Trade Regionalism Under GATT/WTO

The legal sanctity of the trade regionalism under GATT/WTO comes from Article XXIV of GATT 1947, which provides the general framework for the formation and territorial application of frontier tariff case in the form of the Customs Union and Free-trade Areas. Article XXIV defines regional trade arrangement in Paragraph 2 as “…a customs territory shall be understood to mean any territory with respect to which separate tariffs or other regulations of commerce are maintained for a substantial part of the trade of such territory with other territories.” In addition to the Article XXIV of GATT, Enabling Clause or 1979 GATT decision “Differential and more favourable treatment reciprocity and fuller participation of developing countries” along with Article V of GATS also provide for the regional arrangement in the form of preferential trade in goods amongst developing countries and arrangement in cases of services, respectively. This chapter along with covering the theoretical, conceptual and legal nuances of trade regionalism deliberates on the regulation of trade regionalism across the globe. Such regulation is by means of internal, external and review & reporting requirements as emanating from Articles XXIV and various decisions of GATT/WTO.

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Notes

For the classification of economic integration see, Balassa (1962) and Balassa (1987). Figurative presentation: Low (2000).

Source: WTO Secretariat. 2020. Regional Trade Agreements Database. https://rtais.wto.org/UI/charts.aspx. Accessed 18-06-2020.

Preamble of GATT, 1947 states equality as one of its objective in form of ‘the elimination of discriminatory treatment in international commerce’.

See Paragraphs 9 and 10 of WTO Appellate Body Report, Turkey—Restrictions on imports of textile and clothing products, WT/DS34/AB/R, 22 October 1999.

See WTO Appellate Body Report, United States—Definitive safeguard measures on imports of circular welded carbon quality line pipe from Korea, WT/DS202/AB/R 15 February 2002; where United States to invoke Article XXIV of the GATT 1994 as a defence for violating Articles I, XIII, and XIX of the GATT 1994 and Article 2.2 of the Agreement on Safeguards. See also, WTO Panel Report, Turkey—Restrictions on imports of textile and clothing products, WT/DS34/R, circulated on 31 May 1999 and WTO Appellate Body Report, Turkey—Restrictions on imports of textile and clothing products, WT/DS/AB; adopted on 19 November 1999; where Turkey claimed that the right under Article XXIV to establish a customs union is an autonomous right and not just an ‘exception’ from other GATT obligations.

OECD 2001 Ministerial Communiqué as quoted by Ken Heydon, “Regionalism: A Complement, not a Substitute” in “Regionalism and the Multilateral Trading System”, Organisation for Economic Co-Operation and Development publication, 2003 At pg. 12.

Preamble to Understanding on the interpretation of Article XXIV of General Agreement on Tariff and Trade, 1994; See Annex 1.

World Trade Organisation Decision, Committee on Regional Trade Agreements, WT/L/127 notified on 7 February 1996; For detail see point 2.4: Review & Reporting.

See WTO Background Note by the Secretariat Negotiating Group on Rules, “Compendium of issues related to Regional Trade Agreements”, TN/RL/W/8/Rev.1 notified on 1 August 2002. Paragraph 1.

See WTO Background Note by the Secretariat Negotiating Group on Rules, “Compendium of issues related to Regional Trade Agreements”, TN/RL/W/8/Rev.1 notified on 1 August 2002. Paragraph 2.

Paragraph 3 of the WTO General Council Decision, “Transparency Mechanism for Regional Trade Agreements”, WT/L/671 of 14 December 2006 as notified on 18 December 2006.

GATT Report, “Working Party on the customs union between The Czech Republic and The Slovak Republic”, L/7501 of 15 July 1994.

As quoted in WTO Panel Report, Turkey—restrictions on imports of textile and clothing products, WT/DS34/R, circulated on 31 May 1999.

See Paragraph 3 of WTO Background Note by the Secretariat Negotiating Group on Rules, “Compendium of issues related to Regional Trade Agreements”, TN/RL/W/8/Rev.1 notified on 1 August 2002.

Paragraph 3, Preamble of Understanding on the interpretation of Article XXIV of General Agreement on Tariff and Trade, 1994.

