1990s, 90 covering goods or services, or both, were notified to the WTObetween 1995 and 2000. By March 2002, this number reached 115 (WTO,2002a).Since the birth of the WTO in January 1995, an average 15 RIAs werenotified every year. Compared to this, an annual average of three RIAs werenotified to the GATT during its entire lifetime spanning 1948 and 1994. Theincrease in notification partly reflects increase in the membership of the WTO,and partly new notification obligations. WTO members are required to notifyeconomic integration agreements (EIAs) in services.10 This obligation did notexist during the GATT regime. The total number of notified RIAs notified to
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the GATT–WTO system, by the beginning of the Doha Ministerial of theWTO in November 2001, was 214. I hasten to add that about a quarter of theseRIAs are no longer in existence. During 2000, discussions on approximately20 new ones were in progress. Nine African countries agreed to establish afree trade area, as did the 14 island states of the South Pacific Forum. During2001, 19 new RIAs were notified to the WTO.11The total number of notified RIAs stood at 250 in March 2002 (WTO,2002a). According to the WTO 2002 Annual Report, 159 agreements werestill in force in 2001. It must be clarified that included in this number arenotifications made under GATT Article XXIV, GATS Article V, and theEnabling clause. Also, this number does not take into account accession toexisting RIAs. Of these 159 notified RIAs, 18 were EIAs in services. Of theremaining 141 notified RIAs in force, 124 were intended as free trade areas(FTAs) and customs unions (CUs). If RIAs not (or not yet) notified areincluded, the total number of RIAs in force in March 2002 rises to 243, ofwhich 197 have the format of either FTAs or CUs. According to the estimatesmade by the WTO, if the RIAs currently being planned or negotiated areconcluded, a further 87 will be in force by 2007, bringing the total number to246 (WTO, 2002a).In its new incarnation, regionalism engulfed all major players of the globaleconomy. Most WTO members were parties to at least one RIA, while manywere part of two or more. The only exceptions were the People’s Republic ofChina (hereinafter China), Hong Kong SAR, Macao, Mongolia and Japanwhich had not notified any agreement by the end of 2001.12 But theseeconomies are known to be negotiating RTAs at present. Besides, if the APECforum is counted as a planned or informal regional trading arrangement,countries on virtually all continents are now members of regional tradeagreements.13 China, Hong Kong SAR, Macao, and Japan are signatories ofAPEC. The resilience of the trend towards regionalization is likely to intensifyfurther as economies committed to the multilateral-only kind of liberalizationabandon it and enter into RIAs. In this sense, the option of regional tradeliberalization has become an attractive tool for managing their trade policies,alongside multilateral trade liberalization (WTO, 2002a). It needs to be notedthat not all the RIAs were negotiated with sincere trade-expansion andeconomic integration intentions. To be sure, some had mere vague aspirationsfor moving towards this objective.Other than the normal RIAs, there are non-reciprocal preferentialagreements, involving selected developing and industrial economies. Some ofthe best-known examples of such agreements are as follows. During mid2000, the US enacted the Trade and Development Act of 2000, whichcontained the African Growth and Opportunity Act as well as the UnitedStates–Caribbean Basin Trade partnership Act. This legislation reduced
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tariffs on a publicized list of products, including textiles and apparel, for48 sub-Saharan African and 25 Caribbean countries. In addition, the CotonouPartnership Agreement (CPA) between the 71 African, Caribbean and Pacific(ACP) states14 and the EU was signed in June 2000 (UN, 2001). Thisagreement replaced the Lomé Convention. It provided for a preparatory periodof eight years within which the EU would continue to provide preferentialtreatment equivalent to the Lomé Convention for projects originating in ACPcountries. Following this period, new WTO-compatible trading arrangementswould be instituted (see also section 5).3.1 Distinctive Features of New RegionalismTrade theorists were not left behind in the rapid growth in new regionalism. Ina decade, a large body of theoretical literature shedding light on the politicaleconomy of regional trading blocs and integration has developed. Ethier(1998a and 1998b) has identified some characteristics of new regionalism. Acrucial feature of new regionalism is reduction of non-discriminatory mostfavored-nation tariffs along with reduction in intra-RIA tariffs. Some of theother stylized features are as follows. First, new regionalism entails one ormore relatively smaller economies forming a regional or sub-regional blocwith a large emerging-market15 or industrial economy. Second, it is the smallercountry that generally undertakes more significant unilateral liberalization andadopts reform measures. These measures are more or less one-sided. This is ageneralization, having several exceptions. Third, dramatic moves to liberalizeare not commonly seen in the new regionalism. The