WORLD TRADE
ORGANIZATIONTN/RL/W/14
9 July 2002
(02-3817)
Negotiating Group on Rules Original:  English
SUBMISSION ON REGIONAL TRADE AGREEMENTS BY
THE EUROPEAN COMMUNITIES AND THEIR MEMBER STATES
The following communication, dated 5 July 2002, has been received from the Permanent
Delegation of the European Communities.
_______________
1. INTRODUCTION
The European Communities and their Member States welcome the inclusion within the DDA
of negotiations to clarify and improve the disciplines and procedures applying to regional tradeagreements (RTAs) under existing WTO provisions, while taking into account their developmental
aspects.  While negotiations should be based on the specific proposals introduced by WTO Members,
their potential scope should encompass all WTO provisions dealing with RTAs, in particular Article
XXIV of the GATT 1994, the relevant provisions of the Enabling Clause and Article V of the GATS.
2. THE WTO LEGAL FRAMEWORK: THE NEED FOR CLARIFICATION
There are a number of long-standing differences of interpretation associated with the
GATT/WTO rules on regional trade agreements, and in particular Article XXIV of the GATT 1994.
All RTAs notified to the GATT have been examined by working parties under the procedures
foreseen in Article XXIV:7, while agreements no tified to the WTO have been examined in the
Committee on Regional Trade Agreements (CRTA). However, such have been the differences of view
between GATT Contracting Parties and now WTO Members on the manner in which specificprovisions should be interpreted that only in the very rarest cases has it been possible for a consensus
to be established to consider a particular agreement in full conformity with GATT or WTO
requirements.   Negotiations undertaken in the Uruguay Round led to agreement on an Understanding
on the Interpretation of Article XXIV of the GATT 1994.  Although this instrument indeed provided
useful clarification of certain aspects of Article XXIV rules, negotiators were by no means able toresolve all the outstanding differences of interpretation.  This is evident from the inability to date of
the CRTA to complete even a single examination among the agreements referred to it.
The WTO rules relevant for Economic Integration Agreements covering the area of trade in
services are set out in Article V of the GATS.  Even here, despite the fact that these rules were
negotiated as recently as during the Uruguay Round and first enacted in the WTO Agreements whichentered into force in 1995, the experience of examinations undertaken by the CRTA points to
uncertainty among WTO Members as to how the provisions should be applied.
This situation is to the advantage of no one.  Recent years have seen the conclusion of an
increasing number of RTAs, yet the WTO Members who are party to them lack clear and authoritative
guidance on how the relevant WTO rules should be applied.  WTO Members who are not parties to agiven RTA face the risk that agreements will have negative implications for their own legitimate tradeTN/RL/W/14
Page 2
interests.  Yet these same Members may also have RTAs of their own.  The position of the European
Communities is clearly in favour of clarification of the WTO rules for RTAs.  In developing its views
on this issue, the European Communities will be guided by three parameters: its interests in
guaranteeing the proper functioning and continued good health of the open, rules-based multilateral
trading system for the benefit of both developing and developed countries, its market access interestsin respect of third country markets and its own regional agreements.  Similar considerations could be
expected to apply for all WTO Members - the clear majority - who are participants in some RTAs and
not in others.
This approach has been the basis of the positions  that the European Communities have already taken
in the WTO Committee on Regional Trade Agreements on the issue of clarification of WTO rules
relating to regional agreements.
At the same time, it is well known that the Committee on Regional Trade Agreements has not so far
been able to complete even a single examination of the many RTAs that have been referred to it for
examination.  In part, this situation reflects differences of view adopted by individual WTO Members
in that Committee in relation to the substantive nature of the relevant WTO obligations.
3. THE RELATIONSHIP BETWEEN REGIONALISM AND MULTILATERALISM
Given its own experience (the European Union has itself developed as the product of an
ambitious process of deep and wide-ranging regional integration), its involvement in regional
agreements with other countries and its strong support for multilateral liberalisation in the
GATT/WTO, including most recently in the run-up to the launch of the DDA negotiations, the
European Communities have always been persuaded that regional trade agreements must be “steppingstones” towards multilateral liberalisation, rather than “stumbling blocks” and that regionalism and
multilateralism must be mutually supportive rather than contradictory.  WTO rules recognise that
RTAs, whether in the form of Customs Unions or FTAs in the area of trade in goods or in that of
Economic Integration Agreements in the area of trade in services, can make a positive contribution to
the development of trade.  The European Commun ities believe that regional integration can provide
an important contribution to stability and development and therefore supports the objective of
sustaining and strengthening a properly functioning multilateral system in the long term.
The experience of the European Communities shows how regional agreements serve to open
markets by pushing forward a pattern of tariff reduction and elimination in participating countries,
thereby helping them prepare for further multilateral liberalisation.  Regional agreements also provide
the basis for much more far-reaching trade liberalisation, regulatory initiatives and elimination of non-
tariff barriers to trade than have yet been possible within the WTO, enabling Members who are readyto “experiment” with such initiatives before there is an overall WTO consensus.  The European
Communities’ experience shows that the positive impact of regional integration is particularly strong
in cases where regional agreements provide for “deep integration” in the sense of initiatives going
beyond elimination of import and export tariffs and measures having equivalent effect to provide for
elimination of non-tariff barriers to trade and fo r regulatory harmonisation and convergence, even to
the extent, in some cases, of establishing common regulatory frameworks between RTA partners.
