Essay on the GATT Rules and Developing Countries !
Ever since World War II the developing countries have been expressing their dissatisfaction with the pattern of world trade. This dissatisfaction increased rather than diminished during the 1960s. The developed countries enshrined as inviolable the principle of non-discriminatory (MFN) tariff agreements and proceeded to the ever more widespread use of discriminatory non-tariff barriers, which principally affect the developing countries.
The developing countries demanded for the provision of differential treatment to ensure that the world trading system responds to the particular needs of the developing countries. Since 1970, the arrangements designed to promote these facilities have been referred to as instruments of a “differential” treatment.
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In the GATT Agreement there are only two provisions which explicitly allow differential treatment for developing countries and in both cases the objective of the provision is to give more favourable treatment to developing countries. These provisions are Art. XVIII, and Part IV of GATT (Articles from XXXVI to XXVIII). Several clauses of GATT in operation benefit the developing countries. For example, waivers granted under the authority of Art. XXV of GATT have benefited developing countries.
GATT Article XVIII:
Article XVIII was the original article of GATT designed to grant certain privileges to developing countries. The Article XVII first establishes criteria describing those nations entitled to utilize its provisions, i.e., low standards of living and the early stage of development and then basically grants four types of privileges:
Part A:
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The right to renegotiate tariff bindings so as to raise tariffs on products it desires to produce (infant industries).
Pari B:
The privilege to use quantitative restrictions in balance-of-payments difficulties (with criteria and actions permitted being slightly different from the general BOP clauses of GATT Article XII).
Part C:
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A privilege to use any measure necessary to promote a particular industry.
Part D:
Under this part, certain countries with economies in process of development, but not falling within the criteria of low living standards, can apply for permission to deviate from GATT rules so as to establish a particular industry.
A characteristic feature of Art. XVIII is the procedure to be followed in case of action taken under its provisions. Apart from consultations with the contracting parties, the latter are empowered to exercise quasi-judiciary authority following the proposals of the country concerned.
If a modification or withdrawal of tariff concessions by a developing country is under consideration, the contracting parties will enquire into the compensatory adjustments offered by the above country.
In principle, such compensatory adjustment must be adequate, but its adequacy is not an absolute condition and if the contracting parties find that the country has made every reasonable effort to offer adequate compensation, it will be free to proceed with the modification or withdrawal of its tariff concession.
Art. XVIII (4) distinguishes between contracting parties, the economies of which can only support low standards of living, and which are in the early stages of development (4)(a) and between contracting parties, the economies of which are in the process of development, but which do not come within the scope of sub-paragraph (a) of Sec. 4(b).
The countries of the first category, wishing to support a particular industry by government assistance, are free to apply specific measures of no measure consistent with the other Articles of the General Agreements in practicable to achieve the objective.
If action is taken under Sec. C, proceedings are initiated by notification in order to secure the concurrence of the contracting parties. Countries in the second category, desiring to give governmental assistance to a particular industry, must act in accordance with the provisions in Section D of Art. XVIII.
They must apply to the contracting parties for approval of measures to be taken. Consultation will take place in accordance with Art. XVIII and if the contracting parties concur in the proposed measures, the applicant country will be released from obligation under the relevant provisions of the other articles of the Agreement.
If the proposed measures affect a product, which is the subject of a Concession included in a Schedule annex to the agreement, the special procedure in Art. XVIII has to be followed.
All these measures in GATT provide limited solutions to the specific problems of developing countries. Art. XVIII of GATT permitted the protection of infant industries, but only with advance consent of the contracting parties.