MODULE
4
Overview of WTO Agreements on Trade in Goods (Annex 1A of the Agreement Establishing the WTO) ESTIMATED TIME: 6 hours Introduction & GATT 1/2 hour Section 1 3 1/2 hours Section 2 2 hours OBJECTIVES OF MODULE 4
ƒ
Review the structure of the WTO Agreements on trade in goods;
ƒ
review the relationship between the General Agreement on Tariffs and Trade
(GATT) 1947 and GATT 1994 and explain the relationship between GATT 1994 and
other multilateral agreements on trade in goods included in Annex 1A;
ƒ
provide an overview of the Agreement on Agriculture, the Agreement on the
Application of Sanitary and Phytosanitary (SPS) Measures and the Agreement on
Technical Barriers to Trade (TBT); and,
ƒ
provide key features of the other WTO Agreements on Trade in Goods in Annex 1
concerned mainly with Non-Tariff Barriers (NTBs).
I.
INTRODUCTION
I.A.
STRUCTURE OF THE AGREEMENT ESTABLISHING THE WTO
In Module 1, you studied the Marrakesh Agreement Establishing the WTO (the Agreement Establishing the
WTO), which contains four Annexes – Annexes 1, 2, 3 and 4.
The Agreements in Annexes 1, 2, and 3 constitute "Multilateral Trade Agreements", as they are binding on all
WTO Members. In this Module, we will only study the main disciplines of the Multilateral Agreements on
Trade in Goods included in Annex 1 A. The objective is to provide you with a comprehensive introduction to
these Agreements. Annex 1 B (Services), Annex 1 C (Trade-Related Aspects of Intellectual Property Rights
(TRIPS)) and Annexes 2 and 3 (Dispute Settlement and Trade Policy Review Mechanism) will be introduced in
Modules 6, 7 and 10 respectively.
I.B.
ANNEX 1A: THE MULTILATERAL AGREEMENTS ON TRADE IN
GOODS
In Module 1, we have introduced the various Multilateral Agreements on Trade in Goods contained in
Annex 1A. They are:
à
GATT 1994
à
Agreement on Agriculture;
à
Agreement on the Application of Sanitary and Phytosanitary Measures (SPS Agreement);
à
Agreement on Textiles and Clothing;
à
Agreement on Technical Barriers to Trade (TBT Agreement);
à
Agreement on Trade-Related Investment Measures (TRIMS Agreement);
à
Agreement on Implementation of Article VI of GATT 1994 (Anti-Dumping Agreement);
à
Agreement on Implementation of Article VII of GATT 1994 (Customs Valuation);
à
Agreement on Preshipment Inspection (PSI);
à
Agreement on Rules of Origin;
à
Agreement on Import Licensing Procedures;
à
Agreement on Subsidies and Countervailing Measures (SCM Agreement);
à
Agreement on Safeguards.
NOTE
In this Module, we will introduce all the Agreements mentioned above, except the Anti-Dumping Agreement,
the Agreement on Subsidies and Countervailing Measures and the Agreement on Safeguards, which deal
with trade remedies and will be introduced in Module 5.
II.
THE GENERAL AGREEMENT ON TARIFFS AND
TRADE (GATT) 1994
II.A.
INTRODUCTION
As you studied in Module 1, the original GATT, now referred to as GATT 1947, provided the rules of the
multilateral trading system (MTS) from 1 January 1948 until the WTO entered into force on 1 January 1995.
These rules, which dealt only with trade in goods, were supplemented and modified by many instruments
adopted between 1948 and 1995 in multilateral negotiations, including protocols of accession, waivers and
other decisions. The GATT 1947 is no longer in force and has been superseded by the GATT 1994,
which is based on the GATT 1947.
The GATT 1994 consists of:
à
The provisions of the GATT 1947, as amended or modified up to 1 January 1995 (date of entry
into force of the Agreement Establishing the WTO) – See box below;
II.B.
à
protocols and certifications relating to tariff concessions;
à
the protocols of accession (to the GATT up to 31 December 1994);
à
the Decisions on Waivers still in force on 1 January 1995;
à
understandings on the interpretation of various GATT provisions; and,
à
other decisions of the Contracting Parties to GATT 1947.
