GATT Basic Principles
The General Agreement on Tariffs and Trade (GATT 1994) sets out the basic rules governing international trade in goods. Almost all countries are members The Agreement provides a number of basic principles. The most important principles are the most-favoured-nation treatment and the principle of non-discrimination.
Member countries of the WTO (World Trade Organisation) must accord to products of other states, treatment no less favourable than that applied to the goods of another country. This is the most favoured nation (MFN) principle. It means that a concession or favourable treatment afforded to one country must be afforded to all other countries.
Under the non-discrimination principle, taxation and internal regulation treatment should be no less favourable than that accorded to products of national origin or other imports. Once subject to any applicable customs duties and procedures, they must be treated in the same way as domestic goods.
There is a number is an important exception to these important general principles.There is a right to take measures, for example, necessary to protect human, animal or plant life or health, which may restrict trade in goods (GATT 1994). Such measures cannot constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail, or a disguised restriction on international trade.
Similar general exceptions also apply to trade in services (General Agreement on Trade in Services (GATS), whereas there are no general exceptions as such under the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement);
There is a right to take measures to protect essential national security interests, which may restrict trade in goods (GATT 1994). Similar security exceptions are allowed under the GATS and the TRIPS;
There is a very important for Regional Trade Agreements. This includes a trading bloc such as the EU. The tight to depart from the MFN principle in order to grant preferential treatment to goods (GATT 1994) or service suppliers (GATS) from trading partners within a customs union or a free trade area without extending such treatment to all WTO Members;
There is a right to take measures to safeguard a Member’s external financial position and its balance of payments position. There are provisions designed to ensure that states do not use State enterprises to bypass their general obligations under GATT.
Temporary waivers may be granted with the authorisation of the other Members, in exceptional circumstances.
Reduction of Duties and Quotas
The GATT agreement provides for the reduction of customs duties and the elimination of quotas on imports and exports. They are notification requirement regarding state-controlled trading companies. There are provisions in relation to dumping and anti-dumping duty. There are provisions for the settlement of disputes.
The Uruguay Round (1986-1994) was designed to reduce tariff barriers by at least a third in five years. It also sought to limit the number of duties which could not be increased. As a result of the Uruguay round commitments, customs duties by developed countries on industrial products fell by an average of 40% from 6.3% to 3.8%. Almost 40% of all EU industrial products are free of duty. The EU has one of the lowest customs duties in the world.
Under GATT, previous controls and levies on agricultural products were replaced by customs duties. Fixed duties / tariffs were then to be reduced by approximately one third within 6 years. WTO members were required to reduce spending on export subsidies. In the case of products where no commitment was given, no new subsidies were to be introduced.
Domestic support measures for agricultural products were to be reduced. A 20% reduction was to be achieved over five years. The obligations of developing countries were less. These measures were reflected in the substantial reform of the Common Agricultural Policy within the EU.
Previously, textiles and clothing were outside the GATT. The Uruguay Round provided for the gradual elimination of restrictions and quotas under the former multi-fibre agreement. Safeguard measures were permitted for local industries with adjustment difficulties.
Doha Round I
The Doha Round began with a ministerial-level meeting in Doha. Progress in negotiations stalled after the breakdown of the July 2008 negotiations over disagreements concerning agriculture, industrial tariffs and non-tariff barriers, services, and trade remedies.
The most significant differences are between developed nations led by the European Union (EU), the United States (US), Canada, and Japan and the major developing countries led and represented mainly by India, Brazil, China, and South Africa. There is also considerable contention against and between the EU and the US over their maintenance of agricultural subsidies—seen to operate effectively as trade barriers.
Since the breakdown of negotiations in 2008, there have been repeated attempts to revive the talks, so far without success. Intense negotiations, mostly between the US, China, and India, were held at the end of 2008 seeking agreement on negotiation modalities, an impasse which was not resolved.
Doha Round II
A report to the WTO General Council in May 2012 advocated “small steps, gradually moving forward the parts of the Doha Round which were mature, and re-thinking those where greater differences remained.” Adoption of the Bali Ministerial Declaration on 7 December 2013 for the first time successfully addressed bureaucratic barriers to commerce—a small part of the Doha Round agenda.
After 14 years of talks, members of the World Trade Organization effectively ended the Doha round of negotiations in early 2016.At a meeting of the WTO in mid-December 2015 in Nairobi, trade ministers from more than 160 countries failed to agree that they should keep the negotiations going. In recent years,
Many countries have been so frustrated by the Doha stalemate that they have been negotiating bilateral and regional trade deals. The United States recently concluded the Trans-Pacific Partnership with Japan, Vietnam and nine other countries. America and the European Union sought to negotiate the Transatlantic Trade and Investment Partnership. This was terminated in 2017 by the incoming US administration.
The Agreement on Technical Barriers to Trade seeks to ensure that state parties do not create unnecessary obstacles to international trade. Measures for the protection of health and safety and environmental protection are legitimate. However, they must not be discriminatory between national and imported products.
The use of international standards, harmonisation and mutual recognition of technical regulations, standards and conformity assessment procedures is encouraged. The agreement contains codes of practice in respect of the adaptation and application of standards by governmental bodies.
The agreement on sanitary and phytosanitary (SPS) measures applies to measures which may directly or indirectly affect international trade. They are measures applying to human, animal and plant life, health risks arising from additives, contaminants, dioxins, diseases in foodstuffs or in relation to the entry and spread of pests.
