WTO Rules Relating to Regional Trade Agreements by tsv11401

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									WTO Rules Relating to Regional
     Trade Agreements


        Mukela Faustin Luanga
              @wto.org)
    Economic Research and Statistics
           Division, WTO
                       Overview
• The Non-Discrimination Principle
  –   The Most Favoured Nation Clause (MFN)
  –   National Treatment Principle
  –   Implications of the MFN principle
  –   RTAs an exception to the MFN principle
• Why are RTAs proliferating?
  – Disappointment with the MTS (Tokyo Round; Uruguay
    Round and the Doha Ministerial Declaration (treatment of
    the Singapore issues)
  – Economic reasons
  – Geopolitical considerations


                                                          2
                    Overview (2)
• Why did the drafters of the GATT permit the
  contracting parties to form free trade areas and
  customs unions?
• Belief that the conditions inserted into Article XXIV
  would ensure that RTAS would be complementary to
  the MTS
• Evaluation of RTAs concluded in the years of the
  GATT - Simplicity of Agreements entered into by
  the parties and the limited number of GATT
  contracting parties
                                                    3
                       Overview (3)
• GATT/WTO Rules
  –   Article XXIV of the GATT 1994
  –   Article V of the GATS
  –   The Enabling Clause
  –   Waivers - Article IX of the Marrakesh Agreement
      Establishing the WTO (e.g. The Cotonou Agreement)
• Procedural Aspects
• Review of Relevant Case Law
• How can WTO rules be strengthened and the
  examination process improved?
• Doha Ministerial Declaration
                                                          4
           RTAs - Building Blocks or
             Stumbling Blocks
• Debate has centred on whether RTAs are supportive
  of the multilateral trading system in the sense of
  contributing to the overriding goal of trade
  liberalization
• Divergence in the views of economists. Whereas
  some (Fred Bergsten, Lawrence Summers) are strong
  supporters of bilateralism/regionalism, others
  including Bhagwati, Panagariya are sceptical about
  RTAs.
                                                  5
            RTAs - Building Blocks or
            Stumbling Blocks (2)
• Proponents - Bicycle theory, especially in between
  trade rounds. NAFTA, for example, provided an
  impetus to the Uruguay Round (Services and
  TRIMS)
• Empirical studies seem to suggest that they have
  remained supportive of the MTS. WTO study in
  1995 concluded that there was no tension between
  the two and they have complemented each other.
  Baldwin - review of the operation of the EEC had
  had a positive impact on the global economy       6
           RTAs - Building Blocks or
           Stumbling Blocks (3)
• Protagonists argue that by their very nature
  RTAs divert trade, especially where the
  partner countries impose very high external
  tariffs (Trade Diversion V Trade Creation:
  Jacob Viner)
• RTAs encourages the shifting of resources
  which could have been invested in the
  MTS: Political capital wasted; Not enough
  attention to the MTS                         7
          RTAs - Building Blocks or
            Stumbling Blocks (4)
• Different and competing rules make it difficult to
  negotiate multilateral rules in new areas, as each
  bloc is likely to insist on the superiority of its rules
  (Singapore Issues - Investment and Competition
  Policy)
• Proliferation of RTAs risk marginalising further
  developing countries, particularly least-developed
  countries.
• View of developing countries- while critical of
  mega trading blocs, view that RTAs could prepare
  them to compete effectively in the MTS                   8
             Motivation for RTAs
• TRADITIONAL BENEFITS

•   Efficiency considerations
•   Trade Expansion
•   Means of attracting FDI
•   Political considerations - confidence building
•   Easy accession to RTAs and easy
    administration
                                                     9
          Motivation for RTAs
• NON-TRADITIONAL BENEFITS

• Credibility to Domestic Reforms
• Locking in of Domestic Reforms
• Increased Negotiating Leverage in the WTO
  and other fora


                                              10
               Types of RTAs
• Free Trade Areas 
  – Elimination of barriers to trade between parties;
    each party maintains its own external tariffs
• Customs Unions 
  – Elimination of barriers to trade between parties;
    constituent members maintain common external
    tariffs
• Common Market - Customs Unions - Free
  movement of factors production
• Economic Unions - currency and common
  fiscal expenditures
                                                        11
              WTO Rules (1)
• Article XXIV:4 of the GATT 1994

  – Article XXIV:4: “The contracting parties 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 contracting parties
    with such territories.” (italics added)
                                                      12
                WTO Rules (2)

• Article XXIV:4 of the GATT 1994
  – Issue has arisen as to the scope of this article: does
    it create a separate obligation which has to be
    respected by WTO Members wishing to form free
    trade areas or customs unions?

  – Opinions differ. Usually third countries have
    insisted that it creates a separate obligations which
    has to be complied with independently of other
    provisions of Article XXIV.
                                                         13
               WTO Rules (3)
• Article XXIV:4 of the GATT 1994
  – This view is not shared by Members entering into
    free trade agreements or customs unions. The
    European Union has always disputed this view.
    According to it, if Article XXIV:4 were to be held
    to create a separate obligation, it would render the
    first sentence of Article XXIV:5 meaningless.

  – In the review of the Treaty of Rome, the EEC
    argued before a sub-group of the Working Party
    that only paragraphs 5-9 of Article XXIV had to be
    complied with.                                   14
                  WTO Rules (4)
• Article XXIV:4 of the GATT 1994
  – This view was rejected by some members of the
    Working Party, who thought the EEC’s
    interpretation would permit it to raise barriers to
    the trade of third countries:
     • Most members of the Sub-Group were not prepared to accept
       this interpretation. They believed that paragraph 4 establishes
       the basic principles which a customs union should apply to be
       consistent with the objectives of GATT. Where questions arise
       as to the application of the provisions of paragraphs 5 to 9 in
       particular cases, such questions should be resolved in a manner
       consistent with the principles embodied in paragraph 4. Some
       members of the Sub-Group felt, furthermore, that the
       CONTRACTING PARTIES would have to verify whether the
       application of paragraphs 5 to 9 is consistent with the aim of a
       customs union as defined in paragraph 4”                        15
                WTO Rules (5)
• Article XXIV:4 of the GATT 1994
  – The Understanding on the Interpretation of Article
    XXIV addresses this issue but in very general
    terms. It provides that:
     • “[c]ustoms unions, free-trade areas, and interim
       agreements leading to the formation of a customs union
       or free-trade area, to be consistent with Article XXIV,
       must satisfy, inter alia, the provisions of paragraphs 5, 6,
       7 and 8 of that Article.”
  – Instead of clarifying the situation, the
    Understanding succeeded in making the situation
    more murkier. It did not answer the question
    which other provisions have to be complied with. 16
               WTO Rules (6)
• Article XXIV:4 of the GATT 1994
   – Issue as to whether the second sentence of Article
     XXIV:4 creates a separate obligation was
     addressed in Turkey - Restrictions on Imports of
     Textile and Clothing Products
• The fundamental issue in that case was whether
  Article XXIV of GATT 1994 obligated Members of
  the WTO which are parties to a regional trade
  arrangement (customs union) to have the same
  commercial policy towards third countries and, if it
  did, whether it justified the introduction of
  quantitative restrictions prohibited by GATT 1994 and
  the Agreement on Textiles and Clothing and Article
  XI of GATT 1994.
                                                     17
              WTO Rules (7)

• Article XXIV:4 of the GATT 1994
  – Turkey argued that Article XXIV:4 did not create a
    separate obligation, and that the obligations which
    had to be complied with by Members were set out
    in paragraphs 5-8 of the Article.

  – India argued that the guiding principle in Article
    XXIV:4 had to be respected by all Members of the
    WTO entering into RTAs, otherwise WTO rules
    would be abused and rendered ineffective.
                                                     18
                WTO Rules (8)
• Article XXIV:4 of the GATT 1994
  – India’s argument was supported by a number of
    countries, who were also of the view that the
    Article XXIV:4 created a separate obligation which
    had to be respected by Members:
     • “Members had established a standard, separate and
       distinct from the standard imposed under Article
       XXIV:5, for the implementation of the phrase "not to
       raise barriers to the trade of other contracting parties" in
       Article XXIV:4, since the preamble of the Understanding
       on Article XXIV provided, among others, that in the
       formation or enlargement of RTAs "the parties to them
       should to the greatest possible extent avoid creating
       adverse effects on the trade of other Members".
                                                                19
                WTO Rules (9)

• Article XXIV:4 of the GATT 1994
  – The Panel rejected India’s argument on this point.
    It held that Article XXIV:4 did not create a
    separate obligation:

     • “[w]hile not expressed as an obligation, paragraph 4 (and its
       elaboration in the fifth paragraph of the Preamble of the GATT
       1994 Understanding on Article XXIV) argues against an
       interpretation of paragraph 5(a) that would read into that
       paragraph an exception to GATT rules that prohibit specific
       trade barriers.”

                                                                  20
                 WTO Rules (10)
• Article XXIV:4 of the GATT 1994
  – The Panel’s ruling on this point was endorsed by
    the Appellate Body:
     • “Paragraph 4 contains purposive, and not operative, language.
       It does not set forth a separate obligation itself but, rather, sets
       forth the overriding and pervasive purpose for Article XXIV
       which is manifested in operative language in the specific
       obligations that are found elsewhere in Article XXIV. Thus,
       the purpose set forth in paragraph 4 informs the other relevant
       paragraphs of Article XXIV, including the chapeau of
       paragraph 5. For this reason, the chapeau of paragraph 5, and
       the conditions set forth therein for establishing the availability
       of a defence under Article XXIV, must be interpreted in the
       light of the purpose of customs unions set forth in paragraph 4.
       The chapeau cannot be interpreted correctly without constant
       reference to this purpose.”                                         21
               WTO Rules (11)
• Article XXIV:4 of the GATT 1994

  – Could the issue be taken as settled once and for all?
  – Some Members may like this issue to be re-visited
    in the context of the negotiations on RTAs. View
    that third parties’ rights would be better protected if
    Article XXIV:4 were held to create a separate
    obligation which has to be respected by Members
    of the WTO independently of other provisions of
    the Article.
                                                         22
              WTO Rules (12)
• Article XXIV:5 of the GATT 1994
  – One of the most controversial provisions in the
    GATT
  – General intent of the draftpersons of the GATT: to
    protect the interests of third countries and prevent
    parties to a RTA from imposing unjustified
    restrictions on trade:
  – Article based on a number of assumptions:



                                                       23
                WTO Rules (13)
• Article XXIV:5 of the GATT 1994
  – According to a communication submitted by
    Australia:
     • “GATT Article XXIV:5 is concerned with the
       relationship of the parties to customs unions and free -
       trade areas with non-members. It is based on four
       assumptions. The first, an obvious one, is that there is a
       difference between free - trade areas and customs unions.
       Second, it assumes that each constituting party
       maintained a set of duties and other regulations of
       commerce before the customs union or free - trade area
       entered into force. Third, it accepts that the details of
       their incidence on third countries may be varied in the
       negotiations leading to the formation of the new
       arrangement. Fourth, it insists that on the whole, the
       duties and other regulations applied against non-parties
       must be no higher or more restrictive than they were
       before the arrangement was put in place”                   24
              WTO Rules (13)
• Article XXIV:5 of the GATT 1994
  – Interpretative problems that have been experienced
    with the Article
     • (i) the meaning of the phrase “as between the territories
       of contracting parties” in the chapeau of the Article;
     • (ii) the meaning of the phrase “duties and other
       regulations of commerce imposed at the institution of
       any such union/maintained in each of the constituent
       territories;
     • (iii) scope of the requirement relating to the obligation
       that duties and other regulations...”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; and
     • (iv) the meaning of the following phrases: “interim
       agreement”, “reasonable period of time” and “plan and
       schedule”.
                                                               25
             WTO Rules (14)
• Article XXIV:5 of the GATT 1994
  – Meaning of the phrase “as between the
    territories of contracting parties” in the
    chapeau of the Article;
  – Whether applicable only to agreements entered into
    by GATT contracting parties? What about
    agreements entered into by a contracting party and
    a non-contracting party?
  – Consensus that agreements entered into between a
    contracting party and a non-contracting party
    should be handled under the provisions of Article
    XXIV:10, which requires two-thirds majority
    approval
  – Systemic implications - double standard           26
             WTO Rules (15)
• Article XXIV:5 of the GATT 1994
  – Meaning of duties and other restrictive
    regulations of commerce
  – Very little controversy about the term “duties”.
    However, no consensus on the meaning “other
    regulations of commerce.”
  – Should certain trade policy instruments such as
    quantitative restrictions, rules of origin, variable
    levies, customs user fees and duty remission
    schemes be considered to be ORCs within the
    meaning of Article XXIV:5?
                                                           27
          WTO Rules (16)
• Article XXIV:5 of the GATT 1994
  – Quantitative Restrictions
     • Issue is whether QRs which are generally prohibited
       under the GATT could be properly regarded as an
       ORC?
     • In the examination of the Treaty of Rome, the EEC
       disagreed with a number of countries which had
       expressed the opinion that QRs fell outside the
       scope of Article XXIV:5
     • The text of Article XXIV:5 quite unhelpful, as it
       does not give any indication whether QRs are
       outside the scope of the Article. The Understanding
       did not also clarify the issue.
                                                      28
             WTO Rules (17)
• Article XXIV:5 of the GATT 1994
  – Quantitative Restrictions
     • Issue considered by the Panel in the Turkey case.
       Turkey, which had introduced QRs upon the customs
       union agreement with the EU, argued that there was
       nothing in the terms of Article XXIV:5 which
       prohibited parties to a RTA from introducing QRs:

