RESTRICTED  WORLD TRADE  
ORGANIZATION  TN/RL/M/29 
15 July 2005 
 
 (05-3164) 
Negotiating Group on Rules   
  
 
SUMMARY REPORT OF THE MEETING 
HELD ON 14 JUNE 2005 
 
Note by the Secretariat
 
 
 
1. The Negotiating Group on Rules ("the Group") held a formal meeting on 14 June 2005. 
A. ADOPTION OF THE AGENDA  
2. The Group adopted the following agenda: 
A. ADOPTION OF THE AGENDA ............................................................................................1  
B. REGIONAL TRADE AGREEMENTS ...................................................................................1  
C. OTHER BUSINESS ............................................................................................................9  
 
B. REGIONAL TRADE AGREEMENTS  
3. The Chairman proposed that the Group further consider the proposal made by the European 
Communities (TN/RL/W/179), which had been subject  to preliminary discussions at the previous 
meeting, as well as those made by Austra lia and circulated in documents TN/RL/W/173 
(TN/RL/W/173/Rev. 1 in its English version) a nd TN/RL/W/180.  He proposed to open discussions 
on the basis of the issues raised rath er than by proposals, i.e. to address "substantially all the trade" 
(SAT), "transition periods", "other regulations of commerce" (ORCs) and "development aspects".  After those discussions the Group could turn to a proposal which was recently submitted by a 
Participant. 
4. The proponent of TN/RL/W/179 took the floor to respond to comments and requests for 
clarification by Participants raised at the previous  meeting of the Group.  The general nature of the 
paper was intentional given the long-standing gaps and entrenched Members' positions on the issues 
under consideration.  The objective of the proposal w as not to table a wish list of positions, but rather 
to provide a direction to the negotiations and to na rrow down the parameters of the discussion.  With 
respect to the "overall approach to systemic issues" , he noted Participants' broad support for the idea 
of three pillars:  focus on systemic issues be yond the lowest common denominator;  a reasonable 
outcome with respect to past practices;  and full account of development issues. 
5. One Participant noted the RTAs' goal of comple menting multilateral trade liberalization, thus 
providing an important supplement to the multilateral trading system (MTS);  yet, the proliferation of 
RTAs posed challenges to the MTS and increased th e need to address these systemic issues.  Some 
Participants agreed with the proponent of TN/RL/W/ 179 that the starting point for the clarification of 
WTO rules on RTAs could neither be the a priori  exclusion of certain subsets of RTAs, nor the lowest 
common denominator of Members' past practices.  On e Participant noted that negotiations had to be 
based on the recognition that Members had interpre ted the relevant WTO rules differently over the 
years and hence adopted different approaches in thei r RTAs;  new rules should take such differences TN/RL/M/29 
Page 2  
 
into account.  The point was also made that the revi ew of  developing country RTAs had to take into 
consideration the size of the economies as well as their impact on the global trading system. 
6. Clarifications were requested on the categori zation of RTA's "quality" referred to in the 
proposals being discussed;  the criteria for reaching such categorization;  and whether these were 
acceptable terms in the WTO.  When asked to provide examples of "poor quality" RTAs as referred to 
in paragraph 2 of TN/RL/W/179, the proponent stat ed that it referred to an agreement that went 
against, or was not fulfilling the spirit of the agreed objectives of WTO rules on RTAs, which 
imposed an obligation on RTAs' parties to seriously  promote internal trade liberalization and not to 
hurt third parties.  The proponent of TN/RL/W/ 173/Rev.1 and TN/RL/W/180 clarified that a high 
quality agreement was one with a SAT coverage as prescribed by Article XXIV of the GATT 1994. 
7. The proponent of TN/RL/W/179 said that, in order to strike a balance among Members' 
different views, it was proposed that SAT be defi ned through a quantitative benchmark based on an 
average between volume of trade and tariff lines, a nd qualitative aspects.  In the case of the former, 
past practices suggested that the majority of Members favoured a trade benchmark to one based on 
tariff lines;  in that context, a weighted average with trade as the main pillar and tariff-lines as the 
secondary pillar was an option.  This would, ho wever, entail lengthy and complex discussions on the 
coefficients to attribute to each pillar;  theref ore, in the spirit of compromise, simplicity and 
transparency, his delegation had opted for a simple average between these two variables rather than a 
weighted average of separate benchmarks.  This approach would also grant each Member some flexibility on whether to place the emphasis on trade or tariff lines.  He reiterated that no numerical 
benchmark had been proposed, as agreement would first be required on the appropriate methodology 
for the calculation.  The figure should in any case refl ect the three pillars of the general approach.  
