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The World Trade Organization: Legal, Economic and Political Analysis pp 1799–1842Cite as

Regulating Regional Trade Agreements—A Legal Analysis

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Abstract

Recent years have witnessed a remarkable increase in the number of Free Trade Agreements (“FTAs”) and Customs Unions (often collectively referred to as “Regional Trade Agreements” or “RTAs”) entered into by countries that are members of the World Trade Organization (“WTO”).1 The consequences of this recent and unprecedented increase in RTAs on the world trading system are likely to be significant, although they are not yet fully understood.2 RTAs, which by their very nature discriminate against non-signatories, are a derogation from the Most-Favored Nation (“MFN”) principle, one of the fundamental guides for national government behavior the world trading system was intended to establish. While RTAs have the potential to undermine the MFN principle through discriminatory application of tariffs and regulatory barriers, they also have the potential to advance trade liberalization through duty-free trade among signatories, and by allowing the participating nations to integrate their economies more thoroughly than they could through WTO agreements.

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References

  1. Many “regional” trade agreements are not literally “regional,” because they involve countries that are located great distances from each other. Although some RTAs are determined in part by geographic proximity and various related efficiencies, such as transportation and distribution costs, other RTAs are better explained by political considerations (e.g., EC FTAs with former colonies, or the U.S.-Israel and U.S.-Jordan FTAs) or considerations of cultural affinity (e.g., the British Commonwealth Preferences of the early Twentieth Century). For a range of explanations why countries enter RTAs, see, Sungjoon Cho, Breaking the Barrier between Regionalism and Multilateralism: A New Perspective on Trade Regionalism, 42 Harv. Int’l L. J. 419, 423–26 (2000) (summarizing theories advanced by political scientists and economists to explain the growth of regionalism.)

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  2. There is considerable uncertainty regarding the degree to which RTAs are harmful, benign or helpful to the world trading system. See e.g., The World Bank, Trade Blocs (2000) (remarking on the lack of evidence that RTAs either aid or impede WTO multilateral liberalization.); See also Committee on Regional Trade Agreements, Note on the Meeting of 2–3 July 1996, WT/REG/M/2, ¶ 82 (Aug. 14, 1996) (“Second Session of CRTA”) (in which the EC warned against “partial and pre-conceived ideas about the relationship between regionalism and the multilateral trading system.”).

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  3. See Differential and More Favourable Treatment, Reciprocity and Fuller Participation of Developing Countries, Decision of November 18 1979, BISD 265/203 (1979). One-way preferential arrangements, where developed countries give preferred treatment to imports from developing countries but not vice versa, are discussed in Chapter 34 of this book.

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  4. For an economic analysis of the RTA phenomenon, see Scott Baier and Jeffrey Bergstrand, On the Economic Determinants of Free Trade Agreements (June 2001).

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  5. See Doha Ministerial Declaration (reproduced in the Appendix to this book and also available at www.wto.org), Article 29. Four WTO meetings on the subject of RTAs had been completed by mid-December 2002. Negotiations on clarifying and improving the WTO’s regulation of RTAs are scheduled to be completed by January 1, 2005.

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  6. See Committee on Regional Trade Agreements, Basic Information on Regional Trade Agreements: Agreements Notified to the GATT/WTO and in Force as of 31 January 2002, WT/REG/W/44 (Feb. 7, 2002) (“Basic Information on Regional Trade Agreements”). Please note that this figure of twenty-five RTAs excludes five notifications of accessions by new members to the European Communities or to the European Free Trade Association. By November 2002, there had been a total of 255 notifications (including accessions and including RTAs no longer in force) to the GATT/WTO since 1947. See Committee on Regional Trade Agreements, Draft Report (2002) to the General Council, WT/REG/W/47 (Nov. 4, 2002) (“Draft Report (2002) to the General Council”).

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  7. An initial surge in the number of RTAs entered into in the early 1990s has been attributed to European integration efforts after the collapse of the COMECON block and uncertainty over the outcome of the Uruguay Round. See, Clemens Boonekamp, Regional Trade Integration under Transformation, Seminar on Regionalism and the WTO, (Apr. 26, 2002), http://www.wto.org./English/tratop_e/region/sem_april02_e/clemens_boonekamp.doc. With the establishment of the WTO in 1995, countries began entering into RTAs at an even faster pace. Of the 132 RTAs in force which were notified between 1990 and 2002, the overwhelming majority were notified after 1995. See Draft Report (2002) to the General Council, supra note 8. The United States provides a good example of the recent acceleration of interest in RTAs. Although the United States entered only three RTAs between 1947 and 1994 (the U.S.-Israel FTA in 1985, the U.S.-Canada FTA in 1988, and the NAFTA in 1994), it entered into two FTAs on January 1, 2004 (with Singapore and Chile), and—by mid-2004—had concluded negotiations on five additional FTAs (Australia, Bahrain, Dominican Republic, Morocco, and the Central American countries) and had entered into negotiations for additional FTAs (Panama, Thailand, the Andean countries and the countries of the South African Customs Union). It is also negotiating the Free Trade Area of the Americas, and has also proposed in general terms an FTA with an unspecified group of Middle Eastern Countries.

  8. See, Boonekamp, supra Clemens Boonekamp, Regional Trade Integration under Transformation, Seminar on Regionalism and the WTO, (Apr. 26, 2002) note 9, at ¶ 7. Jeffrey F. Schott, Free Trade Agreements: Boon or Bane for the World Trading System, Presentation Made at IIE Conference (May 7, 2003) (providing chart below).

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  9. See Ken Heydon, Regulatory Provisions in Regional Trade Agreements: “Singapore” Issues, WTO Seminar on Regionalism and the WTO, at 3 (Apr. 26, 2002), at http://www.wto.org./English/tratop_e/region/sem_april02_e/ken.heydon.doc

  10. See World Trade Organization, Regionalism and the World Trading System, 29–38 (1995) (classifying major RTAs entered into until 1995 according to region.) (“Regionalism and the World Trading System”).

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  11. Prior to the accession of Eastern European countries to the EC, the EC’s members were Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Spain, Sweden and the United Kingdom. The EC has notified the WTO of FTAs with its Overseas Countries and Territories (1971), as well as with Malta (1971), Switzerland and Liechtenstein (1971), Iceland (1973), Cyprus (1973), Norway (1973), Algeria (1976), Egypt (1977), Jordan (1977), Lebanon (1977), Syria (1977), Andorra (1991), Czech Republic (1992), Slovak Republic (1992), Hungary (1992), Poland (1992), Romania (1993), Bulgaria (1993), Lithuania (1995), Estonia (1995), Latvia (1995), Faroe Islands (1997), Slovenia (1997), the Palestinian Authority (1997), Tunisia (1998), South Africa (2000), Morocco (2000), Israel (2000), Mexico (2000) and Macedonia (2001). These agreements represent only FTAs, and do not account for other Customs Unions or Services Agreements. See, Basic Information on Regional Trade Agreements, supra note 8, at 2–9.

