Substantially-all-trade Criterion

Substantially-all-trade criterion in Global Commerce Policy

In this regard, substantially-all-trade criterion is: Article XXIV of the GATT sets out the conditions under which customs unions and free-trade areas may be regarded as consistent with the Agreement. The entries on trade policy are here. It requires that substantially all trade between the parties to a preferential agreement must be covered as part of qualifying under the rules. The GATT does not say how this is to be understood or calculated. Two schools of thought have emerged on what the criterion means. The first adopts a quantitative approach, and it defines “substantially all trade” in terms of the value of total trade. The entries on trade policy are here. A broad assumption among WTO members has been that this should be about 80% to 90% of total trade. The entries on trade policy in the Encyclopedia are here. Under this approach, agriculture or other sensitive sectors might not be covered by an agreement, but the remainder of trade might be enough to satisfy the criterion. The second approach is qualitative. The entries on trade policy are here. It says that all sectors must be covered, and that leaving out agriculture, for example, would automatically violate the criterion. The entries on trade policy are here. Agreement on which school should prevail is not in sight, even though WTO members have agreed during the Uruguay Round that the contribution of a free-trade agreement to world trade would be diminished if any major sector of trade was excluded. The entries on trade policy are here. Article V of the GATS, which covers free-trade agreements in services, also has a substantially-all-trade criterion. The entries on trade policy are here. It is divided there into the need for substantial sectoral coverage of services and the absence or elimination of substantially all discrimination in terms of national treatment. “Substantial sectoral coverage” is to be understood in terms of number of sectors, volume of trade affected and modes of services delivery. The entries on trade policy are here. Additionally, no mode of supply should be excluded a priori.[1]

Substantially-all-trade criterionin the wold Encyclopedia

For an introductory overview on international trade policy, see this entry.

Resources

Notes and References

1. Dictionary of Trade Policy, “Substantially-all-trade criterion” entry (OAS)

See Also