FTAs permissible by WTO

Question

As a WTO member a country attempts to strike bilateral trade deals to augment the baseline trade schedules agreed at the WTO (IIUC).

I read that sectoral free trade agreements (FTAs) are prohibited by WTO under MFN rules [1]. Is this true?

So, can there be a sectoral FTA? I.e. tariff-free trade in one or a few sectors, or for some companies • NO! • Contravenes MFN principle • Not covered under GATT Article XXIV/GATS Art V • Potentially violates WTO rules on subsidies (SCM Agreement Articles 3.1, 6.1 a and b) • Canada – Autos (2000)

If so, how, for example, is the Japan/EU FTA permitted by the WTO given that tariffs remain on some goods under that deal.

Finally, as a WTO member does a country need to “log” or register with the WTO the FTAs it makes?

Refs

[1] Slide 6, http://blogs.sussex.ac.uk/uktpo/files/2017/03/WTO-rules-UK-EU-FTA.pdf

Answer 1

The previous slide in that presentation says:

WTO Rules: FTAs • GATT Article XXIV:8(b) • in free trade areas ‘duties…eliminated on substantially all the trade between constituent territories’ • Tariffs eliminated in ≥ 90 % of trade • GATS Article V:1(a) • ‘…substantial sectoral coverage’ • Constituted by number of sectors, volume of trade affected and modes of supply

So what that means is that a free trade agreement can have exceptions... but these can't be "the rule", they can't dominate the agreement.

I don't know enough about the Japan/EU FTA to say how much in the way of exceptions it has. Presumably since it was not challenged by [anyone at] the WTO (all FTAs of member need to be registered with them) it passes these tests.

There's a 70-page MA thesis published on the “Substantially all the Trade”- Requirement of GATT Article XXIV, which probably means it's a nontrvial issue. That actually turned out to be pretty weaksauce. http://www.mpil.de/files/pdf3/mpunyb_hilpold_7.pdf is much better; it covers some past disputes etc. on that issue as well as more egregious non-disputed examples.