01__DEVUYST_SERDAREVIC.

DOC 4/14/2008 2:59:11 PM

THE WORLD TRADE ORGANIZATION AND

REGIONAL TRADE AGREEMENTS:
BRIDGING THE CONSTITUTIONAL
CREDIBILITY GAP
YOURI DEVUYST*

ASJA SERDAREVIC**

INTRODUCTION
On July 10, 2006, negotiators of the World Trade Organization’s
(WTO) Doha Development Round approved a new WTO
Transparency Mechanism (Mechanism) for Regional Trade
1
Agreements (RTAs). Instead of awaiting the final results of the

Copyright © 2008 by Youri Devuyst and Asja Serdarevic.

* Professor Youri Devuyst is a member of the Faculty of Law and the Department of
Political Science at the Vrije Universiteit Brussel, Belgium.
** Asja Serdarevic is Researcher at the Center for European Law of the same university.
Her research project is sponsored by the Fund for Scientific Research-Flanders.
1. The World Trade Organization (WTO) is based on the Final Act embodying the results
of the Uruguay Round of Trade Negotiations, done at Marrakesh on April 15, 1994. It entered
into force on January 1, 1995. Final Act Embodying the Results of the Uruguay Round of
Multilateral Trade Negotiations, Apr. 15, 1994, 33 I.L.M. 1125 (1994) [hereinafter Final Act].
The Marrakesh Agreement Establishing the World Trade Organization has four annexes.
Annex 1 includes substantive trade rules that are embodied in the General Agreement on
Tariffs and Trade 1994, April 15, 1994, Marrakesh Agreement Establishing the World Trade
Organization, Annex 1A, Legal Instruments – Result of the Uruguay Round, 33 I.L.M. 1125
(1994) [hereinafter GATT 1994], the General Agreement on Trade in Services, id. Annex 1B
[hereinafter GATS] and the Agreement on Trade-Related Aspects of Intellectual Property
Rights, id. Annex 1C [hereinafter TRIPS]. Annex 2 consists of the Understanding on Rules and
Procedures Governing the Settlement of Disputes, id. Annex 2. Annex 3 contains the
procedures governing the Trade Policy Review Mechanism, id. Annex 3 [hereinafter TPRM],
the WTO’s peer review system of the trade policies of its Members. Annex 4 holds the
Plurilateral Trade Agreements that are binding only on those Members that have accepted
them. The agreements in Annexes 1, 2 and 3 are binding on all WTO Members. See id.
GATT 1994 is based upon the General Agreement on Tariffs and Trade of 1947, Oct. 30,
1947, 61 Stat. A-3, 55 U.N.T.S. 187 [hereinafter GATT 1947]. GATT 1947 never formally
entered into force but found provisional application through the Protocol of Provisional
Application to the General Agreement on Tariffs and Trade, Oct. 30, 1947, 61 Stat. A-2051, 55
U.N.T.S. 308 [hereinafter Protocol of Provisional Application].

1
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2 DUKE JOURNAL OF COMPARATIVE & INTERNATIONAL LAW [Vol 18:1

Doha Round, the WTO General Council formally established the

2
Mechanism on a provisional basis on December 14, 2006. The
decision on the provisional application of the new Mechanism is
significant. It shows the urgency felt by the WTO members for more
transparency in the creation and functioning of RTAs. By July 2007,
no less than 380 RTAs had been notified to the General Agreement
3
on Tariffs and Trade (GATT) and the WTO. An additional twenty
4
RTAs were estimated to be operational, though not yet notified.
From September 2005 to September 2006 alone, thirty-two RTAs
5
were notified. According to the WTO’s website, Mongolia is the
6
only WTO member that is not party to any RTA.
This surge in bilateral trade agreements is likely to continue in
7
the foreseeable future. The rush towards a 21st-century regionalism

The Doha Development Round was launched at the WTO’s Fourth Ministerial Conference
in Doha, Qatar. The Ministerial Declaration of November 14, 2001 gives a mandate for
negotiations on a range of subjects, including agriculture, services and WTO rules. WTO,
Ministerial Declaration of 14 November 2001, WT/MIN(01)/DEC/1, 41 I.L.M. 746 (2002). At
its meeting on July 27-28, 2006, the WTO’s General Council suspended the deadlocked Doha
negotiations. Press Release, WTO, General Council Supports Suspension of Trade Talks, Task
Force Submits ‘Aid for Trade’ Recommendations (July 27-28, 2006),
http://www.wto.org/english/news_e/news06_e/gc_27july06_e.htm. Later, on November 16, 2006,
WTO Director-General Pascal Lamy recommended intensification of the work in the
Negotiating Groups in Geneva to prepare the ground for the resumption of fully-fledged
negotiations. Pascal Lamy, Director-General, WTO, Remarks at the Informal TNC (Nov. 16,
2006), http://www.wto.org/english/news_e/news06_e/tnc_dg_stat_16nov06_e.htm.
For the Doha Development Round Transparency Mechanism for Regional Trade
Agreements, see Press Release, WTO, Lamy Welcomes WTO Agreement on Regional Trade
Agreements (July 10, 2006), http://www.wto.org/english/news_e/news06_e/rta_july06_e.htm.
For the text of the Transparency Mechanism, see Negotiating Group on Rules, Transparency
Mechanism for Regional Trade Agreements, JOB(06)/59/Rev.5 (June 29, 2006) [hereinafter
WTO Transparency Mechanism for RTAs].
2. Press Release, WTO, General Council Establishes Transparency Mechanism for
Regional Trade Agreements (Dec. 15, 2006), http://www.wto.org/english/news_e/news06_e/
rta_15dec06_e.htm.
3. WTO, Regional Trade Agreements, http://www.wto.org/english/tratop_e/region_e/
region_e.htm (last visited Nov. 20, 2006). For the texts of the agreements and treaties that have
been notified to the WTO, see links to the MS Excel tables at WTO, Regional Trade
Agreements notified to the GATT/WTO and in Force, http://www.wto.org/english/tratop_e/
region_e/region_e.htm (last visited Nov. 20, 2006).
4. See WTO, Regional Trade Agreements, supra note 3.
5. See WTO, Regional Trade Agreements Notified to the GATT/WTO and in Force:
Basic Table, http://www.wto.org/english/tratop_e/region_e/summary_e.xls (last visited Nov. 2,
2007).
6. WTO, Regionalism: Friends or Rivals, http://www.wto.org/english/thewto_e/whatis_e/
tif_e/bey1_e.htm (last visited Nov. 20, 2006).
7. International trade economist Richard E. Baldwin speaks about the “domino effect” of
regionalism. See generally Richard E. Baldwin, A Domino Theory of Regionalism, in
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2007] BRIDGING THE CONSTITUTIONAL CREDIBILITY GAP 3

in Asia has filled hundreds of pages in the recent academic literature.8

At the same time, older hands at regionalism have been announcing
renewed efforts in the negotiation of RTAs. Following the
suspension of the Doha Development Round in July 2006, the
European Community (EC) Trade Commissioner Peter Mandelson
declared that he would pursue targeted bilateral trade agreements as
9
a part of a wider competitiveness strategy. In December 2006, the
European Commission formally proposed the start of negotiations for
the creation of free trade agreements with India, South Korea, the
Association of Southeast Asian Nations (ASEAN), Central America
10
and the Andean Community. The European Commission stated
that the “bilateral approach would allow the European Union (EU)
to liberalize tariffs further, to take non-tariff measures better into
account and to restore a level playing field with our main competitors
11
on major markets.” United States Trade Representative Susan C.
Schwab equally underlined that she would pursue an “ambitious
agenda for bilateral and regional agreements that will broaden and
12
deepen trade relations with key, like-minded countries.” In fact,
“[i]n the last five years, [the United States] Congress has approved
free trade agreements with 12 countries[;] . . . [a]greements with

EXPANDING MEMBERSHIP OF THE EU 25 (Richard E. Baldwin, Pertti Haaparanta & Jaakko

Kiander eds., 1996).
8. See generally NAOKO MUNAKATA, TRANSFORMING EAST ASIA: THE EVOLUTION OF
REGIONAL ECONOMIC INTEGRATION (2006); BEYOND JAPAN: THE DYNAMICS OF EAST ASIAN
REGIONALISM (Peter J. Katzenstein & Takashi Shiraishi eds., 2006); Gary Clyde Hufbauer &
Yee Wong, Prospects for Regional Free Trade in Asia (Inst. for Int’l Econ., Working Paper No.
05-12, 2005); EDWARD J. LINCOLN, EAST ASIAN ECONOMIC REGIONALISM (2004); ASIAN
REGIONAL GOVERNANCE (Kanishka Jayasuriya ed., 2004); NEW ASIAN REGIONALISM:
RESPONSES TO GLOBALISATION AND CRISES (Tran Van Hoa & Charles Harvie eds., 2004).
9. Peter Mandelson, EU Trade Comm’r, Speech at the London School of Economics:
Bilateral Agreements in EU Trade Policy 2 (Oct. 9, 2006) (transcript available at European
Commission Speech/06/574).
10. Press Release, European Commission, European Commission Requests Negotiating
Mandates for Bilateral Trade Agreements with India, South Korea, ASEAN (Dec. 6, 2006),
http://ec.europa.eu/trade/issues/bilateral/regions/asem/pr061206_en.htm; Press Release,
European Commission, Central America & Andean Community: Commission proposes
negotiating directives for Association Agreements (Dec. 6, 2006), http://ec.europa.eu/trade/
issues/bilateral/regions/central_america/pr061206_en.htm.
11. European Commission, Annex to Global Europe: Competing in the World. A
Contribution to the EU’s Growth and Jobs Strategy, at 16, COM (2006) 567 final (Oct. 4, 2006).
12. Susan C. Schwab, U.S. Trade Representative-Designate, Opening Statement to the
U.S. Senate Committee on Finance 11 (May 16, 2006) (transcript available at Office of the
United States Trade Representative, Document Library, http://www.ustr.gov/assets/
Document_Library/USTR_Testimony/2006/asset_upload_file533_9447.pdf).
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4 DUKE JOURNAL OF COMPARATIVE & INTERNATIONAL LAW [Vol 18:1

Oman, Peru and Colombia are pending, and agreements with 11 more
13
countries are in negotiation.”
The parties to RTAs have generally emphasized that their
meticulously constructed and ambitious bilateral agreements
14
reinforce the WTO system rather than undermine it. Since 1947,
GATT has stated explicitly that the “contracting parties recognize the
desirability of increasing freedom of trade by the development,
through voluntary agreements, of closer integration between the
15
economies of the countries parties to such agreements.” At the
same time, the multilateral trade regime also imposes certain
conditions on such RTAs. Those conditions can be found in three
different WTO sources: (1) In the area of trade in goods, RTAs are
subject to GATT Article XXIV, complemented by an Understanding
16
on its interpretation that was negotiated during the Uruguay Round;
(2) in the area of trade in services, the legal foundation for RTAs is
found in Article V of the General Agreement on Trade in Services
17
(GATS); and (3) RTAs concluded among developing countries
benefit from particular rules contained in paragraph 2(c) of the
Decision on Differential and more Favorable Treatment, Reciprocity
and Fuller Participation of Developing Countries, also called the
18
Enabling Clause.
As argued by John H. Jackson, the leading legal scholar in the
field, the WTO must be regarded as the constitutional charter
19
governing world trade. It is a constitution that “imposes different
levels of constraint on the policy options available to public and
20
private leaders.” In this context, the rules of GATT Article XXIV,
GATS Article V and the Enabling Clause could be interpreted as
setting the multilateral constitutional limits within which RTAs can

13. Id. at 12.

14. See, e.g., Mandelson, supra note 9, at 4, 6.
15. GATT 1947, supra note 1, art. XXIV:4.
16. Understanding on the Interpretation of Article XXIV of the General Agreement on
Tariffs and Trade 1994, Apr. 15, 1994, Marrakesh Agreement Establishing the World Trade
Organization, Annex 1A, Legal Instruments – Result of the Uruguay Round, 33 I.L.M. 1125,
1161-63 (1994) [hereinafter Understanding on Article XXIV].
17. GATS, supra note 1, art. V.
18. Decision on Differential and More Favourable Treatment, Reciprocity and Fuller
Participation of Developing Countries ¶ 2(c) (Nov. 28, 1979), GATT B.I.S.D. (26th Supp.) at
203 (1980) [hereinafter Enabling Clause].
19. JOHN H. JACKSON, THE WORLD TRADING SYSTEM: LAW AND POLICY OF
INTERNATIONAL ECONOMIC RELATIONS 339 (1998).
20. Id.
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2007] BRIDGING THE CONSTITUTIONAL CREDIBILITY GAP 5

maneuver. Thomas Cottier and Marina Foltea formulate this

theoretical starting point as follows: “WTO principles and rules . . .
assume the role of overriding, constitutional disciplines which
structure the shape and contents of preferential agreements—all with
a view to supporting trade creation, as building blocks to trade
regulation and liberalization, while at the same time avoiding
21
unnecessary trade distortions and diversions.” While the WTO’s
constitutional structure “has potential value for creating greater
predictability, redressing unfair power imbalances, and preventing
escalating international tensions,” Jackson admits that there remain
considerable reasons to be discontented with the “trade constitution”
22
as it exists today. One of the areas of discontent is precisely the
23
relationship between the WTO and the RTAs. The WTO provisions
on RTAs have, indeed, proved to be ill-equipped to deal efficiently
with the realities of RTAs. The WTO Committee on Regional Trade
Agreements (CRTA), which is entrusted with the task of verifying
the WTO compliance of RTAs notified under GATT Article XXIV
24
and GATS Article V, has proved to be practically non-functional.
Only once has there been a consensus on WTO consistency of the
25
RTAs that have been notified. This dismal performance casts a
doubt on the WTO’s constitutional role in international trade
relations. The WTO’s practical inability to come to a consensus on
the compatibility of RTAs with the multilateral rules is an indicator

21. Thomas Cottier & Marina Foltea, Constitutional Functions of the WTO and Regional
Trade Agreements, in REGIONAL TRADE AGREEMENTS AND THE WTO LEGAL SYSTEM 43, 44
(Lorand Bartels & Federico Ortino eds., 2006).
22. JACKSON, supra note 19, at 340.
23. Id. at 344. Among trade lawyers and economists, there seems to be a consensus that
the WTO/GATT rules on RTAs have proved to be “a failure, if not a fiasco.” KENNETH W.
DAM, THE GATT: LAW AND INTERNATIONAL ECONOMIC ORGANIZATION 275 (1970). See
also Sungjoon Cho, Breaking the Barrier Between Regionalism and Multilateralism: A New
Perspective on Trade Regionalism, 42 HARV. INT’L L.J. 419 (2001); Petros C. Mavroidis, Do Not
Ask Too Many Questions: the Institutional Arrangements for Accommodating Regional
Integration within the WTO, in 2 HANDBOOK OF INTERNATIONAL TRADE 239 (E. Kwan Choi &
James C. Hartigan eds., 2005); Colin B. Picker, Regional Trade Agreements v. the WTO: A
Proposal for Reform of Article XXIV to Counter this Institutional Threat, 26 U. PA. J. INT’L
ECON. L. 267 (2005). For a prominent voice among economists, see JAGDISH BHAGWATI, THE
WORLD TRADING SYSTEM AT RISK 76-79 (1991); Jagdish Bhagwati, Regionalism and
Multilateralism: An Overview, in NEW DIMENSIONS OF REGIONAL INTEGRATION 44 (Jaime de
Melo & Arvind Panagariya eds., 1993).
24. Negotiating Group on Rules, Compendium of Issues Related to Regional Trade
Agreements, ¶¶ 13-21, TN/RL/W/8/Rev.1 (Aug. 1, 2002).
25. See Press Release, WTO, Lamy Welcomes WTO Agreement on Regional Trade
Agreements, supra note 1.
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6 DUKE JOURNAL OF COMPARATIVE & INTERNATIONAL LAW [Vol 18:1

of a major credibility gap existing between the organization’s

expectations expressed in constitutional theory and its actual
26
capabilities in monitoring RTAs. This is particularly serious in light
27
of the current proliferation of RTAs. As a remedy for the current
lack of effectiveness in the WTO’s surveillance of RTAs, leading
scholars such as Cottier and Foltea have proposed a reinforcement of
the principle of primacy of WTO law by adopting “an explicit
constitutional approach of regulating preferential agreements by and
28
through the disciplines of WTO law.” By clearly establishing the
supremacy of WTO law over RTAs, preferential agreements that are
incompatible with WTO law would either be declared null and void
ab initio or unlawful under international law, which would trigger
29
state responsibility. While elegant from an international law
perspective, such proposals suffer from “constitutional overstretch”
and therefore threaten to further widen the credibility gap between
30
the WTO’s real capabilities and the constitutional expectations.
In order to fix the WTO’s credibility gap with regard to the
monitoring of RTAs, this article takes a pragmatic view that is based
on three basic considerations. First, the rich literature on compliance
with international legal norms underlines that the substantive
characteristics of treaty obligations are among the most important
31
predicting factors affecting effective implementation. General and

26. The expressions “credibility gap” and “capability – expectations gap” have been
successful tools in the analysis of the European Union’s common foreign and security policy. In
an influential article, Christopher Hill predicted that the announcement of a “common”
European foreign policy by the Treaty of Maastricht (1992) would exacerbate an emerging
“capabilities-expectations gap” by raising expectations that the European Union was simply
incapable of fulfilling. The gap was seen as potentially dangerous because the exaggerated
expectations in the European Union’s institutional possibilities were likely to produce
disproportionate degree of disillusion and resentment with the European Union itself when
hopes would inevitably be dashed. Christopher Hill, The Capability-Expectations Gap, or
Conceptualizing Europe’s International Role, 31 J. COMMON MARKET STUD. 305 (1993);
Christopher Hill, Closing the Capabilities-Expectations Gap?, in A COMMON FOREIGN POLICY
FOR EUROPE? 18 (John Peterson & Helene Sjursen eds., 1998).
27. See infra Part II.
28. Cottier & Foltea, supra note 21, at 67.
29. Id. at 68.
30. The concept of “overstretch” is frequently used in the analysis of foreign policy.
Overstretch emerges when an actor’s commitments go beyond its actual grasp. See WALTER
LIPPMANN, U.S. FOREIGN POLICY: SHIELD OF THE REPUBLIC 9 (1943); see generally Samuel P.
Huntington, Coping with the Lippmann Gap, 66 FOREIGN AFF. 453 (1988).
31. See, e.g., ABRAM CHAYES & ANTONIA HANDLER CHAYES, THE NEW SOVEREIGNTY:
COMPLIANCE WITH INTERNATIONAL REGULATORY AGREEMENTS (1995); MARKUS
BURGSTALLER, THEORIES OF COMPLIANCE WITH INTERNATIONAL LAW (2005); ENGAGING
COUNTRIES: STRENGTHENING COMPLIANCE WITH INTERNATIONAL ENVIRONMENTAL
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2007] BRIDGING THE CONSTITUTIONAL CREDIBILITY GAP 7

imprecise duties that leave a large margin of interpretation are much

less likely to be correctly implemented and complied with than
precise obligations that are tested on their simplicity in
32
implementation. Therefore, the first order of business for the WTO
is to clarify and simplify the vague criteria that currently apply to
RTAs. As long as the substantive criteria remain deficient, it will
hardly be possible to determine with a sufficient degree of legitimacy
whether or not RTAs are WTO-compatible. In this context, Part IV
of this article will assess the substantive WTO law governing RTAs
with a view of suggesting pragmatic solutions to the major problem
points.
Second, such leading scholars in the field of compliance with
international agreements as Abram and Antonia Chayes have
emphasized that “the fundamental instrument for maintaining
compliance with treaties” is not the threat of sanctioning, but “an
iterative process of discourse among the parties, the treaty
33
organization, and the wider public.” In this process, the instruments
of active compliance management include transparency, reporting,
data collection, verification, monitoring, strategic review and
assessment in addition to capacity-building and assistance for those
34
who lack capacity. Within this context, it is important that the
procedural aspects of the WTO’s monitoring process with regard to
RTAs are further streamlined. As Part V of this article will make
clear, the Doha Round Transparency Mechanism for RTAs
constitutes a positive step in this direction but needs to be followed
up with a proper system for the permanent review of RTAs
throughout their lifetime.
Third, it is only when the substantive rules have been sufficiently
clarified and a permanent surveillance framework is established that
the actual enforcement of the WTO’s disciplines in the field of RTAs
stands a chance. These two prerequisites to effective enforcement are
not currently fulfilled with respect to RTAs. In view of the vague
wording of the WTO provisions on RTAs and the need to preserve

ACCORDS (Edith Brown Weiss & Harold K. Jacobson eds., 1998); THE IMPACT OF
INTERNATIONAL LAW ON INTERNATIONAL COOPERATION: THEORETICAL PERSPECTIVES
(Eyal Benvenisti & Moshe Hirsch eds., 2004).
32. Harold K. Jacobson & Edith Brown Weiss, Strengthening Compliance with
International Environmental Accords: Preliminary Observations from a Collaborative Project, in
INTERNATIONAL LAW: CLASSIC AND CONTEMPORARY READING 179, 185 (Charlotte Ku &
Paul F. Diehl eds., 1st ed. 1998).
33. CHAYES & CHAYES, supra note 31, at 25.
34. See id. at 197.
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8 DUKE JOURNAL OF COMPARATIVE & INTERNATIONAL LAW [Vol 18:1

the institutional balance on which the WTO rests, the in-depth

analysis of the justiciability of the WTO disciplines on RTAs,
described in Part VI, leads to the conclusion that a distinction must be
made between the enforcement of concrete trade policy “measures”
and judging the overall legality of RTAs. Following the logic of the
Panel in the Turkey-Textiles case, concrete trade policy measures
should be subject of strict surveillance and sanctioning, notably via
WTO dispute settlement. However, in contrast with the reasoning of
the WTO’s Appellate Body, it would be counterproductive for the
credibility of the WTO and for the long-term effectiveness of the
multilateral trade disciplines if the WTO dispute settlement organs
were to get into questions of the overall legality of specific regional
35
arrangements. Rather, the overall compatibility of regional
arrangements with WTO rules should be the subject of improved
transparency and diplomatic peer review on the basis of the
strengthened benchmarks proposed in Part IV.
Before tackling the core issues described above, Part I will start
with a factual state-of-play of trade regionalism today, and Part II will
put the current WTO framework for RTAs in its historical and legal
context.

I. REGIONAL TRADE AGREEMENTS: AN OVERVIEW

In the evolution of regionalism since the end of World War II,
three phases can be distinguished.

