WORLD TRADE  
ORGANIZATION  TN/RL/W/185 
22 July 2005 
 (05-3305) 
Negotiating Group on Rules Original:   English 
  
 
SUBMISSION ON REGIONAL TRADE AGREEMENTS 
BY CHINA 
 
Paper by China
 
 
 
 The following submission, dated 20 July 2005, is being circulated at the request of the Delegation of China.  
_______________ 
 
 
I. INTRODUCTION 
1. This submission of China on regional trade agreements (RTAs) sets out comments and 
proposals concerning some core systemic issues  in RTA rules negotiation based on the Doha 
Mandate, without prejudice to China’s positions on fu ture transparency requirements for all RTAs, as 
well as other substantive disciplines on RTAs. 
2. RTAs, which are deemed to be supplementary to the multilateral trading system, play an 
important role in promoting ec onomic development and enhancing economic re lations among nations 
and regions.  However, it has long been the case th at due to the ambiguity of many elements in 
RTA rules, Members have different understandings on the application of these rules.  The report 
named “The Future of the WTO - Addressing Institu tional Challenges in the New Millennium” (the 
Sutherland Report) points out that the “spaghe tti bowl” phenomenon caused by various kinds of 
RTAs has been eroding the multilateral trading system.  With a view to better promoting the development of the multilateral trading system, it is essential for this Negotiating Group to further 
discuss issues concerning the clarification and improvement of RTA rules. 
3. A new trend witnessed in recent years is that  developing country Members have paid 
increasing attention to the role of RTAs in their own development process.  RTAs among them (the 
south-south RTAs) are also on the growing trend.  Economic integra tion in the form of RTAs has 
become a core part of the development strategy fo r many developing country Members.  That is also 
an important reason why the Doha Ministerial De claration requires that the developmental aspects 
should be taken into considerati on in the RTA rules negotiations.  
II. DEVELOPMENTAL ASPECTS OF RTAS 
4. Paragraph 29 of the Doha Ministerial Declara tion states:  “We also agree to negotiations 
aimed at clarifying and improving disciplines and procedures under the existing WTO provisions applying to regional trade agreements.  The negotia tions shall take into account the developmental 
aspects of regional trade agreements.” The last sen tence, we believe, means that the development 
issue persistently permeates the whole process and ca lls for careful consideration at every stage of the 
negotiation.  In this regard, China agrees to th e statement in the submission of the ACP group of 
States (TN/RL/W/155) that “the clarification a nd improvement in WTO rules on the formation and TN/RL/W/185 
Page 2  
 
 operation of RTAs should support the development st rategy of developing c ountries through regional 
integration by providing a supportive multilateral fram ework”.  The considera tion of developmental 
aspects, demanded in the Doha Declaration, should be reflected firstly by considering endurance and 
adjusting cost of developing participants in the s ubstantive requirement of RTA rules and secondly by 
refraining from imposing unnecessary restrictions on the developing country Members in the 
implementation of their developmental st rategies through regional integration.  
5. Developing Members greatly differ from the deve loped ones in terms of  level of economic 
development, tariff level, industrial structure, tr ade pattern and capability of withstanding risks and 
strikes.  More importantly, the sensitive sectors in developing country Members often affect the 
livelihood of a large poor population.  Therefore, sp ecific special and differential treatment should be 
granted to developing country Members so that they  will be subject to a lower threshold and receive 
other less-than-full-reciprocity treatment on the substa ntive requirement of RTA disciplines, thus truly 
reflecting the developmental aspects required by paragraph 29 of the Doha Mandate. 
6. The above-mentioned special and differential tr eatment should be granted to all developing 
country Members and any form of attempt to r eclassify developing country Members other than 
LDCs is legally unauthorized, economically infeasibl e and politically risky, which will only lead to a 
deadlock in the whole DDA negotiations.  
7. The Enabling Clause is a tailor-mad e instrument only for the developing country Members.  It 
serves regional economic cooperation in various fo rms and at different levels among developing 
country Members. This very nature predetermine s its difference from GAT T Article XXIV.  RTAs 
concluded within the framework of the Enabling Clause should therefore be governed by provisions 
as set in the Enabling Clause.  Any clarification or improvement of GATT Article XXIV should not 
be detrimental to developing country Me mbers’ rights under the Enabling Clause.  
III. SUBSTANTIALLY ALL THE TRADE 
8. The provision on “substantially all the trade” in  Article XXIV:8 of GATT is a systemic issue 
as an important substantive requirement in RTA disciplines.  While both quantitative and qualitative 
aspects of this provision should be considered, we could first concentrate on the quantitative aspect 
and in particular, the two essential quantitative be nchmarks, i.e. coverage of trade volume and 
coverage of numbers of tariff lines.  
9. As to the level of each benchmark, a one-size-f it-all approach is inappropriate.  Bearing in 
mind the aforementioned differences  of economic development levels , developed Members should be 
subject to a stricter set of benchmarks than developing ones.  
10. Meanwhile, China suggests that the Secretaria t work out a table which includes the real 
situation of trade coverage and ta riff lines coverage in all the notified RTAs which are still in force, 
and then analyze reasons for this situation, gain s and losses for the multilateral trading system and 
possible difficulties and obstacles in changing this situation.  This empirical research and analysis would be very helpful for the establishment of benchmarks for “substantially all the trade”. 
IV. TRANSITIONAL PERIOD 
11. The GATT Article XXIV:5(c) requires that agr eements of establishing Customs Unions or 
Free Trade Areas should be concluded within “reaso nable period of time”.  “The Understanding on 
Article 24 of GATT 1994” stipulates that the “reasona ble period” is normally deemed to be ten years 
and it can be over ten years only under “exceptiona l circumstances”.  However, there is no clear 
definition of the “exceptional circumstances”.  China believes that the ten-year transitional period is a 
practically advisable timeframe, but the “excepti onal circumstances” should be clearly defined in  TN/RL/W/185 
 Page 3 
 
 
 order to be well targeted and not to be abused .  A linkage between the “exceptional circumstances” 
and the developmental aspect should be establis hed, taking the difficulties developing country 
Members have encountered in their implementation of RTAs as an essential element in defining the “exceptional circumstances”.  Only developing countries can take advantage of “exceptional 
circumstances” and have the right  to go beyond ten years in te rms of transitional period.  
V. RETROACTIVITY 
12. Any newly-clarified RTA rules should be retroac tive and applicable to all the RTAs.  If the 
new rules are not retroactive in reality, there will be only a small number of RTAs bound by newly-
clarified rules, leaving the majority of RTAs out side of the multilateral trading system.  This is 
completely against the principle of non-discriminat ion.  Discussions should be continued on the issue 
of reasonable transitional period a nd/or reasonable exceptions needed to make the RTAs currently in 
force in line with the clarified rules. 
__________