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Chapter 4 - Reconciling Parallel Universes: Multilateralism and the Challenge of Preferentialism

Chapter 4 of the Report covers the relationship between multilateralism and regionalism, a topical but vital issue in today’s trading environment. Although the WTO remains the centre of gravity of the multilateral trade regime, the proliferation over the past 10-15 years of Preferential Trade Agreements (PTAs) has raised pressing questions about the quality of trade relations today and their likely future directions in what few would regard as a stable equilibrium. The Commission acknowledges that PTAs are here to stay, but is of the firm view that where feasible, the energy behind such initiatives should be channelled towards reinforcing accepted multilateral principles. We make three specific recommendations in this regard.

Recommendation 7

The Commission believes that the very rapid growth of PTAs in recent years has unnecessarily raised trade costs and carries worrying implications for the world trade regime in terms of stability, fairness, opportunity and coherence. The Commission therefore recommends that as part of a concerted response by governments to this situation, current efforts to clarify and improve disciplines and procedures in relation to WTO provisions on Regional Trade Agreements (RTAs) be intensified.

Recommendation 8

The Commission recommends that as an expression of their commitment to the multilateral trading system and of a willingness to provide leadership in maintaining and strengthening international trade arrangements for the benefit of all, the major industrialised countries should refrain from establishing PTAs among themselves. The Commission also believes that large developing countries with significant shares in world trade should similarly refrain from negotiating PTAs with each other.

Recommendation 9

The Commission recommends that WTO Members strengthen and make permanent the recently established Transparency Mechanism (TM) for reviewing RTAs. The Commission believes that this would provide crucial support for an urgently needed process of reflection, independent of negotiations, to consider how to manage the relationship between multilateral and regional trading arrangements. In this connection, the Commission recommends that consideration should be given to developing a mechanism that facilitates collective surveillance of RTAs and possibly the establishment of a code of best practices.

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Chapter 4