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9TH WTO MINISTERIAL CONFERENCE, BALI, 2013

Briefing note: Regional trade agreements

The number of regional trade agreements (RTAs) has been increasing steadily. Following Mongolia's decision to join the Asia-Pacific Trade Agreement (APTA), all WTO members will soon be members of one or more RTAs (some belonging to as many as 30). This has created what has been described as a tangled “spaghetti bowl” of overlapping trade regulations.

Updated: November 2013

THIS EXPLANATION is designed to help the public understand developments in the WTO. While every effort has been made to ensure the contents are accurate, it does not prejudice member governments’ positions.

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As of 8 November 2013, some 432 RTAs had been notified to the GATT/WTO, of which 250 were in force. Of these 250 agreements, 114 cover goods and services, while 135 cover only goods and one covers services only. Notifications to the WTO are made separately for the goods and services aspects of agreements. The total number of notifications that had been made to the GATT/WTO up to 8 November 2013 was 577, of which 381 cover agreements that are in force.

The WTO recognizes that regional arrangements and closer economic integration can benefit countries. It also recognizes that, under some circumstances, regional trade agreements could hurt the trade interests of other countries. Normally, setting up a customs union or free trade area would violate the WTO’s principle of equal treatment for all trading partners (“most-favoured-nation”). However, Article XXIV of the General Agreement on Tariffs and Trade (GATT), Article V of the General Agreement on Trade in Services (GATS) and paragraph 2c of the Enabling Clause allow regional trade agreements to be set up as a special exception, provided certain criteria are met.

In particular, RTAs should help trade flow more freely among the countries in the group without barriers being raised on trade with the outside world. In other words, regional integration should complement the multilateral trading system and not threaten it.

Article XXIV says if a free trade area or customs union is created, duties and other trade barriers should be reduced or removed on substantially all the trade between the components of the group. Non-members of the RTA should not find trade with the group any more restrictive than before the group was set up.

Similarly, Article V of the GATS permits economic integration agreements in services under certain conditions which are similar to those under GATT Article XXIV. Paragraph 2c of the Enabling Clause allows developing countries to enter into regional or global agreements that include the reduction or elimination of tariffs and non-tariff barriers on trade among themselves, subject to criteria or conditions that may be prescribed by WTO members.

A key feature of modern RTAs is that they are broadening and, in many cases, deepening their coverage. While some agreements are limited to reducing barriers to trade in goods, many are becoming increasingly more comprehensive, with provisions on market opening in services and in other areas, such as investment, competition, trade facilitation, government procurement, intellectual property, electronic commerce and, in some cases, labour and the environment.

Most agreements are bilateral and very often overlapping, giving rise to an increasingly complex regime of different trade regulations. Critics argue that these overlapping regional trade regimes make international trade more complex and undermine WTO non-discrimination principles. However, proponents of RTAs say they can lay the groundwork for future multilateral trade rules. The consolidation of existing RTAs, for instance, through accession by non-parties or the formation of one single plurilateral agreement that replaces existing bilateral relationships among the parties, can also reduce the degree of discrimination they cause.

Since the end of 2006, all RTAs, regardless of whether they are notified under Article XXIV of the GATT 1994, the Enabling Clause (for trade in goods), or Article V of the GATS (for trade in services), are subject to the provisions and procedures of the Transparency Mechanism for Regional Trade Agreements. Established through a General Council Decision in December 2006, and applied provisionally since, the mechanism provides specific guidelines on when a new RTA should be notified to the WTO Secretariat and the related information and data to be provided. It also requires the Secretariat to prepare a factual presentation on each RTA, and for each RTA to be reviewed by members in the appropriate WTO committee.

Agreements notified under Article XXIV of the GATT 1994 and Article V of the GATS are considered by the Committee on Regional Trade Agreements (CRTA), while agreements notified under the Enabling Clause are considered by a dedicated session of the Committee on Trade and Development. The General Council decision requires WTO members to inform the WTO Secretariat in the event of any subsequent changes to a notified agreement and to provide a report once an agreement is fully implemented. In the interests of transparency, WTO members are also encouraged to inform the Secretariat of any agreements being negotiated or those that have been signed but are not yet in force (“early announcements”).

Notifications in 2013

In 2013, WTO members notified 19 RTAs to the WTO (31 notifications if goods, services and accessions are counted separately, of which 19 concern goods notified under Article XXIV of the GATT 1994 and 12 concern services notified under Article V of the GATS).

Database

All the information on RTAs notified to the WTO is contained in a publicly accessible RTA database, which can be consulted at http://rtais.wto.org. The database, which became available to the public in January 2009, contains information on all RTAs notified to the WTO, including links to the official texts and annexes of each agreement as well as information on the examination or consideration process in the WTO. For those RTAs that have already been the subject of a factual presentation, the database also contains the relevant trade and tariff data provided by the parties.