Regionalism and Development


Tariff rates are bound by MFN requirements: thus, all regional trade agreements, free trade agreements and preferential trade agreements seem to conflict with MFN – they give certain members lower tariff rates than others.

Rules of Origin

  • Rule of Origin stop the practice of Trans-Shipment (using roundabout routs to minimise tariffs).
  • E.g. for an item to be “Australian”, there must be a tariff category transformation, merely shipping does not change anything.
  • This has been a problem with developing countries, since they can’t trade within each other and retain market access

Reciprocal Trade Agreements

  • Article 24allows reciprocal trade agreements, but on the following requirements:
  • 24:8:(i) Duties are eliminated with respect to substantial all the trade between the constituent territories

The Enabling Clause/GSP

Differential and more favourable treatment reciprocity and fuller participation of developing countries

  • Requirements:
    • Must involve a developing country member (Art. 1)
    • Differential treatment, here, must:
      • facilitate trade for developing members (Art. 3:a)
    • Developed countries involved should not except reciprocity (Art. 5)
  • You can choose the areas opened in a Preferential Trade Agreementunder the Generalised System of Preference
    • Thus, only less important industries are often liberalised
    • Although, with regards to LDC’s “everything but arms” and “Duty Free Quota Free” is gaining traction
      • Although India has been protesting about Bangladesh’s increased access to the US market

Preference Erosion

  • Preferences given under the enabling clause used to be worth more, but since tariff rates are eroding (with NAMA tariffs averaging at less than 4%), the comparative advantage it gives developing countries is eroding
  • Solutions:
    • Increasing tariffs is out of the question
    • technical assistance for SPS/TBT adherence
    • technical assistance for capacity building

India – EC – GSP case

India won a case saying that GSP preferences should be applied to all developing countries, and won.

Spaghetti bowl problem

  • The MFN rate is no longer the rate
  • Increasingly, FTA rates complicate the matter, and not all FTA’s were registered
    • Recently, there was a crackdown of registration
    • In the future, perhaps harmonisation, but currently not on the table
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