An Introduction to Regionalism and WTO Rules on Preferential Trading Arrangements
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The document discusses the structure and function of preferential trade agreements (PTAs), including free trade agreements (FTAs) and customs unions, highlighting their definitions, formation, and common features. It notes trends in regional trade agreements, mentioning the increasing number of notified and active RTAs, and addresses the ideological debate surrounding non-discrimination and multilateral trade systems. The document also emphasizes the driving forces behind PTAs, especially in the context of stalled negotiations in the Doha Round and the need for deeper economic integration among select nations.
An Introduction to Regionalism and WTO Rules on Preferential Trading Arrangements
- 1. UPH MTIC Program | Introduction to WTO Law | January 2015 Regionalism | The end of non-discrimination
- 2. 2 Structure of the Present Lecture
- 3. 3 Preferential Trade Agreements | typology Nature of concessionsNature of concessions Scope ofScope of inclusioninclusion Examples inExamples in practicepractice ReciprocalReciprocal SelectiveSelective EU, NAFTA, MercosurEU, NAFTA, Mercosur UnilateralUnilateral SelectiveSelective Cotonou, AGOACotonou, AGOA UnilateralUnilateral GeneralizedGeneralized GSPGSP Source: Adapted from Crawford, WTO 2010
- 4. 4 Preferential Trade Agreements | typology Definition of a Free Trade Agreement A group of two or more customs territories that have eliminated all or most tariff and non-tariff measures affecting trade among themselves. Participating countries continue to apply their existing tariffs on external goods. Definition of a Customs Union a group of two or more customs territories that have eliminated all or most tariff and non-tariff measures affecting trade among themselves. Participating countries replace their individual MFN tariffs with a single tariff applied to third countries. Source: Adapted from Crawford, WTO 2010
- 5. 5 Free Trade Agreement| formation Country A & B sign a FTA Tariffs are eliminated on most goods (often with carve outs or longer implementation periods for for sensitive products Each party maintains its tariff structure Rules of origin are negotiated and put in place Other common features Reciprocal concessions (with possible asymmetrical implementation if one of the parties is a developing country) Negative list approach (for trade in services and investment) Deeper integration and regulatory convergence Source: Adapted from Crawford, WTO 2010
- 6. 6 Customs Union| formation Country A & B sign a CU Tariffs are eliminated on most goods (with some exceptions possible for sensitive products) A common external tariff is adopted A mechanism to share customs revenues is devised A temporary rules of origin regime may be put in place Compensation is paid to third countries if bound MFN rates are raised by either or both parties Source: Adapted from Crawford, WTO 2010
- 7. 7 PTAs | degrees of integration • FTA – Many examples such as KORUS, ANZERTA, ASEAN+ FTAs • Customs Union – Turkey and the EU • Common Market – Mercosur • Economic Union – European Union
- 8. 8 PTAs | trends and evolution As of 1 April 2010, 463 RTAs have been notified to the GATT/WTO of which 272 are currently in force Approximately 100 RTAs in the pipeline (signed, not yet in force/under negotiation) – Unaccounted number of RTAs in force but not yet notified Source: World Trade Report 2011
- 9. 9 PTAs | who is using them? Source: World Trade Report 2011
- 10. 10 PTAs | most prolific users Source: World Trade Report 2011
- 11. 11 PTAs | what forms are favored? Source: World Trade Report 2011
- 12. 12 PTAs | scope and coverage 0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 195819601962196419661968197019721974197619781980198219841986198819901992199419961998200020022004200620082010 No.ofRTAs 0 50 100 150 200 250 300 Goods Services Accessions Cumulative 187 RTAs cover trade in goods; 73 trade in services; and 12 are accessions to existing RTAs EIAs represent 28% of total number of RTA notifications – approximately 70% of RTAs being negotiated contain provisions on trade in services Source: Crawford, WTO 2010
- 13. 13 PTAs | what forces are driving them? • Deadlock in Doha and wrangling over various issues from market access, to policy space, to tariff erosion. • Intransigence at the WTO on new issues like competition, investment, government procurement, e-commerce etc. • Political dimension of relatively short time-frames in elected office and the promise of rapid market access gains in the context of a narrow negotiation between a limited number of parties (often 2) • The reality that deeper integration is often easier between a limited number of economies rather than on an MFN basis • The forces of competitive liberalization
- 14. 14 PTA’s | the ideological debate • Non-discrimination has long been considered one of the central organizing principles underpinning the multilateral trading system (since the GATT and now in the WTO). • Historically, the choice of unconditional MFN as the defining principle of the GATT reflected widespread disillusionment with the growth of protectionism and bilateral arrangements during the inter-war period. • Yet five decades after the founding of the GATT, MFN is no longer the rule but has almost become the exception with the EU for example only trading on an MFN basis with a handful of countries (Australia, Chinese Taipei, HK, Japan, New Zealand and the US). Source: Adapted from The Consultative Board, The Future of the WTO, 2004
- 15. 15 Common Principles* • The purpose of an RTA is to facilitate trade among the parties • The formation of the RTA must not entail placing barriers towards third parties higher than those existing before its formation • The RTA must provide for mutual/reciprocal trade concessions *GATT Art. XXIV:4; “Enabling Clause” para. 3(a); GATS Art. V:4
- 16. Which legal cover should beWhich legal cover should be sought?sought? When entering an RTA, a WTO Member should invoke one ofWhen entering an RTA, a WTO Member should invoke one of the following provisions, and comply with the relevantthe following provisions, and comply with the relevant conditions:conditions: RTA partiesRTA parties DevelopedDeveloped onlyonly Developing onlyDeveloping only Developing &Developing & developeddeveloped Trade inTrade in goodsgoods GATT XXIVGATT XXIV GATT XXIVGATT XXIV Enabling ClauseEnabling Clause GATT XXIVGATT XXIV Trade inTrade in servicesservices GATS VGATS V GATS VGATS V GATS VGATS V
- 17. 17 RTA database • Available at: • http://rtais.wto.org/UI/PublicMaintainRTAHome.aspx
- 18. UPH MTIC Program | Introduction to WTO Law | January 2015 Market Access in the WTO Simon Lacey Thank You