TWN Info Service on WTO and Trade Issues (Feb11/06)
22 February 2011
Third World Network

WTO Rules Group begins review of RTA Transparency Mechanism
Published in SUNS #7083 dated 8 February 2011

Geneva, 7 Feb (Kanaga Raja) -- The WTO Negotiating Group on Rules last week started its review of the Transparency Mechanism for Regional Trade Agreements (RTAs), which was established by the General Council on a provisional basis on 14 December 2006.

A meeting of the Rules Group on 4 February considered two proposals on this issue, one by the United States and another by Ecuador.

The mechanism (WT/L/671) provides for the early announcement to the WTO by Members who are either participating in new negotiations aimed at the conclusion of an RTA or are parties to a newly-signed RTA.

It also provides for notification of RTAs to the WTO, as well as procedures to enhance transparency and other provisions such as subsequent notification and reporting, the bodies entrusted with the implementation of the mechanism and technical support for developing countries.

The General Council decision, which applies on a provisional basis to all RTAs, also states that Members will review, and if necessary, modify this decision, in light of the experience gained from its provisional operation, and replace it by a permanent mechanism adopted as part of the overall results of the Doha Round.

At its last meeting in December 2010, the Rules Group agreed to launch the review of the provisional transparency mechanism for RTAs, with a view to making it permanent.

The Chair, Ambassador Dennis Francis of Trinidad and Tobago, had reported that in his informal consultations, delegations said that since its provisional establishment four years ago, the mechanism has performed reasonably well although there are some areas that would require some fine-tuning.

At the meeting on 4 February, the Group discussed a proposal from the US (TN/RL/W/248) for the consideration of all RTAs in a single WTO Committee.

In its proposal, the US said that while the TM (RTA Transparency Mechanism) has on the whole significantly improved transparency with respect to RTAs, some of its operational aspects could be improved.

Most notably, it added, while there is no doubt that the TM applies to all RTAs - whether negotiated under GATT 1994, the GATS, or the Enabling Clause - practical questions of the venue of consideration have arisen when parties to an agreement differ among themselves in their view of the relevant WTO provision for concluding a particular preferential agreement.

The US proposal noted that one problem that has come clearly to light relates to a disagreement between some Members over the forum in which a number of agreements should be considered under the TM.

In two recent cases, said the US, the same agreement has been notified by different parties under Article XXIV of GATT 1994, and the Enabling Clause, respectively. In other cases, while the parties to an agreement have notified it under a particular WTO provision, other Members, not party to the relevant agreement, disagreed with the decision on the appropriate forum for the notification.

Disagreements of this nature even prevented adoption of the final annual reports for 2010 of the CTD (Committee on Trade and Development) and the CRTA
(Committee on Regional Trade Agreements), said the US.

While the Negotiating Group on Rules is unlikely in the near term to be able to bridge the underlying differences among Members as to the scope of the Enabling Clause, it is incumbent upon the Group in its review of the TM to work to avoid future breakdowns in the WTO's working procedures, the US proposal stressed.

In order to avoid un-resolvable conflicts among the Membership concerning the choice of forum, the US proposed that all RTAs - notwithstanding the legal provisions under which they are notified - be considered, for purposes of the Transparency Mechanism, in the CRTA.

[According to the General Council decision establishing the transparency mechanism, the CRTA and the CTD are instructed to implement the mechanism. The CRTA shall do so for RTAs falling under Article XXIV of GATT 1994 and Article V of GATS, while the CTD shall do so for RTAs falling under paragraph 2 ( c) of the Enabling Clause.]

According to trade officials, the US said that its proposal for all RTAs notified to the WTO to be considered in the CRTA is a pragmatic solution to the problem of "dual notifications" and prolonged discussions on what forum should consider which RTA.

[Currently, RTAs among developing countries are considered in the CTD.]

According to trade officials, India questioned whether the Group can consider the US proposal, which it said went beyond the mandate of the Group. It further said that in informal consultations, the understanding of Members was that the review of the mechanism would only lead to adjustments and not what it saw as a fundamental change proposed by the US.

According to trade officials, India added that the US proposal will unravel past agreements that gave RTA roles to the CRTA and the CTD.

The Chair said that only the Members, and not the Chair, can decide on the Group's approach.

Generally supporting India, said trade officials, Egypt, Argentina, China, Bolivia and Brazil underscored the importance of the CTD in dealing with development matters.

On the other hand, the European Union, Turkey, Korea, Japan, Switzerland, Colombia, Australia, New Zealand, Canada, Chile and Costa Rica supported the US proposal, and its consideration by the Group.

A separate proposal was tabled by Ecuador (TN/RL/W/249) on procedural adjustments to the RTA transparency mechanism.

Ecuador proposed amongst others that parties to an RTA submit communications to the WTO in the form of "joint notes" and that a coordinator be assigned by the parties to an RTA to handle the issue of notifications.

According to trade officials, many delegations expressed support for Ecuador's proposal. However, some concerns were also voiced on the "notes" system leading to delays in the review of RTAs.

The Rules Group also took up systemic issues related to RTAs, where it considered a proposal from Bolivia (TN/RL/W/250) to clarify the developmental aspects of RTAs.

According to the Bolivian proposal, a clarification and improvement in WTO rules on the formation and operation of RTAs should support the development strategy of developing countries through regional integration by providing a supportive multilateral framework.

Multilateral rules should support the enhancement and applicability of strengthened Special and Differential Treatment (S&DT) and the less than full reciprocity principles for the rules governing RTAs between developed and developing countries, it added.

"These flexibilities should be transferred into effective commitments, especially if we consider multilateral rules as the overarching umbrella for RTAs. They should also promote coherence between different provisions and Agreements such as GATT Article XXVI and GATS Article V by generating similar outcomes."

Bolivia proposed the incorporation of S&DT and the less than full reciprocity principles into GATT Article XXIV so that commitments of developing countries under RTAs are made effectively and consistently with their individual development, financial and trade needs.

Presently, there is no de jure special and differential treatment for developing countries in meeting the requirements set out in existing GATT Article XXIV disciplines, said Bolivia.

Bolivia added: "Introducing those principles into GATT Article XXIV on a de jure basis will provide a legal framework in the WTO for the formation of North-South RTAs that would be supportive of the sustainable development objectives of the multilateral trade system and consistent with the overarching ambition of the Doha Development Agenda."

Bolivia proposed that the following provision, drawing on GATS Article V: 3 (a), be inserted in an appropriate place in GATT Article XXIV: "Where developing countries are parties to an agreement with developed countries for the formation of a customs union, a free trade area, or an interim arrangement leading to either a customs union or a free trade agreement, special and differential treatment, in particular less than full reciprocity, shall be provided to developing countries regarding the conditions set out above in paragraphs 5 to 9 inclusive, specially with respect to subparagraph 5( c) and subparagraph 8(a)(i) and (b)."

According to trade officials, Switzerland voiced serious reservations, saying that developing countries negotiating an RTA can choose not to agree to the final result. It added that there are other GATT provisions for S&DT, like the entire Part IV.

The Swiss position was generally shared by the European Union, Australia, New Zealand, the US, Canada and Japan, said trade officials.

On the other hand, Venezuela, India, Nicaragua, St. Lucia (on behalf of the ACP Group) and China expressed general support for the Bolivian proposal, said trade officials.

Bolivia said that its proposal stemmed from its experience in negotiating RTAs, when developed countries denied its requests for S&DT.

The next meeting of the Rules Group is scheduled for 7 March. +