Home » Across Borders » WTO Review of Free Trade Agreements
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The continuing failure of WTO members to enter into major agreements starting three years ago has made many countries participate in numerous regional and bilateral trade agreements. Regional Trade Agreements (RTAs), which include bilateral free trade agreements between countries that are not in the same region, have become so widespread that only one WTO member is not party to any RTA, with the vast majority of WTO members party to one or more RTAs.

In the Asia-Pacific region, many of the trade negotiations involve the ASEAN member countries and the major trading countries of Asia. Specifically, the regional agreements between ASEAN and the big three Asian countries (China, Japan and Korea) are in various stages of negotiations or implementation. Last January 12, 2006, the Philippine government issued EO No. 487, which effectively reduced the tariff rates of certain imported articles from China and other ASEAN countries as part of the normal track agreement under the ASEAN-China Free Trade Area (ACFTA) framework.

While RTAs are being negotiated by ASEAN with its neighboring countries, the Philippines has likewise entered into its own bilateral trade agreement with China and this is now being implemented. The RP-Japan agreement is still being negotiated.

WTO Review of RTAs. Last July 1, 2006, the WTO Director-General officially announced the formal approval of the new WTO Transparency Agreement governing these RTAs. Accordingly, the WTO Negotiating Group on Rules has forwarded the decision to the Trade Negotiations Committee. Current estimate is that more than half of world trade is now conducted under RTAs.

Officially, 197 RTAs have been notified to the WTO, with an additional 70 estimated to be operational although not yet notified. By 2006, if RTAs reportedly planned or already under negotiation are concluded, the total number of RTAs in force will be approaching 300.

Committee on RTAs. As a background, a Committee on RTAs was created in 1996 to replace separate working parties that have examined these agreements since the establishment of the WTO. However, differences among member countries on the interpretation of the criteria for assessing the consistency of RTAs with WTO rules have resulted in a huge backlog of uncompleted reports in said committee. In fact, only one case to date has reached consensus on WTO consistency – the customs union between the Czech Republic and the Slovak Republic after the break up of Czechoslovakia.

Transparency Mechanism. Among the major provisions of the new transparency mechanism are as follows:

  1. Early announcement of any RTA and notification to the WTO;
  2. WTO members will consider the notified RTAs on the basis of a factual presentation by the WTO Secretariat;
  3. The Committee on Regional Trade Agreements will conduct the review of RTAs falling under Article XXIV of General Agreement on Tariffs and Trade (GATT) and Article V of the General Agreement on Trade in Services (GATS);
  4. The Committee on Trade and Development will conduct the review of RTAs falling under the Enabling Clause (trade arrangements between developing countries);
  5. The transparency mechanism is to be implemented on a provisional basis (Members are to review and, if necessary, modify the decision, and replace it with a permanent mechanism adopted as part of the overall results of the Doha Round);

Purpose of the Mechanism. Under the agreement, WTO member countries like the Philippines have the following specific obligations:

  1. Members participating in new negotiations aimed at the conclusion of an RTA shall endeavor to inform the WTO; and
  2. Member parties to a newly signed RTA shall convey to the WTO, in so far as and when it is publicly available, information on the RTA, including its official name, scope and date of signature, any foreseen timetable for its entry into force or provisional application, relevant contact points and/or website addresses, and any other relevant unrestricted information.

The formal approval of the new transparency mechanism on RTAs (which include the ASEAN agreements and the Philippines’ own bilateral agreements), will help prevent the continuing logjam in the WTO on RTAs. The mechanism will also ensure that RTAs promote international trade and not become stumbling blocks to world trade.

For the Philippines, existing agreements with other countries, including the ASEAN framework, will have to be reviewed for consistency with the trade rules under the WTO.

A licensed customs broker, the writer is an international trade, indirect tax and customs consultant. He has a Certificate in Purchasing and Supply Management from International Trade Centre (UNCTAD/WTO) and is an accredited trainer of Ateneo Graduate School of Business. Please contact aouvero@customsadvocates.com or (632) 4050021 / 29 for your comments or questions.

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