UPH MTIC Program | Introduction to WTO Law | January 2015

Regionalism | The end of non-discrimination

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Structure of the Present Lecture

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Preferential Trade Agreements | typology

Nature of concessionsNature of concessions Scope of Scope of inclusioninclusion

Examples in Examples in practicepractice

ReciprocalReciprocal SelectiveSelective EU, NAFTA, MercosurEU, NAFTA, Mercosur

UnilateralUnilateral SelectiveSelective Cotonou, AGOACotonou, AGOA

UnilateralUnilateral GeneralizedGeneralized GSPGSP

Source: Adapted from Crawford, WTO 2010

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Preferential Trade Agreements | typology

Definition of a Free Trade AgreementA group of two or more customs territories that have eliminated all or most tariff and non-tariff measures affecting trade among themselves. Participating countries continue to apply their existing tariffs on external goods.

Definition of a Customs Uniona group of two or more customs territories that have eliminated all or most tariff and non-tariff measures affecting trade among themselves. Participating countries replace their individual MFN tariffs with a single tariff applied to third countries.

Source: Adapted from Crawford, WTO 2010

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Free Trade Agreement| formation

Country A & B sign a FTA Tariffs are eliminated on most goods (often with carve outs or longer

implementation periods for for sensitive products Each party maintains its tariff structure Rules of origin are negotiated and put in place

Other common features Reciprocal concessions (with possible asymmetrical implementation if one of the

parties is a developing country) Negative list approach (for trade in services and investment) Deeper integration and regulatory convergence

Source: Adapted from Crawford, WTO 2010

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Customs Union| formation

Country A & B sign a CU Tariffs are eliminated on most goods (with some exceptions possible for sensitive

products) A common external tariff is adopted A mechanism to share customs revenues is devised A temporary rules of origin regime may be put in place Compensation is paid to third countries if bound MFN rates are raised by either or

both parties

Source: Adapted from Crawford, WTO 2010

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PTAs | degrees of integration

• FTA– Many examples such as KORUS, ANZERTA, ASEAN+ FTAs

• Customs Union– Turkey and the EU

• Common Market– Mercosur

• Economic Union– European Union

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PTAs | trends and evolution

As of 1 April 2010, 463 RTAs have been notified to the GATT/WTO of which 272 are currently in force

Approximately 100 RTAs in the pipeline (signed, not yet in force/under negotiation) – Unaccounted number of RTAs in force but not yet notified

Source: World Trade Report 2011

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PTAs | who is using them?

Source: World Trade Report 2011

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PTAs | most prolific users

Source: World Trade Report 2011

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PTAs | what forms are favored?

Source: World Trade Report 2011

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PTAs | scope and coverage

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2

4

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10

12

14

16

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20

22

24

26

28

195819601962196419661968197019721974197619781980198219841986198819901992199419961998200020022004200620082010

No

. o

f R

TA

s

0

50

100

150

200

250

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Goods Services Accessions Cumulative

187 RTAs cover trade in goods; 73 trade in services; and 12 are accessions to existing RTAs

EIAs represent 28% of total number of RTA notifications – approximately 70% of RTAs being negotiated contain provisions on trade in services

Source: Crawford, WTO 2010

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PTAs | what forces are driving them?

• Deadlock in Doha and wrangling over various issues from market access, to policy space, to tariff erosion.

• Intransigence at the WTO on new issues like competition, investment, government procurement, e-commerce etc.

• Political dimension of relatively short time-frames in elected office and the promise of rapid market access gains in the context of a narrow negotiation between a limited number of parties (often 2)

• The reality that deeper integration is often easier between a limited number of economies rather than on an MFN basis

• The forces of competitive liberalization

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PTA’s | the ideological debate

• Non-discrimination has long been considered one of the central organizing principles underpinning the multilateral trading system (since the GATT and now in the WTO).

• Historically, the choice of unconditional MFN as the defining principle of the GATT reflected widespread disillusionment with the growth of protectionism and bilateral arrangements during the inter-war period.

• Yet five decades after the founding of the GATT, MFN is no longer the rule but has almost become the exception with the EU for example only trading on an MFN basis with a handful of countries (Australia, Chinese Taipei, HK, Japan, New Zealand and the US).

Source: Adapted from The Consultative Board, The Future of the WTO, 2004

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Common Principles*

• The purpose of an RTA is to facilitate trade among the parties

• The formation of the RTA must not entail placing barriers towards third parties higher than those existing before its formation

• The RTA must provide for mutual/reciprocal trade concessions

*GATT Art. XXIV:4; “Enabling Clause” para. 3(a); GATS Art. V:4

Which legal cover should be Which legal cover should be sought?sought?

When entering an RTA, a WTO Member should invoke one of When entering an RTA, a WTO Member should invoke one of the following provisions, and comply with the relevant the following provisions, and comply with the relevant conditions:conditions:

RTA partiesRTA parties

Developed Developed onlyonly Developing onlyDeveloping only Developing & Developing &

developeddeveloped

Trade in Trade in goodsgoods GATT XXIVGATT XXIV

GATT XXIVGATT XXIV

Enabling ClauseEnabling ClauseGATT XXIVGATT XXIV

Trade in Trade in servicesservices GATS VGATS V GATS VGATS V GATS VGATS V

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RTA database

• Available at:

• http://rtais.wto.org/UI/PublicMaintainRTAHome.aspx

UPH MTIC Program | Introduction to WTO Law | January 2015

Market Access in the WTO

Simon Lacey

Thank You