gatt presentation 1

General Agreement on Tariffs General Agreement on Tariffs and Trade: Origins and and Trade: Origins and

OverviewOverview

Origins and OverviewOrigins and Overview

Antecedents to GATTAntecedents to GATT

• After World War II, as with other aspects of post war planning- like the creation of the UN, the necessity in the trade field for the creation of a regime of non discrimination- of MFN treatment, prohibition of quantitative restrictions and reduction of trade barriers and open markets was felt.

• Churchill and Roosevelt along with other Allied Powers felt that the failure of the US to join the League of Nations and the disaster of the League that failed to prevent the WW II required the creation of multilateral (universal) organizations that could serve both as a forum of negotiations, as a guardian of rules to prevent future conflict and foster mutual and universal agreement.

Institutions Prior to GATTInstitutions Prior to GATT

• Agreement on the creation of- IMF and World Bank was reached in July 1944 at the Bretton Woods Conference.

• Agreement on creating an international Civil Aviation Organization was reached on Chicago in December 1944.

• Agreement on the UN Charter was reached in San Francisco on April 1945.

Birth of GATT- PrecursorBirth of GATT- Precursor

• In November 1945, the US government issued a document titled ‘Proposals for Expansion of World Trade and Employment,’ for consideration by an International Conference on trade and Employment, resulting from a consensus b/t US and UK discussions.

• Most important aspect of the Proposals: Detailed charter/code of conduct relating to governmental restraints on International trade and creation of the International Trade Organization.

Gist of the Proposed CodeGist of the Proposed Code

• Affirmation of the principle of unconditional most favoured nation treatment and prohibition of quantitative restrictions, (subject to several restrictions, including agriculture).

• Limiting subsidies, conforming state trading to market conditions, prevention of cartels, limited resort to commodity agreements and exceptions to countries with balance of payment problems

• International Trade Organization (ITO) was to administer the code, to provide a forum for settlement of disputes, collection/dissemination of trade statistics and preparation of guidelines for customs valuation.

UN ECOSOCUN ECOSOC

Proposal for International Conference on Trade and Employment was taken up by the UN ECOSOC at its 1st meeting in Paris in February 1946.

In accordance with a resolution introduced by the US, ECOSOC appointed a Preparatory Committee of 19 countries to draft the document to be considered at the conference.

Stages of creation of the Draft Stages of creation of the Draft CharterCharter

• Preparatory Committee met in London on October-November 1946, to continue work on the draft charter suggested by the US.

• 1st draft of the Charter for International trade Organization was produced at the London meeting

• 2nd draft was produced by a technical drafting committee that met from January-February 1947 at UN temporary seat in Lake Success, NY

• 3rd draft- Full Preparatory Committee met in Geneva from April –August 1947 for the draft, which became the basis for a Plenary Conference on trade and Development convened by the UN in Havana in November 1947.

US InitiativeUS Initiative

• After the ‘Proposals’ were issued the US issued an invitation to fifteen countries to enter into negotiations for conclusion of multi lateral trade agreement.

• 8 other countries joined and engaged in a tariff cutting negotiation, simultaneously as the prior drafting sessions for the ITO were going on.

• Negotiations were on a ‘one on one’ sessions focusing on products where one was an important market and other side was a principal supplier, with concessions on products ‘paid for’ based on reciprocity.

US Initiative Cont’d US Initiative Cont’d

• Total of 123 sets of negotiations took place in Geneva in the period of April-October 1947 among 23 countries, 22 involving the US. About 50,000 items of trade were considered that resulted in either a substantial reduction, low rates of duties or duty free entry subject to binding obligations.

• The General Agreement was opened for signature on October 30, 1947, and entered into effect-provisionally- on January 1, 1948.

Consequences of the NegotiationsConsequences of the Negotiations

• 1st- Pace and volume of the negotiations were maintained because they were all held at the same time, spurred by the US statute that gave the executive branch negotiating authority, which was due to expire in June 1948. Geneva rounds set the precedent for subsequent rounds of GATT.

• 2nd- All ‘concessions’ i.e., negotiated reductions and binding tariffs were generalized to all participants, in implementation of MFN.

• 3rd- concessions were recorded on a single document- General Agreement on Tariff and Trade which comprised of binding tariff schedules and a code of conduct designed to Safeguard (provisionally) the undertakings given and a common standard of behaviour.

Conference on Trade and Conference on Trade and Employment (ITO)Employment (ITO)

• Havana Conference on Trade and Employment opened on November 21, 1947.

• Agenda: Importantly, an elaborate structure for the International trade Organization, employment, economic development, restrictive business practices, commodity agreements, trade (commercial policy).

• After acrimonious debate, Final Act of the Havana Conference embodying the ITO was signed on March 24, 1948, on behalf of 53 states.

Reasons for non-implementation of Reasons for non-implementation of ITO CharterITO Charter

• US Congress showed little enthusiasm for the Final Act after the initial initiative. Other countries followed suit, and waited for the US to first ratify the Charter.

• US was ambivalent, as they thought that the Charter may impair support for high priority issues of foreign affairs at the time, like the Marshall Plan for reconstruction of Europe after WW II, establishment of a program of controls on export of strategic materials and war with Korea. ITO faded away.

• GATT 1947, provisionally crafted with some adjustments agreed to at Havana, and not requiring parliamentary approval remained in effect till 1995 till WTO came into existence and included the GATT 1947 as the basic text with later additions.

Overview of GATT:Overview of GATT:Architecture- Reasons for its Architecture- Reasons for its

longetivitylongetivity• 1st- The problem of formal ratification, before domestic

implementation and changes in national substantive laws by countries, especially the US., led the signatory states to sign a Protocol of Provisional Application, with the intention that formal ratification would be directed to the forthcoming ITO Charter. But this provisional application has outlasted all others as the primordial international trade agreement, because of its depth and flexibility to changing times, for 47 years. Responsibility of keeping the informal structure of GATT together to change policies, conduct meetings and grant waivers, etc., was all up to the ‘CONTRACTING PARTIES.’

Architecture cont’d Architecture cont’d

• 2nd- Protocol required signatories to apply Parts I and III without reservation but Part II (‘only to the extent not inconsistent with existing domestic laws).

• Part I contained the most basic provision- MFN treatment (Art. I), binding of scheduled concessions (Art. II).

• Part III contained ‘procedural provisions’ like customs unions and FTA’s (Art XXIV), waivers (Art XXV(5)) tariff negotiations (Art. XXVIII).

