Fundamental to the GATT/WTO system is the Most-Favored Nation (MFN) principle (GATT Art. I ; GATS Art. II and TRIPS Art. 4). The principle obliges WTO members to treat all trading partners equally.
GATT Art. XXIV (to be read in conjunction with the 1994 Understanding on the Interpretation of Article XXIV of GATT) and GATS Art. V provide an exception to the MFN principle for regional trade agreements (RTAs), comprising customs unions and free-trade areas, so long as certain strict criteria are fulfilled. The criteria essentially come down to the principle that RTAs should not impose more trade diversion than is absolutely necessary. [Click here for a brief explanation of the WTO’s rules on regional trade agreements]
Since the early 1990s the number of RTAs have greatly increased and are a very prominent feature of the Multilateral Trading System (MTS). Some 421 RTAs have been notified to the GATT/WTO up to December 2008. Of these, 324 RTAs were notified under Article XXIV of the GATT 1947 or GATT 1994; 29 under the Enabling Clause; and 68 under Article V of the GATS.
In February 1996 a Committee on Regional Trade Agreements (CRTA) was created by the WTO General Council with the purpose of examining RTAs and to assess their consistency with WTO rules. The CRTA also examines how RTAs might affect the MTS, and what the relationship between regional and multilateral agreements might be.
In regard to the examination and assessment of RTAs, on 14 December 2006 the General Council established a provisional basis for a new transparency mechanism for RTAs (WT/L/671, 18 December 2006 (06-6056)). This new mechanism provides for early announcement of a RTA and notification to the WTO. RTAs falling under GATT Article XXIV) and GATS Article V will be considered by the Committee on Regional Trade Agreements, while RTAs falling under the Enabling Clause (trade arrangements between developing countries) will be considered by the Committee on Trade and Development.
One of the requirements of the General Council's Transparency Decision on RTAs is the establishment of an electronic database by the WTO Secretariat. The database should contain all the notifications, links to the content of the relevant RTAs, legal provisions and information on the WTO’s assessments of the RTAs and should be structured to be easily accessible to the public.
On 14 january 2009 the database was launched and can be accessed in English, French and Spanish. The database can be searched by country, region, legal provision, date of notification or entry into force of the RTA. Summary tables of all RTAs currently in force, containing various types of information, can be easily exported by users of the database. [Access database]
Jagdish Bhagwati: Termites in the trading system : how preferential agreements undermine free trade. New York, NY [etc.] : Oxford University Press, 2008
Sungjoon Cho: Breaking the barrier between regionalism and multilateralism : a new perspective on trade regionalism. In: Harvard International law journal, 42(2001), pp 419-465
Robert E. Herzstein and Joseph P. Whitlock: Regulating Regional Trade Agreements : A Legal Analys. In: The World Trade Organization : Legal, Economic and Political Analysis / ed. Patrick F.J. Macrory, Arthur E. Appleton, Michael G. Plummer, New York, NY : Springer [etc.], 2005.,pp 203-246.
Jeffrey J. Schott: Free Trade Agreements : Boon or Bane of the World Trading System? Washington, D.C. : Institute for International Economics, 2004.
Jacob Viner: The Customs Union Issue. New York : Carnegie Endowment for International Peace and Security, 1950.
L. Alan Winters: Regionalism versus multilateralism. Washington, D.C. : The World Bank, 1996.