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  12. The EFTA signatories are Iceland, Norway, Switzerland and Liechtenstein. The EFTA has notified the WTO of FTAs with Turkey (1992), the Czech Republic (1992), the Slovak Republic (1992), Israel (1993), Bulgaria (1993), Romania (1993), Hungary (1993), Poland (1993), Slovenia (1995), Estonia (1996), Latvia (1996), Lithuania (1996), the Palestinian Authority (1999), Morocco (1999), Macedonia (2001), Mexico (2001), Jordan (2002) and Croatia (2002). Each of the EFTA signatories has entered into an FTA with the EC. Austria, Finland and Sweden ceased to be parties to the EFTA following their withdrawal from the EFTA Convention and subsequent accession to the EC on Jan. 1, 1995. See Basic Information on Regional Trade Agreements, supra note 8, at 2–9.

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  13. The Organization of American States has compiled a complete list of all RTAs entered into by all countries in the Western Hemisphere. See, SICE, Foreign Trade Information System, Trade Agreements Sorted by Signatory Country, at http://www.sice.oas.org/acuerdoE.ASP

  14. MERCOSUR is a Customs Union entered into pursuant to the Enabling Clause. MERCOSUR’s signatories are Argentina, Brazil, Paraguay and Uruguay. MERCOSUR has reportedly been negotiating the terms of an FTA with the Andean Community, as well as the EC. See, e.g., Gustavo Bizai, Trade Liberalisation Negotiations between the European Union and MERCOSUR, 6 Int’l Trade L. & Reg. 35 (2000).

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  15. Chile has either entered or is considering FTAs with Canada, Colombia, Ecuador, the EC, Japan, Mexico, Singapore, the United States, and Venezuela, among other countries. Mexico has either entered or is considering FTAs with Bolivia, Brazil, Chile Costa Rica, the EC, the EFTA, El Salvador, Guatemala, Honduras, Israel, Nicaragua, Panama, Uruguay, Japan, Korea, Singapore and the MERCOSUR Customs Union. See Sergio Lopez-Ayllon, Mexico’s Expanding Matrix of Trade Agreements: A Unifying Force?, 5 NAFTA L. & Bus. Rev. 241, 257 (1999) (describing intra-regional integration in Latin America, with a focus on Mexico); see also Website of Mexican Secretary of the Economy available at http://www.economia.gob.mx/?P=39 for a complete list of Mexican RTAs, either completed or under negotiation.

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  16. See generally Rossella Brevetti, Ambitious Schedule for Market Access Talks is Backed by FTAA Trade Ministers, 19 Int’l Trade Rep. 1915 (2002); for a comprehensive discussion of FTAA negotiations through March 25, 2000, see Sherry Stephenson, The Current State of the FTAA Negotiations at the Turn of the Millennium, 6 NAFTA L. & Bus. Rev. 317 (2000).

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  17. It should be noted that APEC cannot be considered an FTA or Customs Union within the terms of the GATT/WTO. This is because APEC—founded on a philosophy of “open regionalism”—neither covers’ substantially all the trade’ among its member states, nor requires specific tariff reduction commitments from its members. Instead, APEC is a forum that tries to build economic, political and institutional ties among its members. Many of APEC’s activities involve education and trade facilitation. For an overview of APEC, its history and future direction, see Andrew Faye, APEC and the New Regionalism: GATT Compliance and the new WTO, 28 L. & Pol’y Int’l Bus. 175, 184–201 (1996); Lorraine C. Cardenas and Arparon Buranakatis, The Role of APEC in the Achievement of Regional Cooperation in Southeast Asia, 5 Ann. Surv. of Int’l & Comp. L. 49 (1999); For an overview of the economic implications for APEC of the recent proliferation of RTAs, See Robert Scollay and John P. Gilbert, New Regional Trading Arrangements in the Asia Pacific? Inst. Int’l Econ. (2001); for an overview of all FTAs either completed or under consideration among APEC members, see Tim Martyn, A Complete Guide to the Regional Trade Agreements of the Asia-Pacific, Australian APEC Study Centre (March, 2001).

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  18. For background discussion regarding ASEAN, see, e.g., George White, Trying to Compete in a Global Marketplace: The ASEAN Free Trade Area, 8 Tulsa J. Comp. & Int’l L. 177 (2000); Mary Hiscock, Changing Patterns of Regional Law Making in Southeast Asia, 39 St. Louis U. L. J. 933 (1995).

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  19. New Zealand and Australia have entered into an FTA called the Australia—NewZealand Closer Economic Relations (“ANZCER”). See Martyn, supra Tim Martyn, A Complete Guide to the Regional Trade Agreements of the Asia-Pacific, Australian APEC Study Centre (March, 2001) note 21, at 17; Joan Fitzhenry and David Robinson, Australia-New Zealand Closer Economic Relations Trade Agreement, 7 Int’l Trade L. & Reg. 136 (2001); Australia is considering further FTAs with Asian and American nations.

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  20. In addition to the ANZCER, New Zealand has also entered into an FTA with Singapore. See Basic Information on Regional Trade Agreements, supra note 8, at 9. Like Australia, New Zealand is considering further FTAs with Asian and American nations.

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  21. Japan entered into an FTA with Singapore in 2002, and has reportedly completed negotiations on a Japan-Mexico FTA, which is to become effective in 2005. Japan has also stated its intention to enter into FTAs with Thailand, the Philppines, Malaysia, South Korea, Australia, Indonesia, Vietnam and perhaps India and China. See Toshio Aritake, Japan Targets Trade, Partnership Pacts with More Than 10 Countries on PM’s Trip, BNA Daily Report for Executives (Sept. 9, 2004). Japan has also discussed the option of a trading bloc consisting of some combination of East Asian countries. See generally, Japanese Ministry of Foreign Affairs, Japan Outlines Strategy Behind Push for Bilateral FTAs, Economic Affairs Bureau, Ministry of Foreign Affairs (Oct. 2002).

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  22. Singapore has entered into FTAs with New Zealand, Japan, Australia, the United States, and the European Free Trade Association. Singapore is currently negotiating or considering FTAs with Canada, Korea, Mexico, India and ASEAN and the People’s Republic of China. See, generally Martyn, supra Tim Martyn, A Complete Guide to the Regional Trade Agreements of the Asia-Pacific, Australian APEC Study Centre (March, 2001) note 21, at 47–9; Development Bank of Japan,ASEAN Free Trade Area and Bilateral Free Trade Pacts: Singapore’s Perspective (2001) at http://www.dbj.org.sg/PDF/512e.pdf.

  23. See generally, Noah J. Smith and Christopher S. Rugaber, USTR Holds Intellectual Property Talks with Taiwan, Setting Off Talk of Possible FTA, 19 BNA Int’l Trade Rep. 41 (Oct.17, 2002).

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  24. See Jonathan Hopfner, China Broaches Idea of Free Trade Area with Japan and South Korea, 19 BNA Int’l Trade Rep. 1908 (Nov. 7, 2002).

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  25. See Jonathan Hopfner, China, 10 ASEAN Members Sign Framework of Pact for Free Trade Area within 10 years, 19 BNA Int’l Trade Rep. 1908 (Nov. 7, 2002).

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  26. See Euro-Arab Management School, Arab Commercial and Economic Co-operation: The Greater Arab Free Trade Area, 3 (May 2001), available athttp://www.eams.fundea.es/research/AFTArea.pdf.

