Abstract
More than four decades ago, John Jackson wrote that preferential arrangement may fade in importance. Contrary to Jackson’s statement, regionalism has grown in strength and Regional Trade Agreements (RTAs) are seen as an integral part of the multilateral trading system (MTS), and account for almost half of world trade, and operate alongside the trade agreements of the WTO. This chapter will consider the motives for the rise of regionalism. The chapter also considers the legal basis for RTAs under the multilateral system, and examine the relevant sections of Article XXIV of GATT 1994. Further, the requirements for notifying agreements under the Enabling Clause are reviewed. Finally, the chapter discusses the impact of the Turkey-Textiles case on the CLS and trade debate.
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- 1.
Jackson (1969), p. 623.
- 2.
Sapir (1998), p. 718.
- 3.
For more information on RTAs notified to the GATT/WTO, see http://www.wto.org/english/tratop_e/region_e/regfac_e.htm. Accessed 6 March 2014.
- 4.
- 5.
Bail (1997), p. 842.
- 6.
Demaret (1997), p. 832.
- 7.
Other reasons put forward are the following: to increase market access, to promote investment, to shield against unfair use of trade remedies, to guard against slowed multilateral liberalisation, to increase support for multilateral liberalisation, to achieve “WTO-plus” levels of integration, to solidify domestic reforms, to increase competitiveness in global markets, to increase clout in international negotiations, to achieve economic stability, and to meet other strategic goals. For a full discussion of these reasons, see Lynch (2010), p. 2.
- 8.
Zoellick (2002), p. 20.
- 9.
- 10.
Studies carried out by WTO, the Organisation for Economic Cooperation and Development (OECD), the International Monetary Fund (IMF), and the World Bank have all indicated that regionalism has on the whole been very supportive of the multilateral trading system. They argue that the fact that there has not been any tension between multilateralism and regionalism to date owes much to political restraint and the simplicity of some of the agreements that were notified to the GATT.
- 11.
See speech (“Globalizing Regionalism: A New Role for MERCOSUR in the Multilateral Trading System”, pp. 1–2) by the Director General of the WTO, Mr. Mike Moore, delivered in Buenos Aires on 28 November 2000, pp. 1–2: “In the 1990s, it was widely assumed that building complementary regional and multilateral institutions was the only way to grapple with the complexities of a fast-changing international economy. But in the wake of Seattle – and our inability so far to launch a new global trade round – has the time come to question that easy assumption? Is there a risk that regionalism is becoming a stumbling-block, more than a building block, for the new WTO? Draining energy from multilateral negotiations? Fragmenting international trade? And creating a new international dis-order characterized by growing rivalries and marginalization and the possibility of hostile blocks?”.
- 12.
Freund and Emanuel (2010).
- 13.
Bhagwati (2001).
- 14.
Bhagwati (2001).
- 15.
Bilal and Szepesi (2005), pp. 389–390.
- 16.
Preamble of the Understanding to Article XXIV. See WTO website.
- 17.
Lamy (2007).
- 18.
Lamy (2012).
- 19.
See Paulwelyn (2009), p. 369.
- 20.
Turkey – Restrictions on Imports of Textile and Clothing Products. The report of the Panel as modified by the Appellate Body, was adopted on 19 November 1999, WT/DS34/R.
- 21.
Brazil – Retreaded Tyres Panel Report, Brazil—Measures Affecting Imports of Retreaded Tyres, WT/DS332/R, adopted 17 December 2007, as modified by Appellate Body Report WT/DS332/AB/R.
- 22.
Brazil – Retreaded Tyres Panel Report.
- 23.
Brazil – Retreaded Tyres Panel Report.
- 24.
Brazil – Retreaded Tyres Panel Report, p. 370.
- 25.
Brazil – Retreaded Tyres Panel Report.
- 26.
Appellate Body Report, EC – Tariff Preferences, para. 101.
- 27.
Appellate Body Report, US – Section 211 Appropriations Act, para. 297. See also Appellate Body Report, Canada – Autos, para. 69.
- 28.