degree of liberalization bymembers is generally modest. Fourth, regional arrangements generally involve‘deep’ integration, or plans to move from ‘shallow’ to ‘deep’ integrationwithin a stipulated period. The partners do not confine themselves toeliminating barriers to market access but move on to harmonization of codesand adjustment of economic policies.The new regionalism differs from the old regionalism in several of itscharacteristics. It is a qualitative departure from the old regionalism in severalrespects. First, while old regionalism was essentially confined to RIAsbetween industrial economies or developing economies, the new regionalismis known for cross-alliances between developing, emerging-market andindustrial economies. The new bonds forged by developing and industrialeconomies offer considerable potential for gains from trade. The flip side ofthis coin is that this new relationship also has a great deal of potential foradjustment problems and trade tensions. Second, while old regionalism wasessentially limited to RIA formations by contiguous economies, the newregionalism does not seem to be limited to neighboring economies. In somerecent or proposed cases, RIAs are intercontinental. Although there may be
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coordination related problems, from the gains-from-trade perspective thiscould be a healthy development.Third, under the new arrangement RIAs are not exclusive, meaning therebyone country can simultaneously be a member of more than one RIA (refer toChapter 1, section 7). This may eventually turn out to be an aid to promotingmultilateralism through RIAs. Fourth, while old regionalism was limited toshallow integration, the new regionalism is more ambitious. The ambitions ofthe constituent members’ countries are reflected in their initiatives towardsdeeper integration at an early stage. A number of recent agreements aspire fordeep integration, with commitments to harmonization of regulatory measures,freeing factor movements, and other close integrating measures. Implicationsof RIAs for the global trading system have been extensively debated in theeconomic literature.Another respect in which the new regionalism differs from the old one isthat during the period of the new regionalism, multilateral liberalization oftrade and finance has made a great deal of progress and traveled far. It has alsobeen much more complete in the industrial economies than during the periodof old regionalism. Many developing economies, particularly the emergingmarket ones, had made a good deal of progress in liberalizing their domesticeconomies and had become enthusiastic participants in the multilateral tradingand financial system. During the period of new regionalism, FDI flows havebecome much more prominent than they were during the period of oldregionalism. A developing or emerging-market economy finds the liberalizedregimes in the industrial economies attractive because they see possibilities ofFDI flowing their way if they join an RIA with them. Indeed, preferentialmarket access would be an additional advantage for the developing oremerging-market economy. Thus, progress in multilateral trade liberalizationhas led to new RIAs, which in turn have tended to support the multilateraltrading system.The recent vintage of RIAs and the ones on the anvil, like MERCOSUR,FTAA, APEC, NAFTA and Euro-Mediterranean Partnership Agreement(EMPA), try to use the institution of an RIA to eliminate the marketsegmenting effects of various regulatory policies. It should, however, be notedthat policy integration is not the objective of all RIAs. Only a small, albeitincreasing, number of them have included this in their objectives. Proponentsof such policy integration point out that that while policy integration can bewelfare enhancing, it cannot be taken for granted. Welfare enhancement, orlack of it, would eventually depend upon the initial terms of agreement of anRIA. The content of the agreement and the modalities that are followed toreduce the market segmenting effects of regulatory regimes would impingeupon the welfare enhancement effect in an RIA (Hoekman et al., 1998).A scrutiny of the current intra-RIA trade statistics reveals that intra-bloc
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trade share is much larger in RIAs between industrial economies (EEC at 38.6percent and CUSFTA at 30.2 percent) and RIAs between industrial andemerging-market economies (NAFTA at 42.1 percent) than in RIAs amongthe developing economies. The largest intra-bloc share in RIAs betweendeveloping economies is in ASEAN (at 16.7 percent), followed byMERCOSUR (at 12.9 percent), East African Cooperation (EAC) at 12.8percent and Central European Free Trade Area (CEFTA) at 10.3 percent. Theother developing-country RIAs have much smaller intra-bloc trade shares. Forinstance, this proportion was 2.3 percent for the Andean Community (AC), 3.3percent for the Group-of-Three (G-3),16 3.2 percent for the South AsianAssociation for Regional Co-operation (SAARC) and 4.2 percent for the GulfCo-operation Council (GCC). Similarly, intra-trade was found to be less than1 percent for the three Sub-Saharan Africa RIAs (namely, Union Douanière etÉconomique de l’Afrique Centrale (UDEAC), Southern African DevelopmentCommunity (SADC), and Communauté Économique