PROVISIONS OF THE GATT 1994 (AS A MODIFIED VERSION
OF GATT 1947)
The most important component of the GATT 1994 is the original GATT 1947 as rectified, amended or modified
up to 1 January 1995. Although the GATT 1947 is legally distinct from, and has been superseded by, the GATT
1994, many of its key elements, including post-1948 legal instruments, have been carried over to the GATT
1994 without change. The Most Favoured Nation (MFN) rule (Article I of the GATT) and the national treatment
rule (Article III of the GATT) – introduced in Module 2, were laid down in the original GATT 1947. The principle
of observance of binding levels of tariff concessions (Article II of the GATT) and the principle of general
prohibition of quantitative restrictions (QRs) (Article XI of the GATT) introduced in Module 3, were also included
in the original GATT 1947 and have been incorporated into GATT 1994. The structure of the core GATT 1994 is
shown in the chart below:
3
PART
MAIN PROVISIONS
SUBJECT
Part I
Article I
Most Favoured Nations (MFN) (Module 2)
Article II
The Schedule of Concessions (Module 3)
Article III
National Treatment (Module 2)
Articles IV, V, VII to XVI
Non-Tariff Measures (Module 3)
Articles VI and XIX
Trade Remedies (Module 5)
Articles XX and XXI
General and National Security Exceptions (Module 8)
Articles XXII and XXIII
Consultations and Dispute Settlement (Module 10)
Articles XXIV
Regional Integration (Module 9)
Article XXVIII and XXVIII bis
Negotiation and Renegotiation of Tariffs (Module 3)
Articles XXXVI to XXXVIII
Trade and Development (Module 9)
Part II
Part III
Part IV
Several provisions contained in the original GATT 1947 are elaborated in detail by the corresponding
multilateral agreements on trade in goods contained in Annex 1A.
For example, the Agreement on
Implementation of Article VI of the GATT 1994 (Anti-Dumping Agreement) elaborates the rules on antidumping
laid down in Article VI of the GATT. The same applies to the Agreement on Customs Valuation, which further
elaborates the rules on valuation for customs purposes laid down in Article VII of the GATT 1994.
II.C. OTHER LEGAL INSTRUMENTS
The GATT 1994 also contains other legal instruments which entered into force under the GATT 1947 and were
incorporated into the GATT 1994. They are:
à
Protocols and certifications relating to tariff concessions. All tariff concessions bound throughout
the prior (GATT) tariff negotiations remain valid and continue to bind the respective Members
(explained in Module 3);
à
protocols of accession (to the GATT up to 31 December 1994). States and Customs territories that
became Contracting Parties to the GATT between 1948 and 1994 had to negotiate the conditions of
their accession to the GATT.
These conditions and commitments are contained in protocols of
accession, which form an integral part of the GATT 1994.
Similarly, the protocol of accession of
Members that joined the organization after its establishment are an integral part of the Agreement
Establishing the WTO (explained in Module 11); and,
à
decisions on waivers still in force on 1 January 1995.
A waiver is a permission granted by
Members permitting a WTO Member to not comply with its obligation(s) under WTO rules. Waivers
have time limits and extensions have to be justified (which will be explained in Module 8);
The Marrakesh Protocol to the GATT 1994, which incorporates the Schedules of concessions and
commitments on goods negotiated under the Uruguay Round and is different from the Agreement Establishing
the WTO, is also part of the GATT 1994.
4
II.D. URUGUAY ROUND UNDERSTANDINGS
The GATT 1994 also contains several Uruguay Round Understandings, which constitute clarifications to
GATT provisions that participants adopted in the Uruguay Round.
TO KNOW MORE... UNDERSTANDINGS THAT FORM PART OF THE GATT 1994
Understanding on the Interpretation of Article II:1(b) of the GATT 1994, which contains provision
à
son "Other duties and Charges" (ODCs) (introduced in Module 3).
Understanding on the Interpretation of Article XVII of the GATT 1994, which contains provisions
à
governing the activities of "state trading enterprises".
Understanding on Balance of Payments (BOP) Provisions of the GATT 1994; Article XII and XVIII:B
à
of the GATT 1994 contain provisions on measures that Members are allowed to take when they
experience difficulties with their BOPs (which will be introduced in Module 8).
Understanding on the Interpretation of Article XXIV of the GATT 1994, which contains provisions
à
governing Members right to enter into regional agreements (customs unions or free-trade areas)
(which will be introduced in Module 8).
Understanding in Respect of Waivers of Obligations under the GATT 1994; Article IX.3 of the
à
Agreement Establishing the WTO contains clarifications of the procedure for the grant of waivers
(introduced in Modules 1 and 3 and explained in Module 8).
Understanding on the Interpretation of Article XXVIII of the GATT 1994, which contains provisions
à
governing the modification of Schedules (introduced in Module 3).
II.E.
