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The WTO and Regional Trade: a family business? The WTO compatibility of regional trade agreements with non-WTO-members

Published online by Cambridge University Press:  23 May 2014

LOUISE EVA MOSSNER
LOUISE EVA MOSSNER*
Affiliation:
Friedrich-Alexander-UniversitätErlangen-Nürnberg
*
*Email: louise.mossner@fau.de.
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Abstract

Numerous WTO members pursue regional economic integration with both other members and non-WTO-members. The resulting derogation from the most-favoured-nation principle needs to be justified in accordance with the relevant WTO provisions. Regional integration in the service sector is expressly allowed between WTO and non-WTO members pursuant to GATS Article V. In the absence of clear regulation, it has been questioned whether the same is true for regional trade agreements (RTAs) covering trade in goods. Providing a comprehensive interpretation, this paper argues that neither GATT Article XXIV nor the Enabling Clause require the WTO membership of all the parties to an RTA.

Type
Review Article
Information
World Trade Review , Volume 13 , Issue 4 , October 2014 , pp. 633 - 649
Copyright
Copyright © Louise Eva Mossner 2014 

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References

1 As of March 2013, it has 159 members.

2 Hilpold, Peter, ‘Regional Integration Agreements According to Art. XXIV GATT – Between Law and Politics’ (7) Max Planck Yearbook of United Nations Law 219 (2003)Google Scholar, at 242, cautions about ‘a blind spot’ risking WTO credibility.

3 Devuyst, Youri and Serdarevic, Asja, ‘The World Trade Organization and Regional Trade Agreements: Bridging the Constitutional Gap’, Duke Journal of Comparative and International Law 1 (2007)Google Scholar, at 5, with further references of the many and longstanding critics and the reform proposals.

4 Article 1 lit. b (iv) of GATT 1994.

5 Marceau, Gabrielle and Reiman, Cornelis, ‘When and How is a Regional Trade Agreement Compatible with the WTO?’, 28 (3) Legal Issues of Economic Integration 297 (2001)CrossRefGoogle Scholar and Hilpold, above n. 2, for example do not mention the issue.

6 Choi, Won-Mog, ‘Legal Problems of Making Regional Trade Agreements with Non-WTO-Member States’, 8 (4) Journal of International Economic Law 825 (2005)Google Scholar.

7 See Devuyst and Serdarevic, above n. 3, at 21 ff. and Rizwanul Islam, Md. and Alam, Shawkat, ‘Preferential Trade Agreements and the Scope of the GATT Article XXIV, GATS Article V and the Enabling Clause: An Appraisal of GATT/WTO Jurisprudence’, Netherlands International Law Review 1 (2009)Google Scholar, at 29 ff.

8 Pellens, Sabine, Entwicklungsgemeinschaften in der WTO. Die internen Rechtsordnungen der regionalen Integrationsgemeinschaften zwischen Entwicklungsländern und ihre Stellung im Recht der Welthandelsorganisation, 1st edn (Berlin: Duncker and Humblot, 2008)CrossRefGoogle Scholar, at 177f, 221f was the first to explicitly propose this thesis.

9 Among these countries more than 20 have entered into negotiations on their accession which, however, often take a long time. In July 2012, the WTO General Council has ‘approved new guidelines to enable least developed countries to negotiate membership of the WTO more quickly and easily’, WTO, Members streamline accession for poorest countries, 2012, available at http://wto.org/english/news_e/news12_e/acc_03jul12_e.htm (visited 4 September 2013). See also WTO, Members and Observers, 2012, available at http://www.wto.org/english/thewto_e/whatis_e/tif_e/org6_e.htm (visited 4 September 2013).

10 See the WTO homepage, RTA Database, List of all RTAs in force, last updated on 23 August 2013, available at http://rtais.wto.org/UI/PublicAllRTAList.aspx (visited 4 September 2013).

11 By way of example, negotiations have been conducted on the Bay of Bengal Initiative on Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) and an agreement between Canada and the Carribean Community and Common Market (CARICOM). See the WTO homepage, RTA Database, List of early announcements, last updated on 23 August 2013, available at http://rtais.wto.org/UI/PublicEARTAList.aspx (visited 4 September 2013).

12 The most important being the RTA concluded with Algeria.

13 The Economic Community of Western African States (ECOWAS) and the FTA between Georgia and Turkmenistan are representative of such RTAs.

14 The GAFTA has not been notified yet to the WTO.

15 ‘Trade within the same region can often be more conducive to “diversification, structural change and industrial upgrading than overall trade”’, UNCTAD, ‘Trade and Development Report, 2007: Regional Cooperation for Development’, UN doc. UNCTAD/TDR/2007, at 102 ff, 110.

16 For example the Southern African Development Community (SADC). Choi, Won-Mog and Lee, Yong-Shik, ‘Facilitating Preferential Trade Agreements between Developed and Developing Countries: A Case for “Enabling” the Enabling Clause’, 21 (1) Minnesota Journal of International Law 1 (2012)Google Scholar, at p. 1 ff, regret the fact that less than one third of all RTAs involving only developing countries have been notified pursuant to the Enabling Clause.

