Regional Cooperation and Free World Trade
The GATT stipulates the principle of non-discrimination, and the “most favoured nation” clause requires that all members of GATT grant each other a treatment as favourable as they give to any country. Regional integration which consists in the liberalization of trade between some countries clearly means that other countries are discriminated. Under certain conditions, however, this is compatible with the principles of GATT. According to article XXIV of GATT customs unions and free trade areas which abolish tariffs between their member countries “within a reasonable length of time” are admitted. Preferential areas which do not abolish tariffs within the area altogether, are equally exempted, if they existed at the time of the foundation of GATT (e.g. the British Commonwealth).
KeywordsRegional Cooperation Custom Union Trade Diversion Trade Creation Preferential Trade Agreement
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