  27. See id. at 4.

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  28. For a detailed history of the negotiations and a timetable of commitments, see Department of Foreign Affairs of Zambia, African Economic Community: History and Present Status (May 28, 2001), available at http://www.dfa.gov.za/for-relations/multilateral/aec.htm; see also Olufemi Babarinde, Analyzing the Proposed African Economic Community: Lessons from the Experience of the European Union, (Sept. 1996), available at http://www.ecsanet.org/conferences/babarinde.htm.

  29. The membership of CEMAC is Cameroon, Central African Republic, Chad, Congo, Equatorial Guinea and Gabon. See USTR, 2000 National Trade Estimate Report on Foreign Trade Barriers 25 (2000).

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  30. See Boonekamp, supra Clemens Boonekamp, Regional Trade Integration under Transformation, Seminar on Regionalism and the WTO, (Apr. 26, 2002) note 9, at ¶ 9 (describing a “new generation of RTAs” that “include more and more regional rules on investment, competition and standards; in a few cases, they also contain provisions on environment and labour.”).

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  31. See Sander M. Levin, Address to Institute for International Economics (“IIE”) Conference on FTAs, May 7, 2003, p. 4: Conditions as to labor markets are vastly different in most of Central America from those in Chile and Singapore. In Central America, unlike Chile and Singapore, domestic laws do not come close to incorporating the five ILO core labor standards, especially the right of workers to assemble and collectively bargain. According to our own State Department and ILO reports, even the highly flawed laws that exist are not enforced, but indeed flagrantly violated. The proof is in the results—in the vast garment maquila industry of the three Central American nations I visited, there is not a single collective bargaining agreement; while in Chile and Singapore, workers rights have increasingly helped grow a middle class.

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  32. See, e.g., United States Trade Representative, Request for Submissions to Volunteer Trade Capacity Building Assistance, 68 Fed. Reg. 24531 (May 7, 2003).

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  33. See generally Denis Lemieux and Ana Stuhec, Review of Administrative Action Under NAFTA, (Carswell, 1999) (examining all NAFTA dispute settlement procedures); William Merritt, A Practical Guide to Dispute Resolution under the North American Free Trade Agreement, 5 NAFTA L. & Bus. Rev. 169 (1999) (discussing four different dispute settlement procedures); Michael Gordon, Forms of Dispute Resolution in the NAFTA, 13 Fla. J. Int’l L. 16 (2000) (discussing five of the dispute settlement procedures).

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  34. See generally Vibysoun Loungnarath and Céline Stehly, The General Dispute Settlement Mechanism in the NAFTA and the WTO System, 34 J. World Trade 39 (2000) (introducing NAFTA Chapter 20 and criticizing its tendency to become politicized); Sidney Picker, NAFTA Chapter 20: Reflections on Party-Party Dispute Resolution, 14 Ariz. J. Int’l & Comp. L. 465 (1997) (comparing main features of Chapter 20 with predecessor provisions under Chapter 18 of the Canada-U.S. Free Trade Agreement.); Lemieux and Stuhec, supra note 41 at 99–116 (discussing procedure and precedent under NAFTA Chapter 20.).

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  35. NAFTA Chapter 11, which enables investors of one member to bring cases against the government of another member, has been actively used and engendered some controversy. See generally Joseph McKinney, Created From NAFTA: The Structure, Function and Significance of the Treaty’s Related Institutions (M.E. Sharpe, 2000). (introducing key provisions and case law); David Gantz, Potential Conflicts between Investor Rights and Environmental Regulation under Chapter 11, 33 Geo. Wash. Int’l L. Rev. 651 (2001); Joseph de Pencier, Investment, Environment and Dispute Settlement: Arbitration under NAFTA Chapter Eleven, 23 Hastings Int’l and Comp.L. Rev. 409 (2000).

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  36. NAFTA Chapter 10, which deals with government procurement, also provides for dispute resolution of related disputes. See Lemieux and Stuhec, supra Denis Lemieux and Ana Stuhec, Review of Administrative Action Under NAFTA, (Carswell, 1999) note 41, at 59–79 (analyzing the text of Chapter 10 and practice thereunder).

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  37. NAFTA Chapter 19 permits parties to antidumping and countervailing duty proceedings to appeal the decisions of the national tribunals to special binational panels instead of the domestic courts. See generally Patrick Macrory, Dispute Settlement in the NAFTA (C.D. Howe Inst. Commentary, 2002, available at www.cdhowe.org); Richard Cunningham, NAFTA Chapter 19: HowWell Does itWork? 26 Can-U.S. L. J. 79 (2000); Homer E. Moyer, Chapter 19 of the NAFTA: Binational Panels as the Trade Courts of Last Resort, 27 Int’l Law. 707 (1993).

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  38. NAFTA Chapter 14, which deals with financial services, refers relevant disputes to the dispute resolution provisions of either Chapter 11 or 20, with some procedural variations. See Constance Wagner, The New WTO Agreement on Financial Services and Chapter 14 of the NAFTA, 5 NAFTA L. & Bus. Rev. 5, 75–78 (1999).

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  39. SeeLemieux and Stuhec, supra Denis Lemieux and Ana Stuhec, Review of Administrative Action Under NAFTA, (Carswell, 1999) note 41, at 121–39 (providing overviewof the North AmericanAgreement on Environmental Cooperation (“NAAEC”) and its dispute resolution procedures); McKinney, supra note 43, at 90–117, 123–222 (analyzing history, institutions and procedures related to the NAAEC.).

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  40. See Robert E. Herzstein, The Labor Cooperation Agreement Among Mexico, Canada and the United States: Its Negotiation and Prospects, 3 U.S.-Mex. L.J. 121 (1996). See alsoMcKinney, supra note 43, at 33–89 (providing overview of the North American Agreement on Labor Cooperation, and discussing its history, institutions and procedures.).

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  41. Although there have been WTO dispute settlement cases in which the parties agreed upon the payment of monetary compensation instead of “retaliation” in the form of increased tariffs, such cases are not the norm. See, e.g., United States—Section 110(5) of the Copyright Act, Recourse to Arbitration under DSU Article 25, WT/DS160/ARB25/1 (Nov. 9, 2001).

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  42. SeeMcKinney, supraJoseph McKinney, Created From NAFTA: The Structure, Function and Significance of the Treaty’s Related Institutions (M.E. Sharpe, 2000) note 43, at 106–109 (discussing the procedures according to which monetary penalties may be imposed against a NAFTA party found to have engaged in a persistent pattern of failure to enforce its own environmental laws); See also. Gary G. Yerkey, U.S. to Propose Use of Fines to Settle Disputes in FTA Talks with Chile, Singapore, 19 BNA Int’l Trade Rep. 1857 (Oct. 31, 2002).

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  43. Harmonization of customs and other border procedures is among the activities generally referred to as “trade facilitation.” As defined by the WTO, trade facilitation consists of the simplification and harmonisation of international trade procedures, including activities, practices and formalities involved in collecting, presenting, communicating and processing data required for the movement of goods in international trade. See WTO website, Overview of Trade Facilitation Work (Dec. 11, 2002), http://www.wto.org/english/tratop_e/tradfa-e/tradefae2_e.htm

  44. See, e.g., Jonathan Hopfner, Japan, ASEAN Set Base for Future FTA, Forge ‘Comprehensive Economic Partnership,’ 19 BNA Int’l Trade Rep. 1907 (Nov.7, 2002).

