『経済研究』（明治学院大学）第 146 号

2013 年WTO-X aspects of recent RTAs

Toshihiro Atsumi
Faculty of Economics
Meiji Gakuin University

Abstract
Regional trade agreements (RTAs) have not only become increasingly prevalent but alsochanged qualitatively. They go beyond traditional tariﬀ reduction and the WTO mandates, to cover issues lying outside the WTO, which are called “WTO-X”. The evolution of such RTAs is related
to the internationalization of supply chains. New features of recent RTAs raise a number of issues
in understanding their eﬀects and consequences.

1．Introduction
Since the early 1990s, regional trade agreements (RTAs) have become increasingly prevalent.
The WTO reports that as of January 2012, some 511 notiﬁcations of RTAs (counting goods and services separately) had been received by the GATT/WTO. Of these, 319 were in force1.
The growing number of RTAs is well known, but it is important to note that there have beensigniﬁcant expansions in the contents of the RTAs going beyond the WTO mandates, which is thefocus of this paper. Horn et al. (2010) started the analysis of such recent aspects of RTAs. Their idea
is to divide the contents of the RTAs into 14 ʻWTO+ʼ and 38 ʻWTO-Xʼ areas. WTO+ provisions are
the ones that come under the current mandate of the WTO, and WTO-X provisions are those thatdeal with issues lying outside the current WTO mandate.
The focus of Horn et al. (2010) was on EC and U.S. RTAs with other countries. WTO (2011) extended the study by covering 96 RTAs of the world to ﬁnd that in recent RTAs, commitments inservices, investment, intellectual property rights, technical barriers to trade, and competition policy
have become signiﬁcant. This is the qualitatively important feature of todayʼs RTAs.
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This paper reviews the literature on WTO-X aspects of recent RTAs, and aims to provide issues and prospects of RTAs and the WTO. The next section summarizes in more detail what Hornet al. (2010) and WTO (2011) have found about WTO+ and WTO-X. The argument by Baldwin (2011)
on why RTAs have changed like this is introduced in section 3. Section 4 brieﬂy reviews what has
been thought about on the economic impacts of RTAs. Section 5 considers potential economic implications of recent RTAs that contain WTO-X provisions. Section 6 looks into a particular RTA as acase study. Section 7 oﬀers a preliminary view on issues and prospects relating to RTAs and the
WTO.

2．WTO+ and WTO-X provisions in RTAs
Horn et al. (2010) applied the WTO+ and WTO-X classiﬁcations to the RTAs involving the EC
and the U.S. They have also evaluated the texts from the viewpoint of legal enforceability, that is,whether the texts specify clear obligations. Their ﬁnding, among others, is that a substantial portionof the agreements goes way beyond traditional tariﬀ reductions to include issues not covered in the
WTO2. RTAs are no longer agreements solely on preferential tariﬀ reduction. Table 1 lists the 14 areas under the current WTO mandate along with other 38 WTO-X areas outside the mandate. WTO(2011) extended the approach by Horn et al. (2010) by covering 96 RTAs of the world. While it isfound that tariﬀs are becoming less important in the RTAs worldwide, the WTO study also ﬁnds
that in recent RTAs, commitments in services, investment, intellectual property rights, technical barriers to trade, and competition policy have become signiﬁcant. This is an important new characteristic of recent RTAs.
Further, according to WTO ( 2011 ), average number of WTO+ areas covered by RTAs has
been increasing. WTO-X provisions have been increasing as well, except for the decline in the 1990s.
One diﬀerence between the WTO+ and the WTO-X provisions is that the WTO+ provisions appear
to be more enforceable: While most WTO+ provisions during the years 2000-2010 are enforceable, on
average less than half of the WTO-X provisions during the same period are considered enforceable.
Turning to the areas covered, competition policy, intellectual property rights, investments, andmovement of capital are the main WTO-X provisions. It is found that these are also the most legally
enforceable provisions. The next largest groups of legally enforceable provisions are environmental
laws, labor market regulations, and visa and asylum.
In terms of country characteristics, RTAs between developed and developing countries contain on average a higher number of enforceable WTO+ provisions. They also contain higher numberof WTO-X provisions, although many are not enforceable. Agreements between developed countries
have the highest number of enforceable provisions. RTAs between developing countries have the58

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Table 1: WTO+ and WTO-X provisions in RTAs
WTO+ (WTO mandate)

WTO-X (Outside current WTO mandate)