CONFLICT BETWEEN A PROVISION OF THE GATT 1994 AND A
PROVISION OF A MULTILATERAL AGREEMENT ON TRADE IN
GOODS (ANNEX 1 A)
A General interpretative note to Annex 1A clarifies that in the event of conflict between a provision of the GATT
1994 and a provision of another Agreement in Annex 1A, the provision of that other Agreement (i.e. not the
GATT 1994) shall prevail to the extent of the conflict.
As an example, in EC-Asbestos, the Panel held that technical regulations which simultaneously fall under the
TBT Agreement and the GATT should be first reviewed under the TBT Agreement (EC-Asbestos, Panel report,
para. 8.16)
5
NOTE
Recall in Module 1 we have studied that, in the event of a conflict between a provision of the Agreement
Establishing the WTO and a provision of any of the Multilateral Trade Agreements (including the GATT 1994),
the provision of the Agreement Establishing the WTO shall prevail to the extent of the conflict (Article XVI:3
of the Agreement Establishing the WTO).
EXERCISES
1.
What does Annex 1A of the Agreement Establishing the WTO contain?
2.
What matters are covered by the core GATT 1994 (as a modified version of the GATT 1947)?
3.
For trade in goods, in case of conflict between a provision in the GATT and a provision in one of the
Multilateral Agreements on Trade in Goods, which provision prevails?
6
III.
THE MULTILATERAL AGREEMENTS ON TRADE IN
GOODS
We have introduced the GATT 1994 which is included in Annex 1A of the Agreement Establishing the WTO.
Now we will introduce the other Multilateral Agreements on Trade in Goods incorporated in Annex 1A. It is
structured in Sections 1 and 2, as follows:
7
III.A. THE AGREEMENT ON AGRICULTURE
III.A.1.
INTRODUCTION
Agricultural trade remains in many countries an important part of overall economic activity and continues to
play a major role in domestic agricultural production and employment (this is particular true for many
developing countries). The Agreement on Agriculture aims at reforming trade in agriculture, envisaging a fair
and market-oriented system.
The Agreement allows governments to support their rural economies, but preferably through policies that are
less "trade-distorting". It also allows some flexibility in the way commitments are implemented by developing
countries, which did not have to cut their subsidies or lower their tariffs as much as developed countries, and
had extra time to implement their obligations. Least-developed countries (LDCs) were completely exempted
from those reduction commitments.
Besides that, Members agreed on special provisions that deal with the
interests of developing countries that rely on imports for their food supplies.
What is "distortion"?
The WTO Dictionary of Trade Policy Terms defines distortion as "a measure, policy or practice that shifts the
market price of a product above or below what it would be if the product were traded in a competition
market.
Measures causing distortions include subsidies, import restrictions and restrictive business
practices."
In the context of agricultural trade this would mean that producers, industries, importers,
exporters and consumer's decisions are influenced by factors other than competitive market conditions.
III.A.2.
NEGOTIATIONS ON AGRICULTURE ... FROM GATT UP TO THE
URUGUAY ROUND
Prior to the Uruguay Round, the GATT 1947 rules (including accession conditions and waivers), permitted GATT
CONTRACTING PARTIES to retain greater protection for agricultural products than for industrial goods.
The
GATT 1947 allowed countries to resort to import restrictions (such as import quotas) and to agricultural export
subsidies, under certain conditions. In the case of export subsidies, the only condition was that the subsidy
should not be used to capture more than an "equitable share" of world exports of the product concerned
(Article XVI:3).
As a result, agricultural trade became highly distorted.
In addition, there were only few
market-opening commitments made for agriculture so the degree of ''binding'' achieved was far less than for
industrial products (only one third of agriculture products had bound tariff rates).
The Uruguay Round negotiations on agriculture represented a major break with the past.
The resulting
Agreement requires WTO Members to commit to long-term reform and to assume specific commitments to
improve market access and reduce trade-distorting subsidies in agriculture. These commitments are contained
in Members' WTO Schedules and were implemented over a six year period - 10 years for developing countries that began in 1995 (a summary of these commitments is presented in a Table at the end of this section).
Participants agreed to initiate negotiations for continuing the reform process one year before the end of the
8
implementation period, i.e. by the end of 1999.
These talks have now been incorporated into the broader
negotiating agenda set at the 2001 Ministerial Conference in Doha, Qatar.
The rules and disciplines in the Agreement on Agriculture are complemented by an undertaking to continue the
reform process through negotiations. Currently, WTO Members are negotiating based on the mandate in
Article 20 of the Agreement on Agriculture and in conjunction with the mandate of the Doha Development
Agenda (DDA).
NOTE
To know more about on-going negotiations in agriculture... (and other key issues of the so-called DDA),
please have a look at documents in the "Doha" Section of our Online Library and Module 9 (WTO
Development Dimension).
III.A.3.