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  45. See Boonekamp supra Clemens Boonekamp, Regional Trade Integration under Transformation, Seminar on Regionalism and the WTO, (Apr. 26, 2002) note 9, (noting that, “[t]here is also a general feeling that complex policy issues of commercial significance in economic relations (notably services, investment, intellectual property protection, cooperation on competition policy, technical standards and government procurement) can better be managed amongst a limited circle of ‘friends’. These motivations act as an incentive to regulate on such issues through RTAs, even if it is generally recognized that RTAs are a second-best option to MFN trade liberalization.”).

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  46. See, e.g., Brian Cassidy, Can Australian and US Competition Policy be Harmonised? (June 21, 2001), avail at: http://www.apec.org.au/docs/Cassidy.PDF

  47. See Cho, supra Sungjoon Cho, Breaking the Barrier between Regionalism and Multilateralism: A New Perspective on Trade Regionalism, 42 Harv. Int’l L. J. (2000) note 1, at 429 (arguing that “socio-political concerns” are as important as trade-creation and trade-diversion concerns.).

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  48. For an explication of the argument that RTAs engender “dynamic effects,” see, e.g., Colin L. McCarthy, Regional Integration of Developing Countries at Different Levels of Economic Development: Problems and Prospects, 4 Transnat’L L. & Contemp. Problems 1 (1994) (noting that under a dynamic effects theory, “the focus shifts from the static effects of integration to the dynamic effects found in a larger market with its opportunities for the economies of scale and specialization that do not exist in a small, low-income domestic market.”)

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  49. See, e.g., Heydon, supra Ken Heydon, Regulatory Provisions in Regional Trade Agreements: “Singapore” Issues, WTO Seminar on Regionalism and the WTO, at 3 (Apr. 26, 2002) note 11, at ¶¶ 53, (noting that—as a result of harmonization of standards—third parties enjoy the same rights as signatories, and adding that, “RTA provisions on trade facilitation help foster convergence of modes of operation within regional groupings. Moreover, to the extent that they draw on international agreements related to trade facilitation, regional initiatives also serve to foster moves towards wider harmonisation.”).

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  50. See Dunn and Mutti, International Economics (2000) (noting the view that RTAs result in greater international stability). The desire for peaceful international relations cannot be overemphasized as a motivating factor in many RTAs. One of the clearest articulations of this notion can be found in the Preamble to the Treaty Establishing the European Coal and Steel Community, in which the signatories state their resolve, to substitute for age-old rivalries the merging of their essential interests; to create, by establishing an economic community, the basis for a broader and deeper community among peoples long divided by bloody conflicts; and to lay the foundations for institutions which will give direction to a destiny henceforward shared. See, Preamble, Treaty Establishing the European Coal and Steel Community (1951), at http://www.eurofer.org/legislation/index.htm

  51. See Fred Bergsten, Competitive Liberalization and Global Free Trade: A Vision for the Early 21stCentury, Working Paper 96–15, Inst. Int’l Ec. (1996).

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  52. See Cho, supra Sungjoon Cho, Breaking the Barrier between Regionalism and Multilateralism: A New Perspective on Trade Regionalism, 42 Harv. Int’l L. J. (2000) note 1, at 432–434 (noting that “one of the most powerful arguments for RTAs stems from their experimental or laboratory effect vis-à-vis multilateral trade liberalization.”)

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  53. The argument is that increased numbers of RTAs will aid multilateral trade negotiations because RTA members are able to present a unified negotiating position, which reduces the number of outstanding negotiating topics and results in smaller, leanly staffed negotiating teams. See, e.g., Jeffrey Schott and Jayashree Watal, Decision-making in the WTO, International Economic Policy Briefs, Institute for International Economics, 6 (2000) (noting that the Mercosur countries have pooled resources and shared representation in preparation for the Doha Round. According to Schott andWatal, blocs of countries with common negotiating positions will likely seek out and find other blocs with similar objectives, which will further rationalize the negotiating process. The Caribbean trading bloc, Caricom, is an example of this phenomenon.)

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  54. See Second Session of the CRTA, supra note 2, at ¶ 85 (in which a representative of the Secretariat articulated this argument and others, such as the argument that, if RTAs create an environment in which inefficient firms are allowed to go out of business gradually, protectionist sentiment opposing multilateralism also wanes.)

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  55. SeeDunn and Mutti, supra Mutti, International Economics (2000) note 58, at 206 (noting that “discriminatory tariff cuts mean that the non-member country loses sales to less efficient producers in a member country, thus reducing world efficiency. Trade is diverted from low-cost to higher-cost sources, and world efficiency suffers.”)

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  56. SeeScollay and Gilbert, supra Robert Scollay and John P. Gilbert, New Regional Trading Arrangements in the Asia Pacific?Inst. Int’l Econ. (2001) note 21, at 13 (noting that, “the fragmentation of the regional economy may intensify if the SRTAs begin to overlap, and if they each also adopt complex, mutually inconsistent rules of origin, so that a particular product may be imported into or exported from a given country under a range of different rules, and even tariffs, depending on its origin or destination.”); Jagdish Bhagwati, Preferential Trade Agreements: The Wrong Road, 27 Law & Pol’y Int’l BUS. 865, 866–68 (1996) (remarking on inefficiencies created by complex rules of origin regimes required under RTAs). Rules of origin are included in RTAs in order to prevent producers in non-signatories from taking advantage of the dutyfree tariff rates by exporting a nearly finished product to producers in one signatory, performing minimal processing, and thereafter shipping the product within the RTA duty-free. Bhagwati also argues that diverse RTAs, with complex and inconsistent provisions, make negotiation of a multilateral agreement more difficult.

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  57. Comments by Professor Richard Cooper, Conference at Institute for International Economics on Regional Trade Agreements (May 7, 2003). See Cho, supra note 1, at 430–31 (explaining that, “RTAs provide abundant opportunities for local interest groups, such as producers of sensitive products, to manipulate both the design and operation of RTAs. The eventual effect of such lobbying efforts is to distort the efficient flow of interstate commerce.”)

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  58. See WTO Negotiating Group on Rules, Compendium of Issues Related to Regional Trade Agreements, TN/RL/W/8/Rev. 1, ¶ 120 (Aug. 01, 2002) (“Compendium of Issues Related to Trade Agreements”) (noting that, “[t]his issue has been raised in particular with respect to RTA clauses providing that, in the event of inconsistency, RTA rules prevail over WTO rules. It has been argued that this could result in a diminution of the rights that the parties had under the WTO in relation to their trade with one another.”). See also, David A. Gantz, Dispute Settlement under the NAFTA and WTO: Choice of Forum Opportunities and Risks for the NAFTA Parties, 14 Am.U.Int’l L. Rev. 1025 (1999). While there is a risk that dispute settlement alternatives might result in the development of inconsistent standards, these dispute settlement alternatives may also have beneficial side effects, such as reducing the pressure on the already over-taxed WTO system. It is conceivable, for example, that at least some of the disputes being resolved under NAFTA Chapters 19 and 20 could have been brought under the WTO system.

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  59. See John McGinnis and Mark Movsesian, TheWorld Trade Constitution, 114 Harv. L. Rev. 550–52 (2000) (explaining that the WTO is forced to address environmental, health and safety issues because of the risk that individual nations will employ environmental, health and safety regulations in order to discriminate against outsiders—a logic that clearly can also apply to the “harmonization of standards” agreed to by countries entering an FTA.).