• Part II contained substantive provisions of code of conduct- national treatment in aspects like internal taxation regulation (Art. III), antidumping and countervailing duties (Art VI), quantitative restrictions (Art XI), measures to safeguard balance of payments (Art. XII-XV), but subject to a ‘grandfather clause,’ which provided national legislation inconsistent with GATT clauses was not unlawful if required by legislation existing as of October 30, 1947, for original and date of accession for states joining later.

Major Principles:Major Principles:

• 1. Universal MFN:• Trade to be conducted on basis of non-discrimination.• All contracting parties undertake in Art. I the obligation to

apply duties on imports of goods equally without regard to origin of the goods

• 2. No Increased trade barriers:• Governmental restraints on goods movement-minimum

and if changed should only be reduced.• Art. II- all contracting parties to apply to others duties set

forth in Schedules submitted at the close of tariff negotiations. Bound duties may be subject to unbinding after discussions, every 3 years but balance in concessions maintained.

Principles cont’dPrinciples cont’d

• 3. Tariffs Only as the accepted form of trade restraints:

• Tariffs are easy to understand than other quantitative restrictions like licenses, and other NTB’s like quotas that are prohibited subject to exceptions (Art. XI)

• Tariffs not prohibited- tariffs formulated as a % of the value of the goods imported- ad valorem tariff; specific tariffs i.e., based on per unit or some other measure.

• Tariffs prohibited- tariff measured by the value of competing products of domestic origin (Art VII).

Principles Cont’dPrinciples Cont’d

• 4. National treatment: • Internal Taxes, other regulations not to be imposed

discriminatorily b/t domestically produced and imported products.

• States not barred from imposing sales taxes or regulatory requirements, but neither in thought or effect shall there exist a distinction b/t burden borne by imported goods compared to domestic goods.

• US insisted upon this principle at Havana over substantial objection.

• Together with MFN the national treatment principle emphasizes tariffs as the sole accepted protectionist instrument and non discrimination against goods based on the country of origin.

Principles Cont’dPrinciples Cont’d

• 5. Regular Negotiations:• Regular negotiations b/t Contracting parties to

lower trade barriers on basis of reciprocity and multilateral framework (Art. XXVIII).

• ‘Substantial Reductions of general tariff levels,’,’ was only included into the text of GATT at the Review session held in Geneva in 1954-5, as it was earlier thought that more regulations would be included in the ITO Charter that failed to materialize.

Qualifications/ ExceptionsQualifications/ Exceptions

• (a) Preservation of Existing Preferences:• Discussions b/t the US and UK preceding the war was

included as the qualifying Article I, (the fundamental MFN article), by express authorization to maintain the Imperial and Commonwealth preferences, and comparable arrangements with other overseas territories.

• Although, undermining MFN principle to some extent, preferences were allowed to assuage te desire of colonial powers to preserve some form of economic ties with the countries, where such ties were dissolving.

• However, Article I cautions that the margin of preference cannot be increased from that prevailing at the start of the Geneva Conference, April 10, 1947. Declining role.

Exceptions Cont’dExceptions Cont’d

• (b) ‘Existing Legislation’ and Protocol of Provisional Application:

• Contracting states were not obligated to change existing legislation with respect to rules in Part II relating to subsidies, Dumping, state trading, customs valuations, national treatment and provisional quantitative restrictions.

• One of the reasons why even the US a joined GATT along with about a 100 other countries acceding later, was b/c countries could join GATT without submitting the Agrt., to their individual parliaments.


• GATT panels interpreted the ‘not inconsistent with existing legislation,’ to only justify a measure contrary to GATT provision that is required by national legislation and as contrasted with merely being authorized.

• Protocol does not include re-enacted laws.


• Eg: US anti subsidy statute adopted in 1897 and remained in effect as part of the Tariff Act of 1930 until 1979. Statute provided for imposition of countervailing duties on subsidized imports- would have violated GATT Art. VI(6) but for the Protocol. Became an issue of contention at the Tokyo round when the Subsidies Code was discussed.


• (c) Political Exclusions (Art.XXXV):• First proposed by India, Article XXXV added in 1948,

provided that when a state joins GATT it could announce that it would not enter into tariff negotiations/and not have GATT apply in relation to that state. Also, contracting parties could not veto the accession of a new party, but could announce its inapplicability of GATT to that state.

• Eg: Abused when about 15 countries having no trade relations with Japan at that time, like Australia, UK, the Netherlands, France and Belgium, invoked Art XXXV during Japan’s accession in 1955. Later rescinded, but as part of negotiations for Japan to liberalize imports.


• (d) National Security (XXI):• According to Art. XXI, nothing in the Agreement is to

prevent a contracting party from taking any action ‘which it considers necessary for the protection of its essential security interests.’

• Potential for misuse, since interpretation was subjective with no objective criteria listed. But, its invocation by countries was deemed reasonable based on facts surrounding individual cases.

• Eg: US/Nicaragua during the Sandinistas control of Nicaragua, and guerilla activities in neighbouring countries (1984-5) EC/Yugoslavia after the breakup of the erstwhile Yugoslav federation.


• (e) ‘General Exceptions:’• Art. XX is designed to specifically justify-but to limit- exceptions to

general provisions of GATT. It includes reasonable restraints on imports on the basis of health, safety, public morals, and subjects excluded from GATT like, trade in gold and silver, national artistic measures, products of prison labour, importantly, measures relating to protection of laws and secure compliance relating to protection of patents, trademarks and copyright, prevention of deceptive trade practices and measures relating to the conservation of exhaustible natural resources.

• Exceptions to follow the non discrimination principle and GATT panels suggested that the importing state bears the burden to prove that the challenged measure was not protectionist in nature but necessary to accommodate state’s purpose, i.e., less restrictive trade measures would not accomplish the purpose.

• Remained problematic till the Uruguay Round and agrts., relating to Trade, sanitary and Phytosanitary Measures were enacted.


• (f) Permissible Quantitative Restrictions:• According to Art. XI paragraph (I) the principle that all

quantitative restrictions are prohibited (see Sec. 3.3(b) para. (4) supra,) paragraph (2)(c) permits contracting parties to impose restrictions on imports on any agricultural or fishing product when ‘necessary for enforcement’ of a governmental program restricting production.

• Art XI(2)(c)- permitted quota ‘shall not be such as will reduce the total of imports relative to the total of domestic production, compared to the actual proportion effected…in absence of restrictions.’ Mere aim to increase domestic market share is not a valid reason.

• But, domestic price support progs.- permitted justification


• 2nd reason for import quotas- ‘to safeguard its external financial position and its ‘balance of payments’ (Art XII).

