WORLD TRADE  
ORGANIZATION  TN/RL/W/182 
9 June 2005 
 (05-2370) 
Negotiating Group on Rules Original:   English 
  
SUBMISSION ON REGIONAL TRADE AGREEMENTS BY  
THE SEPARATE CUSTOMS TERRITORY OF  
TAIWAN, PENGHU, KINMEN AND MATSU 
  
Paper by the Separate Custom Territory of Taiwan,
 
Penghu, Kinmen and Matsu  
  
 The following submission, dated 7 June 2005, is being circulated at the request of the Delegation of the Separate Customs Territo ry of Taiwan, Penghu, Kinmen and Matsu. 
 
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STRENGTHENING THE MULTILATERAL TRADING SYSTEM VIA OPEN REGIONALISM: 
PROPOSAL FOR REGIONAL TRADE AGREEMENTS TO CONTAIN 
AN ACCESSION CLAUSE FOR NON-PARTIES 
 
Paper by the Separate Cust oms Territory of Taiwan,
 
Penghu, Kinmen and Matsu  
 
1. In this paper, the Separate Customs Terr itory of Taiwan, Penghu, Kinmen and Matsu 
proposes that new provisions be added to Artic le XXIV of GATT 1994 and Article V of GATS 
requiring parties to an RTA to allow another inte rested WTO Member to negotiate in good faith the 
terms of its accession to the RTA.  
I. PROBLEMS OF CURRENT REGIONAL TRADE AGREEMENTS UNDER THE 
WORLD TRADE ORGANIZATION 
2. The basic difference between the multilateral system under the World Trade Organization 
(WTO) and RTAs is that the multilateral trad ing system requires non-discrimination among its 
members, while RTAs discriminate against goo ds, services and service-suppliers from non-parties. 
3. There may be an economic and other justifica tion for RTAs to deviate from the fundamental 
principle of most-favoured-nation (MFN) treatment  under Article I of the General Agreement on 
Tariffs and Trade 1994 (GATT 1994) and Article II of  the General Agreement on Trade in Services 
(GATS).  But the WTO allows the existence of RTAs  on the strict condition that they must be trade 
creating, not trade diverting.  Therefore, the justification for RTAs should be scrutinized against the primary goal of supporting the multilateral trading framewo rk, to make sure that RTAs are used solely 
to advance trade liberalization, and not as a means to undermine MFN treatment indefinitely. 
4. Unfortunately, the lack of effective multilate ral supervision to date simply serves to 
demonstrate that the terms and conditions as specified under Article XXIV of GATT 1994 and 
Article V of GATS are not clear enough.  They have  not been playing the supervisory role, because 
they are not strictly observed or adhered to by WTO Members. TN/RL/W/182 
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 5. On the experience of more than half a cen tury under the GATT a nd the WTO framework, 
there appears to be no appropriate approach or prac tical way in which more effective examination and 
supervision of RTAs can be required, nor indeed an y expectation that there can be greater adherence 
to the relevant rules governing RTAs.  This situa tion exists because of the inherently defective 
procedural and substantial provisions under the WTO framework governing RTAs and the 
fundamental discriminatory nature of RTAs. 
6. If we continue the current approach of refini ng some concepts relating to RTA consistency 
issues without dealing with the fundamental discriminatory aspects of RTAs themselves, the inherent defects will continue to undermine the stability a nd development of our multilateral trading system.  
Even if there could be improvement or clarification of the grey areas in the RTA regulations, and even 
if the procedural provisions are improved to accel erate the examination process, the fundamental 
problem arising from the discriminatory nature of RTAs will still remain.  Added to that, it would not be easy to arrive at a crystal-clear meaning of rele vant provisions, and to find a solution to allow the 
expedited examination of RTAs. 
7. In light of the above, we propose new provisions for adoption in Article XXIV of the 
GATT 1994 and Article V of GATS, requiring parties of RTAs to provide an accession clause for 
third-party members, which would expand the reac h of RTAs and thereby promote broader, more 
inclusive and comprehensive trade liberalization. 
II. A POSITIVE MOVE TO BALANCE MULTILATERALISM AND REGIONALISM 
8. We propose that the WTO obliges its Members to  afford adequate opportunity to non-parties 
to accede to their RTAs.  This approach would allo w a third party to accede to the RTAs under certain 
reasonable conditions, and the original parties to th e RTAs would have to extend in good faith their 
preferential treatments to newcomers once they have completed the accession process.  Permitting 
third parties to accede to RTAs would minimize di scrimination, as well as ensure that RTAs promote 
trade liberalization rather than thwart it. 
9. It is worth mentioning that, in our proposal, third parties will not be granted automatic 
accession to RTAs.  However, the original parties to th e RTAs will be required to afford third parties, 
in good faith, adequate opportunity to negotiate i ndividual terms of accession to the RTAs, and at the 
same time the third parties seeking accession will be  required to commit themselves to reach the same 
level of trade liberalization as embedded in the RTAs they seek to enter. 
III. EXAMPLES OF THIRD PARTY ACCESSION TO BILATERAL OR REGIONAL 
TRADE AGREEMENTS 
A. 
THE APEC BEST PRACTICES FOR RTAS AND FTAS  
10. In November last year, the Asia-Pacific Economic Cooperation (APEC ) Annual Ministerial 
