Essay on the Important Salient Features of General Agreement on Tariffs and Trade, 1994 !
The Uruguay Round, the eight and most ambitious Round of multilateral trade negotiations under the auspicious of the GATT which involved 117 countries, concluded on December 15, 1993 after more than 7 years of often contentions trade talks. The Final Act was signed at Marrakesh on the fifteenth day of April, 1994. It contains about 15 separate agreements, 4 annexes, 19 decisions, 4 declarations and 8 understandings. In total, the Final Act comprises 18 Multilateral and 4 Plurilateral Trade Agreements. According to Francis Cherunilan the major themes of the Final Act are as follows:
1. World Trade Organisation (WTO):
GATT has been converted from a provisional agreement into a formal international organisation called WTO. The World Trade Organisation will serve as a single institutional framework encompassing GATT and all the results of the Round. It will be directed by a Ministerial Conference that will meet atleast once every two years, and its regular business will be overseen by a General Council. In order to become WTO Members all countries must completely accept the results of the Uruguay Round. The WTO is a more powerful body than GATT, and plays a major role in the future world economic affairs.
2. Industrial Products (Market Access):
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Under this agreement, tariffs on industrial products are to be reduced by more than 1/3 on average. In industrial countries, tariff would be eliminated in several sectors (for example, steel, pharmaceuticals, and wood and wood products). Developing countries would both lower their tariff barriers significantly and increase the number of their ‘bound’ tariffs (which constitutes a commitment not to raise them without consultation and compensation).
3. Agricultural Products:
Member countries are encouraged to give agricultural trade a stronger market orientation, primarily by (1) reducing export subsidies and (2) converting all non-tariff barriers to tariffs (“tariffication” which increases the transparency of support) and then steadily reducing the latter by about 36% on average. Subsidised export volumes will be reduced over time by 21%. Both the subsidy and tariff reductions envisaged are to be completed within six years for industrial countries and ten years for developing countries, with the “least developed countries” effectively exempted from such commitments. Since the cutting back of subsidies is likely to reduce the quantity of agricultural products dumped on world markets, there is a possibility of a short-term increase in costs for developing countries currently importing substantial quantities of subsidised food.
Consequently, a special decision is included that provides transitional help through possible food aid and support for agricultural development. The Final Act recognises that “least developed countries” and “net food-importing developing countries” to the extent that they experience external payments problems, would be eligible to receive from the IMF and the World Bank from existing and newly emerging facilities.
4. Services:
A framework agreement includes basic obligations of all member countries on international trade in services, including financial services, telecommunications, transport, audio-visual, tourism and professional services, as well as the movement of workers. Among the obligations is a most-favoured-nation (MFN) obligation that essentially prevents countries from discriminating among foreign supplies of services. In addition, countries have made specific commitments on liberalising certain services sectors.
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These commitments include national treatment (that is, to treat foreign suppliers of services like domestic suppliers) and provision of market access. Negotiations on telecommunications, audiovisual, and maritime services are to resume after the ministerial signing of the Final Act. Furthermore, after implementation, participants will have the opportunity to take exemptions from MFN obligations in financial services. The framework agreement also established the basis for progressive liberalisation of international trade in services through successive round of negotiations, which also applies to other agreements under the Final Act.
5. Textiles and Clothing:
Under the agreement, bilateral quotas negotiated under the existing Multifibre Arrangement (MFA) are to be completely phased out over a 10 year period beginning with the entry into force of the agreement. The quotas that remain during this period will be progressively increased to allow further market access.
6. Intellectual Property:
This agreement provides for improved levels of protection for the rights of owners of all types of intellectual property (for example, patents, copyrights, trademarks and trade secrets). These levels are achieved principally by requiring countries (1) to grant national treatment; (2) to provide certain minimum standards of protection for all types of intellectual property (for example, 20 years for a patent); and (3) to institute procedures and remedies under national laws so that foreigners can enforce their rights.
7. Subsidies:
The agreement defines three categories of subsidies:
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1. Prohibited subsidies – those contingents upon export performance or the use of domestic instead of imported goods;
2. Actionable subsidies – those that have demonstrably adverse effects on other member countries; and
3. Nonactionable subsidies, including those provided (with stipulated limitations) to industrial research and precompetitive development activity, to disadvantaged regions, or to existing facilities to adapt themselves to new environmental requirements.