• In early stages, critics of GATT felt that Art XII could undercut Art. XI, as most countries, other than the US had significant balance of payments problems, but by 1960s major currencies had become convertible and Art. XII did not effect the basic thrust of Art XI.

• Restriction on Quotas- fear of contravention with the non discrimination cls. GATT architects stated under Art XIII that quantitative restrictions to be applied on a non discriminatory basis, with provision for public notification and consultation with interested suppliers.


• (g) Escape Clause: Art. XIX authorizes emergency action to impose a restriction on import of a particular product if, ‘as a result of unforeseen developments and of the effect of the obligations incurred by a contracting party, including concessions, any product is being imported into the territory of that contracting party in such increased quantities as to cause or threaten serious injury to domestic producers of like or directly competitive products.’

• Efforts to streamline this ‘safeguard mechanism’ with respect to defining injury, causation, if measures would be subject to the MFN cls. succeeded in the Uruguay round, and the 1994 Subsidies Code did not require the tariff concessions to be the causation factor.

Exceptions Cont’d Exceptions Cont’d

• (g) Customs Unions & Free Trade Areas:• Debate- CUs and FTAs by definition,

inconsistent with the MFN principle but at the same time they entail eliminating trade barriers inter se, and thus consistent with GATT objectives.

• In 1947-48 the Netherlands, Belgium, Luxembourg, founding members of GATT were already part of a CU and the idea of a ‘unified and democratic greater Europe,’ was being debated in the context of the reconstruction of Europe.


• Art XXIV, as revised at the first of the Contracting parties during the Havana Conference in 1948, was to permit contracting parties to enter into CUs and FTAs provided-

• (i) that the arrangement must cover substantially all the trade b/t/ amongst parties (to avoid preferential or discriminatory deals);

• (ii) on the whole, tariff and other non tariff barriers be no higher or restrictive than the average of tariffs of the constituent territories before formation of CUs or FTAs.


• (iii) if formation of CUs leads to the unbinding of prior bound duties then there is an obligation to negotiate with the beneficiaries of the concessions , in order to re-establish the prior balance.;

• (iv) if the CU is to be phased in there must be a plan and schedule to do so within a reasonable timeframe.

• Eg: European Economic Community (EEC) was the most important CU during the the age of GATT.

• NAFTA is one of the most successful CU.


• (h) Dumping and subsidies:• GATT drafters generally agreed that ‘dumping,’

defined, ‘sales by an exporter at prices less than the home market price,’ was an unfair trade practice and anti dumping duty by a importing country to offset was an apt defense.

• Drafters were not, though, in agreement that government subsidized exports was unfair, but they did agree that an importing country was entitled to offset the negative effect by imposing a countervailing duty to balance the market.

Exceptions Cont’d Exceptions Cont’d

• Fears of anti dumping and countervailing duties becoming protectionist. Import quotas and punitive tariffs were not accepted.

• Anti dumping and Countervailing duties permitted as an exception to the MFN and bound duty obligations, provided duties did not exceed the amount of dumping or subsidy and provided authorities of the importing country had made an explicit determination that as a result of dumping/subsidy an industry in the importing country had suffered or was threatened with material injury (Art VI(6)).


• Subsidies Article was expanded as a result of the 1954-5 review session of the GATT to include a statement that a subsidy on the export of a product may have harmful effects for the other contracting parties, a statement that contracting parties should seek to avoid subsidies on primary products, but that in any event such subsidies shall not be applied to bestow more than an equitable share of world export trade in that product and for other products CPs shall cease to grant subsidies.


• (i) Waivers:• Art XXV(5)- waivers could be granted by CPs acting

together, upon approval by 2/3 majority, ‘in exceptional circumstances not elsewhere provided for in this Agrt.’

• Benefits- avoidance of conflict of priorities.• Eg: European Coal and Steel Community was granted a

waiver in 1952, a CU, contrary to Art XXIV. Waiver was subject to detailed annual reporting requirement and commitment that customs duties would be lower that general incidence. When EEC was formed in 1958 Art. XXIV was applied without any waiver, being sought.

• US had waivers covering virtually all agri’l products for 40 yrs till phased out pursuant to agricultural settlement reached at the Uruguay round since granted in 1955.

Dispute SettlementDispute Settlement

• Originally conceived, GATT (and ITO) could facilitate disputes b/t CPs if possible through direct consultations, and help of the secretariat or a small group of neutral GATT experts to act as an arbitration panel.

• Art XXII- each CP ‘shall accord sympathetic consideration’ to representations regarding any matter that may be made by another CP.

• Art XXIII- if any CP should consider that ‘any benefit,’ accruing directly/indirectly is being ‘nullified/impaired,’ matter may be referred to CPs, to make recommendations or give an appropriate ruling. No procedures laid out, but if CPs think matter is serious then successful CP can suspend the application of any trade concessions on the aberrant CP, as determined.

Brief points- Dispute ResolutionBrief points- Dispute Resolution

• 1st- If determined, a challenged measure violated GATT/ GATT Codes, the preferred solution is a recommendation that the aberrant state modify or withdraw the violating act. Retaliation in the form of the complainant state withdrawing some of the concessions was disfavoured as it would result in two barriers to trade.

• 2nd- The previous dispute resolution through panels made up of delegates from third countries, with the Secretariat participating gave way to the legal division after 1981.

• 3rd- Object-restoration of balance of payments. Retaliation- rare, and only for the purpose of compensation.

Evolution of GATT and GATT LawEvolution of GATT and GATT LawGATT Negotiating RoundsGATT Negotiating Rounds

First Five Rounds (1947-61)First Five Rounds (1947-61)• Manner of negotiating: Each pair of countries

exchanged ‘request list,’ and subsequently exchanged ‘offer lists.’ After the lists were exchanged, they were made available to all participants, to be taken into a/c in their own bilateral negotiations and preparation of revised lists. If an exporting country may benefit from a proposed concession, importing country might make its offer subject to being ‘paid,’ by potential beneficiaries.

• Except, the 1st round, the subsequent rounds had small but significant reductions in duties.

Negotiating Rounds Cont’dNegotiating Rounds Cont’d

• The 1st round, held in Geneva, simultaneously resulted in the drafting of the General Agrt., in April-Oct., 1947 and had an underlying theme that the Contracting Parties should meet regularly to negotiate tariff reductions and other trade barriers.

• 2nd and 3rd round (Annecy, France, 1949; Torquay, England 1950-51)- modest tariff cutting and conditions of new accessions, including the recently established Federal Republic of Germany.