１
２
３
４
５
６
７
８
９
10
11
12
13
14

１
２
３
４
５
６
７
８
９
10
11
12
13
14
15
16
17
18
19

Industrial tariﬀs
Agricultural Tarrifs
Customs
Anti-dumping
Counterveiling measures
Export tax
Technical barriers to trade
CATS
TRIPS
State aid
Public procurement
SPS measures
State trading enterprises
TRIMS

Competition policy
Intellectual property rights
Investment
Movement of capital
Environmental laws
Agriculture
Research and technology
Regional cooperation
Education and training
EnergyLabor market regulation
Industrial cooperation
Visa and asylum
Cultural cooperation
Social matters
Financial assistance
Consumer protection
Information society
SMEs

20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38

Approximation of legislation
Statistics
Human rights
Political dialogue
Economic policy dialogue
Illicit drugs
Money laundering
Anti-corruption
Data protection
Audiovidual
Illegal immigration
MiningTaxation
HealthPublic administration
Terrorism
Nuclear safety
Innovation policies
Civil protection

Note: Ordered in terms of frequency
Source: Original table by Horn et al. (2010) modiﬁed using the results by WTO (2011)

smallest number of WTO-X provisions.
It is somewhat puzzling why non-enforceable provisions are included in the RTAs, although it
could be that such provisions are to be ﬁnalized later in future negotiations. Sokol (2008) oﬀers somereasons why RTAs have non-enforceable competition policy provisions, from a South American perspective. It includes symbolic value, facilitation of relationships across antitrust agencies, and signaling domestic constituencies. Indeed, building relations across antitrust agencies could contribute to
the capacity building of their staﬀs, particularly of those in the developing countries. In any casemore needs to be done to understand the background of these WTO-X provisions and their implications and consequences.

3．Why have recent RTAs gone beyond the WTO?
The structure of trade has become complex following the supply chain internationalization, resulting in the kind of trade known as outward processing and/or vertical processing trade. World
trade has become qualitatively diﬀerent compared to that in the previous centuries when mainly ﬁnal goods were shipped across countries in manufacturing. Behind this are the extremely large
North-South wage diﬀerences that motivate the ﬁrms to geographically unbundle their production
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process, and the ICT revolution that enables them to do so (Baldwin (2011)).
Such change in the production structure calls for RTAs that contain the WTO+ and WTO-X
provisions, in addition to tariﬀ reductions, as described in the previous section. Speciﬁcally, the internationalization of supply chain requires less restriction on international movement of capital and on
investment, and ﬁrms competing in the knowledge-based economy today demand proper protectionof intellectual property. Such WTO+/WTO-X agreements were made possible not only because theNorthern government had responded to the needs of their global ﬁrms, but also because governments in the South recognized the importance of taking part in the international supply chain for domestic employment and technological transfer.

4．Traditional views on RTAs
One of the most popular terms when it comes to RTAs is ʻtrade diversionʼ. The work by Viner(1950) raised awareness that preferential tariﬀ reduction in RTAs can cause trade to be diverted to
ineﬃcient countries, leading to global loss in economic welfare.
Another issue raised by Bhagwati (1995) is known as the “spaghetti bowl” phenomenon which
is about the additional costs arising from having to manage various RTAs. In particular, the rules oforigin, that is necessary in a FTA to identify the nationalities of goods, becomes a burden in terms of
judicial and administrative costs, at the expense of consumers. Kawai and Wignaraja (2009) studied
whether there is a “spaghetti bowl” problem in Asia. (They have called it the “noodle bowl” problem
instead.) Based on ﬁrm surveys, it is revealed in their study that the problem does exist, but somewhat limited to large ﬁrms exporting to multiple destinations.
In addition, applying political economy analyses, Levy (1997) among others started considering
mechanisms of how regionalism aﬀects multilateralism. For those who believe in multilateral tradeliberalization, it is worrying whether RTAs eventually lead to the realization of multilateral trade liberalization. Levy (1997) ﬁnds that the multilateral trade liberalization halts in a trade model of product diﬀerentiation combined with voting, when the gains from trade are unequally distributed among
the voters, while it does not occur in a Heckscher-Ohlin framework.
The above mentioned studies in the late 20th century are therefore somewhat negative on theuse of RTAs, from various viewpoints. One exception is by Baldwin (1993) who presented the ʻdomino
theoryʼ to show that RTAs with simply tariﬀ reductions can be building blocks of multilateral free
trade. The analysis is based on a diﬀerentiated goods trade model using monopolistic competition,with a political economy feature as in Grossman and Helpman (1994). It is applied to EC expansion.
Non-EC governments consider the social welfare, political donation, and their nationʼs non-economic
resistance to becoming a member. Countries diﬀer in the level of non-economic resistance. As the60