A. The European Era of Regionalism

36
The first phase is the European era of regionalism. It started
with the Treaty of Rome’s entry into force in 1958, which established
37
the European Economic Community (EEC). As a customs union

35. Both cases will be analyzed throughout this article. For the Reports, see Panel Report,
Turkey – Restrictions on Imports of Textile and Clothing Products, WT/DS34/R (May 31, 1999)
[hereinafter Panel Report on Turkey-Textiles] and Appellate Body Report, Turkey – Restrictions
on Imports of Textile and Clothing Products, ¶ 58, WT/DS43/AB/R (Oct. 22, 1999) [hereinafter
Appellate Body Report on Turkey-Textiles].
36. While European developments were dominant during this period, it must be noted
that, in 1965, New Zealand and Australia concluded their own bilateral Free Trade Agreement.
The 1960s also saw the conclusion of numerous RTAs between developing countries. However,
most of these agreements were never fully implemented.
37. Treaty of Rome Establishing the European Economic Community, Mar. 25, 1957, 298
U.N.T.S. 11 [hereinafter EEC Treaty]. The EEC builds upon the experience of the European
Coal and Steel Community. Treaty of Paris Establishing the European Coal and Steel
Community, Apr. 18, 1951, 261 U.N.T.S. 140 [hereinafter ECSC Treaty]. The EEC Treaty has
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2007] BRIDGING THE CONSTITUTIONAL CREDIBILITY GAP 9

with a common commercial policy, the EEC quickly became a leading

38
player in international trade relations. The western and northern
European countries that were not part of the EEC came together in
39
the European Free Trade Agreement (EFTA). During the 1970s,
the EEC expanded its influence through an impressive set of bilateral
preferential trade areas with the neighboring EFTA countries, the
Mediterranean countries, and the former colonies in Africa, the
40
Caribbean and the Pacific (ACP). Since then, the EEC has
continued to be actively engaged in the negotiation of new
41
preferential trade agreements.

been amended on several occasions. The most important change took place through the Treaty
of Maastricht on European Union, signed on February 7, 1992, 1992 O.J. (C 224) 1, 31 I.L.M.
247 [hereinafter EU Treaty]. The EU Treaty changed the name of the EEC to European
Community (EC). The EC is one of the three pillars of the European Union. As of January 1,
2007, the EU has twenty-seven member states and a population of 492.8 million inhabitants.
The European Union is the world’s largest trading bloc with a combined GDP of 10,948 billion
Euros. See Press Release, European Commission, EU and Euro Area Enlargement on 1
January 2007: The New EU of 27 and Euro Area of 13 (Dec. 19, 2006),
http://europa.eu/rapid/pressReleasesAction.do?reference=STAT/
06/167&format=HTML&aged=1&language=EN&guiLanguage=en.
38. The European Community’s common commercial policy is based on Article 133 of the
EC Treaty. Treaty Establishing the European Community, Nov. 10, 1997, 1997 O.J. (C 340) art.
133 [hereinafter EC Treaty].
39. The European Free Trade Association (EFTA) was established by the Stockholm
Convention signed on January 4, 1960. The main objective of the Stockholm Convention was to
provide a framework for the liberalization of trade in goods amongst its Member States. See
EFTA, EFTA Convention Texts, http://secretariat.efta.int/Web/EFTAConvention/
EFTAConventionTexts/EFTAConventionText (last visited Sept. 29, 2007). At this stage,
EFTA has only four members left: Iceland, Liechtenstein, Norway and Switzerland.
40. In addition to the Lomé Convention with the African, the Caribbean and the Pacific
countries, Council Regulation 199/76, 1976 O.J. (L 25) 1, the EC’s framework of RTAs of the
1970s included bilateral free trade agreements with Switzerland, Council Regulation 2840/72,
1972, O.J. (L 300) 188, Iceland, Council Regulation 2842/72, 1972, O.J. (L 301) 1, Norway,
Council Regulation 1691/73, 1973, O.J. (L 171) 1, Austria, Council Regulation 2836/72, 1972,
O.J. (L 300) 1, Finland, Council Regulation 1508/74, 1974, O.J. (L 163) 1, Sweden, Council
Regulation 2838/72, 1972, O.J. (L 300) 96, Spain, Council Regulation 1524/70, 1970, O.J. (L 182)
1, Portugal, Council Regulation 2844/72, 1972, O.J. (L 301) 164, and preferential trade
agreements with Morocco, Council Regulation 2211/78, 1978, O.J. (L 264) 1, Tunisia, Council
Regulation 2212/78, 1978, OJ. (L 265) 1, Algeria, Council Regulation 2210/78, 1978, O.J. (L 263)
1, Egypt, Council Regulation 2213/78, 1978, O.J. (L 266) 1, Jordan, Council Regulation 2215/78,
1978, O.J. (L 268) 1, Lebanon, Council Regulation 2214/78, 1978, O.J. (L 267) 1, Syria, Council
Regulation 2216/78, 1978, O.J. (L. 269) 1, and Israel, Council Regulation 1274/75, 1975, O.J. (L
136) 1.
41. See European Commission, Bilateral Trade Relations, http://ec.europa.eu/trade/
issues/bilateral/index_en.htm (last visited Jan. 12, 2007).
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10 DUKE JOURNAL OF COMPARATIVE & INTERNATIONAL LAW [Vol 18:1

B. The American Era of Regionalism

The second phase is the American era of regionalism. While the
United States had traditionally been wary of RTAs, its attitude
42
changed in the late 1980s. The conclusion of the bilateral free trade
deal between Canada and the United States in 1988 opened the door
43
for the North American Free Trade Agreement (NAFTA) in 1992.
The United States has also propagated such RTA initiatives as the
Free Trade Area of the Americas (FTAA) and the development of
free trade within the Asia Pacific Economic Cooperation (APEC)
44
framework. In addition, the United States has either concluded or is
in the process of negotiating bilateral free trade agreements with such
countries as Australia, Bahrain, Chile, Colombia, Israel, Jordan,
45
Malaysia, Morocco, Oman, Panama, Peru and Singapore.
At the same time, several other American RTAs came into being
or were revitalized: the Caribbean Community (CARICOM) in 1989,
the Andean Community of Nations (ACN) in 1990, and the Central
46
American Common Market (CACM) in 1993. More significantly, in

42. See generally FREE TRADE AREAS AND U.S. TRADE POLICY (Jeffrey J. Schott ed.,
1989); BILATERALISM, MULTILATERALISM AND CANADA IN U.S. TRADE POLICY (William
Diebold, Jr. ed., 1988); Charles Pearson & James Riedel, United States Trade Policy: From
Multilateralism to Bilateralism?, in THE NEW PROTECTIONIST WAVE 100 (Enzo Grilli & Enrico
Sassoon eds., 1990).
43. North American Free Trade Agreement, U.S.-Can.-Mex., Dec. 17, 1992, 32 I.L.M. 289
(1993). On NAFTA, see GARY CLYDE HUFBAUER & JEFFREY J. SCHOTT, NAFTA: AN
ASSESSMENT (1993); GARY CLYDE HUFBAUER & JEFFREY J. SCHOTT, NAFTA REVISITED:
ACHIEVEMENTS AND CHALLENGES (2005).
44. The FTAA and the APEC free trade area have not yet entered into force. On the
FTAA, see ANTONI ESTEVADEORDAL ET AL., INTEGRATING THE AMERICAS: FTAA AND
BEYOND (2004); FREE TRADE OF THE AMERICAS? THE UNITED STATES’ PUSH FOR THE
FTAA AGREEMENT (Paulo Vizentini & Marianne Wiesebron eds., 2004); P. J. Patterson et al.,
The Free Trade Area of the Americas and Smaller Economies, 27 FORDHAM INT’L L.J. 899
(2004); Roberto Echandi, Regional Trade Integration in the Americas during the 1990s:
Reflections of Some Trends and their Implication for the Multilateral Trade System, 4 J. INT’L
ECON. L. 367 (2001). On APEC, see JOHN RAVENHILL, APEC AND THE CONSTRUCTION OF
PACIFIC RIM REGIONALISM (2001); APEC IN THE 21ST CENTURY (Ryiana Miranti & Denis
Hew eds., 2005); CHARLES E. MORRISON ET AL., AN APEC TRADE AGENDA? THE POLITICAL
ECONOMY OF A FREE TRADE AREA OF THE ASIA PACIFIC (2005); C. Fred Bergsten, APEC
after Osaka: Toward Free Trade by 2010/2020 (Inst. for Int’l Econ., Working Paper No. 96-1,
1996).
45. Office of the United States Trade Representative, Trade Agreements,
http://www.ustr.gov/Trade_Agreements/Section_Index.html (last visited Jan. 20, 2007).
46. Wendy Grenade, An Overview of Regional Governance Arrangements within the
Caribbean Community (CARICOM), in THE EUROPEAN UNION AND REGIONAL
INTEGRATION: A COMPARATIVE PERSPECTIVE AND LESSONS FOR THE AMERICAS 167
(Joaquín Roy & Roberto Dominguez eds., 2005); Henry S. Gill, CARICOM: Origen, Objetivos
y Perspectivos de Integración en el Caribe, 18 INTEGRACIÓN LATINOAMERICANA 37 (1993);
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2007] BRIDGING THE CONSTITUTIONAL CREDIBILITY GAP 11

1991, Argentina, Brazil, Uruguay and Paraguay created their own

47
customs union, named MERCOSUR. In subsequent years, Bolivia,
Chile, Columbia, Ecuador, Peru and Venezuela have become
associate partners of MERCOSUR. The Accession Protocol with
48
Venezuela was signed in 2006.

C. The Global Era of Regionalism

The third phase, characterizing the first decade of the 21st
century, has been labeled the “noodle bowl,” referring to the
49
multiplicity of Asian RTAs. More accurately, it should be labeled
the global era of regionalism. The third phase has three
characteristics.

1. The Boom in Asian RTAs. Asia is a late-comer in the

politics of regionalism. In the early 1990s, the limited results of
ASEAN led to the launching of more ambitious plans for an ASEAN
Free Trade Area (AFTA). AFTA became effective in 1994 and is
aiming at reducing tariffs and non-tariff barriers among ASEAN
50
members on a large range of products. However, the real spark that

Elsa Cardozo de Da Silva, La Comunidad Andina de Naciones: MERCOSUR y ALCA, in

RETOS E INTERRELACIONES DE LA INTEGRACIÓN REGIONAL: EUROPA Y AMÉRICA (Joaquín
Roy et al. eds., 2003); Fernando Rueda-Junquera, Prospects for the Central American Customs
Union, in THE EUROPEAN UNION AND REGIONAL INTEGRATION, supra, at 113; Eric
Jacobstein, The Politics of the Central American Free Trade Agreement (CAFTA), in THE
EUROPEAN UNION AND REGIONAL INTEGRATION, supra, at 135.
47. Treaty of Asunción, Mar. 26, 1991, 30 I.L.M. 1041. See generally MERCOSUR:
BETWEEN INTEGRATION AND DEMOCRACY (Marcos Guedes & Francisco Dominguez eds.,
2004); NICOLA PHILLIPS, THE SOUTHERN CONE MODEL: THE POLITICAL ECONOMY OF
REGIONAL CAPITALIST DEVELOPMENT IN LATIN AMERICA (2004); John A. E. Vervaele,
Mercosur and Regional Integration in South America, 54 INT’L & COMP. L.Q. 387 (2005); G.
Philippidis & A. I. Sanjuán, An Analysis of Mercosur’s Regional Trading Arrangements, 30
WORLD ECON. 504 (2007).
48. INSTRUMENTOS FUNDACIONALES DEL MERCOSUR 5 (Secretaría del Mercosur, 2007),
available at http://www.mercosur.int/msweb/portal%20intermediario/es/index.htm (last visited
on Feb. 19, 2008).
49. Richard E. Baldwin, Managing the Noodle Bowl: The Fragility of East Asian
Regionalism 2 (Ctr. for Econ. Policy Research, Discussion Paper No. 5561, 2006).
50. Ludo Cuyvers, Philippe De Lombaerde & Stijn Verherstraeten, From AFTA towards
an ASEAN Economic Community . . . and Beyond 4 (Centre for ASEAN Studies, CAS
Discussion Paper No 46, 2005), available at http://webh01.ua.ac.be/cas/PDF/CAS46.pdf (visited
on Feb. 19, 2008). See also ROADMAP TO AN ASEAN ECONOMIC COMMUNITY (Denis Hew
Wei-Yen ed., 2005); AFTA IN THE CHANGING INTERNATIONAL ECONOMY (Mohammed Ariff
et al. eds., 1996); Gautam Jaggi, Association of Southeast Asian Nations and ASEAN Free Trade
Area (Inst. for Int’l Econ., Working Paper No. 95-4, 1995); Markus Hund, From
‘Neighbourhood Watch Group’ to Community?: The Case of ASEAN Institutions and the
Pooling of Sovereignty, 56 AUSTL. J. INT’L AFF. 99 (2002).
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12 DUKE JOURNAL OF COMPARATIVE & INTERNATIONAL LAW [Vol 18:1

set off the current surge of RTAs in Asia was China’s initiative in
51
2000 for a free trade agreement with ASEAN. The ASEAN-China
framework agreement laying out the free trade plan was concluded in
52
2003, and it is scheduled to eliminate tariffs by 2010. The Chinese
53
initiative resulted in an “East Asian domino effect.” In response to
China’s project, India also signed a framework agreement with
54
ASEAN in 2003. However, progress towards its implementation has
55
been stalled. As Japan and South Korea did not want to stay
56
behind, they decided to start their own talks for RTAs. In 2006,
Japan managed to conclude free trade economic partnership
57
agreements with Indonesia, Malaysia, and the Philippines. Also in
2006, discussions between South Korea and ASEAN resulted in a
free trade agreement. Furthermore, there are ongoing negotiations
between Japan and ASEAN, Japan and the individual ASEAN
58
countries, and Japan and South Korea.
At the same time, Singapore successfully negotiated RTAs with
countries outside ASEAN: New Zealand (2000), Japan (2002),

51. Richard E. Baldwin, Multilateralising Regionalism: Spaghetti Bowls as Building Blocks

on the Path to Global Free Trade, 29 WORLD ECON. 1451, 1491 (2006). See also Rosemary Foot,
China’s Regional Activism: Leadership, Leverage, and Protection, 17 GLOBAL CHANGE, PEACE
& SECURITY 141 (2005); Vincent Wang Wei-Cheng, The Logic of China-ASEAN FTA:
Economic Statecraft of Peaceful Ascendancy, in CHINA AND SOUTHEAST ASIA: GLOBAL
CHALLENGES AND REGIONAL CHALLENGES 17, 18 (Ho Khai Leon & Samuel C.Y. Ku eds.,
2005); Daojiong Zha, The Politics of China-ASEAN Economic Relations: Assessing the Move
towards a Free Trade Area, in ASIAN REGIONAL GOVERNANCE, supra note 8, at 232; Jing Men,
The Construction of the China-ASEAN Free Trade Area: A Study of China’s Active Involvement,
21 GLOBAL SOC’Y 249, 253 (2007).
52. Jiangyu Wang, China’s Regional Trade Agreements: The Law, Geopolitics, and Impact
on the Multilateral Trading System, 8 SING. J. INT’L & COMP. L. 119, 124-25 (2004); M. Ulric
Killion, Chinese Regionalism and the 2004 ASEAN-China Accord: the WTO and Legalized
Trade Distortion, 31 N.C. J. INT’L L. & COM. REG. 1, 4 (2005). See generally, ASEAN-CHINA
ECONOMIC RELATIONS (Saw Swee-Hock ed., 2006).
53. Baldwin, supra note 51, at 1491.
54. India-ASEAN Framework Agreement, Oct. 8, 2003, http://www.bilaterals.org/IMG/
pdf/India-ASEAN_framework_agreement_2003_.pdf.
55. INDIA-ASEAN ECONOMIC RELATIONS: MEETING THE CHALLENGES OF
GLOBALIZATION 2 (Nagesh Kumar & Rahul Sen eds., 2006). See generally Rahul Sen, ‘New
Regionalism’ in Asia: A Comparative Analysis of Emerging Regional and Bilateral Trading
Agreements involving ASEAN, China and India, 40 J. WORLD TRADE 553 (2006).
56. Hadi Soesastro, Regional Integration in East Asia: Achievements and Future Prospects,
1 ASIAN ECON. POL’Y REV. 215, 225, 227 (2006); Razeen Sally, Free Trade Agreements and the
Prospects for Regional Integration in East Asia, 1 ASIAN ECON. POL’Y REV. 306, 314-15 (2006).
57. For the text of these agreements, see Ministry of Foreign Affairs of Japan, Free Trade
Agreement (FTA) and Economic Partnership Agreement (EPA), http://www.mofa.go.jp/policy/
economy/fta/index.html (last visited Jan. 11, 2007).
58. Baldwin, supra note 51, at 1491.
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2007] BRIDGING THE CONSTITUTIONAL CREDIBILITY GAP 13

Australia (2003), the United States (2003), and South Korea (2006).59
The RTAs negotiated by Singapore, in turn, “energised and raised
the urgency for the other ASEAN countries to become more
60
proactive in open trading activities.” The response from other
ASEAN countries, such as Malaysia and Thailand “was to seek their
own [R]TAs to match the record number of [R]TAs signed by
61
Singapore.” The Asian RTA wave has been labeled an example of
62
“competitive liberalisation.”

2. The Creation of Interregional RTAs. The negotiation of

interregional RTAs has received a particular push from the European
63
Community. Negotiations for a free trade agreement between the
64
EC and Mercosur are well underway. Similarly, the EC has opened
negotiations for the conclusion of a free trade deal with the Gulf
65
Cooperation Council. In the context of the reform of its trade
relations with the ACP countries, the EC is currently negotiating
Economic Partnership Agreements, including reciprocal free trade,
with West Africa, Central Africa, Eastern and Southern Africa, the
Southern African Development Community, the Caribbean, and the
66
Pacific. In addition, the European Commission has set for itself the

59. Ramkishen S. Rajan, Rahul Sen & Reza Siregar, Singapore and the New Regionalism:
Bilateral Trade Linkages with Japan and the US, 26 WORLD ECON. 1325, 1327 (2003). For the
text of these agreements, see WorldTradeLaw.net, Bilateral and Regional Trade Agreements
Notified to the WTO, http://www.worldtradelaw.net/fta/ftadatabase/ftas.asp (last visited Sept.
30, 2007).
60. S.M. Thangavelu & Mun-Heng Toh, Bilateral ‘WTO-Plus’ Free Trade Agreements: The
WTO Trade Policy Review of Singapore 2004, 28 WORLD ECON. 1211, 1215 (2005).
61. Id.
62. Id. at 1217; Hadi Soesastro, Dynamics of Competitive Liberalization in RTA
Negotiations: East Asian Perspective (Apr. 22-23, 2003) (paper presented at the Pacific
Economic Cooperation Council Trade Forum, Washington, D.C.), available at
http://www.pecc.org/publications/papers/trade-papers/1_SII/7-soesastro.pdf.
63. See generally INTERREGIONALISM AND INTERNATIONAL RELATIONS (Heiner Hänggi,
Ralf Roloff & Jürgen Rüland eds., 2005); Michael Reiterer, Interregionalism as a New
Diplomatic Tool: the EU and East Asia, 11 EUR. FOREIGN AFF. REV. 223 (2006).
64. See generally HELIO JAGUARIBE & ALVARO DE VASCONCELOS, THE EUROPEAN
UNION, MERCOSUR, AND THE NEW WORLD ORDER (2003); MERCOSUR-UNIÓN EUROPEA
(Roberto Ruiz Díaz Labrano ed., 2001).
65. Gerd Nonneman, EU-GCC Relations: Dynamics, Patterns and Perspectives, 41 INT’L
SPECTATOR 59, 61 (2006).
66. Melaku Geboye Desta, EC-ACP Economic Partnership Agreements and WTO
Compatibility: An Experiment in North-South Interregional Agreements, 43 COMMON MARKET.
L. REV. 1343, 1360 (2006); Axel Borrmann et al., EU/ACP Economic Partnership Agreements:
Impact, Options and Prerequisites, 40 INTERECONOMICS 169, 171 (2005).
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14 DUKE JOURNAL OF COMPARATIVE & INTERNATIONAL LAW [Vol 18:1

goal to start discussions towards free trade agreements with the

67
Andean Community, Central America and ASEAN.

3. Preferential Trade Arrangements Among Geographically

Distant Partners. As the interregional negotiations indicate,
preferential arrangements are no longer confined to a particular
geographical region. Trade relations in the 21st century are
characterized by a proliferation of RTAs concluded between
countries that are geographically far apart. In addition to its
intraregional deals, the European Community has concluded bilateral
free trade deals with geographically distant countries such as South
Africa (1999), Mexico (2000) and Chile (2002) and has announced its
68
intention to start negotiations with India. Likewise, Japan has
successfully negotiated intercontinental free trade agreements with
69
Mexico (2004) and Chile (2006). The United States has recently
concluded free trade agreements with geographically distant
countries such as Jordan (2001), Bahrain (2004), and Morocco (2006)
and is pursuing negotiations with Malaysia, South Korea and
70
Thailand.

II. THE HISTORICAL AND LEGAL

CONTEXT OF THE WTO’S RTA PROVISIONS
For a proper understanding of the relationship between the
increasing number of RTAs and today’s multilateral trade regime, a
brief historical introduction to the WTO’s provisions on RTAs is
necessary. GATT started functioning on January 1, 1948, on the basis
of the Protocol of Provisional Application to the Havana Charter of
71
1948 establishing the International Trade Organization (ITO). The
Protocol was signed in Geneva on October 13, 1947, following the
72
Geneva Round of reciprocal tariff negotiations. GATT included

67. See Press Release, European Commission, Central America & Andean Community:
Commission proposes negotiating directives for Association Agreements (Dec. 6, 2006),
http://ec.europa.eu/trade/issues/bilateral/regions/central_america/pr061206_en.htm.
68. European Commission, supra note 41.
69. Ministry of Foreign Affairs of Japan, supra note 57.
70. At the same time, the United States also pursued free trade deals with countries in the
Americas. Agreements were signed with Chile (2002), Colombia (2006), Panama (2006), and
Peru (2006). See Office of the United States Trade Representative, Bilateral Trade
Agreements, http://www.ustr.gov/Trade_Agreements/Bilateral/Section_Index.html (last visited
Dec. 8, 2007).
71. Protocol of Provisional Application, supra note 1.
72. Id.
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2007] BRIDGING THE CONSTITUTIONAL CREDIBILITY GAP 15

relatively few clauses, mainly relating to tariff obligations. Their main

function was to enable the swift implementation of tariff reductions
while awaiting the coming into existence of the ITO. However,
because the ITO was never ratified, GATT gradually assumed the
73
role of the major multilateral trade forum.
GATT contains two general concepts that are essential to
understanding the discussion on regionalism in international trade:
schedules of tariff concessions and unconditional most-favored-nation
(MFN) treatment. GATT Article II introduces the concept of a
“schedule of concessions,” where each contracting party lists detailed
item-by-item tariff concessions negotiated during GATT rounds of
74
tariff negotiations. In accordance with Article II, GATT contracting
parties undertake the commitment to levy no more than the tariffs
listed in the schedule. Article II has been called GATT’s “central
obligation” since it ensures the solidity of the tariff-reducing
75
agreements concluded during the negotiating round. Therefore, it
also fosters the likelihood of the contracting parties making credible
initial commitments.
76
The WTO’s GATS contains a similar provision. Each WTO
member is required to have a schedule of specific commitments which
“identifies the services for which members guarantee market access
77
and national treatment and any limitations that may be attached.”
Schedules must specify: (1) the terms, limitations and conditions on
market access; (2) the conditions and qualifications on national
treatment; (3) the undertakings relating to additional commitments
and, where appropriate, the time-frame for implementation of such
commitments; and (4) the date of entry into force of such
78
commitments. GATS Article XVI stipulates that “each Member
[must] accord services and service suppliers of any other Member

73. See DAM, supra note 23, at 11; JACKSON, supra note 19, at 41; see also JOHN H.
JACKSON, WORLD TRADE AND THE LAW OF GATT: A LEGAL ANALYSIS OF THE GENERAL
AGREEMENT ON TARIFFS AND TRADE 51 (1969) [hereinafter JACKSON, WORLD TRADE].
74. ANWARUL HODA, TARIFF NEGOTIATIONS AND RENEGOTIATIONS UNDER THE GATT
AND THE WTO: PROCEDURES AND PRACTICES 111 (2001); JACKSON, supra note 19, at 142;
PETROS C. MAVROIDIS, THE GENERAL AGREEMENT ON TARIFFS AND TRADE: A
COMMENTARY 53-54 (2005).
75. JOHN H. JACKSON, WILLIAM J. DAVEY & ALAN O. SYKES, LEGAL PROBLEMS OF
INTERNATIONAL ECONOMIC RELATIONS 384 (1995).
76. World Trade Organization, The General Agreement on Trade in Services (GATS):
Objectives, Coverage and Disciplines, Question 8, http://www.wto.org/english/tratop_e/serv_e/
gatsqa_e.htm (last visited Jan. 12, 2007) [hereinafter GATS Objectives].
77. Id.
78. GATS, supra note 1, art. XX:1.
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16 DUKE JOURNAL OF COMPARATIVE & INTERNATIONAL LAW [Vol 18:1

treatment no less favourable than that provided for under the terms,
limitations and conditions agreed and specified in its [commitment
79
s]chedule.”
GATT Article I contains the most-favored nation (MFN)
obligation. It holds that, with respect to customs duties and all other
rules in connection with importation and exportation, “any
advantage, favour, privilege or immunity granted by any contracting
party to any product originating in or destined for any other country
shall be accorded immediately and unconditionally to the like product
originating in or destined for the territories of all other contracting
80
parties.” The unconditional MFN-norm thus implies non-
discriminatory treatment in importation and exportation among
81
GATT contracting parties. In principle, the contracting parties are
forbidden to grant special trade preferences or privileges to only one
or a few other contracting parties. In GATS, a comparable principle
can be found. Members are held to extend immediately and
unconditionally to services or service suppliers of all other members
“treatment no less favourable than that it accords to like services and
82
service suppliers of any other country.”
In spite of its unconditional MFN principle, from the start,
GATT tolerated the formation of customs unions and free trade
83
areas. Both concepts are defined in greater detail in Part IV. In
short, customs unions aim to liberalize trade barriers between its
members and create a common customs tariff and trade policy in
relation with non-member countries. Free trade areas share the
internal component with customs unions, but do not create a unified
84
external trade and customs policy towards third countries. As such,
both customs unions and free trade areas constitute exceptions to the
MFN principle. Viewed in the context of the general elimination of

