Regional trade agreements (RTAs) have become increasingly popular in recent years as a means to facilitate trade between countries. However, not all RTAs are compatible with the rules and regulations set out by the World Trade Organization (WTO). In this article, we will discuss when and how an RTA can be compatible with the WTO.
When is an RTA Compatible?
An RTA is deemed compatible with the WTO if it satisfies the conditions outlined in Article XXIV of the General Agreement on Tariffs and Trade (GATT). The main condition is that the RTA must cover “substantially all” trade between its member countries. This means that the RTA must eliminate tariffs and other trade barriers on a significant portion of the goods and services traded between its members.
In addition, the RTA must not create new trade barriers or discriminate against non-members. This means that the RTA must not impose higher tariffs on goods imported from non-member countries or provide preferential treatment to its members over non-members.
Finally, the RTA must not impede the development of free trade among all countries. This means that the RTA should not be used as a means to protect domestic industries or to create a trading bloc that excludes other countries.
How is an RTA Compatible?
To ensure compatibility with the WTO, an RTA must be notified to the organization and go through a review process. The review process is conducted by the WTO`s Committee on Regional Trade Agreements (CRTA), which examines the RTA`s provisions to ensure they comply with WTO rules.
During the review process, the CRTA examines the RTA`s trade liberalization measures, its rules of origin, and any exemptions or safeguards included in the agreement. The CRTA also examines the RTA`s impact on trade flows, including its impact on non-member countries.
If the RTA is found to be compatible with WTO rules, it can be approved and implemented. If the RTA is found to be incompatible, the WTO may request changes or send the RTA back for further review.
Conclusion
In conclusion, an RTA can be compatible with the WTO if it satisfies the conditions outlined in Article XXIV of the GATT. These conditions require that the RTA covers substantially all trade between its members, does not create new trade barriers or discriminate against non-members, and does not impede the development of free trade among all countries. To ensure compatibility, an RTA must go through a review process conducted by the CRTA. By following these rules and procedures, an RTA can promote regional trade while still complying with WTO regulations.