     • “[t]he plain meaning of Articles XXIV:4 and 5 was
       clearly that the provisions of the GATT did not
       prevent the imposition of a regulation of commerce at
       the institution of a customs union, as long as this was
       not more restrictive than the general incidence of the
       duties and regulations applicable in the constituent
       territories prior to the formation of the customs
       union…”.
                                                           29
              WTO Rules (18)
• Article XXIV:5 of the GATT 1994
  – Quantitative Restrictions
     • India challenged Turkey’s interpretation of Article
       XXIV:5. It maintained its view that parties to RTAs
       cannot introduce measures which are prohibited under
       the GATT, otherwise it would lead to an incongruous
       situation: “The terms of Article XXIV.5 do not provide
       a legal basis for measures otherwise incompatible with
       GATT/WTO rules. This provision merely authorizes the
       formation of a customs union or free-trade area, nothing
       else. Its terms consequently exempt from the other
       obligations under the GATT only measures inherent in
       the formation of a customs union or a free-trade
       area…There is, in particular, nothing that requires
       Members forming a customs union to impose new
       restrictions on imports from one particular third Member,
       inconsistently with Articles XI and XIII of GATT and
       Article 2.4 of the ATC.”
                                                             30
              WTO Rules (19)
• Article XXIV:5 of the GATT 1994
  – Quantitative Restrictions
     • The Panel held that QRs could be considered an
       ORC within the meaning of Article XXIV:5. As to
       the central question of whether parties to a RTA are
       justified in introducing QRs, the Panel answered in
       the negative:
        – “we consider that the wording of Article XXIV does not
          authorize a departure from the obligations contained in
          Articles XI and XIII of the GATT and Article 2.4 of the
          ATC…[P]aragraphs 5 and 8 of Article XXIV provide
          parameters for the establishment and assessment of a
          customs union…These provisions do not, however,
          address any specific measures that may or may not be
          adopted on the formation of a customs union and
          importantly they do not authorise violations of Articles XI
          and XIII, and Article 2.4 of the ATC…”.                   31
                 WTO Rules (20)

• Article XXIV:5 of the GATT 1994
  – Quantitative Restrictions
     • On appeal, the Appellate Body reversed the the
       Panel on this point:
        – “[W]e are of the view that Article XXIV may justify
          a measure which is inconsistent with certain other
          GATT provisions. However, in a case involving the
          formation of a customs union, this "defence" is
          available only when two conditions are fulfilled.
          First, the party claiming the benefit of this defence
          must demonstrate that the measure at issue is
          introduced upon the formation of the customs union
          that fully meets the requirements of sub-paragraph
          8(a) and 5(a) of Article XXIV. And, second, that
          party must demonstrate that the formation of the
          customs union would be prevented if it were not
                                                                  32
          allowed to introduce the measure at issue
                   WTO Rules (21)

• Article XXIV:5 of the GATT 1994
  – Rules of Origin: FTAs usually adopt stringent ROO to
    prevent products originating in third countries from entering
    their markets duty-free or at concessionary rates.
  – Three types of ROOs are usually used by parties to FTAs:
     • Substantial transformation process - imported product undergoes
       further processing resulting in a change of tariff classification
     • Non-regional inputs to account for no more than a specified
       maximum percentage of production cost or transaction value
     • Specific processes to be undertaken within FTA or some other
       product-specific technological requirement be satisfied


                                                                       33
              WTO Rules (22)
• Article XXIV:5 of the GATT 1994
  – Rules of Origin: Depending on the type of ROOs which
    is chosen and the threshold figures or requirements set
    by the parties to the FTA, ROOs could have the
    potential of raising or increasing barriers to external
    trade.
  – Issue is are ROOs to be regarded as coming within the
    definition of ORCs within the meaning of Article
    XXIV:5?
  – No consensus on this issue
  – WTO Work Programme on ROOs

                                                         34
               WTO Rules (23)
• Article XXIV:5 of the GATT 1994
   – Duties and Other Regulations of Commerce “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”
      • Note the different wording for parties to FTA (corresponding
        duties and ORCs should not be higher or more restrictive after
        the FTA)
   – Basic issue is how do you calculate the general
     incidence of duties and other regulations of commerce
     and make the determination whether they are not “on
     the whole higher or more restrictive”?
   – Does the Article require an aggregated or disaggregated
     analyses to be undertaken?
                                                                    35
              WTO Rules (24)

• Article XXIV:5 of the GATT 1994
  – View has been expressed that separate analyses have to
    be undertaken for tariffs and regulations of commerce.
    No consensus on this issue
  – Another separate issue is whether when considering
    only tariffs or other regulations of commerce, an
    aggregated analyses or disaggregated analyses should
    be used in calculating the restrictiveness or otherwise of
    tariffs or other regulations of commerce?

                                                           36
               WTO Rules (25)
• Article XXIV:5 of the GATT 1994
  – As noted by Professor Kenneth Dam:
     • “A principal decision to be made is whether the words “on the
       whole” and “general incidence” refer to each item in the
       common external tariff schedule or the common external tariff
       schedule as a whole. If the latter alternative is chosen, one
       must still determine whether the initial step is to calculate the
       height and restrictiveness of each national tariff schedule and
       then strike some kind of average between these national
       levels...Or is one first to strike some union-wide average for
       each tariff classification and then to determine the aggregate
       height of a common external tariff composed of these union-
       wide averages, the customs union being free to assign any
       duties on individual items in the common external tariff as long
       as the calculated union index is not exceeded?”
                                                                     37
               WTO Rules (26)
• Article XXIV:5 of the GATT 1994
  – Negotiating history seem to support the view that the
    drafters wanted an aggregated analyses to be
    undertaken to determine the restrictiveness of duties
    and other regulations of
  – The Understanding on the Interpretation of Article
    XXIV attempts to clarify the issue by providing that
    “the assessment shall be based upon an overall
    assessment of weighted average tariff rates and of
    customs duties collected.”
  – It further provides that “this assessment shall be based
    on import statistics for a previous representative period
    to be supplied by the customs union, on a tariff-line
    basis and in values and quantities, broken down by
    country of origin.”                                      38
                  WTO Rules (27)

• Article XXIV:5 of the GATT 1994
  – Critical issue is how can the rights of third countries be
    protected
  – Optimal result would be to require parties to RTAs to
    extend the same preferences to third countries within a
    specific period of time
  – Politically difficult - Free riding
  – Parties to RTAs to be required to adopt the lowest MFN
    tariff on every product which was applied by any of the
    parties prior to the formation of the customs union

                                                             39
                 WTO Rules (28)
• Article XXIV:5 of the GATT 1994
  – Meaning of “applicable in the constituent territories” -
    Does it refer to applied rates of duty or bound rates of
    duty?
  – In WTO negotiations, it is the bound rate which is
    relevant.
  – Issue clarified by the Understanding on the Interpretation
    of Article XXIV: applied rates are the benchmark rates to
    be taken into account in determining the general incidence
    of duties.

                                                          40
                  WTO Rules (29)
• Article XXIV:5 of the GATT 1994
  – Meaning of “interim agreement”: An agreement
    establishing a CU or FTA which does not immediately
    commit the parties to abolishing barriers to substantially
    all the trade between them. In practice, very few
    agreements commit the parties to abolishing barriers to
    their trade immediately.
  – Some Members have insisted on the past their agreements
    were not interim agreements establishing a CU or FTA,
    whereas, in fact, it was an interim agreement leading to
    the formation of either a CU or FTA.
                                                           41
                 WTO Rules (30)
• Article XXIV:5 of the GATT 1994
  – What should a plan and schedule contain?
  – Requirement that interim agreements must be submitted
    with a plan and schedule is meant to ensure that parties do
    not circumvent their obligations under Article XXIV by
    maintaining indefinitely a RTA which does not comply
    with the terms of Article XXIV.
  – While the plan and schedule must not necessarily be
    comprehensive, they must be such as to permit an initial
    factual appraisal of the agreement

                                                           42
                WTO Rules (31)

• Article XXIV:5 of the GATT 1994
  – Meaning of “within a reasonable period of time”
  – In the past, there was a lot of controversy as to the
    meaning of this requirement. The transitional period of
    some agreement exceeded 20 years, sometimes over 30
    years
  – The Understanding on the Interpretation of Article XXIV
    provides that it should not normally exceed 10 years.


                                                        43
                 WTO Rules (32)

• Article XXIV:6 of the GATT 1994
  – Rationale for subsection seems to be that non-
    members of a RTA should not be made to lose their
    trade benefits within the MTS, just because a group of
    countries have decided to further liberalise trade
    among themselves.
  – Where a CU increases the tariff on a bound item, it is
    expected to enter negotiations with parties having initial
    negotiating rights and a principal supplying interest.

                                                          44
                 WTO Rules (33)

• Article XXIV:6 of the GATT 1994
  – Three main interpretative difficulties have been
    experienced:
  – First, how to deal with an increase in a bound rate of duty
    in some constituent members of the CU, when other
    members have reduced the duty for that specific item
  – The Understanding on the Interpretation of Article XXIV
    provides “due account shall be taken of reductions of
    duties on the same tariff line made by other members of
    the customs union?
                                                           45
                     WTO Rules (34)
• Article XXIV:6 of the GATT 1994
   – Second, is reverse compensatory adjustment recognised
     under WTO rules? The EC made the argument that it was
     entitled to receive compensation from the contracting parties
     of the GATT as the acceding countries had to lower their
     import tariffs on a broad range of industrial goods. The
     reductions in this sector more than offset any increases in
     tariffs on agricultural products.
   – The Understanding on the Interpretation of Article XXIV
     provides “GATT 1994 imposes no obligation on Members
     benefiting from a reduction of duties consequent upon the
     formation of a customs union, or an interim agreement
     leading to the formation of a customs union, to provide
     compensatory adjustment to its constituents.”               46
                   WTO Rules (35)

• Article XXIV:6 of the GATT 1994
   – Third, when should compensatory negotiations under the
     procedures outlined in Article XXVIII of the GATT 1994
     take place?
   – In a number of cases, the parties unilaterally modified their
     concessions contrary to the provisions of Article II of the
     GATT 1994 before commencing compensatory negotiations
   – In the examination of the CU between the EC and Turkey,
     Thailand criticised the parties for not following established
     procedures

                                                              47
                   WTO Rules (36)

• Article XXIV:6 of the GATT 1994
   – The Understanding on the Interpretation of Article XXIV
     resolves this issue by making it clear that compensatory
     negotiations should be commenced before the parties modify
     or withdraw their tariff concessions under Article II of the
     GATT 1994
   – It would appear that there is no obligation on the parties to
     conclude the negotiations before withdrawing or modifying
     their concessions
   – ONE issue yet to be clarified is how to deal with non tariff
     barriers - Panel in Turkey - Textiles.
                                                              48
                   WTO Rules (37)
• Article XXIV:7 of the GATT 1994
   – Article is one of the most abused provisions of Article. Its
     provisions are routinely ignored by GATT/WTO Members
   – Members of the WTO are obliged to promptly notify their
     agreements to the WTO and attach any relevant information
     which would enable the GC to make any recommendations
     it deems appropriate
   – Objective is to give residual control to the GC over such
     agreements to ensure that they complemented the MTS.
   – Drafting history confirms that there were some concerns
     about RTAs. By investing that power in the GC, it was
     thought that an effective mechanism had been found which
     would ensure the complementarity between the two
     approaches to trade
                                                             49
                   WTO Rules (38)

• Article XXIV:7 of the GATT 1994
   – Two main difficulties have been experienced with this
     provision: (i) when should notifications be made; and (ii) the
     extent of the powers of the GC to make binding
     recommendations
   – A cursory reading of the Article would seem to suggest that
     Members have to notify their agreements before
     implementing them. In practice, however, most agreements
     are implemented before they are notified to the WTO.