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  60. See Heydon, supra Ken Heydon, Regulatory Provisions in Regional Trade Agreements: “Singapore” Issues, WTO Seminar on Regionalism and the WTO, at 3 (Apr. 26, 2002) note 11, at ¶ 61 (alleging that “[m]easures of simplification of international trade procedures undertaken at the regional level rarely have a preferential effect,” while acknowledging certain exceptions to that rule).

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  61. See Second Session of the CRTA, supra note 2, at ¶ 85 (in which a representative of the Secretariat articulated this argument against RTAs).

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  62. A somewhat apocalyptic scenario is found in Michael J. Trebilcock and Robert Howse, The Regulation of International Trade 130 (1995), where the authors assert that regional blocs “necessarily entail playing favourites and risk reducing international relations to mutually destructive factionalism of the kind that was so dramatically evidenced in the 1930s.”

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  63. See Regionalism and the World Trading System, supra note 12, at 5.

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  64. See John H. Jackson, The Jurisprudence of the GATT and WTO: Insights on Treaty Law and Economic Relations 58 (2000).

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  65. See Alfred E. Eckes, Jr., Opening America’S Market: U.S. Foreign Trade Policy Since 1776, 90–93 (1995) (noting that U.S. State Department officials supported unconditional MFN clauses based on a view that conditional MFN clauses led to U.S. trade policies based on “special concessions to some instead of equal treatment for all,” and that unconditional MFN clauses would more effectively support U.S. exports.).

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  66. Along with the National Treatment principle of GATT Article III, the MFN principle should be considered a fundamental principle of the GATT, because the GATT systemwas conceived in part in reaction to the negative effects of preferential trading regimes, especially the high tariffs maintained by British Commonwealth countries against imports from non-Commonwealth countries. The Roosevelt Administration’s push for lower tariffs abroad, for international acceptance of an unconditional MFN principle, and ultimately, for a multilateral trading institution was grounded in a view that trade rivalries and discriminatory trading regimes had contributed to the Great Depression and, ultimately, World War II. See Thomas W. Zeiler, Free Trade, Freeworld: the Advent of GATT, 8–9, 30–36 (1999); See also, Eckes, supra note 77, at 140–66 (quoting Cordell Hull: “to me, unhampered trade dovetailed with peace; high tariffs, trade barriers, and unfair economic competition, with war.”).

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  67. SeeZeiler, supra Thomas W. Zeiler, Free Trade, Freeworld: The Advent of GATT, 8–9, 30–36 (1999) note 78.

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  68. For a more detailed discussion, See, Jackson, Davey and Sykes, International Economic Relations, 436–37 (3d Ed. 1995). See also Jackson, supra note 75, at 60–61.

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  69. See Regionalism and theWorld Trading System supra note 12, at 5 (1995) (explaining that “equal treatment of imports from different origins helps ensure that these are purchased from the lowest-cost foreign suppliers, thereby reinforcing comparative advantage in the world market and minimizing the cost of protection at home.”).

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  70. SeeJackson, Davey and Sykes, supra note 83, at 436–37.

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  71. John Jackson has provided a concise explanation for the practical reasons why RTAs—to be effective—need to be permitted as an exception to the GATT MFN principle: “The establishment of a customs union or free trade area requires a departure from the MFN principles. If there were no such exception to the MFN principle, the elimination of custom duties between the participants would have to be generalized to all contracting parties to GATT with no quid pro quo.” See Jackson, supra John H. Jackson, The Jurisprudence of the GATT and WTO: Insights on Treaty Law and Economic Relations (2000) note 75, at 64.

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  72. See Regionalism and the World Trading System, supra note 12, at 11.

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  73. See Regionalism and the World Trading System, supra note 12, at 8 (noting that, despite its central desire to create a multilateral trading system based on MFN, the United States acknowledged the necessity of customs unions, based on the political importance of creating a unified Western Europe after World War II. However, the United States did not recognize the necessity of Free Trade Areas or Interim Agreements. (Interim Agreements are the legal mechanisms under which parties gradually align their economic systems in preparation for their entry into a Customs Union or Free Trade Area.).

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  74. See id.

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  75. See id.

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  76. Id.

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  77. See, General Agreement on Tariffs and Trade, Guide to GATT Law and Practice, 739 (1994).

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  78. The latter agreements are governed by provisions set forth in the Enabling Clause. See Differential and More Favourable Treatment, Reciprocity and Fuller Participation of Developing Countries, Decision of 28 November 1979.

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  79. Article V of the General Agreement on Trade in Services provides that WTO Members may enter into agreements liberalizing trade in services, provided that such agreement (a) have substantial sectoral coverage, and (b) eliminate substantially all current and future discriminatory measures in the covered sectors. To date, twenty-two agreements have been notified under this provision. See Article V, General Agreement on Trade in Services, Apr. 15, 1994, art. V, Marrakesh Agreement Establishing the World Trade Organization (“WTO Agreement”), Annex 31, I.L.M. 44 1B, Results of the Uruguay Round Multilateral Trade Negotiations Vol. 31 (GATT Secretariat 1994).

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  80. For an introduction to Customs Unions and RTAs under the GATT and WTO, see, John Jackson, Perspectives on Regionalism in Trade Relations, 27 Law & Pol’y Int’l Bus. 873, 875–77 (1996) (explaining the relationship between GATT Article XXIV and the Uruguay Round’s Draft Understanding on Interpreting Article XXIV).

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  81. See US/EEC—Negotiation on Poultry, Conciliation, 12 S/65 (Nov. 21, 1963) This dispute arose out of the withdrawal of West German tariff bindings at the time of the imposition of an EEC Common External Tariff (“CET”) on poultry products. The United States not only claimed that this change resulted in a higher and more restrictive tariff level on its products than had existed before introduction of the CET, but also claimed that illegal German quantitative restrictions in force immediately before the advent of the CET had kept U.S. exports at an artificially low level, a factor that should be considered in establishing the appropriate level of compensation. The Panel agreed with the United States, and examined the level of poultry sales in a surrogate country—Switzerland—in order to estimate what U.S. exports would have been in the absence of the quantitative restrictions.

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  82. See Working Party Report, Accession of Portugal and Spain to the European Communities, 35 GATT BISD 295–96 (1989) (In the EC’s view, “Article XXIV:5 only required an examination on the broadest possible basis. The task was general, namely to reach a view on whether the general incidence of customs duties and regulations after enlargement was on the whole more or less restrictive than before. Even if a negative incidence were shown to be the case for certain items, such as when duties were increased or replaced by variable levies, one had to consider whether these effects were not balanced by the effects of other changes in the tariff sector taken as a whole.”).

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  83. The 1994 Understanding further specifies 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 WTO country of origin.” See Understanding on the Interpretation of Article XXIV of the General Agreement on Tariffs and Trade 1994, 2, Apr. 15, 1994, Marrakesh Agreement Establishing the World Trade Organization, Annex 1A, in RESULTS OF THE URUGUAY ROUND OF MULTILATERAL TRADE NEGOTIATIONS 31 (GATT Secretariat 1994) (“1994 Understanding”).

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  84. Id.