Reacting to concerns raised as to whether this aver age entailed a risk of exclusion of major sectors, 
such as agriculture, from the coverage  of an RTA, he stressed that the flexibility envisaged for each 
pillar would be very limited;  in any case, it was th e view of his delegation that the exclusion of any 
major sector was a breach of existing requirement s.  Turning to the SAT qualitative aspects, his 
delegation was not offering specific solutions, but ju st pointing out issues that needed to be discussed 
in order to clarify the SAT concept.  The propo sed list of key qualitative benchmarks was of an 
extensive nature, so as to reflect those issues raised  in various submissions a nd statements, as well as 
common RTA practice involving inter alia  tariff-rate quotas (TRQs), seasonal restrictions and special 
sectoral safeguards.  RTAs' review clauses were al so included in the list;  though often employed to 
improve commitments during the transition period, they further complicated the SAT evaluation 
(usually conducted upon notification of an RTA).  In summary, the quantitative benchmark would set 
the floor – i.e. an RTA falling below that benchmark would be considered as non-compliant with the rules, but an RTA matching or going above that be nchmark would not automatically be compliant.  
Qualitative aspects would also have to be factored  in on a case-by-case basis, so as to have the full 
picture of the RTA while ensuring an ambitious SAT. 
8. A number of Participants concurred with th e proponent of TN/RL/W/179 that a multi-track 
approach to SAT was preferable to a single quan titative benchmark, since qualitative elements were 
just as relevant to its clarification.  The point w as made that a too strict benchmark could misguide 
Members when analysing the compatibility of an RTA with the WTO;  what was crucial was to have 
criteria that could show, under all circumstances, whether an RTA was going in the right direction or 
not. 
9. With respect to the question of quantitative benc hmarks, several Particip ants agreed that SAT 
should be looked at from the perspectives of both trade volumes and tariff-lines coverage.  Questions 
were raised, however, on how to combine these two benchmarks and on the we ight to be given to 
each of them.  One Participant recalled that, based  on past practices, the quantitative element to SAT 
had primarily referred to trade volume;  it would, ther efore, be interesting to see whether this could be 
complemented with a tariff-line indicator.  He indi cated, however, that the level of such a benchmark 
had to provide for a balance between the systemic interest of not undermining the MTS and the need  TN/RL/M/29 
 Page 3 
 
 
for not disregarding Members' past and present practices.  Another Participant was of the opinion that further study was needed on these questions;  he looked forward to further collaboration with the 
proponent of TN/RL/W/179 on the idea of combined  average thresholds and how this could be 
implemented in practice.  One Participant noted  that in setting the SAT benchmarks, due account 
should be taken of the different le vels of economic and social development, tariff structures, trade 
partners, industrial structures and sensitive sector s between developed and developing Members; 
two sets of SAT benchmarks should be envisaged to reflect these differences, and a margin of ten per 
cent was suggested for illustrative purposes.  That suggestion was supported by another Participant.  
The proponent of TN/RL/W/179 indicated his delegati on's readiness to discuss  possible calculations 
of combined averages and their implications;  howev er, such discussions would hinge on the type of 
methodology applied to the tariff-line pillar.  His delegation had also considered the question of 
differentiated benchmarks and conducted some analysis on differe ntial quantitative thresholds with 
respect to trade.  The results suggested that it might  be better to provide diffe rentiated benchmarks on 
the basis of RTA parties rather than on the basis of  the RTA itself, since in the latter case trade flows 
and balance of trade would be decisive factors in calculating the flexibility provided for under the 
trade benchmark;  that was not the case for the tari ff-line benchmark.  In spite of the methodological 
challenges, his delegation was open to discuss wh ether it was possible to have differentiated 
thresholds for developing countries, including LDCs, and to explore ways of doing that.  Clarification 
was requested on whether the quantitative benchmarks  referred to in paragraph 10 of TN/RL/W/179 
were indicative or mandatory;  it was the view of one Participant that these should be mandatory:  
while meeting the benchmarks did not guarantee the c onformity of an RTA, since other elements had 
to be weighted, not meeting it would certainly mean that the RTA was not conforming.  Another 
Participant appreciated the proposal that no single benchmark be determinativ e but rather that both 
benchmarks would be taken into account, given that the quantitative  benchmark would set the floor 
while qualitative aspects would be factored in th e overall evaluation of SAT.  These views were 
confirmed by the proponent of TN/RL/W/179. 
