1 Regional Trade Agreements: Challenges and Opportunities Dr. James H. Mathis Faculty of Law University of Amsterdam, NL. mathis@jur.uva.nl.

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1 Regional Trade Agreements: Challenges and Opportunities Dr. James H. Mathis Faculty of Law University of Amsterdam, NL. mathis@jur.uva.nl Slide 2 2 Why are there regional trade exceptions in the WTO ? GATT emerged from a regional / bilateral / colonial world Question for the drafters: –Given a general MFN clause, –how broadly should MFN apply –What is the scope of application of MFN? Slide 3 3 An architectural (and systemic) issue –Broad exception to MFN, then less MFN. –Narrow exception to MFN, more MFN. –How important was MFN then, –How important is MFN now ? The question is political, legal, economic and social. Institutional, procedural, and substantive Slide 4 4 Is Art. XXIV development–friendly ? Pre-Havana drafts only provided for completed customs unions –Free-trade Areas added in Havana on developing country issues Intensely drafted provisions –definitions, CUs and FTAs –notification plan and schedules –review requirements, recommendations Slide 5 5 So... why so many RTAs and so few recommendations? The issues are internal - how much free trade is required to obtain the exception ? –…duties and other restrictive regulations of commerce are eliminated with respect to substantially all the trade between the territories… All terms can be settled, but parties disagree on how much GATT control Slide 6 6 Internal Trade - technical issues –What is `substantially`? Quantity. Tariff benchmarks and indicators (existing trade, potential trade) Quality. What is a major sector not to be excluded. Agriculture, sugar? –What are other regulations of commerce? Use of safeguards and anti-dumping in an RTA ORRCs and regulations- harmonisation/ recognition role of restrictive rules of origin between members Slide 7 7 Overall, the bi-polar nature of Article XXIV Purpose to facilitate trade between members … and not to raise barriers to the trade of non-members… (para.4) The XXIV paradox (Haight) –non members are requested to approve complete formations –that are more diverting to non member trade. Slide 8 8 However, dispute resolution has affected the balance. Burden shifting. Is only notification enough ? No recommendation, no easy RTA defence Panels can review the trade components of RTAs Qualifying RTA has to be demonstrated if the defence is raised Substantially - more than some, less than all, but modifies the word … all Slide 9 9 What does Doha para 29 require ? –… negotiations aimed at clarifying and improving disciplines and procedures under the existing WTO provisions applying to regional trade agreements. –The negotiations shall take into account the developmental aspects of regional trade agreements. Slide 10 10 What is the development dimension for Article XXIV? How much reciprocity (flexibility) in a north-south agreement and, What relationship to the Enabling Clause ? –for both N/S –and S/S agreements ? How many gradations in preference can the system tolerate? Slide 11 11 Ultimately, the issues are political - states / sovereign power, and MFN To what degree should MFN govern global trade ? What should be the reach of GATT and GATS most-favoured nation ? Question for states and for stakeholders