Meeting held in Santiago, Chile, endorsed a three-st age initiative to strengthen the role of RTAs and 
FTAs, including an overall APEC policy response to its stakeholders, a set of clear transparency 
measures and a capacity building programme.  Th e “APEC Best Practices for RTAs and FTAs” are 
adopted to set high standards for RTAs and FTAs in the region, to ensure that RTAs and FTAs will 
contribute to achieving Bogor Goals, and that they  are consistent with WTO disciplines as well.   
11. One of the principles declared in the “Best Practices” targets specifically the issue of 
third-party accession.  It requires the APEC RT As and FTAs to be “ope n to the possibility for 
accession of third parties on negotiated terms and c onditions,” and it considers such an arrangement 
as “consistent with APEC’s philosophy of open regionalism and as a way to contribute to the 
momentum for liberalization throughout the APEC  region.”  The APEC Meeting of Ministers  TN/RL/W/182 
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 Responsible for Trade held in Jeju, Korea on 2 and 3 June of this year, further agreed to forward the 
“Best Practices” to the WTO Rules Negotiating Group for reference, as part of the substantial 
contribution made by APEC to the DDA negotiations. 
12. It is the basic principle of the GATT, and the conviction of APEC member economies that 
RTAs, if properly constructed, can be genuine building blocks of multilate ralism.  An accession 
clause for third parties to RTAs would no doubt estab lish the proper construction of RTAs in order to 
maintain and further enhance our multilateral tradin g system under the WTO.  This principle should 
be of interest to all WTO Members, quite apar t from just those in the Asia-Pacific region, and 
certainly its usefulness and appropriateness for APEC  member economies should also be of important 
reference for other WTO Members. 
B. STATE PRACTICES :  NAFTA , THE PACIFIC -FOUR AND BEYOND  
13. Many free trade agreements concluded among APEC member economies do include 
accession clause for third parties. 
14. Paragraphs 1 & 2, Article 24 of the Clo ser Economic Partnership Agreement between 
Australia and New Zealand provides that “[t]he Me mber States may agree to the association of any 
other State with this Agreement,” and “[t]he terms of such association shall be negotiated between the 
Member States and other States.” 
15. Article 2204 of NAFTA provides that “[a]ny count ry or group of countries may accede to this 
Agreement subject to such terms and conditions as ma y be agreed between such country or countries 
and the Commission and following approval in accord ance with the applicable legal procedures of 
each country.” 
16. Article 23.1 of the Free Trade Agreement between Australia and the United States, and 
Article 21.6 of the Free Trade Agreement betwee n Singapore and the United States also accord 
similar arrangements. 
17. Most recently, the conclusion of the “Trans Pacific Strategic Economic Partnership” (also 
known as “Pacific Four”), Free Trade Agreement be tween Brunei Darussalam, Chile, New Zealand 
and Singapore was announced at the APEC Meeting of Ministers Responsible for Trade, in Jeju, 
Korea.  This Agreement is often cited as a good example of RTA extension by third party accession. 
18. Recent negotiations conducted by the Separa te Customs Territory of Taiwan, Penghu, 
Kinmen and Matsu with other WTO Members have taken note of this deve lopment and include a 
similar clause for third party accession in the draft text.  We call upon all WTO Members to reflect further on this, and to consider making it standard practice by way of a new RTA discipline to be 
added to the relevant part of our agreement in the Rules negotiations. 
IV. PROPOSED PROVISIONS 
19. The Separate Customs Territory of Taiwan , Penghu, Kinmen and Matsu would like to 
propose the following provisions for the applica tion and interpretation of Article XXIV of 
GATT 1994 and Article V of the GATS. 
- “An RTA shall be open for accession by other WTO Members, on terms to be agreed 
between the original parties of the RTA and the interested WTO Members.” 
- “WTO Members not parties to the RTA may i ndicate their intention to accede to such 
RTA to the parties in writing.  The parties of the RTA shall respond sympathetically TN/RL/W/182 
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 to such requests, and accord in good faith adequate opportunities for other interested 
WTO Members to negotiate the terms of their accession.” 
- “Requests, replies, progress and results of subsequent nego tiations conducted in 
accordance with previous provisions shall be notified to the Committee on Regional 
Trade Agreements in a timely manner.” 
V. CONCLUSION 
20. This proposal seeks to balance the principle of  non-discrimination with the current practices 
of WTO Members to enter into preferential arrange ments through RTAs.  This proposal also seeks to 
ensure that the WTO multilateral framework be main tained and further enhanc ed through constructive 
application of RTAs containing an accession clause for third parties. 
21. We hope that, with this proposal, the differe nt interests derived from multilateralism and 
regionalism can be better reconciled,  better coordinated and more mutu ally supportive of each other, 
without the need to sacrifice the future of our multilate ral trading system that is rooted so deeply in 
the principle of non-discriminatory MFN treatment. 
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