The World Trade Organization and Regional Trade Agreements: Bridging the Constitutional Credibility Gap

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On July 10, 2006, negotiators of the World Trade Organization's (WTO) Doha Development Round approved a new WTO Transparency Mechanism (Mechanism) for Regional Trade Agreements (RTAs). (1) Instead of awaiting the final results of the Doha Round, the WTO General Council formally established the Mechanism on a provisional basis on December 14, 2006. (2) The decision on the provisional application of the new Mechanism is significant. It shows the urgency felt by the WTO members for more transparency in the creation and functioning of RTAs. By July 2007, no less than 380 RTAs had been notified to the General Agreement on Tariffs and Trade (GATT) and the WTO. (3) An additional twenty RTAs were estimated to be operational, though not yet notified. (4) From September 2005 to September 2006 alone, thirty-two RTAs were notified. (5) According to the WTO's website, Mongolia is the only WTO member that is not party to any RTA. (6)

This surge in bilateral trade agreements is likely to continue in the foreseeable future. (7) The rush towards a 21st-century regionalism in Asia has filled hundreds of pages in the recent academic literature. (8) At the same time, older hands at regionalism have been announcing renewed efforts in the negotiation of RTAs. Following the suspension of the Doha Development Round in July 2006, the European Community (EC) Trade Commissioner Peter Mandelson declared that he would pursue targeted bilateral trade agreements as a part of a wider competitiveness strategy. (9) In December 2006, the European Commission formally proposed the start of negotiations for the creation of free trade agreements with India, South Korea, the Association of Southeast Asian Nations (ASEAN), Central America and the Andean Community. (10) The European Commission stated that the "bilateral approach would allow the European Union (EU) to liberalize tariffs further, to take non-tariff measures better into account and to restore a level playing field with our main competitors on major markets." (11) United States Trade Representative Susan C. Schwab equally underlined that she would pursue an "ambitious agenda for bilateral and regional agreements that will broaden and deepen trade relations with key, like-minded countries." (12) In fact, "[i]n the last five years, [the United States] Congress has approved free trade agreements with 12 countries[;] ... [a]greements with Oman, Peru and Colombia are pending, and agreements with 11 more countries are in negotiation." (13)

The parties to RTAs have generally emphasized that their meticulously constructed and ambitious bilateral agreements reinforce the WTO system rather than undermine it. (14) Since 1947, GATT has stated explicitly that the "contracting parties recognize the desirability of increasing freedom of trade by the development, through voluntary agreements, of closer integration between the economies of the countries parties to such agreements." (15) At the same time, the multilateral trade regime also imposes certain conditions on such RTAs. Those conditions can be found in three different WTO sources: (1) In the area of trade in goods, RTAs are subject to GATT Article XXIV, complemented by an Understanding on its interpretation that was negotiated during the Uruguay Round; (16) (2) in the area of trade in services, the legal foundation for RTAs is found in Article V of the General Agreement on Trade in Services (GATS); (17) and (3) RTAs concluded among developing countries benefit from particular rules contained in paragraph 2(c) of the Decision on Differential and more Favorable Treatment, Reciprocity and Fuller Participation of Developing Countries, also called the Enabling Clause. (18)

As argued by John H. Jackson, the leading legal scholar in the field, the WTO must be regarded as the constitutional charter governing world trade. (19) It is a constitution that "imposes different levels of constraint on the policy options available to public and private leaders. …