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PRESS/10
18April 1995
NOEVIDENCE OFPOLARIZATION OFWORLD TRADE AMONG THREE "BLOCS"
AND NOCLASH BETWEEN WORLD AND REGIONAL TRADE SYSTEMS
-SAYS NEW WTO REPORT
Ananalysis ofthegrowth intradebetween participating countries inregional agreements and
theirtradewithother regions doesnotsupport theconclusion ofanincreasing regionalization ofworld
trade, nordoesitconfirm thenotion oftheemergence oftrading "blocs" centred inNorth America,
Western Europe andtheAsia-Pacific region. Infact,trade withpartners inthesame region andwith
partners inother regions havebothbecome increasingly important innational economies throughout
thepostwar period.
Thelegalfoundations formore opentrade havebeenlaidbythemultilateral trading system
-global initscoverage -withregional integration agreements serving todeepen relations with
neighbouring countries. Thus, "theregional andmultilateral integration initiatives arecomplements
rather thanalternatives inthepursuit ofopentrade".
These areamong themainconclusions ofastudy, Regionalism andtheWorld Trading System1,
published today, bytheWorld Trade Organization Secretariat, inGeneva. However, commenting
ontheWTO rules andprocedures governing regional integration agreements, thestudy says, "...it
maybethatgovernments willconsider thatreforms arenecessary inorder toputthemutually supportive
relationship between multilateralism andregionalism onamore solid foundation".
1RegionalismandtheWorldTradingSystemwillbeavailableshortlyinEnglish,FrenchandSpanish.
Itcanbeobtained from theWTO Secretariat, Centre William Rappard, 154ruedeLausanne, 1211
Geneva 21.Price SwF40.-
95-0951 MOREPRESS/10
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Theshare ofworld merchandise tradewhich isintra-regional (ie.conducted within ageographic
region) hasrisenfrom40.6percentin1958to50.4percentin1993. Thisincrease ismainly accounted
forbythedevelopment ofWestern Europe, whose internal trade grew from 53to70percentofits
overall tradeduring thisperiod. While thisistheonlyregion toexhibit aclearpolicy-induced increase
intherelative importance ofintra-regional trade, theimportance ofWestern Europe 'stradewithother
regions inrelation toitsoutput haslargely beenmaintained.
Between 1947 andtheendof1994, atotalof108regional agreements were notified tothe
GATT. Inlooking atthecomplementarity between regional integration agreements andthemultilateral
trading system -firsttheGATT andnowtheWTO -thestudy makes anumber ofpoints:
- thescope forachieving tariff advantages attheregional levelismuch reduced since,
oncetheUruguay Round commitments arefullyimplemented, 43percentofdeveloped
countries 'imports ofindustrial products frompartners receiving MFN (Most-Favoured
Nation) treatment willbeduty-free, withanaverage ofonly6.6percentonthe
remainder;
- withtheimportance oftariffs reduced, attention hasshifted totheissue ofnon-tariff
trade measures, which areseldom administered preferentially, anddomestic policies
(such asproduction subsidies), which cannot beadministered preferentially;
- fewregional agreements cover services, agriculture andtheprotection ofintellectual
propertyrightswhereastheWorldTradeOrganizationhasprovidedanintegratedsystem
ofrights andobligations atthemultilateral levelinalltheseareasaswellasmerchandise
trade ingeneral;
- atthesame time, itisrecognized thatsteps taken incertain regional integration
agreements helped laythefoundations forprogress intheUruguay Round.
Thereport concludes thattheco-existence ofregional integration agreements andtheworld
trading system hasbeen"atleastsatisfactory, ifnotbroadly positive". However, theSecretariat finds
some reasons forconcern inthemanner inwhich theGATT rulesandprocedures oncustoms unions
andfree-trade areas haveoperated. Inparticular, Article XXIV ofGATT -nowsubsumed within the
WTO rules-requires thatsuchagreements cover "substantially alltrade" between members andthat
thelevel oftrade barriers facing those outside be"notonthewhole higher ormore restrictive". It
isnoted thatamong the69working parties called ontoexamine theconformity ofcustoms unions
andfree-trade agreements withArticle XXIV, onlysixhavebeenabletoreach aconsensus.
Thereport examines various proposals thatmight ariseinanyattempt toimprove thefunctioning
oftherules andprocedures onregional integration agreements; among these are:
- allowing theworking parties toreview regional agreements before signature and
domestic approval begins, inother words while thereisstillscope forchanging them;
- clarifyingthecriterialaiddowninArticleXXIVandperhapsintroducingnewprovisions
toincrease theprotection ofthirdcountry interests; and
- improving transparency through anenhanced system ofWTO surveillance ofthe
performance andeffects ofregional integration agreements.
END