The agreement also puts restrictions on the use of countervailing measures introduced in respect to competitors’ subsidies. To prevent undue hardships, developing countries and countries in transition from centrally planned to market economies are allowed extra time to bring their subsidies into conformity with the new rules.
8. Technical Barriers:
The agreement seeks to ensure that technical negotiations and standards as well as resting and certification procedures; do not create unnecessary barriers to trade. To this end, it encourages countries to use international standards, but does not oblige harmonisation of standards. At the same time, it recognises the right of countries to establish protection – for example, for human, animal, or plant life; health; and the environment – at levels they consider appropriate, and specifies that they should not be prevented from ensuring that their desired standards are met.
9. Anti-Dumping Rules:
The agreement provides greater clarity and more detailed rules concerning the method of determining dumping and injury, the procedures to be followed in anti-dumping investigations, and the duration of antidumping measures. It also clarifies the role of dispute-settlement panels in conflicts relating to anti-dumping actions taken by national authorities. A number of issues that could not be sorted out have been delegated to the Committee on Anti-dumping for resolution.
10. Trade-Related Investment Measures (TRIMs):
The agreement requires the elimination of certain restrictive measures (such as local content and foreign exchange balance requirements) that violate GATT principles of national treatment and prohibition of quantitative restrictions.
11. Government Procurement:
The Final Act contains procedures designed to facilitate the membership of developing countries in the existing Government. Procurement Agreement. In addition, negotiations on a new agreement on Government Procurement, not formally part of the Uruguay Round, are proceeding and are expected to conclude in the near future. The objectives of these negotiations include broadening the coverage of the Agreement to include services as well as (already covered) goods and to include procurement by levels of government that are subordinate to central Governments.
12. Safeguard Actions:
Art. XIX of the GATT allows members to take safeguard actions – import restrictions to protect a domestic industry from the negative effects of an unforeseen import surge – if a domestic industry is threatened with serious injury. The new agreement, however, prohibits the use of such activities where they constitute “grey-area” measures, including voluntary export restraints, orderly marketing agreements, or other similar measures applied on either exports or imports. “Grey- area” measures currently in effect are to be phased out within four years after establishment of the WTO.
Furthermore, the agreement provides discipline on the use of all safeguard measures taken under Art. XIX including time limits, requirements for safeguard investigation, and non-discrimination (generally) among sources of supply. Developing countries would be granted protection against the introduction of safeguard actions by their trading partners where the developing country’s share of the partner’s domestic market is relatively small.
13. Balance of Payments Provisions:
The Final Act specifies that member countries imposing trade restrictions for balance of payments purposes should do so in a way that causes minimum disruption to international trade. To this end, price-based measures such as import surcharges and import deposits should be preferred to quantitative restrictions. The Final Act also strengthens current procedures that require countries using such restrictions to consult with the GATT.
14. Dispute Settlement:
The Final Act provides for further strengthening the existing dispute settlement system of the GATT. This system had already been strengthened and streamlined as a result of the Mid-Term Review Ministerial Meeting on the Uruguay Round, which was held in Montreal in December, 1988.
It leads greater automaticity to the adoption of the findings of both panels charged with settling trade disputes and of the new Appellate Body designed to hear appeals of panel findings. It also provides for “cross-retaliation” (withdrawal of benefits in one sector for violation of rules in another sector). The broadened coverage of world trade under the Final Act and the WTO’s reliance on a single dispute-settlement system would considerably increase that system’s importance.
The understanding also seeks to limit unilateral determinations that trade rules have been violated (by affirming that members shall not themselves make determinations that a violation has occurred), and instead promote the use of the WTO dispute-settlement rules and procedures of seek redress.
The understanding also makes special provision for protection of the interests of both developing countries and least-developed countries. Finally, it provides recourse for members who feel that their benefits are being nullified or impaired, albeit without any direct violation of obligation.
15. Coherence in Global Policy Making:
The Final Act notes that greater exchange rate stability based on more orderly underlying economic and financial conditions should contribute to the expansion of trade, sustainable growth and development, and the timely correction of global imbalances. Recognizing the important linkages between trade policy and other economic policies and the need for them to be mutually consistent, the Final Act calls on the WTO to strengthen its co-operation with the Bretton Woods institutions. It suggests that the Director-General of the WTO review with the Managing Director of the IMF and the President of World Bank the implications of the WTO’s future responsibilities for its co-operation with the two Bretton Woods institutions.