RESTRICTEDWORLD TRADE
ORGANIZATIONWT/REG/M/17
12 June 1998
(98-2402)
Committee on Regional Trade Agreements
Seventeenth Session
NOTE ON THE MEETINGS OF 4-5 AND 7-8 MAY 1998
Chairman:  Mr. Jean-Marie Noirfalisse (Belgium)
A. Adoption of the Agenda
1. The Seventeenth Session of the Committee on Regional Trade Agreements (CRTA) was
convened in Airgram WTO/AIR/831.
2. The following Agenda was adopted:
A. Adoption of the Agenda
B. Election of Officers
C. Examination of Regional Trade Agreements:
I. European Communities-Hungary Europe Agreement, ServicesII. European Communities-Poland Europe Agreement, Services
III. European Communities-Slovak Republic Europe Agreement, Services
IV. Treaties establishing the European Union, Services
V. Enlargement of the European Communities (Accession of Austria, Finland and
Sweden)
VI. Central European Free Trade Agreement
VII. Free Trade Agreement Between the Republic of Slovenia and the Republic of
Bulgaria
VIII. Free Trade Agreement Between the Czech Republic and the Republic of
Bulgaria
IX. Free Trade Agreement Between the Slovak Republic and the Republic of
Bulgaria
X. Free Trade Agreement Between Canada and Chile
D. Reporting on the Operation of Agreements
E. Systemic Implications of Agreements and Initiatives for the Multilateral Trading
System and the Relationship Between Them:
I. "Other regulations of commerce"II. "Substantially all the trade"
III. Non-tariff provisions in regional trade agreements
F. Other Business
B. Election of Officers
3. The Chairman proposed to confirm the nominations of the officers.  He said that at the informal
meeting of the Committee on Regional Trade Agr eements (CRTA) held on 24 March 1998, he had
informed Members that agreement had been r eached on appointing Ambassadors Eladio Loizaga
Caballero of Paraguay and Chul-Ki Ju of Korea as the two new Vice-Chairmen of the Committee.
Ambassador Claude Bouah-Kamon of Côte d'Ivoire would continue to serve as Vice-Chairman.  As
there had been no objection, he proposed, and th e Committee agreed, to make such appointments.WT/REG/M/17
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4. The Chairman said that the in tentions of the officers were to endeavour to conclude the
examinations of some regional trade agreements (RTAs)  and issue their reports.  Informal meetings had
been held on the North American Free Trade Agreement,  and discussions were c ontinuing on layout of a
report.  That report could set the precedent for further re ports, both in terms of its form and spirit.  It was
not expected that full agreement or disagreement w ould be reached on its elements, and that might play
into the systemic debate.
C. Examination of Regional Trade Agreements
5. Minutes for these examinations are being circulated as separate documents.
D. Reporting on the Operation of Agreements
6. The Chairman recalled that the Committee had adopted at its last Session recommendations to
the Council for Trade in Goods (CTG), the Council for Trade in Services (CTS) and the Committee on
Trade and Development (CTD).  These recommendations were contained respectively in documentsWT/REG/4, WT/REG/5 and WT/REG/6.  However, be fore transmitting these recommendations to the
relevant bodies, the Committee still had to solve so me points as to how to make these requirements
operational, in particular regarding RTAs in the goods area.  The Secretariat had circulated on 6 March
an Informal Note entitled "Submission of Bienni al Reports on the Operation of Regional Trade
Agreements", with a proposed schedule for the subm ission of such reports in 1999.  Subsequently, the
Committee held an informal meeting in which the scheduling question, as well as the need to avoid
duplication, had been discussed.  At that meeting, the Committee had been informed that the European
Communities (EC) would need some time to consider  the practical implications of such an exercise
before it could agree to transmit these recommendations to the relevant bodies.  He asked the
representative of the EC whether he had any elements  that should be brought to the attention of the
Committee at that stage.
7. The representative of the European Communities said that his delegation had not yet been able
to reach a sufficiently clear understanding on the pr actical implications of what was proposed.  The EC
had been examining the issue and discussing the prac ticalities informally with the Secretariat and among
delegations, and also among its Member States.  T hose discussions had yet to lead to a definitive
conclusion, and he requested that some more time be given to the EC to finish them.
8. The Chairman recalled that that issue had been on the agenda of the Committee for more than
two years and that for some delegations this was a matter of serious concern.  He noted that the
submission of biennial re ports was an obligation, and that 1999 w ould be fast arriving.  Delegations
were also aware of the fact that the preparation of  those reports would take some time; otherwise, the
discussion on that point w ould not have taken so much time.  He informed the Committee that the next
CTG meetings were scheduled for 5 June, 8 July and 1 October.  He stressed the need for the
outstanding points to be clarified as soon as possible, through bilateral, plurilateral and/or multilateral
consultations so that the recommendations could be se nt to the relevant bodies for consideration.  If the
exercise was to become operational in 1999, the decisions by the relevant bodies should ideally be takenbefore the summer break.
9. The representative of the United States reque sted clarification on whether the recommendations
had been transmitted to the relevant bodies.  She th en inquired as to whether the schedule of reports
would also be transmitted to these bodies.  Respondi ng to those questions, the representative of the
Secretariat said that the recommendations had not  yet been transmitted to the bodies and that the
schedule of the submission of reports was for the use of  the Committee, but that could also be sent to the
relevant bodies for information.  Regretting that the issue was still open, the representative of theWT/REG/M/17
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United States said that she hoped that the EC and it s Member States could fini sh consultations quickly
so that the Committee might follow the schedule starting in 1999.
10. Although indicating that he could understand the difficulties of the EC, the representative of
Australia said that he agreed with the United St ates.  Looking at the terms of reference of the
Committee, he noted that the Committee did not  have much success to report.  Under item 1(a) of the
terms of reference, the Committee had not issued an  examination report for any RTA;  under item 1(b),
the Committee would be lucky if it coul d deal with what was actually a relatively simple issue, to ensure
that it become operational in 1999;  some results ha d been achieved in item 1(c).  For the good of the
Committee and to ensure that it could continue to operate successfully, it would be important to achieve
some successes, so that delegations could explain to capitals that the Committee's work was important
and that it should continue in its worthwhile format.  Referring to th e fact that the EC problem was more
of a logistical nature, the Chairman called for an expeditious solution to be found under that agenda
item.
