GATT Rules for Regional Trade Agreements

Article XXIV of GATT 1994 permits members to depart from the most-favoured-nation principle when forming qualifying regional trade arrangements in goods. It permits customs unions, free-trade areas, and interim agreements genuinely leading to either form, subject to conditions protecting both internal liberalisation and non-members' trade interests.

Permitted forms

• A customs union removes duties and other restrictive trade regulations on substantially all internal trade, while members apply substantially the same duties and trade regulations to non-members.
• A free-trade area removes duties and other restrictive trade regulations on substantially all trade in originating goods among members, while each member retains its own external trade policy.
• An interim agreement leading to a customs union or free-trade area is permitted if it contains a plan and schedule for completing the arrangement within a reasonable period.

Conditions attached to the exception

Article XXIV seeks to facilitate trade within the region without raising barriers against other WTO members.

• Internal liberalisation must cover substantially all trade, subject to specified GATT exceptions, rather than merely a few selected products.
• For a customs union, external duties and trade regulations must not, on the whole, become higher or more restrictive than those applying before its formation.
• For a free-trade area, each member's barriers against non-members must not become higher or more restrictive than its corresponding pre-agreement barriers.
• Members must notify the WTO and provide sufficient information for examination of the proposed arrangement.

Scope of Article XXIV

The provision governs regional arrangements concerning trade in goods. Preferential arrangements in services are governed separately by Article V of GATS, while certain developing-country preferences may rely on the Enabling Clause.

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