA,
should be notified to the WTO as soon as
possible after changes occur. The parties should
provide a summary of the changes made, as well
as any related texts, schedules, annexes, and
protocols, in one of the WTO official languages and,
if available, in electronic format.
At the end of the RTA's implementation period, the
parties shall submit to the WTO a short written
report
on
the
realization
of
liberalization
commitments in the RTA as originally notified.
The CRTA is currently discussing procedures to
standardize the submission of such reports.
FACTUAL ABSTRACTS
Article 22(b) of the Transparency Mechanism calls
for a factual abstract to be prepared by the
Secretariat to present the features of RTAs for
which the CRTA has concluded the factual
examination by 31 December 2006. Factual
abstracts are short reports presenting the main
features of RTAs, essentially in a tabular format.
REVIEW OF THE TM
The Decision of 2006 establishing the Transparency
Mechanism for RTAs contains a provision to
review, and if necessary modify [the TM], in light
of the experience gained from its provisional
operation. It also envisages to replace it by a
permanent mechanism adopted as part of the
overall results of the DDA. These discussions are
taking place at the NGR, in the context of the DDA.
TEST
YOUR
BRAIN

elaborate on each of the items listed
Keywords (TM)
DDA mandate, paragraph 29

on a provisional basis
Early announcement
Timing of notification
Submission of data by the parties
Factual presentation
Consideration of an RTA
CRTA and CTD
Subsequent notification and
reporting
Factual abstract
Review of the Mechanism
MODULE 4
The DDA & the Transparency

Mechanism on RTAs
MODULE 5
The WTO RTA-IS
(Regional Trade Agreements Information System)
Click on this icon

to move to the
next slide
WTO RTA-IS
Module 5
MANDATE FOR A DATABASE ON RTAs

A provision of the Decision to establish the TM
mandates the WTO Secretariat to establish and
maintain an updated electronic database on
individual RTAs. The 2006 Decision also indicates
that the database (officially named the WTO
Regional Trade Agreement Information System /
RTA-IS) shall include relevant tariff and traderelated information, and give access to all written
material related to announced or notified RTAs
available at the WTO. The database is accessible to
the public.

access the WTO
RTA-IS (Database)
Click on this icon
to move to the
previous slide
WTO RTA-IS
WHAT IS THE WTO RTA-IS (DATABASE)?
The Regional Trade Agreement Information
System (RTA-IS) is a comprehensive database of
RTAs notified to the GATT/WTO. The application
allows users to search and export available
information on any notified RTA, as well as on the
consideration process of a particular RTA within
the CRTA or the CTD. In particular, it allows a
dynamic search through all notified RTAs
according to a selection of criteria, such as the
year of entry into force, the type of agreement,
etc. The RTA-IS is maintained in the WTOs three
official languages (English, French, and Spanish)
by the Regional Trade Agreement Section in the
Trade Policies Review Division of the WTO.
The RTA-IS contains information only on
agreements that have been notified or for which
an early announcement has been made to the
WTO. Information on the content of these
agreements and the parties to them reflects
information provided by the parties to the WTO.
Therefore, membership in the agreement may not
be up to date if changes have not been notified by
the parties. Similarly, any subsequent change,

additional protocol, etc. to the agreement will be
available in the database only to the extent that it
has been notified.
WTO RTA-IS
RTA-IS PORTAL
your door to enter the database
A SIMPLE, DIRECT WAY to access the
portal is to go to http://rtais.wto.org.
RTA-IS
You may also access the RTA-IS portal through the