11. The Committee took note of the comments made.
E. Systemic Implications of Agreements and In itiatives for the Multilate ral Trading System and
the Relationship Between Them
12. Following an invitation by the Chairman to introduce a written contribution on "other
regulations of commerce" contained in document WT/REG/W/25, the representative of Australia said
that it was difficult to interpret the phrases "d uties and other regulations of commerce" (ORCs) and
"duties and other restrictive regulations of commerce" (ORRCs), as there was no single perspective; the
matter needed to be looked at from all angles.  Wel coming any comments, he said that his delegation's
contribution reflected the broader economic aspects of that issue.  In consider ing how to interpret ORCs
and ORRCs,  it was important not to lose sight of the fact that the aim of Article XXIV:4 was topromote closer integration between economies.  It c ould be seen from examinations of various RTAs in
the Committee that there were very different levels of ambition for economic integration and different
starting points for the members of RTAs.  For instance, the EC had achieved a very advanced form of
integration, largely through the development of s upranational legislation.  But at the same time
economic integration could take a different perspective when the parties might simply decide to
eliminate tariffs and ORRCs between each other.  Members should keep in mind those different
ambitions and starting points when  considering ORCs and ORRCs.  At the same time, Members should
also remember that the Committee was considering ru les that were applicable to all RTAs concluded
under Article XXIV, and it should examine to what extent  some sort of synthesis of regulations or rules
was possible.  It was with this in mind that the Australian paper had set out various hypothetical cases
that explored some issues.  While his delegation did no t pretend to have all the answers, he believed that
unless the Committee's examinations were based on conditions that might actually exist in the real
world, its work would not proceed very far.
13. Commenting in a preliminary manner on Australia 's submission, the representative of Japan
referred to some of the cases presented as possibl e ORCs.  In the case involv ing countries A, B and C,
the harmonization of rules brought by the forma tion of the customs union resulted in country B's
introducing anti-dumping legislation which it did not previously have.  While it appeared that country B
would not in reality use anti-dumping measures, and ev en if the possibility was very slim for B to use
such measures against third-countries, that potential use was of concern to his delegation.  In all cases, if
B would like to apply anti-dumping measures vis-à-vis  third-country products, it should independently
make an investigation rather th an automatically extend the anti-dumping measures.  In the case
involving countries C and D, the fact that there was potential for D to introduce import quotas against
third-country products, which had not existed before th e formation of the RTA, was of concern to Japan,
despite the low probability of that occurring.  His delegation would like to build upon that paper.  For
example, it would like to expand the part on rules of or igin, in particular looking at the case of free tradeWT/REG/M/17
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agreements which required an additional percentage of  local content for granting origin, thus placing  an
additional burden on third-country companies located in the area.
14. The representative of Hong Kong, China said the Australian submission was interesting and
thought provoking.  It brought up a host of issues central to the interpretation of ORCs and ORRCs in
the context of a customs union and a free-trade area (F TA), and it provided a useful contrast of the
application of the two concepts under paragraphs 5 and 8 of Article XXIV.  Her delegation accepted the
broad conclusion in paragraph 11 of the paper that a constructive interpretation of the concepts would
have to include legal as well as economic consideratio ns.  However, while it would be useful to examine
the systemic issues from the perspective of the ob jective of closer economic integration, it would be
equally important for any comprehensive analysis of the trade effects of RTAs to take into account other
objectives set out in Article XXIV:4, such as incr easing freedom of trade, trade facilitation, and not
raising barriers to trade with non-members.  He r delegation was inclined to support Australia’s
proposition in paragraph 7 of the submission that  the CRTA might explore whether it was possible to
arrive at a list of criteria giving guidance to Members in the assessment of WTO-consistency of newly
formed RTAs.  Anticipating strong resistance in  the CRTA as well as practical difficulties in
establishing a set of objective criteria, her delegati on hoped that that could be taken up in the context of
further broad-based multilateral liberalization, if a mandate for negotiations were eventually given.
Turning to comment on specific parts of the paper, she said that paragraph 6 seemed to suggest that
there had been a consensus that the three named RTAs, including the Australia-New Zealand Closer
Economic Relations Agreement, qualified as “deep integration"; however, this was debatable and
potentially misleading.  While paragraph 8 stated that trade diversion was a zero-sum game, herdelegation believed that in some cases it represented a negative-sum game in terms of global economic
welfare, since it was possible that the formation of an RTA imposed greater costs on third countries than
the total benefits derived from it.  Regarding the first example in paragraph 9, she said it might be
necessary to treat the introduction of anti-dumping legislation and the actual use of anti-dumping
measures differently, as it was not possible to pred ict whether the new legislation would actually be
used.  Concerning the second example in paragra ph 9, she asked if the introduction of a nominal quota
would be necessary as imports could be regulated by  applying rules of origin.  The third example, found
in paragraph 10, brought out the wider question of the coverage of ORRCs.  In this regard, her
delegation doubted whether harmonization of sanitary and phytosanitary (SPS) regulations was required
by virtue of Article XXIV:8.  The inclusion of Article XX in the parentheses of this paragraph meant
that necessary measures to protect human, animal or plant life or health were excluded from the scope of
integration.  Also it would be stretching the m eaning of the phrase “duties and other restrictive
regulations of commerce…are eliminated” a bit too far if harmonization  of SPS regulations was also
required under Article XXIV:8.  Harmonization of SPS m easures should continue to be governed by the
relevant agreements.  Her delegation’s preliminar y view was that Article XXIV:8 should perhaps be
construed to cover only border measures plus those inte rnal measures that were discriminatory in nature.
The fourth example, also found in paragraph 10, was similar to the third.  The crux of the issue was thescope of ORRCs.  In case, the question was whet her competition laws and their enforcement were
captured by Article XXIV:8.
