Regional Trade Arrangements Among Developing Countries: Enabling Clause Re-Visited

Abstract

This paper intends to show the legal relationship between paragraph 2 (c) of Enabling Clause and GATT Article XXIV as RTAs among developing countries are concerned. GATT Article XXIV justifies MFN departure of customs unions and free trade agreements if some requirements are met. Paragraph 2© of Enabling Clause waives these requirements where developing countries form regional trade arrangements among themselves. The paper has no intention to discuss RTAs among developing countries in an econometric context. Nor it is to examine the proxies for welfare impacts of the RTAs involving only developing countries in a comparative analysis with the RTAs among developed countries or those between developed and developing countries. Instead, the paper intends to focus mainly on the way these two legal bodies, mainly Enabling Clause 2 (c) and GATT Article XXIV compete in providing legal cover for RTAs among developing countries. The paper concludes that regional trade agreements among developing countries should be subject to both legal covers successively; starting with Enabling Clause 2(c) pending graduation in accordance with the requirements of paragraph 7 of the Enabling Clause. With graduation, the legal coverage automatically shifts to GATT Article XXIV. The paper, however, acknowledges the lack of clarity in the graduation criteria embedded in the language of Enabling Clause paragraph 7 which is equally cumbersome for other areas of S&D.