MAIN DISCIPLINES PROVIDED IN THE AGREEMENT
Scope of Application of the Agreement on Agriculture
The Agreement defines in its Annex 1 agricultural products by reference to the harmonised system of
product classification (HS – Explained in Module 3) — the definition covers not only basic agricultural
products such as wheat, milk and live animals, but the products derived from them such as
bread, butter and meat, as well as all processed agricultural products such as chocolate and
sausages. The coverage also includes wines, spirits and tobacco products, fibres such as cotton, wool and
silk, and raw animal skins destined for leather production. Fish and fish products are not included, nor are
forestry products.
The three "pillars" to which the new rules and commitments as set out in the Agreement apply are:
THE THREE "PILLARS" UNDER THE AGREEMENT ON AGRICULTURE
I.
Market Access: trade restrictions confronting imports (tariff and NTBs);
II.
Domestic Support: subsidies and other programmes, including those that raise or guarantee
farmgate prices and farmers’ incomes; and,
III.
Export Competition: includes export subsidies and other methods used to make exports
artificially competitive.
9
a.
Market access
Market Access
The general rules regulating market access on agricultural products as set out in the Agreement are:
à
Tariffication –transform non-tariff border measures into tariffs, reflecting substantially the same
level of protection (Article 4.2);
à
commitments on tariffs and tariff quotas - maintain existing import access levels and ensure
minimum-access opportunities (Schedule of tariff concessions);
à
special safeguard – allows the imposition of an additional duty under certain circumstances
(available for those Members that reserved the right to use the safeguard measure in their
Schedules) (Article 5);
à
special treatment – allows certain Members to maintain non-tariff border measures on certain
products in exceptional circumstances (Annex 5).
1.
THE PROHIBITION OF NON-TARIFF BORDER MEASURES
The new market access rule for agricultural products is a "tariff only" system (Article 4.2). Before the Uruguay
Round, some agricultural imports were restricted by non-tariff border measures which were mainly in the form
of quantitative import restrictions or import quotas. All these non-tariff measures were to be either removed
or to be replaced by tariffs, reflecting substantially the same level of protection. This process of converting
non-tariff measures to tariffs is called "tariffication". Besides tariffs, the Agreement allows the application of
tariff-rate quotas (TRQs), explained in Module 3.
Article 4.2 does not prevent the application of non-tariff import restrictions consistent with the provisions of the
GATT or other WTO Agreements, such as those permitted under the SPS Agreement.
2.
SCHEDULE OF COMMITMENTS
Each WTO Member has a "Schedule" of tariff concessions covering all agricultural products (Article 4.1) (an
example of WTO Member's Schedule of commitments on agricultural products has been provided at the end of
this Module – Appendix 1).
These concessions, reached during the Uruguay Round negotiations, are an
integral part of the GATT 1994.
The Schedule sets out the maximum tariff that can be imposed on the importation of each individual
agricultural product entering into the territory of the Member concerned. The tariffs in the Schedules include
those from the tariffication process.
In some cases, these are considerably higher than industrial tariffs,
reflecting the incidence of agriculture-specific non-tariff measures prior to the WTO.
Many developing
countries have bound their previously unbound tariffs at "ceiling" levels, i.e. at levels higher than the applied
rates prior to the WTO.
Article 4.1 does not prevent the application of higher customs duties than those included in the Schedule,
consistent with the provisions of the GATT and WTO Agreements under exceptional circumstances, such as
anti-dumping, countervailing and safeguard measures (see Module 5).
10
3.
TARIFF-RATE QUOTAS (TRQS)
It was foreseen that the conversion of non-tariff measures into tariffs by using the 1986 to 1988 reference
price could result in high tariff levels. Therefore, a system of TRQs, meaning lower tariffs within the quotas
and higher tariff rates for quantities outside the quotas, was agreed so as to maintain existing import access
levels and to provide minimum-access opportunities (See graph below). These tariff quotas are specified in the
WTO Members' Schedules.
Article XIII (explained in Module 3) and the Agreement on Import Licensing
Procedures (will be explained in Section 2 of this Module) govern the distribution of TRQs between supplying
Members.
Basically, Article XIII provides that import restrictions should be applied in a non-discriminatory
manner.
4.
SPECIAL TREATMENT
The Agreement contains a ''special treatment'' clause in Annex 5, under which four countries were permitted,
subject to strictly circumscribed conditions, to maintain non-tariff border measures on certain products during
the implementation period, with the possibility of extension but subject to further negotiations. As one of the
conditions, market access in the form of progressively increasing import quotas had to be provided for the
products concerned.