WTO website at http://www.wto.org (then chose
Trade Topics, then, under Other topics, click
on Regional Trade Agreements, then click on
the hyperlink indicating RTA Database.
Click to enlarge
and see how
the RTA-IS
Portal looks like
WTO RTA-IS
RTA-IS PORTAL: your door to the Database
When you enter the
RTA-IS portal, you may
navigate through the
database in different
ways,
depending
on
what type of information
you want to access.
Search by country
2
Search by criteria
3
Search the lists of RTAs
Examine pre-defined
reports and summary
tables
The user guide contains

background and practical
information and may be
consulted at any time
when using the database.
WTO RTA-IS
1
Search by country
You can select the

country
you
are
interested in examining
by clicking on the map
or on the drop-down
list. You will then have
access to details of all
RTAs that have been
notified
or
early
announcements by the
selected country.
You must first define if
you want to search all
RTAS (covering goods and
services), or only RTAs
covering goods or only
RTAs covering services.
Click directly on the

map.
Select the country in the

drop-down list.
WTO RTA-IS
1
Search by country
You can select the

country
you
are
interested in examining
by clicking on the map
or on the drop-down
list. You will then have
access to details of all
RTAs that have been
notified
or
early
announcements by the
selected country.
Access to Turkeys IDCard (as an example)
The search by
country/territory also
makes available a number
of background WTO
documents on WTO
Members trade laws,
policies, or trade
environment, such as the
Trade Profile, the Tariff
Profile or the most recent
Trade Policy Review.
Click on a RTA to access

the ID-Card of the
selected Agreement.
WTO RTA-IS
For
each
RTA,
the
information is presented
in the form of an IDCard, which displays all
the factual information
available on a given
agreement.
ID-Card
Type of agreement,
provision it has been
notified under, date of
notification, end of the
implementation period
Basic information
on the selected RTA
is available here
Information on
signatories, date of
signature, date of entry
into force, etc
Access to the text of the

agreement
WTO RTA-IS
For
each
RTA,
the
agreement.
Information can also be

traced on the WTO
consideration process
that has taken place
regarding any agreement.
All official WTO documents

issued in relation to the
selected RTA can be
consulted here
ID-Card
WTO RTA-IS
For
each
RTA,
the
agreement.
Here you can view the list

of the main topics covered
by the selected RTA.
Note: The list of all main
topics considered can be
consulted in the user
guide
ID-Card
If the agreement has been

the subject of a factual
presentation or a factual
abstract, a list of the main
topics covered by the
agreement and presented in
the document is also
provided.
Most information can

also be retrieved in
Excel format.
WTO RTA-IS
ACCESSING
TRADE-RELATED DATA
In this section, users can

find tariff and trade data
received from the parties
for the preparation of the
factual presentation.
Information is
presented in Excel
format so that it can
be utilized directly by
the user.
ID-Card
WTO RTA-IS
2
Search by criteria
You
may
select
a
combination of search
parameters to obtain a
list of RTAs meeting
those parameters. You
can then click on the
RTA name to obtain its
ID-Card.
You must first define

the coverage of the
agreement (goods or
services).*
WTO RTA-IS
3
Search through lists of

RTAs
You can search within

the list using a
selected string of
characters to
generate a specific
list of RTAs.
This option allows the

selection of an RTA from
either the list of RTAs in
force or the list of Early
Announcements.
You can then select the

specific RTA you wish to
examine and access its
ID-Card.
The information can be

sorted in ascending or
descending order for any
column.
WTO RTA-IS
4
Examine pre-defined
reports and summary
tables
Pre-defined reports
are formatted as lists of
all RTAs in force sorted
by: alphabetical order*;
date of entry into force;
type
of
Agreement;
notification; country /
territory;
WTO RTA-IS
4
Examine pre-defined
reports and summary
tables
Summary tables
provide detailed figures
on the number of RTAs
notified to the GATT/WTO
and still in force, sorted
by: notification*, by type
of agreement; and by
status
in
the
WTO
consideration process.
WTO RTA-IS
TEST
YOUR
BRAIN

discussed in the previous section.
Keywords (TM)
2006 Transparency Mechanism

Early Harvest of the DDA
Available through the public
website of the WTO
Information about RTAs (notified
& early announcements)
Trade data related to regionalism
Access to official written
documents circulated for the
consideration of RTAs
Ready-made Reports and
Summary Tables containing with
figures on RTAs
WTO RTA-IS
PRACTICE
YOUR
NAVIGATING SKILLS
The best way to learn the database is to practice it.