15. Following an invitation by the Chairman, th e representative of Australia introduced his
delegation’s most recent submissi on, contained in document WT/REG/W /22/Add.1, by saying that his
delegation had been pleasantly surprised at the consideration given in previous Sessions to its earlier
paper (WT/REG/W/22).  That paper proposed a possible solution to interpreting the meaning of
“substantially all the trade”, which was a key term in  the WTO rules applying to RTAs.  His delegation
was pleased that other delegations had been willing to explore the issue.  Discussions at the last meeting
had raised some interesting issues, including the problem of developing a measurement for
"substantially all the trade" which would be both qualitative and quantitative.  His delegation had
prepared a response to the questions raised in an effo rt to clarify and explore the concept further.  The
recent paper outlined thoughts which were very much at the conceptual stage, and the answers offered
by his delegation did not necessarily present an ideal  solution and would need to be considered againstWT/REG/M/17
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the practicalities of both the negotiation and the admi nistration of RTAs.  His delegation looked forward
to hearing comments on that issue.  Welcoming the paper presented by the delegation of Hong Kong,
China at the last Session, he said it was a useful c ontribution to the discussion on the legal aspects of the
interpretation of "substantially all the trade" and he looked forward to its amended version, which, he
had heard, would be made available.
16. The representative of New Zealand said a partic ularly useful contribution on “substantially all
the trade” had been made by the Hong Kong, Ch ina delegation (WT/REG/W/24) regarding the meaning
of the term with reference to th e rules of interpretation set out in the Vienna Convention on the Law of
Treaties.  In the analysis by Hong Kong, China, it had been pointed out that the Article XXIV rules
regulating RTAs related to an exception to the f undamental GATT/WTO principle of MFN, and as such
they were to be interpreted strictly.  The point had been made that, while “substantially all the trade” did
not necessarily mean all the trade, the term did sugges t that a very high standard of total trade coverage
would need to be met.  With this general considera tion in mind, his delegation was also interested in the
ideas set forth in the Australian paper (WT/REG/W/22)  which suggested a test for "substantially all the
trade" that would focus on a specific level of coverage  of Harmonized System (HS) tariff lines.  In the
Australian paper, the figure of 95 per cent had been put forward as a formula.  The points made aboutemploying a qualitative approach to complement the approach outlined by Australia at the Committee’s
last meeting had been quite useful; his dele gation welcomed the Addendum introduced today
(WT/REG/W22/Add.1), which extended the earlier appr oach proposed by allowing for an assessment of
the actual trade covered between parties in an agreem ent, in addition to the HS tariff-line coverage.  It
seemed this latest paper emphasized that a formula based on HS tariff-line coverage might be a means toan end, rather than an end in itself.  In taking th is issue forward, the Committee needed to look at some
main questions.  The basic one was whether Members accepted that a specific and predictable test or
formula for assessing coverage of “substantially a ll the trade” needed to be developed.  During the
Committee’s last Session various views had been put forward, with some delegations contending that
the requirement was one that could only be consider ed on a case-by-case basis, taking account of all
quantitative and qualitative factors.  The view had been  put forward that setting out a specific test, and
thereby drawing a line in the sand, could merely encourage RTA parties to do the bare minimum
necessary to meet the agreed test.  Against this, the absence of any agreement as to the extent of trade
coverage envisaged in the “substantially all the tr ade” requirement tended to suggest that it would be
difficult if not impossible in any case-by-case contex t, where trade coverage was less than 100 per cent,
to arrive at agreement as to whether the requiremen t was satisfied.  This made it less rather than more
likely that the requirement would be  applied with the same degree of rigor as was expected with respect
to other GATT/WTO obligations.  Accordingly, his de legation was of the view that if the "substantially
all the trade" requirement were to have practical sign ificance, predictable tests to assist in determining
how the requirement was satisfied were necessary.  This pointed to an approach along the lines
advocated by the Australian delegation, which looked at the specific percentage of trade - measured in
both quantitative and qualitative terms - that would satisfy the requirement.
17. The representative of New Zealand continued, saying if Members accepted that it was both
desirable and necessary to establish some practical tests to assist in determ ining compliance with the
"substantially all the trade" requirement, there was th e question of what consid erations should influence
the substance of such tests.  In effect, how high s hould the standard, i.e. the percentage of trade covered,
be pitched?  In this connection, the delegation of  Hong Kong, China had made some useful points by
highlighting the exceptional nature of the arrangemen ts provided in Article XXIV.  Like a waiver,
Article XXIV was an exception to the fundamental GATT/WTO discipline of MFN treatment, and, also
like a waiver, the requirements of Article XXIV should be interpreted strictly.  "Substantially all the
trade" should consequently be seen as indicating a high standard of trade coverage.  In addition, in
looking at the issue as to what percentage of trad e met the high standard of coverage implicit in the
requirement, Members needed to bear fully in mind th e world as it existed today, and not as it existed
forty or even twenty years ago.  The degree to wh ich the multilateral trading system had evolved in the
last 50 years was an important consideration in this regard.  The extent and depth of coverage of theWT/REG/M/17
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MFN obligations assumed by GATT Contracting Parties in 1947, 1957 or 1967 would by today's
standards be considered rather modest.  The fact th at in past decades the extent of trade covered by
multilateral disciplines had been much more limited than today and, more generally, that general trade
and economic cooperation at the regional or multilateral levels had been much more restricted as a result
of both practical and geo-political fact ors, was likely to have affected the approach of states to the
"substantially all the trade" requirement.  For exam ple, agricultural trade had not been significantly
integrated into the GATT/WTO disciplines until the conclusion of the Uruguay Round.  In those
circumstances, the level of protest voiced about the ex clusion of parts of the agricultural sector or major
parts of it from coverage in an RTA had perhaps been somewhat more muted than it was today.  Over
the last 50 years, and particularly as a result of the Uruguay Round, the range of MFN obligations
encompassed by the GATT/WTO had broadened and deepened far beyond the imagination of
negotiators at the Havana Conference in 1947.  The degree of economic integration achieved at the
multilateral level was now quite high in itself, and th e coverage of issues dealt with at the multilateral
level was in many cases broader than the coverage of issues in an RTA context.  It was from this
perspective in particular that the "substantially all the trade" requirement now needed to be considered.
