Regional trade agreements (RTAs) are reciprocal preferential trade agreements between two or more partners.
Globally, these agreements are permitted under the GATT and WTO and are subject to three sets of rules:
- Article XXIV of the GATT 1994.
- The Enabling Clause.
- Article V of the GATS.
In general, according to the WTO, RTAs must cover the essentials of commercial exchanges, unless they are concluded under the Enabling Clause, and contribute to a greater fluidity of commercial exchanges between partners, without erecting obstacles to trade with the rest of the world.
Article XXIV of the GATT 1994 distinguishes between free trade areas and customs unions based on internal and external criteria or conditions, namely:
- Free trade zones are understood to be a group of customs territories between which customs duties and other restrictive commercial regulations are eliminated with respect to commercial exchanges of products originating from the parties.
- Customs unions are understood as the replacement of two or more customs territories by a single customs territory in which customs duties and other restrictive commercial regulations are eliminated with respect to commercial exchanges between their members, at the same time that the members apply, with with respect to third parties, customs duties and other trade regulations that, in substance, are identical.
Interim agreements that give rise to free trade zones or customs unions are also allowed.
If the establishment of an RTA brings with it a bound rate increase in the duty of a Member in the WTO, it is necessary to compensate the other Members through the procedure established in Article XXVIII of the GATT (“Modification of schedules”).
The Enabling Clause refers to preferential trade agreements in the area of trade in goods between developing country Members.
At the same time, the WTO explains, the Clause allows a generalized system of preferences without reciprocity or discrimination, granted by developed countries, which benefits developing countries.
It also allows the establishment of Partial Scope Agreements (AAP).
In particular, Article V of the GATS deals with provisions relating to Economic Integration Agreements (EIGs) that refer to RTAs in the area of services.
The GATS provisions regulate the conclusion of RTAs that cover trade in services, for both developed and developing countries.
They consist of a set of internal and external conditions that require that the liberalization of trade between the parties to said agreements have a substantial sectoral coverage, establishing the absence or elimination, in essence, of any discrimination between the parties, insofar as non-parties should not face an overall level of obstacles higher than the level applicable prior to the RTA.
All RTAs must be notified to the WTO for transparency purposes.