Report by the Consultative Board to the Director General Supachai Panitchpakdi, The Future of the WTO: Addressing Institutional Challenges in the New Millennium (hereinafter the ‘Sutherland Report’) (WTO, 2004), para. 60.
- 29.
Kessie (2001).
- 30.
- 31.
See Article XXIV: 4 of the General Agreement.
- 32.
See Frankel (1997), pp. 13–17.
- 33.
Jackson (1969), p. 587.
- 34.
Jackson (1969), pp. 575–576. See further the unadopted panel report in EEC-Member States’ Import Regimes for Bananas, June 3, 1993, DS32/R, para. 358: “The Panel noted that Article XXIV:5 to 8 permitted the Contracting Parties to deviate from their obligations under other provisions of the General Agreement for the purpose of forming a custom union …”
- 35.
Turkey – Restrictions on Imports of Textile and Clothing Products. The report of the Panel, as modified by the Appellate Body, was adopted on 19 November 1999, WT/DS34/R, hereinafter Turkey – Textiles. On 6 March 1995, the Turkey–EC Association Council adopted Decision 1/95 to conclude the association agreement between Turkey and the EC. Article 12(2) of the Decision states: “In conformity with the requirements of article XXIV of the GATT Turkey will apply as from the entry into force of this Decision, substantially the same commercial policy as the Community in the textile sector including the agreements or arrangements on trade in textile and clothing.” Following this, Turkey in January 1996 imposed quantitative restrictions on imports from India on 19 categories of textiles and clothing products. In 1998, India filed a complaint against Turkey claiming that the restrictions imposed by Turkey were inconsistent with Turkey’s obligations under Articles XI and XIII of GATT and were not justified by Article XXIV of GATT, which did not authorise the imposition of discriminatory QRs, and that the restrictions were inconsistent with Turkey’s obligations under Article 2 of the ATC. India also claimed that the restrictions appeared to nullify or impair benefits accruing to it directly or indirectly under GATT and the ATC. Turkey did not deny India’s clam that the quantitative restrictions were inconsistent with its obligations under Articles XI and XIII of the GATT 1994 and Article 2.4 of the Agreement on Textiles and Clothing. However, Turkey argued that the quantitative restrictions were justified under Article XXIV. The Panel found that Turkey’s imposition of the quantitative restrictions were inconsistent with Articles XI and XIII. The Panel also found that Turkey’s measures were new restrictions, which did not exist at the time of the entry into force of the ATC, and, thus, were prohibited by Art. 2.4. In its ruling on appeal, the Appellate Body agreed with the Panel’s ruling that Turkey’s measures were not justified under Article XXIV.
- 36.
See WTO Document WT/REG/W/31; 18 November 1998, p. 1.
- 37.
The Working Party Report (L/778) was adopted on 29 November 1957: see GATT, (BISD) (1958) Sixth Supplement, para. 2, pp. 70–71. In the examination of the North American Free Trade Agreement by the Committee on Regional Trade Agreements, the representative of the European Communities said that according to Article XXIV:4, “it was permissible to form free trade agreements or customs unions, provided Members did so in a way that did not harm others or undermined the broad, non-discriminatory architecture of the multilateral trading system”: see WT/REG4/M/2; 21 February 1997; para. 22, p. 6.
- 38.
See GATT, Sixth Supplement, The Working Party Report (L/778), para. 3, p. 71.
- 39.
See Dam (1970), p. 278.
- 40.
Turkey – Textiles, WT/DS34/R, para. 9.126, p. 131.
- 41.
Turkey – Textiles, para. 6.32, p. 37.
- 42.
Turkey – Textiles, para. 6.47, p. 39.
- 43.
Turkey – Textiles, para. 9.123, p. 131.
- 44.
Turkey – Textiles. The Appellate Body report was adopted on 19 November 1999, WT/DS34/AB/R, para. 57, p. 15.
- 45.
WT/DS34/AB/R, para. 45.
- 46.
Paragraph 3 of the Understanding on the Interpretation of Article XXIV of the GATT 1994.
- 47.
WT/REG/W/22; 30 January 1998.
- 48.
