	Free Trade Agreements: WTO Obligations

		MFN Exception

As parties to the General Agreement on Tariffs and Trade (GATT) 1994, World Trade Organization (WTO) Members must grant immediate and unconditional most-favored-nation (MFN) treatment to the products of other Members with respect to customs duties and import charges, internal taxes and regulations, and other trade-related matters. Free trade agreements (FTAs) are inconsistent with this obligation because of the favorable treatment granted by FTA parties to each other's goods. FTAs, however, have generally been viewed as vehicles of trade liberalization; therefore, the GATT contains an exception for such agreements. Further improvement in this area is also a part of the negotiating mandate for the WTO Doha Round. On December 14, 2006, the WTO General Council established a new transparency mechanism for FTAs which, among other things, provides for early notification of FTA negotiations. Safeguards provisions are also included in recently signed FTAs with Colombia, Panama and the Republic of Korea, all of which are awaiting approval by Congress. The United States has also entered into FTAs with Oman, Peru, Colombia, Panama and South Korea. While implementing legislation for the FTAs with Oman and Peru has been enacted into public law, neither FTA has yet entered into force. Implementing legislation for the FTA with Colombia was introduced April 8, 2008 ( H.R. 5724 ; S. 2830 ), but expedited legislative procedures that would have applied to the bill were suspended by the House on April 10, 2008 ( H.Res. 1092 ). The Administration has also begun negotiating FTAs with Thailand, Malaysia, the United Arab Emirates, and the Southern African Customs Union (SACU).
World Trade Organization (WTO) members must grant immediate and unconditional most-favored-nation (MFN) treatment to the products of other members with respect to tariffs and other trade matters. Free trade agreements (FTAs) are facially inconsistent with this obligation because they grant countries who are party to the agreement more favorable trade benefits than those extended to other trading partners. Due to the prevailing view that such arrangements are trade-enhancing, Article XXIV of the General Agreement on Tariffs and Trade (GATT) contains a specific exception for FTAs. The growing number of regional trade agreements, however, has made it difficult for the WTO to efficiently monitor the consistency of FTAs with the provided exemption. Negotiations on rules for regional trade agreements are part of the WTO Doha Round; separately, the WTO General Council in December 2006 established a new transparency mechanism for FTAs which provides for early notification by WTO Members of FTA negotiations. The United States is presently a party to nine bilateral or regional trade agreements. While Congress has approved FTAs with Oman and Peru FTAs, these have not yet entered into force. In addition, the Administration has entered into FTAs with Colombia, Panama, and South Korea FTAs, all of which are pending approval by Congress. Implementing legislation for the FTA with Colombia was introduced April 8, 2008 (H.R. 5724, S. 2830), but expedited legislative procedures that would have applied to the House bill were suspended by the House on April 10, 2008 (H.Res. 1092). The Administration has also been involved in FTA negotiations with several other countries, including Thailand, Malaysia, the United Arab Emirates, and the South African Customs Union. This report will be updated as events warrant.