10. Following a request for clarification on what c onstituted a "major sector", the proponent of 
TN/RL/W/179 clarified that it was his delegation's vi ew that there was an obligation under current 
rules not to exclude any major sector from the covera ge of an agreement, but that such obligation had 
not been defined and would benefit from a clarifi cation.  His delegation was open to discuss that 
issue, including a combined threshold for major sectors along the line of the SAT debate. 
11. One Participant provided more information on six qualitative indicators proposed at the 
Group's previous meeting as evaluative criteria fo r measuring RTA liberalization and helping the  
review process in the Committee on Regional Trade Agreements (CRTA);  these indicators should not 
be considered as absolute "tests", but rather as providing a more comprehensive picture of the extent of liberalization provided by the RTA.  First, the CRTA would examine how an RTA treated each 
party’s top exports, both to each ot her RTA party as well as to the world.  For example, and using 30 
for illustrative purposes, consideration of the RTA ta riff treatment of the top 30 bilaterally-traded 
products would show whether each party was willing to  liberalize the other party’s top exports;  the 
RTA tariff treatment of each party’s top 30 export products to the world would provide additional 
insights.  Second, a comparison would be done betw een the average preferential tariff rates applied 
among the RTA partners before the implementa tion of the RTA and those applied after full 
implementation.  This comparison could also incl ude a qualitative description of the prior preferential 
programme, if appropriate.  This indicator would sh ed light on the extent to which RTA signatories 
had maintained or extended preferential benefits und er the RTA.  Third, a comparison of each party’s 
30 highest base preferential tariff rates at the date of  entry into force with the 30 highest MFN-applied 
tariff rates would be done.  Give n that commercially meaningful liberalization occurred only when the 
RTA resulted in a reduction in applied MFN tariffs, this indicator would help the CRTA understand 
the timing of commercially meaningful liberalization.  In other words, if tariffs were to be reduced 
from applied rates, the benefits of the RTA would occur more rapidly than if there were cuts from 
"hypothetical" rates that were above existing applied rates;  this also addressed in part the concern 
raised by one Participant regarding back-loading of RTAs.  Fourth, a comparison of the number of TN/RL/M/29 
Page 4  
 
tariff lines in a party’s tariff schedule one or two y ears before the launch of RTA negotiations to the 
number of tariff lines at the date of entry into force would also be done.  Although new tariff lines 
might legitimately be created in the process of RTA negotiations, an excessive number of new tariff 
lines might suggest that parties had manipulated th eir tariff schedules for the sole purpose of meeting 
the tariff line coverage requirement.  Fifth, th e CRTA would review whether an RTA excluded major 
sectors from liberalization.  While the SAT test permitted some residual protection, excluding an 
entire sector detracted from the intent of RTAs to facilitate trade between signatories to an RTA and 
deepen economic integration.  Sixth, focus would be  given to the use of TR Qs in the RTA.  That 
would include ascertaining the percentage of trad e covered by TRQs upon entry into force, at an 
intermediary point, such as ten years, and at full implementation;  considering the TRQ parameters 
initially and over the phase-in period to ascertain whethe r, for example, the initial within-quota tariff 
rate was set at zero, the within-quota volumes expanded over time, and the over-quota rate was 
eliminated.  This information would help Member s evaluate whether and how the signatories to the 
RTA were using TRQs as a liberalization tool. 
