11:56 AM May 24, 1996


Geneva 24 May (Chakravarthi Raghavan) -- The Committee on Regional Trade Agreements (CRTA) of the World Trade Organization, which is chaired by Amb. John Weekes of Canada, has agreed on a work programme and calendar for the rest of the year to examine the various regional trade agreements notified to the WTO and begin looking at the systemic implications of such regional agreements.

The WTO recently established the Committee to look at and deal with all the regional agreements notified to the WTO -- instead of the separate working parties that went into the individual agreements -- and also the overall issue of the systemic implications of the proliferating regional agreements.

The new work programme was settled after what WTO sources described as one of the largest attended WTO meetings, mainly procedural, but where several of the members raised the issue of systemic implications and need to address them as a priority.

The work programme appears to be a compromise between those, like the European Community, which want the individual regional agreements and their conformity with Art. XXIV of the General Agreement to be looked at, and conclusions drawn, before addressing the systemic implications, and others who want to focus, as a priority, the systemic implications of the growing web of regional agreements.

Under the programme, 15-1/2 days of meetings have been scheduled from July to November, with two meetings in July and October to look at systemic implications and the procedures to facilitate examination of such regional agreements.

WTO officials say that the volume of work before the secretariat and the delegations in dealing with this issue is amazing and growing. Under current practices, months could go by between the notification about an agreement, eliciting of information, and ultimately its scrutiny. And there is also the requirement about half-yearly reports and their scrutiny. So even if they are able to evolve a standard format of questionnaire and answers to be supplied, it would move things forward.

There is an impression that the Committee and its processes are sought to be used to head off a substantive debate on this question of systemic implications of the regional agreements at the Singapore Ministerial meeting.

Some participants say that the EU, and members of some other regional integration agreements and arrangements do not want the forthcoming Singapore Ministerial meeting to focus on the regionalism issue.

On the one hand the EU is sensitive to a close scrutiny and a full examination of the European Union (the Rome and Maastricht treaties, the various agreements for adhesion of countries to the EU, and the web of agreements and arrangements in Europe and elsewhere).

It has hence been arguing that given the EU's trade policies come up for review, once in every two years, under the Trade Policy Review Mechanism, there is no need for a separate review of the EU and reports by the EU on developments.

However, at the last TPRM review of the EU, when a number of members pointed to the incompatibility and inconsistencies in the EU's web of agreements and arrangements and its WTO obligations, the EU representative in effect brushed them aside by speaking of "political realities", leaving the members without any recourse.

On the other side, the EU is worried about 'arrangements' like the APEC (from which Europe is excluded) which are not customs or free trade area agreements covered by Art XXIV of the GATT, but may have an overall effect.

The renewed focus on regional agreements at the WTO, is partly for fear that this, and the 'implementation' of the Uruguay Round agreements to which the developing countries attach high priority, would sufficiently becloud the Singapore meeting and prevent any serious effort to bring new issues (like investment, labour standards) on to the WTO trade agenda.

But South Korea has provided a "non-paper" for the Ruggiero-led informal Heads of Delegations process to prepare for the Singapore Ministerial Meeting calling for the issue of regionalism and the multilateral trading system to be addressed at Singapore, and that this should be done in a meaningful way and not in some vaguely worded formulations in the Ministerial statement that may be issued.

And with the Singapore meeting due to take place within weeks of the APEC Summit in the Philippines, it may be difficult to put aside the regionalism issue and its implications.

Thinking within the WTO secretariat, and among some of the leading industrial nations, appears to have undergone a 180 degree turn, within about a year, on the regionalism vs multilateralism issue at the WTO secretariat and there are no clear answers to the reason for this.

In April 1995, the WTO secretariat (then headed by Mr. Peter Sutherland) brought out a study, "Regionalism and the World Trading System". Work on this had clearly been initiated before the WTO came into being. Like the earlier GATT, the WTO secretariat has no mandate to initiate and publish studies on its own.

During the Uruguay Round negotiations, and particularly after the 1990 Brussels Ministerial meeting's failure to conclude the Round, efforts of the US to forge regional agreements like NAFTA and the idea of a Free Trade Area for the Americas were all being explained in terms of efforts of leading nations to forge regional agreements because of the stalemate on the multilateral front.

But the regional thrust continued even after, and at the Marrakesh Ministerial meeting, several countries raised the regionalism issue and its threat to the multilateral system.

Outside the GATT/WTO, a number of countries and international economists had also been expressing concerns over the continuing drive towards regional agreements and the prospect of the world being divided up into three inward-looking regional blocs centred around one or the other of the Triad (US, Europe and Japan).

