Taking Stock of GATT’s Conflicting Provisions: Competitive Liberalization and the Demise of the WTO

Abstract

Contained in the GATT, are provisions whose applications contradict each other. Article XXIV, which empowers WTO members to form regional trade agreements (RTAs), otherwise referred to as competitive liberalization, is contrary to the idea of the Most-Favored-Nation (MFN) principle set out article I. Indeed article XXIV is an exception to article I, however the conflict caused by these provisions, has led to a situation where the two will not co-exist for long, and one will eventually phase-out the other. While under article I, countries are prevented from discriminating between their trading partners, and any benefit granted to one member of the WTO must be extended to all WTO members; article XXIV gives countries the option of circumventing article I, to offer preferential trade benefits to only the select few with which they choose to trade through the formation of RTAs. Thus, conclusion of RTAs is a practice that is contrary to the interest of the World Trade Organization. Rules of origin present in most RTAs have a negative impact on competitive liberalization, a key goal of the WTO in combatting protectionism, as RTAs grant special treatment to members regardless of their inability to produce commodities more competitively than non-members due to the reciprocal benefits of RTAs. This seeks to frustrate the aims of the WTO in attempting to effectively regulate international trade, because while RTAs facilitate trade amongst its members; it hinders trade for non-member with which it has no trade desires. Regrettably, however, the WTO has faced increasing difficulty in the regulation of RTAs, in their manifold shapes and sizes.