79. Id. art. XVI:1.

80. GATT 1947, supra note 1, art. I:1.
81. For clear explanations of the GATT MFN principle, see JACKSON, supra note 19, at
157; JACKSON, DAVEY & SYKES, supra note 75, at 444-56; PETER VAN DEN BOSSCHE, THE LAW
AND POLICY OF THE WORLD TRADE ORGANIZATION 310 (2005); MAVROIDIS, supra note 74,
at 112; MITSUO MATSUSHITA, THOMAS J. SCHOENBAUM & PETROS C. MAVROIDIS, THE
WORLD TRADE ORGANIZATION: LAW, PRACTICE, AND POLICY 205 (2006).
82. GATS, supra note 1, art. II:1. In contrast with GATT 1994, GATS allows for
derogations to the MFN-principle in the form of so-called Article II-exemptions. Members
were allowed to request such exemptions before GATS entered into force or at their time of
accession. Exemptions should not in principle last longer than 10 years. GATS Objectives,
supra note 76, Question 7; VAN DEN BOSSCHE, supra note 81, at 325.
83. GATT 1947, supra note 1, art. XXIV.
84. Id. art. XXIV:4.
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2007] BRIDGING THE CONSTITUTIONAL CREDIBILITY GAP 17

trade preferences which the United States was seeking to forward in

its Proposals for Expansion of World Trade and Employment (1945)
and the Suggested Charter for International Trade Organization
(1946), the exception for customs unions and free trade areas
85
deserves an explanation. Initially, the United States was aiming for
86
a provision that authorized customs unions, but not free trade areas.
The customs union exception had been generally accepted during the
inter-war period. As the League of Nations’ Economic Committee
stated in 1929: “Customs Unions constitute exceptions, recognized by
87
tradition, to the principle of most-favored-nation treatment.”
During the negotiation of the GATT, the United States did not
question this reasoning. According to Clair Wilcox, then-Director of
the Department of State’s Office of International Trade Policy,
America’s acceptance of customs unions and refusal of other
preferential arrangements had an economic reason:
A customs union creates a wider trading area, removes obstacles to
competition, makes possible a more economic allocation of
resources, and thus operates to increase production and raise
planes of living. A preferential system, on the other hand, retains
internal barriers, obstructs economy in production, and restrains
the growth of income and demand. It is set up for the purpose of
conferring a privilege on producers within the system and imposing
88
a handicap on external competitors.
In summary, Wilcox said, “[a] customs union is conducive to the
expansion of trade on a basis of multilateralism and non-
89
discrimination; a preferential system is not.” After former Secretary
of State George Marshall’s famous “Marshall Plan” speech on June 5,

85. JAMES H. MATHIS, REGIONAL TRADE AGREEMENTS IN THE GATT/WTO: ARTICLE

XXIV AND THE INTERNAL TRADE REQUIREMENT 33-34 (2002); Kerry A. Chase,
Multilateralism Compromised: the Mysterious Origins of GATT Article XXIV, 5 WORLD TRADE
REV. 1, 6-7 (2006); Richard H. Snape, History and Economics of GATT’s Article XXIV, in
REGIONAL INTEGRATION AND THE GLOBAL TRADING SYSTEM 273, 281 (Kym Anderson &
Richard Blackhurst eds., 1993); JACKSON, WORLD TRADE, supra note 73, at 576-77; GATT
Secretariat, Note on Article XXIV of the General Agreement, MTN.GNG/NG7/W/13 (Aug. 11,
1987).
86. JACKSON, WORLD TRADE, supra note 73, at 576-77.
87. U.N. DEP’T OF ECON. AFFAIRS, CUSTOMS UNIONS: A LEAGUE OF NATIONS
CONTRIBUTION TO THE STUDY OF CUSTOMS UNION PROBLEMS at 31, U.N. Sales No.
1948.II.D.3 (1947). Although the United States was not a member of the League of Nations, it
had accepted the customs union exception during the inter-war period. See The Policy of the
United States with Respect to Customs Unions and Regional Preferential Trade Arrangements
(U.S. Department of State Advisory Committee on Post-War Foreign Policy, Trade Barriers
Subcommittee, 1943). On the interwar preference practice, see MATHIS, supra note 85, at 13-20.
88. CLAIR WILCOX, A CHARTER FOR WORLD TRADE 70-71 (1949).
89. Id. at 71.
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18 DUKE JOURNAL OF COMPARATIVE & INTERNATIONAL LAW [Vol 18:1

1947,90 the unification of Western Europe became one of

91
Washington’s central foreign policy goals. As a result, banning
customs unions became inconceivable since they were regarded as an
92
adequate means to obtain European integration.
At the start of the negotiations that led to the GATT, it was not
foreseen that Article XXIV would also authorize free trade areas, i.e.
RTAs aiming to abolish trade barriers between its members, but
without establishing a common tariff and common commercial
93
policy. The free trade area provisions are the result of secret
negotiations between the United States and Canada for the
94
establishment of a bilateral trade agreement. The treaty initially
envisaged by the American and Canadian negotiators was, however,
95
limited to the removal of restrictions on their bilateral trade, which
would not meet the customs union test. As a result, the American
delegation was instructed to find wording in the GATT that would
96
accommodate the bilateral treaty with Canada. At the same time,
the developing countries from Latin America and the Middle East
had expressed dissatisfaction with the heavy conditions imposed on
97
customs unions. While their request for permission to form
preferential trading zones was rejected, free trade areas were added
98
as a compromise formula. On the one hand, free trade areas were
“easier” to achieve than customs unions as they did not require the
creation of a unified external commercial and tariff policy among
their members. On the other hand, free trade areas still obliged the
liberalization of substantially all trade between the constituent

90. George C. Marshall, Secretary of State, Remarks at Harvard University (June 5, 1947),
reprinted in 3 FOREIGN REL. U.S. 1947, at 237 (1972).
91. MICHAEL J. HOGAN, THE MARSHALL PLAN. AMERICA, BRITAIN, AND THE
RECONSTRUCTION OF WESTERN EUROPE, 1947-1952, at 26 (1987); GEIR LUNDESTAD,
“EMPIRE” BY INTEGRATION. THE UNITED STATES AND EUROPEAN INTEGRATION, 1945-1947,
at 29 (1997); ALAN S. MILWARD, THE RECONSTRUCTION OF WESTERN EUROPE 1945-51, at 61
(1984).
92. HOGAN, supra note 91, at 57-60; MILWARD, supra note 91, at 58-61, 232.
93. See Chase, supra note 85, at 1-6.
94. Id. at 12-14.
95. Id. at 13. The free trade treaty between Canada and the United States that was
envisaged in 1947 never entered into force. Id. at 19.
96. See id. at 14.
97. See MATHIS, supra note 85, at 37-40; F. A. Haight, Customs Unions and Free-Trade
Areas under GATT: A Reappraisal, 6 J. WORLD TRADE L. 391, 394-97 (1972).
98. GERARD CURZON, MULTILATERAL COMMERCIAL DIPLOMACY: THE GENERAL
AGREEMENT ON TARIFFS AND TRADE AND ITS IMPACT ON NATIONAL COMMERCIAL POLICIES
AND TECHNIQUES 261 (1965).
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2007] BRIDGING THE CONSTITUTIONAL CREDIBILITY GAP 19

parties, thus avoiding the trade-diverting effects of preferential

agreements limited to a few economic sectors.
In 1956, during the negotiations for the creation of the European
Economic Community, the United States maintained its support for
the creation of customs unions and free trade areas. In his
instructions to diplomatic missions abroad, the then-Secretary of
State, John Foster Dulles, stated American policy in the following
terms:
The United States has generally opposed preferential arrangements
in international trade because of the discrimination against the
trade of third countries which they involve. The United States has
taken a different and generally favorable attitude, however, toward
customs unions and free-trade areas, since both involve, in addition
to discrimination against the trade of third countries, the
elimination of restrictions on substantially all of the trade among
the participating countries, thereby making possible the more
efficient allocation of economic resources among the participating
countries with a consequent over-all expansion of international
99
trade.
In subsequent years, the GATT/WTO rules authorizing RTAs were
extended by the Tokyo and Uruguay Rounds. In November 1979, as
part of the Tokyo Round, the GATT contracting parties adopted the
Decision on Differential and More Favorable Treatment, Reciprocity
and Fuller Participation of Developing Countries, known as the
100
“Enabling Clause.” It allows developing countries to grant trade
preferences to each other without having to extend them to other
101
WTO members. Following the conclusion of the Uruguay Round,
GATS Article V authorizes the WTO members to be a party to an
economic integration agreement liberalizing trade in services between
or among the parties. The Uruguay Round negotiators also
succeeded in agreeing on an understanding (the “Uruguay Round
Understanding” or the “Understanding”) on the interpretation of
102
GATT Article XXIV.

99. See Circular Airgram from the Secretary of State to Certain Diplomatic Missions (July
13, 1956), reprinted in 4 FOREIGN REL. U.S. 1955-1957, at 450 (1986).
100. Enabling Clause, supra note 18.
101. See id. ¶ 2(b).
102. Understanding on Article XXIV, supra note 16.
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20 DUKE JOURNAL OF COMPARATIVE & INTERNATIONAL LAW [Vol 18:1

III. THE WTO’S SUBSTANTIVE STANDARDS

FOR RTAS: ANALYSIS AND PROPOSALS FOR CHANGE
While the new Transparency Mechanism is an essential
component for the restoration of the WTO’s supervisory role on the
trade policies pursued by RTAs, the impact of the Mechanism is
103
necessarily limited by a number of non-procedural factors. One of
the current stumbling blocks to the WTO’s effectiveness in dealing
with RTAs is the lack of agreement on the interpretation of the
104
substantive WTO criteria. Under GATT 1947, the Working Groups
in charge of the examination of RTAs were generally unable to
105
resolve basic methodological issues. As a consequence, the reports
submitted by the Working Groups to the GATT Council did, in most
cases, merely list the divergent views expressed by the contracting
106
parties. In fact, the WTO Committee on Regional Trade
Agreements (CRTA) has not been more productive than the old
107
GATT Working Parties. The paragraphs below provide an
explanation for the problems in the interpretation and application of
the main substantive requirements for RTAs.
The substantive rules relating to RTAs for goods are contained
in paragraphs 4 through 10 of GATT Article XXIV, as clarified in the
108
Uruguay Round. This Article includes both internal and external
requirements applicable to the creation of free trade areas and
109
customs unions. Internal requirements deal with the legal
relationship among the constituent parties to customs unions and free
110
trade areas. The external requirements concern the relationship
111
between an RTA and the “outsiders.” Much like GATT Article
XXIV, GATS Article V puts internal and external conditions on such
112
RTAs that cover trade in services. As its terminology is close to
that of GATT Article XXIV, GATS Article V suffers from many of

103. See infra Part V.

104. See infra Part IV.
105. See 2 GUIDE TO GATT LAW AND PRACTICE: ANALYTICAL INDEX 759-62 (1994)
[hereinafter GUIDE TO GATT].
106. See id. at 761.
107. See supra notes 24-25.
108. GATT 1947, supra note 1, art. XXIV; Understanding on Article XXIV, supra note 16.
109. GATT 1947, supra note 1, art. XXIV.
110. See infra Part IV.A.
111. See infra Part IV.B.
112. GATS, supra note 1, art. V.
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2007] BRIDGING THE CONSTITUTIONAL CREDIBILITY GAP 21

the same problems that plague RTAs covering trade in goods.113

Practice with GATS Article V is, however, significantly less
developed than with GATT Article XXIV, which has existed since
114
1947.

A. The WTO’s Internal Requirements for RTAs

1. The Membership of RTAs. The internal requirements are

found in paragraphs 5, 8 and 5(c) of Article XXIV. The first internal
requirement concerns the membership of the RTAs. Paragraph 5
states that the provisions of the Agreement “shall not prevent, as
between the territories of contracting parties, the formation of a
customs union or of a free-trade area or the adoption of an interim
agreement necessary for the formation of a customs union or a free-
115
trade area[.]” It has been debated whether paragraph 5 is also
applicable to agreements with countries that are not contracting
116
parties to GATT. As early as 1960, the reports of the Working
Parties on the European Free Trade Association (EFTA) and on the
Latin American Free Trade Area (LAFTA) recorded divergent views
as to whether paragraph 5 is applicable to agreements with countries
117
that are not contracting parties. The orthodox view is that a
customs union or free trade with a country that is not a contracting
party would need to be approved by a two-thirds majority in
118
accordance with GATT Article XXIV:10. This position was
defended by the United States in the framework of the GATT
dispute settlement procedure on “EC-Tariff Treatment on Imports of
Citrus Products from Certain Countries in the Mediterranean
119
Region.” The United States contended
that the procedures of Article XXIV:7(b) applied only to interim
agreements among contracting parties and hence not to the
agreements concluded with [countries] which were not contracting
parties [to the GATT]. These agreements were rather subject to

113. Compare GUIDE TO GATT, supra note 105, at 790-94, with GATS, supra note 1, art V.
114. Id.
115. GATT 1947, supra note 1, art. XXIV:5 (emphasis added).
116. Won-Mog Choi, Legal Problems of Making Regional Trade Agreements with Non-
WTO-Member States, 8 J. INT’L ECON. L. 825, 826 (2005).
117. GUIDE TO GATT, supra note 105, at 798.
118. See id. at 798-99.
119. Report of the Panel, EC-Tariff Treatment on Imports of Citrus Products from Certain
Countries in the Mediterranean Region, L/5776 (Feb. 7, 1985) (unadopted).
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22 DUKE JOURNAL OF COMPARATIVE & INTERNATIONAL LAW [Vol 18:1

the procedures of Article XXIV:10 which required a two-thirds

120
majority approval.
The opposite argument was advanced by the European
Community during the examination of its Association Agreements
121
with Tunisia and Morocco. As Tunisia and Morocco were, at that
time, not yet contracting parties, some delegations referred to the
122
need for a waiver according to Article XXIV:10. The EC, however,
recalled that in previous cases of EFTA and LAFTA, some
participants in those free trade areas were not at the time contracting
123
parties to the GATT 1947 either. On that basis, the EC claimed
that it had been shown in practice that the term “territories of
Contracting Parties” was not to be interpreted as restricting the
124
applicability of paragraph 5.
The issue has never been formally settled. At this stage, the
CRTA has several RTAs under examination that have been
concluded between a WTO member and a non-member. Armenia,
Georgia, and the Kyrgyz Republic each notified RTAs with non-
125
members, such as the Russian Federation, Kazakhstan and Ukraine.
The EC concluded Euro-Mediterranean free trade agreements with
126
non-members Algeria, Lebanon and Syria. In practice, the political
and economic imperatives that drive RTAs have been stronger than
127
the controversial WTO membership prerequisite. As the number of
WTO members continues to grow, the long-run issue is likely to
128
become less problematic.

120. Id. ¶ 3.14.

121. EEC-Agreements of Association with Tunisia and Morocco, ¶ 16, L/3379 (Apr. 7, 1970),
GATT B.I.S.D. (18th Supp.) at 149, 154 (1970).
122. Id.
123. Id.
124. Id.
125. With one exception, these agreements were concluded before Armenia, Georgia and
the Kyrgyz Republic became WTO members. Armenia notified RTAs with non-members the
Russian Federation (1993), Ukraine (1996), Turkmenistan (1996) and Kazakhstan (2001).
Georgia notified RTAs with the Russian Federation (1994), Ukraine (1996), Azerbaijan (1996),
Kazakhstan (1999) and Turkmenistan (2000). The Kyrgyz Republic notified RTAs with the
Russian Federation (1993), Kazakhstan (1995), Ukraine (1998) and Uzbekistan (1998). WTO,
Regional Trade Agreements notified to the GATT/WTO and in Force, http://www.wto.org/
english/tratop_e/region_e/region_e.htm (last visited Mar. 2, 2007).
126. European Commission, supra note 41.
127. See infra Part VI.
128. GATT 1947 originally had twenty-three contracting parties. WTO, The GATT Years:
From Havana to Marrakesh, http://www.wto.org/English/thewto_e/whatis_e/tif_e/fact4_e.htm
(last visited Oct. 2, 2007). The WTO currently has 149 members. WTO, Understanding the
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2007] BRIDGING THE CONSTITUTIONAL CREDIBILITY GAP 23

Proposal: From a constitutional perspective, the continuing

confusion on the interpretation of the WTO membership requirement
is a factor that feeds the WTO’s credibility gap. In this context, an
authoritative interpretation of GATT Article XXIV:5 is required.
This interpretation should consist of two elements. First, as a matter
of principle, the interpretation should confirm that GATT intended
RTAs to be concluded between its contracting parties. Second, it
should recognize that the CRTA has several RTAs under
consideration that involve non-WTO members. Where WTO
members find it necessary to conclude RTAs with non-members, two
additional requirements should be imposed. The WTO members of
such RTAs should (a) be required to provide the CRTA with a full
explanation on the reasons for concluding the RTA with the non-
member; and (b) be required to take the responsibility of providing
technical assistance to the non-member with a view of bringing that
country towards WTO membership. As such, RTAs between WTO
members and non-members would effectively become learning tools
129
for the non-members.

2. The Degree of Trade Liberalization: the “Substantially All”

Requirement. The second internal requirement focuses on trade
coverage. GATT Article XXIV:8(a)(i) provides that customs union
shall be understood to mean “the substitution of a single customs
territory for two or more customs territories,” so that duties and other
restrictive regulations of commerce are eliminated with respect to
“substantially all the trade between the constituent territories of the
130
union.” The precise definition of “substantially all” has troubled
the assessment of RTAs from the start. The matter is of particular
relevance for the RTAs that fail to fully liberalize trade in all
economic sectors, such as agriculture.
The “substantially all the trade” requirement was initiated by the
United States because of its bilateral trade discussions with Canada,
which coincided with the negotiations that created the GATT in

WTO: The Organization, Members and Observers, http://www.wto.org/english/thewto_e/

whatis_e/tif_e/org6_e.htm (last visited Nov. 20, 2006).
129. For example, when the EC and EFTA each concluded bilateral free trade agreements
with Bulgaria in 1993, the latter was not yet a GATT contracting party. Bulgaria’s Europe
Association Agreement with the EC paved the way for integration into the EC’s common
commercial policy and thereby led to WTO membership. Bulgaria became a WTO member in
1996. On Bulgaria and the WTO, see WTO, Bulgaria and the WTO, http://www.wto.org/
english/thewto_e/countries_e/bulgaria_e.htm (last visited Sept. 18, 2007).
130. GATT 1947, supra note 1, art. XXIV:8(a)(i) (emphasis added).
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24 DUKE JOURNAL OF COMPARATIVE & INTERNATIONAL LAW [Vol 18:1

1947.131 The American negotiators in the multilateral framework

were therefore instructed to insist on language that did not require
132
total free trade between the parties to a RTA. While aiming for a
bilateral RTA with Canada, the United States was not planning to
give up its agricultural quotas for wheat and wheat flour and its
133
seasonal quotas on many fruits and vegetables. Antidumping and
countervailing duties against Canadian products were also to remain
134
in force. In this context, the American negotiators invented the
135
“substantially all” concept.
During the examination of the European Economic Community
in 1957, its member states proposed that “a free-trade area should be
considered as having been achieved for substantially all the trade
when the volume of liberalized trade reached 80 per cent [sic] of total
136
trade.” Many other members of the Working Party examining the
EEC refused this proposal, as they held that it was “inappropriate to
fix a general figure of the percentage of trade” as a requirement to
137
meet the “substantially all” criterion.
An attempt at clarifying the matter during the Working Party on
EFTA in 1960 was far from conclusive. The Working Party report
simply noted the view by several delegations that “the phrase
‘substantially all the trade’ had a qualitative as well as quantitative
aspect and that it should not be taken as allowing the exclusion of a
major sector of economic activity. For this reason, the percentage of
trade covered, even if it were established to be 90 per cent [sic], was
138
not considered to be the only factor to be taken into account.” This
issue was later touched upon in the preamble of the Uruguay Round
Understanding. While it did not formulate a key to the legal
interpretation of the “substantially all” criterion, the Understanding
“recogniz[ed]” in general political terms that the positive trade
contribution of RTAs “is increased if the elimination between
constituent territories of duties and other restrictive regulations of

131. Chase, supra note 85, at 13-15.

132. Id. at 14-15.
133. Id. at 17.
134. Id.
135. See id.
136. GATT, Report Submitted by the Committee on Treaty of Rome to the Contracting
Parties on 29 November 1957, Annex IV ¶ 30, L/778 (Nov. 29, 1957).
137. Id. Annex IV ¶ 34.
138. GATT, Report of the Working Party on the European Free Trade Association, ¶ 48,
L/1235 (June 4, 1960).
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2007] BRIDGING THE CONSTITUTIONAL CREDIBILITY GAP 25

commerce extends to all trade, and diminished if any major sector of

139
trade is excluded[.]”
The state of agreement on the interpretation of this crucial
paragraph has hardly progressed with the entry into force of the
140
WTO. In the Turkey-Textiles case of 1999, the WTO dispute
settlement Panel and the Appellate Body did not proceed much
141
beyond the Working Party’s assessment. The Panel acknowledged
that neither the GATT contracting parties nor the WTO members
have ever reached agreement on the interpretation of the provision’s
142
“substantially all” term. In an attempt to nevertheless clarify the
matter, the Panel held that “[t]he ordinary meaning of the term
‘substantially’ in the context of sub-paragraph 8(a) appears to provide
143
for both qualitative and quantitative components.” The Appellate
144
Body confirmed this finding, and further agreed with the Panel that
the “terms of sub-paragraph 8(a)(i) offer ‘some flexibility’ to the
constituent members of a customs union when liberalizing their
145
internal trade.”
It is clear that an effective WTO monitoring process of RTAs
requires a consensus on the interpretation of the term “substantially
all,” and discussion has continued in the framework of the Doha

139. Understanding on Article XXIV, supra note 16, pmbl.

140. See WTO, WTO ANALYTICAL INDEX: GUIDE TO WTO LAW AND PRACTICE, GATT
1994, Part III, Article XXIV, ¶ 631 (2007), http://www.wto.org/english/res_e/booksp_e/
analytic_index_e/gatt1994_09_e.htm#article24 [hereinafter WTO ANALYTICAL INDEX].
141. See generally Panel Report on Turkey – Textiles, supra note 35; Appellate Body Report
on Turkey – Textiles, supra note 35. For a comment on these reports, see James H. Mathis,
WTO, Turkey – Restrictions on Imports of Textile and Clothing Products, 27 LEGAL ISSUES OF
ECON. INTEGRATION 103 (2000); Joel P. Trachtman, Decisions of the Appellate Body of the
World Trade Organization, 11 EUR. J. INT’L L. 217 (2000); Gabrielle Marceau & Cornelis
Reiman, When and How Is a Regional Trade Agreement Compatible with the WTO?, 28 LEGAL
ISSUES ECON. INTEGRATION 297 (2001); Peter Hilpold, Regional Integration According to
Article XXIV GATT – Between Law and Politics, 7 MAX PLANCK Y.B. U.N. L. 219 (2003).
142. Panel Report on Turkey – Textiles, supra note 35, ¶ 9.148.
143. Id.
144. Appellate Body Report on Turkey – Textiles, supra note 35, ¶ 49. According to Thomas
Cottier and Mathias Oesch, the current state of the law can be summarized as follows: for an
RTA to be consistent with Article XXIV, “the term ‘substantially all the trade’ requires
cumulatively that a certain percentage of trade is liberalized and no major sector of a national
economy is excluded.” See THOMAS COTTIER & MATHIAS OESCH, INTERNATIONAL TRADE
REGULATION: LAW AND POLICY IN THE WTO, THE EUROPEAN UNION AND SWITZERLAND
378 (2005); Thomas Cottier, The Legal Framework for Free Trade Areas & Customs Unions in
WTO Law, in MULTILATERALISM AND BILATERALISM AFTER CANCUN: CHALLENGES AND
OPPORTUNITIES OF REGIONALISM 107, 109 (Martin Godel & Jonathan Gage eds., 2004).
145. Appellate Body Report on Turkey – Textiles, supra note 35, ¶ 48.
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26 DUKE JOURNAL OF COMPARATIVE & INTERNATIONAL LAW [Vol 18:1

