Regional Trade Agreements (RTAs)

RTAs are discriminatory arrangements between two or more countries that provide (at a minimum) for free trade among the members in substantially all trade. 

They depart from the general principles of the multilateral system, but are permitted under the terms of GATT Article XXIV.

That article sets two major requirements for RTAs:-

1. First, they must cover “substantially all the trade between the constituent territories” of the RTA. 

2. The second standard is that the tariffs and commercial regulations on third countries that are “imposed at the institution of” an RTA “shall not on the whole be higher or more restrictive than the general incidence of the duties and regulations of commerce applicable” before its formation.Trading partners must be compensated for any increased tariffs upon the establishment or enlargement of an RTA. 

RTAs take three principal forms: 

1. Free Trade Agreements (FTAs), 

2. Customs Unions (CUs), and 

3. Common Markets 

While FTAs are generally restricted to the elimination of trade barriers, the other forms of RTAs aim at deeper economic integration. 

CUs and common markets both have common external tariffs, and are more prone than FTAs to act as trade blocs.