Members should bear in mind the comment by the Intern ational Court of Justice that "an international
instrument has to be interpreted and applied within  the framework of the entire legal system prevailing
at the time of interpretation."  Commenting further on this aspect, Sir Ian Sinclair, in his discourse on the
Vienna Convention on the Law of Treaties, noted that  "the evolution and development of the law can be
taken into account in interpreting certain terms in a treaty which are by their very nature expressed in
such general terms as to lend themselves to an  evolutionary interpretation...".  His delegation
emphasized the importance of looking at the "subs tantially all the trade" requirement from the
standpoint of today's world, noting that the suggesti on that had sometimes been made, that the various
RTAs concluded since 1947 shoul d be seen as the best indication of the meaning of the "substantially all
the trade" requirement, in fact suggested little mo re than a lowest-common-denominator approach.  The
Membership was not likely to see any understanding ev olve that would reflect the realities of today if
they simply sought to work on the basis that the past  practice of states in itself showed the way forward.
It also should be remembered that very few agre ements had ever been confirmed by the GATT/WTO
Membership as meeting Article XXIV requirements.  His delegation agreed that factual information
about the percentage of trade covered in current agr eements would be useful in highlighting the extent to
which trade had been included or excluded in pract ice, and it would be useful for all parties to
agreements to cooperate with the Secretariat in ma king this information available as an aid to the
Committee's ongoing work.
18. The representatives of New Zealand added that the "substantially all the trade" requirement
should be interpreted as requiring an appropriately high level of trade coverage/integration, particularly
when viewed in the context of the highly developed multilateral trading system as it existed today.  For
the purposes of further analysis, his delegation was prepared to proceed in an open-minded way with
considering proposals, such as that of the Austra lian delegation which suggested a working figure of
95 per cent six-digit HS line coverage, complemented by other criteria  aimed at addressing qualitative
considerations.  An approach of this  sort would assist in ensuring comprehensive sectoral coverage.  His
delegation was equally willing to consider alternativ e approaches that were aimed at arriving at an
acceptable resolution of the debate over the interpreta tion of the term.  Establishing an appropriate line
in the sand seemed preferable to prolonging the impasse  on an issue that was likely to continue further to
undermine the effectiveness of the relevant WTO rules.
19. The representative of Korea thanked the delegations of Australia, New Zealand and
Hong Kong, China for putting forward the thoughtful a nd useful papers.  His delegation agreed with the
position expressed by the representative of New Zeal and that Members needed to establish a practical
guideline to move forward with the discussion on “s ubstantially all the trade”.  Members had not been
able to agree on a definition of “substantially all the trade” despite long and arduous discussions for the
past several years.  In this light, his delegation was of the view that the proposals by the Australian and
New Zealand delegations could prov ide useful yardsticks.  His delegation also agreed with the NewWT/REG/M/17
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Zealand assessment that Members should encourage as  much liberalization as possible for RTAs, and
that Article XXIV should be interpreted in a very strict manner.  In that sense, the criteria for
"substantially all trade" should be set as high as  possible.  At the last Session, his delegation had
expressed its interest in the Australian proposal, while  noting that there might also need to be some sort
of qualitative standard in determining the conformity of RTAs with WTO rules and he was encouragedto hear from the Australian and New Zealand delega tions that an approach might need to be both
qualitative and quantitative.  His delegation did not itself have a specific proposal on what this formula
should be, but it was ready to accept the formula proposed.
20. The representative of Hong Kong, China said he r delegation had made its views on that subject
known on previous occasions, so her comments now  would focus on the additional paper prepared by
the Australian delegation.  There had been some que stions suggesting that the Australian proposal might
still permit substantial trade to be excluded from RTAs.  Her delegation’s initial comments on the paper
were that the advantage of a sufficiently high cr iterion based on tariff lines, over both the established
concepts, was that potential trade in the RTA w ould be much better covered than by focusing on
pre-formation trade.  The purpose of  an RTA should be to increase freedom of trade, i.e. to transform
potential trade into actual trade, rather than merely lower barriers on existing trade.  For those products
in which pre-formation trade was relatively high, it was likely that trade barriers were already low.
Sensitive products in contrast would be subject to pr otection and pre-formation trade would be relatively
low.  It was such sensitive products that would tend to be excluded from RTAs, and a quantitative
criterion calculated on pre-formation trade levels w ould not register them.  The so-called qualitative
approach, interpreted in terms of no major sectors being excluded, registered sensitive sectors at themacro level, but did not register a myriad of sensitiv e products at the micro level.  A tariff-line criterion
was effective in quantitative terms, provided it was set at a high enough figure.  To consider the
extremes, a criterion of 100 per cent would, of course, be totally effective in quantitative terms, but a
criterion of 50 per cent might be almost totally meanin gless in quantitative terms in certain cases, i.e. it
might enable almost all the pre-formation trade to be excluded.  What was needed before selecting a
specific figure for the criterion was to study a variet y of, if not all, RTAs and to examine the degree to
which given percentages of tariff lines covered propor tions of trade.  Her delegation did not know what
the results of such a study would be, but if it show ed a fairly narrow range of percentages for which
proportions of trade increased significantly, then the a ppropriate specific figure to be selected for the
tariff-lines criterion would lie within the narrow range.   To select the figure on the basis of such a study
would be an improvement on an arbitrarily chosen figure.  Assuming the study had been sufficiently
broad in the examples of RTAs considered, there woul d then be some assurance that the criterion would
not, in practice, permit the exemption of sizeable tr ade flows.  A Secretaria t study, which would not be
attributable to individual RTAs, would be one way of advancing Australia’s proposal without having to
obtain a consensus commitment to it.  Her delegati on would reflect further and come back with more
detailed proposals if necessary.
21. The representative of the United States said  that she doubted the wisdom of accepting any set
formula for "substantially all the trade".  The Committ ee was to explore issues, and to start talking about
accepting formulas connotated a negotiation, which Me mbers were not engaged in at that moment.
However, her delegation was always willing to gath er information which might be relevant to a
discussion, as had been done in many areas.  Coll ecting information on how trade was covered in RTAs
seemed useful.  In short, the Committee should not apply specific formulas as it collected the data, but
perhaps some summary information would be interesting.