Negotiations Cont’dNegotiations Cont’d

• 4th Round- restrained by the fact that in the Trade Agreements Extension Act, 1955, the US Congress had authorized President to negotiate duty reduction by only 15% of the duties in effect on January 1, 1955 or to 50 % ad valorem.

• Due to the fact that the US could not offer greater reductions, the MFN and reciprocity principle u/GATT meant other states could not offer substantially more reductions.

Negotiation Cont’dNegotiation Cont’d

• Close of the 4th round the Benelux countries, France, Italy and Federal Republic of Germany met in Venice to consider and approve Spaak report for the est. of the European Common market.

• Creation of the European Eco. Market changed but did not weaken GATT.

• European Eco. Community created pursuant to the Treaty of Rome was in complete compliance with the CU requirements under GATT, and became a principle force to be reckoned with in GATT.

Negotiations Cont’d (Dillon Round)Negotiations Cont’d (Dillon Round)

• 5th ( Douglas ‘Dillon’ Round) : 2 aspects-• Another effort in multilateral tariff cutting,

continuing from the prior rounds, but encouraged by the new US negotiating authority, permitting duty reductions of up to 20% from the January ’58 level.

• Negotiation b/t the European Community and other GATT CPs u/Art. XXIV(6) about compensation for unbinding of duties of member states of the EEC, bound in prior GATT rounds.

Dillon Round Cont’dDillon Round Cont’d

• EEC position- common external tariff on an item created by arithmetic average of previous duties of constituent states, as called for by Treaty of Rome, did not require any compensation to third countries, as it would balance out among the member states.

• Rejected. Principle was established that 3rd parties were entitled to make ‘item-by-item claims for compensation pursuant to Art. XXIV(6) when CU was established/enlarged with admission.

Results of the Dillon RoundResults of the Dillon Round

• Aside from agriculture, Dillon XXIV(6) round was regarded as successful, as the EEC was integrated into GATT, with no friction.

• Reduction of duties modest, and product-by-product negotiation-tedious. EEC had used across the board adjustments to complete eliminations inter se in transition and had suggested the same technique to GATT, but such a technique was inconsistent with US negotiating authority, which required individual reports by US Tariff Commission. Evinced interest to find an acceptable alternative.

• Object- preserve reciprocity and Non discrimination. Impetus from the US in the form of Trade Expansion Act of 1962 that stimulated the Kennedy Round.

Kennedy Round (1964-7)Kennedy Round (1964-7)

• US embraced EEC politically, as a way to solve the Germany Problem and a way to strengthen Western democracies against the threat of Communism, but economically it feared that EEC would become a self directed, high tariff zone detrimental to the US trading interests.

• Trade Expansion Act of 1962, in the words of President Kennedy, was to be ‘a new and modern instrument of trade negotiations; as the architects understood the effect of CUs even when they meet the Art. XXIV requirements may deprive an outsider of the MFN and concessions previously paid for.

Kennedy Round Cont’dKennedy Round Cont’d

• US government wanted to seek to limit the ‘trade diversion effect’ that will depend on the height of the common external tariff. This meant moving away from the prior article-by-article negotiation and securing authority for across-the-board/ linear negotiations.

• US Cong. Granted authority to reduce duty by up to 50% of rate existing on July 1, ’62 until June 30, ’67.

• The decision to hold a new round of trade negotiations on the principle of linear or across-the-board tariff negotiations was finalized in a formal Ministerial Decision, in May 1963.

• The manner in which tariff rates could be uniformly brought down, so as to have reciprocity b/t states was a problem, but states remained keen on implementing it.


• Issue of reciprocity became dominant in the negotiations, when the EC pointed out that the tariffs on industrial products- by averaging member countries’ tariffs in the process of forming a common external tariff were in the medium range of 10-20% ad valorem, whereas British and US tariffs were widely distributed, and a 50% linear cut would leave most of its tariffs at relatively low levels compared to UK and the US, who would still constitute substantial restraint.

Kennedy round Cont’dKennedy round Cont’d

• Solution: ‘écrêtement’- leveling of the peaks- a formula whereby the contracting parties would agree on target rates by major categories, and then would undertake to cut their duties by an agreed % of the difference b/t the actual and the target rate.

• But, the above formula was unacceptable as inconsistent with reciprocity and the US law requirements of ‘mutual trade benefits.’

• As linear reductions might fall unevenly on different products, tariff structures and countries, reciprocity in this context was not discussed.


• US Congress granted the executive negotiating power, i.e., 50% reduction for 5 year periods, but excluding products subject to the escape cls., and national security provs., thus excluding about 12% of imports from negotiations.

• Compromise Ministerial meeting- tariff negotiations would be based upon a plan of substantial linear tariff reductions with bare minimum of exceptions which shall be subject to confrontation and justification. Linear reductions were to be equal, and in case of significant disparities, they will be based on special rules of general/automatic application.

• Disparities- partial return to bilateral negotiations, with offers subject to reservations.

Results of the Kennedy RoundResults of the Kennedy Round

• Negotiating round was a hybrid of product-by-product and linear negotiations.

• Resulted in duty reductions on 20% of the dutiable products of the industrial countries, about 2/3rd by 50% or more.

• But, principle of reciprocity remained something to aspire for economically at the close of the round.

Tokyo Round and the Separate Tokyo Round and the Separate Codes (1973-9): Expanded AgendaCodes (1973-9): Expanded Agenda• In the aftermath of the Kennedy round and its results that

became fully effective in 1970s, tariffs on industrial products had been reduced substantially.

• The new item on the agenda that needed attention was the Non Tariff Barriers.

• A Joint Declaration by the US and EC to the Director General of GATT urging a new round of negotiations was issued in February 1972, and through a formal Ministerial Meeting in Tokyo in September 1973, another round was declared open.

• Declaration stressed- Overall Reciprocity and adherence to MFN cls.

Separate Codes and MFNSeparate Codes and MFN

• Overall reciprocity and well-balanced package suggested that since equality in all agreements is not possible, parties should aim for an overall settlement satisfactory to all participants.

• Eg: A CP might agree to open up opportunities for non-nationals to bid for its govt., procurement projects to a greater extent than its own nationals would be allowed in the other country, as a ‘concession,’ to enable it to prevail on the issue of dumping.

Separate Codes and MFN Cont’dSeparate Codes and MFN Cont’d

• Industrial Countries- US, UK, EC, Canada and Japan were interested in all the subjects on the agenda for negotiations, many other countries had no interest in NTBs.

• Therefore, to assuage all countries including the ones not in favor of some of the proposals set for negotiations on the agenda, the idea of developing ‘codes,’ nominally in the implementation of provs., of the General Agrt., to create more specific understanding came up.