17 GATT, Article I. The GATS contains in its Article II a MFN clause as does the TRIPS in its Article 4.

18 Done at Vienna, 23 May 1969, United Nations, Treaty Series, vol. 1155, p. 331.

19 WTO Appellate Body Reports, United States – Standards for Reformulated and Conventional Gasoline (US–Gasoline), WT/DS2/AB/R, adopted 20 May 1996, p. 17; Japan – Taxes on Alcoholic Beverages (Japan–Alcoholic Beverages II), WT/DS8/AB/R, WT/DS10/AB/R, WT/DS11/AB/R, adopted 1 November 1996, pp. 10 ff.

20 Authors' italics.

21 Choi, above n. 6, at 836 f.

22 VCLT, Article 31 para. 2, 3 lit. b and c.

23 See WTO, GATT Analytical Index – Guide to GATT Law and Practice (hereinafter GATT Analytical Index), updated 6th edn 2012, at 846 referring to GATT doc. W.12/18, at 5–6.

24 Havana Charter, Article 15.

25 GATT Analytical Index, above n. 23, at 847.

26 See GATT Contracting Parties, ‘Nicaragua – El Salvador Free-Trade Area’, Corrigendum, GATT/CP.6/24/Add.1/Corr., 5 November 1951, referring to the GATT Contracting Parties' Decision of 25 October 1951, BISD II/30.

27 GATT Contracting Parties, Decision of 13 November 1956, BISD 5S/29.

28 ‘The Contracting Parties’ Decision concerning the Customs Union between France and Italy', GATT doc. GATT/1/49, 19 March 1948, does not refer to para. 10 but to para. 5 of GATT Art. XXIV: ‘The Contracting Parties decide in terms of para. 5 of Art. XXIV that the provisions of the General Agreement on Tariffs and Trade shall not prevent the establishment of a custums union or an interim agreement for a custums union between France and Italy.’

29 See Choi, above n. 6, at 840.

30 The currently 57 notified agreements, which concern trade with non-WTO members, are evidence of the continuous practice as they reach back to the 1970s, 1980s, 1990s, and to the last two decades.

31 Choi, above n. 6, at 841 quotes the example of the Interim Agreements of FTAs between the EC and, respectively, Estonia, Latvia, and Lithuania, these countries being not WTO members at the time of entry into force.

32 See McNair, Arnold, ‘La terminaison et la dissolution des traités’, 22 Recueil des Cours de l'Académie de Droit International de La Haye 465 (1928-II)Google Scholar, at 518; Kolb, Robert, ‘La désuetude en droit international public’, Revue Générale de Droit International Public 577 (2007)Google Scholar and Le Floch, Guillaume, ‘La désuetude en droit international public’, Revue Générale de Droit International Public 609 (2007)Google Scholar.

33 See the US American Statement in CRTA, ‘Note on the Meeting of 4 March 2009’, WTO doc. WT/REG/M/52, para. 14. See also the ‘Report of the GATT Working Parties on the European Free Trade Association’, GATT doc. L/1235, 4 June 1960, para. 58 and GATT Working Parties, ‘Report on the Latin American Free Trade Area’, GATT doc. L/1364, 17 November 1960, para. 31.

34 Choi, above n. 6, at 836.

35 Report of the Panel, ‘EEC – Import Regimes for Bananas’, 11 February 1994 (unadopted), GATT doc. DS38/R, para. 163. The Panel relies on the same argument as Choi: the wording that the Panel consider to be confirmed by the drafting history.

36 Report of the Working Party, ‘Agreements of Association between the European Economic Community and Tunisia and Morocco’, 7 April 1970, GATT doc. L/3379, para. 16. GATT Panel Report, European Community – Tariff Treatment on Imports of Citrus Products from Certain Countries in the Mediterranean Region (EC–Citrus), L/5776, 7 February 1985, unadopted, para. 4.9: ‘in the past, RTAs such as EFTA, LAFTA, Arab Common Market, UK–Ireland Free-Trade Area Agreement have already been evaluated by GATT member states based on paragraph 7(b) of GATT Article XXIV’.

37 Report of the Panel, EEC – Member States' Import Regimes for Bananas (EEC–Bananas I), DS32/R, 3 June 1993, unadopted, para. 364–372.

38 See e.g. the Report of the Working Party, ‘Agreements of Association between the European Economic Community and Tunisia and Morocco’, 7 April 1970, GATT doc. L/3379, para. 16, and the GATT Panel Report, EC–Citrus, para. 4.9: ‘in the past, RTAs such as EFTA, LAFTA, Arab Common Market, UK–Ireland Free-Trade Area Agreement have already been evaluated by GATT member states based on paragraph 7(b) of GATT Article XXIV’.

39 Choi, above n. 6, at 836 refers to GATT Working Parties, ‘Report on the United Kingdom – Ireland Free-Trade Area Agreement’, conclusions adopted on 5 April 1966, BISD 14S/23.