de l’Afrique de l’Ouest(CEAO)), while it was 1 percent for the Central American Common Market(CACM).17The countries that signed FTAs with the EU or the European EconomicArea (EEA)18 were drawn towards the EU by the centripetal force a largemarket exerts on smaller economies in the vicinity. The EU has fast becomethe major trading partner of such economies, and a large or significant part oftheir total trade is with it. There is another fact explaining the viewpoint of theacceding countries in creating an RIA with the EU: as more countries joinedit, staying on the outside became ever more expensive and the incentive to joinincreased. Current intra-trade statistics show that Iceland has 60 percent of itstotal trade with the EU, Norway 61.3 percent, Morocco 74.4 percent, Tunisia56.8 percent, Hungary 41.5 percent, Poland 49.4 percent, the Czech Republic46.7 percent, Estonia 16.7 percent, Lithuania 23.0 percent and Latvia 21.7percent. These developing and emerging-market economies can be consideredwell integrated with the EU through trade.193.2 The Deepening of IntegrationDuring the second wave of regionalism, not only did the number of RIAsbeing negotiated increased exponentially but also their scope and geographicalreach broadened. Greater regional economic integration was frequently takenup as one of the principal objectives of the RIA, which implied deepening ofintra-regional trade. Deep integration, as opposed to shallow integration, goesbeyond border protection measures, that is, beyond liberalization of tariffs andNTBs. It includes expansion of mutual FDI and harmonization of commercialregulations, standards and practices.Some RIAs have attempted integration of standards relating to industrial
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products and safety and health and environmental policies. Some have alsotried to integrate policies relating to major sectors like agriculture, industry,transport and corporate law. Presently, under the rubric of deep integration,prospects of integrating corporate and indirect taxation, accounting standardsand regulation of financial services are being examined.The term ‘deep integration’ also refers to the pace with which scope,coverage and depth of tariff liberalization is adopted by an economy thatbecomes a member of an RIA. Although a ‘big-bang’ approach in this regardcan be adopted, this happens infrequently. According to this approach tariffsare eliminated on all products on the day of entry into force of the agreement.What is more common is that tariff concessions are introduced in a phasedmanner, spread over a stipulated transition period. During the brisk expansionof RIAs during the second wave, elimination of existing tariffs on industrialproducts either took place on the date of entry into force of the agreement, orprogressively during the course of the transition period. The goal of free tradein industrial products has become an accepted norm in RIAs, whileagricultural goods are treated in a different manner. Generally trade inagricultural products is treated as an exception, with only a small number ofRIAs succeeding in instituting free trade in agriculture. They have also failedto remove tariff spikes in agricultural products.
4. NEW REGIONALISM: THE EVOLVING LANDSCAPEAs many countries are members of several agreements – sometimes with verydifferent rules – the contemporary global network of RIAs has become highlycomplex. As a rule of thumb, one observes that shallow integration is far morecommon than deep integration. A large majority of existing RIAs fall in thecategory of FTAs. The only customs unions are the EU, the South AfricanCustoms Union (SACU), MERCOSUR in South America, and CARICOM inthe Caribbean.20 The Andean Group (AG) or the Andean Community (AC)21and CACM have partial common tariffs, that is, they combine features of anFTA and a CU.Supported by its economic and political momentum, the EU has beendeepening and expanding. As seen earlier, its membership will rise to 25economies in May 2004. The Maastricht Treaty22 provided the blueprint forEconomic and Monetary Union. Its objective was to further the economic andpolitical integration of the EU. In order to qualify to participate in the EMU,the member states were required to achieve a high degree of sustainableconvergence, as laid down in the convergence criteria established by theTreaty. Over the course of the 1990s, the economic policies of the memberstates were geared towards meeting the convergence criteria. Cyprus, Malta
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and the eight Central and Eastern European Countries (CEEC) entering the EUautomatically become members of the EMU, with a special status. This specialstatus would allow them to participate in the European Monetary System(EMS).23 Furthermore, there are prospects of increasing EU membership to 28or even 30 before 2010.24 When the new members join, it would be much morethan a mere change of scale (Vedrine, 2000).The 2004 wave of EU expansion would increase the Union’s population by20 percent. Most of the accession countries are small, save Poland with nearly40 million people. The planned enlargement would mark the fifth time the EUhas admitted new members.25 This would dwarf any previous expansion andwould almost double the number of official languages