                                                               50
                      WTO Rules (39)
• Article XXIV:7 of the GATT 1994
   – Concern led to the adoption of a Decision in October 1972:
       • Without prejudice to the legal obligations to notify in pursuance
         of Article XXIV, the Council decides to invite [Members] that
         sign an agreement falling within the terms of Article XXIV,
         paragraphs 5 to 8, to inscribe the item on the agenda for the first
         meeting of the Council following such signature, to the extent that
         the advance notice of ten days prescribed for inclusion of items on
         the agenda can be observed. Inclusion of the item should allow
         the Council to determine the procedures for the examination of
         the agreement"
                                                                        51
                   WTO Rules (40)

• Article XXIV:7 of the GATT 1994
   – Adoption of this decision did not change the practice. In the
     examination of the CU between the EU and Turkey, Hong
     Kong noted that while the agreement went into force on 31
     December 1995, it was not until mid-February of the
     following year that the agreement was notified to the WTO.
   – Although the delay was only 2 months, HK was interested in
     making a systemic point. In response, the EU pointed out
     that “it might be impracticable for parties to a RTA to notify
     their agreement before its implementation.”
                                                               52
                   WTO Rules (41)
• Article XXIV:7 of the GATT 1994
   – Question is why is there a flagrant disregard of the
     provisions of Article XXIV:7?
   – First, knowledge that the examination process is too slow
     and would not yield conclusive results at the end.
     MERCOSUR was notified in 1993, but no decision as of
     June 2003. Economic gains would be lost if Members were
     to wait for the decision of the WTO before implementation
   – Second, WTO-mandated changes before the implementation
     of a RTA could create difficulties for governments - Issue of
     sovereignty. Related to this point is that it may be
     impractical to notify agreements immediately after signature,
     as the agreement may be changed in the course of the
     legislative process.
                                                              53
                   WTO Rules (42)
• Article XXIV:7 of the GATT 1994
   – What kind of recommendations could be made by the
     GC?
   – XXIV does not throw any useful light on this issue, but it
     could be argued that these should include:
       • requiring the parties to phase out their restrictions on each
         other’s trade within a shorter period;
       • broaden the coverage of their agreement to include sectors or
         sub-sectors which had been excluded from the coverage of the
         agreement
       • the reduction of the general incidence of duties and other
         regulations of commerce
   – A close reading of the provisions of the Article would seem
     to suggest that the drafters wanted the GC to make these
     recommendations to the parties before the implementation of
     their agreements                                          54
                    WTO Rules (43)
• Article XXIV:8 of the GATT 1994
  – Purpose of requirement is said to be a “public choice one”: an
    attempt to ensure that participants in regional liberalisation
    efforts go all the way
  – Designed to constrain the ability of participating countries to
    violate their MFN obligations selectively.
  – Customs unions and FTAs thought to be welfare-enhancing, while
    liberalisation in a few sectors thought to reduce global welfare.
  – Concept of Trade Creation and Trade Diversion: Introduced
    by Jacob Viner in his seminal work on customs unions.
  – Trade creation was likely to occur if parties to RTAs substantially
    liberalised their economies. Abolition of tariffs and other barriers
    to intra-trade would ensure would enhance the position of the
    most efficient producer, who will be able to produce for the entire
    FTA or CU, thereby enhancing consumer welfare and promoting
                                                                      55
    efficiency gains.
                    WTO Rules (44)
•   Article XXIV:8 of the GATT 1994
    – Partial liberalisation was likely to cause trade diversion, as
      members of the CU or FTA will simply be substituting high-
      cost producers in their territories with slightly better ones from
      other participating countries.
    – Key question is how much liberalisation should occur
      before the constituent territories could be considered to
      have satisfied the test in Article XXIV:8 of the GATT 1994.
      As noted by Australia:
        • “an agreed understanding of the meaning of
          “substantially all the trade” has so far eluded the
          [GATT/WTO] membership.
    – Lack of a uniform interpretation is partly responsible for the
      failure of Working Parties to arrive at a unanimous decision in
      their examination of RTAs.                                      56
                   WTO Rules (45)
•   Article XXIV:8 of the GATT 1994
    – The Quantitative and Qualitative School of Thoughts
    – Quantitative: Liberalisation of a significant proportion of the
      trade between the constituent territories. In the examination
      of the Treaty of Rome, the six member states opined that the
      test would be satisfied if 80% of the volume of trade between
      the parties was liberalised.
    – In the Line Pipe case, the United States argued that since NAFTA
      covered 97% of the trade between the parties, it was in conformity
      with the provisions of Article XXIV.8.
    – While the quantitative approach has some positive aspects, it has
      some conspicuous drawbacks. It can permit parties to an
      agreement to exclude the so-called sensitive sectors such as
      agriculture and textiles and clothing. [ Comments of New Zealand
      over the exclusion of agriculture from the free trade agreement
      between Singapore and Japan].
                                                                    57
                     WTO Rules (46)
•   Article XXIV:8 of the GATT 1994
    – To reduce the selectivity associated with the quantitative
      approach, Australia suggested that the threshold figure should be
      95% of all the six-digit tariff lines listed in the harmonized
      system.
    – Australia claims that the main advantages of its proposal are that:
        • (i) It would obviate the need to establish the extent to which trade in a
          given product may have been affected by other measures in place.
        • (ii) Unlikely that approach would permit the carving out of any major
          sector because of the strong possibility that the permitted exemptions
          would have to be spread out over a range of potentially sensitive
          sectors.
        • (iii) Approach is easily verifiable without requiring complex
          econometric studies.
    – CRTA has not adopted the Australian proposal. No textual basis,
      figure of 95% is arbitrary. CRTA could adopt the proposal, but it
      would mean an amendment of the current rules.                58
                   WTO Rules (47)
•   Article XXIV:8 of the GATT 1994
    – The Qualitative Approach: Proponents argue that for a
      RTA to be consistent with the Article, it should exclude
      any major sector of economic activity.
    – They argue that the fact that trade in the so-called sensitive sectors
      is usually small is no reason to exclude them from the coverage of
      the agreement.
    – In the examination of the EFTA Agreement, the view was
      expressed that the exclusion of agriculture from the coverage of
      the Agreement was not in conformity with the latter and spirit of
      the provisions of Article XXIV:8 of the GATT 1994.
    – The parties accepted that both the quantitative and qualitative
      elements were relevant, but they challenged the view that their
      agreement excluded agriculture. They pointed out that it covered
      a third of trade in agricultural products.
                                                                        59
                   WTO Rules (48)
•   Article XXIV:8 of the GATT 1994
    – In the examination of the Interim Agreements between the EC -
      and the Czech Republic, Hungary, Poland and the Slovak
      Republic, the representative of Australia expressed the view
      that the agreement did not comply with the “substantially all
      the trade requirement”, as there were significant barriers in
      trade in agricultural products. He asserted that for an
      agreement to comply with the requirement, there needed to be
      free trade in agricultural products. Japan endorsed this
      statement.
    – The EC disagreed; Australia had erroneously interpreted the
      terms of Article XXIV:8:
       • “The word “substantially” qualified the phrase “all the trade”. A
         free-trade area did not mean complete free trade; otherwise the
         word “substantially” was meaningless”                           60
                      WTO Rules (49)
•   Article XXIV:8 of the GATT 1994
• The view of the EC cannot be disparaged. The word
  “substantial” does not mean “all”. Any other interpretation
  would be ignoring the ordinary meaning of the word
  “substantial”.
• In United States - Standards for Reformulated and Conventional
  Gasoline (WT/DS2/AB/R), the Appellate Body held that:
    – "[O]ne of the corollaries of the 'general rule of interpretation' in the
      Vienna Convention is that interpretation must give meaning and effect
      to all the terms of the treaty. An interpreter is not free to adopt a
      reading that would result in reducing whole clauses or paragraphs of a
      treaty to redundancy or inutility.”
    – Principle of Effective Treaty Interpretation has been
      applied subsequently in a number of cases
                                                                          61
                    WTO Rules (50)
•   Article XXIV:8 of the GATT 1994
• The Understanding on the Interpretation of Article XXIV
  provides in its preamble that:
       • "Recognizing also that such contribution is increased if the
         elimination between the constituent territories of duties and
         other restrictive regulations of commerce extends to all
         trade, and diminished if any major sector of trade is
         excluded."
• Preambular language has been the subject of intense debate. In EC
  - Czech Republic, Hungary, Poland and the Slovak Republic, the
  Australian representative argued that the Understanding obliged
  parties to a RTA to include all sectors:
                                                                  62
                     WTO Rules (51)
•   Article XXIV:8 of the GATT 1994
    – "the WTO Understanding on the Interpretation of Article XXIV
      of the GATT clearly referred to a diminished contribution to
      the WTO system if any major sector of economic activity were
      excluded. Notwithstanding the "coverage" of agriculture in
      these Agreements, the sector was, in effect, excluded from the
      obligations of Article XXIV.”
    – The EC disagreed and stated that the Australian representative
      had misconstrued the significance of the preambular language.
      Too much had been read into the Understanding and that
      Members were not obliged to liberalise all their trade.
                                                                 63
                     WTO Rules (52)
•   Article XXIV:8 of the GATT 1994
    – In Turkey-Textiles, the Panel expressed the view that “the
      ordinary meaning of the term “substantially” in the context of
      sub-paragraph 8(a) appears to provide for both qualitative and
      quantitative components”.
    – The AB confirmed this view: The test in Article XXIV.8
      required a certain percentage of trade to be liberalized and also
      the non-exclusion of any major sector of economic activity.
    – The AB said that the test offered some flexibility. The word
      “substantial” did not mean “all”, but it required “something
      considerably more than merely some of the trade.”

                                                                   64
                     WTO Rules (53)
•   Article XXIV:8 of the GATT 1994
    – Why the substantial all trade requirement? Drafters thought
      that it would further the goal of trade liberalization. If that is
      the case, then logical to insist on parties to RTAs complying
      with a higher threshold as suggested by Australia. The
      following statement by Clair Wilcox is very instructive:
        • A customs union creates a wider trading area, removes obstacles
          to competition, makes possible a more economic allocation of
          resources, and thus operates to increase production and raise
          planes of living. A preferential system, on the other hand, retains
          internal barriers, obstructs economy in production, and restrains
          the growth of income and demand. It is set up for the purpose of
          conferring a privilege on producers within the system and
          imposing a handicap on external competitors. A customs union is
          conducive to the expansion of trade on a basis of multilateralism
          and non-discrimination; a preferential system is not."
                                                                         65
                   WTO Rules (54)
•   Article XXIV:8 of the GATT 1994
    – Other Interpretative problems
    – Unilateral Trade Preferences
       • Strongly debated in the past whether agreements under which
         developed countries granted unilateral trade preferences to
         developing countries were consistent with the substantial all trade
         requirement?
       • In the first ACP-EEC Convention of Lomé, the view of the parties
         that their agreement complied with the relevant provisions of the
         GATT was challenged by some members of the Working Party,
         who thought that Article XXIV obliged parties to undertake
         reciprocal commitments.
       • Trade and Commercial Relations between Australia and Papua
         New Guinea- argument of Australia that the agreement covered
         substantially al the trade between the parties, notwithstanding the
         lack of reciprocity was dismissed by some members of the WP.
                                                                       66
                      WTO Rules (55)
•   Article XXIV:8 of the GATT 1994
    – Other Interpretative problems
    – Unilateral Trade Preferences
       • In EEC - Member States’ Import Regimes for Bananas, the
         compatibility of Lomé II was challenged by Colombia, Costa
         Rica, Guatemala, Nicaragua and Venezuela). The EEC argued
         that the agreement was compatible with the provisions of Article
         XXIV:8 when read in conjunction with Part IV of the GATT
         1994. The Panel rejected the argument of the EEC:
           – “The Panel noted that Article XXIV:8(b) clearly defined free
              - trade areas as areas in which duties and other restrictive
              regulations of commerce are eliminated on substantially all
              the trade between the constituent territories, not merely on the
              imports into one of the constituent territories. The Panel
              noted that the EEC itself considered that the preference was
              justified not by Article XXIV on its own, but by Article
              XXIV taken in combination with the provisions of Part IV of
              the General Agreement.”                                     67
                     WTO Rules (56)
•   Article XXIV:8 of the GATT 1994
    – Other Interpretative problems
    – Meaning of other duties and other restrictive regulations of
      commerce
    – The meaning of “other restrictive regulations of commerce” has
      provoked a lot of controversy. Not clear how different it is
      from the phrase “other regulations of commerce” appearing in
      Article XXIV:5
    – Some Members of the WTO have argued that there is a
      difference between the two phrases and that the standards for
      evaluating them are different.