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  85. See World Trade Organization, Regionalism and theWorld Trading System, 20 (1995)(noting that, “while the purpose of the Understanding on Article XXIV is to clarify certain of the areas where the application of Article XXIV had given rise to controversy in the past, and particularly as regards the external policy of customs unions, it fell short of addressing most of the difficult issues of interpretation... For example, no consensus emerged... concerning proposals... to clarify the substantially-all-trade requirement.”).

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  86. See 1994 Understanding, Preamble. Commentators, the WTO Appellate Body and the WTO Secretariat have laid emphasis on the preamble’s final clause, which states that RTAs contribution to the expansion of world trade is “diminished if any major sector of trade is excluded.” This focus is understandable in light of the desire of some countries to exclude politically sensitive sectors—such as agriculture—from RTAs. It remains contentious today whether an RTA can exclude an entire sector, notwithstanding the 1994 Understanding’s preamble. See discussion infra at 30–31. See generally Negotiating Group on Rules, Compendium of Issues Related to Regional Trade Agreements, TN/RL/W/8/Rev.1, ¶ 68 (2002).

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  87. See 1994 Understanding, ¶ 11. These requirements are also emphasized in the WTO’s Procedures on Reporting on Regional Trade Agreements. See, World Trade Organization, Procedures on Reporting on Regional Trade Agreements, G/L/286 (Dec. 16, 1998).

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  88. See 1994 Understanding, ¶ 12 (providing that “the provisions of Articles XXI and XXII of GATT 1994 as elaborated and applied by the Dispute Settlement Understanding may be invoked with respect to any matters arising from the application of... Article XXIV.”). This provision of the Understanding is significant, because during the GATT era, it was disputed whether a Contracting Party that was not party to an RTA could invoke dispute settlement proceedings against an RTA signatory on the grounds that the RTA was inconsistent with Article XXIV or other relevant disciplines. For a discussion of the history and effect of the dispute over the applicability of dispute settlement provisions to RTAs, see Cho, supra Sungjoon Cho, Breaking the Barrier between Regionalism and Multilateralism: A New Perspective on Trade Regionalism, 42 Harv. Int’l L. J. (2000) note 1, at 437–38.

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  89. Committee on Regional Trade Agreements, Rules of Procedure for Meetings of the Committee on Regional Trade Agreements, WT/REG/1 (Aug. 14, 1996) (“CRTA Rules of Procedure”).

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  90. See Committee on Regional Trade Agreements, Draft Rules of Procedure for Meetings of the Committee on Regional Trade Agreements, WT/REG/W/2, at 2 (1996).

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  91. See e.g., Cho, supra Sungjoon Cho, Breaking the Barrier between Regionalism and Multilateralism: A New Perspective on Trade Regionalism, 42 Harv. Int’l L. J. (2000) note 1, at 436 (“Though the rationale of Article XXIV is quite understandable and idealistic in light of its legislative background, the text itself is so nebulous as to leave many important issues open to wide speculation. Consequently, actual applications of the black letter law were neither clear nor resolute, rendering Article XXIV a virtual dead letter from its inception.”) JACKSON, supra note 74, at 64–5 (“The GATT language is unfortunately ambiguous, and the GATT has allowed some very loose preferential arrangements to exist without effective challenge in the context of GATT. Article XXIV has become, some say, the most significant loophole to the MFN obligation.”).

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  92. See Cho, supra Sungjoon Cho, Breaking the Barrier between Regionalism and Multilateralism: A New Perspective on Trade Regionalism, 42 Harv. Int’l L. J. (2000) note 1, at 436–43 (discussing provisions of Article XXIV that—because of their wording—have engendered controversy, specifically in regard to their application to certain allegedly trade-distorting measures.).

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  93. See Cho, supra Sungjoon Cho, Breaking the Barrier between Regionalism and Multilateralism: A New Perspective on Trade Regionalism, 42 Harv. Int’l L. J. (2000) note 1, at 439–443 (discussing five Article XXIV concepts and textual provisions subject to contention during the GATT.); Compendium of Issues Related to Regional Trade Agreements, supra note 66, at ¶¶ 66–84, 85–113 (discussing contentious aspects of GATT Article XXIV and GATS Article V.); Regionalism and the World Trading System, supra note 12, at 13–15 (discussing two contentious Article XXIV provisions.). Among the other provisions which often receive attention is the provision stating that “other regulations of commerce... shall not on the whole be higher or more restrictive.” For documents devoted specifically to discussion of this language, see Committee on Regional Trade Agreements, Communication from Japan, WT/REG/W/28 & WT/REG/W/29 (July 28, 1998); Committee on Regional Trade Agreements, Systemic Issues Related to “Other Regulations of Commerce” WT/REG/W/17 (Oct. 31, 1997) & WT/REG/W/17/Add.1 (Nov. 5, 1997).

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  94. See Cho supra Sungjoon Cho, Breaking the Barrier between Regionalism and Multilateralism: A New Perspective on Trade Regionalism, 42 Harv. Int’l L. J. (2000) note 1, at 447 (noting that the Appellate Body and Panel in Turkey-Restrictions on Imports of Textile and Clothing Products (WT/DS34/AB/R & WT/DS34/R) both agreed that GATT Article XXIV obligations must be read in light of Article XXIV:4, which forms part of their context.).

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  95. See Cho, supra Sungjoon Cho, Breaking the Barrier between Regionalism and Multilateralism: A New Perspective on Trade Regionalism, 42 Harv. Int’l L. J. (2000) note 1, at 439–440 (reciting the EC position during the accession of Portugal and Spain to the EC that RTA signatories “can introduce new barriers... if the net impact is less than what had prevailed before” the RTA’s inception.). As discussed infra at pages 42–45, Turkey made a similar argument with regard to its Customs Union with the EU in Turkey—Restrictions on Imports of Textile and Clothing Products, infra, note 165.

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  96. Evidence of the contentious debate of the precise meaning of this language is seen in the sheer number of WTO member submissions and CRTA official documents that have been issued in conjunction with this phrase. See e.g., Committee on Regional Trade Agreements, Systemic Issues Related to “Substantially All the Trade,” WT/REG/W/21 (Nov. 28, 1997) and WT/REG/W/21/Add.1 (Dec. 2, 1997).

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  97. See Regionalism and the World Trading System, supra note 12.

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  98. See Compendium of Issues Relating to Regional Trade Agreements, supra note 66, at Annex, p. 32 (2002)(comparing RTA examination under GATT and under the WTO.).

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  99. See WTO Secretariat, Regional Trade Agreements Notified to the GATT/WTO and in Force, (Jan. 24, 2003) (avail. at. http://www.wto.org/english/tratop_e/region_e/status_240103_e.xls)

  100. SeeJackson, Davey & Sykes, supra Sykes, International Economic Relations (3d Ed. 1995) note 82, at 471.

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  101. See Meeting of the General Council, p. 25, C/M/253 (1992), cited in General Agreement on Tariffs and Trade, Analytical Index: Guide to Gatt Law and Practice, 760 (6th ed. 1994)

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  102. See, World Trade Organization, Regionalism and the World Trading System, 63–5 (1995)(suggesting the establishment of a single body to examine regional trade agreements.); See also Second Session of the CRTA, supra note 2, at ¶ 87 (discussing the decision of the WTO membership to create the CRTA.).

