Regional Trade Regional Trade Agreements Agreements and the WTOand the WTO

Roberto FiorentinoRoberto FiorentinoWorld Trade OrganizationWorld Trade Organization

Outline:Outline: Some facts and figuresSome facts and figures

RTAs and the WTORTAs and the WTO

DDA negotiationsDDA negotiations

Regional Trade Regional Trade Agreements Agreements and the WTOand the WTO

1. What is a Regional Trade 1. What is a Regional Trade Agreement? Agreement?

A problem of definitions:A problem of definitions: Preferential Trade Arrangements (PTA)Preferential Trade Arrangements (PTA)these are trade arrangements under which a party agrees, these are trade arrangements under which a party agrees, either unilaterally or as a result of negotiations, to accord one either unilaterally or as a result of negotiations, to accord one or more other parties preferential treatment in trade in goods or more other parties preferential treatment in trade in goods or services. or services.

Free-Trade Agreement (FTA)Free-Trade Agreement (FTA)a contractual arrangement between two or more countries under which they give each other preferential market access

Regional Trade Arrangement (RTA)Regional Trade Arrangement (RTA)a a free-trade agreement, customs union or or common market consisting of two or more countriesconsisting of two or more countries

2. How many RTAs are 2. How many RTAs are there?there?

As of November 2008, 418 RTAs have been As of November 2008, 418 RTAs have been notified to the GATT/WTO of which 227 are notified to the GATT/WTO of which 227 are currently in forcecurrently in force

161 RTAs cover trade in goods; 54 trade in 161 RTAs cover trade in goods; 54 trade in services; and 12 are accessions to existing RTAsservices; and 12 are accessions to existing RTAs

0

2

4

6

8

10

12

14

16

18

20

22

24

26

No

. o

f R

TA

s

0

50

100

150

200

250

Goods Services Accessions Cumulative

05

101520253035404550556065707580859095

100

1949195

1195

3195

5195

7195

9196

1196

3196

5196

7196

9197

1197

3197

5197

7197

9198

1198

3198

5198

7198

9199

1199

3199

5199

7199

9200

1200

3200

5200

7

No

. o

f R

TA

s

0

50

100

150

200

250

300

350

400

450

Notified RTAs (goods, services & accessions) Inactive RTAs

Cumulative RTA notifications Cumulative active RTAs

Typology of RTAsTypology of RTAs

FTAs account for the FTAs account for the great majority of great majority of RTAs notified and in RTAs notified and in forceforce

...and of the ...and of the projected RTAsprojected RTAs

Notified RTAs in force as of Notified RTAs in force as of November 2008November 2008

RTAs signed and under negotiations RTAs signed and under negotiations

85%

8%7%

FTA Customs Union Partial Scope

92%

1% 7%

FTA Customs Union Partial Scope

Participation in RTAs (goods) as of January 2009* Participation in RTAs (goods) as of January 2009*

1 to 41 to 4 5 to 9 10 to 19 20 to 26 No data

* Notified and in force.* Notified and in force.

The global landscape of RTAsThe global landscape of RTAs

Configuration of RTAsConfiguration of RTAs

Bilateral RTAs account Bilateral RTAs account for the majority of for the majority of RTAs notified and in RTAs notified and in force and of future force and of future RTAsRTAs 0%

20%

40%

60%

80%

100%

In Force Signed/Neg

Plurilateral Bilateral

Cross-regional Cross-regional RTAs account for a RTAs account for a large share of large share of future RTAsfuture RTAs

RTA configuration as of RTA configuration as of November 2008November 2008

Cross-regional RTAs as of Cross-regional RTAs as of November 2008November 2008

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

In Force Signed/Neg

Intra-Regional Cross-Regional

Global & regional developments

The spaghetti bowl effect...

UnitedStates

EC

EFTA

Mexico

Chile

S. Africa

Singapore

MERCOSUR

GCC

Australia

N. Zealand

ASEAN

Japan

KoreaJordan

Israel

ECOWAS

CEMAC

SACU

ESA

Morocco

ChineseTaipei

Panama

Bahrain

Thailand

India

Signed / In ForceUnder NegotiationUnder Consideration

China

SADC

Egypt

PACIFICEPA

CARIFORUM

Canada

3. RTAs in the WTO3. RTAs in the WTO

What is the legal nature of an RTA What is the legal nature of an RTA in the WTO?in the WTO?