See Paragraphs 9.148 of WTO Panel Report, “Turkey – restrictions on imports of textile and clothing products”, WT/DS34/R, circulated on 31 May 1999 which stated the following:

[t]he ordinary meaning of the term “substantially” in the context of subparagraph 8(a) appears to provide for both qualitative and quantitative components. The expression “substantially the same duties and other regulations of commerce are applied by each of the Members of the [customs] union” would appear to encompass both quantitative and qualitative elements, the quantitative aspect more emphasized in relation to duties.

However, the confusion persists as this ruling was challenged before WTO Appellate body which refused to make any finding on issues arising out of Article XXIV. [Paragraph 65 of of WTO Appellate Body Report, Turkey—restrictions on imports of textile and clothing products, WT/DS/AB; adopted on 19 November 1999].

WTO-Trade Policy Reviews. 2017. Further liberalisation in agriculture could enhance resource allocation in Switzerland and Liechtenstein: First press release, secretariat and government summaries PRESS/TPRB/150 6 December 2000. https://www.wto.org/english/tratop_e/tpr_e/tp150_e.htm Accessed 22 February 2017.

WTO-Trade Policy Reviews. 2017. Further liberalisation in agriculture could enhance resource allocation in Switzerland and Liechtenstein: First press release, secretariat and government summaries PRESS/TPRB/150 6 December 2000. https://www.wto.org/english/tratop_e/tpr_e/tp150_e.htm Accessed 22 February 2017.

WTO Panel Report, WT/DS34/R, circulated on 31 May 1999, as modified by the WTO Appellate Body Report, WT/DS/AB; adopted on 19 November 1999.

Article 12(2) of decision No 1/95 of the EC-Turkey Association Council of 22 December 1995 on implementing the final phase of the Customs Union. Available on https://trade.ec.europa.eu/doclib/docs/2003/december/tradoc_115267.pdf as on 23 February 2017.

Article XI and XIII of GATT provides for the General Elimination of Quantitative Restrictions and Non-discriminatory Administration of Quantitative Restrictions, respectively.

Paragraphs 9.86, 9.188 and 9.189 of WTO Panel Report, Turkey—restrictions on imports of textile and clothing products, WT/DS34/R, circulated on 31 May 1999.

See Paragraph 48 of WTO Appellate Body Report, Turkey—restrictions on imports of textile and clothing products, WT/DS/AB; adopted on 19 November 1999.

Paragraph 48 of WTO Appellate Body Report, Turkey—restrictions on imports of textile and clothing products, WT/DS/AB; adopted on 19 November 1999.

Paragraph 68 of WTO Appellate Body Report, Turkey—restrictions on imports of textile and clothing products, WT/DS/AB; adopted on 19 November 1999 states,

We wish to point out that we make no finding on the issue of whether quantitative restrictions found to be inconsistent with Article XI and Article XIII of the GATT 1994 will ever be justified by Article XXIV. We find only that the quantitative restrictions at issue in the appeal in this case were not so justified. Likewise, we make no finding either on many other issues that may arise under Article XXIV. The resolution of those other issues must await another day. We do not believe it necessary to find more than we have found here to fulfil our responsibilities under the DSU in deciding this case.

WTO Appellate Body Report, United States—Definitive safeguard measures on imports of circular welded carbon quality line pipe from Korea, WT/DS202/AB/R 15 February 2002.

See WTO Committee on Regional Trade Agreements, “Note on the meetings of 16–18 and 20 February 1998” Sixteenth Session, WT/REG/M/16 as notified on 18 March 1998. Paragraph 54.

WTO Appellate Body Report, United States—Definitive safeguard measures on imports of circular welded carbon quality line pipe from Korea, WT/DS202/AB/R 15 February 2002.

WTO Appellate Body Report, United States—Definitive safeguard measures on imports of circular welded carbon quality line pipe from Korea, WT/DS202/AB/R 15 February 2002; Paragraph 49.

Forward by Pascal Lamy, Director-General, World Trade Organization. 2008. In Multilateralizing Regionalism, ed. Richard Baldwin and Patrick Low, xii. New York: Cambridge University Press.