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  103. See, CRTA Rules of Procedure, supra note 114.

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  104. See, Committee on Regional Trade Agreements, Checklist of Points on Reporting on the Operation of Regional Agreements, WT/REG/W/3 (June 20, 1996)(acknowledging that the ad hoc GATT working party approach “led to a lack of consistency in the reporting procedure,” which resulted—in 1971—in the Contracting Parties’ adoption of a Decision to require the submission of biennial reports.). Other clarifications of the reporting process were set forth in the 1994 Understanding. See, discussion, infra footnotes 111–118 and accompanying text.

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  105. The CRTA was created in February 1996 pursuant to a Decision of the General Council. See Committee on Regional Trade Agreements, Decision of 6 February 1996, WT/L/127 (1996).

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  106. All WTO members are invited to participate in meetings of the CRTA. The CRTA’s mandate is set forth in its Terms of Reference. The CRTA elects a Chairperson and a Vice-Chairperson from among the Member representatives. The Chair-and Vice-Chairpersons hold office for one-year terms. See CRTA Rules of Procedure, supra note 114, at Rule 12.

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  107. See Differential and More Favourable Treatment, Reciprocity and Fuller Participation of Developing Countries, Decision of 28 November 1979, ¶ 4.

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  108. See Compendium of Issues Related to Regional Trade Agreements, supra note 66, at 32.

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  109. Specifically, the following items are distributed to the WTO members at this stage: (1) an “airgram” announcing the upcoming meeting; (2) an agenda for the meeting; and (3) any necessary documentation (such as information supplied in the standard format). See, Committee on Regional Trade Agreements, Draft Rules of Procedure for Meetings of the Committee on Regional Trade Agreements, Statement by the Chairman, WT/REG/W/2 (June 13, 1996) (“CRTA Draft Rules of Procedure”).

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  110. It should be noted that RTAs falling under the Enabling Clause are notified to the Committee on Trade and Development (“CTD”), while RTAs covered by the GATS are notified to the Council for Trade in Services (“CTS”). The CTD does not generally refer RTAs falling under its purview to the CRTA for in-depth review. Similarly, it is within the discretion of the CTS to refer Services Agreements to the CRTA for review: Unlike FTAs and Customs Unions, Services Agreements are not subject to a mandatory review in the CRTA. See Committee on Regional Trade Agreements, Work of the Committee on Regional Trade Agreements, at www.wto.org/English/tratop_e/region_e/regcom_e.htm

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  111. See Committee on Regional Trade Agreements, Standard Format for Information on Regional Trade Agreements, WT/REG/W/6 (Aug. 15, 1996)(I. Background Information includes (1) membership, dates of signature, ratification and entry into force; (2) type of agreement; (3) scope; and (4) trade data. II. Trade Provisions include (1) import and (2) export restrictions, such as duties and charges, as well as quantitative restrictions; (3) rules of origin; (4) standards; (5) safeguards; (6) anti-dumping and countervailing measures; (7) subsidies and state-aid; (8) sector-specific provisions; and other measures. III. General Provisions include (1) exceptions and reservations, (2) accession provisions; (3) dispute settlement procedures; (4) relation with other agreements; and (5) institutional framework. IV. Other is a basket provision for all other information required for the sake of transparency.).

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  112. See Compendium of Issues Related to Regional Trade Agreements, supra note 67, at 32.

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  113. Id.

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  114. Id.

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  115. Id.

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  116. Id.

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  117. Id.

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  118. Id., at 6–7.

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  119. See, Committee on Regional Trade Agreements, Synopsis of “Systemic” Issues Related to Regional Trade Agreements, WT/REG/W/37, ¶ 13 (March 2, 2000) (“Synopsis of Systemic Issues”) (noting that some members maintain that notification should be made “before entry into force” of the RTA. Other members respond that the imprecision regarding notification procedures “reflects the ‘pragmatism’ necessary to address complex negotiations for the formation of an RTA, a particularly relevant matter in the case of large agreements in which the bulk of concessions are made at the last minute.”).

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  120. Because of the disagreement over notifications, some WTO members have proposed that a means of gathering information on non-notified RTAs be developed. One proposal suggests a so-called “counternotification” procedure, whereby a member having reason to believe that another member has entered into an RTA notifies the WTO of the basis for such belief; the WTO would then solicit comments and information from the members believed to have concluded an RTA. This proposal has been rejected by those WTO members who believe that it is not authorized under the WTO agreements. See, id., at ¶ 16.

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  121. The minutes of the examination meetings for NAFTA provide an example of a particularly sustained and thorough RTA examination. The NAFTA came into force before the advent of the WTO, and thus it was examined under the GATT RTA examination procedures. Nonetheless, the acute interest of WTO members in the NAFTA strongly influenced the examination of the NAFTA, as is reflected in the probing questions in the referenced documents. See World Trade Organization, Working Party on the North American Free Trade Agreement: Questions and Replies, WT/REG4/1 (June 25, 1995), WT/REG4/1/Add.1 (July 22, 1996) and WT/REG4/1/Add.2 (Oct. 15, 1996).

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  122. Justice Brandeis emphasized the importance of transparency in his 1933 publication on the securities industry, OtherPeople’s Money: “Publicity is justly commended as a remedy for social and industrial diseases. Sunlight is said to be the best of disinfectants; electric light the most efficient policeman.” Louis Brandeis, Other People’s Money, 62 (1933).

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  123. See, Committee on Regional Trade Agreements, Draft Report (2002) of the Committee on Regional Trade Agreements to the General Council, WT/REG/W/47, ¶ 6 and Attachment 3 (Nov. 4, 2002); See also, Committee on Regional Trade Agreements, Reporting on Regional Trade Agreements—Recommendations by the CRTA to the Council for Trade in Goods, WT/REG/4 (March 11, 1998)(setting forth detailed reporting requirements regarding RTAs.).

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  124. See, Committee on Regional Trade Agreements, Draft Report (2002) of the Committee on Regional Trade Agreements to the General Council, Attachment 3, WT/REG/W/47 (Nov. 4, 2002).

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  125. Id., at ¶¶ 8 and 9.

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  126. See, Basic Information on Regional Trade Agreements, supra note 8. This information has been updated in some respects in the 2002 Draft Report to the General Council. See, Committee on Regional Trade Agreements, Draft Report (2002) of the Committee on Regional Trade Agreements to the General Council, WT/REG/W/47 (Nov. 4, 2002)(recording 125 actively under examination, of which 27 are in the midst of the examination process, with the other 74 having completed the examination process, but not having resulted in the issuance of a report.).

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  127. See, e.g., Committee on Regional Trade Agreements, Coverage, Liberalization Process and Transition Provisions in Regional Trade Agreements, WT/REG/W/46 (April 5, 2002); Committee on Regional Trade Agreements, Rules of Origin Regimes in Regional Trade Agreements, WT/REG/W/45 (April 5, 2002).