22. The representative of Canada said the submissions and interventions had helped to spur on the
Committee’s consideration of issues, thus deepening th e debate.  As his delegation had indicated in the
past, there was some attractiveness to a formula appr oach because it was clear, transparent and easy to
apply.  At the same time, however, his delegation w ould have concerns about the down-sides to such an
approach, as there were always different policy cons iderations that came into play, and it was difficult to
factor all these into the formulation of a specifi c number.  Among the serious policy difficulties, asWT/REG/M/17
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mentioned in a previous Session, was the fact that a specific percentage could encourage prospective
RTA parties to reach it as a minimum, as opposed to aiming for full liberalization.  The parties would
then have the specific number as the ceiling.  It would be unfortunate if the start of negotiations for an
RTA were marked by an immediate rush from domestic groups seeking that carve out from the coverage
of the agreement.  That was something the Members n eeded to guard against.  As a matter of principle
and course, when Members decided to enter into  RTAs, they should aim for the maximum possible
liberalization.  Further, there were the other f undamental policy considerations that the Committee
would need to bear in mind in developing ideas in that area.  His delegation was open to the suggestion
by the delegation of Hong Kong, China, that the Committee gather some information across the range of
RTAs that currently were in force.  In particular, it would be interesting to know if there was a trend
toward broader coverage in the most recent RTAs, presumably because of the progress made in the
Uruguay Round to cover some sectors that were not fully integrated in the Uruguay Round.  Maybe that
trend at the multilateral level was also taking place at  the regional level, so that recent agreements were
showing a trend toward broader coverage than there was in pre-1990 agreements.  That sort of
information could be quite useful, and his delegation would see merit in developi ng such an information
base.
23. The representative of Hungary said his delegation welcomed the interesting and
thought-provoking submissions.  Because the Committee had different tasks, delegations were under
certain influences.  Debate during examinations affect ed discussions on systemic issues.  It seemed that
to continue the discussion within the same paramete rs as had been used might not lead to anything.
Therefore it might be better first to agree on certa in ground rules, and then to try to work out new
parameters, conditions or standards for those FTAs or customs unions which were to be concluded in
the future.  It would be naive to think that RTAs which had been concluded 30 years ago or even 5 years
ago would match the conditions the WTO Members migh t establish now.  It seemed from the discussion
that some delegations expected the Committee to wo rk out certain standards and then to apply them
retroactively; his delegation would never agree to this ex ante .  If the Members were going to work out
conditions, they needed to take into account the evolu tion of the trading system and the evolution in the
WTO.
24. The representative of the European Communitie s thanked the Australian delegation for the
follow-up paper it had prepared to complement its previous one.  Although the Committee had made
efforts to explore some of the questions raised, his delegation still had reservations regarding the idea.
Similarly, he was grateful to the delegation of New Zealand for its us eful statement.  The Committee did
indeed need to consider the evolutionary dimens ion of the GATT, as there was 50 years experience of
the GATT.  The world was not as it had been in 1947, and while the New Zealand delegation had
correctly pointed out that the multilateral trading sy stem had gone from strength to strength in the
interim, he was not sure if that was because of or despite the existence of RTAs, which had also been
with the system for that span of years, and whic h had become more numerous and common over time.
Some had a tendency to treat Article XXIV in some respects as a waiver, but it was not.  The language
of Article XXIV actually suggested that the Contrac ting Parties welcomed the existence of RTAs.  The
presentation of this provision was completely differe nt from the rather more cautious presentation of the
WTO provisions on waivers.  Prov isions on waivers talked clearly about exceptional circumstances and
the need to apply terms and conditions, whereas the drafters of the GATT and the successiveparticipants in multilateral negotiating rounds had accepted that RTAs, be they customs unions or FTAs,
could play a supporting role in the development of the multilateral system.  Before seeking to introduce
an interpretation of the language of 1947 based on the meaning of words in 1997, the Committee ought
to bear in mind that there had been some experi ence in negotiating rounds, most recently the Uruguay
Round, when the Committee’s predecessors had looked at the language and had considered developing
more specific tests or interpretations and had left things as they had in the Uruguay Round.  So, there
were lessons to be drawn.  His delegation’s position was much the same as that presented in the last few
Sessions.  His delegation w ould look forward to considering th e proposal by the delegation of Hong
Kong, China for a statistical study when that idea w ould be presented.  As he understood it, the idea wasWT/REG/M/17
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raised at this stage in a tentative way, with it st ill needing some development.  His delegation anticipated
that this would entail the sort of research that the Secretariat had done on non-tariff provisions in RTAs,
which was potentially very useful and interesting.  His delegation welcomed contributions of that sort
which the Secretariat might be able to make.
25. The representative of Argentina thanked th e delegations of New Zealand, Australia and
Hong Kong, China for the useful elements they had brought to the discussion on SAT.  While they
served as an interesting basis for the Committee in starting up its work, they also seemed to be trying to
guide the efforts of the Committee in a certain direc tion.  As expressed in the past, his delegation had
some doubts regarding the principles behind the pr oposals being submitted.  His delegation did not see
the legitimacy of the interest of third-parties in an RTA.  More discussion was needed on  what the
Members meant by SAT.  His delegation understood th at Members were talking about figures close to
100 per cent, but this did not seem to be the Committee’s main objective, and it would seem to imply
that Members had to help the RTAs to reach figures close to 100 per cent.  He recalled what the EC
representative had said at the last Session, i.e. that when the Committee talked about the GATT/WTO
system that had been operating since 1947, it was ta lking about a system that had an equilibrium
between rights and obligations and that aimed at bala nced results in negotiations.  He did not grasp what
injury an RTA could cause to third-parties.  If th e Committee were to talk about an arbitrary figure, it
would destroy any theoretical work  that it would like to do.  The Members could perhaps have a legal
approach as New Zealand had suggested;  if so, th e Committee would need to discuss the principles and
forms of interpretation, because an interpretation in  the context of the evolution of the multilateral
system was not the only interpretation possible.  There were other forms of interpretation in the
contemporary legal system, so the Committee could compare different literal interpretations, for
example it could see what different contractual elemen ts existed at the time the Contracting Parties had
signed the General Agreement on Trade in Services.  It seemed that proposals were advocating two very
different ways of moving forward.  On the one hand, some countries were focusing on a concrete
proposal to have a formula.  That would first require  an effort to see what elements should be factored
into the formula.  On the other hand, there was a nother group of countries wanting to talk about the
experience of the countries which had serious integr ation commitments to see what could be achieved.