• Although codes would be open to all CPs, no particular no., of signatories would be required to bring them into effect. Codes would be binding only on signatories and they could pick the ones they wanted to adhere to.

Codes and MFN Cont’dCodes and MFN Cont’d

• Industrial states understood that such non compulsory codes, to some extent undermined the claim of GATT as a universal orgn.

• Government Procurement Code and Subsidies Code that conferred benefits on signatories, replaced the principle of unconditional MFN with a form of conditional MFN, top some extent.

• Advantage of Separate codes- international legislation could be completed in time, a a package deal could be put together where benefits granted, could be used to offset a perceived unsatisfactory result for that state on another subject.

Effect of Conditional MFNEffect of Conditional MFN

• Although the conditional MFN cls. And the separate code were designed to offer incentives for CPs to sign on, they had negative repercussions as well.

• Eg: in return for a stricter definition of subsidies and prohibition of export subsidies o non-primary goods in the Subsidies Code, the US agreed to amend its law to require independent finding of material injury to a domestic injury before imposing a countervailing duty. But, Brazil abused this benefit, by signing on to the agrt., as it had a vast subsidies program and wanted to prevent US from imposing countervailing duties on its exports.

• Left a bad taste, but the Tokyo round Codes bridged the gap b/t GATT 1947 to GATT 1994.

Achievements and Failures of the Achievements and Failures of the Tokyo RoundTokyo Round

• Final Act of the Tokyo Round was submitted for signature on April 12, 1979. All industrial countries signed, but only Argentina, amongst the developing countries signed at first, as a silent boycott to show their disappointment at the minor role that developing countries played, but later in that year more countries signed after a resolution was passed to ensure ‘unity and consistency,’ of GATT & that existing rights/benefits would be upheld and not affected by these separate agrts.

Achievements and Failures Cont’dAchievements and Failures Cont’d

• Greatest achievement- Maintenance of ‘unity and consistency’, in the face of other uncertainties like the collapse of the international monetary system, recession and energy crises throughout both the developed and less developed world.

• International legislation on Subsidies and Countervailing Duties, on Dumping and Anti Dumping, Govt. Procurement, Technical Standards, Customs Valuation and Import Licensing. These agrts., contained substantive rules, and established committees of signatories to oversee their implementation and dispute settlement as well. The fact of creation of a large body of law that was technical and important is the major achievement of the Tokyo Round

Tariff Cutting u/Tokyo roundTariff Cutting u/Tokyo round

• Although not the principle issue on the agenda, it was understood that agricultural tariffs would not be subjected to any tariff cutting formula.

• Tariff cutting principle- higher the initial tariff, higher the % by which it would be cut, subject to an 8 year period of staging.

• In spite of agricultural exceptions and others, the principle of linear tariff reductions was accepted and overall reciprocity was the guiding principle.

Failures of the Tokyo RoundFailures of the Tokyo Round

• Biggest drawback- Failure to achieve agrt., on Code of Safeguards, i.e., measures of relief against sudden and unforeseen imports of a given product, in the form of a quantitative restraint. Safeguards were imposed by importing state acting alone, or agrt., b/t importing and exporting states, or by industries in one/both countries with the tacit approval of the govts.

• States agreed that an international discipline for safeguards was needed, and several versions of draft Code or an ‘Outline of an Arrangement’ on safeguards was published near the close of the Tokyo Round.

• CPs agreed that serious injury to domestic products was required, but ‘the cause,’ or ‘principle cause,’ was being debated.

• Most argued issue- ‘Selectivity.’ Whether safeguards must be imposed on an MFN basis or could be imposed against a source of increased/excessive import only?

• EC wanted safeguards imposed selectively, developing countries, including Japan were not in favour and US was in the middle.

Uruguay Round (1986-93)Uruguay Round (1986-93)Heavy Agenda for the RoundHeavy Agenda for the Round

• In 1982, even before the developments from the Tokyo round were tried and tested, US urged another round of GATT negotiations. Supporters sought to undercut the protectionist trends in the US and chose to focus on new areas for the first time- services, IP and investment.

• US urged that the new areas, along with agriculture and safeguards be the agenda for the new round.

• Opposition came from the developing countries who felt let down by the Tokyo round and EC, who feared that its ‘Common Agricultural Policy,’ would be in jeopardy.

• US persisted, and in 1985, a Preparatory Committee was charged with drafting a program for a new GATT round for submission at the Ministerial Meeting.

• Ministerial Meeting- Convened at Punta del Este in September 1986. , but was not harmonious to begin with. After 5 days of arguments, a Ministerial Declaration was agreed to initiating the 8th round of Multilateral trade negotiations.

Heavy Agenda Cont’dHeavy Agenda Cont’d

• Most ambitious round dealing with tariffs, NTBs, trade related aspects of investment regulations; of IP and of services, including banking, a/cing, insurance, shipping and even legal services.

• Reform trade in agriculture, and reduce the pattern of subsidies and overproduction in some countries, while famine existed in others.

• Address the safeguards problem and bring trade in textiles under the nominal GATT regime.

• ‘Standstill’- commitment not to take any trade restrictive/distorting measure, or take any measure in exercise of GATT rights ‘that would go beyond requirement,’ to remedy specific situations.

• ‘Rollback’- elimination of trade restrictive/distorting measures previously taken without requesting GATT concessions.

• At the behest of India and Brazil, negotiations on trade in services was separated into Part II of the Declaration.

• US proposed a more definite and predictable method of enforcing rules and resolving disputes. (dispute resolution).

Developments of the Uruguay Developments of the Uruguay RoundRound

• 15 subjects, both old and new were the topics of negotiation groups. After meetings in 1987 and 1988, a Midterm Ministerial meeting was held in Montreal and agrt., was reached on 11 out of 15 topics. 4 topics evaded any agrt.,- agriculture, textiles, protection of IP and safeguards. A final meeting Ministerial meeting of the Uruguay round was to be held at Brussels in December 1990, and the 4 contentious topics would also be negotiated.

• July 1990- Group of Seven Eco., Summit held in Houston was stormy as US wanted reduction/elimination of subsidies of the Common Agricultural Policy followed by the EC in 3 imp., elements- levels of domestic support, import barriers, and export subsidies.

Developments of the Uruguay Developments of the Uruguay Round Cont’dRound Cont’d

• The developing countries, made it clear that that if they were not granted greater access for their agricultural products by the industrial countries, they were not going to open their markets to Western services, liberalize investment regimes, or grant IP protection (including patents on pharmaceutical and software).

