Comments on "Sovereignty and Regionalism." (Response to Article by Horacio A. Grigera Naon in This Issue, P. 1073)(symposium: Free Trade Areas: The Challenge and Promise of Fair vs. Free Trade)

By Van Bael, Ivo | Law and Policy in International Business, Summer 1996 | Go to article overview

Comments on "Sovereignty and Regionalism." (Response to Article by Horacio A. Grigera Naon in This Issue, P. 1073)(symposium: Free Trade Areas: The Challenge and Promise of Fair vs. Free Trade)


Van Bael, Ivo, Law and Policy in International Business


The term "regionalism" is used throughout the paper by Horacio Grigera Naon as referring to bilateral or minilateral efforts toward economic cooperation among states seeking to accomplish their collective reinsertion into the world market. Faced with the globalization of the economy, developing countries in particular are finding it attractive to bridge the gap between their relatively weak economies and the world economy by aiming at greater integration inside their regions, while at the same time attempting to reduce barriers to trade with the rest of the world.

Participation in regional trade arrangements implies a delegation of sovereignty to supranational organs in charge of collective decision-making in order to achieve economic integration or cooperation. In addition, a set of rules is required to sanction the authority so delegated and to solve disputes arising therefrom.

Naon describes in detail the institutions involved, if any, their powers, and the relevant dispute resolution provisions in a number of regional trade arrangements in which developing nations are participating, including the Association of Southeast Asian Nations (ASEAN) and the Asia-Pacific Economic Cooperation (APEC); the North American Free Trade Agreement (NAFTA); MERCOSUR and the Andean Pact; and the African Economic Community (AEC), the Southern African Development Community (SADC), and the Common Market for Eastern and Southern Africa (CMES). The author also describes the power structure and dispute settlement provisions of the new World Trade Organization (WTO), which is somewhat surprising since the WTO, as its name suggests, is not a regional but rather a multilateral organization of world trade.

From Naon's description it is clear that a number of these regional trade arrangements operate with very few, if any, collective institutions (e.g., ASEAN, APEC, and NAFTA), whereas others rely heavily on supranational organs (e.g., MERCOSUR, the Andean Pact, and the African Treaty organizations). As to the delegation of sovereignty for the resolution of disputes, NAFTA and, of course, the WTO contain detailed provisions and mechanisms to adjudicate disputes. Perhaps more interesting is the fact that under the Brasilia Protocol, private parties can file claims against any member country of MERCOSUR for actions which are discriminatory, in restraint of trade, or in violation of fair competition rules. Such claims may eventually lead to the dispute being submitted to binding international arbitration.

In his conclusion, Naon argues that regional arrangements must transfer sufficient sovereignty to international bodies to underpin the credibility of the economic cooperation program in question and to save it from undue political interference from the participant members.

A few comments on Naon's contribution can be appropriately made.

I. THE MULTILATERAL VERSUS THE REGIONAL APPROACH

The author has described the two potential approaches to trade arrangements (multilateral versus regional) in terms of a fundamental choice to be made by developing countries. However, there is also the requirement in Article XXIV of the General Agreement on Tariffs and Trade (GATT) that regional arrangements must cover "substantially all . . . trade."(1) Apparently, thus far only six out of eighty regional arrangements have been found to comply with that rule. The European Union (KU) is not among the six that have been cleared so far.

In this context it is interesting to note that on November 15, 1995, the WTO General Council moved to establish a permanent committee on regional trade arrangements in order to consider refinements to WTO rules on regional trade agreements and to assess whether particular regional arrangements are in compliance with those rules. In fact, the WTO's annual report describing trends in world trade came with a warning of the danger resulting from competing trade blocs:

Throughout much of the postwar period, the multilateral trading

system was rightly seen as a bulwark against a return to the trade

chaos of the 1930s. …

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