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membership increases, the increased size of the EC market promotes more countries to join in orderof the level of the resistance3.
Empirical studies investigating whether RTAs are stumbling blocks for multilateral trade liberalization are now available. The results are, however, somewhat mixed. An econometric study byLimão (2006) shows that U.S. RTAs are stumbling blocks to multilateral trade liberalization. More recently, Baldwin and Seghezza (2010) ﬁnd RTAs are neither stumbling blocks nor building blocks.
Much of exiting literature has focused, naturally, on the tariﬀ reduction aspect of RTAs. In themeantime the RTAs in the real world have developed diﬀerently, as reviewed in the previous sections.

5．Potential impact of recent RTAs ‒ preferential applicability and third country impact
As the Horn et al. (2010) and the WTO (2011) studies indicate, recent RTAs are not only about
preferential tariﬀ reduction but include WTO+ and WTO-X provisions that go beyond the coverageof WTO. The main WTO-X provisions in terms of frequency and enforceability are competition policy, intellectual property rights, investments, and movement of capital. One important aspect of these
WTO-X provisions is that they are not necessarily applicable in a preferential manner to a speciﬁccountry/product, unlike tariﬀs. Therefore, tariﬀ analyses, on which the existing studies focus, cannot
be applied to many of the WTO-X provisions.
The fact that RTAs are not just about tariﬀs raises new issues on forecasting the economic
impact of RTAs. Studies forecasting the economic impacts of RTAs, typically using CGE techniques,
understandably calculate the price eﬀects of tariﬀ reduction to which the economic agents respond.
Results from these studies oﬀer important guidance, but if one fully takes into account the WTO-X
aspects of RTAs, the results may well be very diﬀerent, although it is practically diﬃcult to implement such a task.4
The issue of preferential applicability can be illustrated from measures taken in trade facilitation, although it is a WTO+ rather than a WTO-X area. The complexity is that some measures oftrade facilitation can be applied preferentially but others may not. An electronic system of certifying
ROO documents will enable the importing foreign country to check the ROO document online using
the database created at the country of origin. This facilitates trade between the two countries, beneﬁting the ﬁrms in the exporting country and the importer. It is an example of preferential applicationof a trade facilitation measure. On the other, if facilitation is about capacity building of the oﬃcials at
the customs border, it cannot be applied preferentially; the beneﬁt from it is likely to spillover tothird countries that export to the RTA economies.
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If the WTO-X provisions in RTAs help to improve the business environment of the membersof an RTA, third country ﬁrms are also likely to beneﬁt from this. Examples of such areas may include competition policy, intellectual property rights, investment, movement of capital, labor market
regulation, and anti-corruption.
On the other, environmental laws and consumer protection could mean diﬀerent regulations
being introduced in the RTA members. This may imply that third country ﬁrms face diﬀerent regulations in home and in the RTA member countries, which could become an obstacle for the third
country ﬁrms.
WTO-X areas also include agreements on speciﬁc sectors, such as agriculture, energy, andmining. Much cannot be said in general on the third country impacts of these provisions, since they
will depend heavily on what is actually agreed upon in these sector speciﬁc provisions.
Eventually it is of interest to see whether the WTO-X RTAs contribute to other larger regional schemes such as the Asia-Paciﬁc Economic Cooperation (APEC) and of course the WTO. In fact
APEC, which has been working on (concerted) unilateral most-favored-nation based trade liberalization, now views RTAs as “another way for APEC to make progress towards achieving the Bogor
Goals of free and open trade and investment (APEC (2012)).”

6．An example: Japan-Philippines Economic Partnership Agreement (JPEPA)
This section takes a closer look into some of the features of recent RTAs by focusing on a particular RTA. The example raised here is Japan-Philippines Economic Partnership Agreement (JPEPA), a typical North-South free trade agreement (FTA) formed between the two countries in 2002.
Table 3 lists the chapters in JPEPA. Among these, investment, intellectual property, competition, and improvement of business environment can be considered as WTO-X chapters. These are
Table 3: Contents of JPEPA
ChapterContent

ChapterContent

1

General Provisions

9

Movement of natural persons

2

Trade in Goods

10Intellectual property

3

Rules of Origin

11

Government procurement

4

Customs Procedures

12Competition

5

Paperless trading

13

Improvement of the business environment

6

Mutual recognition

14

Cooperation

7

Trade in services

15

Dispute avoidance and settlement

8

Investment

16

Final provisions

Source: Agreement between Japan and the Republic of the Philippines for an economic partnership.