12. With respect to this latter indicator, a Partic ipant recalled that the proposal contained in 
TN/RL/W/179 referred to special sectoral safeguards which, given their lack of injury test, had the 
same economic effect as TRQs.  Questions were  posed on whether the information obtained under 
these six qualitative indicators would only serve tr ansparency purposes or rules-based objectives as 
well, whether these indicators would be additional to the quantitative threshold, and how they factored 
in discussions relating to issues raised in TN/RL/ W/179.  The proponent of the six indicators replied 
that his delegation supported the use of the minimum percentage of tariff-line coverage as an indicator 
in the SAT test, and thus welcomed submissions  TN/RL/W/173/Rev.1 and TN/RL/W/180.  As for the 
relationship between the six indicators suggest ed and the qualitative factors identified in 
TN/RL/W/179, he clarified that his delegation had attached importance to those issues for quite some time;  references made to these in TN/RL/W/179 had provided the opportunity to add some ideas to particular qualitative factors. 
13. Highlighting that the SAT concept included two intertwined elements, namely the elimination 
of duties and the elimination of "other restrictive regulations of commerce" (ORRCs), one Participant 
noted the importance of further discussing SAT qua litative aspects, since these would have to be 
factored in the quantitative assessment  of the concept.  Furthering that point, one Participant said that 
the consideration of ORRCs - one of his delegation's primary concer ns in this negotiation - would 
certainly imply a debate on the application of trade remedy measures between RTA partners.  
Acknowledging Participants' interest to discuss the different elements, especially with regards to 
ORRCs, the proponent of TN/RL/W/179 indicated that the two issues to be addressed were the 
definition of ORRCs, and the list of exceptions provid ed for in paragraphs 8 (a)(i) and (b) of Article 
XXIV of the GATT 1994 (more specifically whether it constituted an illustrative or exhaustive list).  
In spite of this being a long standing issue, he welcomed the opportunity to engage in such 
discussions with a view to finding solutions. 
14. As for transition periods, the proponent of TN/R L/W/179 stated that they existed largely in 
order to deal with developing countries' needs and concerns, given their lesser capacity to buffer for 
structural adjustments resulting from the elimination of  tariffs and other restrictions on trade due to an 
RTA.  Developing countries should then be allowed a transition period of longer than ten years for a 
limited set of products, and SAT should be calcula ted at the end of the transition period.  The 
proponent of TN/RL/W/179 was of the view that discussions should focus on two questions, namely 
under which circumstances a country could go beyond the ten-year transition period, and how to 
factor this in the calculation of SAT.  In th is respect, the proponent of TN/RL/W/173/Rev.1 and 
TN/RL/W/180 reiterated her delegati on's concerns over back-loading.  Their proposal to calculate 
SAT at the beginning of the ten-year transition period  and that duties be eliminated on at least 70 per 
cent of tariff lines at the Harmonized System six-di git level on entry into force was designed to 
minimize such a risk.  Her delegation was open to discuss special and differential (S&D) treatment for 
developing countries in that context, as put forward by the proponent of TN/RL/W/179.  The point  TN/RL/M/29 
 Page 5 
 
 
was made that while back-loading could be a concern, it would not be a problem as long as the end result would be a highly ambitious RTA.  It was s uggested that this matter could be debated in the 
context of the discussions on the review clause, wh ich could also include a common practice of many 
RTAs to postpone the implementa tion of elimination commitments. 
15. One Participant recalled that paragraph 18 of TN/RL/W/180 asserted that only those RTAs 
notified as interim agreements could have phase-in periods, otherwise they had to comply with the 
SAT test at the time of entry into force;  that im plied that the identificatio n by the parties to an 
agreement of its "interim" nature ha d legal significance.  It was his delegation's view that nothing in 
Article XXIV of GATT 1994 supported that assertion;  rather, the only requirement applying to interim agreements was that found in paragraph 5(c) , namely that it included a plan and schedule for 
the formation of the free-trade area or customs union within a reasonable length of time.  That was 
corroborated by the Members' approach throughout this Article's history:  Article XXIV of the 
GATT 1994 addressed the RTA's content, but not its title.  He referred to several agreements (European Economic Community-Spain, United Stat es-Israel, European Co mmunities-South Africa, 
and the North American Free Trade Agreement (NAFTA)) as some examples of RTAs where 
discussions on the "reasonable length of time" had been held even though none of them had been 
notified as interim agreements.  The suggestion th at an RTA had to be notified as an interim 
agreement to be considered an in terim agreement exalted form over substance, ignored the text of 
Article XXIV of the GATT 1994, and disregarded GA TT and WTO practice and panel reports.  It was 
thus argued that the 1994 Understanding applied to all agreements with phase-in periods and 
schedules, and it allowed transition periods beyond te n years so as to obtain a better agreement.  He 
referred to two GATT panels
1 that had evaluated particular RTAs that qualified as an interim 
agreement by focussing on their content and not thei r title.  Finally, he noted that greater trade 
liberalization over a longer period of time was pr eferable to a less ambitious RTA with a rigid 
adherence to the ten-year rule.  The proponent of  TN/RL/W/180 remarked that if a Panel was called 
upon to look at Article XXIV:7(b) of the GATT 1994, it might not necessarily reach that 
interpretation.  One Participant pointed out that sev eral RTAs went beyond the ten-year rule and noted 
that the question of an acceptable transition period ha d to be seen in light of the fact that the longer 
the transition period, the greater the problem relate d to tariff reduction.  The point was made that 
RTAs ambition should not be jeopardized by a rigi d application of existing requirements regarding 
transition periods. 