States may take SPS measures on the basis of scientific principles. They must not be discriminatory. They must not have a protectionist objective. Standards must be based on international standards and guidelines, where possible.
The Agreement on Rules of Origin covers the rules used for non-preferential commercial policy. It seeks to harmonise non-preferential rules of origin, in order to ensure similar criteria are applied by WTO members.
The conditions for determining origin must not be restrictive, distort or disrupt international trade. They must not impose unduly onerous requirements. The agreement ultimately requires harmonised rules in relation to origin to be established.
The Agreement on Import Licensing Procedures requires the simplification of rules and procedures. It is designed to ensure that they are transparent and predictable and are administered fairly and equitably
Trade protection measures are justified, only where determined in accordance with procedures and investigations. In the case of dumping, there must be a variance between the standard price and the export price. Its existence must significantly injure trade in the country of import. Similar criteria applied to countervailing subsidies.
Safeguarding measures must be applied on a non-discriminatory basis. It may limit imports, under certain conditions, in order to protect domestic industry from serious damage caused by an increase in imports.
Investment and Procurement
The Agreement on Trade-Related Investment measures requires that certain investment measures which restrict or distort trade or are inconsistent with the principle of national treatment or with the elimination of quantitative restrictions must be eliminated.
The Agreement on Government Procurement seeks to liberalise procurement procedures, in so far as possible. Transparency and non-discrimination requirements apply in relation to foreign products or suppliers. The provisions apply to central and non-central governmental administration. The agreement relates to procurement above certain values
- 130,000 SDR for goods and services by central bodies;
- 200,000 SDR for sub-central governments;
- 400,000 for public utility companies
- 5,000,0000 SDR for construction contracts.
The Agreements apply only to WTO members that have acceded to the Convention. This includes the EU.
General Agreement on Trade in Services
The 1994 General Agreement on Trade in Services (GATS) was the first set of rules relating to trade in services. It applies to trade in all services in all sectors, save those provided by the public authorities.
The agreement applies to many types of services.
- cross-border services;
- supplying a service in one state to a consumer in another;
- supplying a service through a commercial presence in another state
The most-favoured-nation treatment principle applies. Each member must accord treatment, no less favourable than that accorded to service providers in other countries. There are exceptions in relation to particular services.
Groups of countries may liberalise trade in services between themselves, without having to extend the most favoured treatment to all other GATT members, provided that it has substantial sectoral coverage and provides for the absence or elimination of discrimination. Agreements must be governed by laws and be transparent. Bilateral agreements must be open to other members who wish to negotiate access. States must ensure that monopolies do not abuse their position
The agreement identifies services and activities for which market access is guaranteed. It sets out the conditions applicable. Once provided for, they can be modified only following negotiation of compensation with the affected countries.
The agreement is based on the principle of non-discrimination. Other than as provided for in the agreement, and subject to any conditions provided, each government must allow services, no less favourable treatment than that accorded to its own service suppliers. Parts of the agreement relate to specific sectors.
Complaints and Enforcement
Where a third country outside the EU, adopt a trade practice prohibited by international trade rules, the party affected may apply to the EU Commission to seek to eliminate the practice concerned. The rules that apply are the WTO rules or the bilateral agreement between the EU and the country concerned.Producers in the EU of the products or services which are subject to the obstacles to trade may complain.
They must represent all producers or those with sufficient combined output to represent a major proportion of the total Community production for the services or products concerned. Complaints may be made by businesses or trade associations.
The EU Commission will decide the admissibility of the complaint. If the complaint is admitted, an examination is initiated and announced by publication.
If it is found as a result of the examination that the interests of the Community require action to be taken, appropriate commercial policy measures may be taken. They may include
- suspension or withdrawal of concessions;
- raising of customs duties or introduction of other charges;
- introduction of quantitative restrictions are other measures
The World Trade Organisation
The World Trade Organisation is a permanent organisation with its own institutions. Its functions are designed to facilitate the implementation, administration and operation of various trade agreements. It provides a forum for multilateral negotiations. It resolves trade disputes. It reviews national trade policies.
There is a ministerial Council composed of representatives of all member states. There are three subsidiary bodies
- the Council for trade in goods
- the Council for trade in services
- the Council for trade-related aspects of intellectual property rights.
There are a director-general and secretariat. The organisation acts by consensus. If this cannot be done, it acts by the majority. The European Union is a full member of the organisation, with the number of votes equal to the number of its member states who are members of the WTO
The trade policy review mechanism is designed to achieve greater transparency and understanding of trade policies and practices of the WTO members, to encourage adherence to the rules and promote the good functioning of the system.
All WTO members are subject to review. The review is undertaken by the trade policy review body. The report and declaration are published following the review.
WTO Dispute Resolution
The dispute settlement mechanism covers multilateral trade agreements, including GATT and GATS. The system is administered by the dispute settlement body. T
he process commences when one member state submits a request for consultations on an issue. If the consultations do not settle the dispute, the member may call for the establishment of a panel consisting of independent experts in order to deal with the matter. Alternatively, the parties may agree to use other dispute mechanisms such as conciliation and mediation.
If the panel is established, it submits a report to the Dispute Settlement Body. This must be done within a certain period. Parties may appeal issues of law and legal interpretations. There is a standing appellate body. The DSB undertakes surveillance of the implementation of its recommendations and decisions.
References and Sources
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