Should you wish to practice it, we invite you to:
1.
2.
3.
4.
CONNECT to the database

SURF the site
ANSWER the questions below
E-MAIL your answers, through the online platform,
to your course coordinator before completing the
Intermediary Exam
QUESTIONS
A. How many early announcement have been made by
your country?
B. How many RTAs have been notified by your country?
C. How many RTAs, in total, have been notified under
the Enabling Clause?
D. What is the document code used for the factual
presentation on the FTA between Chile and Japan?
E. How many physical RTAs are in force?
The WTO RTA-IS

MODULE 5
(Regional Trade Agreements Information System)
MODULE 6
Recapitulation and
Conclusions
Click on this icon
to move to the
next slide
Recap. and Conclusions

Module 6
TIME TO RECAPITULATE
You are almost at the end of
this online-course. Well done!
Its now time to review what
you have retained and build
on your acquired knowledge.
You may return to the previous
Modules at any time to verify
elements you may have missed
or forgotten. Simply click on the
attributed
to
the
dots
module(s), then come back to
Module 6 when you feel ready
to review the main points
before we conclude and take
the Final Exam.
Click on this icon

to move to the
previous slide

What are preferences? What are RTAs?
And what they are not
regionalism
Through facts and figures, the past and
present
landscape
defining
the
phenomenon
of
regional
trade
integration and the various motivations
behind the conclusion of RTAs.
Right to the heart of the WTO rules
governing the establishment of RTAs.
Module 4 DDA & the 2006
Transparency Mechanism on RTAs
How it came to life and how it works.
Module 5 The RTA-IS

How to find information on regional
initiatives and navigate through the
WTO database on RTAs.

More than 250 physical and active RTAs
notified (by end July 2013)
RTAs = reciprocal trade agreements between
two
or
more
partners
establishing
preferential trade regimes
The GATT/WTO rules on RTAs establish a

conditional right, for WTO Members, to
derogate from the MFN principle
Preferential Trade Arrangements (PTAs) =
non-reciprocal
preferential
treatment
granted unilaterally to certain products
originating in developing countries. Under
the WTO rules, PTAs (as defined for this
course) are not the same as RTAs and
different rules apply to them

regionalism
In 1947: only a few RTAs
Since 2000:
exploded
the
number
of RTAs
has
Motives for negotiating RTAs include:

neutralizing beggar-thy-neighbour trade
policies
gaining
credibility
and
predictability for traders
increasing
increasing market sizes

signalling openness to investors and/or
moving from shallow to deep integration
Non-economic,
such
as
political,
rationales, and/or the domino theory may
also explain the proliferation of RTAs
Regional trade agreements as an alternative
approach to liberalization when multilateral
trade negotiations are stalled

Module 4 DDA & the 2006 Transparency

Mechanism on RTAs
Substantive rules
GATT XXIV (general framework for trade
in goods)
FTAs, CUs, and interim agreements
the
Enabling
Clause
(special
and
differential treatment for trade in goods)
preferential
arrangements
developing countries
between
GATS V (general framework for trade in

services, including differential treatment )
economic integration agreements (EIAs)
Monitoring through the CRTA and the CTD
Transparency through notification
Examination / Review of the RTAs

compatibility (or lack of) with the legal
conditions: a test never completed
Early Harvest of the DDA

The new Transparency Mechanism (TM): on
a provisional basis
Monitoring through the CRTA and the CTD
Main features of the TM:
early announcement
notification and transmission of data
WTO Secretariat to
presentation of RTAs
draft
factual
Consideration by the Members

subsequent notification and reporting
factual abstracts for most pre-2006 RTAs
review of the TM
The RTA-IS (database on RTAs): another
contribution of the TM

Module 5 The RTA-IS
The WTO database on RTAs, based on
notifications, data, and information provided
by the Members
Run and regularly updated by the WTO
Secretariat
Publically available electronically (internet)
Searchable information on each RTA
Information on WTO consideration processes
for each RTA
Access to official documents
The database: a contribution to increased
transparency about RTAs and a mine of
information for researchers
http://rtais.wto.org/UI/PublicMaintainRTAHome.aspx