16. As for the question of "neutrality", the propone nt of TN/RL/W/179 recalled that the proposal 
aimed at shifting the focus from the definition of  the highly complex concept of ORCs to the 
application of the existing neutrality test to this  "evolving concept", as it had been described in the 
report of the Panel on Turkey – Textiles .2  These discussions could be problematic;  from a legal 
perspective, it was highly feasible that an RTA c ould be found in contradic tion with Article XXIV of 
the GATT 1994 even though the rules and regulations  promoted by it were fully compatible with 
provisions under existing WTO Agreements, e.g., in  the case of sanitary and phytosanitary (SPS) 
measures and technical barriers to trade (TBT).  It  seemed odd that as a result of the "necessity test" 
established in rulings by the Appellate Body on Turkey – Textiles  and by the Panel on US – Line Pipe3 
in order for parties to an RTA to derogate from WTO rules, GATT Article XXIV could influence or 
even diminish Members' rights and obligations under other WTO rules.  The proposal that "regulations falling under existing WTO Agreements cannot be questione d on grounds of neutrality, if 
                                                     
 
 1 European Community - Tariff Treatment on Imports of Citrus Products from Certain Countries in the 
Mediterranean Region, L/5776, 7 February 1985 (unadopted), e.g., paras. 3.7, 3.8, 3.102, 3.104, and 4.5-4.8;  
and EEC- Member States’ Import Regimes for Banana, DS32/R, 3 June 1993 (unadopted), e.g., paras. 240 and 
358. 
2 Appellate Body Report on Turkey – Restrictions on Import s of Textile and Clothing Products , 
adopted on 19 November 1999 (WT/DS34/AB/R). 
3 Panel Report on United States – Definitive Safeguard Measures on Imports of Circular Welded 
Carbon Quality Line Pipe from Korea , adopted on 8 March 2002 (WT/DS202/R). TN/RL/M/29 
Page 6  
 
the parties of the RTAs fulfil their rights and ob ligations under those Agreements", as contained in 
paragraph 15 of TN/RL/W/179, was a reaction to that  situation;  notwithstanding, existing rulings 
would have to be factored in these discussions.  As  to the examples, his delegation had confined its 
legal analysis to SPS and TBT measures;  however, the Group could use the list of ORCs identified in 
document TN/RL/W/116 as a starting point for di scussions.  While his delegation agreed that 
WTO-plus provisions in RTAs should be factored in as positive elements in the evaluation of an 
RTA compatibility with WTO rules, the evaluation of ORCs should be conducted on a case-by-case basis and should comprise the implications of applying the neutrality test to each regulation potentially falling under the concept.  To th e suggestion that this process should include 
anti-dumping, safeguards and like-measures, he noted that these were generally considered as ORRCs 
rather than ORCs;  nevertheless, his delegation wa s prepared to include anti-dumping in the scope of 
these discussions. 
17. Clarifications were sought regarding the princi ple of neutrality outlined in paragraphs 13-15 
of the proposal circulated as TN/RL/W/179, in particul ar its relationship to preferential rules of origin; 
whether paragraph 15 implied that conformity of only preferential measures could be questioned;  and 
which body would be responsible for d eciding on the conformity of measures vis-à-vis  a given 
WTO Agreement. 