The Working Party Report (L/4064) was adopted on 30 October 1974: see GATT, Basic Instruments and Selected Documents (BISD) (1975) 21st Supplement, para. 16, p. 80.
- 49.
See WTO Document, WT/REG/W/17/Add.1, supra note 121. See further Communication from Australia in WTO Document WT/REG/W/25.
- 50.
WT/DS34/AB/R, para. 48.
- 51.
WT/DS34/AB/R, para. 49.
- 52.
The Working Party Report (L/778) was adopted on 29 November 1957: see GATT, (BISD) (1958) Sixth Supplement, para. 33, p. 100. In the examination of the North American Free Trade Agreement by the Committee on Regional Trade Agreements, the representative of the European Communities said that according to Article XXIV:4, “it was permissible to form free trade agreements or customs unions, provided Members did so in a way that did not harm others or undermined the broad, non-discriminatory architecture of the multilateral trading system”: see WT/REG4/M/2, 21 February 1997, para. 22, p. 6. See further the report of the Working Party in the examination of European Communities—Agreements with Portugal that was adopted on 19 October 1973: see GATT, Basic Instruments and Selected Documents (BISD) (1974), Twentieth Supplement, para. 16, p. 176. The representative of the EC observed that “no exact definition of the expression [‘substantially all the trade’] existed and that the precise figures would vary from case to case according to several factors. At any rate, percentages were established as a general indicator of the trade covered by the Agreement and were not to be regarded as a conclusive factor.”
- 53.
GATT; BISD, Sixth Supplement, para. 34, p. 100.
- 54.
WT/REG/W/22; 30 January 1998, para. 8, p. 3.
- 55.
WT/REG/W/22; 30 January 1998, paras 10–13.
- 56.
In the joint examination of the interim agreements between the European Communities and the Czech Republic, Hungary, Poland, and the Slovak Republic, the representative of the European Communities stated that “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”: see WT/REG1/M/2; 3 October 1997, para. 14, p. 4.
- 57.
WT/REG/W/18; 17 November 1997, paras 10–12, p. 2. See further communication from Hong Kong to the CRTA, WT/REG/W/19, dated 17 November 1997, paras 14–16, p. 3: “[t]he meaning of the word ‘substantially’ is imprecise. It obviously means less than quite close to the whole, but how close it approaches completeness is far from clear. It is also open to discussion whether the meaning of ‘substantially’ should be interpreted quantitatively, qualitatively, or both… It is also for consideration whether a single definition or threshold for the word ‘substantially’ should be pursued in numerical terms…[T]he expressed purpose of a customs union ‘to facilitate trade between constituent territories and not to raise barriers to trade of other contracting parties with such ‘territories’ should also have an impact on the consideration of this issue.”
- 58.
WT/REG/W/22; 30 January 1998, paras 10–13, p. 3. In its response to a comment as to whether or not the figure of 95 % would apply to the trade of all the parties to a regional trade agreement, Australia replied as follows: “The figure of 95 per cent would apply to any arrangement regardless of the number of parties. Between them, the parties would be able to exempt 5 per cent of all six-digit tariff lines as listed in the Harmonised system (HS) from the requirement spelt out in GATT Article XXIV:8. How they would share out the 5 per cent would reflect the particular circumstances of the economies involved. The actual division of the available tariff lines would be done through negotiations between the prospective parties to the arrangement. In the same vein, if, for example, three economies were to participate, each would be entitled to a notional 1.66 per cent of exceptions.” WT/REG/W/22/Add.1; 24 April 1998, para. 3, pp. 1–2.
- 59.
WT/REG/W/22/Add.1; 24 April 1998, para. 2, p. 1.
- 60.
Part IV, which deals mainly with trade and development, was added to the General Agreement in 1965, at the behest of developing countries. It established the principle of non-reciprocity in trade negotiations between developed and developing countries and provided for special and differential measures intended to promote the trade and development of the less-developed members of GATT. It has been argued by some that it does not create legally enforceable rights. In other words, its provisions are merely hortatory in character.
- 61.
