Jagdish Bhagwati (op. cit.) reported that proponents of multilateralism and non-discrimination were prepared to accept the exception for free trade agreements and customs unions, as they believed that the terms of Article XXIV would make these regimes relatively rare. The aim of these conditions was to direct such agreements towards maximizing trade between the parties and minimizing the diversion of trade at the expense of the outside world. The most important conditions are that “the bulk of trade” should be covered and that liberalization should take place over a relatively short period of time. With regard to unions, the new common external tariffs that apply to third parties should not be “on the whole” more restrictive than those introduced by the parties before the customs union. 7 Art. XXIV also authorizes “intermediate agreements” as long as they result in a customs union or free trade agreement within a “reasonable period of time.” As with the net economic effects of trade creation and reorientation, the impact of regionalism on the multilateral trading system depends in part on the specifics of each ATR and the economic and political impact of the resulting trade policy changes in this area. In addition, two other arguments call for THE ATTs to be seen as support for the multilateral system or, at the very least, for global trade integration. First, regional negotiations have, in important cases, resulted in “episodes of competition liberalization” in which excluded parties conduct multilateral negotiations to compensate for the discriminatory effects of the ATR.
The final argument in favour of ATRs, particularly the “mega-regional” agreements negotiated by President Barack Obama with partners across the Pacific and across the Atlantic, is that they are more likely than the WTO to make progress on “deep integration” issues that should be at the heart of 21st century trade policy. Rather, Richard Baldwin argues that the 21st century trading system must be a two-pillar system, adopting multilateral and regional/plurilateral approaches in order to function smoothly. The WTO would continue to focus on flat integration – continue to monitor, enforce and further liberalise rules on traditional barriers to trade – while mega-regionals or other multi-laterals (such as negotiations on a new trade in services agreement) address deep integration issues that are important to global value chains. 33 The WTO would continue to play a role in promoting transparency and assessing the impact of ATRs to ensure that they minimize the negative effects. However, the GATT has not clearly defined these conditions and has only applied them smoothly in practice. This is partly because the United States, for foreign policy reasons, gives priority to European integration over the legalties of the GATT. Two decades after the creation of the GATT, lawyer Kenneth Dam concluded that only one of the more than a dozen regional agreements notified to GATT met the requirements of Article XXIV (e.g. B Ukreukt – Ireland). 8 But neither the GATT nor the WTO have ever rejected an RTA for inconsistency in Article XXIV. 9 Because they are inherently discriminatory, even if they are fully compliant with Article XXIV, ATRs could also encourage third parties to push for multilateral trade openings to reduce the level of discrimination they face.
C. Fred Bergsten is one of the strongest proponents of regional negotiations as a positive global force through “competitive liberalization.” He argues that the NAFTA negotiations, combined with President Bill Clinton`s efforts to promote regional trade liberalization through the Asia-Pacific economic cooperation process, showed that the United States had alternatives to the GATT negotiations, thereby helping to complete the troubled Uruguayan cycle (1986-1993).