It was important to see what the principles were  that supported the different approaches.  The
Committee could draw on the experience certain count ries had with RTAs, for example looking at how
the European Union contributed to the multilateral tr ading system.  For many countries, RTAs were also
important political exercises.  The Committee might be able to come up with a test that could easily be
carried out and that would guide the countries con cerned.  The ideas of the Hungarian delegation were
interesting but perhaps premature; it seemed correct , however, to view the exercises the Committee was
carrying out as oriented toward the future and future  agreements.  Any type of  exercise would not have
retroactive effect.  Delegates were good lawyers and could easily recall basic elements of international
law.  At the end of the day, delegates were also politicians, and for his delegation RTAs were political
initiatives.  In his country, they went much further than just trade relations.
26. The representative of Australia expressed hi s delegation’s support for the proposal by the
delegation of Hong Kong, China.  He also agreed with the EC representative that the Committee would
doubtless have to engage in a discussion on the terms of  reference.  One of the problems often faced in
the Committee, as all had agreed on different occasi ons, was the lack of good, reliable information about
the actual economic developments that underpinned RTAs .  The sort of study suggested by Hong Kong,
China could help build confidence within the Committ ee.  If the basic rationale for most RTAs was to
facilitate trade, it should be expected that there w ould be a high degree of trade covered, and that there
would be the removal of preferences on a large amount  of trade.  Economic logic would likely come into
it at some point, so it could be useful to have such  a study done.  Regarding the question raised by the
delegation of Hungary, he said that the matter of retroactivity would doubtless need to be faced at some
stage and he hoped Members would face it with a renegotiation of disciplines.  This was not to deny that
retroactivity was a question, and in fact that was probably at the back of all delegate’s minds,
influencing the way they approached the issues.  Fo r the better functioning of the Committee, however,WT/REG/M/17
Page 10
it seemed necessary to bear in mind that, at the mo ment, what the Committee was trying to discuss was
what it considered current disciplines to mean, bot h from a legal and from an economic point of view.
While Members’ thinking would no doubt be affected by what they imagined would be the implications
of answers the Membership might come up with, Memb ers should try to perform the analysis first, and
only then think about the implications of the analys is, as with any activity conducted in the WTO.  The
representative of Argentina had also raised some in teresting, broader points about RTAs.  Members all
knew that there were a variety of reasons behind the formation of RTAs, and his delegation had always
encouraged parties to RTAs to explain their side  of the story to Members of the Committee as that
explanation would affect the Committee’s work.  However, the Committee also needed to accept that
third-parties naturally had an interest in RTAs, primarily because RTAs were discriminatory.  The
Committee could then have a discussion about the ec onomic impact of RTAs and try to determine if
such agreements were, as many argued, trade creating.  As other delegations had pointed out, the context
of Article XXIV, which set disciplines for RTAs, was to facilitate trade among the parties.  This went
beyond just the interests of the parties because these were WTO disciplines in which all Members had
an interest.  From a legal point of view, it was quite  natural that third-parties would want to see the
greatest possible facilitation of trade between parties to an RTA, particularly given the argument often
advanced that RTAs were building bl ocs to multilateral trade liberalization.  If that was the case, and his
delegation had some scepticism about this, it would cl early be in the interests of the wider membership
of the WTO to see the maximum amount of liberalizati on take place in RTAs.  It was not surprising that
third-parties would be very interested in this subject, for quite legitimate reasons.
27. The representative of Argentina said that hi s delegation had a problem with the Committee’s
pre-judging any results.  It was premature to talk about negotiating or interpreting Article XXIV through
modifications.  The exercise that the Committee was cu rrently carrying out was to  try to interpret Article
XXIV and possibly end up with certain recommendations .  At present, the Committee seemed rather far
from reaching such a situation.  His delegation belie ved the Committee should continue to come closer,
sharing opinions and thereby reaching more common pos itions.  In response to previous interventions,
he said customs unions and FTAs were discriminatory by their nature.  Members should remember,
however, that that discrimination, i.e. the potentia l for RTAs to result in injury, was compensated
through Article XXIV.  Generally this discrimination or possible damage or injury that could be caused
was solved through negotiations.
28. The representative of Hungary said that he subscr ibed to some of the elements of the Australian
intervention but disagreed on two points.  First, his delegation did not consider it proper to paint
regionalism as an issue of discrimination in the multila teral trading system.  The truth of the matter was
that over the past few decades, the real motor for development was the creation of RTAs, as it was
RTAs which facilitated trade among parties and with third-parties.  The net effect was much more
positive than the very minimal negative elements.  Si nce the Secretariat had been able to produce the
inventory study, it also would be wort hwhile to request it to look at this aspect of regionalism as well.
Second, there was the need first to agree on ground rule s and then to try to agree on the standard;  his
understanding of the Australian approach was that it wo rked vice-versa.  In his view, if Members really
wanted to negotiate in good faith and improve ne gotiations, they first needed a solid understanding
about the subject they were negotiating.
29. The representative of Hong Kong, China said that the Committee was supposed to be engaging
in a systemic debate.  Issues for discussion had ar isen out of the examination of individual RTAs and
had been identified as being of systemic inte rest.  The Committee was therefore not talking about
individual agreements but rather was trying to be academic to better understand the subject.  She had
been somewhat disturbed by the comm ents of previous speakers and wished to clarify what the nature of
the debate was.  She recalled that the previous Committee Chairman had presented a Note spelling out
what the Committee was doing in the systemic deba te, and the Committee had already gone through the
procedures and the framework.WT/REG/M/17
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30. The Chairman recalled the mandate of the Committee for that aspect of its work, under item
1(d) of the Terms of Reference: “to consider the sy stemic implications of such agreements and regional
initiatives for the multilateral trading system and the relationship between them, and make appropriate
recommendations to the General Council”.  He recal led Members that the framework of the debate had
been discussed under the Committee's Chairmanship of Ambassador John Weekes.  Regarding theproposal for a statistical study, the Committee would need to consider the timing, feasibility, terms of
reference, etc.  In the debate on a quantitative approach to SAT, more clarifications had been given, but
no convergence had been achieved.  The Committee should resume that discussion in an informal
meeting before the next Session so as to consider how to have further meaningful dialogue on the issue.
