Trade Liberalization under the GATT, the NAFTA and the EU: Selected Topics

By Baggaley, Nicholas | Journal of Comparative International Management, June 1998 | Go to article overview

Trade Liberalization under the GATT, the NAFTA and the EU: Selected Topics


Baggaley, Nicholas, Journal of Comparative International Management


Multilateral free trade has taken on increasing global importance with the passage of such agreements as the NAFTA, the EU, the GATT, and the recent transformation of the latter into the WTO. The underlying principle of each is progressive trade liberalization in all fields of economic activity, including those which are more prone to protectionist forces such as agriculture, financial services, and foreign direct investment. In aiming to promote progressive trade liberalization, the GATT the NAFTA and the EU contain rules designed to guard against wrongful trade practices, for example an exporter "dumping" cheap products in a foreign market. This paper critically examines the degree to which these agreements reach their objective, and concludes that although they facilitate the removal of trade restrictions and other barriers, they do not go far enough in a number of specific areas. Examples are provided.

INTRODUCTION

The General Agreement on Tariffs and Trade (GATT) [1] bound the original 23 members to a multilateral free trade agreement which eventually culminated in the Agreement Establishing the World Trade Organization. [2] The objective of the GATT--the main legal and institutional framework for multilateral free trade--was to eliminate or substantially reduce trade tariffs and other impediments to trade, on the basis of reciprocity and mutual advantage. Although a great deal of substantive international trade law has changed since 1947, the GATT's cornerstone principle of progressive trade liberalization remains the same.

Implicit in this principle are four concepts which include:

(1) Most-favoured-nation (MFN) treatment, which prohibits discriminatory trade practices favouring one member state over another. In other words, if trade benefits are extended to one member by another, then they must be extended to all members.

(2) National treatment, which prohibits a member from employing domestic fiscal or administrative laws (e.g. taxes) to discriminate against another member. In other words, each member is required to treat goods or service providers of other member states no less favourably than its own. These first two concepts are the most important principles of non-discrimination underlying international trade law:

(3) Regional trading groups (e.g. EU, NAFTA, ASEAN), which are permitted to the extent that, as a whole, they do not discriminate against nations not belonging to the group.

(4) Remedies (e.g. antidumping and countervailing duties), which may be imposed unilaterally when members are found to be in violation of a GATT obligation.

The European Union was established by the Treaty of European Union, also known as the Maastricht Treaty, [3] originally consisting of twelve countries. Founded upon the elements of the European Community, a common foreign and security policy, and cooperation in the fields of justice and home affairs, the significance of the EU has arguably a greater political than legal dimension. This is reflected in the two main objectives contained in Article B: (1) "to promote economic and social progress which is balanced and sustainable [...] through the strengthening of economic and social cohesion and through the establishment of economic and monetary union, ultimately including a single currency [...]"; and (2) "to assert its identity on the international scene, in particular through the implementation of a common foreign and security policy [...] which might in time lead to a common defence."

The operative section of the Maastricht Treaty, Article G(3) calls for "the elimination, as between Member States, of customs, duties and quantitative restrictions on the import and export of goods, and of all other measures having equivalent effect."

The North American Free Trade Agreement (NAFTA) is a trilateral trade agreement between Canada, the United States and Mexico concluded under the authority of Article XXIV of the GATT (concept #3 above). …

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