Round.146 A number of delegations have limited themselves to

repeating the well-known position that “substantially all” cannot be
simplified into a mere mathematical formula, as it also contains
147
qualitative aspects. Among those looking for a solution, some
participants expressed that they were in favor of a definition based on
148
trade benchmarks. Others have argued for “a definition setting
minimum percentages for both duty-free tariff lines and trade flows,
referring in that context to the need for an adequate approach for
149
evaluating the exclusion of major sectors from the RTA coverage.”
The most elaborate proposal on the interpretation of the
150
“substantially all” criterion was formulated by Australia in 2005.
The Australian submission recognizes that statistics on actual trade
flows between RTA partners cannot take into account the dynamics
of the economic integration process, and starts from the premise that
151
such figures are of limited use in the “substantially all” debate.
Instead, Australia proposes to define the “substantially all” criterion
in terms of the tariff lines listed in the Harmonized Commodity
152
Description and Coding System (HS). According to the Australian
proposal, RTAs would—upon their entry into force—need to
eliminate duties and other restrictions to trade on at least seventy
153
percent of tariff lines at the HS six-digit level. Within a ten-year
transition period, this figure would need to increase to ninety-five
percent and the exclusion of “highly traded products” would be

146. See Negotiating Group on Rules, Summary Report of the Meeting Held on 8 & 10 July
2002, ¶ 19, TN/RL/M/3 (Aug. 1, 2002).
147. Negotiating Group on Rules, Summary Report of the Meeting Held on 11 June 2003, ¶
20, TN/RL/M/9 (July 10, 2003).
148. Negotiating Group on Rules, Summary Report of the Meeting Held on 17-18 May 2005,
¶ 4, TN/RL/M/27 (June 30, 2005).
149. Id. ¶ 9.
150. See generally Negotiating Group on Rules, Submission on Regional Trade Agreements
by Australia, TN/RL/W/173/Rev1 (Mar. 3, 2005) [hereinafter Submission by Australia (March)]
(outlining Australia’s proposal); Negotiating Group on Rules, Submission on Regional Trade
Agreements by Australia, TN/RL/W/180 (May 13, 2005) [hereinafter Submission by Australia
(May)] (responding to comments on its previous submission); Edwini Kessie, Counsellor,
Presentation of the Council and Trade Negotiation Committee, Negotiations on Regional Trade
Agreements 21-31 (June 12-13, 2006) (presentation available at the U.N. Institute for Training
and Research, http://www.unitarny.org/mm/File/RTA%20negotiations.pdf).
151. Kessie, supra note 150, at 21.
152. Submission by Australia (May), supra note 150, ¶ 13. For more on the Harmonized
System, see HODA, supra note 74, at 124; MAVROIDIS, supra note 74, at 56.
153. Submission by Australia (March), supra note 150, ¶ 13.
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2007] BRIDGING THE CONSTITUTIONAL CREDIBILITY GAP 27

prohibited.154 While it has the advantage of being easily verifiable and

avoiding complicated economic analysis, the Australian proposal does
155
not yet hold a consensus. Japan, in particular, has argued that a
tariff line-based test alone is deficient as it does not reflect the actual
156
trade volume.
Much like GATT Article XXIV, GATS Article V also stipulates
that RTAs covering trade in services must have “substantial sectoral
157
coverage.” In addition, RTAs should provide for the absence or
elimination of “substantially all” discrimination between and among
158
the parties in the sectors covered. This can be achieved through
elimination of discriminatory measures and/or prohibition of new or
more discriminatory measures, “at the entry into force of that
agreement or on the basis of a reasonable time-frame, except for
159
measures permitted under Articles XI, XII, XIV and XIV bis.”
Substantial sectoral coverage is defined as a condition “understood in
terms of number of sectors, volume of trade affected and modes of
supply. In order to meet this condition, [the] agreement[] should not
160
provide for the a priori exclusion of any mode of supply.” This
means that RTAs for trade in services should, in principle, be
applicable to:
(1) cross-frontier supplies not involving any movement of persons;
(2) consumption abroad, which entails the movement of the
consumer into the territory of the WTO member country in which
the supplier is established; (3) commercial presence, i.e. the
presence of a subsidiary or branch in the territory of the WTO
member country in which the service is to be rendered; and (4) the
presence of natural persons from a WTO member country,
enabling a supplier from one member country to supply services
161
within the territory of any other member country.

154. Id. ¶¶ 5-6. Such “highly traded products” would be defined either as those products for
which the value of a member’s imports in any single HS six-digit line as a proportion of their
total imports from the RTA partner exceeds 0.2% or the top fifty imports of each RTA party at
HS six-digit level. Submission by Australia (May), supra note 150, ¶ 14.
155. Kessie, supra note 150, at 23. See generally id. at 32-104 (outlining other members’
proposals).
156. See Submission on Regional Trade Agreements, Sec. III ¶¶ 1-3, TN/RL/W/190 (Oct. 28,
2005) (Japan’s submission); Discussion Paper on Regional Trading Arrangements, ¶ 6,
TN/RL/W/114 (June 6, 2003) (India’s Discussion Paper).
157. GATS, supra note 1, art. V:1(a).
158. Id. art. V:1(b).
159. Id.
160. Id. art. V:1(a) n.1.
161. Case 1/94, Opinion pursuant to Article 228(6) of the EC Treaty, ¶ 43, 1994 E.C.R. I-
5267.
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28 DUKE JOURNAL OF COMPARATIVE & INTERNATIONAL LAW [Vol 18:1

In order to evaluate whether the conditions have been met,

consideration must “be given to the relationship of the agreement to
a wider process of economic integration or trade liberalization among
162
the countries concerned.” In spite of the guidance provided by
GATS Article V, the concrete interpretation of the required sectoral
coverage is a matter of discussion. One view is that RTAs should not
163
necessarily cover all sectors. Another view is that the flexibility
provided by the word “substantial” does not allow for the exclusion
164
of a sector from an RTA. The precise extent of liberalization
needed for an RTA to meet the “substantial sectoral coverage” test
165
thus remains to be resolved.
Proposal: The long-lasting inability of GATT/WTO to agree on a
definition of the “substantially all trade” criterion is a major
contributor to the WTO’s constitutional credibility gap with respect
to RTAs. If the WTO is to play a meaningful role with respect to the
assessment of RTAs, it should find a solution to the deadlock. First,
it is necessary to reaffirm the reasons for the “substantially all”
requirement, which is to avoid preferential agreements that provide
166
for the liberalization of only a few products. The idea behind this is
to discourage predominantly trade-diverting arrangements and to
avoid a repetition of the devastating disintegration of the world
economy that characterized the 1930s. Second, as it seems useful to
maintain the “substantially all” criterion, a workable definition needs
to be agreed upon. Definitions based on trade flows are problematic.
As Sungjoon Cho has underlined, “the measurement of ‘liberalized’
trade volume would hardly be accurate in reality because such
measurement is generally based on ex ante forecasts of unrealized
167
transactions . . . .” WTO practice has, indeed, shown that it is
hardly possible to accurately measure the impact of RTAs on actual

162. GATS, supra note 1, art. V:2.

163. See Negotiating Group on Rules, supra note 24, ¶¶ 67-68.
164. Id.
165. See id.
166. See generally Hilpold, supra note 141, at 231 (explaining that partially integrated RTAs
can be trade-diverting agreements). In this context, Hilpold quotes Robert E. Hudec: “once
governments are allowed to select some products and not others, political forces will inevitably
exert enormous pressure to choose trade-diverting preferences first. Trade-diverting
preferences are the ones that result in the greatest net political gain for governments; the
political gains arise from pleasing local producers who displace third-country producers, while
political losses are entirely avoided because third-country producers do not vote.” Robert E.
Hudec, GATT’s Influence on Regional Arrangements, in NEW DIMENSIONS IN REGIONAL
INTEGRATION 151, 155 (Jaime Melo & Arvind Panagariua eds., 1993).
167. Cho, supra note 23, at 443.
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2007] BRIDGING THE CONSTITUTIONAL CREDIBILITY GAP 29

trade flows that are dynamic and shift over time.168 Definitions based
on the non-exclusion of economic sectors are equally problematic.
On the one hand, members disagree on the definition of “economic
169
sector.” On the other hand, considering the many RTAs that fail to
fully liberalize trade in agriculture, it is unrealistic to expect a
consensus on an all-sector-inclusive-obligation for RTAs.
In light of these two problems, the Australian proposal of 2005
offers the most constructive solution. The “substantially all”
discussion should be based on the tariff lines in the schedules of
concession at the HS six-digit level, which is internationally
recognized and can hardly pose problems. RTAs that do not reach
the required liberalization percentages of seventy percent at the start
and ninety-five percent after a ten-year transition period should be
obliged to present a plan that details the manner in which barriers to
trade would be eliminated as regards additional tariff lines in the
schedules of concession. While the recommended plan might lack
sophistication, it would avoid unnecessary methodological discussions
170
on measuring trade volumes or defining economic sectors.

3. The Reciprocity of Trade Liberalization. The third criterion

concerns the reciprocity of liberalization between the parties in free
trade areas and customs unions. Under GATT 1947, several one-way
171
free trade areas had been notified. Whether the Article XXIV:8
requirement to liberalize “substantially all the trade” implied that
such liberalization needed to be fully reciprocal was the subject of
172
debate and disagreement. As pointed out by Australia during the
examination of its Trade and Commercial Relations Agreement with
Papua New Guinea, “Article XXIV did not contain any specific
173
provision with respect to reverse preferences.” As a result,
Australia claimed that the non-reciprocity of the agreement did not

168. See infra notes 222-28.

169. See sources cited supra notes 136-38.
170. As it is argued by Jeffrey J. Schott, such definitional problems clouded many of the
earlier proposals to set a numerical target for the “substantially all” criterion. See Jeffrey J.
Schott, Free Trade Agreements: Boon or Bane of the World Trading System?, in FREE TRADE
AGREEMENTS: US STRATEGIES AND PRIORITIES 3, 18 (Jeffrey J. Schott ed., 2004).
171. See GUIDE TO GATT, supra note 105, at 826.
172. See id. at 826-27.
173. Id. (quoting Report of the Working Party on the Australia/Papua New Guinea Trade
and Commercial Relations Agreement, ¶ 7, L/4571 (Nov. 11, 1977)).
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30 DUKE JOURNAL OF COMPARATIVE & INTERNATIONAL LAW [Vol 18:1

affect the free-trade area status.174 Other contracting parties

disagreed. They
expressed doubts about the conformity of the Agreement with the
provisions of Article XXIV, since it appeared that no reciprocal
reduction of duties or elimination of other restrictive regulations of
commerce by Papua New Guinea had been required. . . . One
member . . . stated that he did not share the view expressed by the
representative of Australia that, in light of the fact that Article
XXIV made no mention of reverse preferences, reciprocity was not
175
required between the parties to free-trade area agreements.
Similar disagreements emerged following the notification by the
European Community of its Lomé Conventions with the African,
176
Caribbean and Pacific (ACP) countries. None of these Conventions
177
obliged the associated countries to grant reverse preferences.
The reciprocity issue increased in significance during the long-
lasting dispute on the EC’s trade regime for bananas under the Lomé
Convention. The EC maintained that the requirement of Article
XXIV:8(b), according to which free trade areas must cover
substantially all the trade between the constituent territories. did not
apply in respect of arrangements between developed contracting
178
parties and developing countries. Because of the principle of non-
reciprocity set out in GATT Part IV, the EC claimed that its one-way
free trade regime for the ACP countries was fully compatible with the
179
GATT. The GATT dispute settlement panels disagreed, holding
that GATT Part IV did not permit contracting parties to accord
preferences to a selected group of developing countries and that
doing so was inconsistent with the MFN-principle of GATT Article

174. Id.
175. Id. at 827.
176. See Report of the Working Party on the ACP-EEC Convention of Lomé, ¶¶ 10-14,
L/4369 (July 15, 1976), GATT B.I.S.D. (23rd Supp.) at 46 (1977); Report of the Working Party
on the Second ACP-EEC Convention of Lomé, ¶ 17, L/5292 (Mar. 31, 1982), GATT B.I.S.D.
(29th Supp.) at 119 (1983); Report of the Working Party on the Third ACP-EEC Convention of
Lomé, ¶¶ 12, 19, L/6382 (Sept. 22, 1988), GATT B.I.S.D. (35th Supp.) at 321 (1989). For the
history of the Lomé Conventions, see European Commission, From Lomé I to IV bis,
http://ec.europa.eu/development/Geographical/Cotonou/LomeGen/LomeItoIV_en.cfm (last
visited Jan. 27, 2008).
177. See Jürgen Huber, The Past, Present and Future ACP-EC Trade Regime and the WTO,
11 EUR. J. INT’L L. 427, 428-30 (2000); GUIDE TO GATT, supra note 105, at 826-27.
178. Report of the Panel, EEC – Member States’ Import Regimes for Bananas, ¶ 364,
DS32/R (June 3, 1993) (not adopted) [hereinafter Panel Report Bananas I]; see Report of the
Panel, EEC – Import Regimes for Bananas, ¶¶ 159-61, DS38/R (Feb. 11, 1994) (not adopted)
[hereinafter Panel Report Bananas II].
179. Panel Report Bananas II, supra note 178, ¶ 156.
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2007] BRIDGING THE CONSTITUTIONAL CREDIBILITY GAP 31

I.180 Thus, the panels found that the Article XXIV reciprocity
181
requirements were not modified by the provisions of Part IV.
Furthermore, the Bananas II Panel held that the use of the plural in
the phrases of GATT Article XXIV “between the constituent
territories” and “originating in such territories” made clear that only
reciprocal agreements, “providing for an obligation to liberalize the
trade in products originating in all of the constituent territories could
be considered to establish a free-trade area within the meaning of
182
Article XXIV:8(b).” As a consequence, the EC was required to
request a formal waiver to keep its preferential trade regime for the
183
ACP countries in conformity with the GATT/WTO. In an attempt
to bring its relations with the ACP countries in line with the
reciprocity requirement of GATT Article XXIV, the EC began
negotiating Economic Partnership Agreements, aiming for reciprocal
free trade, with West Africa, Central Africa, Eastern and Southern
Africa, the Southern African Development Community, the
184
Caribbean, and the Pacific. Several authors have tried to examine
the impact of the change from non-reciprocal to reciprocal free trade
185
in EU-ACP relations. While the precise effect does not always
seem clear, some Non-Governmental Organizations underline the
negative impact of reciprocal free trade on the local farmers,

180. See Panel Report Bananas I, supra note 178, ¶¶ 369-72; Panel Report Bananas II, supra
note 178, ¶¶ 160-64.
181. See Panel Report Bananas I, supra note 178, ¶¶ 369-72; Panel Report Bananas II, supra
note 178, ¶¶ 160-64.
182. Panel Report Bananas II, supra note 178, ¶ 159 (emphasis added).
183. See Panel Report Bananas I, supra note 178, ¶ 241. The first GATT waiver for the
Lomé Conventions was granted on December 9, 1994. Fourth ACP-EEC Convention of Lomé-
Decision of 9 December 1994, ¶ 1, L/7604 (Dec. 9, 1994). On October 14, 1996 the waiver was
extended by the WTO. Fourth ACP-EEC Convention of Lomé Extension of Waiver - Decision
of 14 October 1996, ¶ 1, WT/L/186 (Oct. 14, 1996). On November 14, 2001 the Doha Ministerial
Conference provided a further waiver to the Cotonou Agreement, which is the successor to the
Lomé Conventions, limited to December 31, 2007. WTO, Ministerial Decision of 14 November
2001, WT/MIN(01)/15.
184. Desta, supra note 66; Borrmann et al., supra note 66.
185. See generally Stephen Karingi et al., Economic and Welfare Impacts of the EU-Africa
Economic Partnership Agreements (U.N. Econ. Comm’n for Africa, Africa Economic Policy
Centre Work in Progress No. 10, 2005); Christopher Stevens & Jane Kennan, EU-ACP
Economic Partnership Agreements: The Effects of Reciprocity (May 2005) (unpublished
Briefing Paper of the Institute of Development Studies); Lawrence E. Hinkle & Maurice Schiff,
Economic Partnership Agreements between Sub-Saharan Africa and the EU: a Development
Perspective, 27 WORLD ECON. 1321 (2004); Matthew McQueen, ACP-EU Trade Cooperation
after 2000: An Assessment of Reciprocal Trade Preferences, 36 J. MOD. AFRICAN STUD. 669
(1998).
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32 DUKE JOURNAL OF COMPARATIVE & INTERNATIONAL LAW [Vol 18:1

employment, tax revenues, and even political stability in the ACP

186
countries.
The requirement for reciprocal liberalization in free trade areas
goes to the heart of the economic development problem. GATS
Article V explicitly states that, in interpreting the “substantially all”
provision, flexibility is provided where developing countries are
187
parties to RTAs. In contrast with GATS Article V, GATT Article
XXIV does not include an explicit authorization for “flexibility”
regarding RTAs involving developing countries. However, some
authors continue to argue that the Enabling Clause constitutes a
188
sufficient basis for such flexibility. In the view of Jacques Berthelot,
to say that the Enabling Clause merely authorizes regional
arrangements amongst less-developed countries would be “totally
189
redundant” as GATT Article XXIV already allows such RTAs.
Instead, Berthelot pleads for an integrated reading of paragraphs 1
190
and 2 of the Enabling Clause. The wording in paragraph 1 strongly
suggests that the contracting parties are developed, not developing, as
it stipulates that “Contracting Parties may accord differential and
191
more favourable treatment to developing countries.” Paragraph
2(c) authorizes regional arrangements amongst less-developed
countries. The Enabling Clause makes clear that the provisions of
192
paragraph 1 apply to what is provided for in paragraph 2.
According to this logic, contracting parties would be authorized to
accord differential and more favorable treatment to developing
countries in regional arrangements. It is clear, however, that the
current state of WTO law, as applied by the GATT Panels, does not
reflect Berthelot’s reasoning.

186. Matt Griffith & Liz Stuart, Catholic Agency For Overseas Development, The Wrong
Ointment: Why the EU’s Proposals for Free Trade with Africa will Not Heal its Scar of Poverty
(2004), available at http://www.cafod.org.uk/var/storage/original/application/php7ywMCg.pdf;
Cosmas Ochieng & Tom Sharman, Action Aid, Trade Traps: Why EU-ACP Economic
Partnership Agreements Pose a Threat to Africa’s Development (2004), available at
http://www.actionaid.org.uk/_content/documents/Trade%20traps_782006_122739.pdf.
187. GATS, supra note 1, art. V:3(a).
188. Jacques Berthelot, Solidarité, David and Goliath: Argument against the Economic
Partnership Agreements (EPAs) between the European Union and the African, Caribbean and
Pacific Countries 12-14 (2006), available at http://www.acp-eu-trade.org/library/files/Berthelot_
EN_191206_Solidarite_David-Goliath-argument-against-the-EPAs.pdf.
189. Id. at 13.
190. Id.
191. Id.
192. Enabling Clause, supra note 18, ¶ 2.
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2007] BRIDGING THE CONSTITUTIONAL CREDIBILITY GAP 33

Proposal: The reciprocity issue could have important

implications for developing countries. Current studies on the
economic impact of reciprocal RTAs between developing and
developed countries are not leading to generally agreed conclusions.
To provide a more solid basis for decision-making in the framework
of the Doha Development Round (Doha Round or Round), a
comprehensive impact study should be jointly commissioned by WTO
and the United Nations Conference on Trade and Development
(UNCTAD) to determine the economic and social consequences of
changing non-reciprocal benefits for regional groups of developing
countries into reciprocal free trade.
Furthermore, in view of the development focus of the Doha
Round, the members should be ready “to redress the imbalance
between [special and differential treatment] in Article V of GATS
193
and its absence in the Article XXIV of GATT.” Such a step would
be in full respect for the Round’s mandate which states explicitly that
negotiations on rules for RTAs “shall take into account the
194
developmental aspects of regional trade agreements.” In their
interesting study on this issue, Axel Borrmann, Harald Grossmann
and Georg Koopmann have explained that the concept of special and
differential treatment for developing countries in the context of
Article XXIV can take the form of flexibility as regards the breadth,
195
the depth, and the speed of liberalization. Flexibility regarding the
breadth of liberalization would allow the developing countries to
196
apply less demanding levels of final trade coverage under the RTA.
Flexibility as to the depth of liberalization would permit developing
countries to take temporary protective measures, in particular to
197
protect infant industries. Flexibility as to the speed of liberalization
would provide developing countries with a possibility for asymmetry

193. Stephen N. Karingi & Rémi Lang, Presentation by the United Nations Economic
Commission for Africa for the retreat of African Ambassadors and Negotiators based in
Geneva on Development Benchmarks for the Hong Kong Ministerial, Lausanne: Negotiations
on Rules with regard to Regional Trade Agreements 1 (Nov. 5-6, 2005). See generally Rémi
Lang, Renegotiating GATT Article XXIV: a Priority for African Countries Engaged in North-
South Trade Agreements (U.N. Econ. Comm’n for Africa, Africa Trade Pol’y Ctr. Work in
Progress No. 33, 2006).
194. WTO, Ministerial Declaration of 14 November 2001, supra note 1, ¶ 29.
195. AXEL BORRMANN, HARALD GROSSMANN & GEORG KOOPMANN, FED. MINISTRY
FOR ECON. COOPERATION AND DEV., THE WTO COMPATIBILITY OF THE ECONOMIC
PARTNERSHIP AGREEMENT BETWEEN THE EU AND THE ACP STATES 34 (2005) (F.R.G.).
196. See id. at 35.
197. Id.
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34 DUKE JOURNAL OF COMPARATIVE & INTERNATIONAL LAW [Vol 18:1

in tariff removal and the right to enjoy a lengthy transitional period

198
for the entry into force of the RTA. The precise scope of the
flexibility would need to be defined in function of the results of the
joint WTO-UNCTAD study.

4. The Specific Requirement for Customs Unions. The fourth

internal requirement deals specifically with customs unions. GATT
Article XXIV:8(a)(ii) contains the requirement that the parties to
customs unions must apply “substantially the same duties and other
199
regulations of commerce” in relation to third parties. According to
the Appellate Body in the Turkey-Textiles case, this provision implies
that the “constituent members of a customs union are . . . required to
200
apply a common external trade regime.” The Appellate Body adds
that the term “substantially the same” offers a “certain degree of
flexibility.” However, it cautioned that this flexibility is limited: “It
must not be forgotten that the word ‘substantially’ qualifies the words
‘the same’. Therefore, in our view, something closely approximating
201
‘sameness’ is required by Article XXIV:8(a)(ii).”

5. The Period of Implementation. The fifth internal

requirement deals with the time period within which the RTA is to be
formed. GATT Article XXIV:5(c) states that “any interim
agreement . . . shall include a plan and schedule for formation of . . .
customs union or . . . free trade area within the reasonable period of
202
time.” The Understanding on the Interpretation of Article XXIV of
GATT 1994 clarifies that the “reasonable period of time” referred to
in paragraph 5(c) should be ten years and should only exceed this
period of time in exceptional cases. Where the parties believe that
they need more time, the Understanding stipulates that they shall
203
provide a full explanation to the Council for Trade in Goods.
Proposal: In order to avoid needless discussions and possible
abuse, terms such as “reasonable” should be avoided in a
constitutional text. In this context, it would be appropriate to clarify
that the ten-year principle included in the Uruguay Round

198. Id.
199. GATT 1947, supra note 1, art. XXIV: 8(a)(ii) (emphasis added).
200. Appellate Body Report on Turkey-Textiles, supra note 35, ¶ 49; see also COTTIER &
OESCH, supra note 144, at 379.
201. Appellate Body Report on Turkey-Textiles, supra note 35, ¶ 50.
202. GATT 1947, supra note 1, art. XXIV:5(c) (emphasis added).
203. Understanding on Article XXIV, supra note 16, ¶ 3.
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2007] BRIDGING THE CONSTITUTIONAL CREDIBILITY GAP 35

Understanding is the rule: “[T]he right to depart from the general

rule of ten years should be reserved for developing countries and
204
[Least Developed Countries].”

B. The WTO’s External Requirements for RTAs

1. The General Principle. GATT Article XXIV:4 starts by

stating that
[t]he contracting parties recognize the desirability of increasing
freedom of trade by the development, through voluntary
agreements, of closer integration between the economies of the
countries parties to such agreements. They also recognize that the
purpose of a customs union or of a free-trade area should be to
facilitate trade between the constituent territories and not to raise
205
barriers to trade of other contracting parties with such territories.
Already in the GATT 1947 era, the question arose of whether
206
paragraph 4 creates a separate operational obligation on RTAs.
While the parties to RTAs have generally held the view that
paragraph 4 can be seen as a purposive preamble without additional
legal consequences, third countries have tended to interpret it as
creating a separate obligation to be complied with by the RTA
207
parties, independent of other Article XXIV provisions. The issue
was first discussed in depth during the examination of the Treaty of
208
Rome establishing the European Economic Community in 1957.
The Community’s representatives held that the paragraph was merely
laying down a “general principle” that was translated into legal
209
requirements in paragraphs 5 to 9. However, “[m]ost members of
the Sub-Group were not prepared to accept this interpretation” and
argued that consistency with paragraph 4 was something to be
210
checked separately.

