Will preferential agreements undermine the multilateral trading system

There are three components that together comprise the cornerstones of the GATT system: the principles of reciprocity and non-discrimination, which are regularly identified as the 'pillars' of the GATT architecture, and the enforcement mechanisms, which Dam (1970, p. 81) calls the 'heart' of the GATT system. Below we describe how preferential agreements may be expected to interact with the multilateral system in light of each of its three principle components. We approach the question posed at the outset in two parts. We first ask, will preferential agreements undermine a multilateral trading system that is built on the pillars of reciprocity and non-discrimination? A remaining question is then, how do preferential agreements affect the enforcement provisions of the GATT? To lay the foundation for an answer to the first question, we describe a framework within which the pillars of reciprocity and non-discrimination can themselves be interpreted and understood. From this perspective, we then offer support for the view that preferential agreements pose a threat to the multilateral system. An answer to the second question requires an understanding of how GATT agreements are enforced. Observing that these agreements must be self-enforcing, we describe circumstances under which preferential agreements can either enhance or detract from the performance of the GATT system through their impacts on enforcement at the multilateral level.