• Warning in the Punta del Este declaration against ‘unwarranted cross sectoral demand,’ was disregarded. Trade in agriculture and agricultural subsidies seemed to be the most contentious issues.

Developments of the Uruguay Developments of the Uruguay Round Cont’dRound Cont’d

• November 1990- trade ministers from 107 countries met in brussels to bring the Uruguay round to a conclusion, but US wanted precedence given to security concerns, EC tried to buy out the Cairns Group, with individual concessions, but to no avail. Latin American Countries withdrew their delegates from working groups on IP and services to protest the deadlock on agriculture.

• GATT groups continued to meet, and at year end 1991, Director-General, Arthur Dunkel issued a Comprehensive Draft Final Act, a document containing either agrts., or feasible compromises. At a first appraisal meeting scheduled for January 1992, much of the draft was tacitly agreed, with the understanding that nothing is agreed, unless everything is agreed.

Developments Cont’dDevelopments Cont’d

• Agriculture and particularly efforts to limit the subsidy programs of the European Community, turned out to be a major and continuing obstacle in 1992, but 3 elements led to major eventual changes. The proposals are-

• (i) that the Balkanization of GATT law of the Tokyo round be reversed and all agrts., to be signed by all parties.

• (ii) Integrated system of dispute settlement, covering GATT, and inclusive of all the associated agrts., and codes with authority to9 retaliate.

• (iii) GATT to be placed in a firm organizational footing, what eventually became the WTO.

Final StageFinal Stage

• After NAFTA was passed, a renewed effort to complete the Uruguay Round was made. The continuing controversy over agriculture was resolved with EEC agreeing to cut back on export subsidies more slowly, than previously understood, in return for imposed access to the European market for the US and other suppliers.

• On December 15, 1993, last day of the ‘fast track authority,’ of the US executive branch, the successful completion of the Uruguay Round, covering important new areas of world economy was announced, by DG, Peter Sutherland.

Summary of the Negotiating Summary of the Negotiating RoundsRounds

• (1947-61)- First 5 rounds- Emphasis was on tariff reduction based on MFN treatment and ‘mutual exchange of benefits,’ (reciprocity).

• Kennedy Round (1964-7)-attempt for linear tariff reductions based on reciprocity.

• Tokyo Round (1973-9)- crafting rules applicable to NTBs affecting trade in goods, and negotiation of codes (agreements) on subsidies, antidumping and countervailing measures, govt., procurement, customs valuation.

• Uruguay Round (1986-93)- CPs moved well beyond trade in goods to include services, IP, transnational investment, agrt., on safeguards, agrt., on trade in agriculture and the creation of the WTO.

GATT and Developing CountriesGATT and Developing Countries

• Why has GATT failed to address the development needs of developing countries?– a) the passive and defensive role of developing

countries– b) the lack of participation of developing countries in

the exchange of concessions– c) the focus of developing countries on Special and

Differential treatment for developing countries as their main objective

Alleged that for the large part developing countries had to become bystanders and many had acceded under article XXVI 5(c), which exempted them from having to negotiate concessions in order to enter.

GATT during the ITO GATT during the ITO

• GATT originally started out with 23 CPs out of which 10 were from developing countries. By the Uruguay Round there were 76 developing countries participating and in the Doha round over 70% of the 153 members are currently developing countries.

• Due to colonization and nascent newly independent countries a lot of the early bargaining/negotiations were done by the developed countries who ‘represented,’ the developing countries, a trend unfavourable to the developing countries.

ITO negotiations by developing ITO negotiations by developing countries: reciprocity and MFNcountries: reciprocity and MFN

• Notwithstanding the dominance of developed countries, developing countries, did participate actively in the ITO negotiations.

• They tabled a wide range of proposals. The very first draft of the ITO charter proposed by the USA in December 1945, had no provisions on economic development, nor were there any rules or exceptions for developing countries.’

• Principle of reciprocity was debated, with developing countries raising concerns that they lacked the bargaining power to enable them to extract concessions of value from developed countries on a reciprocal basis and the developing countries inability to grant reciprocal tariff cuts of equal value should be considered.

ITO negotiations cont’dITO negotiations cont’d

• ITO Charter negotiations in London in 1947- US put forward its ‘proposed charter.’

• Brazilian delegation also put forth a ‘proposed charter,’ on behalf of the developing nations and engaged with the US on the MFN clause, stating that this should be adhered to unconditionally ‘only,’ by countries in the advanced stage of development, and need for special measures to assist with development.

• Both charters were in agrt., as to a ban on quantitative restrictions, but the US proposed a broad exemption on the ban for any agricultural product.

ITO Cont’d. ITO Cont’d.

• During negotiations of the ITO in the UN ECOSOC, developing countries were able to insert some amendments that called for the ITO negotiations to take into ‘a/c the special conditions that prevail in countries whose manufacturing industry was still in the initial stages of development.’ US rejected this amendment, and so was never included in the final draft of the ITO Charter.

• However, some of the concerns of importance to developing countries was included in the final draft of the Charter at the Havana conference in 1948. It is partly this reason and the fact that the US did not have all its interests accepted that the US Congress rejected the ITO Charter initiated by it.

Early GATT roundsEarly GATT rounds

• 3 major obstacles in the process of tariff bargaining/ exchange of concessions:– (a) Principle of reciprocity– (b) Principle-Supplier rule– (c) Internal taxes and quotas of developed

countries.

Early rounds cont’dEarly rounds cont’d

• US made it clear that it wanted MFN and reciprocity to be the foundational GATT principle and developing countries like India argued that due to the limited size of their domestic market their bargaining power was inadequate to induce concessions from developing countries, and they also wanted to protect their infant industries that were in the early stages of development.

• Many countries preferred across the board tariff negotiations, including the

UK. But, US Congress did not accept it and the US delegation argued for a system of reciprocal bargaining over specific tariff lines that required a product-by-product, principle supplier method of tariff negotiations by which a country could only be requested to make tariff cuts on a particular product by the principle supplier of that product to that country.

• Developing countries at the time were seldom principle suppliers of any product except raw materials that entered industrialized countries duty free. Developing countries were effectively locked out and prevented from requesting concessions on products, they did not produce in large quantities.

Early rounds cont’dEarly rounds cont’d

• Internal taxes and quotas of the developed countries posed another problem as they were as high as 500% for products such as sugar. But they were never on the agenda and quotas only increased for products that were of interest to the developing countries.

• Thus, industrialized countries increased their exports of manufactured goods and followed a policy of protectionism through a blend of GATT waivers on agriculture, textiles and clothing.