                                                                68
                         WTO Rules (57)
•   Article XXIV:8 of the GATT 1994
    – Other Interpretative problems
    – In a communication to the CRTA, Australia stated that:
       • "Article XXIV does not give guidance on how the word
         "restrictive" should be interpreted. … [T]here appears to be a
         presumption that at least some of the measures allowed under the
         articles listed in Article XXIV:8 should be considered restrictive
         when they are applied to the trade between the parties to an
         arrangement. The perspective in Article XXIV:5 is different. The
         assumption is that there is an undefined range of regulations
         governing the trade of the parties to an arrangement with the non-
         parties. These regulations must not become restrictive as a result
         of the formation of a free - trade area or a customs union…It
         would appear…that in terms of Article XXIV:8, some regulations
         are always restrictive, whereas under Article XXIV:5 they can
         become more restrictive”.                                        69
                      WTO Rules (58)
•   Article XXIV:8 of the GATT 1994
    – Other Interpretative problems
    – In the examination of the FTA between Canada and the United
      States, a member of the Working Party challenged the
      maintenance of QRs on dairy products and poultry by the
      parties to the FTA. The representative of Canada in response
      to the observation that Article XXIV:8(b) did not give parties
      to an FTA “an open-ended permission to maintain QRs” stated
      that “they had considered it necessary to maintain particular
      programmes for such products under Article XI, a measure
      which was consistent with Article XXIV.8(b).”
    – Basis for the statement appears to be the exceptions clause in
      Article XXIV:8(b), which envisages that parties to a FTA or
      CU can impose restrictions on each other’s exports pursuant to
      certain articles of the General Agreement.
                                                                 70
                     WTO Rules (59)
•   Article XXIV:8 of the GATT 1994
    – The Exceptions Clause
        • “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”.
        • Similar provision for FTAs
    – Two main difficulties have been experienced: (a) whether the
      list of exceptions in the Article is exhaustive; and (b) whether a
      party to a CU or FTA could exempt the products from other
      constituent members of the RTA when it imposes trade
      restrictions sanctioned by the article.                       71
                     WTO Rules (60)
•   Article XXIV:8 of the GATT 1994
    – The Exceptions Clause - Is the list exhaustive?
        • Issue was considered by a sub-group of the Committee on the
          EEC. There, it was debated whether a party to a RTA could avail
          itself of Article XVIII of the GATT, notwithstanding that it was
          not listed in Article XXIV:8
        • Some members of the Working Party thought that the list was
          exhaustive:
             – paragraph 8(b), in derogation of the rule regarding the
               elimination of internal obstacles, made provision for certain
               restrictive trade regulations authorized under certain Articles
               of the General Agreement; the list of these did not, however,
               include Article XVIII, concerning governmental assistance to
               economic development. The application of the customs
               duties and of the restrictions instituted under Article XVIII
               did not therefore benefit from the exception for which
                                                                          72
               provision was made in Article XXIV."
                        WTO Rules (61)

•   Article XXIV:8 of the GATT 1994
    – The Exceptions Clause - Is the list exhaustive?
        • The EEC disagreed that the list was exhaustive:
            – the Rome Treaty did not make any legal use of Article XVIII.
              Furthermore, the argument which had been drawn a
              contrario from the fact that Article XVIII was not one of
              those referred to in Article XXIV:8(b) did not take into
              account the fact that Article XXI was not mentioned either.
              It would be difficult, however, to dispute the right of
              contracting parties to avail themselves of that provision
              which related, inter alia, to traffic in arms, fissionable
              materials, etc., and it must therefore be concluded that the list
              was not exhaustive” (italics added)

                                                                           73
                    WTO Rules (62)
•   Article XXIV:8 of the GATT 1994
    – The Exceptions Clause - Is the list exhaustive?
        • In Argentina - Footwear, the Panel seemed to be of the view
          that the Article was merely indicative and that other Articles of
          the GATT could be invoked by parties to RTAs:
            – “Although the list of exceptions in Article XXIV:8 of GATT
              clearly does not include Article XIX, in our view, that paragraph
              itself does not necessarily prohibit the imposition of safeguard
              measures between the constituent territories of a customs union or
              free-trade area during their formation or after their completion. A
              frequently advanced justification for the maintenance or
              introduction of safeguards clauses within regional integration
              areas is the argument that the obligation of Article XXIV:8 to
              eliminate all duties and other restrictions of commerce applies
              only to "substantially all”, but not necessarily to "all" trade
              between the constituent territories. It could be argued that for all
              practical purposes the application of safeguard measures to
              particular categories of like or directly competitive products is
              unlikely to affect a trade volume that could put the liberalisation
              of "substantially all trade" between the constituent territories of a
                                                                                  74
              customs union into question”
                      WTO Rules (62)
•   Article XXIV:8 of the GATT 1994
    – The Exceptions Clause - Is the list exhaustive?
        • The Panel, however, qualified this statement acknowledging that
          in certain situations unrestrained use of safeguard measures could
          actually go beyond the acceptable limits under Article XXIV.
    – Given that there is no logical reason for the omission of certain
      articles such as Articles XIX and XXI, it could be argued that
      the list in Article XXIV:8 is merely indicative and not
      exhaustive.
    – In United States - Line Pipe, the issue was whether a party to a
      RTA could exempt the exports of its partner countries from the
      application of a safeguard measure. The Panel answered in the
      affirmative. The AB did not feel it necessary to pronounce
                                                                       75
      itself on this issue.
                       WTO Rules (63)
•   Article XXIV:8 of the GATT 1994
    – The Exceptions Clause - Is the list exhaustive?
    – It would appear that parties to an RTA have the flexibility to
      decide whether to impose a safeguard measure on the exports
      of its partner countries. This would also depend on the terms of
      their agreement. The Panel in Argentina - Footwear noted that:
        • “In our view, the express omission of Article XIX of GATT from
          the lists of exceptions in Article XXIV:8 of GATT read in
          combination with the requirement to eliminate all duties or other
          restrictions of commerce on "substantially all trade" within a
          customs union, leaves both options open, i.e., abolition of the
          possibility to impose safeguard measure between the member
          States of a customs union as well as the maintenance thereof”.
        • As this issue was not raised on appeal, the Appellate Body did not
          pronounce itself on this issue.
                                                                         76
                        WTO Rules (64)
•   Article XXIV:8 of the GATT 1994
    – The Exceptions Clause - List of Exceptions and the Non-
      Discrimination Principle
    – Assuming that the list of articles in paragraph 8 is merely
      indicative and that parties to RTAs can impose restrictive
      measures such as safeguard measures, the question has arisen
      whether in the application of such measures, the non-
      discrimination principle should be observed.
    – The difficulty of this issue is underscored in the following
      statement by the Industrial Council of Japan:
       • “There are two different views on the issue. One states that not
         invoking safeguards against members of the union area is a
         natural result of having a customs union or free - trade area. The
         other says that the purpose of safeguards is to protect domestic
         industries, and it is therefore not rational to waive them only for
         countries within the union or area. Safeguards should therefore
         be applied in conformance with the obligation to provide most-
         favoured-nation treatment.”                                    77
                   WTO Rules (65)
•   Article XXIV:8 of the GATT 1994
    – The Exceptions Clause - List of Exceptions and the Non-
      Discrimination Principle
    – In Argentina - Footwear and the United States - Line Pipe, it
      was decided that parties to RTAs need not observe the non-
      discrimination principle when applying safeguard measures,
      provided they observe certain conditions in excluding the
      exports of their partner countries.
    – Given the overarching objective of the drafters of the
      GATT to ensure a high degree of liberalizatioin of trade
      between constituent members of a RTA, would it make
      sense to oblige them to exempt each other’s exports from
      the application of any trade restrictive measures?    78
                   WTO Rules (66)
•   Article XXIV:8 of the GATT 1994
    – Are parties to CUs required to apply substantially the same
      duties and other regulations of commerce?
    – Whereas there is a convergence in the views of WTO Members
      that parties to CUs have to apply substantially the same duties
      and other restrictive regulations of commerce from the outset,
      there is a divergence in the opinions of Members whether
      subsequent applicants have to adopt the same restrictive
      regulations of commerce upon their accession, if they were not
      applying such restrictions
    – Issue came to the limelight following the enlargement of the
      EU to include Austria, Finland and Sweden.                 79
                   WTO Rules (67)
•   Article XXIV:8 of the GATT 1994
    – Issue was also considered in Turkey -Textiles, where following
      its CU with the EU, Turkey started applying restrictions on
      textiles and clothing products maintained by the EU on these
      products. Turkey sought to justify its measures on the basis of
      Article XXIV:8(a)(ii), which obliges parties to CUs to apply
      “substantially the same duties and other regulations of
      commerce”. (italics added)
    – Turkey argued that since trade in textiles and clothing products
      constituted about 40% of its trade with the EU, it was important
      for them to apply the same regulations, otherwise there could
      be massive trade diversion such as to fundamentally weaken
      the common commercial policy of the EU.                     80
                             WTO Rules (68)
•   Article XXIV:8 of the GATT 1994
    – After an extensive analysis of the provisions of Article XXIV,
      the Panel concluded that whereas in some situations, parties to
      a RTA could adopt inconsistent WTO measures, in this
      particular case, Turkey had failed to prove that it was necessary
      for it to adopt the challenged measures.
    – This finding of the Panel was confirmed on appeal by the AB:
      "We agree with the Panel that had Turkey not adopted the same quantitative
      restrictions that are applied by the European Communities, this would not
      have prevented Turkey and the European Communities from meeting the
      requirements of sub-paragraph 8(a)(i) of Article XXIV, and consequently
      from forming a customs union. We recall our conclusion that the terms of
      sub-paragraph 8(a)(i) offer some – though limited – flexibility to the
      constituent members of a customs union when liberalizing their internal trade.
      …[T]here are other alternatives available to Turkey and the European
      Communities to prevent any possible trade diversion, while at the same time
      meeting the requirements of sub-paragraph 8(a)(i)”                        81
              Enabling Clause (1)
• The Enabling Clause adopted in 1979 as part of
  the results of the Tokyo Round. Provided
  permanent legal bases for the ff:
   – Derogation from the MFN principle to allow developed
     countries to grant trade preferences on a generalized, non-
     reciprocal and non-discriminatory basis to developing
     Countries (Generalized System of Preferences - GSP;
     Deeper preferences for LDcs.
   – Derogation from the the MFN principle to permit
     developing countries to enter into regional trade
     agreements among themselves.
   – Does the Enabling Clause provide an alternative legal
     basis for the formation of RTAs?
                                                              82
   – MERCOSUR - Precedent or a special case?
               Enabling Clause (2)
• Paragraph 2(c) permits the entering of global trading
  arrangements. Excludes agreements entered into between
  developed and developing countries, which would have to
  be examined under Article XXIV of the GATT 1994 or
  Article V of the GATS, unless a waiver is obtained.
   – Before the enactment of the Enabling Clause, developing countries
     relied on Part IV to form RTAs. ASEAN was notified pursuant to
     the provisions of Part IV of the GATT 1947, but later re-notified
     under the Enabling Clause.
• Requirements under the Enabling Clause
   – The arrangement should 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 contracting parties
   – Is this provision legally enforceable taking into the jurisprudence
                                                                      83
     on Article XXIV
      Enabling Clause (3)
– Members invoking the Enable Clause should ensure
  that their agreement is not impeding the MFN reduction
  or elimination of tariff and non-tariff trade restrictions.
– Flexibility for developing countries when it comes to
  reduction of tariffs; for non-tariff barriers, they have to
  be reduced in accordance with guidelines of Members.
– Does the Enabling Clause authorise developing
  countries to form free trade areas or customs unions, or
  just to exchange a few tariff preferences?
– Does the Enabling Clause provide a legal cover for
  agreements covering trade in services?             84
Article IX of the Marrakesh Agreement1
 – Article XXV of the GATT 1947 allowed contracting
   parties to obtain a waiver from the CPs, if they were
   incapable of discharging their obligations under the
   General Agreement
 – If could therefore be invoked by countries who, in
   breach of their Article I obligation, wanted to enter into
   preferential trading arrangements. A waiver would
   typically be requested if the agreement did not comply
   with the terms of Article XXIV or the Enabling Clause
   and [Art. V of the GATS]
 – France obtained a waiver to enter into a CU with Italy,
   then not a member of GATT
 – EEC Members obtained a waiver to form a FTA in coal
   and steel                                        85
         Article IX of the Marrakesh
                 Agreement2
– The United States and Canada obtained a waiver for their
  agreement on free trade in automobiles in 1965
– However, most of the waivers that were granted were to
  enable developed countries to extend trade preferences to
  developing countries on a selective basis, e.g., Lomé
  Convention; Australian Preferences to Products originating
  in Papua New Guinea, Canada’s preferences to imports from
  the Caribbean Basin (1968), and the United States
  preferences granted to Caribbean countries under the
  Caribbean Basin Economic Recovery Act (1985).
– A number of these agreements have been re-notified
  pursuant to the provisions of Article IX of the WTO
  Agreement
– Under this Article, Members wishing to obtain a waiver have
  to submit a request to the Ministerial Conference, which has
  to establish a time-period not exceeding 90 days to consider
                                                              86
  the request.
Article IX of the Marrakesh Agreement3
 – If a decision is not taken by consensus during the 90-day
   period, a decision could be taken by three fourths of the
   Members
 – The article imposes a number of conditions:
 – The MC has to justify its decision to grant a waiver and state
   the terms and conditions governing the grant and the date on
   which it shall be terminated
 – There is a monitoring requirement when waiver is granted
   for more than one year. The MC expected every year to
   “examine whether the exceptional circumstances justifying
   the waiver still exist and whether the terms and conditions
   attached to the waiver have been met”. On the basis of the
   review, the MC may decide “to extend, modify or terminate
   the waiver.”                                                87
           Article V of the GATS (1)
– The equivalent of Art XXIV in the field of trade in Services.
  Before the GATS, the services component of RTAs was not
  examined.
– The GATS provisions mirror that of Article XXIV, although
  it does not use the terms free-trade areas or customs unions,
  but rather “economic integration” reflecting the broad reach
  of the GATS - It covers all the four modes of delivery.
– The guiding principle is set out in Article V:4 which
  provides that any economic integration agreement "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
  arrangement".                                                 88
         Article V of the GATS (2)
– Requirements under Article V of the GATS
  • With its emphasis on "respective sectors or subsectors",
    it is generally thought that Article V offers more
    protection for non-participating countries than in Article
    XXIV. It has been suggested that as a result of the more
    desegregated (i.e. sub-sectoral) focus taken in Article V,
    a WTO Member might find it difficult to argue - in
    contrast to GATT 1994 - that the average level or
    "general incidence" of protection has not changed,
    regardless of what might have occurred at the level of
    individual products (sub-sectors)
  • Provisions on compensation more elaborate than Article
    XXIV. Stated clearly that compensation has to be on an
    MFN basis.                                            89
             Article V of the GATS (3)
   – Requirements under Article V of the GATS
• Like Article XXIV:8, Article V:1(a) requires economic
  integration agreements to have "substantial sectoral coverage",
  which should be understood in terms of the "number of sectors,
  volume of trade and modes of supply".
• An agreement would not be consistent with the terms of Article
  V, if it provided for the a priori exclusion of one of the modes
  of supply. The reason behind this rule is to prevent Members
  from entering into narrow discriminatory agreements, which are
  generally thought not to be welfare-enhancing from the view
  point of the multilateral trading system. Members wishing to
  form an economic integration must be prepared generally to go
  beyond the liberalization commitments under the GATS, if their
  agreement is to conform to the provisions of Article V.
                                                               90
           Article V of the GATS (4)