31. The Chairman then called the Committee’s a ttention to the Secretariat’s paper entitled
“Inventory of Non-Tariff Provisions in Regional Trade Agreements”, issued as document
WT/REG/W/26, which had been developed according to  the discussion at the Committee’s last Session
and at the ensuing informal meeting.
32. Introducing the paper, the representative of the S ecretariat said that in preparing the Inventory,
the Secretariat had followed the methodology it had presented to the Committee in an informal
information session.  The assumptions and parameters of the Secretariat’s study were explained in the
first two pages of the document.  She apologized for the document's late circulation, attributing this to a
resource constraint.  She highlighted the note in paragr aph 2 that that was an initial research which could
be deepened.  The Secretariat had tried to do its best to give the Committee an overview of the
information found in RTAs notified to the GATT/WTO, but it had not gone into much detail.  In termsof content, the Secretariat had not in all cases been ab le to cover all provisions relating to trade in goods.
Thus, apart from tariff information, the study also left aside non-tariff provisions which either were
contained in unavailable Protocols or were too difficult to analyze.  Th at meant that a small part of the
information was left for further research if the Co mmittee thought it was appropriate.  She noted that the
results of the study should be looked at in a cautious manner, as the provisions in RTAs were at least as
difficult to interpret in an analytic al sense as the WTO legal texts.  There might be some inaccuracies in
classifications of the RTAs’ provis ions, but, on the whole, any “plus on e” in one part would be set off by
a “minus one” in another part.  She did not think that would be a problem for the overview itself.
33. Thanking the Secretariat for having provid ed that information which responded to his
delegation's request, the representative of Canada said  that he looked forward to having a full discussion
on the paper in the future, once Members had had time to reflect on it.  From many standpoints the
document was useful, indicating that  RTAs contained a broad range of disciplines that sometimes
overlapped or expanded on those of the WTO.  It wa s interesting to note that there were differences
among RTAs as they followed different approaches.  There was also an evolution in time, in terms of
the deepening of the rules.  It seemed quite useful  that the study broke the RTAs into the two groups of
“pre-” and “post-1990", with the 1990 threshold marki ng differences in the nature and scope of RTAs.
His delegation considered this type of work to be helpful not for understa nding how conformity with
Article XXIV ought to be treated, but rather, in a broader sense, for understanding how RTAs could be
used as a stepping stone to further multilateral rule -making.  To his delegation Section VI was the most
interesting, and he was pleased to see this was one of the most detailed sections.  In his delegation’s
view, this was an area regarding which deeper analys is would be welcome.  For example, his delegation
would like to see expanded analysis of the comp arison of RTA treatment of safeguards and anti-
dumping.  He noted that the study focused on a sort of pre-consultation clause that existed in a number
of agreements.  It would be useful to deepen the analysis to look at what exactly the treatment was
regarding anti-dumping and contingency protection in various RTAs, as that was an area where RTAs
had different models in place and there might be lessons for the multilateral system.  In short, thedocument compiled much information on RTAs wh ich up until then had been examined only in
isolation;  it brought together information that wa s pertinent not only to the mandate of the Committee
but also to the mandate of the WTO at large.  Th at was the perspective which his delegation wanted to
bear in mind in addressing some of the issues presented.WT/REG/M/17
Page 12
34. The representative of Hong Kong, China than ked the Secretariat for compiling the study.  As
mentioned by the representative of the Secretariat,  delegations had not had much time to consider the
study, but the document seemed very useful for givi ng them a better understanding of the whole picture.
Regarding the section dealing with the scope of RTAs , her delegation noted that only a small number of
RTAs - 13 out of the 69 RTAs under study, i.e. 18 per cent - covered both industrial and agricultural
products.  The remaining 56 RTAs either excluded agricultural products entirely or covered them
selectively.  Furthermore, only 9 per cent - 4 out  of 45 - of the post-1990 FTAs had comprehensive
coverage, which was even worse than those established before 1990 - 21 per cent - and the customs
unions - 60 per cent.  In light of these, she questi oned whether the Members were facing an increasing
trend of sectoral exclusion.  Her de legation noted that the use of preferential rules of origin in RTAs was
wide-spread, covering 66 out of 69 RTAs.  It would be  useful to have more information in this area,
with a view to ascertaining the differences between preferential rules and ordinary rules of origin, in
terms of the methods used for origin determination and the level of trade restrictiveness.  Looking at
how WTO Members with multiple RTA membership admi nistered the different sets of preferential and
non-preferential rules would serve to reveal the co mplications and the potential trade-disruptive effects
of such preferential arrangements.  Her delegati on was concerned about the lack of provisions for
accession in most bilateral RTAs and the fact that only a small number of the RTAs - 9 out of 69  -
permitted third-party accession.  Even for t hose which did permit third-party accession,
regional/geographical qualifications to accession often existed.  These findings gave rise to doubts about
the openness of RTAs and their effectiveness in contributing to the expansion of world trade and further
trade liberalization.  Of note was the fact that Article XXIV did not impose any disciplines on accession;
her delegation considered that to be an area meriting further consideration in the CRTA.  With respect to
quantitative restrictions (QRs), the Secretariat note revealed that only 12 of the 69 RTAs under study
required their abolition at the entry into force of th e RTA, and that some QRs remained in those RTAs.