40 Ibid, at 836.

41 WTO CRTA, ‘Synopsis of “systemic” issues related to Regional Trade Agreements’, WTO doc. WT/REG/W/37, 2 March 2000, at para. 67.

42 Ibid.

43 Findlay, Christopher, Stephenson, Sherry, and Javier Prieto, Francisco, ‘Services in Regional Trade Agreements’, in Macrory, Patrick F. J., Appleton, Arthur E., and Plummer, Michael G. (eds.), The World Trade Organization: Legal Economic and Political Analysis (New York, NY: Springer, 2005), 293–311Google Scholar, at 294.

44 Para.1 of GATS Art. V.

45 See Choi, above n. 6, at 843 ff., 845 and Pellens, above n. 8, at 178.

46 Markus Krajewski, ‘Services Liberalization in Regional Trade Agreements: Lessons for GATS “Unfinished Business”?’, in Lorand Bartels and Federico Ortino (eds.), Regional Trade Agreements and the WTO Legal System (Oxford, New York: Oxford University Press, 2006), 175–200, at 178.

47 Pellens, above n. 8, at 178.

48 Choi, above n. 6, at 846 explains the different wording inter alia with the fact that ‘the phrase “as between the contracting parties” in paragraph 5 of GATT Article XXIV had already lost its ability to control RTAs involving non-GATT member states, and that paragraph 10 approval procedure was largely bypassed’.

49 See Marceau and Reiman, above n. 5, at 309.

50 See Pellens, above n. 8, at 177 f.

51 Singapore Ministerial Declaration, WTO doc. WT/MIN(96)/DEC, adopted on 13 December 1996, para. 7.

52 Pellens, above n. 8, at 177 f.

53 See Choi, above n. 6, at 832.

54 Ibid, at 832.

55 ‘Report of the Second Session of the Preparatory Committee of the United Nations Conference on Trade and Employment’, UN doc. E/PC/T/186, 10 September 1947, draft Article 93.

56 ‘Report of Review Working Party IV on Organizational Questions’, GATT doc. L/327, 22 February 1955, para. 39: ‘The Working Party considered the question of the extension by contracting parties to non-contracting parties of the benefits of the Agreement by means of bilateral agreements. It was pointed out in the discussion that noncontracting parties frequently received all the benefits of the Agreement without having to undertake its corresponding obligations, and that this situation could discourage rather than induce other countries to join. Most members of the Working Party felt, however, that the attitude a contracting party wished to adopt in this respect to a non-contracting party was a matter for each contracting party to decide.’

57 (London and New York) Draft Charter of ITO, Article 38. ‘Report of the Second Session of the Preparatory Committee of the United Nations Conference on Trade and Employment’, adopted on 22 August 1947, at 78.

58 ITO Charter draft as established at the Havana Conference, Article 44. See GATT Analytical Index, above n . 23, at 846 for the drafting history of GATT Art. XXIV. The GATT was originally drafted as part of the International Trade Oragnization (ITO) Charter, an international trade body covering employment, commodity agreements, restrictive business practices, international investments, and services. Having been approved at a conference in Havana in 1948, the ITO Charter was ultimately not ratified and therefore never became effective. See GATT Analytical Index, above n. 23, at 3 ff. for the drafting of the Havana Charter.

59 Choi, above n. 6, at 836 f.

60 In 1946, 1947, and 1955. See the ‘Report of the Second Session of the Preparatory Committee of the United Nations Conference on Trade and Employment’, adopted on 22 August 1947, at 55 and GATT Contracting Parties, ‘Report of Review on Organizational and Functional Questions’, GATT doc. L/327, adopted on 28 February 1955, para. 39 ff.

61 Authors' italics.

62 See Choi, above n. 6, at. 852 who just excludes LDCs from the WTO membership requirement in virtue of para. 2 lit. d. See also Islam and Alam, above n. 7, at 32.

63 VCLT, Article 31 para. 1.

64 See Choi and Lee, above n. 16, p. 9: ‘The current legal framework of the Enabling Clause, which allows preferential treatment for RTAs only among developing WTO member countries, deserves criticism.’

65 Ibid, p. 11.

66 Ibid, p. 11.

67 See Pellens, above n. 8, p. 221.

68 Ibid, at 221 f.

69 Ibid, at 222.

70 See the second paragraph of the Agreements preamble and the title as well as para. 1 of the Enabling Clause.

71 Yusuf, Abdulqawi A., ‘Differential and More Favourable Treatment of Developing Countries in International Trade: The GATT Enabling Clause’ (14) Journal of World Trade Law 488 (1980)Google Scholar, at 492.

72 UNCTAD, ‘Trade and Development Report, 2007: Regional Cooperation for Development’, UN doc. UNCTAD/TDR/2007, at 102 ff.

73 See Choi, above n. 6, at 855 adopts this argument not for all the developing countries, but only for LDCs.