18. Turning to the proposals on "Development Aspects" contained in TN/RL/W/179, the 
proponent stressed that the aim was not to create new categories of developing countries subject to different rules, but rather to consider, beyond any dogmatic line, that some RTAs affected a great 
amount of trade;  these RTAs, if not appropriately  regulated, could have serious effects on the MTS 
and notably on developing countries not participati ng in the RTA.  The basis for the reasoning in 
paragraph 16(b) was the requirement contained in the rules themselves, that RTAs had no negative 
effects on third parties, and the assumption that RTAs between countries, or groups of countries, 
accounting for a sizable share of world trade were mo re likely to have systemic implications on third 
parties.  The aim of the proposal was to move from a de facto  flexibility generated by the imprecision 
of the existing rules to a de jure  flexibility, thus not constituting a revision of Article XXIV of the 
GATT 1994 but rather an interpretation of the existi ng flexibility, with the level of this flexibility 
being open for negotiation.  Pa ragraph 18 did not aim at an a priori  differentiation between 
developing countries with respect to Article XXIV  of the GATT 1994;  it was his delegation's position 
that every developing country was entitled to go beyond the ten-year transition period if it had a 
justifiable case.  He noted that paragraphs 16(a)  and (b) had been based on the need for coherence 
among the three sets of WTO rules on RTAs, which we re related to each other in various ways, citing 
as an example that GATS Article V contained e xplicit S&D provisions but Article XXIV of the 
GATT 1994 did not – and that was an issue proposed for amendment.  It was important to ensure that 
the requirements among the three sets of rules on RTAs be logical from the point of view of the existing goals they enshrined (i.e. to promote internal  trade liberalization and not to hurt third parties).  
His delegation was open to discuss ways of doing th at;  the proposed criterion of sizable share of 
world trade represented one way of accommodating c oncerns expressed by some developing countries 
with respect to the legal integrity of the Enabli ng Clause.  Another suggestion to avoid touching the 
Enabling Clause would be to work on the basis of what had already been agreed upon as a voluntary 
guideline in APEC.  Finally, he noted the prelimin ary nature of these discussions and reiterated his 
delegation's readiness to discuss th ese issues in an open way. 
19. Acknowledging the concerns raised in para graph 16 of TN/RL/W/179, one Participant 
cautioned against making assertions in the absence of comprehensive empirical data;  further, a 
normative judgement could not constitute a credible basis to subject RTAs under the Enabling Clause 
to the criteria of Article XXIV of the GATT 1994.  That North-South RTAs could have at least as 
high a developmental impact as those RTAs falling under the Enabling Clause, and that RTAs among 
developing countries that were relatively sizeable  actors in world trade could have meaningful 
implications for other WTO Members were assertions  which should be questioned.  Therefore, it was  TN/RL/M/29 
 Page 7 
 
 
argued, it seemed sensible to assume, as it had been  the case so far, that RTAs under the Enabling 
Clause had a greater impact on development than other RTAs. 
20. Following these discussions, the Chairman s uggested that the Group consider, in a 
preliminary manner due to its late arrival, the subm ission made by the Separate Customs Territory of 
Taiwan, Penghu, Kinmen and Matsu, circulated as TN/RL/W/182. 
21. The proponent of TN/RL/W/182 said that the aim of the submission was to address the 
genuine concerns of the dramatic proliferation of RTAs in the past decade.   The workload of the 
CRTA was heavy, as it was that of a private busin ess entity trying to sell its products to the world 
market:  in addition to the 148 tariff schedules, there were some 300 sets of extra schedules with 
different transition periods;  and worst of all, the number of RTAs was increasing at a rapid speed.  