   – Requirements under Article V of the GATS
• Article V:1(b) underscores this point by providing that the
  agreement should "provide for the absence or elimination
  of substantially all discrimination...between or among the
  parties, in the sectors covered under subparagraph(a)
  through [the] elimination of existing discriminatory
  measures, and/or prohibition of new or more
  discriminatory measures".


                                                          91
        The Procedural Aspects - The
          Examination Process (1)
• Important tool at the disposal of the WTO to ensure that RTAs
  entered into by its Members comply with the relevant
  multilateral rules.
• WTO Members obliged to notify RTAs they conclude promptly
  to the WTO to permit an examination of the terms and
  conditions of the agreement
• The proliferation of RTAs and the widely varying and extensive
  provisions of some require the examination process to be
  efficient.
• Under the GATT, Article XXIV agreements were notified to the
  Council for Trade in Goods (CTG). Once notified, the
  agreement was put on the agenda of the next meeting of the
  CTG. Text of the agreement and any relevant information would
  be circulated in advance of the meeting.
• Agreement will be formally introduced by one of the parties. 92
           The Procedural Aspects - The
             Examination Process (2)
• Any contracting party could ask for the floor and provide comments on
  the agreement. Open to any contacting party to request the
  establishment of a Working Party (WP) to examine the consistency of
  the agreement with the rules of the WTO
• Rare for a request for the establishment of a WP to be opposed. It was
  within the authority of the Chairman of the Council to request the
  CONTRACTING PARTIES (CPs) to authorise him/her to establish
  the WP, draw up its terms of reference and appoint its chairperson.
• Membership of the WP was open to all contracting parties.
  Chairperson of the WP appointed in consultations with CPs which had
  expressed their interest in the agreement
• Examination process starts with CPs sending questions to the parties to
  the agreement, who had to send their replies within six weeks of
  receiving them. Once the replies were received, the GATT Secretariat
  consolidated the questions and answers and issued the ensuing
  document to the CPs of the GATT.                                    93
         The Procedural Aspects - The
           Examination Process (3)
• Document formed the basis of the initial discussion of the WP.
  Any CP was entitled in the course of the examination process to
  seek clarifications or pose any questions to the parties.
• Objective of the WP was to submit a report containing
  conclusions and recommendations to the Council.
  Unfortunately, the conclusions and recommendations were not
  very helpful: The last paragraph of the report of the Working
  Party on the EFTA - Turkey Free-Trade Agreement, for
  example, provided that “some members concluded that there
  were questions about the full consistency of the EFTA - Turkey
  Free-Trade Agreement with respect to the relevant provisions of
  the General Agreement, including Article XXIV, and therefore
  reserved their GATT rights”.
                                                              94
      The Procedural Aspects - The
        Examination Process (4)

• Given the inconclusive nature of the reports, the Council
  rarely required parties to an RTA to make changes to their
  agreement. It usually took note of the statements made by
  delegations, adopted the inconclusive report of the
  Working Party and instructed that the agreement in
  question be added to the list of agreements which had to be
  reviewed every two years by the Council pursuant to the
  1972 Decision of the CONTRACTING PARTIES.

                                                         95
         The Procedural Aspects - The
           Examination Process (5)
• Examination Process under the WTO
• Examination process under the WTO has not changed
  much, although attempts have been made to streamline it.
• First step taken by the Members of the WTO was to
  establish the CRTA, a standing body to replace the
  numerous Working Parties established on an ad-hoc basis
  to examine agreements notified to the GATT.
• Institutional and operational improvements have been
  made.
• Timely provision of information (standard format) and
  WTO Standard Guidelines for the examination process
• Critique of the examination process - Decisions are still not
                                                             96
  being made
         Regional Trade Agreements and
             Dispute Settlement (1)
• Original Article XXIV did not have any explicit provisions on dispute
  settlement. Could well be that it was the intention of the CPs that all
  RTAs would be implemented only when they had been examined by
  the CPs and endorsed as being consistent with the provisions of Article
  XXIV. View supported by the wording of Art XXIV:7
• The delicate balance which the GATT CONTRACTING PARTIES
  thought they had established started to unravel with the failure of the
  first WP to reach a unanimous conclusion on the consistency of the
  Treaty of Rome with the provisions of Article XXIV.
• No legal challenges to the assertion of the EEC Members that their
  agreement was in conformity with the relevant rules of the GATT.
• Geopolitical considerations. Failure to reach clear and conclusive
  results had significant implications for the parties to the agreement, as
  well as non-participating countries.
                                                                        97
         Regional Trade Agreements and
             Dispute Settlement (2)
• Critical issue is what are the consequences for the inability of
  the CONTRACTING PARTIES to issue "such reports and
  recommendations"?
• Could it mean that the parties are entitled to legally implement
  their agreement, for if it had violated the provisions of Article
  XXIV, the CONTRACTING PARTIES would have required
  them to make changes before implementing the agreement?
• The opposing argument is that, in the absence of a clear
  statement by the CONTRACTING PARTIES [CRTA ] that an
  agreement is consistent with the provisions of Article XXIV, it
  cannot be assumed that it is. Proponents of this view argue that
  in such a case, non-participating countries have the right to have
  recourse to other provisions of the GATT.
                                                                     98
       Regional Trade Agreements and
           Dispute Settlement (3)
• Lack of Recommendations - Implicit Acceptance of the
  Agreement?
• Parties to RTAs have construed the terms of Art XXIV:7 very
  narrowly. Their main contention is that if their agreements
  really violated the provisions of Article XXIV, the CRTA would
  have requested them to make changes to their agreements. By
  not making such recommendations, it could be interpreted to
  mean that it has approved of their agreement.
• Argument deficient on two grounds: First, it ignores the nature
  and dynamics of the decision-making process of the WTO; and
  second, the a contrario argument that failure to reach
  conclusions is tantamount to acceptance of the agreement is
  without any legal basis. It ignores the underlying reasons as to
  why no conclusions are reached.                                  99
         Regional Trade Agreements and
             Dispute Settlement (4)
• Lack of Recommendations - Implicit Acceptance of the
  Agreement?
• In Turkey - Textiles, Turkey argued that since the CRTA had not
  made any recommendations regarding the customs union
  agreement between it and the European Community, the
  agreement could be taken to be in conformity with Article
  XXIV:
   – "Turkey considered that, though the CRTA had not yet
      concluded its examination of the Turkey - EC customs
      union, there was no indication, two and a half years after the
      completion of the customs union, that it would recommend
      to the parties, under Article XXIV:7(b), that modifications
      be made to the Agreement. … No country had asked for
      compensatory adjustment with respect to any tariff bindings
      that might have been affected by the Turkey - EC customs
      union.”                                                      100
    Regional Trade Agreements and
        Dispute Settlement (5)
• Lack of Recommendations - Implicit Acceptance of the
  Agreement?
• The Panel rejected Turkey’s argument relying on the
  earlier GATT case of EEC - Imports from Hong Kong,
  where the EEC sought to justify its imposition of QRs on
  certain products from HK on the ground that the measures
  had been in force for a long period.



                                                        101
        Regional Trade Agreements and
            Dispute Settlement (6)
• Lack of Recommendations - Rejection of the Agreement?
• In United States - Line Pipe, Korea argued that since the CRTA
  had not approved of NAFTA, it should be presumed that
  NAFTA was not consistent with the relevant rules of the WTO.
  In response to a question from the Panel, Korea asserted that:
   – “Korea’s position that NAFTA has not been demonstrated to
      be in compliance with Article XXIV:8 is based on the
      preliminary analysis of the Committee on Regional Trade
      Agreements which is still considering the question and has
      not yet issued a final decision on the matter.”
• The Panel rejected Korea’s argument and held that prima facie,
  NAFTA was consistent with the rules of the WTO:
                                                             102
          Regional Trade Agreements and
              Dispute Settlement (6)
• Lack of Recommendations - Rejection of the Agreement?
   – “In our view, the information provided by the United States in these
     proceedings, the information submitted by the NAFTA parties to the
     Committee on Regional Trade Agreements (“CRTA”) (which the United
     States has incorporated into its submission to the Panel by reference), and
     the absence of effective refutation by Korea, establishes prima facie case
     that NAFTA is in conformity with Article XXIV:5(b) and (c), and with
     Article XXIV:8(b). Concerning Article XXIV:8(b), we do not consider
     that the fact that the CRTA has not yet issued a final decision that NAFTA
     is in compliance with Article XXIV:8 is sufficient to rebut the prima facie
     case established by the United States. Korea’s argument is based on the
     premise that a regional trade arrangement is presumed inconsistent with
     Article XXIV until the CRTA makes a determination to the contrary. We
     see no basis for such a premise in the relevant provisions of the
     Agreement Establishing the WTO (including, in particular, the
     Understanding on the Interpretation of Article XXIV of the GATT 1994).
     Nor has Korea pointed to any provision that might support such a
     premise.”                                                               103
   The Doha Ministerial Declaration (1)

• Paragraph 29 of the Doha Ministerial Declaration
   – “We 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.”
• Negotiations being conducted in the Negotiating Group
  on Rules