within the Union, from11 to 20. It would increase the land mass by 25 percent.More importantly, the integration of the EU with the CEEC has significanteconomic implications. In 1986, when Spain and Portugal joined the EU, theirGDP per capita was already 70 percent of the EU average in purchasing powerparity (PPP) terms. The 1995 accession countries (Austria, Finland andSweden) even produced a higher output per capita than the union had had upto then. The ten present candidates post a purchasing-power adjusted GDP percapita of less than 40 percent of the EU average. In euro terms, this ratio is aslow as 15 percent. As the accession countries are much poorer, the addition tothe EU’s GDP (measured at the market exchange rates) would rise by a littleless than 5 percent. The per capita GDP of the new EU of 25 members woulddecline by 14 percent.Also, CEEC financial sectors are far less developed than those in their EUcounterparts (Suppel, 2000). In 2007, the European Council is expected toapprove the accession of Bulgaria and Rumania and Croatia would not be farbehind (EIU, 2003). With the projected 2010 wave of expansion, the EU islikely to include Albania, Bosnia and Herzegovina, Macedonia, Serbia andMontenegro and Turkey.26 The concept of bringing them into the fold of theEU in the future has existed for some time. This country group has lowerincomes compared to the EU average in PPP terms as well as relatively poorfinancial infrastructure.As the expansion was on the cards, the ten new accession economies hadstarted the integration process. It had progressed economically more thanpolitically. The low labor costs in the new accession economies made themattractive destinations for FDI from the older EU member economies. By2003, trade barriers between the EU and the new accession countries were allbut eliminated. Two-thirds of the trade of the ten accession countries was withthe EU members in 2003, which was as much as the smallest EU membercountries do with each other (EIU, 2003).During the early 2000s, the majority of RIA initiatives were taken in theAmericas and in Asia. Mexico has concluded seven RIAs, four of which are
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bilateral agreements with other Latin American countries. It is also in theprocess of negotiating bilateral agreements with Japan and Singapore. The USwas involved in at least eight sets of RIA negotiations, mostly with LatinAmerican and Asian nations. It was hoped that the US–Central AmericanRIAs would springboard negotiations for the FTAA. Additionally, the US hasextended invitations to all countries in ASEAN to form bilateral agreements,using the Singapore–US RIA as a prototype. ASEAN’s larger neighbors havealso taken an interest in negotiating trade agreements. For instance, Singaporecompleted a ‘New Age’ FTA with Japan (Chapter 5, section 8.1) and iscurrently working on one with China.Other recent RIA activity includes EU agreements with South Africa,Croatia, and Macedonia and proposed EU agreements with Chile, the GulfCooperative Council, Mediterranean countries, and the African CaribbeanPacific countries. The US has also initiated trade talks for the South AfricaCustoms Union, and with Australia, and Morocco. Australia has also taken theinitiative for a number of FTAs with ASEAN countries like Singapore, and iscurrently negotiating with the US.274.1 New Regionalism: A Stimulant to Multilateral Trade?Some of those who examined the relationship between new regionalism andmultilateralism in the current mise-en-scène have came to the conclusion thatthe two trends feed on each other and that they reinforce each other. Thisperspective on regionalism and multilateralism is something of a reversal ofthe past relationship between the two trends. Trade economists believed thatregionalism and multilateralism had a mixed impact on each other, or that theywere the antitheses of each other. The reason was that these trade theoristsexamined multilateralism and regional integration from an age-old Vinerianperspective. They assumed that regional integration is an exogenous variableand therefore they came up with mixed answers about its impact onmultilateralism, multilateral trade liberalization, and its welfare effect ingeneral. However, arguments presented by Ethier (1998b, 1999) in thisregard differ radically. His examination was confined to the current wave ofregionalism and he posited that the regional integration that began in the latterhalf of the 1980s, was caused, and strengthened by, multilateralism and/ormultilateral trade liberalization. Ethier stressed that the causality goes frommultilateral trade liberalization to regional integration. Regionalism in turnbenefited from and promoted multilateralism (see Ethier, 1998b, 1999). Thisis how the causal circle is completed.As alluded to above, during the current era of regional integration, tradeliberalization in the industrial, emerging market and many developingeconomies has progressed a great deal. Relatively, progress in liberalization in