This very serious situation, of common concern to  both governments and the private sectors, needed 
to be addressed urgently.  The Group had been ma ndated to clarify and improve WTO disciplines on 
RTAs;  while in-depth discussion had taken place on transparency and some substantive rules, no 
attempt had been made to address the core issue of the proliferation and the impact of the RTAs on the MTS, let alone to vent ideas and approaches on how to deal with it.  WTO Members had a 
legitimate right to establish RTAs, thus being ex empted from the MFN principle and being legally 
allowed to accord preferential treatment to their RT A partners.  Drafters of the GATT had formulated 
Article XXIV with the conviction that RTAs were building blocks for the MTS and a supplementary 
tool to reach the ultimate goal of multilateral fre e trade.  Yet, somehow, the humble and good will of 
the drafters 50 years ago did not foresee the monstr ous development of RTAs of the present day.  If 
Members did not deal with this situation at the present time, they would soon see multilateral 
negotiations getting less and less meaningful.  It would not be surprising if, some years ahead, 
Members would be confronted with the situati on where the successful result of a new round of 
negotiations would only matter to so me 10 or 20 per cent of world trade, with the lion’s share of 
world trade governed by RTA rules rather than multila teral trade rules.  Against these considerations, 
his delegation was of the view that the work to  clarify and to improve RTA disciplines under the 
WTO framework would never be complete if they we re not prepared to do or at least say something 
with respect to the core of the problem.  He indi cated that there were two distinct mindsets towards 
signing RTAs.  The first one was to reach a higher level of trade liberalization at a pace faster than multilaterally, with the aim of making the global mark et more open and liberal;  those sharing this 
mindset were willing and ready to share the fruit of th eir trade liberalization with those who were also 
willing and ready to follow suit.  By doing so, the RTAs were in fact contributing to the ultimate goal 
of creating free and open world trade.  The other mindset, however, was to create preferential 
treatment among a limited number of parties;  once those trade preferences had been secured, they 
were not meant to be open to, or shared by outsiders .  It was his delegation's view that an RTA with 
an open mind was a building block to the WTO frame work, while an RTA with a closed and narrow 
mind was in fact a stumbling block to the WTO framework.  The submission was to be seen against 
such belief and conviction;  the proliferation of RTAs should be redirected by sharing the trade 
benefits of open-minded RTAs with those ready to participate. 
22. The proponent of TN/RL/W/182 indicated that the proposal could be divided into two parts.  
The first one referred to the strong need for Members to declare their political intentions to open their 
RTAs to outsiders.  For illustrative purposes, he refe rred to the decrease in numbers of RTAs due to 
the enlargement of the European Union from 15 memb er States to 25, as well as the recent conclusion 
of the Pacific-4 Agreement, the latter being a good example of a fourth party joining the club, instead 
of signing three separate and additional agreements which would further complicate the situation.  
The second part of the proposal outlined procedural a rrangements.  In this respect, he stressed that no 
coerced obligation for Members to blindly open their RTAs to just anyone was requested, but rather 
the sincerity of RTA parties' to be prepared to negotiate with outsiders, and for outsiders to be 
prepared and willing to extend their level of trade lib eralization to match that of the RTA and then to 
be welcomed to join it. TN/RL/M/29 
Page 8  
 
23. Participants indicated that they could only provide preliminary comments due to the late 
circulation of the submission.  Several Particip ants concurred with the proponent that accession 
clauses were generally a good idea.  It was noted  that numerous RTAs contained accession clauses 
and several examples were offered (Austr alia-New Zealand, New Zealand-Singapore, 
Thailand-New Zealand, NAFTA and the recently c oncluded Pacific-4, more commonly known as the 
Trans Pacific Strategic Economic Partnership).  It was however observed that accession clauses in 
those agreements were not of a mandatory nature;  decisions on accession, and its relevant terms, were left to the RTA parties.  The point was made that paragraph 19 of the submission appeared to be 
of another nature, as its wording suggested that RTA parties could not reject an accession application and had to commence negotiations upon receipt of th at application.  Clarification was sought on 
whether such interpretation was correct;  whether parties could refuse to allow a Member to accede 
once the negotiations had commenced;  the meanin g of "adequate opportunity" to non-parties to 
accede and of "respond sympathetically";  the "reasonabl e conditions" referred to in paragraph 8;  and 
whether the suggestion that the RTA preferential treatment be extended to the acceding party meant 
that the latter would adopt the existing preferential tr eatment of one of the RTA parties or this would 
be subject to separate negotiations. 