204. BORRMANN, GROSSMANN & KOOPMANN, supra note 195, at 35.

205. GATT 1947, supra note 1, art. XXIV:4.
206. See GUIDE TO GATT, supra note 105, at 796-98.
207. Edwini Kessie, Counsellor, Presentation of the Council and Trade Negotiation
Committee, WTO Rules on Regional Trade Agreements 20 (Dec. 4-8, 2006) (presentation
available at the U.N. Institute for Training and Research, http://www.unitarny.org/mm/
File/RTA-Rules.pdf).
208. GUIDE TO GATT, supra note 105, at 796.
209. Id. at 797.
210. GATT, Report Submitted by the Committee on Treaty of Rome to the Contracting
Parties on 29 November 1957, supra note 136, Annex I ¶ 3.
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36 DUKE JOURNAL OF COMPARATIVE & INTERNATIONAL LAW [Vol 18:1

The Community’s position that “Article XXIV:4 did not

211
constitute an obligation but an objective . . .” has in the meantime
been endorsed by the WTO’s Appellate Body. In the Turkey-
Textiles case it held, “Paragraph 4 contains purposive, and not
operative language. It does not set forth a separate obligation itself
but, rather, sets forth the overriding and pervasive purpose for Article
XXIV which is manifested in operative language in the specific
212
obligations that are found elsewhere in Article XXIV.” The
Appellate Body also concluded that “the purpose set forth in
paragraph 4 informs the other relevant paragraphs of Article XXIV”
and that these other paragraphs “must be interpreted in the light of
213
the purpose . . . set forth in paragraph 4.”

2. The External Trade Consequences of RTAs. In addition to

its internal requirements that focus on the relationship between the
parties to an RTA, GATT Article XXIV also contains external
obligations that deal with the RTAs legal relationship with non-
members. A crucial provision in this context states that the “duties
and other regulations of commerce” imposed by a customs union or
free-trade area in respect of contracting parties not parties to such
union or free-trade area “shall not on the whole be higher or more
restrictive than the general incidence of the duties and regulations of
commerce applicable in the constituent territories prior to the
214
formation of such [a customs] union . . . [or] free-trade area.”
During the Uruguay Round, the European Community argued
that the purpose of the examination under GATT Article XXIV:5
was to discuss the consequences of the customs union or free trade
area “by looking at the total trade of the member States with the
215
other contracting parties taken collectively.” Japan, however,
strongly opposed an approach that would simply be based on a
comparison of the average overall tariff rates before and after the
formation of a customs union or free trade area. “[T]o ensure that
particular industries and non-member contracting parties would not
be disproportionately affected by [a new] customs union [or a free

211. GATT, Report of the Working Party on Accession of Portugal and Spain to the
European Communities, ¶ 22, L/6405 (Oct. 5, 1988).
212. Appellate Body Report on Turkey-Textiles, supra note 35, ¶ 57.
213. Id.
214. GATT 1947, supra note 1, art. XXIV:5 (emphasis added).
215. Youri Devuyst, GATT Customs Union Provisions and the Uruguay Round: The
European Community Experience, 26 J. WORLD TRADE 15, 29 (1992).
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2007] BRIDGING THE CONSTITUTIONAL CREDIBILITY GAP 37

trade area], the approach favoured by the Japanese delegation

[suggested taking] into account the specific product-by-product
effects . . . on individual non-members.” The EC rejected the
Japanese proposal as being in total opposition to its well-established
216
views. In the end, the Uruguay Round Understanding clarified that
evaluations in application of Article XXIV:5 would have to “be based
upon an overall assessment of weighed average tariff rates and of
217
customs duties collected.” Settling the debate as to whether one
should consider, when applying the test of Article XXIV:5, the bound
rates or the applied rates of duty, the Understanding clarified that
“the duties and charges to be taken into consideration shall be the
218
applied rates of duty.” With respect to the “overall assessment of
the incidence of other regulations of commerce for which
quantification and aggregation are difficult,” the Uruguay Round
Understanding recognized that “the examination of individual
measures, regulations, products covered and trade flows affected may
219
be required.” The Appellate Body in the Turkey-Textiles case
confirmed this recognition by stating that “for the purpose of the
overall assessment of the incidence of other regulations of commerce
for which quantification and aggregation are difficult, the
examination of individual measures, regulations, products covered
220
and trade flows affected may be required.”
In general, the Appellate Body in the Turkey-Textiles case held
that the test for assessing whether a specific customs union is
221
compatible with GATT Article XXIV:5 is an “economic” one.

216. Id. at 28-29.

217. The Understanding stipulates that “[t]his assessment shall be based on import statistics
for a previous representative period to be supplied by the customs union, on a tariff-line basis
and in values and quantities, broken down by WTO country of origin. The Secretariat shall
compute the weighed average tariff rates and customs duties collected in accordance with the
methodology used in the assessment of tariff offers in the Uruguay Round.” Understanding on
Article XXIV, supra note 16, ¶ 2.
218. Id.
219. Id.
220. Id.; Appellate Body Report on Turkey-Textiles, supra note 35, ¶ 54.
221. Appellate Body Report on Turkey-Textiles, supra note 35, ¶ 55. See also WTO
ANALYTICAL INDEX, supra note 140, ¶ 623. Following Jacob Viner’s seminal work on customs
unions, JACOB VINER, THE CUSTOMS UNION ISSUE 41-81 (1950), some lawyers have proposed
to reformulate the wording of GATT Article XXIV to underline that RTAs should serve trade
creation and not trade diversion. Trade creation occurs when the establishment of an RTA
stimulates a member country to replace goods previously produced at home (at a relatively
higher cost) with goods imported from another member (at relatively lower costs). Trade
creation may also be the result of the economic growth that is induced by an RTA and results in
higher amounts of imports from the outside world. Trade diversion takes place when goods
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38 DUKE JOURNAL OF COMPARATIVE & INTERNATIONAL LAW [Vol 18:1

However, both practitioners and academics have argued that such

economic tests suffer from three important shortcomings. First, the
Uruguay Round compromise related to the calculation of the
“general incidence of duties and other regulations of commerce” and
did not foster agreement on the final conclusion to be drawn from
such economic tests in specific cases. The Understanding still
provides
sufficient room for members . . . to express diverging opinions on
the relative weight to be attached to the overall assessment versus a
product-specific or country-specific assessment. Moreover, even if
attention goes mainly to the overall assessment of a customs
union’s global tariff schedule, past Article XXIV:5 exercises have
shown that an evaluation of weighted average tariff rates on the
one hand and of customs duties collected on the other hand does
222
not necessarily lead to a similar conclusion.
Second, among expert economists, there is no agreement on the
methodology to be used for measuring the impact of an RTA:
“empirical studies [on the economic impact of RTAs] yield diverse
conclusions according to the particular methodological assumptions
223
and limitations of the economic models they employ.” Some have
even argued that it is simply impossible to arrive at any sound result
on the basis of economic analysis. Ambassador Ernest H. Preeg, a
U.S. foreign service officer with twenty-five years of experience in
trade diplomacy, has come to the conclusion that “the actual trade
impact of regional free trade arrangements . . . cannot be measured
224
with precision.” Likewise, for Frederick M. Abbott, “the passage of

previously imported from the outside world are replaced, after the formation of an RTA, by
higher-cost production from within the RTA. See DAM, supra note 23, at 291-95.
222. Devuyst, supra note 215, at 29.
223. Cho, supra note 23, at 434. On the basis of a major review of the empirical literature on
RTAs, Chantal Pohl Nielsen concludes “that the quantitative assessments of PTAs are almost as
disparate in their conclusions as the theories underlying them.” CHANTAL POHL NIELSEN,
REGIONAL AND PREFERENTIAL TRADE AGREEMENTS: A LITERATURE REVIEW AND
IDENTIFICATION OF FUTURE STEPS 109 (Danish Research Inst. Food Econ., Report No. 155,
2003).
224. Ernest H. Preeg, The Compatibility of Regional Economic Blocs and the GATT, 526
ANNALS AM. ACAD. POL. & SOC. SCI. 164, 167 (1993). A similar conclusion was reached when
numerous U.S. agencies tried to foresee the economic consequences of the EC’s Internal
Market project in 1988-1992. The most comprehensive American report on this topic found
that “customs union theory . . . cannot predict whether trade with non-member countries will
increase or decrease.” U.S. INT’L TRADE COMM’N, PUBL’N NO. 2204, THE EFFECTS OF
GREATER ECONOMIC INTEGRATION WITHIN THE EUROPEAN COMMUNITY ON THE UNITED
STATES, at vi (1989). On the one hand, “the internal liberalization . . . will . . . tend to increase
trade among EC countries at the expense of existing trade with more efficient producers in the
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2007] BRIDGING THE CONSTITUTIONAL CREDIBILITY GAP 39

time [has given] rise to the sanguine conclusion that the trade
creation/trade diversion effects of RTAs are a priori indeterminate
225
under the current state of the economic art.” Jürgen Huber agrees:
“ex ante – and that is when the [GATT has] to decide about the
compliance with Art. XXIV – there is just no way to predict the
226
impact that can be expected from [an RTA].” The third problem is
that globalization of investment and production has increasingly
undermined the relevance of such concepts as trade creation and
diversion because they were intended to judge the effects of RTAs on
227
geographically defined national economies. According to Augusto
de la Torre and Margaret R. Kelly of the International Monetary
Fund, the assessment of RTAs should take into account that “the
gains from trade creation would also accrue to firms of non-member
countries with a physical presence (branches or subsidiaries) in the
region or with other forms of linkage to firms in the region (licensing
agreements, cross-shareholding arrangements, strategic alliances, and
228
so on).”
Proposal: As the previous paragraph has made clear, economists,
lawyers, and practitioners alike agree that there is simply no way to
predict in mathematical terms and with any degree of precision and
consensus what the overall impact of an RTA is going to be.
Therefore, as Frederick M. Abbott has written, this type of exercise is
229
“not the appropriate end of inquiry.” Frieder Roessler, the former
Director of GATT’s Legal Service, agrees with this conclusion. In his
view, the legal status of RTAs should not be made dependent on
calculated, but necessarily shaky, predictions of their economic

United States and other nonmember countries.” Id. On the other hand, “[p]roducers in
nonmember countries will benefit if the EC 1992 program boosts growth in the EC.” Id.
225. Frederick M. Abbott, GATT and the European Community: A Formula for Peaceful
Coexistence, 12 MICH. J. INT’L L. 1, 7 n.16 (1990).
226. Jürgen Huber, The Practice of GATT in Examining Regional Arrangements under
Article XXIV, 19 J. COMMON MARKET STUD. 281, 295 (1981). Along similar lines, see generally
Daniella Markheim, A Note on Predicting the Trade Effects of Economic Integration and Other
Preferential Trade Agreements: An Assessment, 32 J. COMMON MARKET STUD. 103 (1994);
Martin Wolf, Is there a Case for Free Trade Areas?: Comments, in FREE TRADE AREAS AND
U.S. TRADE POLICY, supra note 42, at 90.
227. See AUGUSTO DE LA TORRE & MARGARET R. KELLY, INT’L MONETARY FUND,
REGIONAL TRADE ARRANGEMENTS 5 (1992).
228. Id.
229. Abbott, supra note 225, at 7 n.16.
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40 DUKE JOURNAL OF COMPARATIVE & INTERNATIONAL LAW [Vol 18:1

impact.230 In other words, “general incidence” calculations could – at

most – have an indicative value. They should not determine the
WTO’s final stance towards RTAs. Instead, the WTO’s assessment
of RTAs should increasingly focus on the continuing evaluation of its
concrete trade policy measures. According to economists Alexis
Jacquemin and André Sapir, RTAs can be beneficial to world trade,
but only provided that their external trade policy is geared toward a
cooperative and welfare creating game with other regions and
231
countries. This cannot be measured or estimated in advance, but
rather, requires the examination of the RTA’s external trade policy
232
instruments on a sectoral basis. In other words, an effective
assessment of RTAs “requires an understanding of the detail” of their
233
commercial policy, as it evolves over time. This point underscores
the importance of a functioning and permanent monitoring system for
RTAs, as recommended in Part IV.E of this article. The current
CRTA reviews do not, however, include such a concrete and
permanent analysis of RTA trade policy measures.

3. The Specific Requirement for Customs Unions:

Compensatory Adjustment. The second external requirement on
RTAs concerns the common customs duties that are adopted by the
members of a customs union. If, in the creation of a customs union, a
WTO member increases a rate of duty inconsistently with what is
listed in its schedule of concessions, the customs union is obliged to
enter into compensatory adjustment negotiations with the “outside”
234
contracting parties. According to GATT Article XXIV:6, the
members of a customs union must thus offer compensatory
adjustment when bound tariffs have been raised following the

230. See Frieder Roessler, The Relationship between Regional Integration Agreements and
the Multilateral Trade Order, in REGIONAL INTEGRATION AND THE GLOBAL TRADING SYSTEM
311, 313 (Kym Anderson & Richard Blackhurst eds., 1993).
231. Alexis Jacquemin & André Sapir, Europe Post-1992: Internal and External
Liberalization, 81 AM. ECON. REV. 166, 169-70 (1991).
232. André Sapir, Regional Integration in Europe, 102 ECON. J. 1491, 1494-99 (1992).
233. Stephen Woolcock, The European Acquis and Multilateral Trade Rules: Are they
Compatible?, 31 J. COMMON MARKET STUD. 539, 545 (1993).
234. See GATT 1947, supra note 1, art. XXIV:6. Since free trade areas do not lead the
establishment of a common external trade policy and a common customs tariff, the creation of a
free trade area does not involve the unbinding of tariff schedules vis-à-vis third countries. As a
result, free trade areas do not need to go through the compensatory adjustment exercise under
GATT Article XXIV:6.
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2007] BRIDGING THE CONSTITUTIONAL CREDIBILITY GAP 41

formation or the enlargement of the union.235 Compensatory

adjustment negotiations following the formation of a customs union
are a logical consequence of the GATT system itself. As was
explained in Part II, under GATT Article II, the contracting parties
undertake the commitment to levy no more than the tariffs bound in
236
their schedule of concessions. If the formation of a customs union
leads to an increase in bound tariffs, the other contracting parties
should, according to the GATT logic, be compensated. In the
wording of GATT Article XXVIII, the aim is “to maintain a general
237
level of reciprocal and mutually advantageous concessions.” In
practice, the contracting parties “forming a customs union must
indicate the bound tariffs which they intend to modify or withdraw in
the establishment of the common customs tariff as well as the
238
compensatory adjustment which they are prepared to offer.” Those
contracting parties “with which the withdrawn tariff concessions were
initially negotiated or which have a principal supplying interest may
239
claim compensation for a breach of bindings.” If no negotiated
agreement can be reached on the correct amount of compensation
required, Article XXVIII:3 allows the parties to the customs union to
240
move ahead with the modification of their concessions. However,
in such a case, the parties claiming compensation as initial negotiator
or principal supplier are equally free to withdraw substantially
241
equivalent concessions within a six-month period.
In the pre-Uruguay Round era, the main problem during the
bilateral Article XXIV:6 negotiations was related to the so-called
242
credit-debit debate. While calculating the amount of compensatory
adjustment that was due to the non-members following the formation
of a customs union’s common customs tariff, the customs union often
claimed credits for tariff reductions in order to offset the debits
resulting from the increase of bound duties. Customs union requests

235. See id.; see also GATS, supra note 1, art. V:5 (“If, in the conclusion, enlargement or any
significant modification of any [RTA in services], a Member intends to withdraw or modify a
specific commitment inconsistently with the terms and conditions set out in its Schedule, it shall
provide at least 90 days advance notice of such modification or withdrawal and the procedure
set forth in paragraphs 2, 3 and 4 of Article XXI shall apply”).
236. See sources cited supra notes 74-75.
237. GATT 1947, supra note 1, art. XXVIII:2.
238. Devuyst, supra note 215, at 21.
239. Id.
240. GATT 1947, supra note 1, art. XXVIII:3(a).
241. Id.
242. See Devuyst, supra note 215, at 23-25.
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42 DUKE JOURNAL OF COMPARATIVE & INTERNATIONAL LAW [Vol 18:1

for internal credits that have been within one tariff-line have generally
243
been “relatively uncontested” by the contracting parties. However,
customs union requests for external credits and for reverse
244
compensation have proved controversial. Requests for external
credits by the parties to a customs union transgress a single tariff-line.
But the outsiders to customs unions have traditionally aimed for
product-specific compensation, and consequently, tended to reject
245
requests for external credits. In the Article XXIV:6 negotiations
with the United States following the creation of the European
Economic Community, the EC’s request for the acceptance of
246
external credits formed a major problem. Referring to specific U.S.
industries that would be injured by the creation of the common
customs tariff, the chairman of the U.S. delegation argued that there
was “no means of compensating such industries [as the automobile
sector] by credits accruing from the concessions to other industries
247
[such as the chemical sector].” On occasion, the EC has gone
beyond requests for external credits by claiming reverse
248
compensation. This means that the EC requested compensation
from its major trading partners because it deemed that—following an
enlargement with new member states—the general incidence of the
duties of those new EC member states decreased substantially in
249
comparison with the tariffs applied before the accession. Such
demands have been categorically dismissed by the “outsiders” as
250
being “without foundation” in the GATT.
During the Uruguay Round, the negotiators agreed that there is
no obligation on third parties to accept requests for reverse
251
compensation. Regarding external credits, the Uruguay Round
Understanding on the interpretation of Article XXIV recognizes that

243. Id. at 23. The Uruguay Round Understanding on Article XXIV recognizes internal
credits by stating that the calculation of compensation must take “due account shall be taken of
reductions of duties on the same tariff line made by other constituents of the customs union
upon its formation.” Understanding on Article XXIV, supra note 16, ¶ 5.
244. See Devuyst, supra note 215, at 23-25.
245. Id. at 24.
246. Id.
247. European Commission, Article XXIV:6 Tariff Negotiations U.S./EEC, GATT 422/61, 4
(Feb. 10, 1961).
248. This was notably the case following the EC’s enlargement with Greece in 1981. See
generally European Commission, U.S. Position in GATT on Greece’s Accession to the EEC
(July 9, 1982).
249. Devuyst, supra note 215, at 24-25.
250. Id. at 25.
251. Understanding on Article XXIV, supra note 16, ¶ 6.
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2007] BRIDGING THE CONSTITUTIONAL CREDIBILITY GAP 43

a customs union may “offer compensation, which may take the form
of reductions of duties on other tariff lines. Such an offer shall be
taken into consideration by the members having negotiating rights in
252
the binding being modified or withdrawn.” The Uruguay Round
clarification has been helpful during the concrete GATT Article
XXIV:6 negotiations. During the EEC’s creation and subsequent
enlargements in the pre-Uruguay Round years, compensatory
adjustment negotiations invariably resulted in trade disputes with the
253
United States. As a result of the clarification on the credits that can
be requested, the GATT Article XXIV:6 deals following the EC’s
enlargements of 1995 and 2004 have been concluded without major
254
drama.

IV. THE WTO’S PROCEDURAL

STANDARDS FOR ASSESSING RTAS: ANALYSIS OF THE
DOHA ROUND’S TRANSPARENCY MECHANISM AND
PROPOSALS FOR CHANGE
Transparency is an essential concept in the WTO: “Members
recognize the inherent value of domestic transparency of government
decision-making on trade policy matters for both Members’
economies and the multilateral trading system, and agree to
255
encourage and promote greater transparency . . . .” Transparency is

252. Id. ¶ 5.
253. Devuyst, supra note 215, at 25. See generally Vera Erdmann-Keefer, The Corn War: A
Euro-American Trade Dispute, in THE EVOLUTION OF AN INTERNATIONAL ACTOR 241
(Reinhardt Rummel ed., 1990); George N. Yannopoulos, United States Trade Interests and EC
Enlargement, 21 J. WORLD TRADE L. 49 (1987).
254. For the agreement under GATT art. XXIV:6 between the EC and the United States
following the EC’s enlargement to include Austria, Finland and Sweden in 1995, see U.S. Trade
Compliance Center, European Union Enlargement Compensation Agreement (July 22, 1996),
http://tcc.export.gov/Trade_Agreements/All_Trade_Agreements/exp_002819.asp. A similar
agreement was reached following the EC’s enlargement to include Estonia, Latvia, Lithuania,
Poland, Slovakia, the Czech Republic, Slovenia, Hungary, Cyprus and Malta in 2004. See Press
Release, U.S. Trade Representative, United States and European Communities Reach
Agreement on Enlargement Compensation Package (Nov. 30, 2005), http://www.ustr.gov/
Document_Library/Press_Releases/2005/November/United_States_European_Communities_R
each_Agreement_on_Enlargement_Compensation_Package.html.
255. WTO, Annex 3: Trade Policy Review Mechanism, in THE LEGAL TEXTS: THE RESULTS
OF THE URUGUAY ROUND OF MULTILATERAL TRADE NEGOTIATIONS 380, 380 (1999)
[hereinafter TPRM]; see also Meinhard Hilf, Power, Rules and Principles – Which Orientation
for WTO/GATT Law?, 4 J. INT’L ECON. L. 111, 119 (2001); K. G. Anthony Hill, former
Ambassador from Jamaica to the U.N, Remarks at the WTO Public Symposium – WTO after
10 Years: Global Problems and Multilateral Solutions: Transparency and Participation in the
National Trade Policy Process (Apr. 20, 2005), www.wto.org/english/news_e/events_e/
symp05_e/hill5_e.doc; MAVROIDIS, supra note 74, at 270; see generally Sylvia Ostry, China and
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44 DUKE JOURNAL OF COMPARATIVE & INTERNATIONAL LAW [Vol 18:1

of particular importance with respect to RTAs as they are an

exception to the key MFN-principle. In Article XXIV:7(a), GATT
1947 provides that contracting parties should “promptly notify [their
Agreement to] the contracting parties and shall make available to them
such information regarding the proposed union or area as will enable
them to make such reports and recommendations to contracting parties
256
as they may deem appropriate.” GATS Article V:7(a) stipulates
that members which are parties to any RTA covering trade in services
shall promptly notify such agreement, enlargement or modification of
that agreement. Members that are parties to an RTA that is
implemented on the basis of a time-frame shall report periodically on
257
its implementation. The Enabling Clause provides in paragraph 4
that “[a]ny contracting party taking action to introduce an
arrangement . . . or subsequently taking action to introduce
modification or withdrawal of the differential and more favourable
treatment so provided shall: (a) notify the contracting parties and
furnish them with all the information they deem appropriate relating to
258
such action. . . .”
As noted in the introduction, the WTO assessment of RTAs has
not been successful. None of the RTAs notified to the WTO have
been formally approved. When WTO members agreed at the Doha
Ministerial Conference to launch negotiations in the area of the WTO
rules, provisions applying to regional trade agreements were included
259
in the mandate. Taking developmental aspects into account, the
WTO members agreed to start negotiations that would improve
disciplines and procedures under the existing WTO provisions
applying to RTAs. The negotiations took place in the Negotiation
Group on Rules (NGR) that reports to the Trade Negotiations
Committee (TNC). “Several delegations . . . stressed the need to
improve the transparency of RTAs and the efficiency of the

the WTO: The Transparency Issue, 3 UCLA J. INT’L L. & FOREIGN AFF. 1 (1998); Carl-
Sebastian Zoellner, Note, Transparency: an Analysis of an Evolving Fundamental Principle in
International Economic Law, 27 MICH. J. INT’L L. 579 (2006).
256. GATT 1947, supra note 1, art. XXIV:7(a).
257. GATS, supra note 1, art. V:7(b).
258. Enabling Clause, supra note 18, at 204; WTO, TECHNICAL COOPERATION HANDBOOK
ON NOTIFICATION REQUIREMENTS: REGIONAL TRADE AGREEMENTS at 2,
WT/TC/NOTIF/REG/1 (1996) [hereinafter WTO TECHNICAL COOPERATION HANDBOOK].
259. WTO, Ministerial Declaration of 14 November 2001, supra note 1, ¶ 29 (“We also
agree to negotiations aimed at clarifying and improving disciplines and procedures under the
existing WTO provisions applying to regional trade agreements. The negotiations shall take
into account the developmental aspects of regional trade agreements.”).
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2007] BRIDGING THE CONSTITUTIONAL CREDIBILITY GAP 45

procedures related to the examination of RTAs, noting that the

CRTA [Committee on Regional Trade Agreements] ha[s] been
unable to adequately fulfill its mandate of reviewing RTAs and
260
overseeing their implementation.” At the meeting of November 25-
27, 2002, Turkey submitted a paper to the NGR which “indicated that
[the] basic transparency requirements such as notification, scope of
information to be submitted, periodical reporting, examination
process and determining the legal status of the examination reports of
the [CRTA] appeared” to be subjects where agreement would be
possible and, therefore, could be “a good starting-point for the
261
negotiations.” Other members submitted constructive proposals on
262
the theme. On July 10, 2006, after long process of discussing and
negotiating, the NGR formally approved a new Transparency
Mechanism for all RTAs, and decided to let the new transparency
263
mechanism enter into force on a provisional basis. The following
paragraphs will detail the features of the Transparency Mechanism
against the background of the WTO’s practice over the last decades.

