Regional Trade Agreements: Challenges, Opportunities and the Development Dimension

1. Regional Trade Agreements:Challenges, Opportunities and the Development Dimension CUTS/WTO Regional Outreach Workshop “The Multilateral Trading System: Opportunities and Challenged for East Africa” Nairobi, 29-30 April

2. Overview • Multilateralism and regionalism compared • Motives for going regional • GATT/WTO law on regionalism • Developing countries and regionalism • Options for convergence

3. Number of RTAs • Number of RTAs rising fast. • S-S is growing fastest (many not notified) • N-S also growing fast. • Most doable N-N have been done.

4. Multilateralism and Regionalism Compared • Not substitutes, both supply unique attributes • Parallel universes needing better connections • Downsides of regionalism, although indeterminate welfare analytics and global governance considerations • Preferentialism and trade costs • Challenges for multilateralism progress, legitimacy and difficulties with reciprocity

5. Why Do Countries Establish Regional Trade Agreements? • Wish to move further, faster • Deeper integration, especially of neighbours • Insurance • Credibility • Fear of exclusion • Domino effect • Identity politics

6. Regionalism and Multilateralism • Trade diversion risks • Regulatory divergence and fragmentation • Incomplete integration (Agriculture, Subsidies) and same peaks, exclusions • Focus can mean neglect of multilateral interests • Multiple agreements means higher transactions costs – rules of origin etc.

7. GATT/WTO Law and Practice The Law: • Loopholes and a lack of specificity • Contested interpretations • Limited influence on the design and content of RTAs • Sparse, permissive jurisprudence Practice: • Virtually no decisions on conformity • Confusion between law and politics

8. GATT/WTO Law and Practice (cont) Gaps in the rules: • Nothing on preferential rules of origin • No provisions for agriculture-specific measures (e.g. TRQs) • Lack of clarity on application of contingency measures Definitional problems: • “Substantially all trade” • “No more trade restrictive” • Interim agreements

9. GATT/WTO Law and Practice (cont) Arguments about role of dispute settlement: • Judicial review rather than dispute settlement for “balance” • Appeal to customary law • This is about politics not law • If GATT/WTO has not disapproved of RTAs they should be assumed to conform • Co-existence is the ticket for WTO survival

10. From the Legal to the Procedural • Historic tension: information – political conversation – compliance imperative (substantive rules) • De facto a dysfunctional mix • The 2006 Transparency Mechanism • Early announcement • Factual only, no basis for dispute settlement • A “consideration” not an “examination”

11. Developing Countries and Regionalism • Enabling Clause • No longer substantially all • Lighter surveillance and accountability • South-South agreements • Distinguish between CUs and FTAs • North-South agreements • Power asymmetries or alternative reciprocity • WTO-plus • Multilateralism versus regionalism

12. Options for Convergence • Abandon regionalism • Multilateralize regionalism • Liberalize multilaterally • Fix the WTO law • Adopt soft WTO law