Non-discrimination is a fundamental principle of the WTO. Members generally committed not to favour one trading partner over another. An exception to this rule are the RTAs. These transactions are inherently discriminatory, as only their signatories benefit from more favourable market access conditions. WTO members recognize the legitimate role of RTA, which aims to facilitate trade between its parties, but which would not create barriers to trade vis-à-vis third parties. The United States and the United Kingdom began negotiating the rules and institutions they hoped to avoid a new Great Depression and foster post-war reconstruction and economic prosperity well before the end of the Second World War. Together with the International Monetary Fund and the World Bank, responsible for managing international financial markets and providing financial resources, they created the GATT to regulate trade. The very first GATT article codified the Principle of the Most Favoured Nation (MFN) as the central pillar of the rules-based trading system. Contrary to what the term suggests, the MFN principle encourages non-discrimination by requiring that each GATT signatory treat all other GATT parties in the same way as its “most favoured” trading partner. U.S. Secretary of State Cordell Hull used this principle in bilateral negotiations to defuse the protectionist binge of the 1930s, which deepened and prolonged the Great Depression. 2 Under the MFN, all tariff reductions negotiated between two or more GATT parties are automatically extended to all other GATT members. With the principle of national treatment of Article III, which stipulates that imports must be treated in the same way as domestic products after the border, the MFN has cemented the place of non-discrimination at the heart of the multilateral trading system.
The Article XXIV agreements were notified to the Goods Trade Council (NTC), which accepted the mandate and forwarded the agreement to the CRTA for review. The services trade rtAs were notified to the Services Trade Council (STC) in accordance with Article V of the GATS, which may have decided to submit the agreement to the CRTA for review. Unlike the ATRs notified under GATT Article XXIV, such a review was optional. In the vast majority of cases, such a review was imposed. Paragraph 29 of the Doha Declaration calls for negotiations to “clarify and improve” disciplines and procedures under existing WTO regional trade agreements (ATR) provisions. However, as atRs have multiplied, other issues have been put forward. An important debate is focused on the impact of ATRs on increasingly fragmented global supply chains. One of the arguments put forward by RTA is that it is a more effective way to make progress on the “deep integration” issues that these modern supply chains need to function well. This benefit is, however, underestimated by the increased transaction costs associated with the overlap and inconsistency of atRs, with different rates for the same product and different rules of origin.
According to Baldwin and Thornton (summary of a conference on regionalism jointly organized by the WTO), the spaghetti bowl effect has become a major concern of the international economy.