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the industrial economies and industrial sector has been more complete. Theemerging-market economies, and many developing economies, haveabandoned their past preference for anti-trade, anti-market strategy. Instead,many of them are eagerly trying to integrate into the global trading andfinancial network. With all-round expansion in multilateralism, both crossborder trade and financial flows, including FDI, have expanded considerablyin volume.Several recently created RIAs, where one or more small developing economies have entered into an RIA with a larger emerging-market or industrialeconomy, demonstrate that multilateralism or multilateral trade liberalizationhas caused regional integration. A plausible line of logic can be as follows.Production of some industrial products in an emerging market or industrialeconomy may take place in two stages of manufacturing. The first, or therudimentary stage of production, may take place in a developing country,while the second one is in the emerging market or the industrial economy,where the product is finally marketed. As the emerging market or industrialeconomy moves from a non-cooperative Nash tariff equilibrium to acooperative (or multilateral) one, tariff rates in the industrial economy fall. Agreater degree of multilateral liberalization raises the benefit to the developingeconomy of being a part of the multilateral trading system, and joiningthe emerging-market or industrial economy in an RIA. Therefore, whendeveloping economies see sufficient gains from reforms and liberalization,they consciously decide to liberalize their domestic regimes, even in the faceof intense opposition from domestic lobbying groups. As integrationstrengthens, these liberalizing developing economies also hope to receive FDIfrom the partner countries, which invest there to produce and export the finalproduct to their home countries. Furthermore, by adopting reforms, thedeveloping economy obtains access to higher technology and productionprocedures than available locally. This illustration demonstrates howmultilateral liberalization can promote regional integration.Creation of RIAs also encouraged multilateral trade negotiations (MTNs) tobring down the trade barriers in general. Creation of the EEC, it is believed bymany commentators, led to the Dillion Round (1960–61) and Kennedy Round(1964–67) of MTNs. The US thought that MTNs and trade liberalizationwould mitigate the EEC’s potential for diverting trade. This is indeed a likelyscenario, but it is difficult to believe that MTNs would not have taken placewithout the creation of the EEC, especially given the global influence of theUS during the 1960s. Similar arguments about regionalism promoting MTNswere made during the Tokyo Round (1973–79) and the Uruguay Round(1986–94) of MTNs. The beginning of the new regionalism coincided with thelaunch of the Uruguay Round. It is believed that as the Uruguay Round was ahighly ambitious round of MTNs. It faced numerous difficulties and progress
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was halting. At one point it nearly collapsed.28 Many economies sensed animminent debacle and reacted by turning away from multilateralism. They sawsalvation in regionalism. It is difficult to ascertain whether this stand iscorrect. It seems plausible that these rounds of MTNs may have been inspiredand spurred on by regionalism, but that regionalism was a direct causal factorfor the MTNs seems a difficult proposition apart from the Uruguay Roundperiod. Formation of a large RTA could certainly affect the timing, not theincidence, of subsequent MTNs.In an environment of ongoing multilateral liberalization, many developingeconomies may see the benefits of liberalization and of joining into the globaltrading system. Under these circumstances, creating an RIA with theappropriate economy or economies first creates a secure access to the market,second, it locks in reforms, and third it ensures that the emerging-market orindustrial economy would feel more safe in investing in the partner developingeconomy than in other liberalizing non-partner developing economies (refer toChapter 2, section 5.2). Thus, regional integration results in increased FDIflows. This is obviously different from the usual regional integration scenario,where focus is essentially on trade, not on FDI inflows. Thus viewed, regionalintegration during the recent past has been spawned by the ongoingmultilateralism. In turn, it has strengthened commitment to multilateral tradingsystems.4.2 New Regionalism: A Deterrent to Multilateral Trade?As soon as a new RIA is proposed or formed, the non-member economies thattrade with the RIA-forming economies wonder and worry about its ‘fortress’aspect. Is it a potential fortress promoting trade only between the constituentmembers and discouraging that with the non-member economies? Will itcreate trade between members and in the process divert that from nonmembers? These have been age-old concerns for the non-constituenteconomies of any RIA. When the EU was giving final shape to its SingleMarket initiatives in the late 1980s, these concerns were rampant. Theexpression ‘Fortress Europe’ was bandied about frequently in differentmultilateral fora.Although some RIAs did raise tariffs and other barriers against the rest ofthe world, this accusation cannot be generalized. The strategies followed byFTAs and CUs in this regard vary widely. Members of an FTA have a goodreason to lower tariffs for the rest of the world because by doing so they reducetrade distortion in the form of trade diversion. This is called ‘openregionalism’.29 By reducing tariff barriers for the non-members, they expandtheir sources of imports and include the non-members of the RIA in it.Besides, in situations when some imported products from the RIA members
