What is an ECA?

The term Economic Cooperation Agreement is one way of calling a Regional Trade Agreement (RTA), which may also be called a Free Trade Agreement (FTA), an Economic Partnership Agreement (EPA), or a Closer Economic Relations (CER), etc.

An ECA is an agreement signed by two or more economies for promotion of trade activities and economic integration with each other by reducing tariffs and fees, as well as by eliminating other trade barriers for goods and services. Under the WTO framework, as the signing of an FTA between members is in violation against the most favored nation (MFN) treatment of the WTO, conformity to the following provisions is required to waive the applicability of the MFN treatment:

A. In terms of trade in goods, conformity is required to Article XXIV of the General Agreement on Tariffs and Trade (GATT) 1994:

1. “The duties and other restrictive regulations of commerce are eliminated on substantially all the trade between the constituent territories in products originating in such territories.” However, since said article in the GATT lacks a clear definition or standard for “substantially all the trade,” which, in practice, is thus identified on the basis of trade volume and tariff lines.
2. Transition period for tariff reduction should not exceed a reasonable length of time, which should not exceed 10 years in principle.

B. In terms of trade in services, conformity is required to Article V of the General Agreement on Trade in Services (GATS):

1. Contracting members must provide the agreement with a “substantial sectoral coverage,” which can be identified on the basis of the number of service sectors, volume of trade, service provision model, etc.
2. Members must provide for the absence or elimination of “substantially all” discriminatory measure in non-compliance with Article XVII of the GATS in the sectors covered under the GATS and for prohibition of new or more discriminatory measures.

C. In addition, developing countries may sign an agreement on trade in goods on the basis of the Enabling Clause of the WTO, mutually granting favorable treatment with respect to certain products. The conditions of the Enabling Clause are as follows:

1. Applicable only to developing countries.
2. The favorable treatment in trade includes mutual reduction or elimination of tariff and non-tariff measures imposed on products imported from other members.
3. Reduction and elimination of non-tariff measures should be conducted in accordance to the criteria or conditions recognized by the WTO members.