Free Trade Agreements and the WTO Exceptions

Publication Date: September 2004

Publisher: Library of Congress. Congressional Research Service

Author(s):

Research Area: Trade

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Abstract:

World Trade Organization (WTO) Members must grant immediate and unconditional most-favored-nation (MFN) treatment to the products of other Members with respect to tariffs and other trade matters. Free trade agreements (FTA) are facially inconsistent with this obligation because they grant countries who are party to the agreement the ability to receive more favorable trade benefits than those extended to other trading partners. Due to the prevailing view that such arrangements are tradeenhancing, Article XXIV of the General Agreement on Tariffs and Trade (GATT) contains a specific exception for FTAs. The growing number of regional trade agreements, however, has made it difficult for the WTO to efficiently monitor the consistency of FTAs with the provided exemption. With the recent Congressional approval of both the U.S.-Australia and U.S.- Morocco FTAs, the United States is presently a signatory to eight FTAs. In addition, the Administration has recently signed and released drafts of the Central American Free Trade Agreement (CAFTA), as well as the U.S.-Bahrain FTA. Finally, the Administration is involved in ongoing FTA negotiations with a number of other countries including the Free Trade Area of the Americas, Thailand, Panama, the Andean Nations and the South African Customs Union. This report will be updated.