Review: Paragraphs 7 and 8 of the Uruguay Round Understanding on the interpretation of Article XXIV of the General Agreement on Tariffs and Trade, 1994.

See Paragraph 18 of WTO General Council Decision, “Committee on Regional Trade Agreements” WT/L/127 of 6 February 1996.

See Preamble of the WTO General Council Decision, “Committee on Regional Trade Agreements”, WT/L/127 of 6 February 1996 as notified on 7 February 1996.

Article 1 of WTO General Council Decision, “Committee on Regional Trade Agreements”, WT/L/127 of 6 February 1996 as notified on 7 February 1996.

WTO General Council Decision, “Transparency Mechanism for Regional Trade Agreement” WT/L/671 of 14 December 2006 as notified on 18 December 2006.

Paragraph 6 of the WTO General Council Decision, “Transparency Mechanism for Regional Trade Agreement” WT/L/671 of 14 December 2006 as notified on 18 December 2006.

Annex to WTO General Council Decision, “Transparency Mechanism for Regional Trade Agreement” WT/L/671 of 14 December 2006 as notified on 18 December 2006.

Paragraph 7(b) and 9 of the WTO General Council Decision, “Transparency Mechanism for Regional Trade Agreement” WT/L/671 of 14 December 2006 as notified on 18 December 2006.

Paragraph 11 of the WTO General Council Decision, “Transparency Mechanism for Regional Trade Agreement” WT/L/671 of 14 December 2006 as notified on 18 December 2006.

Paragraph 14 of the WTO General Council Decision, “Transparency Mechanism for Regional Trade Agreement” WT/L/671 of 14 December 2006 as notified on 18 December 2006.

Paragraph 14 of the WTO General Council Decision, “Transparency Mechanism for Regional Trade Agreement” WT/L/671 of 14 December 2006 as notified on 18 December 2006.

Paragraph 15 of the WTO General Council Decision, “Transparency Mechanism for Regional Trade Agreement” WT/L/671 of 14 December 2006 as notified on 18 December 2006.

See WTO Background Note by the Secretariat Negotiating Group on Rules, “Compendium of issues related to Regional Trade Agreements”, TN/RL/W/8/Rev.1 notified on 1 August 2002. Paragraph 16.

See Status vis-à-vis the examination process of RTAs notified to the GATT/WTO under GATT Art. XXIV by CRTA in WTO Background Note by the Secretariat Negotiating Group on Rules, “Compendium of issues related to Regional Trade Agreements”, TN/RL/W/8/Rev.1 notified on 1 August 2002. Paragraphs 16–21.

The Report of the first Warwick Commission, “The Multilateral Trade Regime: Which Way Forward?” The University of Warwick, UK, 2007.

The nomenclature and division of regionalism into two phases were given by Jagdish Bhagwati. See Bhagwati (1993); Bhagwati and Panagariya (1996), pp. 1–78, Bhagwati et al. (1998), Bhagwati (1968).

Viner (1950). This theory was further developed by James Meade and Richard Lipsey. See Meade (1955), Lipsey (1958).

See the detail discussion on ‘functionalism’, ‘neo-functionalism’ and ‘inter-governmentalism’ in Sect. 2.3.3 of this chapter.

Paul Krugman, The Move to Free Trade Zones. In Symposium Sponsored by the Federal Reserve Bank of Kansas City, Policy Implications of Trade and Currency Zone, 1991 as quoted in Bhagwati and Panagariya (1996), pp. 1–78.

See Lipsey (1957). See also Ohyama (1972), Vanek (1965); Panagariya and Krishna (2002), Kühnhardt (2010).

Vilfredo Federico Damaso Pareto, 15 July 1848–19 August 1923, was an Italian economist, political scientist, and philosopher.

International Political Economy (IPE) has been defined by Robert Gilpin as, “the reciprocal and dynamic interaction in international relations of the pursuit of wealth and the pursuit of power.” Gilpin (1975). Also see, Gilpin (1981).

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Authors and Affiliations

1. Department of Law, National Law University Odisha, Cuttack, Odisha, India Owais Hasan Khan

1. Owais Hasan Khan