The products and countries concerned are rice in the case of Japan, Korea and the
Philippines and cheese and sheepmeat in the case of Israel.
The special treatment has lapsed for Japan and Israel, but Korea and the Philippines have extended their
special treatment for rice (Members are required to notify if they are seeking to extend the special treatment –
see G/AG/W/63).
5.
SPECIAL SAFEGUARD
As a third element of the tariffication package, Members are entitled to invoke the special safeguard provisions
(Article 5 of the Agreement) provided that: (i) non-tariff barriers (NTBs) have been ''tariffied''; and, (ii) the
Member has reserved the right to apply the special safeguard measure in its Schedule (by inscribing the
symbol ''SSG'' next to the tariff line in its Schedule). The right to make use of the special safeguard measures
has been reserved by 36 Members.
The special safeguard for agricultural products allows the imposition of an additional tariff where certain criteria
are met. The criteria involve either a specified surge in imports (volume trigger), or, a fall of the import price
below a specified reference price (price trigger) determined on a shipment by shipment basis. In case of the
volume trigger, the higher duties only apply until the end of the year in question. In case of the price trigger,
11
any additional duty can only be imposed on the shipment concerned. The additional customs duties cannot be
applied to imports taking place within tariff quotas.
This special safeguard is different from the general safeguard provided in Article XIX of the GATT 1994 and the
Agreement on Safeguards. The latter is applicable not only to agricultural products, but to all products and it is
subject to different conditions, as we will see in Module 5.
b.
Domestic support
Not all subsidies distort trade to the same extent. However, production-related subsides, such as price support
measures, are deemed to encourage over-production in some countries and distort world market prices.
The Agreement distinguishes between two categories of domestic support: (i) support with no, or minimal,
distortive effect on trade, not subject to reduction commitments; and, (ii) trade-distorting support, subject to
limits/''bindings'' and reduction commitments (often referred to as "Amber Box" measures). For example, the
provision of subsidies by a government for agricultural research or training is considered to be one of the
former type, while government buying-in at a guaranteed price ("market price support") falls into the latter
category.
Under the Agreement on Agriculture, all domestic support in favour of agricultural producers is subject to rules.
The general rules regulating domestic support for agricultural products as set out in the Agreement are:
Domestic
distortive
supports
effect
with
-
NOT
NO
or
MINIMAL
subject
to
the
Article 7 & Annex 2 (''Green Box'' measures):
government services such as research, disease
control, infrastructure and food security.
''bindings'' and reduction commitments
Article 6.5 (''Blue Box'' measures): certain direct
payments
to
farmers
where
the
farmers
are
required to limit production.
Article 6.4:
domestic
supports
that
are
de
minimis.
Article 6.2: measures of assistance adopted by
developing countries.
Domestic
Support
with
distortive
effect
and
Articles 3.1, 3.2 & 6 (''Amber Box'' measures):
SUBJECT to the ''bindings'' and reduction
trade-distorting
commitments
agricultural
domestic
producers
support
should
not
in
favour
exceed
of
the
commitment levels specified in Members' Schedules
and are subject to Aggregate Measurement of
Support (AMS) reduction commitments specified in
the Schedules.
The agricultural package of the Uruguay Round has fundamentally changed the way domestic support in favour
of agricultural producers was treated under the GATT 1947.
12
1.
DOMESTIC SUPPORT WITH NO OR MINIMAL DISTORTIVE EFFECT - NOT SUBJECT TO THE
REDUCTION COMMITMENTS
1.1
GREEN BOX
The Agreement on Agriculture sets out a number of general and measure-specific
criteria which, when met, allow those measures to be placed in the Green Box
(Annex 2) category. These measures are exempted from reduction commitments
and, indeed, can even be increased without any financial limitation under the
WTO. The fundamental criteria are that the measures must have no, or at most
minimal, trade-distorting effects on production.
provided
through
a
publicly-funded
In addition, they must be
government
programme
(including
government revenue foregone) not involving transfers from consumers and must
not have the effect of providing price support to producers.
The Green Box covers many government service programmes including general services provided by
governments, public stockholding programmes for food security purposes and domestic food aid - as long as
the fundamental criteria and some other measure-specific criteria are met by each measure concerned. The
Green Box also provides for the use of direct payments to producers which are not linked to production
decisions, i.e. although the farmer receives a payment from the government, this payment does not influence
the type or volume of agricultural production ("decoupled").
The Green Box applies to both developed and developing country Members; but in the case of developing
countries, special treatment is provided in respect of governmental stockholding programmes for food security
purposes and subsidized food prices for urban and rural poor.