                                                         104
   The Doha Ministerial Declaration (2)
• Assessment of Negotiations by the Chair of the
  Negotiating Group on Rules Prior to Cancun
   – Good progress has been made in the negotiations on regional
     trade agreements.
   – Participants appeared to attach priority to procedural issues,
     particularly transparency of RTAs and have agreed to
     address them informally. The Secretariat might be asked to
     prepare a mock presentation of the Chile- Canada Free Trade
     Agreement
   – Systemic issues were being addressed in formal meetings.
     Progress has been slow but quite encouraging
• Optimistic of presenting a positive report to
  Ministers in Cancun                                          105
       The Doha Ministerial Declaration (3)

• Summary of proposals submitted to date by the
  following participants in the negotiations

   – Australia(TN/RL/W/2+15)
   – Chile(TN/RL/W/16 + 151+152)
   – India (TN/RL/W/114)
   – The European Communities(TN/RL/W/14)
   – Australia, Chile, (HK, China), Korea and New
     Zealand (TN/RL/W/117)
   – Korea (TN/RL/W/116)
   – ACP Group of States(TN/RL/W/155)
   – Turkey (TN/RL/W/32)

                                                    106
      The Doha Ministerial Declaration (4)
• Proposal by Australia
  – Current methods for determining whether the parties have
    liberalised “substantially all the trade” between them not very
    reliable.
  – The use of actual trade statistics and trade flows has limitations.
    GATT working parties and the CRTA have recognized that any
    calculation of the percentage of trade not freed from barriers would
    need to take account of the fact that this trade would be, or would
    have been, larger if the trade had been allowed freely. In other
    words, simply looking at trade flows does not take account of the
    dynamics at work before the conclusion of an arrangement, its
    implementation and the situation prevailing once it has been fully
    implemented.
                                                                       107
   The Doha Ministerial Declaration (5)
• Proposal by Australia
  – Instead of using trade flows, it would be better to use as a basis the
    classifications used to examine or regulate aspects of these flows.
    The Harmonized Commodity Description and Coding System
    would be particularly suitable as the basis for an assessment of
    whether substantially all trade is covered by an arrangement. It is
    aimed specifically at internationally traded goods, and it is
    therefore well understood by the trade policy community.
  – ”Substantially all the trade" should be defined in terms of coverage
    by a free trade agreement, or an agreement establishing a customs
    union, of a defined percentage of all the six-digit tariff lines listed
    in the Harmonized System.
  – This approach would ensure that there is sufficient flexibility to set
    aside product areas that for one reason or another cannot yet be
    traded between the partners free of restrictions. Proceeding in this
    way, it would not be necessary to discover the extent to which
    trade in a given product may have been affected by other measures
                                                                          108
    in place.
      The Doha Ministerial Declaration (6)
• Proposal by Australia
  – Australia considers that such a percentage criterion should be
    established at a sufficiently high level to prevent the carving-out of
    any major sector, in terms of its near-complete exclusion of
    coverage.
  – It may be necessary to include an assessment of prospective trade
    flows at various stages of implementation of the RTA where trade
    is initially concentrated in relatively few sectors. Such an
    approach would bridge the quantitative and qualitative approaches
    mentioned earlier.
  – There should not be tariffs or non-tariff barriers affecting the
    products in question.
  – Easily verifiable - complicated economic analyses avoided
  – Easy to measure the progress being made by parties to interim
    agreements establishing free-trade areas and agreements
    establishing customs unions
                                                                         109
The Doha Ministerial Declaration (7)
• Proposal by Chile
  – When to notify: Before or after parliamentary approval?
  – Where to notify: Instead of the respective bodies, all notifications
    should be made directly to the CRTA
  – What to notify: Limitations of the standard formats. Not very
    helpful when it comes to determining whether requirements,
    including whether the parties have liberalised substantially the
    trade between themselves
  – Discussions tend to focus on the information which parties to a
    regional agreement furnish. Limited capacity for non-Members to
    study and assess its impact on their economies and the multilateral
    system. One way of enhancing the transparency and effectiveness
    of such reviews could be for the studies of notified agreements to
    be carried out by third parties in accordance with agreed
    parameters. The Secretariat or independent trade experts could
    conduct reviews, ask questions and present statements of fact,
    thereby facilitating the governments' conclusions.                110
  The Doha Ministerial Declaration (8)
• Proposal by Turkey
• Procedural Issues to be focussed on in the negotiations: Basic
  transparency requirements such as the notification requirements, scope
  of information to be submitted, periodical reporting, the examination
  process and the legal status of the CRTA examination reports
• Improving the Effectiveness of the CRTA:
    – Simplification of the relevant rules
    – Grand-fathering existing agreements and applying new, tightened
      rules to agreements subsequently notified after the cut-off date
    – Need to focus more on trade data and flows in examinations rather
      than every provision in the text of Article XXIV
    – It should be accepted as a prerequisite that the regulatory
      harmonization type of provisions are within the full mandate of the
      Members and considered WTO-consistent
    – Notification of all agreements to the CRTA
                                                                     111
The Doha Ministerial Declaration (9)
• Proposal by Turkey
• Definition of the term “substantially all the trade” -
  Turkey favours the quantitative approach. The
  qualitative approach unrealistic
• Harmonisation of preferential rules of origin used in
  different regional trade agreements should be
  encouraged. In the long term, uniform rules of origin
  should be adopted. Initially, parties to RTAs should
  adopt a single set of rules of origin; Convergence of
  rules of origin applied by different RTAs should be the
  next step
• Development dimension - Developing countries to be
  granted certain flexibilities.: long transitional periods,
  coverage of the agreement etc.,                           112
     The Doha Ministerial Declaration (10)
• Proposal by the European Communities
   – Clarification of the legal framework applicable to RTAs
   – Trade in Goods - Art XXIV and the Understanding
    the definitions of key concepts for the application of Article XXIV,
     including “regulations of commerce”, “restrictive regulations of
     commerce”, “substantially all the trade”, “applicable duties” and
     “major sector”;
    clarification of the application of provisions relating to the staged
     implementation of RTAs, including the “exceptional circumstances” in
     which transitional periods for the formation of a customs union or free
     trade area might be legitimately expected to exceed ten years;
    closer alignment of the disciplines imposed on parties to FTAs with
     the disciplines imposed on parties to Customs Unions, particularly in
     respect of the obligations of GATT Article XXIV:5 concerning the
     implications of individual RTAs for non-parties;
                                                                      113
   The Doha Ministerial Declaration (11)
• Proposal by the European Communities
   – Clarification of the legal framework applicable to RTAs
   – Trade in Goods - Art XXIV and the Understanding
    treatment of non-tariff measures in trade between RTA partners
     including rules of origin;
• The Enabling Clause
    the relationship between the provisions of the Enabling Clause
     relating to regional and global agreements entered into amongst
     less-developed contracting parties and Article XXIV of the GATT
     1994;




                                                                 114
    The Doha Ministerial Declaration (12)
• General Agreement on Trade in Services
    clarification of key concepts for the application of Article V of the
     GATS, including “substantial sectoral coverage” and “substantially
     all discrimination”;
    the definition of the “reasonable time frame”               for   the
     implementation of economic integration agreements;
    the appropriate combination of elimination of discriminatory
     measures (roll-back) and prohibition of new or more
     discriminatory measures (stand-still) in order to achieve the
     absence or elimination of substantially all discrimination (Article
     V:1(b)(i) and (ii));
    the appropriate methodology to ensure that the overall level of
     barriers and restrictions to trade in services with respect to third
     parties is not raised in the creation or enlargement of economic
     integration agreements;
                                                                       115
The Doha Ministerial Declaration (13)
• Examination Process in the CRTA
    timing of notifications under relevant WTO provisions, the nature
     and form of information that should be supplied by RTA
     participants to support the examination of RTAs; timing of
     examination of notifications by the competent bodies;
    procedures for examination of agreements notified under the
     Enabling Clause.
    It should be noted that this only represents an initial list of issues
     where the work undertaken in the CRTA points to a need for
     further examination now in the Negotiating Group. This is not an
     exhaustive list of issues that the Negotiating Group can be
     expected to address. The European Communities expect other
     WTO Members to submit their own proposals on this, and indeed
     the European Communities should also be expected to come
     forward with further proposals and ideas as the negotiations
     progress.
                                                                        116
The Doha Ministerial Declaration (14)
• Proposal by ACP States – TN/RL/W/155
    RTAs a core development strategy for ACP states.
    Some of the concerns (development aspects) addressed in the
     proposals by the EC and Turkey
    Developmental Aspects of RTAs
    Multilateral rules need to be supportive
    Negotiation of EPAs with the EU – a building block for ACP
     states regional integration processes and to the MTS. More
     flexibility for developing countries entering into RTAs with
     developed countries
    Enabling Clause to continue providing legal cover for agreements
     entered into between developing countries
    Current rules inadequate. De facto flexibility (ambiguous rules
     and permissible practices over the years) not enough. Explicit
     S&D rules needed, especially in light of the AB decision in Turkey
     – Textiles.                                                     117
The Doha Ministerial Declaration (15)
• Proposal by ACP States – TN/RL/W/155
    There should be parallelism between Article XXIV of the GATT
     1994 and Article V of the GATS. Article V.1 of the GATS
     provides for S&D for developing countries.
    Distinction drawn between agreements entered into by developing
     and developed countries and agreements entered into only by
     developing countries: Article V:3(a) and V:3(b).
    “Members agree that S&D treatment for developing countries be
     formally and explicitly made available to developing countries in
     meeting criteria set out in paragraphs 5 to 8 of GATT Article
     XXIV in the context of regional agreements entered into between
     developing and developed countries”.
    S & D to apply to the following:



                                                                   118
The Doha Ministerial Declaration (16)
• Proposal by ACP States – TN/RL/W/155
   – “(i)Article XXIV:8(a)(i) and (b) ("substantially all the trade"):
   – With regard to duties, appropriate flexibility shall be provided for
     developing countries in meeting the "substantially all the trade"
     requirement in respect of trade and product coverage, including in
     terms of the application of favourable methodology and/or lower
     threshold levels, if to be applied, in the measurement of trade and
     product coverage of developing country parties to an RTA;