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  128. See, World Trade Organization, Seminar on Regionalism and the WTO, (April 26, 2002)(containing links to papers presented by panelists), avail. at. www.wto.org/English/tratop e/region e/sem april02 e/background obj e.htm

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  129. See (1) Report of the Appellate Body, United States—Definitive Safeguard Measures on Imports of Circular Welded Carbon Quality Line Pipe from Korea, WT/DS202/AB/R (2002); (2) Report of the Appellate Body,United States—Definitive Safeguard Measures on Imports of Wheat Gluten from the E.C., WT/DS166/AB/R (2001); (3) Report of the WTO Panel, Canada—Certain Measures Affecting the Automotive Industry, WT/DS139, 142/R (2000); (4) Report of the Appellate Body, Turkey—Restrictions on Imports of Textile and Clothing Products, WT/DS34/AB/R (1999); (5) Report of the Appellate Body, Argentina—Safeguard Measures on Imports of Footwear, WT/DS121/AB/R (1999).

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  130. See United States—Line Pipe, Argentina—Footwear, and United States—Wheat Gluten, supra note 164.

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  131. See Report of the WTO Panel, Turkey—Restrictions on Imports of Textile and Clothing Products, WT/DS139,142R, ¶¶ 2.15–2.16

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  132. See id., at ¶ 2.10–2.20, 2.33–2.35

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  133. See id., at ¶ 1.3

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  134. Turkey—Restrictions on Imports of Textile and Clothing Products, WT/DS34/AB/R, ¶ 58 (1999).

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  135. See id., ¶ 62.

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  136. See id., ¶ 63.

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  137. See, Canada—Certain Measures Affecting the Automobile Industry, ¶¶ 2.3.

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  138. See id., ¶ 6.108.

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  139. See id., ¶ 6.109–111 (arguing that—while certain measures may be justifiable under Article XXIV if they are “necessary” to the formation of the FTA, no provision of the NAFTA “required” the duty exemptions established by the Auto Pact.).

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  140. Id., ¶ 6.115.

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  141. Id., ¶ 10.54.

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  142. Id., ¶¶ 10.55–56. The panel decision was not appealed.

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  143. This is the most recent case to examine the relationship between Article XXIV and the Agreement on Safeguards. In it, the Appellate Body held that the United States had violated its obligations under the Agreement on Safeguards by including imports from Canada and Mexico in the determination regarding injury to the U.S. industry, but excluding these imports from the application of duties. See United States—Line Pipe from Korea, supra, note 154. This U.S. methodology resulted in application of safeguard duties to non-NAFTA countries beyond “the extent necessary to prevent or remedy serious injury and to facilitate adjustment.” Id., ¶ 197. The Appellate Body suggested that the non-application of duties to Canada and Mexico might have been permissible if the U.S. International Trade Commission had provided “a reasoned and adequate explanation that establishes explicitly that imports from non-NAFTA sources by themselves satisfied the conditions for the application of a safeguard measure.” Id., at ¶ 197.

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  144. See Report of the Panel, Argentina-Footwear, ¶¶ 5.67–5.76, 8.74, supra note 163.

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  145. See, id.

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  146. See, id. ¶ 8.93. Argentina noted that the last sentence of the footnote to Article 2.1 explicitly stated there to be no consensus on the relationship between Articles XIX and XXIV of GATT. Argentina noted that although Article XXIV:8 specified some exceptions from the requirement to abolish all duties and other restrictive regulations on substantially all trade within a Customs Union, GATT Article XIX (on safeguards) was not one of those enumerated exceptions. Thus, Argentina claimed that Article XXIV:8 (not to mention MERCOSUR legislation) explicitly prohibited it from imposing safeguard measures against imports from other MERCOSUR countries.

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  147. See id., ¶ 8.96 (The Panel noted that Article XIX is not one of the restrictive regulations enumerated in Article XXIV:8 as one of those that must be eliminated within the territories of a Customs Union. Furthermore, the Panel found the practice of GATT Contracting Parties and WTO Members to be “inconclusive on the issue of the imposition or maintenance of safeguard measures between the constituent territories of a customs union or an [FTA].” Finally, the Panel accepted that, “ [i]t is a matter of fact that many agreements establishing [FTAs]... or customs unions allow for the possibility to impose safeguard measures on intraregional trade, while few regional integration agreements explicitly prohibit the imposition of intra-regional safeguard measures once the formation of such an integration area is completed.”

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  148. See, id., ¶ 8.98.

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  149. Report of the Appellate Body, Japan-Taxes on Alcoholic Beverages, WT/DS8/AB/R, WT/DS10/AB/R, WT/DS11/AB/R (1996).

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  150. Raj Bhala, The Precedent Setters: De Facto Stare Decisis in WTO Adjudication (Part Two of a Trilogy), 9 J. Trans Nat’l L. & Pol’y 1, 3–4 (1999) (arguing that the Appellate Body is in the process of establishing binding principles with the effect of Stare Decisis).

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  151. As noted by the CRTA, not only is key language in Article XXIV disputed, but the relationship between Article XXIV and other WTO provisions is also unclear. The following list of questions raises issues that WTO members consider to be unanswered by the relevant provisions of the GATT and WTO Agreements: —Is the introduction of new quantitative restrictions justifiable in the context of GATT Articles XXIV:5 and XXIV:8(a)(ii) in the case of a customs union? —How should antidumping/safeguard measures already in place within an RTA be applied by new parties to that RTA? —Since no multilaterally agreed methodology exists, how should individual Members’ reduction commitments on domestic support and export subsidies be translated into common commitments when a customs union is established or enlarged? Synopsis of Systemic Issues, supra note 131, at ¶ 30.

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  152. See, e.g., Committee on Regional Trade Agreements, Communication from the Republic of Korea, WT/REG/W/4, ¶ 9 (June 27, 1996) (“Communication from the Republic of Korea”) (proposing that, during the first WTO Ministerial Conference the General Council work: (a) To identify elements of regionalism which may conflict with the objectives of the [multilateral trading system (“MTS”)]... and to explore ways and means of addressing such elements; (b) To explore creative means of capturing trade liberalizations advanced by regional initiatives and incorporating them into the MTS; (c) To reviewthe validity of the WTO’s current legal regime on regionalism, embodied in Article XXIV of GATT 1994 and Article V of GATS, in light of its relevance in the vastly changed global trade environment; (d) To redefine... RTAs’ proper relationship with the MTS, and to explore ways and means by which to ensure that regionalism complements and reinforces the objectives of the MTS... Over six years later, it cannot be stated unequivocally that all—or even any—of these objectives has been met. However, as countries enter RTAs at an increasing rate, it becomes increasingly urgent for WTO members to reach some agreement on appropriate rules to ensure the complementarity of the RTA phenomenon with the multilateral trading system).

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  153. See e.g., Cho, supra Sungjoon Cho, Breaking the Barrier between Regionalism and Multilateralism: A New Perspective on Trade Regionalism, 42 Harv. Int’l L. J. 419, 423–26 (2000) note 1, at 430–37 (outlining several “legal solutions” to systemic problems associated with regionalism.); See also Jackson, supra note 75, at 80.

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    Robert E. Herzstein (attorneys at the law firm) & Joseph P. Whitlock

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    Michael G. Plummer (Professor of International Economics) (Professor of International Economics)

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Herzstein, R.E., Whitlock, J.P. (2005). Regulating Regional Trade Agreements—A Legal Analysis. In: Macrory, P.F.J., Appleton, A.E., Plummer, M.G. (eds) The World Trade Organization: Legal, Economic and Political Analysis. Springer, Boston, MA. https://doi.org/10.1007/0-387-22688-5_46

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