Article XVIII of GATTArticle XVIII of GATT

But, at the review session of GATT (1954-55), Art. XVIII was revised to provide developing countries additional flexibility. Titled “Govt., Assistance to Economic Development,” created significant provs.

Section A- developing CPs to modify or withdraw scheduled tariff concessions to promote est. of a particular industry.

Section B- recognition of the balance of payment problems of developing CPs and flexibility for use of quantitative restrictions. LDCs should use least trade disruptive measures and should use price based measures, like import surcharges and deposits rather than quantitative restrictions. Consultations by GATT BOP committee.

Section C- enabled with certain conditions to use any measure not consistent with other provs., for promotion of a particular industry.

Haberler ReportHaberler Report

• AT 1957 Ministerial session an expert panel headed by Prof. Gottfried Haberler was established to examine the trends in IT, specifically “failure of the trade of less developed countries to develop as rapidly as that of industrialized nations, excessive short term price fluctuations of primary products and widespread resort to agricultural protectionism” Report produced in October 1958.

• CPs adopted a ‘Declaration on the Promotion of trade of less developed countries in December 1961. Declaration called for sympathetic analysis of reciprocity of developing countries and technical assistance to expansion of trade among developing countries, improvement in production and marketing methods. Call for action in 7 areas-

• Speedy removal of quantitative restrictions effecting exports of LDcs• Special attention to tariff reductions of products of primary benefit to LDCs• Removal/reduction of fiscal duties in DCs• Improved access of developing countries in purchases made by state agencies.• Preferences in market access for developing countries.• Limitation of subsidies on export of primary products.• Careful observance of GATT or UN mandated limitations on disposal of commodity

surpluses/ strategic stocks.

Dillon Round (1960-61)Dillon Round (1960-61)

• Haberler report recommended inclusion of internal taxes, and together with pressures from India and Brazil, internal taxes were included in the Dillon round. US and EEC fiercely opposed it.

• Increasing barriers on agriculture and exclusion of agriculture from negotiations resulted in disappointing results for Developing countries

• In 1963 a Nigerian led group of developing countries (G21) proposed CPs to focus on targeting those barriers to trade identified as directly affecting LDCs. Resolution adopted on May 1963 called for a standstill on new tariff and non-tariff barriers.

• However, EEC sought exception for its emerging common external tariff. Austria and Japan stated inability to comply by the December 1965 deadline and US stated that its national legislation only allowed for a reductions in tariffs over 5 year periods.

• Thus, 1963 resolution only resulted in a committee to investigate the revision of GATT for the benefit of developing nations.

Kennedy RoundKennedy Round

• US Trade Expansion Act (1962) authorized US to negotiate across the board formula based negotiations. US chose a hybrid method that utilized across the board formula combined with substantial bilateral negotiations over the exception list, b/t principle suppliers to ensure reciprocity.

• Developing countries could not participate as they were once again hampered by their lack of bargaining power, which resulted in far greater concessions for the developed countries.

• Resulted in appro., 35% tariff reduction in manufactured goods of industrial countries, while tariff cuts on cotton textiles was only 18% from the US and 22% from the EEC for developing countries. Also, they made the cut conditional on renewal of LTA that were imposed against the largest supplying developing countries into the developed markets.

• However, in spite of little progress on agriculture, and semi finished industrial products, there were about 14 developing countries who made binding tariff concessions included in the GATT schedules.

Part IV of GATTPart IV of GATT

• After a Special session of the contracting parties, (17th November to 8th February 1965), the CPs drew up a protocol amending GATT, and introduced a fourth protocol known as Part IV of GATT on trade and development. 3 articles:– Principles and objectives (Art. XXXVI)- need for conscious and

purposeful effort on the part of CPs individually/jointly to improve access to the world markets for products of interest to developing countries. ‘Non reciprocity,’ (para.8) where developed nations do not expect similar reciprocity for commitments from developing countries

– Commitments (Art. XXXVII)- introduces prov., for CPs to take certain measures in respect of trade interests of developing countries.

– Joint Action (Art. XXXVIII)- mandated access to world markets of primary products of developing countries.

ResultResult

• A significantly reduced version of provisions submitted by the LDCs. Important aspects:– High priority to the reduction/ elimination trade barriers for goods

of export interest to developing countries. – Refrain from introducing tariffs/ non tariff barriers on these

products– Remove requirement for reciprocity– Create a Committee on trade and development to monitor

progress being made in these areas.

Part IV also created the basis for preferences for developing countries, both b/t developed and developing, and b/t developing countries themselves.

Part IV of GATT and UNCTADPart IV of GATT and UNCTAD

• Committee on Trade and Development was established in 1964, review application of provisions of Part IV. But, Part IV was best regarded as best endeavour undertaking with no legal force.

• The process of decolonization led to the creation of UNCTAD (1964). Part IV of GATT also agreed to establish institutional arrangements, “to collaborate with the UN and its organs in matters of trade and development policy.”

• ITC (International Trade Center) was established to become an agency of UNCTAD and GATT.

• On 8th December 1971, a protocol relating to trade negotiations relating to GSPs b/t developing countries was finalized along with trade negotiations b/t developing countries.

Tokyo RoundTokyo Round

• Developing countries participated by implementing restrictions in certain areas, as the round went beyond tariff reductions to include non tariff barriers.

• Problem for developing countries- (Voluntary export restraint- VER’s). Dominated the cotton sector and other primary products of importance developing countries. More than 800-850 NTB restrictions were in place by that time

Committee examining Quantitative Committee examining Quantitative RestrictionsRestrictions

• 2 reports: one synthesizing the proposals of developing countries, represented by Brazil and the 3 chairs; of GATT CPs, the Council and the Committee on Trade and Development. Called for gradual liberalization and elimination of QRs.

• 2nd report presented by the US- made a distinction b/t legal and illegal QRs, with only illegal QRs being subject to negotiations. This definition and distinction was not accepted by majority of the countries- scrapped.

• Thus multilateral approach to negotiations on QRs was abandoned in favour of bilateral talks.

Tokyo Round Cont’dTokyo Round Cont’d

• Developed countries made extension of MFA (Multi Fiber arrangement) a precondition for reduction of tariffs on textiles. US further restricted the growth of its quota for developing countries further from 6% to 1-3% per yr.

• EEC required the clothing and textile exports from the developing countries to be reduced to below 1976 levels requiring cuts of 9%, 7% and 25% respectively from Hong Kong, Korea and Taiwan.

• Safeguards: Developing countries had a big interest, so Brazil and Nigeria presented proposals, but negotiations broke down, as developing countries refused to accept EECs demand that each member should have the right to impose unilateral safeguards on individual countries without multilateral approval.