    – With regard to "other restrictive regulations of commerce", the
      term shall be interpreted in a flexible manner, so that the right of
      developing countries to apply contingency protection measures
      including safeguards and other non-tariff measures (e.g. rules of
      origin) on intra regional trade is not unduly impeded, and that legal
      security and predictability is guaranteed for special and differential
      treatment measures in terms of asymmetry in rights and obligations
      of developed and developing country member under an RTA in
      respect of such non-tariff measures;
                                                                        119
The Doha Ministerial Declaration (17)
• Proposal by ACP States – TN/RL/W/155
   – “(ii) Article XXIV:5(c) and para. 3 of the 1994 Understanding:
   – Article XXIV:5(c) and paragraph 3 of the 1994 Understanding
     ("reasonable period of time"):
   – The legal standing of interim agreements during the transition
     period prior to effective application of provisions of Article XXIV
     of GATT 1994 should be clarified to the effect that the substantive
     and procedural requirements of GATT Article XXIV 5-8 becomes
     applicable to an RTA only after the transition period expires;
   – The modality for determining "exceptional circumstances" should
     be clarified so that a transition period longer than 10 years will be
     made legitimately and more easily available to developing
     countries;
   – The maximum length of the transition period permissible is to be
     established, the period should be determined in such a manner that
     is consistent with the trade, development and financial situation of
     developing countries, but in any case not less than 18 years;       120
The Doha Ministerial Declaration (18)
• Proposal by ACP States – TN/RL/W/155
   – “(iii) Article XXIV:7 and paras 7-10 of the 1994
     Understanding:
   – review in the Committee on Regional Trade Agreements):
   – Due account shall be given to "developmental aspects" of RTAs
     involving developing countries in determining their conformity
     with Article XXIV.
   – There shall be streamlined, efficient and less onerous transparency
     and examination procedures of RTAs involving developing
     countries, which shall take due account of limited administrative,
     human and financial capacities developing countries;
   – (iv) Paragraph 12 of the 1994 Understanding (dispute
     settlement):
   – The relationship between the DSU and GATT Article XXIV, and
     jurisdictions of DSB and the CRTA, should be clarified, so that the
     jurisdiction of the CRTA to determine WTO-compatibility of
     RTAs is not unduly overridden by the dispute settlement
     procedures and rulings.                                         121
The Doha Ministerial Declaration (19)
• Proposal by ACP States – TN/RL/W/155
   – “(v) Enabling Clause:
   – Members reaffirm the legal validity of the Enabling Clause to
     cover regional trade arrangements entered into among developing
     countries (i.e. South-South agreements) to the effect that
     developing countries' right to form such arrangements under the
     Enabling Clause are not undermined by paragraphs 5 to 9 of
     GATT Article XXIV.
   – Developing countries may enter into regional trade agreements
     among themselves for mutual elimination of trade barriers, in
     accordance with the provisions of the Enabling Clause, and
   – When developing countries notify RTAs under the Enabling
     Clause, it is the provisions of the Enabling Clause that exclusively
     apply in the determination of compliance with WTO rules.
   – The importance of the Enabling Clause as a development
     milestone in the history of GATT and the WTO cannot be
     overemphasized. The Clause is an "acquis" in the legal architecture
     of WTO. The negotiations on RTA rules should not prejudice the
     coverage of South-South agreement under the Enabling Clause. 122
The Doha Ministerial Declaration (20)
• Proposal by Korea – TN/RL/W/116
   – Definition and Scope of ORCS and ORRCS:
   – The terms “duties” and “tariffs” used interchangeably.
     Has not given rise to any controversy
   – No clear definition of the terms ORCs and ORRCs.
     Should they be considered as non-tariff measures or
     should they be considered as referring to something
     more than NTMs?
   – Lack of clarity has been a source of confusion
   – The Standard Format for Information on RTAs does not
     refer to the terms ORCs and ORRCs, but has a section
     called “Trade Provisions” which cover both tariff and
     non-tariff measures.
   – Why the omission? Standard Format lists the following
     measures – tariffs and NTMs. Good basis for defining  123
     the terms ORCs
The Doha Ministerial Declaration (21)
• Proposal by Korea – TN/RL/W/116
   – Definition and Scope of ORCS and ORRCS:
   – Import Restrictions: Duties and Charges, Quantitative
     Restrictions, Common External Tariffs;
   – Export Restrictions: Duties and Charges, Quantitative
     Restrictions;
   – Rules of Origin;
   – Standards: Technical Barriers to Trade, Sanitary and
     Phytosanitary Measures;
   – Safeguards;
   – Anti-dumping and countervailing measures;
   – Subsidies and State-aid;
   – Sector-specific provisions; and
   – Other: cooperation in customs administration, import
     licensing and customs evaluation, etc., in cases where
     they differ from those applied on a MFN basis.
                                                          124
The Doha Ministerial Declaration (22)
• Proposal by Korea – TN/RL/W/116
   – Definition and Scope of ORCS and ORRCS:
   – Korea not aware of any substantial arguments for
     differentiating between these trade disciplines and the
     concept of “other regulations of commerce”
   – Any clarification of the scope of the term ORC in Article
     XXIV:5 should not only address the textual meaning of the
     words, but should also reflect the purpose of the
     clarification.
   – Standard Format provides helpful assistance in clarifying the
     types of measures that should come within the scope of the
     term ORC.
   – Article XXIV:8 refers to “other restrictive regulations of
     commerce”, but does not define the meaning of this term.
     Any difference between the meaning of ORRC and ORC in
     Article XXIV:5
                                                               125
The Doha Ministerial Declaration (23)
• Proposal by Korea – TN/RL/W/116
  Definition and Scope of ORCS and ORRCS:

   – Article XXIV:8 requires parties to FTAs and CUs to
     eliminate “other restrictive regulations of commerce” except
     the following:
   – Article XI (General Elimination of Quantitative Restrictions);
   – Article XII (Restrictions to Safeguard the Balance of Payments);
   – Article XIII (Non-discriminatory Administration of Quantitative
     Restrictions);
   – Article XIV (Exceptions to the Rules of Non-discrimination);
   – Article XV (Exchange Arrangements); and
   – Article XX (General Exceptions).

     Note that list is not exhaustive. It does not, for example,
     include Article XIX nor Article XXI of the GATT 1994
                                                                    126
The Doha Ministerial Declaration (24)
• Proposal by Korea – TN/RL/W/116
  Definition and Scope of ORCS and ORRCS:
  Two systemic issues – the issue of the exhaustiveness of the list
  of exceptions and the possibility for countries to introduce some
  restrictive measures when forming a FTA or CU. This fact has
  to be borne in mind in the interpretation of ORRCs and ORCs
  How to determine whether tariffs and ORCs are more restrictive
  following the formation of a FTA or CU?: Korea proposes the
  following:
    – whether the measures differs from those applied on a MFN basis;
    – whether the formation of RTAs would be prevented if it were not
      allowed to introduce the measures; and
    – whether the effects of the measures have a negative effect on the
      trade of third parties in terms of economic tests.
                                                                     127
The Doha Ministerial Declaration (25)
•   Proposal by Korea – TN/RL/W/116
    Definition and Scope of ORCS and ORRCS: Sector-
    specific issues: Preferential Rules of Origin (PROs)
    Views of some Members that are parties to RTAs that PROs
    are trade provisions which are only applied to the trade
    between the constituent territories on a technical basis.

    Other Members, however, feel that the trade of third parties
    with the members of the RTA has been negatively affected by
    the use of PROs.




                                                              128
The Doha Ministerial Declaration (26)
•   Proposal by Korea – TN/RL/W/116
    Definition and Scope of ORCS and ORRCS: Sector-
    specific issues: Preferential Rules of Origin (PROs)
    In several cases, parties to RTAs establish PROs that are more
    stringent than those applied on an MFN basis. Consequently,
    producers obliged to change their source of supply from third-
    party country suppliers to constituent party suppliers in order
    to receive preferential treatment under the RTA.
    This issues requires attention when considering whether
    PROs should be treated as an ORCs or ORRCs. In particular,
    these negotiations should address whether to permit diagonal
    cumulation schemes, which favor certain third parties to a
    particular RTA but discriminate against the rest.

                                                                129
The Doha Ministerial Declaration (27)
•   Proposal by Korea – TN/RL/W/116
    Definition and Scope of ORCS and ORRCS: Sector-
    specific issues: TBT and SPS Measures
    Some RTAs provide a preferential standard criteria or
    procedure for the products traded from the constituent parties
    whereas they do not do so on the products of third parties.

    Another example is the establishment of a conformity
    assessment standard on a regional basis. In this situation,
    products from both the region including the constituent
    parties and from third parties may comply with the standard,
    but the parties to the RTA in the region treat only the products
    from the region itself as satisfying the standard.
    Are these to be prohibited because they are discriminatory?
                                                                130
The Doha Ministerial Declaration (28)
•   Proposal by Korea – TN/RL/W/116
    Definition and Scope of ORCS and ORRCS: Sector-
    specific issues: Safeguard Measures
•   Three issues: (i) are they to be considered as ORCs or ORRCs
    and (ii) whether they should be included in the list of
    exemptions in Article XXIV:8; (iii) whether the
    discriminatory application of investigation procedures and
    safeguard measures between the constituent parties and third
    parties are allowed under GATT XXIV.
•   These issues have been considered by some panels and the
    AB, but still no definitive interpretation making it possible for
    each Member to adopt its own interpretation



                                                                  131
The Doha Ministerial Declaration (29)
•   Proposal by Korea – TN/RL/W/116
    Definition and Scope of ORCS and ORRCS: Sector-
    specific issues: Safeguard Measures
•   If assumed that safeguard measures are ORCs or ORRCs,
    then issue should be addressed under Article XXIV. If
    opposite view taken, then departures from the obligations
    under the Safeguard Agreement should not be permitted since
    Article XXIV is an exception to the MFN principle, and the
    exception should be permitted only to the extent contemplated
    in Article XXIV.
•   Should safeguard measures already in place by a customs
    union be applied by acceding parties without a new
    investigation being conducted?
•   Issue important for both the interpretation of Article XXIV
    and also the Safeguards Agreement.                          132
The Doha Ministerial Declaration (30)
•   Proposal by Korea – TN/RL/W/116
    Definition and Scope of ORCS and ORRCS: Sector-
    specific issues: Antidumping Measures
    Anti-dumping measures give rise to the same issues as
    safeguard measures
    Should it be possible under Article XXIV for parties to a
    RTA to maintain a dual system of anti-dumping duties
    for third parties and competition policy among RTA
    parties?




                                                           133
The Doha Ministerial Declaration (31)
•   Proposal by India – TN/RL/W/114
•   Concern about the surge in the number of RTAs and the
    inadequacy of WTO rules: Surge in RTAs has continued
    unabated since the early 1990s. Some 250 RTAs have
    been notified to the GATT/WTO up to June 2002, of
    which over 170 RTAs are currently in force. It is also
    indicated that by end of 2005, the total number of RTAs
    might well approach 300.
    Definition of “Substantially all the Trade”
•   Formation of a RTA should be welfare enhancing for the
    participants. Meaningful welfare gains require closer
    integration between the economies of the participants i.e.
    the RTA extends to as large a proportion of the trade as
                                                            134
    possible.
The Doha Ministerial Declaration (32)
•   Proposal by India – TN/RL/W/114
•   Concern about the surge in the number of RTAs and the
    inadequacy of WTO rules: Surge in RTAs has continued
    unabated since the early 1990s. Some 250 RTAs have
    been notified to the GATT/WTO up to June 2002, of
    which over 170 RTAs are currently in force. It is also
    indicated that by end of 2005, the total number of RTAs
    might well approach 300.
    Definition of “Substantially all the Trade”
•   Formation of a RTA should be welfare enhancing for the
    participants. Meaningful welfare gains require closer
    integration between the economies of the participants i.e.
    the RTA extends to as large a proportion of the trade as135
    possible.
The Doha Ministerial Declaration (33)
•   Proposal by India – TN/RL/W/114
•   Definition of “Substantially all the Trade”
•   RTAs between developed countries formed under
    Article XXIV still leave out sectors like agriculture from
    integration. This limits trade creation and consequently
    the welfare gain to participants.
•   Keeping in view the above, Members may like to define
    “substantially all the trade” for purpose of GATT Article
    XXIV in terms of both (i) a threshold limit of the HS
    tariff lines at the six-digit level; and (ii) the trade flows
    at various stages of implementation of the RTA.


                                                               136
The Doha Ministerial Declaration (34)
•   Proposal by India – TN/RL/W/114
•   Enabling Clause
•   Concern about the proposal by some Members to subject
    RTAs into by developing countries pursuant to the Enabling
    Clause to “Article XXIV transparency mechanism” – review
    of such agreements by the CRTA
•   Objective of the Enabling Clause should be kept in mind
•   What is the objective of those seeking to change the
    procedure for the examination of RTAs concluded pursuant to
    the Enabling Clause. Is it a precursor to applying more
    rigorous disciplines of GATT Article XXIV?
•   Not advisable to change the notification requirement of RTAs
    under the Enabling Clause and the existing system of
    notifying such RTAs to the CTD should continue.
                                                             137
The Doha Ministerial Declaration (35)
•   Proposal by India – TN/RL/W/114
•   Transparency
•   Substantial growth in the number of RTAS and inability of
    the CRTA to effectively examine them indicates an urgent
    need to clarify the principles concerning notification and
    examination of RTAs
•   Appropriate to have a two-step process of notification of a
    RTA: outline of the agreement could be notified to the WTO
    at the time of signature of a RTA but prior to its ratification;
    second notification could be made after ratification, but
    before its entry into force
•   Second notification – full and detailed
•   Merits of the proposed system: Address legal problems of
    countries that cannot notify an agreement until after its
                                                                    138
    ratification
    The Doha Ministerial Declaration (36)
•     Proposal by India – TN/RL/W/114
•     Transparency
•     Initial notification would not be burdensome on the parties
      and could largely be based on public announcements
•     First step could act as a kind of database and a monitoring
      mechanism for receiving a detailed notification later
•     Useful to define a time-frame for notifying changes to an
      RTA. Art. 5.1 of the Agreement on Import Licensing – 60
      days
•     Helpful if Members could be made familiar with various
      provisions of a RTA at an early stage and presented with an
      analysis of its impact on the MTS. Could be achieved
      through a prior factual analysis of the RTA by the WTO
      Secretariat (info provided by parties and info in public
      domain
•     Advantage of this is that it would enable members to be active
      in the examination process.                                  139
    The Doha Ministerial Declaration (37)
•     Proposal by India – TN/RL/W/114
•     Transparency
•     In addition to the initial review by the Secretariat, there could
      be a fixed periodicity of summary review of existing RTAs
      depending on the share of their trade along the lines of the
      present TPRM. Parties to make available all relevant
      information and data to enable the Secretariat to undertake a
      comprehensive analysis
•     Large gap between the two reviews, so as to avoid imposing
      undue burdens on the parties




