The Role of Rules of Origin to Provide Discipline to the Gatt Article XXIV Exception

Abstract

This article examines how the GATT Article XXIV regional trade agreement (RTA) exception can be strengthened to curb the proliferation of RTAs that maintain questionable levels of trade liberalization. The lack of rigorous application of the ‘substantially all the trade’ requirement and the use of rules of origin in a restrictive manner are persistent problems that have led to the exclusion of products that should otherwise be part of trade liberalization under RTAs. To provide the discipline currently lacking in Article XXIV, the internal trade under an RTA should be based upon ‘non-preferential rules of origin’ (NPROO) so that trade barriers between RTA parties with respect to ‘substantially all the trade’ will be eliminated. Furthermore, restrictive preferential rules of origin should be eliminated by replacing them with harmonized NPROO. NPROO therefore not only help define the proper scope of trade coverage for RTAs, but they also provide the proper standard to ensure that RTA rules of origin do not become impermissibly restrictive.