Tokyo Round and the Enabling Tokyo Round and the Enabling clause of 1979clause of 1979

• Preferential treatment cls., that started at the end of the Kennedy round was provided a firmer legal basis through adoption of the Enabling Clause in 1979.

• US had agreed in 1969 to expand the GSP system to create its own GSP for developing countries that the EEC already had in place, at the time of GATT formation. (colonial preferences). Led to the formal legal recognition of the derogation from the MFN principle.

Provisions of the Enabling cls.Provisions of the Enabling cls.

• Permanent legal authorization for the GSP preferences

• Preferences b/t developing countries• Special treatment for developing countries from

GATT rules and special treatment for LDCs.• Developing countries refused to sign the codes

reached by the Tokyo round until developed countries reached an agrt., to include special and differential treatment provisions for developing countries. US and other developed countries agreed under the guise of non binding assurances of technical assistance.

Result of the Tokyo round for Result of the Tokyo round for developing countriesdeveloping countries

• Part IV (1965) and the subsequent enabling clause (1979) created a basis for the special and differential treatment prov., as a direct response to the failure of the developed countries to address key issues of interest to the developing countries, although the developing countries had already contributed to tariff reduction and exchange of concessions. They were mostly a best endeavour exercise without legal force.

• The US and EEC negotiated mutually acceptable outcomes with other members of the Quad (Japan and Canada).

Therefore, exchange of concessions by the developing countries should be seen from the perspective of the stakes against them- agriculture, principle-supplier prob.,

Uruguay RoundUruguay Round

• Developing countries understood the dangers posed by the new issues that were proposed by the US for inclusion into the new round. This is why they opposed the inclusion of these issues in the agenda.

• Developing countries, such as India and Brazil opposed the proposed extension of GATTs remit into services, IP and investment, as they argued that first action should be taken to remove VERs, the MFA and restrictions in Agriculture. This opposition was a major factor that resulted in the collapse of the 1982 Ministerial meeting.

• US pursued with threats of imposing unilateral restrictions under sec. 301 and also introduced subsidies to challenge the EEC.

• However, a group of 24 countries opposed the new agenda of services, TRIPs and investment, and instead called for a round that was confined to industrial products and agriculture, together with a standstill and rollback of protectionist measures that were not inconsistent with GATT.

Uruguay RoundUruguay Round

• Agrt., by developing countries only after having secured agrt., that these issues would be discussed on a separate track from the negotiations on goods.

• Long negotiations at Punta del Este, b/t US, India and Brazil as principle participants, resulting in the emergence of a detailed procedural agrt., that ensured coverage of all the three subjects but separated them from traditional areas to be acceptable to India, brazil and other allies.

• Fact remains that Uruguay round was launched 5 years after the original call for a new round by the US was due to the stiff resistance by the developing countries.

UR cont’dUR cont’d

• Final Act embodied on ministers in Marrakesh on April 15, 1994. in addition to the text of the Final Act, it contains texts of Ministerial Declarations, clarifying certain provs.

• Final Act covers all aspects negotiated at Punta del Este, with 2 exceptions. 1st- results of “market access negotiations,” in which individual countries have made binding commitments to reduce/eliminate specific tariffs/NTBs to merchandise trade. Concessions recorded in national schedules of concessions annexed to the UR Protocol GATT 1994, forming an integral part Final Act. 2nd- “initial commitments,” on liberalization of trade in services, also recorded in the national schedules.

Agreement on AgricultureAgreement on Agriculture

• 4 main portions- (1) agrt., on Agriculture (2) concessions and commitments members are to undertake on market access (3) domestic support and export subsidies (4) agrt., on Sanitary and Phytosanitary measures (5) Ministerial Decision concerning least-developed countries and Net Food importing Developing countries.

• Regarding market access, NT border measures replaced by tariffs that provide substantially the same level of protection. ‘Tariffication’ process tariffs and other tariffs on agricultural products to be reduced by 36% for developed countries, 24% in case of developing countries, with mini., reduction for each tariff line being required. Reductions to be undertaken over a period of 6 years for developed countries and 10 years in case of developing countries and LDCs were not required to reduce tariffs at all.

• Tariffication process also provides for maintenance of current access opportunities and est., of mini., access tariff quotas where current access is <3% of domestic consumption, which is to be extended 5% over implementation period.

Agriculture cont’dAgriculture cont’d

• Agrt., sets up a committee that will monitor the implementation of commitments, and monitor follow up to the Decision on Measures Concerning the Possible Negative Effects of the reform programme on LD and Net Food Importing developing countries.

• Package calls for further negotiations in the 5th year, of implementation which would also consider special and differential treatment for developing countries.

Decision on Measures Concerning Decision on Measures Concerning Possible Negative Effects of the Possible Negative Effects of the

Reform Prog., on LD and NFIDcsReform Prog., on LD and NFIDcs• Problems recognized. Therefore, a special

decision sets out objectives with regards to prov., of food aid, prov., of basic foodstuffs in full grant form and aid for agricultural development.

• Also refers to assistance from the IMF and WB with respect to short term financing of commercial food imports. Committee on Agriculture monitors the decision followup.

Agrt. On Textiles and ClothingAgrt. On Textiles and Clothing

• Object- Eventual integration of the textiles and clothing sector- where much of the trade is currently subject to bilateral quotas negotiated under (Multifibre Arrangement) (MFA) into the GATT on the basis of strengthened GATT rules and disciplines.

• This integration is going to be in a phased manner (Stage 1- 1995-97 inclusive, Stage 2- 1998-2001 inclusive an Stage 3- 2002-2004 inclusive). All MFA restrictions as applicable would be carried over into new agrt., and maintained until restrictions are removed/product integrated into GATT.

• Contains specific transitional safeguard mechanism which could be applied to products in yet integrated into GATT. Action u/safeguard mechanism could be taken by mutual agrt., or unilaterally subject to review by Textile Monitoring Body. TMB- responsible gor implementation of commitments, as agrt, also provides for special treatment for certain categories of countries- new entrant small suppliers and LDcs.

Agrt. On TRIMSAgrt. On TRIMS

• Recognition that certain investment measures restrict and distort trade. Provides that no CP shall apply any TRIM inconsistent with Art III (national treatment) and Art. XI ( prohibition of QRs).

• Exceptions to the above present, including measures which require local procurement by an enterprise etc.,

• Mandatory notification of all non-conforming TRIMS and elimination within 2 years for developed countries and 5 years for developing countries and 7 years for LDCs.

• Establishes a Committee on TRIMS to monitor implementation.

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