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mostly in line with what WTO (2011) indicated as the frequently observed WTO-X provisions.
Competition policy is addressed as follows in Chapter 12 of JPEPA:

Chapter 12 Competition
Article 135 Promotion of Competition
by Addressing Anti-competitive Activities
1. Each Party shall, in accordance with its applicable laws and regulations, take measures which it considers appropriate to promote competition by addressing anticompetitive activities, in order to facilitate tradeand investment flows between the Parties and the efficient functioning of its market. Any such measures
shall be taken in conformity with the principles of transparency, non-discrimination and procedural fairness.
2. Each Party shall, when necessary, review and improve or adopt laws and regulations to effectively promote competition by addressing anti-competitive activities.
Article 136 Cooperation on Promoting Competition
by Addressing Anti-competitive Activities
1. The Parties shall, in accordance with their respective laws and regulations, cooperate in the field of promoting competition by addressing anti-competitive activities, subject to their respective available resources.
2. The details and procedures of cooperation under this Article shall be specified in the Implementing
Agreement.

Summarizing Chapter 12 on competition, as pointed out by Sokol (2008), the contents of theprovision do not appear to be enforceable; in fact, it is basically composed of statements on promotionof competition, review/improvement of laws and regulations, and cooperation between the authorities of Japan and the Philippines. It can be said, however, that it will contribute to the capacity building of the authorities, and help to improve the fairness of both markets.
In contrast, Chapter 10 on intellectual property is much more detailed, and goes much further
than simply cooperation, and includes articles on “Streamlining and Harmonization of Procedural
Matters”, “Promotion of Public Awareness Concerning Protection of Intellectual Property”, “Unfair
Competition”, and ﬁnally an article on “Enforcement”.
Interestingly, JPEPA has another chapter titled “Improvement of the Business Environment”(Chapter 13). It is documented that a sub-committee, a consultative group, and a liaison oﬃce will be
set up to improve the business environment. This clearly indicates that JPEPA is agreed upon by
the two governments as a response to the demand from the business sector that organizes internationalized supply chains.
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7．Issues and prospects on RTAs and the WTO

RTAs have changed substantially as reviewed in this paper. The categorization of the contents into WTO+ and WTO-X are helpful in understanding their qualitative changes. However, when
one thinks of their eﬀects it is necessary to look into the agreements to see what is actually intended.
As reviewed in the case of JPEPA, a competition policy chapter may simply indicate the cooperation
between the two countryʼs antitrust agencies and their capacity building. Instead, a competition policy chapter may contain introduction of particular policy measures in the RTA members. If it changes the competition environment within the RTA members, it could then have signiﬁcant impact on
the third country ﬁrms.
Another example is intellectual property rights. Given that regimes on intellectual property
are not necessarily harmonized across countries today, diﬀerent RTAs can establish diﬀerent kindsof regimes. We will then see a competition of rules, which may hinder the multilateral liberalization
process.
Many RTAs contain non-enforceable provisions. These made be left as they are, but they
could also be updated in later negotiations as enforceable provisions. In this sense, it could be said
that many of the RTAs are not ﬁxed and have the potential to evolve into diﬀerent schemes.
The apparent halt of the Doha talks and the proliferation of WTO-X RTAs could mean thatthe role of WTOs is being undermined. Hufbauer and Schott (2012) analyze that despite the failure of
the Doha round, the WTO does have new roles to play. They raise a number of new areas in which
the WTO should take part as its next steps. The areas include WTO-IMF coordination on currency
undervaluation, greenhouse gas and energy measures, and rules of the road for state owned enterprises (SOEs). These remaining global issues indeed need to be considered as they are not necessarily covered by the WTO-X RTAs.

Notes
1

I stick to the term RTA to describe various types of reciprocal trade agreements between two or more partners.

2

They also point out the diﬀerences between the EC and U.S. agreements. The former contain almost fourtimes as many instances of WTO-X provisions. The provisions in the EC agreements, however, are less legally enforceable. U.S. agreements tend to emphasize regulatory areas more.

3

More recent argument for regionalism as building blocks to multilateral trade liberalization can be found in
Baldwin (2004).

4

Kim et al. (2010) estimate the impact of the creation of the Free Trade Area of Asia Paciﬁc (FTAAP) on theworld economy. In addition to tariﬀ reductions, they take into account the eﬀect of trade facilitation as wellas liberalization in services trade.
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