                                                                      140
    The Doha Ministerial Declaration (38)
•     Proposal by India – TN/RL/W/114
•     Preferential Rules of Origin (PRO)
•     Should they be regarded as an ORC within the meaning of
      Article XXIV:5?
•     Serve almost the same function as a common external tariff
      (CET) in customs unions
•     Recognised that a complete harmonisation of PROs would
      neither be practicable nor desirable, as they are often derived
      from production and trade structures in place between the
      RTA members and designed to meet certain specific
      requirements
•     An attempt to harmonise PROs would require a re-negotiation
      of the WTO Agreement on ROOs, as PROs outside the
      current harmonisation efforts
                                                                   141
    The Doha Ministerial Declaration (39)
•     Proposal by India – TN/RL/W/114
•     Preferential Rules of Origin (PRO)
•     Some PROs have significant trade diversionary effects or
      create barriers to trade of non-RAT Members
•     One such element is the requirement in some PROs that the
      raw materials used for the next stage product conversion
      taking place in a RTA member should be sourced from one of
      the RTA members.
•     There is the requirement in the PRO of a major RTA that for a
      large category of fabrics, made-up articles and apparels to get
      the benefit of a preferential tariff under the RTA, they should
      contain yarn or fibre made in a RTA member. Effect is to
      displace the exports of third countries
•     Effect could be significant on third countries which had
      traditionally supplied fabrics to the relevant members of the 142
      RTA.
    The Doha Ministerial Declaration (40)
•     Proposal by India – TN/RL/W/114
•     Preferential Rules of Origin (PRO)
•     Could lead to increased transportation costs and also
      investment diversion, as the traditional suppliers may want to
      “jump” these new barriers
•     Another complex origin rule is that for clothing and coats to
      be entitled to the benefit of preferential tariff, linings should
      originate from the fabric stage from one of the RTA members.
      Requirement appears to go beyond the substantial
      transformation requirement and also a breach of the TRIMS
      Agreement
•     To create a level playing field, the value addition norms of
      PROs for RTAs between developed countries should not be
      less stringent than the value addition norm provided under
      GSP scheme operated by any of the developed country, which        143
      is a member of the FTA
    The Doha Ministerial Declaration (41)
•     Proposal by India – TN/RL/W/114
•     Preferential Rules of Origin (PRO)
•     Another area of concern in existing PROs is the prevalence of a
      system of diagonal cumulation between various RTAs or for some
      countries vis-à-vis an RTA without any formal agreement as
      understood under Article XXIV. Discriminatory and appear not to
      be consistent with Article XXIV:4 and 5.
•     Understanding should be reached that ROOs are ORCs and as such
      they should meet the criteria set forth in Article XXIV:4 and 5.
•     Tests such as these could be employed: proportionality, least-trade
      restrictiveness, non-violation of GATT fundamental principles.
•     There should be no requirement that the raw material used for next
      stage product conversions should be 100% originating in a RTA
      Member country; (b) there should be no insistence for use of
      particular originating items to give origin to a product (like fabrics
      for apparel, lining for coat)                                          144
    The Doha Ministerial Declaration (42)
•     Proposal by India – TN/RL/W/114
•     SPS and TBT Measures
•     Article XXIV:4 of the GATT 1994 – Members to avoid raising
      barriers to the trade of third countries
•     Putting the provisions for harmonisation of rules of
      recognition for SPS/TBT measures between the RTA
      Members on a fast track procedure or a simplified procedure,
      acts as barriers to exports for non-RTA Members.
•     Such fast track procedures are not followed for the non-RTA
      members and, therefore, their goods are denied market access
      till such time as the normal and time taking procedure for
      non-members are complied with. The additional time and
      costs involved for the non-RTA members is a market access
      barrier because such factors add to the cost of the exported
      product.
•     RTAs – mutual recognition of each other’s certification
      agencies, standardizing bodies and in some cases mutual
      recognition of standards (MRAs)                              145
    The Doha Ministerial Declaration (43)
•     Proposal by India – TN/RL/W/114
•     SPS and TBT Measures
•     Need to extend on an MFN basis similar opportunity for MRAs,
      conformity assessment systems, certification bodies to all
      Members
•     Understanding should be reached that the norms and
      procedures under which the standardizing bodies and
      certification agencies are mutually recognized between RTA
      Members be notified to CRTA or CTD as the case may be.
•     A further understanding could be reached that the RTA
      members shall afford adequate opportunity for other
      interested Members to negotiate their accession to such an
      MRA or arrangement or to negotiate comparable ones with
      them within similar time frame and similar simplified
      procedures as existing for the RTA members.
•      Such a provision could be formulated in line with the     146
      language as in Para 2 to 5 of GATS Article VII
    The Doha Ministerial Declaration (44)
•     Proposal by India – TN/RL/W/114
•     SPS and TBT Measures
•     No legal basis for permitting any derogation for MRAs between
      RTA members.
•     SPS and TBT measures appear not be ORRCs within the meaning
      of Article XXIV:8. Not intended to reduce market access
•     Absurd if they are considered to be ORRCs, as they would have to
      be eliminated.
•     More rational inference would be that only a sub-category of
      TBT/SPS measures should be regarded as ORRCs – those are
      discriminatory and unnecessary




                                                                         147
    The Doha Ministerial Declaration (45)
•     Proposal by India – TN/RL/W/114
•     Trade Defence Measures
•     MFN character of safeguard measures needs to reaffirmed in the
      negotiations
•     Another issue that could be addressed is derogation from the
      standards of safeguard investigation for taking action only
      against RTA Members. An understanding should be reached
      that such a derogation could be permitted when tariffs are
      increased from preferential level up to the MFN level, that is,
      preferences would be suspended between regional parties,
      while the disciplines of the WTO Agreement on Safeguard
      would apply for raising duty above the MFN level.
•     Understanding to be reached in the context of the imposition
      of AD duties and Countervailing duties: parameters to be set
      for injury determination, time-frame for the imposition of
      duties would be no different from that provided in the
      relevant WTO Agreements. Harmonisation of WTO and
                                                                    148
      RTA rules on trade defence measures.
The Doha Ministerial Declaration (46)
•   Proposal by Chile – TN/RL/W/151
•   CRTA – Whether it could make decisions
•   Expresses doubt if the CRTA would ever be able to
    make decisions
•   Would it not be more appropriate for the CRTA to
    conduct a thorough examination of a notified RTA and
    simply take note of Members’ statements and the
    Secretariat Report?
•   Provided, of course, that increased transparency with
    better examination procedures and clear and
    improved disciplines are achieved, it would then be up
    to any member who considers that there is nullification
    or impairment of its rights to pursue the matter under the
    DSU.                                                     149
The Doha Ministerial Declaration (47)
•   Proposal by Chile – TN/RL/W/151
•   Concepts such as “substantially all the trade”, “other
    regulations of commerce”, “preferential rules of origin”,
    relations between WTO rules on RTAs
•   Negotiations should not affect or diminish the rights of
    developing countries under the Enabling Clause.
    Agreements notified under the Enabling Clause could
    benefit from improved transparency and examination in
    the CRTA, but they should not be subjected to the
    disciplines of Article XXIV, as far as tariff preferences
    are concerned
•

                                                            150
    The Doha Ministerial Declaration (48)
•     Proposal by Chile – TN/RL/W/152
•     GATS – Article V
•     Basic conditions to be fulfilled are the ff:
•     (i) Substantial sectoral coverage: This condition is to be
      understood in terms of number of services sectors, volume of
      trade affected and modes of supply. The agreement should not
      exclude a priori any mode of supply.
•     (ii) Limitation of substantially all discrimination among its
      parties in the sectors it covers, by eliminating existing
      measures and or preventing the introduction of new
      discrimination within a reasonable time frame.
•     (iii) The agreement should not raise the overall level of
      barriers to members outside those FTAs.
                                                                 151
    The Doha Ministerial Declaration (49)
•     Proposal by Chile – TN/RL/W/152
•     GATS – Article V
•     A general question that might be explored is possible
      similarities between GATT Article XXIV and GATS Article
      V. These similarities should be analyzed not only with
      respect to the transparency mechanism but also with respect
      to various substantive issues (such as “substantially all the
      trade” v/s “substantial sectoral coverage”; “level of duties and
      other regulation of commerce” v/s “level of barriers”,
      “reasonable time–frames” etc.)
•     We also should analyze and clarify, in particular, the
      following substantive issues: “substantial sectoral coverage”
      (Article V.1(a)) and how to assess it; “elimination of
      substantially all discrimination”, “reasonable time-frame” and
      how to address discriminatory measures on market access as 152
      defined in Article XVI (Article V.1(b));
    The Doha Ministerial Declaration (50)
•     Proposal by Chile – TN/RL/W/152
•     GATS – Article V
•     Clarification of the meaning of “wider process of economic
      integration” (Article V.2); flexibility for developing countries
      (Article V.3(a)); requirements to avoid rising “the overall
      level of barriers trade in services” (Article V.4) and how to
      asses it; meaning of substantive business operations” (Article
      V.6).
•     With respect to transparency issues, a particular aspect that
      could be analyzed is the obligation of notification of
      Recognition Agreements between members of a RTAs, within
      the context of those RTAs (GATS Article VII and GATS
      Article V).

                                                                    153
    The Doha Ministerial Declaration (51)

•     Proposal by Australia, Chile, HK, China, Korea and new
      Zealand – TN/RL/W/117
•     Transparency of RTAs
•     Consensus in the Negotiating Group for a higher level of
      transparency in relation to RTAs.
•     Opposing views expressed on when and where notifications
      should be made and what they should contain
•     Legal basis for notification of agreements: Article XXIV:7 of
      GATT 1994; Article V:7(a) of the GATS and para. 4(a) of the
      Enabling Clause



                                                                  154
    The Doha Ministerial Declaration (52)

•     Proposal by Australia, Chile, HK, China, Korea and new
      Zealand – TN/RL/W/117
•     When to Notify
•     Two-stage process: (i) preliminary notification on the signing
      of the agreement by the parties; (ii) a full notification before
      entry into force or before preferential treatment is actually
      applied, whichever is earlier
•     With respect to customs unions, notification should be made
      no later than 90 days before entry into force or before
      preferential treatment is actually applied, whichever is earlier
•     Subsequent notification to be made in cases of significant
      changes and/or developments in the Agreements. Should be
      reported as they occur. Ninety days in the case of CUs
                                                                     155
    The Doha Ministerial Declaration (53)
•     Proposal by Australia, Chile, HK, China, Korea and new
      Zealand – TN/RL/W/117
•     What to Notify
•     Preliminary Notification:
•     In the preliminary notification, the Parties to the Agreement
      should (at a minimum) provide the following facts, on
      condition that they may be subject to change in the full
      notification.
•     Name of the Agreement; Parties to the Agreement; Provisions
      of the WTO Agreements under which the Agreement is
      established; Date of signature; Provisional date of ratification,
      acceptance, approval or accession, if available; Provisional
      date of entry into force of the Agreement, if available;
      Duration of the Agreement
•     Contact point including website address, if available;
      Objectives of the Agreement; Scope of the Agreement (Table
      of Contents, Index, or, if not available, List of chapter titles) 156
    The Doha Ministerial Declaration (54)
•     Proposal by Australia, Chile, HK, China, Korea and new
      Zealand – TN/RL/W/117
•     What to Notify
•     Full Notification: Members to provide the Secretariat with the
      following:
•     the full text of the Agreement, including all Annexes, Schedules and
      Protocols
•     on a line-by-line basis (at least 6-digit level), tariff rates and import
      statistics in value and quantities, by country of origin for the 3 year
      period preceding the notification. (Need for a consolidated tariff
      schedule that includes all applied tariffs (MFN and Preferential) in
      electronic format
•     Secretariat to prepare a factual report based on the Draft Outline for
      a Factual Presentation on Individual RTAs. Document needs to be
      clarified in relation to the heading, scope and depth of intra-trade
      liberalisation. Section on trade and tariff analysis to include trade
      data on a sector by sector basis and by providing information on a
      tariff line basis (i.e. indicating what proportion of tariffs will remain
      at the MFN rate, what proportion will be reduced and what
      proportion will be eliminated
                                                                                157
•     Same to be prepared for individual RTAs for the services sector
    The Doha Ministerial Declaration (55)
•     Proposal by Australia, Chile, HK, China, Korea and
      new Zealand – TN/RL/W/117
•     Where to Notify
•     All RTAs to be notified to the CRTA. Idea is to improve
      transparency and not to change the procedures for
      examining agreements entered pursuant to the Enabling
      Clause.
•     We would like to emphasise that this suggestion for
      increased transparency does not prejudge any
      interpretation of the mandate of the Committee on Trade
      and Development (the CTD), nor would it prejudice
      rights and obligations of Members with respect to RTAs
      notified under the Enabling Clause.

                                                            158

								
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