24. Several Participants noted that proving for a mandatory accession clause would be extremely 
burdensome, politically sensitive and difficult, and coul d potentially lead to a situation where an RTA 
could expand to create an alternative to the WT O;  they cautioned the Group and the proponent on 
embarking into such a discussion.  Though ac knowledging that accession clauses could benefit the 
MTS by furthering regional integration and liberalizing trade, as included in the Bogor goals agreed 
upon in the 2004 APEC meeting, one Participant not ed that RTA negotiations were a complicated 
matter with significant give and take by the parties;  it was therefore unrealistic to ask any country to 
bind itself in advance to enter into negotiations  with every country that requested accession, 
regardless of whether or not such an accession made sense, and whether or not there were any common economic interests.  Moreover, the possibility  of acceding to an RTA always existed, if the 
conditions warranted it;  even if the RTA did not explicitly provide for accession, its signatories could 
suspend, amend or renegotiate the RTA if they conclu ded that another party should be added.  That, it 
was noted, had happened when the United Stat es-Canada FTA was suspended and the NAFTA 
negotiated.  Some Participants highlighted that in  RTA negotiations, considerations other than trade 
came into play and might be more  important than trade itself;  he nce, RTA parties would probably not 
want to be obliged to enter into accession negotia tions with a non-party without taking into full 
account these considerations.  One Participant qu estioned whether the Group had the mandate to 
include such provisions in future possible RTAs th at Members might conclude.  It was further noted 
that a mandatory accession clause might not provide the appropriate answer to the concerns raised by 
the proponent;  as the Sutherland Report had found, the best response to the concerns about preferential agreements was a multilaterally-agreed reduction of MFN rates and greater discipline of 
RTAs within the WTO.  One Participant expressed in terest in continuing discussions on some of the 
proposals made, including the insertion of accession provisions in RTAs and making mandatory that parties consider an accession application.  In that  respect, another Participant pointed out that there 
was a difference between requiring RTAs to include  an accession clause and requiring such a clause 
to be drafted in a particular manner;  she adde d that her delegation supported the idea of accession 
clauses in RTAs. 
25. The proponent provided preliminary replies to th e points raised.  He reiterated the importance 
of reducing the number of RTAs and opening them up so  that the trade benefits they had created were 
shared with others.  The WTO itself was a good example of such aims, since it had its own accession 
clause to which all Members were committed.  Despite  the existence of a "non-application" clause in 
the WTO (Article XIII), Members had chosen not to invoke it because of their commitment to share 
trade benefits and conduct normal trade relati onships amongst each and every WTO Member;  he 
hoped that this was still their common goal.  He re minded Participants of the objectives enshrined in 
Article XXIV of the GATT 1994, and noted with interest  that some Participants had pointed out that 
RTAs included all sort of non-trade considerations .  He shared that view, in the sense that an  TN/RL/M/29 
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increasing number of RTAs were being used as a tool to pursue non-trade objectives instead of genuinely promoting free trade amongst parties;  these concerns were at the forefront of his 
delegation's proposal.  The proposal was a call on Members to address these core issues, not only for 
the benefit of the MTS, but also for signalling a message to the outside world that WTO Members 
were serious in promoting the MTS.  While the procedural issues outlined in the proposal raised 
several genuine concerns, such as multiple simulta neous trade negotiations, resource constraints and 
geographical considerations, the proposal advocat ed that Members commit themselves to good faith 
in replying to requests for accession negotiations, so as  to ensure equal-footing participation wherever 
it was appropriate.  While acknowledging the concer ns raised, the proponent referred to several 
examples of RTAs with accession claus es where in reality such concerns did not manifest.  Finally, he 
recalled that the Group's mandate was to clarify a nd improve the RTA situation and that this would 
not be the case if the focus was to be limited to transp arency issues;  therefore, he reaffirmed that the 
proposal did fall under the Group's mandate.  
C. O
THER BUSINESS  
26. The Chairman informed the Group that the next meeting was scheduled for 25 and 26 July, 
but that he would consider at a later stage whethe r two full days were needed;  in any case, he would 
consult delegations on a suitable format for the ne xt meeting.  The meeting's duration would depend 
on the topics to be discussed, in particular whether new proposals on systemic matters were received; he also noted the busy July schedule because of the work in other Negotiating Groups.  He further 
announced that the Group's meetings devoted to RTAs  until the end of the year had been tentatively 
scheduled for 3-4 October, and 31 October-1 November. 
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