FINAL WORD TO YOU
Since the formation of the WTO, there has been a
rapid rise in RTAs among its Members. That
increase continues today. The phenomenon has
given rise to concerns that the different sets of
rules and preferences created by RTAs has made
modern trading relationships more complex and
ultimately has negative systemic implications for
the multilateral trading system.
As tariffs have fallen, due to unilateral, preferential,
and multilateral negotiations, a number of behind
the border issues are playing a more important
role in RTAs. Moreover, the tariff peaks that remain
have been difficult to liberalize further, even in
RTAs. However, in several areas, RTAs do not seem
to diverge as significantly as expected from the
multilateral trading system, while a number of
lend
themselves
more
easily
to
issues
multilateralization.
Differences remain between multilateral trading

rules, embodied in the WTO texts, and rules
contained in RTAs, and the various layers that are
created through RTAs probably do make trading
relationships more complex. However, some tools
to develop closer coherence between the
multilateral and regional trading regimes already
exist in RTAs. More coherence may also need to be
developed in the future.
The development of regional trade integration
constitutes both a challenge and an opportunity for
the development of trade relationships between
countries, in an increasingly globalized economy.
So it is for the Multilateral Trading System.
We hope that through this online course you have
increased your interest in the matter, and that you
now feel better equipped to participate actively in
the debate.

THANK YOU FOR PARTICIPATING
You have almost completed this on-line course.
Congratulation! One more final exam to take and
an evaluation to forward to the organizers, and you
will be through.
We hope that this training activity has stimulated
your interest and you will continue to reflect on the
relationship between multilateral trading rules and
the development of RTAs.
Click on TV
screen to
see a short
concluding
video
MODULE 6
Recapitulation and Conclusions

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Course Guide

RTAs and the WTO

Click on this icon

RTAs and the WTO

WELCOME to the Online Course on Regional

Click on this icon

While the WTO E-Learning material is freely

Be able to relate WTO terminology about

Be able to consider regionalism in its

Be able to discuss the substantive WTO

Have practised navigation through the

Each module contains training

The E-Learning website offers interactive tools to

Self-assessment exercises are

Please note that you may take

Your own E-Learning email

The Final Exam is at the end of

This is the place to discuss the

Chat sessions with WTO

Module 1 Introduction to RTAs

Module 5 WTO RTA-IS

Click on this icon

Click on this icon

REGIONAL TRADE AGREEMENTS

The traditional objective of an

In the legal framework of the WTO,

Click on this icon

The MFN principle through time

RECIPROCITY DOES NOT

PREFERENTIAL TRADE AGREEMENTS

The analysis of RTAs presents a number of

It is remarkable to note that none of the

The attached chart shows the situation of

Sources: UNSD Comtrade / WTO Statistics / WTO RTA-IS

% of exports to RTA partners

Participation in RTAs, Share of World exports

Number of RTAs concluded and ratified to the the WTO

Sources: UNSD Comtrade / WTO Statistics / WTO RTA-IS

In the example below, products imported

It may be that part of the preferential trade

First country E concludes a RTA granting

Assume now that country E concludes

PREFERENTIAL RULES OF ORIGIN:

LESS PREFERENCES AS IT MAY SEEM.

Such preferential rules of origin may

Imperfect RTA coverage and/or restrictive

The evolving world of

The evolving world of regionalism

Click on this icon to move

A total of 124 agreements

(notified by the end of July 2013)

LAIA, Andean Community

The evolving world of regionalism

We will see in Module 3 that the rules governing

The evolving world of regionalism

The evolving world of regionalism

The eighties: regionalism picks up

The evolving world of regionalism

In Latin America a powerful Customs Union

In Africa, numerous regional economic cooperation institutions (partly inspired by efforts

In addition to the constitution of these poles of

In Asia the ASEAN Free Trade Area entered into