A. The Competent Body for the Examination of RTAs

In the old days of GATT 1947, examination of RTAs was
264
conducted by individual working parties. Often, several working
parties co-existed, each assessing different RTAs. This fragmented
approach neither contributed to coherence, nor to an orderly
discussion of systemic issues which are common to RTAs. To remedy
these problems, the WTO General Council established the
Committee on Regional Trade Agreements (CRTA) in February
265
1996. The CRTA’s role is to carry out the examination of RTAs; to
consider and make appropriate recommendations on the requirement
for biennial reporting on their operation; to develop procedures to
facilitate and improve the examination process; and to consider the

260. Negotiating Group on Rules, Summary Report of the Meeting Held on 6 & 8 May 2002,
¶ 40, TN/RL/M/2 (June 11, 2002).
261. Negotiating Group on Rules, Summary Report of the Meeting Held on 25-27 November
2002, ¶ 26, TN/RL/M/5 (Jan. 8, 2003); Negotiating Group on Rules, Submission on Regional
Trade Agreements by Turkey, at 2, TN/RL/W/32 (Nov. 25, 2002).
262. See generally Negotiating Group on Rules, Joint Communication from Australia; Chile;
Hong Kong,China; Korea and New Zealand, Submission on Regional Trade Agreements,
TN/RL/W/117 (June 11, 2003) (suggesting changes to RTAs).
263. General Council, Meeting of 14-15 December 2006, at 3, WT/GC/M/106 (Mar. 1, 2007).
264. GUIDE TO GATT, supra note 105, at 814-15.
265. General Council, Decision of 6 February 1996, WT/L/127 (Feb. 7, 1996).
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46 DUKE JOURNAL OF COMPARATIVE & INTERNATIONAL LAW [Vol 18:1

systemic implications of such agreements and regional initiatives for

266
the multilateral trading system and the relationship between them.
In WTO practice, RTAs falling under GATT Article XXIV are
notified to the Council for Trade in Goods (CTG) which is in charge
of adopting the terms of reference and of transferring the agreement
267
to the CRTA for examination. RTAs covering trade in services
concluded by any WTO members, whether developed or developing,
are notified to the Council for Trade in Services (CTS) which is free
to decide whether to pass the agreement to the CRTA for
268
examination. Unlike mandatory examinations of RTAs notified
269
under GATT Article XXIV, these examinations are optional. The
notification of RTAs falling under the Enabling Clause is made to the
Committee on Trade and Development (CTD). The agreement is,
then, placed on the agenda of the CTD meeting where a debate is
held. Generally, however, no in-depth examination in the CRTA is
270
requested.
During the course of the Doha Round, one of the issues debated
was whether all RTAs should be notified to one single body or
whether RTAs under the GATT 1994 and the GATS should be
reviewed separately from the RTAs concluded under the Enabling
271
Clause. For the Group of African and Least Developed Countries
(LDC), bringing “Enabling Clause RTAs” under CRTA review was
“contrary to the spirit of the WTO framework and of the Doha
Ministerial Declaration.” They contended that these RTAs should
continue to be notified to the Committee on Trade and Development
272
(CTD). The final version of the Transparency Mechanism gave
satisfaction to the LDC on this point. The bodies entrusted with the
implementation of the transparency mechanism continue to be the
CRTA for RTAs falling under GATT Article XXIV and GATS
Article V and the CTD for RTAs falling under paragraph 2(c) of the
Enabling Clause. For purposes of performing the functions

266. Id. ¶ I.
267. Work of the Committee on Regional Trade Agreements (CRTA), http://www.wto.org/
english/tratop_e/region_e/regcom_e.htm (last visited Nov. 20, 2006).
268. Id.
269. Id.
270. Id.
271. See Negotiating Group on Rules, supra note 260, ¶ 36.
272. Negotiating Group on Rules, supra note 148, ¶ 12.
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2007] BRIDGING THE CONSTITUTIONAL CREDIBILITY GAP 47

established under the Transparency Mechanism, the CTD shall

273
convene in dedicated session.

B. The Information to be Provided

The examination of notified RTAs is conducted on the basis of
information provided by the parties. GATT Article XXIV:7(a)
requires WTO members to provide information on a proposed free
trade area or customs union as they deem appropriate. It does not lay
down any specific notification format to be followed by countries
274
wishing to form a regional trading arrangement. GATS Article
V:7(a) provides without further instructions that any member
entering into an agreement shall make relevant information available
275
to the Council for Trade in Services as the latter may request it.
Paragraph 4(a) of the Enabling Clause states that any member taking
action to introduce an arrangement shall provide other contracting
parties with all information, as the former considers appropriate.
However, the Enabling Clause “does not lay down any specific format
to be followed by developing countries wishing to grant preferences to
276
each other.”
In an attempt to clarify matters, the WTO’s Technical
Cooperation Handbook on Notification Requirements of 1996
specifies that “the notification is expected to indicate the parties to the
arrangement, the coverage of the agreement, whether it is a free-trade
277
area or a customs union or an interim agreement.” In the case of an
interim agreement, the transitional period must be stated. A copy of
the Treaty or Agreement between the parties must be annexed to the
278
Notification. Also in 1996, the Chairman of the CRTA worked out a
Standard Format for Information on Regional Trade Agreements.
While extensive in scope, the Standard Format “should be viewed as
Guidelines by the Chairman as to basic information that could be
provided by parties notifying regional trade agreements to the

273. WTO Transparency Mechanism for RTAs, supra note 1, ¶ 18.

274. See GATT 1947, supra note 1, art. XXIV:7(a)
275. See GATS, supra note 1, art. V:7(a)
276. WTO TECHNICAL COOPERATION HANDBOOK, supra note 258, at 2; see also Enabling
Clause, supra note 18, at 204.
277. WTO TECHNICAL COOPERATION HANDBOOK, supra note 258, at 3.
278. Id.
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48 DUKE JOURNAL OF COMPARATIVE & INTERNATIONAL LAW [Vol 18:1

WTO.”279 In other words, the parties could adhere to the Standard

280
Format on a voluntary basis, but they were not obliged to do so.
The clarifications of 1996 did not resolve the discussions between
the members on the quantitative and qualitative nature of the
statistics that had to be submitted by the parties. Some members
insisted that a maximum possible amount of statistics was very
important for assessing the conformity of RTAs with WTO rules and
to understand how the economies of parties to RTAs were adjusting
281
to the evolution of trade patterns. Others argued that detailed
282
statistics were not only hard to obtain, but often misleading. The
Doha Round Transparency Mechanism hardly contributes to settling
the matter. The Transparency Mechanism’s inventory of data that
the RTA parties are expected to make available is less comprehensive
283
than the Standard Format of 1996. Furthermore, as it is staying at a
high level of generality, the Transparency Mechanism is unlikely to
bring an end to the long-lasting discussions on the level of
sophistication that is required of the statistical information to be
submitted.

C. The Role of the WTO Secretariat

With respect to the concrete examination of RTAs by the CRTA
and the CTD, the Doha Round Transparency Mechanism contains an
important novelty. In the past, the WTO Secretariat played only a
marginal role in the assessment of RTAs. Under the Transparency
Mechanism, “the WTO Secretariat, on its own responsibility and in
full consultation with the parties, shall prepare a factual presentation
284
of the RTA.” This procedure seems comparable to what exists
285
under the Trade Policy Review Mechanism (TPRM). In preparing
the factual presentation, the WTO Secretariat must refrain from any

279. Committee on Regional Trade Agreements, Standard Format for Information on

Regional Trade Agreements, at 1, WT/REG/W/6 (Aug. 15, 1996).
280. See id.
281. Committee on Regional Trade Agreements, Synopsis of “Systematic” Issues Related to
Regional Trade Agreements, ¶ 18(a), WT/REG/W/37 (Mar. 2, 2000).
282. Id. ¶ 18(b).
283. See WTO Transparency Mechanism for RTAs, supra note 1, Annex paras. 2-4.
284. Id. ¶ 7.
285. For information regarding TPRM, see generally Asif H. Qureshi, The New GATT
Trade Policy Review Mechanism: An Exercise in Transparency or “Enforcement”?, 24 J. WORLD
TRADE 147 (1990); Victoria Curzon-Price, GATT’s New Trade Policy Review Mechanism, 14
WORLD ECON. 227 (1991); Petros C. Mavroidis, Surveillance Schemes: The GATT’s New Trade
Policy Review Mechanism, 13 MICH. J. INT’L L. 374 (1992).
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2007] BRIDGING THE CONSTITUTIONAL CREDIBILITY GAP 49

value judgment. The presentation shall be primarily based on the

information provided by the parties. “[I]f necessary, the WTO
Secretariat may also use data available from other sources, taking
into account the views of the parties in furtherance of factual
286
accuracy.” Contrary to what had been suggested in the academic
literature, the Transparency Mechanism leaves no doubt that the
WTO Secretariat’s factual presentation shall not be used as a basis for
dispute settlement procedures or to create new rights and obligations
287
for members. If the TPRM may serve as precedent, the WTO
Secretariat’s reporting duty is likely to bring coherence and
consistency to the assessment process. Furthermore, it will provide
an objective starting point for the examination. As such, it constitutes
288
a major improvement in the surveillance process.
The WTO Secretariat’s factual presentation, as well as any
additional information submitted by the parties, shall be circulated
in all WTO official languages not less than eight weeks in advance
of the meeting devoted to the consideration of the RTA.
As a rule, a single formal meeting will be devoted to consider each
notified RTA; any additional exchange of information should take
289
place in written form.
In a further push for transparency, the Doha Round Mechanism
states that:
the WTO Secretariat shall establish and maintain an updated
electronic database on individual RTAs. This database shall
include relevant tariff and trade-related information, and give
access to all written material related to announced or notified
RTAs available at the WTO. The RTA database should be
290
structured so as to be easily accessible to the public.

D. The Timing of the Notification

1. Early Announcement. As to the timing of the assessment

exercise, some delegations expressed support for early notification.
Australia and Hong Kong, for example, interpreted the term “shall
promptly notify” to mean that the notification and submission of
information should take place before the entry into force of the

286. WTO Transparency Mechanism for RTAs, supra note 1, ¶ 9.

287. But see Cottier & Foltea, supra note 21, at 71 (advocating a stronger monitoring role
for the WTO Secretariat).
288. See sources cited supra note 285.
289. WTO Transparency Mechanism for RTAs, supra note 1, ¶¶ 11-12.
290. Id. ¶ 21.
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50 DUKE JOURNAL OF COMPARATIVE & INTERNATIONAL LAW [Vol 18:1

agreement.291 However, members frequently participating in RTAs

refused an obligation to formally notify their agreements before the
292
entry into force. Instead, the Doha negotiators agreed on a two-
293
stage process.
The first phase is called the “early announcement.” Without
affecting the substance and the timing of the notification required
under GATT Article XXIV, GATS Article V or the Enabling Clause,
nor affecting members’ rights and obligations under the WTO
agreements in any way, the Doha Round negotiators agreed on the
usefulness of an “early announcement” of pending RTAs. This
implies that members participating in negotiations aimed at the
conclusion of an RTA
. . . shall endeavour to so inform the WTO.
Members 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
294
any other relevant unrestricted information.
295
This information will be posted on the WTO website.

2. Notification in the Strict Sense. The second phase covers the

notification in the strict sense. The Transparency Mechanism
stipulates that notification “shall take place as early as possible. As a
rule, it will occur no later than directly following the parties’
ratification of the RTA or any party’s decision on application of the
relevant parts of an agreement, and before the application of
296
preferential treatment between the parties.” The Mechanism adds
that the WTO consideration of a notified RTA “shall be normally
concluded in a period not exceeding one year after the date of
297
notification.” The submission of the required information should,
normally, “not exceed ten weeks— or 20 weeks in the case of RTAs

291. Committee on Regional Trade Agreements, supra note 281, ¶ 13(a).

292. See Negotiating Group on Rules, Summary Report of the Meeting Held on 8-10 July
2002, at 7, TN/RL/M/3 (Aug. 1, 2002).
293. Negotiating Group on Rules, supra note 147, ¶ 16.
294. WTO Transparency Mechanism for RTAs, supra note 1, ¶ 1.
295. Id. ¶ 2.
296. Id. ¶ 3.
297. Id. ¶ 6.
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2007] BRIDGING THE CONSTITUTIONAL CREDIBILITY GAP 51

involving only developing countries— after the date of notification of

298
the agreement.”
To fight non-notification, the Doha Round agreed that “[a]ny
Member may, at any time, bring to the attention of the relevant WTO
body information on any RTA that it considers ought to have been
submitted to Members in the framework of th[e] Transparency
299
Mechanism.”

3. The Subsequent Notification and Reporting of Changes to

RTAs. GATS Article V:7(a) makes clear that parties to any RTA
covering trade in services shall also notify the enlargement or
modification of that agreement. Moreover, under GATS, parties to
an RTA that is implemented on the basis of a time-frame are obliged
300
to report periodically on its implementation. GATT Article XXIV
does not include explicit provisions on the notification or reporting of
modifications or extensions of existing customs unions or free trade
areas. By way of the Uruguay Round Understanding on the
interpretation of Article XXIV, it was nevertheless agreed that parties
to an interim agreement should notify substantial changes in an RTA’s
301
plan and schedule to the Council on Trade in Goods. If requested,
302
the Council will examine the changes. Customs unions and
constituents of free-trade areas shall, furthermore, report periodically
to the Council on Trade in Goods on the operation of the relevant
agreement. Any significant changes and/or developments in the
303
agreement should be reported as they occur. In practice, little
progress has been achieved with the implementation of this
instruction.
The Doha Round Transparency Mechanism goes only slightly
beyond these existing provisions. It adds that the required
notification of changes affecting the implementation of an RTA, or
the operation of an already implemented RTA, shall take place “as
304
soon as possible after the changes occur.” The Transparency
Mechanism clarifies that the

298. Id. ¶ 8.
299. Id. ¶ 20.
300. GATS, supra note 1, art. V:7(a)-(b).
301. Understanding on Article XXIV, supra note 16, ¶ 9.
302. Id.
303. Id. ¶ 11.
304. WTO Transparency Mechanism for RTAs, supra note 1, ¶ 14.
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52 DUKE JOURNAL OF COMPARATIVE & INTERNATIONAL LAW [Vol 18:1

[c]hanges to be notified include, inter alia, modifications to the

preferential treatment between the parties and to the RTA’s
disciplines. The parties shall provide a summary of the changes
made, as well as any related texts, schedules, annexes and
protocols, in one of the WTO official languages and, if available, in
305
electronically exploitable format.
It is also specified that the parties to an RTA shall—at the end of the
RTA’s implementation period—“submit to the WTO a short written
report on the realization of the liberalization commitments in the
RTA as originally notified. Upon request, the relevant WTO body
shall provide an adequate opportunity for an exchange of views on
306
the communications submitted.”

E. The Lack of Effective Monitoring After the Formative Stage of

RTAs
The Doha Round Transparency Mechanism for RTAs includes a
number of useful clarifications. The most significant innovation is the
WTO Secretariat in the examination of RTAs. Practice in the WTO’s
TPRM has indicated that the involvement of the WTO Secretariat
brings coherence, professionalism and objectivity to the assessment of
307
the trade policies of the members. Furthermore, the literature on
the compliance with international legal commitments underlines that
the involvement of the international secretariat to a treaty
organization in the reporting process is generally beneficial because
the secretariat often fulfils an educational role in guiding the parties
with respect to the techniques that have been or can be used to fulfill
308
their obligations. It is likely that the Secretariat’s role in the
examination of RTAs will fulfill a similar role.
The most important shortcoming of the Transparency
Mechanism concerns the monitoring of RTAs after their formal
notification. This is important. The practical effect of RTAs on the
multilateral trade system can hardly be studied upon their
309
formation. As RTAs are dynamic structures, a proper surveillance
regime requires a permanent monitoring system, also after their
formative stage. As Jeffrey J. Schott has argued,

305. Id.
306. Id. ¶¶ 15-16.
307. See generally ASIF H. QURESHI, THE WORLD TRADE ORGANIZATION: IMPLEMENTING
INTERNATIONAL TRADE NORMS, ch. 8 (1996); DONALD B. KEESING, IMPROVING TRADE
POLICY REVIEWS IN THE WORLD TRADE ORGANIZATION (1998).
308. Jacobson & Weiss, supra note 32, at 199.
309. See Cho, supra note 23, at 421.
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2007] BRIDGING THE CONSTITUTIONAL CREDIBILITY GAP 53

the WTO should undertake more active surveillance after pacts

enter into force. Most of the time, when it does take place, WTO
monitoring of regional pacts examines only what was negotiated
and whether it comports with GATT and GATS obligations.
However, what is really important is how the agreements are
implemented and what effects they have on international trade and
310
investment. That requires ex post analysis.
Even skeptical observers such as Richard Blackhurst and David
Henderson conclude that “knowledge that there will be such
surveillance is very likely to have an a priori impact on the contents of
311
the agreement.”
In spite of the importance given to “subsequent notification and
reporting” in the literature, the Transparency Mechanism’s provisions
do not constitute a significant step forward in comparison with the
pre-Doha regime for RTAs. Already under the pre-Doha rules, the
CRTA could, in theory, have fulfilled a permanent review function.
In 2001, the CRTA adopted a timetable for the submission of biennial
312
RTA reports. In practice, the planned biennial reporting did not
work well. It was regularly postponed, notably because of the late
submission of the required information by the parties concerned and
because of the already burdensome workload of delegations in the
313
context of the Doha Round.
In addition to the possible monitoring of RTAs by the CRTA,
the Uruguay Round texts on the TPRM foresaw “the review of
314
entities having a common external policy.” The TPRM is the
successful multilateral peer review system designed to provide a
collective appreciation and understanding of the full range of
members’ trade policies and practices and their impact on the
315
multilateral trading system. All WTO members are reviewed by the

310. Schott, supra note 170, at 18.

311. Richard Blackhurst & David Henderson, Regional Integration Agreements, World
Integration and the GATT, in REGIONAL INTEGRATION AND THE GLOBAL TRADING SYSTEM
408, 428 (Kym Anderson & Richard Blackhurst eds., 1993).
312. WTO, Report (2002) of the Committee on Regional Trade Agreements to the General
Council, Attachment 3, WT/REG/11 (Nov. 25, 2002).
313. Id. ¶¶ 6, 8.
314. TPRM, supra note 255, at 381.
315. As it has been successful, activists have tried to link their special interest subjects to the
TPRM. See generally Barbara Evers, GAPRESEARCH.ORG, Linking Trade and Poverty:
Reinventing the Trade Policy Review Mechanism (2003), http://www.gapresearch.org/
governance/Evers-TPRM-WEB-31july03.pdf; Barbara Evers, GAPRESEARCH.ORG, Gender,
International Trade and the Trade Policy Review Mechanism: Conceptual Reference Points for
UNCTAD (2002), http://www.gapresearch.org/governance/BE%20evers%20unctad%20
paper1.pdf; Int’l Labour Org., Reviewing Labour Rights Through the Trade Policy Review
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54 DUKE JOURNAL OF COMPARATIVE & INTERNATIONAL LAW [Vol 18:1

Trade Policy Review Body (TPRB), the frequency of each country’s

316
review varying according to its share of world trade. TPRM
monitoring is conducted on the basis of a policy statement by the
member under review and a report prepared by the WTO Secretariat.
The TPRB’s debate is stimulated by two discussants, selected
317
beforehand for this purpose. While it had the possibility to include
RTAs with a common trade policy on its review list, in practice there
has been little inclination by the TPRB to include RTAs in its
examination schedule. In a note dated December 13, 1995, the TPRB
Chairperson stated that “it should be stressed that individual reviews
must remain the basis of the TPRM. There is room for consideration
of grouping of reviews, where possible; however, at this stage there is
318
no support for reviews of regional entities other than the EU.” As a
WTO member, the EU has been subject to TPRM reviews in 1995,
319
1997, 2000, 2002, 2004 and 2007. As regards the other RTAs, only
the South African Customs Union (in 1998 and 2003) and the WTO
members of the Organization of East Caribbean States have been
320
subject to TPRM review.
Proposal: With respect to the monitoring of RTAs after their
creation, the Doha Round Transparency Mechanism suffers from two
important shortcomings. First, the initiative for “subsequent
notification and reporting of changes” to RTAs essentially remains
with the parties to regional agreements. Without regularity in the
timing of the submission of information and without a detailed
reporting format, “subsequent notification and reporting” risks
remaining without practical effect. The WTO should therefore strive
for the creation of a regular reporting and updating requirement for
321
all RTAs, for instance on a five-year basis. Such a requirement
would help to bring discipline into the permanent monitoring system.

Mechanism, http://www.ilo.org/dyn/idea/ideasheet.display?p_idea_id=57 (last visited Nov. 5,

2006).
316. See WTO, Overseeing National Trade Policies: the TPRM, http://www.wto.org/english/
tratop_e/tpr_e/tp_int_e.htm (last visited Mar. 2, 2007).
317. Id.
318. WTO, WTO ANALYTICAL INDEX: GUIDE TO WTO LAW AND PRACTICE, Trade Policy
Review Mechanism pt III.B.2 ¶ 13 (2007), available at http://www.wto.org/english/res_e/
booksp_e/analytic_index_e/tprm_e.htm.
319. See WTO, Trade Policy Reviews: The Reviews, http://www.wto.org/english/tratop_e/
tpr_e/tp_rep_e.htm#chronologically (last visited Mar. 2, 2007).
320. See id.
321. The five-year rule is in line with the proposal by Schott. Schott, supra note 170, at 18.
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2007] BRIDGING THE CONSTITUTIONAL CREDIBILITY GAP 55

This should be coupled with a standard reporting format.322 Second,

the Doha Round Transparency Mechanism fails to set up a proper
institutional framework for the permanent monitoring of RTAs.
Practice has shown that, under the currently applicable procedures,
neither the CRTA nor the TPRB are inclined to devote much time to
the permanent review of RTAs. Giving a practical meaning to
“subsequent notification and reporting,” implies the creation of an
appropriate institutional mechanism. This could take the form of a
subcommittee for the permanent review of RTAs within the CRTA.
The subcommittee should elect its own chairperson and be equipped
with its own staff. Much like the TPRM, permanent review of RTAs
should be conducted on the basis of a policy statement by the RTA
that is under review and a report prepared by the WTO Secretariat.
The review debate should be stimulated by two discussants, selected
323
beforehand for this purpose.

V. THE ENFORCEMENT OF THE WTO’S RTA DISCIPLINES:

AVOIDING “CONSTITUTIONAL OVERSTRETCH”
In addition to the discussions on the substantive and procedural
requirements that must be met by RTAs, questions persist on two key
topics related to the enforcement of WTO disciplines on RTAs. The
first question concerns the legal consequences that should result from
a WTO finding of incompatibility. The second question deals with
the justiciability of WTO disciplines on RTAs. Both issues will be
discussed below.