Twelve RTAs further allowed parties to retain th e right to impose new QRs on imports.  Her delegation
was pleased to note that there was a general trend towards broader and faster market accessliberalization in recent years in relation to QRs on imports.  Table VI.3 showed that 8 RTAs specifically
referred to exclusion of parties from MFN sa feguards, which in her delegation’s view was
discriminatory and not justifiable under current WTO rules.  What was not so clear was whether RTAs
which did not have such provisions applied safegu ards on a most-favoured-nation (m.f.n.) basis.  The
presence of anti-dumping provisions in so many RTAs seemed to suggest that, in practice, many
Members were treating the exemption list in the pare ntheses of Article XXIV:8 as not exhaustive.  In
that connection, she referred to footnote 25 of  the document which noted that a number of RTAs
contained provisions allowing  immediate imposition of anti-dumping duties in exceptional
circumstances, a practice which was not permitted under WTO rules.  She noted that the paper indicated
that the criteria employed in RTAs for the invo cation of countervailing duties were much wider than
those permitted under the multilateral framework, although the post-1990 trend seemed to be towards
the adoption of WTO language.
35. The representative of New Zealand said his delegation also welcomed the Inventory, as well as
the detailed analysis of it by the delegation of Hong Kong, China.  He called Members' attention to the
comment made by the Canadian representative that  that document was of use in showing the way RTAs
worked in practical terms.  While the document ha d originally been commissioned during the discussion
of ORCs, it contained some information that was quite  pertinent to other issues.  For example, Annex I
(Scope) touched on some of the issues the Committee had been discussing in relation to SAT, and that
might provide a basis for the further work for which interest had been expressed that day.  Annex I
referred to the issue of coverage, and he wondered whet her he was correct in reading that to refer to both
the coverage of trade where tariffs were eliminated and also where there was some sort of preferential
regime in place.  It seemed it would be helpful, in th e context of the further work in that area, to provide
more specific details of both elimination and prefer ential regimes since that was a theme permeating the
Committee’s discussion.  Overall, he considered the information provided in the document to be very
useful.  Responding to the question posed, the representa tive of the Secretariat clarified that the coverageWT/REG/M/17
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in Annex I referred only to the provisions that had been taken into account.  While RTAs had usually a
provision labelled “Scope” or “Coverage”, that was typically in terms of groups of goods or sectors
covered, or else all goods or all products were cove red.  The Secretariat had not done specific analysis of
the RTAs.
36. The representative of the United States thanked the Secretariat for the work put into the paper.
As there had not been sufficient time to consider  the document, she would refrain from making any
comments on the substance of the paper at this time.  She requested that the study be placed on the
agenda of the next Session for full discussion.  The representative of Korea encouraged the continuation
of such good Secretariat's work.  As that was initi al research, he hoped that type of research could
continue.  He looked forward to discussing the doc ument at the next Session.  The study would be useful
in the Committee’s future deliberations.  The represen tative of Australia thanked the Secretariat for what
appeared to be a solid piece of work.  His delegati on would look forward to a detailed discussion in the
future.
37. The representative of Argentina joined others in expressing appreciation for the study.  With
reference to the statement that the study represented “initial research”, he asked if that meant that the
study would continue.  Noting that the scope of ORC was unclear, he said that his first reaction would
be that accession and coverage did not seem to fall under that label.  The representative of the Secretariat
said that the research was described as “initial” because the study was an attempt simply to give an
overview of all RTAs, without going any deeper.  It was initial or preliminary in that sense.  If the
Committee decided at a given time to ask the Secretar iat to continue that investigation, it would cease to
be initial or preliminary investigation.  Regardin g the question of what fell under the label ORCs, she
recalled that the Secretariat had been given a clear manda te, i.e. not to look into ORCs but rather to look
at all non-tariff provisions.
38. The Chairman said the Committee would return to  this discussion at its next Session in July.
The reactions voiced today showed that Members all recognized the merits of the approach adopted, and
that that would help the Committee to consider differ ent systemic issues in a more clear manner.  There
was a great diversity among the RTAs, and the Comm ittee would no doubt need to fine-tune its analysis
of what was driving various elements and leading to  certain evolutionary trends.  Members already had
some questions as well as some expectations from the Secretariat regarding more developed research on
such topics as anti-dumping and countervailing measur es, safeguard clauses, rules of origin, the degree
of openness as far as accession was concerned, etc.
39. The Committee took note of the comments made.
F. Other Business
40. The Chairman said that the vitality of the Committee and the pace of its work would be
improved if efforts were made to submit the documen tation for its sessions in time.  That had not been
the case for some agenda items of that Session.  He  hoped that the late arrival of documentation would
not however be used as an argume nt for postponing discussions, as he  thought it was important to stick
to the calendar.
41. The representative of the United States noted that that week's airgram had been rather long, and
many documents were listed on it.  For a variety of  reasons, the documents had not been available when
the airgram had been distributed.  A number of documents had appeared only few days before the
meeting, which caused problems for delegations’ prepar ations and which seemed to hinder efficient use
of Committee's discussions.  In the future, if documen ts were not going to be available to Members at
the time the airgram went out, for whatever reason, it seemed appropriate that they did not appear on the
airgram as items for discussion.  If they were noted as documents that might be circulated but would not
be up for discussion, that was suitable.  It was objectionable to have documents dropped on MembersWT/REG/M/17
Page 14
just prior to meetings, creating a situation in wh ich some delegations decided to comment and others
not, which seemed to prevent a balanced discussion.
42. The Chairman asked if the Committee supported this proposal, noting that it seemed a way to
put order in the Committee’s activities and to introduce predictability.  It would require more discipline
on everyone’s part, but for complex issues it would a llow much greater efficiency.  Since the General
Council was applying this rule, it seemed appropria te that the Committee follow the same approach.
The representative of Korea said he supported the idea as the Committee needed timely document
distribution.
43. The Committee so agreed.
44. The representative of Hungary recalled that, af ter long discussions, the CRTA had taken note  of
the Standard Format for Submission of Information on RTAs.  Since that time, his delegation had been
using the Standard format when presenting their RTAs.  That has brought some discipline on how to
start examining RTAs.  In the view of the recent developments which occurred in the review of free-
trade agreements, he though it was necessary to begi n considering further developing of the Standard
Format.  Agreement should be reached in particular on which were the statistical requirements that
parties to RTAs should provide as well as on how far they were obliged to provide information.
45. The Chairman then indicated that the Committ ee would hold an informal meeting to take up
that issue and to consider other aspects of the Committee’s work.
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