1.2
BLUE BOX
Direct payments under production limiting programmes (often referred to as
"Blue Box" measures) are exempted from commitments if such payments are:
(i) based on fixed area and yields; or, (ii) made on 85% or less of the base level
of production; or, (iii) livestock payments are made on a fixed number of head
(Article 6.5).
1.3
MEASURES OF ASSISTANCE ADOPTED BY DEVELOPING
COUNTRIES
The type of support that fits into the developmental category are measures of assistance, whether direct or
indirect, designed to encourage agricultural and rural development that are an integral part of the development
programmes of developing countries (Article 6.2). They include: (i) investment subsidies which are generally
available to agriculture in developing country Members; (ii) agricultural input subsidies generally available to
low-income or resource-poor producers in developing country Members; and, (iii) domestic support to
producers in developing country Members to encourage diversification from growing illicit narcotic crops.
1.4
DE MINIMIS
Article 6.4 establishes de minimis thresholds under which both the reduction commitments and the ''bindings''
specified in Members' Schedules do not apply.
13
According to the de minimis provision, any domestic support not covered by the exempted categories
described above, must be maintained within the relevant product-specific and non-product-specific de minimis
levels (five per cent for developed countries and ten per cent for developing countries). Unless that Member
has Amber Box commitments as explained below.
2.
DOMESTIC SUPPORT WITH TRADE-DISTORTING EFFECT - SUBJECT TO REDUCTION
COMMITMENTS
2.1
AMBER BOX
All domestic support measures considered to distort production and trade, with
the exceptions discussed above, fall into the "Amber Box". They include measures
to support prices (provided either through administered prices - involving
transfers from consumers - or through certain types of direct payments from
governments),
input
subsides
or
subsidies
directly
related
to
production
quantities. These domestic support measures should not exceed the commitment
levels
specified
in
Members'
Schedules
and
were
subject
to
reduction
commitments specified in Members' Schedules (Article 3.2).
Any domestic support that cannot be included in the categories exempt from reduction (''Green Box'',
Development Measures and ''Blue Box''), had to be accommodated within the ceilings set by the Total
Aggregate Measurement of Support (Total AMS) and/or the de minimis provisions of the Agreement set
out in Article 6.4.
The AMS includes all product-specific support and non-product-specific support in one single figure. Members
with a Total AMS had to reduce base period support by 20 per cent over six years (developed country
Members) or 13.5 over ten years (developing country Members). The details for AMS calculations are specified
in Annex 3 of the Agreement on Agriculture.
14
Notify your Domestic Supports
Article 18.2 of the Agreement on Agriculture requires all Members to notify the extent of their domestic
support measures to the Committee on Agriculture. This requires:
All Members
à
a list of all measures that fall into the exempted categories (the ''Green Box'', the development
programmes, and direct payments under production-limiting programmes - the ''Blue Box'').
à
make annual notifications, except for LDC Members, which are required to notify every two years.
à
notify any modifications of existing or new measures in the exempted categories.
Members with Scheduled AMS Commitments
à
calculations of Total AMS, including the de minimis claims, and a notification of the Current Total
AMS for Members that have scheduled domestic support reduction commitments.
Members without Scheduled AMS Commitments
à
if a Member does not have scheduled AMS commitments and provides Amber Box subsidies, it
must justify that such support falls within its de minimis levels.
c.
Export competition
Export Competition
à
General prohibition of export subsidies unless the subsidies are specified in a Member’s
Schedule (Article 3.3 & Article 8);
à
Reduction commitments – when the right to use export subsidies is scheduled, the agreement
requires WTO Members to cut both the amount of money they spend on export subsidies as well as
the quantities of exports that receive subsidies (Article 3.3 & Article 9.1);
à
Anti-circumvention – aimed at preventing the circumvention of the export subsidy commitments
and set out criteria for food aid donations and export credits (Article 10.1);
à
Special treatment for certain transport and marketing subsidies in developing countries
(Article 9.4);
à
Peace Clause (Expired in 2003): restricted other Members rights to challenge export subsidies
which were within a Member's Schedule (Article 13).
Before the Uruguay Round negotiation, export subsidies for agricultural products were only subject to limited
disciplines (Article XVI of the GATT 1947). This situation changed after the entry into force of the Agreement
on Agriculture, which allows the use of export subsidies only in two situations: (i) if a Member has reserved
the right to use export subsides in their respective Schedules, subject to the limits and reduction
commitments specified in the Schedule; or, (ii) if developing countries provide export subsidies consistent
15
with the special and differential treatment provisions. In all other cases, the use of export subsidies for
agricultural products is prohibited.
Why PROHIBIT Export Subsidies?
