Preferential Trade Agreement

December 15, 2020

Henri Joel NKUEPO is a doctoral student in International Essrecht (University of the Western Cape – Cap) and a research fellow at the Human Rights Commission of South Africa. His research focuses on the regulation of natural resource trade, the protection of human rights, the environment and the protection of foreign direct investment in natural resources. One of the fundamental principles of trade liberalization is the non-discrimination provided for in Articles I of the GATT, II of the GATS and IV of the TRIPS agreement. This principle, Most Favoured-Nation (MFN), means that WTO members must not discriminate against their trading partners. Therefore, if a member pays a favour to one member, he must grant the same favour to others. However, as an exception to this principle, paragraphs 4 to 10 of GATT Article XXIV have been introduced. It allows for the creation of an agreement between members, whereby one member can grant more favourable trade terms to other parties to the agreement, not to other WTO members. The enabling clause, which aims to increase the participation of developing countries, was also introduced as an exception to the MFN in favour of developing countries. It allows the establishment of PTAs for preferential trade agreements between these countries. Trade diversion means that free trade agreements divert trade from a more efficient supplier, a non-member, to a less efficient supplier under the free trade agreement. Let`s take an African country, Rwanda. Rwanda imports food, machinery and equipment, steel, petroleum products, cement and building materials, and its main suppliers are Kenya and Uganda. However, its export partners are China and Belgium.

I think Rwanda imports mainly from Kenya and Uganda because they are part of the East African community and not because they have comparative advantages. In addition, Rwanda`s main export is coffee, tea and tin, and these are also produced and exported by Kenya. Instead of interacting with countries that have an absolute or comparative advantage, Rwanda is obliged to act with countries that have difficulty producing. This is not a good thing for both countries and the question is whether developing countries are prepared to bear the consequences of trade diversion. The rules of the PTA seem too strict for the economies of developing countries and should be revised accordingly. It seems that a developing country earns more by reaching an agreement with a developed country. This is because trade plays an important role in promoting development and because increased trade with developing countries increases their export earnings, promotes industrialization and promotes the diversification of their economies. The WTO has introduced a “special and differentiated treatment” to help developing countries and the EU has introduced the `widespread preference system`, an agreement that benefits the least developed countries and territories while ensuring trade with the EU. An example is “everything but arms,” which grants duty-free access to imports of all LDC products, with the exception of weapons and ammunition, without quantitative restrictions.

The European Commission reports annually on the implementation of its main trade agreements in the previous calendar year. Negotiated agreements, meetings, fact sheets, circular reports Several hundred bilateral EDPs have been signed since the beginning of the 20th century. The Canada Research Chair in International Political Economy`s TREND project[6] lists approximately 700 trade agreements, the vast majority of which are bilateral. [7] A preferential trade zone (including preferential trade agreements, PTA) is a trading bloc that offers preferential access to certain products from participating countries.

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