But the 1995 WTO study that came out in that wake gave a 'good chit' to the regional arrangements, saying that there was no evidence to support the view about increasing regionalisation of world trade or of emergence of trading 'blocs' centred in North America, Western Europe and Asia-Pacific. It then went on to suggest that governments may however consider "reforms necessary in order to put the mutually supportive relationship between multilateralism and regionalism on a more solid foundation".

That 'study' was initiated by then WTO Director-General Peter Sutherland, who pointedly stressed at that time that it was his own initiative and that he had not consulted the contracting parties nor sought any mandate for this.

The study tried to blur the controversies over the regional agreements, led or initiated by the EU and the US, by referring to the large number of regional agreements and that only three countries (Japan, South Korea and Hong Kong) were not part of any regional agreement.

[But all three are part of the APEC (which also includes the US and Canada, but excludes the European Union). APEC may not be a regional agreement within the WTO terms, and only an 'arrangement' and forum, but nevertheless is emerging as a closed club, with those inside (like Hong Kong) wanting to freeze new entrants until they could lay down the rules for the entrants].

But Sutherland's successor as WTO head, Mr. Renato Ruggiero, is known to have become concerned that the regional agreements, and their periodic meetings at level of Heads of State/Government, is taking focus and attention away from the multilateral trading system and that the WTO only attracts trade ministers every two years and lacks the summit-level involvement of countries.

He has even tried to initiate the idea of Summit level meetings for the WTO, and begin the process with a commemorative meeting for the 50th anniversary of the GATT and the aborted Havana Charter, and holding that meeting in the capital of the country than sank that Charter.

Ruggiero and others like him, while raising the danger of regionalism, are trying to argue that the reason why the major nations are looking to regional agreements is because of the new areas and issues they want to cover (investment, environment, labour standards etc).

In this view, Ruggiero is trying to push new issues sought by the US and the EU on to the WTO agenda, arguing that the way to avoid the fragmentation of the multilateral system is to take the new issues, and the same levels of disciplines, so as to obviate the need for anyone to look to regional arrangements.

This really means that the pace in multilateral front is to be set at the speed and will (or greed) of the fastest and strongest -- a sure way, according to critics, of marginalizing most of the world and destroying the multilateral system in the pursuit of theoretical views about competition and economic efficiency, while ignoring issues of equity.

Another element for the renewed interest on regional agreements is also perhaps the fact that hitherto the major regional agreements were either among the industrial nations (as in the case of the European Union), or led by them (as in the case of Nafta and now the APEC), whereas some regional moves among developing countries, such as the MERCOSUR or AFTA (Asean free trade agreement), are beginning to take shape and could over time impart a different dynamics to international, and even more the North-South trade and economic relations.

The present work programme set out by the Committee on Regional Trade Agreements, unless it first examines the systemic implications and enables a WTO decision on the overall approach to be followed, may not be able to deal with these wider issues, and would perhaps continue to look at the regional agreements purely in terms of Art. XXIV (which is all that the WTO/GATT requires).

It would be unfair to the new agreements (involving mostly or mainly the developing countries) to subject them to new criteria, unless the older 'culprits' like the EU itself, and the NAFTA are first scrutinised in these terms.

In a more recent paper in the American Economic Review journal -- "Compatibility of Regional and Multilateral Trading Agreements: Reforming the WTO Process" -- Gary Sampson, Director of the WTO secretariat's Development Division, makes the point that while the pillar of the WTO (agreements in goods, services and intellectual property) is non-discrimination, the corner stone of regional trading agreements is discrimination against outsiders.

Sampson's article also underlines that the scrutiny of the regional agreements under the WTO/GATT is in terms of their compatibility with Article XXIV of the GATT (which deals with customs unions and free trade agreements for trade in goods) whose guiding principle is that they should facilitate trade between the parties, not raise barriers to the trade of other WTO members, and that customs duties and regulations restricting trade are eliminated with respect to substantially all trade between parties to the agreement.

But with customs duties (particularly among the industrial countries) at very low levels, the real barriers to outsiders arise out of non-border measures, rules of origin etc -- issues that don't get much scrutiny at the working parties.

In fact in the entire GATT history, of the 80 working parties that examined the conformity of agreements with the GATT, only one was found to be in compliance (that in 1994 between the Czech and Slovak Republics). The consensus rule of decision-making and disagreements in the working parties has meant no recommendations, but only reports setting out views of both sides, and which are merely taken note of by the GATT Council.

In explaining what the new Committee (serviced by his division) would or could do, Sampson suggests that it could provide the means to systematically analyze the common features of new and existing agreements and draw conclusions on the basis of fact. He also suggests that the Singapore Ministerial Meeting could provide the logical forum for WTO members to present conclusions or recommendations on how regional agreements can further complement - rather than compete - with WTO rules and thereby bring greater coherence to the rules-based multilateral trading system.