The negative effects of export subsidies on agriculture have been analyzed by international organizations,
many WTO Members, as well as independent economists and academic institutions. Exporters that receive
export subsidies enjoy an advantage, since they can, for example, sell below the cost of production.
In most cases the subsidy depends on the difference between the world and domestic prices, which means
the exporter can always match or undercut exporters in other countries.
This in turn increases
competition for other exporters or for domestic producers in the importing country.
Besides reducing prices and undercutting unsubsidised exporters in other countries, export subsidies also
amplify world market price variations.
As the level of subsidy usually depends on the difference
between domestic and world market prices, if world market prices fall the subsidy increases and supply from
the subsidised exporter can remain the same, or even increase. In addition, supply from the subsidising
country is not affected by market prices as the subsidy increases or decreases as prices fall or rise. This
exaggerates the swings in world prices by reducing supply in times of high prices and increasing it in times
of low prices.
The Agreement on Agriculture does not provide a definition of "subsidy".
However, the SCM Agreement
provides that three elements must be met for a subsidy be deemed to exist: (i) there is a financial
contribution; (ii) by a government or any public body within the territory of a Member; and, (iii) a benefit is
thereby conferred.
The disciplines in the SCM Agreement only apply to specific subsidies, i.e. a subsidy
available only to an enterprise, industry or group of enterprises or industries within the jurisdiction of the
granting country (see also Module 5).
The general rules on export competition as set up in the Agreement are:
1.
REDUCTION COMMITMENTS APPLICABLE TO EXPORT SUBSIDES INCLUDED IN THE
SCHEDULE
As mentioned above, the Agriculture Agreement prohibits export subsidies on agricultural products unless the
subsidies are specified in the Member’s lists of commitments. Where they are listed, the agreement requires
WTO Members to cut both the amount of money they spend on export subsidies and the quantities of exports
that receive subsidies.
Article 1(e) of the Agreement defines ''export subsidies'' as subsidies contingent upon export performance.
Article 9.1 provides a list of examples of export subsidies subject to reduction commitments, while Article 10.1
prohibits the use of export subsidies not listed in Article 9.1 in a manner which results in, or which threatens to
lead to, circumvention of export subsidy commitments.
Twenty-five WTO Members (counting the European Commission (EC) as one) can subsidize exports, but only
for products on which they have commitments to reduce these subsidies. These Members cannot: (i) introduce
new subsidies for products not listed in their Schedules; (ii) exceed the limits in their Schedules; or,
(iii) transfer existing commitments to other agricultural products.
16
In EC – Sugar, the Appellate Body stated that the commitments specified in a Members' Schedule must be in
conformity with the provisions of the Agreement on Agriculture (EC-Sugar, Appellate Body Report, para. 216).
2.
EXPORT SUBSIDES ALLOWED UNDER SPECIAL AND DIFFERENTIAL TREATMENT
PROVISIONS
Article 9.4 allowed developing countries to use subsidies aimed at reducing the cost of marketing, including
internal and external transport, as well as handling and processing costs, provided that they are not applied in
a manner that would circumvent export subsidy reduction commitments.
This exemption is one of the special and differential treatment provisions of the Agreement on Agriculture and
was only available during the implementation period. At the Hong Kong Ministerial Meeting, Ministers decided
that "developing country Members will continue to benefit from the provisions of Article 9.4 for five years after
the end-date for elimination of all forms of export subsidies" according to the negotiations in the Doha Round.
Notify your Export Subsidies
All Members must notify annually their export subsidies to the Committee on Agriculture on an annual basis.
à
Members without reduction commitments - notification involves only a statement to the effect
that export subsidies on agricultural products have not been used.
à
Members with reduction commitments – notification involves the annual use of subsidies in
terms of both volume and budgetary outlays.
Likewise, total exports of agricultural products must be notified by Members with reduction commitments as
well as by a number of other "significant exporters" as defined by the Committee. In addition, as part of the
anti-circumvention provisions, Members must notify the use of food aid on an annual basis if such aid is
granted.
17
REDUCTION COMMITMENTS ON AGRICULTURAL PRODUCTS REACHED DURING
THE URUGUAY ROUND NEGOTIATION
Implementation Period
Developed Countries 6 Years:
Developing
Countries
1995 - 2000
Years: 1995 - 2004
10
Tariffs
-36%
-24%
-15%
-10%
-20%
-13.3%
Cut in budgetary outlays
-36%
-24%
Cut
-21%
-14%
Average cut for all agricultural
products
minimum cut per product
Domestic Support
Total AMS cuts for sector (base
period: 1986- 88)
Export Subsidies
in
subsidized
quantities
(base period: 1986-90)
Table 1:
III.A.4.