A. The WTO as the “Partial” Constitutional Supervisor of RTAs

In a leading contribution, Thomas Cottier and Marina Foltea
have underlined the importance of clearly establishing the supremacy
324
of WTO law over RTAs. They propose “an explicit constitutional
approach of regulating preferential agreements by and through the
325
disciplines of WTO law.” Under this approach, regional trade
agreements that are incompatible with WTO law would either be
declared null and void ab initio or unlawful under international law,

322. An adequate format exists on a voluntary basis. See Comm. on Reg’l Trade
Agreements, Note by the Chairman: Standard Format for Information on Regional Trade
Agreements, WT/REG/W/6 (Aug. 15, 1996).
323. This would be like the Trade Policy Review Mechanism. See WTO, supra note 316.
324. Cottier & Foltea, supra note 21, at 44.
325. Id. at 67.
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56 DUKE JOURNAL OF COMPARATIVE & INTERNATIONAL LAW [Vol 18:1

triggering state responsibility.326 However, while elegant from an

international law perspective, such proposals fail to appreciate the
limited nature of the WTO. Although the WTO framework might be
labeled a constitution, it is only a weak and partial constitution. On
the one hand, the WTO is largely confined to trade law and policy
and is far from a comprehensive legal structure that reflects the
variety of issues covered by RTAs. On the other hand, the WTO is
partial in the sense of being biased in favor of liberal trade values, to
the detriment of broader societal norms that are often expressed in
regional agreements. Failing to properly take these two limitations
into account might lead to proposals suffering from “constitutional
overstretch,” thus widening the credibility gap between the WTO’s
real capabilities and the constitutional expectations.
While the WTO does have a number of rules on topics that are
not exclusively trade issues, such as intellectual property rights and
health and safety measures, its scope of action is roughly limited to
327
trade policy. The principal mandate of the WTO is, indeed, to
provide the institutional framework “for the conduct of trade relations
328
among its members.” RTAs, however, often have broad
geopolitical, developmental, macroeconomic, social and
329
environmental goals, going well beyond trade policy. The
European Community’s vast network of RTAs, for instance, is
inspired by a combination of geopolitical, developmental and
330
commercial objectives. The RTAs concluded by the EC can be
divided into five categories:
• Free trade deals as part of association agreements that are
designed to support political and economic reform in the

326. Id. at 68.

327. Jeffrey L. Dunoff, Constitutional Conceits: The WTO’s ‘Constitution’ and the Discipline
of International Law, 17 EUR. J. INT’L L. 647, 666 (2006). For a comprehensive treatment of the
WTO’s scope, see generally Steve Charnovitz, Triangulating the World Trade Organization, 96
AM. J. INT’L L. 28 (2002). See also COTTIER & OESCH, supra note 144, at 83; VAN DEN
BOSSCHE, supra note 81, at 86.
328. Marrakesh Agreement Establishing the World Trade Organization, Apr. 15, 1994, 108
Stat. 4809, 1869 U.N.T.S. 183, art. II, available at http://www.wto.org/english/docs_e/legal_e/04-
wto_e.htm [hereinafter WTO agreement].
329. See generally Louise Fawcett, Regionalism in Historical Perspective, in REGIONALISM
IN WORLD POLITICS, REGIONAL ORGANIZATION AND INTERNATIONAL ORDER 9 (Louise
Fawcett & Andrew Hurrell eds., 1995); THE POLITICAL IMPORTANCE OF REGIONAL TRADING
BLOCS (Bart Kerremans & Bob Switky eds., 2000).
330. For an extensive study of the various dimensions of the RTAs concluded by the EC,
see generally Marc Maresceau, Bilateral Agreements concluded by the European Community,
309 RECUEIL DES COURS 125 (2004).
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2007] BRIDGING THE CONSTITUTIONAL CREDIBILITY GAP 57

post-Cold War countries of Central and Eastern Europe after

the fall of the Soviet system and to assist them on the way to
EU membership in areas such as environmental policy,
331
consumer protection and social security;
• Free trade deals as part of association agreements that are
designed to support peace and stability in ex-Yugoslavia,
foster political and economic reform in the associated
countries, and assist them on the way to potential EU
332
membership;
• Free trade deals as part of association agreements that are
designed to foster close and stable political and economic
relations with immediate neighboring countries in Europe,
333
North Africa and the Middle East;
• Preferential access as an instrument of economic
development of the African, Caribbean and Pacific (ACP)
334
countries;
• Free trade deals as an instrument of mutually beneficial,
reciprocal market opening with third countries outside the

331. See the Europe Association Agreements concluded during the 1990s with the Central
and Eastern European countries (Poland, Hungary, Czech Republic, Slovak Republic, Slovenia,
Estonia, Latvia, Lithuania, Bulgaria and Romania). These agreements are no longer in
existence, as all countries listed have become EU member states. See, for instance, Europe
Agreement establishing an association between the European Communities and their Member
States, of the one part, and the Republic of Bulgaria, of the other part, 1994 O.J. (L 358) 3. For
a legal analysis of the Europe Agreements, see Marc Maresceau & Elisabettta Montaguti, The
Relations between the European Union and Central and Eastern Europe: a Legal Appraisal, 32
COMMON MKT. L. REV. 1327 (1995).
332. See the Stability and Association Agreements concluded with Croatia and Macedonia.
On the EC’s Stabilization and Association process and the texts of the agreements, see Stability
and Association Process-Background Documents, http://ec.europa.eu/enlargement/
key_documents/sap_en.htm (last visited Oct. 2, 2007).
333. See the Free Trade Agreements of 1972 with the remaining EFTA countries and the
Euro-Mediterranean Association Agreements. Association Agreements between the EU and
its Mediterranean Partners are in force between the EU and Tunisia, Israel, Morocco, Jordan,
Egypt and “on an interim basis with the Palestinian Authority.” See The Euro-Mediterranean
Partnership - Association Agreements, http://ec.europa.eu/comm/external_relations/euromed/
med_ass_agreemnts.htm (last visited Jan. 12, 2007). Agreements were signed with Algeria, and
Lebanon, and negotiations were concluded with Syria. Id.
334. See the Yaoundé and Lomé Conventions and Cotonou Agreement with the ACP
countries. For the text of the currently applicable Cotonou Convention and its historical
context, see The Cotonou Agreement, http://ec.europa.eu/development/body/cotonou/
index_en.htm (last visited Jan. 12, 2007).
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58 DUKE JOURNAL OF COMPARATIVE & INTERNATIONAL LAW [Vol 18:1

EU’s traditional geographical scope, often as a reaction to or

335
in anticipation of broader geo-economic developments.
The EC’s broad political aims in the negotiation of RTAs have
recently been emphasized by EC Trade Commissioner Peter
Mandelson when announcing his request to start negotiations with
ASEAN, India and South Korea. One of Mandelson’s priorities is to
use the RTAs as a means “to encourage countries to enforce basic
labor rights, such as the ILO [International Labor Organization] core
336
conventions, along with environmental standards.” Political,
environmental, social and developmental considerations are largely
beyond the WTO’s strict legal scope.
The creation of RTAs is, in the first place, a political process that
often involves trade-related provisions serving non-commercial goals
such as international peace and human rights. In political science
literature, it is frequently argued that RTAs—whether WTO
337
compatible or not—“can be a powerful force for peace.” The idea
is that “[b]uilding interdependence between countries, creating
economic incentives for peace and developing non-military means for
resolving disputes . . . should help to bind countries’ interests into a
338
shared future.” Furthermore, empirical studies have shown that
“preferential trade agreements (PTAs) have come to play a
339
significant role in governing state compliance with human rights.”

335. See the Bilateral Trade Relations with South Africa, Mexico and Chile at European
Commission. EC, Bilateral Trade Relations, http://ec.europa.eu/trade/issues/bilateral/
index_en.htm (last visited Jan. 12, 2007).
336. Press Release, Peter Mandelson, EU Trade Commissioner, Trade Policy and Decent
Work (Dec. 5, 2006), http://europa.eu/rapid/pressReleasesAction.do?reference=SPEECH/
06/779&format=HTML&aged=0&language=EN&guiLanguage=fr.
337. OLI BROWN ET AL., INT’L INST. FOR SUSTAINABLE DEV., REGIONAL TRADE
AGREEMENTS: PROMOTING CONFLICT OR BUILDING PEACE? (2005), http://www.iisd.org/
pdf/2005/security_rta_conflict.pdf.
338. Id. at 14. On the idea that RTAs can help sustain peace, see generally Edward D.
Mansfield, Preferential Peace: Why Preferential Trading Arrangements Inhibit Interstate Conflict,
in ECONOMIC INTERDEPENDENCE AND INTERNATIONAL CONFLICT: NEW PERSPECTIVES ON
AN ENDURING DEBATE 222 (Edward D. Mansfield & Brian M. Pollins eds., 2003) (referring to
“PTAs”); Edward D. Mansfield & Jon C. Pevehouse, Trade Blocs, Trade Flows, and
International Conflict, 54 INT’L ORG. 775 (2000); Edward D. Mansfield & Rachel Bronson,
Alliances, Preferential Trading Arrangements, and International Trade Patterns, 91 AM. POL. SCI.
REV. 94 (1997); Yoram Z. Haftel, Designing for Peace: Regional Integration Arrangements,
Institutional Variation, and Militarized Interstate Disputes, 61 INT’L ORG. 217 (2007); Harry Bliss
& Bruce Russett, Democracy and Trade: Ties of Interest and Community, in DEMOCRATIC
PEACE FOR EUROPE: MYTH OR REALITY? 75 (Gustaaf Geeraerts & Patrick Stouthuysen eds.,
1999) (referring to international trade reducing conflict).
339. Emilie M. Hafner-Burton, Trading Human Rights: How Preferential Trade Agreements
Influence Government Repression, 59 INT’L ORG. 593, 593 (2005).
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2007] BRIDGING THE CONSTITUTIONAL CREDIBILITY GAP 59

In particular when they tie trade liberalization benefits to compliance

with human rights principles, “PTAs are more effective than softer
human rights agreements (HRAs) in changing repressive
340
behaviors.” In short, when proposing WTO legality tests on RTAs,
economists and trade lawyers must be conscious that “trade policy is
341
foreign policy.” The link between peace, regional integration and
GATT/WTO law is not merely theoretical.
The European Coal and Steel Community (ECSC), for instance,
was an explicit and successful attempt to foster the reconciliation
342
between France and Germany after World War II. Limited to only
two economic sectors, the ECSC was inconsistent with the
“substantially all the trade” provisions of GATT Article XXIV. As
343
such, it obtained the necessary GATT waiver, and formed the basis
for the EEC and EU. These organizations are generally credited with
having made a crucial contribution to the peace in Western Europe
344
since 1945. Arguably, the ECSC waiver illustrates the proper and
flexible functioning of the GATT/WTO system. However, it is
necessary to inquire whether it is appropriate to require such RTAs
as the ESCS to apply for a waiver in the GATT/WTO framework.

340. Id. On the EC’s practice of tying the benefits of RTAs to human rights behavior, see
generally Barbara Brandtner & Allan Rosas, Trade Preferences and Human Rights, in THE EU
AND HUMAN RIGHTS 699 (Philip Alston, Mara Bustelo & James Heenan eds., 1999); Karen E.
Smith, The EU, Human Rights and Relations with Third Countries: “Foreign Policy” with an
Ethical Dimension?, in ETHICS AND FOREIGN POLICY 185 (Karen E. Smith & Margot Light
eds., 2001).
341. See Richard N. Cooper, Trade Policy Is Foreign Policy, 9 FOREIGN POLICY 18, 18
(Winter 1972-1973). “[H]istorically trade issues frequently intruded into, and occasionally even
dominated . . . foreign policy among countries.” Id. at 19. See generally Richard N. Cooper,
Trade Policy as Foreign Policy, in U.S. TRADE POLICIES IN A CHANGING WORLD ECONOMY
291 (Robert M. Stern ed., 1988).
342. The ECSC was established by the Treaty of Paris (1951) in order to “substitute for
historic rivalries a fusion of their essential interests.” Treaty Establishing the European Coal
and Steel Community preamble, Apr. 18, 1951, 261 U.N.T.S. 140. On the ECSC, see JOHN
GILLINGHAM, COAL, STEEL AND THE REBIRTH OF EUROPE, 1945-1955: THE GERMANS AND
FRENCH FROM RUHR CONFLICT TO ECONOMIC COMMUNITY (1991); DESMOND DINAN,
EUROPE RECAST: A HISTORY OF EUROPEAN UNION 46-57 (2004).
343. GATT, Waiver granted in connection with the European Coal and Steel Community
(Nov. 10, 1952), GATT B.I.S.D. 1S/17 (1st Supp.) at 17-22 (1953).
344. Mette Eilstrup-Sangiovanni & Daniel Verdier, European Integration as a Solution to
War, 11 EUR. J. INT’L REL. 99, 99 (2005). For the constructive impact of European integration
on border conflicts, see Thomas Diez, Stephan Stetter & Mathias Albert, The European Union
and Border Conflicts: The Transformative Power of Integration, 60 INT’L ORG. 563, 563-64
(2006).
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60 DUKE JOURNAL OF COMPARATIVE & INTERNATIONAL LAW [Vol 18:1

Waivers are costly to those who request them.345 As they need to be

negotiated with the other WTO members, waivers—in GATT/WTO
tradition—frequently require a quid pro quo in terms of political or
346
economic concessions. Thus, instead of encouraging its members to
negotiate ECSC-type agreements, the WTO penalizes those parties
that follow the Franco-German reconciliation model.
The limited range of competence of WTO law should lead to
modesty in proposals for expanded constitutional supervisory powers
over RTAs. While the WTO is the appropriate forum for the
assessment of the trade policy measures of RTAs, it should not be
burdened with the role of overall constitutional arbiter of the legality
of RTAs. Providing the WTO with an overall constitutional
supervisory role over RTAs would imply that there is a consensus to
elevate the WTO’s particular underlying normative values—based on
347
the “right to trade”—to a rank that is superior to other legal norms.
According to Jeffrey L. Dunoff, such a constitutional elevation of
WTO law would “privilege[] economic rights as opposed to other
important social interests” and “necessarily limit governments’ ability
to pursue many non-economic goals, such as environmental
348
protection and other social policies.” Or, as Robert Howse has
argued, if there is a conflict of values, it is hardly legitimate to resolve
these within the trading system, according to its fundamental
349
principles. It might, for example, be considered whether other U.N.
bodies are more suitable for examining the contribution that an RTA
trade policy regime could make to international peace and security.
A possible procedure could consist of an examination of the peace
potential of RTAs by the Security Council. The resulting formal
declaration by the Security Council would automatically be

345. On waivers in the WTO context, see COTTIER & OESCH, supra note 144, at 508;
MATSUSHITA, SCHOENBAUM & MAVROIDIS, supra note 81, at 13.
346. Such quid pro quo deals are the essence of what Paul Krugman calls “GATT-think.”
See Paul Krugman, The Move Toward Free Trade Zones, in POLICY IMPLICATIONS OF TRADE
AND CURRENCY ZONES 7, 26 (1991) (discussing the economic concessions that would be made
in trade negotiations, as predicted and explained by “GATT-think” principles).
347. Dunoff, supra note 327, at 664, 667.
348. Id. at 664.
349. Robert Howse, From Politics to Technocracy – and Back Again: The Fate of the
Multilateral Trading Regime, 96 AM. J. INT’L L. 94, 105-06 (2002); see also Robert Howse &
Kalypso Nicolaidis, Legitimacy and Global Governance: Why Constitutionalizing the WTO Is a
Step Too Far, in EFFICIENCY, EQUITY, AND LEGITIMACY: THE MULTILATERAL TRADING
SYSTEM AT THE MILLENNIUM 227, 229 (Roger B. Porter et al. eds., 2001) (discussing that
compromises between competing trade and non-trade-related values should not be made within
the rules of WTO dispute settlement but, rather, within non-WTO institutions).
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2007] BRIDGING THE CONSTITUTIONAL CREDIBILITY GAP 61

transformed in a WTO waiver of the trade policy provisions indicated

by the Council as peace-contributors. The precise formulation of
such a mechanism could be a useful topic for further legal research.

B. The Limited Justiciability of the WTO’s RTA Disciplines

While the WTO should not be put in charge of judging the
overall legality of regional agreements, it is the proper framework for
the supervision of the trade policy measures formulated by RTAs. A
key question in this context is the degree of justiciability of disputes
on the interpretation of the WTO rules on RTAs. Since the entry
into force of the Uruguay Round Agreements, the WTO dispute
settlement system is operating largely as an independent judicial
350
branch. Under the old GATT 1947 procedure, the adoption by the
GATT Council of reports produced by dispute settlement Panels
required consensus. In other words, countries that were unhappy
351
with the outcome of a case could block the adoption of a ruling. In
contrast with GATT 1947, reports issued by WTO dispute settlement
Panels and the Appellate Body are automatically adopted unless
there is an—unlikely—consensus among the members to reject a
352
ruling. Formally, the function of Panels and the Appellate Body is
to assist the members in the WTO Dispute Settlement Body in
353
making recommendations or in giving rulings. In practice, the
“reverse consensus” requirement has ensured that the “judicial”
organs in the dispute settlement procedure have the last word in

350. For excellent volumes on the WTO dispute settlement system, see generally REFORM
AND DEVELOPMENT OF THE WTO DISPUTE SETTLEMENT SYSTEM (Dencho Georgiev & Kim
Van der Borght eds., 2006); THE WTO DISPUTE SETTLEMENT SYSTEM: 1995–2003 (Federico
Ortino & Ernst-Ulrich Petersmann eds., 2004). On the judicial independence of the WTO
dispute settlement system, see Steve Charnovitz, Judicial Independence in the World Trade
Organization, in INTERNATIONAL ORGANIZATIONS AND INTERNATIONAL DISPUTE
SETTLEMENT: TRENDS AND PROSPECTS 219 (Laurence Boisson de Chazournes, Cesare
Romano & Ruth Mackenzie eds., 2002).
351. William J. Davey, Dispute Settlement in GATT, 11 FORDHAM INT’L L.J. 51, 60 (1987).
On the GATT 1947 dispute settlement system, see generally Robert E. Hudec, GATT Dispute
Settlement after the Tokyo Round: An Unfinished Business, 13 CORNELL INT’L. L.J. 145 (1980);
ROBERT E. HUDEC, ENFORCING INTERNATIONAL TRADE LAW: THE EVOLUTION OF THE
MODERN GATT LEGAL SYSTEM (1993).
352. Understanding on Rules and Procedures Governing the Settlement of Disputes, Apr.
15, 1994, Marrakesh Agreement Establishing the World Trade Organization, Annex 2 arts. 16.4,
17.14, Legal Instruments – Result of the Uruguay Round, 33 I.L.M. 1125, 1226 (1994)
[herinafter Dispute Settlement Understanding].
353. On the “assisting” role of the Panels, see id. arts. 6, 11. On the role of the Dispute
Settlement Body, see id. art. 2.
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62 DUKE JOURNAL OF COMPARATIVE & INTERNATIONAL LAW [Vol 18:1

giving binding interpretations of the WTO Agreements.354 The

permanent WTO Appellate Body, in particular, has been identified as
“the dynamic force behind [WTO] constitution-building by virtue of
its capacity to generate constitutional norms and structures during
355
dispute resolution.”

1. GATT/WTO Dispute Settlement and RTAs: The State-of-

Play. In the days of the old GATT 1947, the relationship between the
dispute settlement system and Article XXIV came up in two cases. In
1985, the GATT Panel in the EC Mediterranean Citrus case explicitly
declined to rule on the Article XXIV compatibility of the agreements
356
concluded between the EC and several Mediterranean countries.
The Panel held that the “examination— or re-examination— of Article
357
XXIV agreements was the responsibility of the contracting parties.”
The Panel added that “it would not be appropriate to determine the
conformity of an agreement with the requirements of Article XXIV
on the basis of a complaint by a contracting party under Article
358
XXIII:1(a).” It emphasized that such conformity assessments:
should be done clearly in the context of Article XXIV and not
Article XXIII, as an assessment of all the duties, regulations of
commerce and trade coverage as well as the interests and rights of
all contracting parties were at stake . . . and not just the interests
359
and rights of [the] . . . contracting party raising a complaint.
In 1993, the GATT 1947 Panel in the Bananas case adopted a
360
different logic. In response to the European Community’s
argument that the overall consistency of regional arrangements was
the subject of examination under Article XXIV:7 and could therefore
not be investigated under the dispute settlement procedures of
Article XXIII, the Panel replied that, “notwithstanding the issue of

354. On the judicial nature of the WTO dispute settlement process, see generally DEBORAH
Z. CASS, THE CONSTITUTIONALIZATION OF THE WORLD TRADE ORGANIZATION (John H.
Jackson ed., 2005).
355. Deborah Z. Cass, The ‘Constitutionalization’ of International Trade Law: Judicial
Norm-Generation as the Engine of Constitutional Development in International Trade, 12 EUR. J.
INT’L L. 39, 42 (2001).
356. Report of the Panel, European Community – Tariff Treatment on Imports of Citrus
Products from Certain Countries in the Mediterranean Region, ¶ 4.15, L/5776 (Feb. 7, 1985) (not
adopted), available at http://www.wto.org/gatt_docs/english/sulpdf/90080242.pdf [hereinafter
Panel Report EC – Mediterranean Citrus].
357. Id. (emphasis removed).
358. Id.
359. Id.
360. See Panel Report Bananas II, supra note 178.
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2007] BRIDGING THE CONSTITUTIONAL CREDIBILITY GAP 63

whether the procedures of Article XXIV:7 supersede those of Article

XXIII:2, it would first have to examine whether the Lomé
Convention is an agreement of the type to which the procedures of
361
Article XXIV:7 apply.” The Panel’s reasoning runs as follows:
The Panel could not accept that tariff preferences inconsistent with
Article I:1 would, by notification of the preferential arrangement
and invocation of Article XXIV against the objections of other
contracting parties, escape any examination by a panel established
under Article XXIII. If this view were endorsed a mere
communication of a contracting party invoking Article XXIV could
deprive all other contracting parties of their procedural rights
under Article XXIII:2 and therefore also of the effective protection
of their substantive rights, in particular those under Article I. The
Panel concluded therefore that a panel, faced with the invocation of
Article XXIV, first had to examine whether or not this provision
362
applied to the agreement in question.
In the framework of the Uruguay Round, the negotiators agreed to
make explicit that the WTO’s dispute settlement provisions “may be
invoked with respect to any matters arising from the application of
those provisions of Article XXIV relating to customs unions, free
trade areas or interim agreements leading to the formation of a
363
customs union or a free trade area.” As a consequence, the WTO
Appellate Body has given clear signals that the judicial organs in the
dispute settlement process are capable of judging on the WTO
364
compatibility of RTAs. In the Turkey-Textiles case, the Appellate
Body explicitly referred to the absence of an assessment by the Panel
on the compatibility of the EC-Turkey customs union with the
365
requirements of Article XXIV:5(a) and 8(a). While the issue was
not appealed, the Appellate Body strongly hinted that Panels are
entitled to judge RTAs on their overall compatibility with Article
366
XXIV. In the same logic, the Panel in the United States-Line Pipe
case did explicitly consider that:
the information provided by the United States in these proceedings,
the information submitted by the NAFTA parties to the

361. Id. ¶ 158-59.

362. Id.
363. Final Act, supra note 1, ¶ 12.
364. See, e.g., Panel Report, United States - Definitive Safeguard Measures on Imports of
Circular Welded Carbon Quality Line Pipe from Korea, ¶ 7.144, WT/DS202/R (Oct. 29, 2001),
available at http://www.wto.org/english/tratop_e/dispu_e/202r_a_e.pdf [hereinafter Panel Report
on Line Pipe].
365. See Appellate Body Report on Turkey-Textiles, supra note 35, ¶ 60.
366. See Kessie, supra note 207.
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64 DUKE JOURNAL OF COMPARATIVE & INTERNATIONAL LAW [Vol 18:1

Committee on Regional Trade Agreements (‘CRTA’) (which the

United States has incorporated into its submission to the Panel by
reference), and the absence of effective refutation by Korea
establishes the prima facie case that NAFTA is in conformity with
367
Article XXIV:5(b) and (c), and with Article XXIV:8(b).
In fact, the Appellate Body has done more than suggesting that the
conformity of RTAs can be assessed in the framework of WTO
dispute settlement. In the Turkey-Textiles case, it emphasized that
the demonstration by RTAs of their overall compatibility with Article
XXIV constitutes an essential condition if such regional arrangements
want to maintain a measure that is otherwise inconsistent with other
368
GATT provisions. In the words of the Appellate Body:
[W]e are of the view that Article XXIV may justify a measure
which is inconsistent with certain other GATT provisions.
However, in a case involving the formation of a customs union, this
“defence” is available only when two conditions are fulfilled. First,
the party claiming the benefit of this defence must demonstrate that
the measure at issue is introduced upon the formation of [the] . . .
customs union that fully meets the requirements of sub-paragraphs
8(a) and 5(a) of Article XXIV. And, second, that party must
demonstrate that the formation of [a] customs union would be
prevented if it were not allowed to introduce the measure at
369
issue.”
Knowing that the CRTA is politically paralyzed and will therefore
not provide the parties with solid conclusions on the conformity of
RTAs, the test imposed by the Appellate Body seems intended to
strengthen the role of the dispute settlement mechanisms in
controlling the compatibility of RTAs. In the absence of a political
decision, it is in the dispute settlement context that RTAs will have to
deliver proof of their compatibility.
According to the dispute settlement Panels, the absence of
operational conclusions by the CRTA does not, in itself, constitute a
definitive indication of the (in)compatibility of an RTA. In the
Turkey-Textiles case, the Panel rejected the argument that the
absence of recommendations by the CRTA constituted an implicit
370
acceptance of the EC-Turkey customs union. In the United States-
Line Pipe case, Korea’s position was that, in the absence of CRTA

367. Panel Report on Line Pipe, supra note 364, ¶ 7.144.

368. Appellate Body Report on Turkey-Textiles, supra note 35, ¶ 58.
369. Id.
370. Panel Report on Turkey-Textiles, supra note 35, ¶¶ 9.172–9.174.
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2007] BRIDGING THE CONSTITUTIONAL CREDIBILITY GAP 65

approval, NAFTA should be presumed as inconsistent with the WTO

371
rules. The Panel refuted the Korean argument. It held as follows:
[W]e do not consider that the fact that the CRTA has not yet issued
a final decision that NAFTA is in compliance with Article XXIV:8
is sufficient to rebut the prima facie case established by the United
States [on NAFTA’s compliance]. Korea’s argument is based on
the premise that a regional trade arrangement is presumed
inconsistent with Article XXIV until the CRTA makes a
determination to the contrary. We see no basis for such a premise
in the relevant provisions of the Agreement establishing the
372
WTO.