Basic principles:• MFN• National Treatment

WTO

• General General ExceptionsExceptions

• Security Security ExceptionsExceptions

• WaiversWaivers

• S&D (GSP, EBA, S&D (GSP, EBA, etc)etc)

• RTAsRTAs

Dero

gatio

ns

& e

xcep

tion

s

Non - Discrimination

RTAs are RTAs are thethe major exception to major exception to MFN (Article 1)MFN (Article 1)

•GATT Article XXIV

•Enabling Clause

•Understanding on GATT Art. XXIV

•GATS Article V

Goods

Services

RTAs are RTAs are permittedpermitted albeit albeit conditionalconditional exceptions to the MFN principle; exceptions to the MFN principle;

RTAs can be established in accordance with RTAs can be established in accordance with the following the following conditionalconditional legal provisions: legal provisions:

RTAs & the WTORTAs & the WTO

What type of an exception is an What type of an exception is an RTA?RTA?

To invoke the exception the RTA has to be To invoke the exception the RTA has to be notifiednotified

Common PrinciplesCommon Principles

1.1. The purpose of an RTA is to facilitate The purpose of an RTA is to facilitate trade among the parties through the trade among the parties through the reductionreduction or or eliminationelimination of tariffs and of tariffs and other barriers to tradeother barriers to trade

2.2. The RTA must provide for The RTA must provide for mutual/reciprocalmutual/reciprocal trade concessions trade concessions

3.3. The attainment of the internal objective The attainment of the internal objective of trade liberalization must not entail of trade liberalization must not entail placing placing barriersbarriers towards non-RTA parties towards non-RTA parties higherhigher than those existing before the than those existing before the formation of the RTAformation of the RTA

4. RTAs & WTO: 4. RTAs & WTO: problems?problems?

Lack of transparency:Lack of transparency: Failure to comply with notification Failure to comply with notification

obligationsobligations Where notified, inadequate information Where notified, inadequate information

providedprovided

Systemic concerns:Systemic concerns: Proliferation of RTAsProliferation of RTAs Divergent interpretation of WTO Divergent interpretation of WTO

provisions on RTAsprovisions on RTAs

Institutional deadlock:Institutional deadlock: No effective WTO surveillance mechanism No effective WTO surveillance mechanism

of RTAsof RTAs No consistency assessment of the RTAs in No consistency assessment of the RTAs in

forceforce

The Doha Ministerial Declaration (14 Nov 2001) contains two references to RTAs:

§4 Recognize the WTO as unique forum for global trade rule-making and liberalization

... and RTAs’ role in trade liberalization and development

§29 Calls for negotiations to clarify and improve WTO rules and procedures on RTAs

... taking into account RTAs’ developmental aspects

Preambular

language

Negotiating

Mandate

5. DDA negotiations on RTAs: the 5. DDA negotiations on RTAs: the mandatemandate

Procedural Procedural RequirementsRequirements

GATT Art. XXIVGATT Art. XXIV GATS Art. VGATS Art. VEnabling Enabling

Clause – Para. Clause – Para. 2(c)2(c)

Transparency Mechanism for Transparency Mechanism for RTAsRTAs

General Council’s Decision General Council’s Decision

of 14 December 2006 (WT/L/671)of 14 December 2006 (WT/L/671)

State of play and what remains State of play and what remains to be doneto be done

RTA Transparency:RTA Transparency: Review of the Mechanism - § 23 of Review of the Mechanism - § 23 of

WT/L/671WT/L/671 Permanent application (Single Permanent application (Single

Undertaking)Undertaking) Database on RTAsDatabase on RTAs

Systemic Issues:Systemic Issues: Last meeting dedicated to these Last meeting dedicated to these

questions was held in February 2007questions was held in February 2007 Main problem facing the Group is the Main problem facing the Group is the

lack of text-based proposals to advance lack of text-based proposals to advance the processthe process

Chair has been holding bilateral Chair has been holding bilateral consultations with Members to hear consultations with Members to hear their views on the way forwardtheir views on the way forward

Thank youThank you

Roberto.Fiorentino@wto.orgRoberto.Fiorentino@wto.org

RTA SectionRTA Section

World Trade OrgainzationWorld Trade Orgainzation