Regional trade agreements (RTAs) were permitted under Article XXIV of the General Agreement on Tariffs and Trade (GATT) 1947 and the Decision on Differential and More Favourable Treatment, Reciprocity and Fuller Participation of Developing Countries (Enabling Clause). RTAs are classified into customs unions, free trade areas and interim agreements leading to the formation of either, based on the criteria of ‘substantially all the trade’ and ‘not on the whole higher or more restrictive’. RTAs formed by developing countries are afforded more favourable treatment. Article XXIV of the GATT 1947 and the Enabling Clause were incorporated into the World Trade Organization (WTO) agreements, together with a new Understanding on the Interpretation of Article XXIV of the General Agreement on Tariffs and Trade 1994. The General Agreement on Trade in Services (GATS) adds another dimension to these exceptions from the most-favoured nation (MFN) principle, namely RTAs involving trade in services, with similar conditions applying as to RTAs on trade in goods.

Customs unions and free trade areas evolved from the frontier traffic between adjacent countries, which were ‘grandfathered’ by the GATT 1947 as a fact of life. Currently such agreements have to be notified to the Council for Trade in Goods (RTAs under Article XXIV), Committee on Trade and Development (RTAs under the Enabling Clause) or Council for Trade in Services (RTAs covering trade in services), and examined by a Working Party formed by the WTO Committee on Regional Trade Agreements (CRTA), which was established by the WTO General Council in February 1996.