What Is Required for a Free Trade Agreement to Be Consistent with Wto Rules
Free trade agreements (FTAs) have become increasingly popular in today`s globalized economy, as they allow countries to reduce trade barriers and facilitate the flow of goods and services across borders. However, for an FTA to be consistent with the rules of the World Trade Organization (WTO), it must meet certain requirements.
Firstly, an FTA must comply with the “most favored nation” (MFN) principle of the WTO. This principle requires that countries treat all trading partners equally, without discriminating against any particular member. In other words, if a country offers preferential treatment to one of its trading partners through an FTA, it must also offer the same treatment to all other WTO members.
Secondly, an FTA must not undermine the WTO`s principle of non-discrimination. This principle is divided into two parts: the national treatment principle and the market access principle. Under the national treatment principle, imported goods or services must be treated no less favorably than domestically-produced goods or services. Under the market access principle, countries must not impose unnecessary barriers to trade, such as import tariffs or quotas.
Thirdly, an FTA must not create obstacles to trade between its members and non-members. This is known as the WTO`s “multilateralism” principle, which aims to promote a level playing field for all WTO members. FTAs should not create an environment whereby trade between members becomes easier, while trade with non-members becomes more difficult.
Fourthly, an FTA must not threaten the WTO`s dispute settlement system. The WTO provides a mechanism for resolving disputes between member countries, and this mechanism should not be circumvented by disputes arising within an FTA. If disputes arise within an FTA that cannot be resolved through negotiations, they should be referred to the WTO`s dispute settlement system.
Finally, an FTA must not undermine the overall objectives of the WTO. These objectives include promoting economic growth, sustainable development, and the reduction of poverty. FTAs should not be used as a means to promote the interests of one country at the expense of these wider objectives.
In conclusion, for an FTA to be consistent with the WTO`s rules, it must be designed in a way that complies with the principles of non-discrimination, multilateralism, and dispute settlement. It should also avoid undermining the overall objectives of the WTO. By meeting these requirements, FTAs can promote economic growth and development while remaining compatible with the rules of the world trading system.