Such more far-reaching economic integration within RTAs can also be of great benefit to non-parties,
since it is often objectively difficult and economically meaningless to set up a bilateral or regional
regulatory framework that still discriminates against non-parties to the RTA.  Thus, consideration
should be given as to how the WTO framework could serve to encourage and channel such more far-reaching integration and trade liberalisation.  In this context, it will be important to try to ensure that
regulatory aspects of “deep” regionalism are based, to the fullest extent possible, on multilateral
norms.TN/RL/W/14
Page 3
4. THE DEVELOPMENT DIMENSION
The mandate for negotiations explicitly acknowledges the importance of the development
dimension of regional agreements.  The European Communities consider that regional integration can
play an important role in supporting economic development through the creation of additional trade
and investment opportunities as well as accompanying measures and initiatives to support structuraland regulatory reforms.  This is true both for RTAs between developing and developed countries and
for those between developing countries.  Regional agreements should also ensure that trade
liberalisation at the regional level contributes to sustainable development.
RTAs involving developing countries are subject to existing WTO provisions such as Article
XXIV of the GATT and Article V of the GATS, al though for agreements in trade in goods between
developing countries, the Enabling Clause is also relevant.
The European Communities are of the view th at the DDA negoti ations on RTAs should aim
to clarify the flexibilities already provided for wi thin the existing framework of WTO rules.  This is
likely to involve further consideration of the relationship between GATT Article XXIV and the
Enabling Clause, as well as an examination of the extent to which WTO rules already take into
account discrepancies in development levels between RTA parties.
The economic logic of regional integration indicates that all parties to such agreements should
pursue a high level of reciprocal market opening and regulatory harmonisation or convergence while
also pursuing an open approach to trade policy w ith third countries within the multilateral framework
if they are to achieve the full potential benefits.  This is as true for agreements among developing
countries as it is for agreements between developing and developed countries or among developed
countries alone.  At the same time, it is important to recognise that the ability of many developingcountries to adjust to greater competition on their domestic markets or take full advantage of
additional market access opportunities can be constrained by their own individual level of
development.  This points to the need to examine, inter alia , the flexibilities available during the
transitional or implementation period of RTAs, taking into account the needs of developing countries
in a properly focused and appropriate manner so as to support their greater integration into themultilateral trading system.  Aspects in respect of which such flexibilities might be appropriate
include the length of the transitional period, the level of final trade coverage and the degree of
asymmetry in terms of timetables for tariff reduction and elimination.
During the course of negotiations, the Negotiating Group on Rules should welcome input in
an appropriate form from the WTO Committee on Trade and Development, to which the Doha
Ministerial Declaration has allocated a specific role to monitor developmental aspects of the
negotiations as a whole.  The Negotiating Group should also be alert to the development of the workprogramme on Small Economies, which was also launched at Doha and which is to be undertaken
under the auspices of the General Council.  The Negotiating Group on Rules would have to remain,
however, the forum for discussions and eventual decisions relating to this aspect of RTAs.
5. THE SCOPE OF NEGOTIATIONS
Apart from this horizontal aspect of the deve lopment dimension of RTAs, which is explicitly
identified in the mandate for the negotiations on RTAs, the European Communities and their Member
States are of the view that among the issues that merit discussion and analysis during the course of the
negotiations are the following:TN/RL/W/14
Page 4
1. Clarification of the legal framework applicable to RTAs
Agreements in the area of trade in goods
Article XXIV of the GATT 1994 and the WTO Understanding on the Interpretation of Article XXIV
of the GATT 1994
/g167 the definitions of key concepts for the application of Article XXIV, including “regulations of
commerce”, “restrictive regulations of commerce”, “substantially all the trade”, “applicable
duties” and “major sector”;
/g167 clarification of the application of provisions relating to the staged implementation of RTAs,
including the “exceptional circumstances” in which transitional periods for the formation of a
customs union or free trade area might be legitimately expected to exceed ten years;
/g167 closer alignment of the disciplines imposed on parties to FTAs with the disciplines imposed on
parties to Customs Unions, particularly in respect of the obligations of GATT Article XXIV:5concerning the implications of individual RTAs for non-parties;
/g167 treatment of non-tariff measures in trade between RTA partners including rules of origin;
The GATT Decision on Differential and more Favourable Treatment, Reciprocity and Fuller
Participation of Developing Countries (the Enabling Clause)
/g167 the relationship between the provisions of the Enabling Clause relating to regional and global
agreements entered into amongst less-developed contracting parties and Article XXIV of the
GATT 1994;
Agreements in the area of trade in Services
/g167 clarification of key concepts for the application of Article V of the GATS, including “substantial
sectoral coverage” and “substantially all discrimination”;
/g167 the definition of the “reasonable time frame” for the implementation of economic integration
agreements;
/g167 the appropriate combination of elimination of discriminatory measures (roll-back) and prohibition
of new or more discriminatory measures (stand-still) in order to achieve the absence or
elimination of substantially all discrimination (Article V:1(b)(i) and (ii));
/g167 the appropriate methodology to ensure that the overall level of barriers and restrictions to trade in
services with respect to third parties is not raised in the creation or enlargement of economic
integration agreements;
2. Improvement of procedural aspects of the examination of RTAs in WTO bodies
/g167 timing of notifications under relevant WTO provisions, the nature and form of information that
should be supplied by RTA participants to support the examination of RTAs; timing of
examination of notifications by the competent bodies;
/g167 procedures for examination of agreements notified under the Enabling Clause.
It should be noted that this only represents an initial list of issues where the work undertaken
in the CRTA points to a need for further examinat ion now in the Negotiating Group.  This is not anTN/RL/W/14
Page 5
exhaustive list of issues that the Negotiating Group can be expected to address. The European
Communities expect other WTO Members to submit their own proposals on this, and indeed the
European Communities should also be expected to come forward with further proposals and ideas as
the negotiations progress.
__________