2. The Justiciability of the WTO’s RTA Disciplines. It is

important to analyze whether the current state of the WTO case-law
constitutes an appropriate answer to the credibility gap with regards
to the monitoring of RTAs. In the highly political context
surrounding the creation of regional agreements, the most pertinent
question concerns the justiciability of the WTO disciplines on RTAs
and the possible impact of an over-legalization of the enforcement of
the rules. The issue will be looked at from three related angles: the
rather vague nature of the WTO provisions on RTAs; the
institutional balance on which the WTO rests; and the difference
between judging concrete trade policy “measures” versus the overall
legality of RTAs.

a. The Nature of the WTO’s RTA Provisions. As it is explained

in the literature on compliance with international legal norms, the
substantive characteristics of treaties are among the most important
373
predicting factors affecting effective implementation. Duties of a
general and imprecise nature that leave a large margin of
interpretation are much less likely to be correctly implemented than
precise obligations that are tested on their simplicity in
implementation. Furthermore, the interpretation of imprecise
374
provisions by adjudicating bodies is generally controversial. There
is little doubt that WTO’s current rules on RTAs are characterized by
375
a general lack of precision. Frieder Roessler, the former Director of
GATT’s Legal Service, has underlined that even crucial trade policy

371. Panel Report on Line Pipe, supra note 364, Annex B-7, available at http://www.wto.org/
english/tratop_e/dispu_e/202r_c_e.pdf.
372. Panel Report on Line Pipe, supra note 364, ¶ 7.144.
373. See sources cited supra note 31.
374. See generally Jacobson & Weiss, supra note 32.
375. See supra Part III.
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66 DUKE JOURNAL OF COMPARATIVE & INTERNATIONAL LAW [Vol 18:1

aspects of RTAs have remained undefined. In his opinion, “[t]he

Contracting Parties have deliberately never defined the degree of
376
trade integration required by Article XXIV.” In addition, central
provisions of GATT Article XXIV involve the highly disputed
quantification of terms as the general incidence of the duties and
regulations of commerce and substantially all the trade. Economists,
lawyers and practitioners have emphasized that there is just no way to
predict in mathematical terms and with any degree of precision and
377
consensus the future economic impact of RTAs. As correctly stated
by Roessler, it is inappropriate to make the legal status of RTAs
378
dependent on such shaky provisions and controversial calculations.
The Appellate Body, in the Turkey-Textiles case, has taken
another course of action. With its ruling, the Appellate Body has not
only given an expansive interpretation of the tasks of the WTO’s
judicial bodies as regards the legality of RTAs, it is also signaling a
willingness to enter into judicial lawmaking “in areas that had been
379
the subject of diplomatic deadlock.” The position by the Appellate
Body should be deplored. First, the dispute settlement system is
intended to “to preserve the rights and obligations of Members under
380
the covered agreements.” Dispute settlement recommendations
and rulings “cannot add to or diminish the rights and obligations
381
provided in the covered agreements.” In combination with the
structural imprecision in the wording of the WTO rules on RTAs, the
prohibition for Panels and the Appellate Body to add or diminish
rights and obligations of members should inspire them to great
restraint. Indeed, in view of the lack of precision in the wording of
the WTO provisions on RTAs, “a panel that rules on this matter
382
would . . . be acting without any prior normative guidance.”
Second, “judicial overreaching” by the WTO Appellate Body should
be discouraged as it contributes to undermine the WTO’s

376. Frieder Roessler, The Institutional Balance between the Judicial and the Political Organs
of the WTO, in NEW DIRECTIONS IN INTERNATIONAL ECONOMIC LAW 332 (M. Bronckers & R.
Quick eds., 2000).
377. See supra notes 222-28 and the accompanying text.
378. Roessler, supra note 376, at 313
379. Richard H. Steinberg, Judicial Lawmaking at the WTO: Discursive, Constitutional, and
Political Constraints, 98 AM. J. INT’L L. 247, 251 (2004).
380. Dispute Settlement Understanding, supra note 352, art. 3.2.
381. Id.
382. Roessler, supra note 376, at 332.
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2007] BRIDGING THE CONSTITUTIONAL CREDIBILITY GAP 67

legitimacy.383 When confronted with cases where there is a gap in the

law or where the law is manifestly unclear, the Appellate Body should
explicitly recognize this and abstain from pronouncing itself, rather
384
than trying to fill the blanks.

b. Preserving the WTO’s Institutional Balance. An important

additional reason for the restraint of the WTO judicial organs is the
need to preserve the WTO’s institutional balance between political
and judicial bodies. According to Roessler, the framers of the WTO
negotiated a complex institutional structure “under which separate
385
judicial and political bodies” were created. Referring to the “trias
politica of modern states,” Roessler makes a distinction between:
• The WTO’s legislative branch: the membership of the WTO
acting collectively under the amendment and other rule-
making provisions;
• The WTO’s executive branch: the political organs of the
WTO taking decisions within the framework of the existing
law, including the Committee on Regional Trade
Agreements and the Committee on Balance-of-Payments
Restrictions; and
• The WTO’s judicial branch: the Panels, arbitrators and the
386
Appellate Body.
For Roessler, it is evident that “[j]ust as modern states, the WTO
must ensure that its judicial organs exercise their powers with due
regard to the jurisdiction assigned to the other parts of its institutional
387
structure.” In the words of the representative of India, during the
dispute on its quantitative restrictions maintained for balance-of-
payments reasons, “there is a principle of institutional balance which
requires panels, in determining the scope of their competence, to take
into account the competence conferred upon other organs of the

383. See Howse & Nicolaidis, supra note 349, at 227; Steinberg, supra note 379, at 251; see
generally Roger P. Alford, Reflections on US-Zeroing: A Study in Judicial Overreaching by the
WTO Appellate Body, 45 COLUM. J. TRANSNAT’L L. 196 (2006).
384. See Charnovitz, supra note 350, at 233 (noting a “true lacuna of law might justify a
holding of non liquet”). For the opposite view, see William J. Davey, Has the WTO Dispute
Settlement System Exceeded its Authority?, 4 J. INT’L ECON. L. 79, 106 (2001). For a detailed
comment on the possibility for WTO Panels and the Appellate Body to declare a non liquet, see
Lorand Bartels, The Separation of Powers in the WTO: How to Avoid Judicial Activism, 53
INT’L & COMP. L.Q. 861, 873 (2004).
385. Roessler, supra note 376, at 325.
386. Id.
387. Id. at 326.
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68 DUKE JOURNAL OF COMPARATIVE & INTERNATIONAL LAW [Vol 18:1

WTO.”388 The Panel in the Textiles-Turkey case accepted the

principle of the separation of powers and did not want to enter into
the politics of assessing the EC-Turkey customs union. The Panel
justified its view as follows:
As to the . . . question of how far-reaching a panel’s examination
should be of the regional trade agreement underlying the
challenged measure, we note that the Committee on Regional
Trade Agreements (CRTA) has been established, inter alia, to
assess the GATT/WTO compatibility of regional trade agreements
entered into by Members, a very complex undertaking which
involves consideration by the CRTA, from the economic, legal and
political perspectives of different Members, of the numerous facets
of a regional trade agreement in relation to the provisions of the
WTO. It appears to us that the issue regarding the GATT/WTO
compatibility of a customs union, as such, is generally a matter for
the CRTA since, as noted above, it involves a broad multilateral
assessment of any such customs union, i.e. a matter which concerns
389
the WTO membership as a whole.
As signaled above, the Appellate Body did not agree with the Panel’s
390
reasoning on this point. For the Appellate Body, an assessment of
the overall compatibility of RTAs is entirely within the jurisdiction of
391
the dispute settlement organs. In the words of Lorand Bartels, the
attitude of the Appellate Body can be summarized as a “rejection of
392
the principle of ‘institutional balance.’” While the Appellate Body’s
ruling has been supported in the academic literature, its wisdom is
393
highly questionable. First, it is doubtful whether Panels are
technically equipped to make an overall assessment of the
compatibility of RTAs with the WTO disciplines. In view of the
paralysis of the CRTA, it is unlikely that Panels—when examining
the overall compatibility of the RTA—will be able to base their
rulings on clear decisions adopted by the members. Panels would
thus need to rule on the overall compatibility of RTAs in line with
their own assessment. It is entirely unclear how Panels would
approach such a daunting task as their rulings would go well beyond

388. Appellate Body Report, India-Quantitative Restrictions on Imports of Agricultural,

Textile and Industrial Products, ¶ 98, WT/DS90/AB/R (Aug. 23, 1999) (adopted Sept. 22, 1999),
available at http://www.wto.org/english/tratop_e/dispu_e/90abr.pdf.
389. Panel Report on Turkey-Textiles, supra note 35, ¶ 9.52.
390. Appellate Body Report on Turkey-Textiles, supra note 35, ¶ 58-60.
391. See Roessler, supra note 376, at 337; Bartels supra note 384, at 879; Davey, supra note
384, at 87.
392. Bartels, supra note 384, at 878.
393. For a generally positive attitude towards the Appellate Body’s reasoning, see Davey,
supra note 384, at 86; MATSUSHITA, SCHOENBAUM & MAVROIDIS, supra note 81, at 556.
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2007] BRIDGING THE CONSTITUTIONAL CREDIBILITY GAP 69

the interpretation of a WTO rule in a precise case. Second, if Panels

logically examine RTAs from a narrow legal perspective, they would
neglect the political and economic considerations of RTAs that were
correctly recognized as significant by the Panel in the Turkey-Textiles
394
case. Third, as the WTO’s substantive rules on RTAs are vague,
Panels would have to pass their judgment “without having received
any prior normative guidance from the WTO membership and
395
therefore engage essentially in a legislative or political task.”
Fourth, there is a problem of political acceptability of dispute
settlement rulings on the legality of RTAs, especially in view of the
vague substantive criteria. As the African, Caribbean and Pacific
states have specifically argued during the Doha Round, the
jurisdiction of the CRTA to determine the WTO compatibility of
RTAs should not be unduly overridden by the dispute settlement
396
procedures and rulings. In more theoretical terms, Joost Pauwelyn
has expressed the problem as follows:
[K]nowing that legalization or increased discipline unequivocally
calls for more politics and expression of voice or participation, the
harder law solution would only worsen, not resolve, the current
deadlock in the political, rulemaking process: countries would insist
even more on their veto rights. Moreover, since harder law or
more discipline cannot be sustained without more political support
or more politics, it is highly questionable, as things stand today, that
sufficient political support – be it at the state or broader societal
level – is available to make such further legalization digestible . . . It
risks rather serious pressure on the exit side: . . . WTO members,
especially the most powerful ones, could walk away from their
obligations. This, in turn, may undermine, rather than strengthen,
397
the legitimacy and effectiveness of the trade regime.
Finally, it is entirely unclear what the consequences would be of a
WTO dispute settlement ruling that effectively declares an RTA
incompatible with the WTO laws. The repercussions for the global
trading system, for the law produced in the framework of the RTA
and for the trade policies of its member states would unquestionably
be serious. In view of the arguments underlined by Pauwelyn and the
high political stakes of some RTAs, it is not unlikely that members
would consciously decide to disregard a dispute settlement ruling. It

394. Panel Report on Turkey-Textiles, supra note 35, ¶¶ 9.52-9.53.

395. Roessler, supra note 376, at 344.
396. Negotiating Group on Rules, Submission on Regional Trade Agreements by the ACP
Group of States, ¶ 3, TN/RL/W/155 (Apr. 28, 2004).
397. Joost Pauwelyn, The Transformation of World Trade, 104 MICH. L. REV. 1, 51 (2005).
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70 DUKE JOURNAL OF COMPARATIVE & INTERNATIONAL LAW [Vol 18:1

is interesting, in this context, to recall the experience of the American

trade negotiators when examining the compatibility of the Treaty of
Rome that created the European Economic Community with the
GATT. According to Isaiah Frank, the Chair of the U.S. delegation
during the examination, the Europeans considered the Community of
such vital importance that “if the Six [member states] had to choose
between renegotiating the Treaty and being formally declared in
violation of the GATT, they would undoubtedly have let the GATT
398
go.”

c. Judging Concrete Trade Policy “Measures” Versus the

Overall Legality of RTAs. In contrast with the Appellate Body, the
Panel in the Turkey-Textiles case has taken a more modest, but more
realistic and more sustainable approach in assessing complaints
against the trade policy measures adopted by RTAs. The Panel
underlined that its mission was to express itself on the compatibility
of concrete trade policy “measures”:
[W]e understand from the wording of paragraph 12 of the WTO
Understanding on Article XXIV, that panels have jurisdiction to
examine “any matters ‘arising from’ the application of those
provisions of Article XXIV.” For us, this confirms that a panel can
examine the WTO compatibility of one or several measures
“arising from” Article XXIV types of agreement . . . . Thus, we
consider that a panel can assess the WTO compatibility of any
specific measure adopted by WTO Members . . . on the occasion of
the formation of a customs union . . . . As to whether panels also
have the jurisdiction to assess the overall WTO compatibility of a
customs union, we recall that the Appellate Body stated that the
terms of reference of panels must refer explicitly to the
“measures” . . . all of which could potentially be examined by
panels, before, during or after . . . CRTA examination, if the
requirements laid down in the DSU [Dispute Settlement
Understanding] are met. However, it is arguable that a customs
union (or a free-trade area) as a whole would logically not be a
399
“measure” as such, subject to challenge under the DSU.

398. ISAIAH FRANK, THE EUROPEAN COMMON MARKET: AN ANALYSIS OF COMMERCIAL

POLICY 164 (1961). A similar statement was made by Gardner Patterson, former Deputy
Director General of the GATT. He claimed that “the GATT itself probably would have been
destroyed” if there had been a serious attempt to block the progress of the European Economic
Community on the basis of the legal requirements of GATT Article XXIV. See GARDNER
PATTERSON, DISCRIMINATION IN INTERNATIONAL TRADE: THE POLICY ISSUES, 1945-1965, at
263 (1966).
399. Panel Report on Turkey-Textiles, supra note 35, ¶¶ 9.50, 9.51, 9.53 (emphasis added).
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2007] BRIDGING THE CONSTITUTIONAL CREDIBILITY GAP 71

As such, the Panel simply focused on whether Turkey was

permitted to introduce the quantitative restrictions that were attacked
by India. The Panel particularly examined whether the wording of
Article XXIV authorized a departure from the obligations contained
400
in GATT Articles XI and XIII. In comparison with the complex
legal reasoning established by the Appellate Body, the Panel’s logic is
superior. The legal test set by the Panel is considerably more
straightforward than the reasoning of the Appellate Body and has
greater legitimacy as it is not based on elaborate judicial rule-making.
Furthermore, the Panel’s focus on concrete trade policy measures is
more suited to the expertise and competence of dispute settlement
Panels.
Proposal: Following the logic of the Panel Report in the Turkey-
Textiles case, this article proposes that, during the enforcement
exercise, a distinction should be made between, on the one hand, the
legality of the regional arrangement as such and, on the other hand,
the legality of concrete trade policy measures adopted by the RTA.
The latter should be subject of strict surveillance and sanctioning,
notably via WTO dispute settlement. In contrast to the line taken by
the WTO’s Appellate Body, it would, however, not be advisable for
the WTO dispute settlement system to get into questions of the
overall legality of specific regional arrangements. The overall
compatibility of regional arrangements with WTO rules is better
suited for diplomatic transparency and peer review exercises in the
CRTA on the basis of the clarified benchmarks, as proposed in Part
IV of this article.
According to Roessler, it is clear—already at this stage—that the
dispute settlement process may only be invoked with respect to
401
“specific measures” imposed by RTAs. Following the
interpretation of the Panel in the Turkey-Textiles case, he is of the
opinion that the Uruguay Round Understanding on Article XXIV is
sufficiently precise. The Understanding states that the WTO dispute
settlement procedures may be invoked “with respect to any matters
402
arising from the application of” the Article XXIV provisions.
According to Roessler, “[t]he ‘ordinary meaning’ of the term
‘application’ is ‘a specific use or purpose for which something is put’

400. Id. ¶ 9.134.

401. Roessler, supra note 376, at 330-31.
402. Final Act, supra note 1, ¶ 12.
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72 DUKE JOURNAL OF COMPARATIVE & INTERNATIONAL LAW [Vol 18:1

and ‘applicability in a particular case.’”403 This, in his view, “suggests

404
that panels can only make findings on specific measures imposed.”
William J. Davey, another former Director of the WTO Legal Affairs
Division, disagrees with Roessler’s interpretation. According to
Davey, the “ordinary meaning” of the Uruguay Round
Understanding “clearly demonstrates that there is a broad grant of
405
authority to dispute settlement panels.” He adds the Uruguay
Round Understanding was particularly “not intended to restrict the
406
power of panels as compared to GATT practice.” However, “given
the complexity” of the overall compatibility assessment of RTAs with
the WTO disciplines, Davey nevertheless believes that “it would be
407
preferable for panels to avoid that issue where possible.” The fact
that Panel and Appellate Body have disagreed over this issue and
that it also divides the most knowledgeable WTO scholars and former
practitioners is an indication that the state of the law is unclear. The
Uruguay Round Understanding on the interpretation of Article
XXIV should therefore be amended to express with greater precision
that the WTO’s dispute settlement provisions may be invoked with
respect to any specific measure adopted by WTO members or by an
RTA under the provisions of GATT Article XXIV, GATS Article V
and the Enabling Clause.

CONCLUSIONS
It is hard to deny that the current WTO regime for RTAs is a
failure. Since its creation in 1996, paralysis has reigned in the CRTA.
In the mean time, the world outside the WTO headquarters has
witnessed a proliferation in the number of RTAs. The paralysis in
the WTO’s assessment of RTAs has been carried over from the
GATT 1947 to the WTO. In spite of the Uruguay Round
Understanding on GATT Article XXIV, the parties have failed to
resolve fundamental differences in the interpretation of the
multilateral RTA rules. The creation of the CRTA as the single body
in charge of examining RTAs notified under GATT and GATS did
not help to untangle the knot. This is not unexpected as the CRTA is

403. Roessler, supra note 376, at 330.

404. Id.
405. Davey, supra note 384, at 86.
406. Id.
407. Id. at 87 (emphasis added).
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2007] BRIDGING THE CONSTITUTIONAL CREDIBILITY GAP 73

charged with applying rules that continue to form the subject of a

bitter debate among WTO members.
During the Doha Round, the negotiators decided to focus in the
first place on the improvement of the transparency procedures with
respect to RTAs. The principle of transparency stands high in the
408
hierarchy of WTO norms. The Doha Round Transparency
Mechanism for RTAs, which was provisionally put into force in
December 2006, includes a number of useful innovations, notably on
the role of the WTO Secretariat in the examination of RTAs. The
Transparency Mechanism is not, however, without shortcomings. Its
most important flaw concerns the lack of an effective monitoring of
RTAs after their formal notification. Such permanent monitoring is
important as their practical effect on the multilateral trade system can
hardly be studied upon their formation. Still, the Transparency
Mechanism fails to set up a proper institutional framework for the
continuous monitoring of RTAs. This deficiency should be rectified
by incorporating an appropriate review procedure in the
Transparency Mechanism along the lines of the successful TPRM
practice.
The new procedural rules of the Transparency Mechanism are,
however, likely to remain without much impact as long as a host of
substantive legal problems continue to hinder their smooth
implementation. Already in 1975, the Chairman of the GATT
Working Group on the examination of the European Community’s
enlargement with the United Kingdom, Ireland and Denmark
explicitly declared that the vagueness and ambiguities of the
provisions of Article XXIV fostered methodological disagreements.
While emphasizing the necessity of a formal clarification of Article
XXIV’s provisions, the Chairman concluded that the GATT itself was
an important contributing factor to the deadlocks in the Working
409
Groups. More than twenty-five years later the interpretations of
essential terms such as “substantially all trade” and “other regulations
of commerce” remain “the subjects of lengthy discussions . . . without
any sign of consensus being reached, and without sign of . . .
410
willingness on the part of some to engage in the exercise.” Part III
of this article has tried to formulate a number of realistic, pragmatic

408. See sources cited supra note 255.

409. See GATT Council, Minutes of the Meeting, at §§ 3-5, C/M/107 (July 25, 1975).
410. Committee on Regional Trade Agreements, Note on the Meetings of 6-7 and 10 July, ¶
48, WT/REG/M/18 (July 22, 1998).
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74 DUKE JOURNAL OF COMPARATIVE & INTERNATIONAL LAW [Vol 18:1

solutions to the major substantive problem points. The main

recommendation is that the Doha Round negotiators should abandon
the unfruitful path of trying to attach legal consequences to uncertain
results of overall economic assessments of RTAs, involving the
quantification and aggregation of duties and other regulations of
commerce. Instead, the WTO assessment of RTAs should
concentrate on concrete and tangible trade policy measures and their
compatibility with the WTO rules. Such a surveillance process should
not be limited, however, to the first stage of RTAs, but should be
pursued through their existence via the creation of an effective and
permanent monitoring mechanism for RTAs.
Some legal scholars have made more sophisticated proposals to
provide the WTO with an overall role in deciding the legality of
RTAs as such. These proposals risk contributing to the WTO’s
constitutional credibility gap rather than helping resolve it. First,
such suggestions make little sense without substantially clarified and
simplified substantive rules for RTAs. Second, they do not
sufficiently take into account the limited—or “partial”—nature of the
WTO constitution. Realistic proposals on the improvement of the
WTO’s role with regard to the surveillance of RTAs must take into
consideration that regional arrangements often have several broad
objectives—including peace and security—going well beyond trade.
In that context, it hardly seems appropriate to request that the
WTO—as organisation based on a partial set of trade rules—assumes
the role of ultimate arbiter on the overall legality of RTAs. The key
issue, however, is whether the WTO, and in particular its dispute
settlement system, will have the capacity to resist, what Jeffrey L.
Dunoff calls, “an expansionist, perhaps even imperialist, view of the
411
trade system.”
In view of the vague wording of the WTO provisions on RTAs
and the need to preserve the institutional balance on which the WTO
rests, the in-depth analysis of the justiciability of the WTO disciplines
on RTAs, described in Part V, leads to the conclusion that a
distinction must be made between the enforcement of concrete trade
policy “measures” and judging the overall legality of RTAs.
Following the logic of the Panel in the Turkey-Textiles case, concrete
trade policy measures should be subject to strict surveillance and
sanctioning, notably via WTO dispute settlement. However, in
contrast with the reasoning of the WTO’s Appellate Body, it would

411. Dunoff, supra note 327, at 667.

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2007] BRIDGING THE CONSTITUTIONAL CREDIBILITY GAP 75

be counterproductive for the credibility of the WTO and for the long-
term effectiveness of the multilateral trade disciplines if the WTO
dispute settlement organs were to get into questions of the overall
legality of specific regional arrangements. The overall compatibility
of regional arrangements with WTO rules should rather be the
subject of improved transparency and diplomatic peer review on the
basis of the strengthened benchmarks proposed in Part IV.