Regional Trade Agreements in the WTO System

In the international trading system today, regional trade agreements, referring to reciprocal trade agreements between two or more countries providing exclusive trade preferences, govern not only the trade relations among the parties to the RTAs, but also form additional sets of trade disciplines. These agreements exist parallel to the multilateral trading system under the auspices of the World Trade Organization. The GATT/WTO rules authorize RTAs under certain conditions; thus on the surface, RTAs appear to be a legitimate part of the WTO system. However, in substance, the preferential terms of trade in RTAs are essentially in conflict with the most important principle of the WTO system, the most-favored-nation treatment. The current proliferation of RTAs thus makes exclusive RTA preferences, which are supposedly an exception to the MFN principle, a rule rather than an exception. This article examines GATT/WTO rules on RTAs, addresses the potential conflict between RTAs and the WTO system with potential solutions, and analyzes RTAs from the development perspective.