The precursor of the Enabling Clause was the January 1979 Decision of the CONTRACTING PARTIES to adopt the Report of the Working Party on Preferential Trading Arrangements. The Decision essentially authorised, contrary to the terms of Article I of the General Agreement, the formation of preferential trading arrangements. Members that invoked this Decision to form or make modifications to an existing arrangement were required to notify the CONTRACTING PARTIES.
- 62.
See Crawford and Laird (2000), p. 13.
- 63.
WTO Secretariat (1995), p. 18.
- 64.
WTO Secretariat (2000), footnote 74 and accompanying text, p. 15.
- 65.
WTO Secretariat (1995), p. 18.
- 66.
This is an RTA comprising of Argentina, Brazil, Paraguay and Uruguay.
- 67.
WT/COMTD/5/Rev.1; 25 October 1995. During the years of the GATT, agreements notified under the Enabling Clause were not thoroughly examined. Normally, after notifying the CTD in writing of the formation of the regional trading arrangement, one of the parties would officially introduce the agreement in the next meeting of the CTD. Any interested contracting party could ask questions or express its opinion on the agreement. There was usually no Working Party examination of agreements notified pursuant to the Enabling Clause, hence the reluctance of developing countries to allow the examination of their agreements under Article XXIV, under which Working Parties were routinely established to examine the consistency of agreements with the multilateral rules.
- 68.
WT/DS34/R, paras 9.186–9.187, p. 147.
- 69.
WT/DS34/AB/R, para. 45, p. 11.
- 70.
WT/DS34/AB/R, para. 58, p. 16.
- 71.
Article 41 of the VCLT in relation to RTAs is discussed in Chap. 4.
- 72.
WT/DS34/R, paras 9.182, p. 145.
- 73.
Turkey – Textiles. The report of the Panel, as modified by the Appellate Body, was adopted on 19 November 1999, WT/DS34/R, paras 9.50–9.51, pp. 112–113.
- 74.
Turkey – Textiles, paras 9.52–9.53, p. 114.
- 75.
Turkey – Textiles, para. 60, pp. 16–17. The Appellate Body report, together with the Panel report, as modified by the Appellate Body report, was adopted on 19 November 1999, citing WT/DS90/AB/R, adopted 22 September 1999, paras 80–109.
- 76.
Roessler (2000), p. 7. He notes that: “[t]his ruling [of the Appellate Body] implies that … [it] is of the view that panels are competent to examine the overall consistency of a regional trade agreement.”
- 77.
See paragraph 21 of the Draft Ministerial Conference Text; JOB (99)/5865/Rev.1); 19 October 1999.
- 78.
Roessler (2000), pp. 7–8.
- 79.
Roessler (2000), p. 8.
- 80.
Roessler (2000), p. 8.
- 81.
Carr (2001), p. 17.
- 82.
Turkey – Textiles, para. 9.52, p. 114.
- 83.
“It is possible that a panel and the BOP Committee could examine successively the issue of whether the same balance-of-payments measures are justified under Article XVIII:B. If there has been no decision in the BOP Committee or General Council at the time of the panel’s consideration of the issue, the issue of conflict does not arise at the panel stage, which is the situation in this case. While the BOP Committee and the General Council have considered the justification of India’s balance-of-payments measures at issue in this case, they made no determinations and reached no agreed conclusions. Even if this Panel were to decide that India’s measures are not justified, nothing would prevent the Committee and the General Council from reaching different conclusions on the basis of new, different facts, in which case the Council could take a decision on a phase-out period under paragraph 13 of the 1994 Understanding on Balance-of-Payments Provisions. Moreover, what Members accepted in the DSB could be modified in the General Council. The discretionary competence of the General Council to waive India’s obligations under Article IX of the WTO Agreement would remain unaffected. Similarly, a decision by the Panel that India’s measures were justified as of November 1997 would not preclude re-examination by the BOP Committee or the General Council of India’s measures in the future”: WT/DS90/R, para. 5.93, p. 153.
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Addo, K. (2015). Regional Trade Agreements and the Interface Between Labour Standards and International Trade. In: Core Labour Standards and International Trade. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-662-44619-5_6
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