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are unsettling and squeezing local firms, reducing external tariff barriers inthose products would encourage imports from the rest of the world, allowingthe governments to generate tariff revenues on the imports without furtherdestabilizing domestic firms.The objective of minimizing trade diversion is important to the members ofCUs as well. Unlike the situation in an FTA, members of the CU set theircommon external tariffs (CETs) in concert, therefore the option of loweringtariff barriers individually for reducing trade distortion in the form of tradediversion is not open to them. However, membership of the CU increases theirmarket power and they can raise the CETs vis-à-vis the rest of the world. Thisis, indeed, a theoretical possibility because a CU cannot raise its CETs at will– WTO rules forbid it. The WTO requirement in this regard is that averagetariffs are not raised. Non-members can demand compensation if they areadversely affected by a particular increase in CETs vis-à-vis the rest of theworld. In a real-life situation, CUs often get away with increasing CETsbecause WTO rules in this regard are not strictly enforced. In addition, in anambiance of advancing trade liberalization at the global level, merely slowingdown the reduction in protection is equivalent to increasing it. In the late1990s, the Union Douanière et Économique de l’Afrique Centrale introducedacross-the-board increases in CETs vis-à-vis the rest of the world to financeinternal trade preference. Such moves indeed go counter to the grain ofmultilateralism.In the contemporary period, some RIAs cover areas not yet covered by theWTO system, while others tend to go beyond WTO provisions in several areasof trade regulations. Many have differing regulatory policies which differ fromWTO, in areas like anti-dumping, subsidies, intellectual property rights, andtechnical barriers to trade (TBT) and sanitary and phytosanitary (SPS)measures. These developments again promote the suspicions of the fortressmentality in non-constituent economies.The fortress RIA concerns particularly relate to the SPS and TBT measures.For instance, as noted above, when the Single Market Programme (SMP) wasbeing debated in the EU, non-EU economies worried whether the SPS, TBTand other measures would be used as protectionist barriers. The WTOagreements on the SPS and TBT measures encourage activities at theinternational level that reduce barriers to trade resulting from product andproduct-related regulations. Such activities at the multilateral or WTO levelreduce the potential barriers to exports. A new development, encouraged bythe TBT Agreement, is the conclusion of mutual recognition agreements(MRAs), on the results of conformity assessment procedures, between tradingpartners who have established confidence in each other’s testing entities andprocedures. Until 2001, the trend to conclude such MRAs was, however,confine to the industrial economies.30
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Harmonization of the SPS and TBT measures for the constituent membersof an RIA disadvantages producers and traders from the non-membercountries. Conversely, by virtue of harmonization and creating a singlemarket, the insiders come to have an advantage in addressing the singlemarket. Harmonization can have negative effect on the economy. It candiminish welfare by suppression of efficient variation and competition.However, this effect of harmonization may not apply to all economies and allproducts. It is not incorrect to assume that the impact of harmonization wouldvary from economy to economy and product to product (Lamy, 2002).Trachtman (2003) believes that Article XXIV, Paragraph 8, does not appear torequire harmonization of all the SPS and TBT arrangements among theconstituent members of an RIA. If the RIA regulations do requireharmonization, the harmonization measures must conform to the WTO – to bemore precise GATT-1994 – regulations laid down in the SPS Agreement andTBT Agreement.In the original Article XXIV of GATT-1947, and its Uruguay Roundclarification updated by the Understanding on Interpretation in the GATT1994, RIA regulations regarding SPS and TBT are still somewhat unclear, infact fuzzy. The WTO law does require non-discrimination and imposition ofnational treatment on the constituent members of an RIA. In addition, theWTO system provides an anti-protectionism discipline for the non-constituenteconomies. The SPS and TBT agreements touch upon the RIAs in a superficialmanner. While the TBT leaves compliance with the MFN requirement open,the SPS does have somewhat nuanced requirement in this regard. It stipulatesthat the SPS measures should not be applied in an ‘arbitrary or unjustlydiscriminatory manner’ where ‘identical or similar conditions prevail’,although it does allow for justifiable discrimination (Trachtman, 2003).From the perspective of regulatory theory, both SPS and TBT Agreementsare protectionist and work as restraints on trade and global competition. Tradeauthorities who apply these agreements