ITRADE

MFN like product originating in or destined for the reach at global levels. Also, WTO rules ensure that RTA
Prohibits discrimination between like services and territories of all other contracting parties. create trade more than divert it. In Doha Development
service suppliers from different countries. It ensures Round, members are negotiating to further clarify and
equality of opportunity for services and service RTA improve the rules applying to FTA.
suppliers from all WTO members. It is an umbrella covering both FTAs and CUs. The term
"Preferential Term Agreement" (PTA) is used as a CU
MFN means that every time a country lowers a trade synonym for RTA since the latter can be misleading Substitution of a single customs territory for 2 or more
barrier or opens up a market, it has to do so for the because it suggests all countries that are members of customs territory so that
same goods or services from all its trading partners — FTA or CU are located in the same geographic region. -duties and other restrictive regulations of commerce
whether rich or poor, weak or strong Example: US and Bahrain are not in the same region, (except where necessary) are eliminated with respect
yet have an FTA. On the other hand, Belize and Panama to substantially all the trade between constituent
Means non-discrimination. Each member treats all the are not members of CAFTA-DR. PTA avoids territories of the union or at least with respect to
other members equally as “most-favoured” trading misconception but it can also be confused with substantially all the trade in products originating in
partners. If a country improves the benefits that it preferential agreements for developing and least such territories
gives to one trading partner, it has to give the same developed countries such as GSP and AGOA. -substantially the same duties and other regulations of
“best” treatment to all the other WTO members so that commerce are applied by each of the members of the
they all remain “most-favoured”. The key characteristic of RTA is that the parties to such union to the trade of territories not included in the
agreements offer each other MORE FAVOURABLE union
With respect to customs duties and charges of any kind treatment in trade matters that they offer other trading
imposed on or in connection with importation or partners. To the extent that these other trading Standard for INTERNAL TRADE between constituent
exportation or imposed on the international transfer of partners are WTO members, such discriminatory members
payments for imports or exports, and with respect to treatment is inconsistent with the MFN treatment members of CU eliminate duties and other restrictive
the method of levying such duties and charges, and obligation, one of the non-discrimination principles of regulations of commerce with respect to substantially
with respect to all rules and formalities in connection WTO. Yet both GATT 1994 and GATS allow, under all the trade between them. Members may maintain,
with importation and exportation, and with respect to certain conditions, RTA establishing CU and GTA. WTO where necessary, certain restrictive regulations of
all matters referred to in paragraphs 2 and 4 of Article law recognises the advantages of ECONOMIC commerce in their internal trade that are permitted
III,* any advantage, favour, privilege or immunity INTEGRATION and TRADE LIBERALISATION even under GATT 1994. The standard offers flexibility to the
granted by any contracting party to any product when these efforts involve only some members given members of a CU when liberalising their internal trade.
originating in or destined for any other country shall that at a regional level, it may be possible to achieve a
be accorded immediately and unconditionally to the degree of trade liberalisation which may be out of Standard for TRADE of constituent members with
ITRADE

THIRD COUNTRIES
members of CU apply substantially the same duties and Unlike CU, the definition of FTA establishes only a
other regulations of commerce to trade with third standard for the internal trade between members. No
countries. They are required to apply COMMON standard, i.e. no requirements, for the trade of
EXTERNAL TRADE REGIME, relating to both duties and members with third countries.
other regulations of commerce. Again, substantially the
same offers a certain degree of flexibility to the Internal Trade Standard: elimination of duties and
constituent members in the creation f a common other restrictive regulations of commerce on
commercial policy. substantially all trade between constituent members
(same as CU)
When the measure, though GATT-inconsistent at first
glance, is justified under GATT 1994 when 2 conditions Here, it requires that the duties and other regulations
are fulfilled. of commerce applied by a member of FTA to trade with
First Condition: measure must be introduced upon 3rd countries after the formation of the FTA must NOT
formation of a customs union that meets the BE HIGHER OR MORE RESTRICTIVE than the duties
requirements of Art XXIV:8(a) 5(a) and other regulations of commerce applied by the
Second Condition: without the introduction of the member BEFORE THE FORMATION OF FTA.

measure concerned, the formation of a customs union
would be impossible

FTA
GATT-inconsistent is justified under Art. XXIV of the
GATT 1994. Please refer above under CU)

A group of 2 or more customs territories in which the
duties and other restrictive regulations of commerce
(except, where necessary, those permitted) are
eliminated on substantially all the trade between the
constituent territories in products originating in such
territories