PRESS BRIEF

REGIONALISM AND THE MULTILATERAL TRADING SYSTEM

    Nearly all of the WTO's 128 Members have signed regional trade agreements with other countries. Some of these agreements are wide-ranging in scope; others, aim to achieve trade liberalization across a number of sectors over time.

    

    A fundamental debate concerning regional trade agreements, however, is their compatibility with the multilateral trading system. The main requirement is that the purpose of a regional trade agreement is to facilitate trade between the constituent territories and not to raise barriers to the trade of other WTO Members which are not parties to the agreement. This question is central to both Article XXIV of the GATT 1994 and Article V of the GATS. In Singapore some countries are expected to support the introduction of tighter rules in this area.

    During the Uruguay Round of trade negotiations (1986-1993), a number of Article XXIV provisions were clarified. Meanwhile, the number of regional agreements being reported to the WTO is increasing. Since there were already more than 20 separate working parties examining regional trade agreements, a decision was taken in February 1996 to establish a Committee on Regional Trade Agreements. The Committee was primarily created to centralize the effort of working parties in one body and to examine in detail future regional trade agreements notified to the WTO, including those relating to trade in services, but also to provide a common platform to discuss ways of dealing with the issue of regionalism in the WTO. To date, 144 regional trade agreements have been notified to the GATT/WTO, of which around 80 are still in force.

    Throughout 1996, the Committee examined various regional agreements and discussed how such trade agreements should be examined. It is important to note that countries party to such agreements are not always the first to divulge detailed information as to how they work, which sectors are covered and, perhaps most importantly, which sectors are excluded.

Committee examines 21 regional agreements

    By the end of 1996, the Committee will have continued or started to examine 21 regional trade agreements, including: the enlargement of the European Communities to include Austria, Finland and Sweden; the North American Free Trade Agreement (NAFTA), both for goods and services; the MERCOSUR (the customs union between Argentina, Brazil, Paraguay and Uruguay); and a number of free-trade agreements between both the European Communities and members of the European Free Trade Association with several countries in Central and Eastern Europe (e.g., Hungary, Poland, the Czech Republic, the Slovak Republic, Romania, Bulgaria and the Baltic States of Estonia, Latvia, and Lithuania). The Committee also addressed how countries which are parties

to regional trade agreements should report biennially on the operation of such agreements. Efforts are now underway to finalize a standard reporting format.

    Another area which the Committee will continue to discuss concerns the systemic implications of regional trade agreements and initiatives for the multilateral trading system and the relationship between them. This discussion mainly focuses on what repercussions such agreements may have on the functioning of the WTO system of rights and obligations.

Many countries in favour of discussing regional trade issues in Singapore

    

    Many WTO Members participate in the Committee's work and several have stressed that the issue of regionalism should feature in the Ministerial Declaration at Singapore. While there are differences, it seems clear that most WTO Members agree that regional trade initiatives promote further liberalization and may even assist developing and transition economies, in particular, to integrate into the world's trading system. Some countries, however, insist that the relationship between such regional agreements and the multilateral trading system must be clearly defined. There is general agreement that the multilateral trading system as it stands should take precedence over regional agreements and that countries should reaffirm their commitment that regional agreements are compatible and consistent with it. In this regard, some are calling on Ministers at Singapore not to just make a political commitment to continue to examine the agreements but to actually provide the General Council and its Committee on Regional Trade Agreements with a specific direction for future deliberations on systemic issues. This would allow the Committee to look into such fundamental aspects as the possibilities of improving the WTO's legal regime on regionalism or even, of reviewing existing rules.


END