Reduction commitments on agricultural products reached during the Uruguay
Round negotiation
SPECIAL AND DIFFERENTIAL TREATMENT TO DEVELOPING AND
LEAST-DEVELOPED COUNTRIES (LDCS) UNDER THE
AGREEMENT ON AGRICULTURE
GENERAL
à
Significant improvement in market access conditions for
agricultural products of interest to developing country
Members.
à
Ministerial Decision on Measures Concerning the Possible
Negative Effects of the Reform Programme on LeastDeveloped and Net Food-Importing Developing Countries.
DOMESTIC SUPPORT
à
Lower reduction commitments & longer implementation periods
(Schedules of Commitments).
à
Greater de minimis allowance (10% compared to 5% for
developed countries, Article 6.4).
à
Exclusion of some domestic support policies (measures of
assistance) from the reduction commitments (Article 6.2).
18
EXPORT SUBSIDIES
à
Lower reduction commitments & longer implementation periods
(Schedules of Commitments).
à
Possibility to use transportation and marketing-cost reduction
subsidies during a certain period (Article 9.4).
The Decision on Measures Concerning the Possible Negative Effects of the Reform Programme on
Least-Developed and Net Food-Importing Developing Countries (NFIDCs) recognizes the possibility
that during the implementation of the reform programme embodied in the Agreement on Agriculture, the
least-developed and net food-importing developing countries may experience negative effects in terms of the
availability of adequate supplies of basic foodstuffs from external sources on reasonable terms and conditions,
including short-term difficulties in financing normal levels of commercial imports of basic foodstuffs.
The
Ministers therefore agreed to a number of mechanisms to ameliorate the situation.
III.A.5.
RELATIONSHIP BETWEEN THE AGREEMENT ON AGRICULTURE
AND OTHER WTO AGREEMENTS
Relationship between the Agreement on Agriculture and Other WTO Agreements
à
The provisions of GATT 1994 and of other Multilateral Agreements on Trade in Goods
(Annex 1A) shall apply subject to the provisions of the Agreement on Agriculture (Article 21.1 of
the Agreement on Agriculture).
à
The SCM Agreement applies to all goods, including agricultural goods. However, in the case of
agricultural products, the SCM Agreement applies subject to the provisions of the Agreement on
Agriculture. In US - Upland Cotton, the Appellate Body interpreted that agricultural subsidies are
subject to the SCM Agreement "except to the extent that the Agreement on Agriculture contains
specific provisions dealing specifically with the same matter" (para. 530-533).
The relationship
between the two Agreements will be further explained in Module 5 during our study on the SCM
Agreement.
à
The Agreement on Agriculture and the SPS Agreement are closely related. Their relationship will
be addressed while introducing the SPS Agreement.
à
Article XIX of the GATT and the Agreement on Safeguards apply to agricultural products.
à
Article VI of the GATT and the Agreement on Anti-Dumping apply to agricultural products.
19
EXERCISES
4.
What are the main changes introduced with the Agreement on Agriculture resulting from the Uruguay
Round?
5.
What are the main provisions on special and differential treatment to developing countries and LDCs
under the Agreement on Agriculture?
20
III.B. THE AGREEMENT ON SANITARY AND PHYTOSANITARY
MEASURES (THE SPS AGREEMENT)
III.B.1.
INTRODUCTION
How can governments ensure that consumers within their territory are being supplied with food that is safe to
eat - "safe" by the standards they consider appropriate? And at the same time, how can governments ensure
that strict health and safety regulations are not being used as an excuse for protecting domestic producers?
Sanitary and phytosanitary (SPS) measures may result in restrictions to trade. All governments accept the fact
that some trade restrictions may be necessary to ensure food safety and animal and plant health protection.
However, sanitary and phytosanitary measures sometimes go beyond what is needed for health protection and
could be used to shield domestic producers from economic competition. Such pressure is likely to increase as
other trade barriers were reduced as a result of the Uruguay Round agreements.
The Agreement on Sanitary and Phytosanitary Measures (SPS) builds on previous GATT rules to restrict the use
of unjustified sanitary and phytosanitary measures for the purpose of trade protection.
It is a separate
agreement covering the basic rules on food safety, as well as animal and plant health. The SPS Agreement
explicitly recognizes the right of governments to take measures to protect human, animal and plant life or
health, as long as these are based on science, are necessary for the protection of health, and do not
unjustifiably discriminate among foreign sources of supply.
III.B.2.
OBJECTIVE OF THE SPS AGREEMENT
The multilateral framework which guides SPS measures aims to improve the phytosanitary situation in all
Members (human, animal and plant life or health), while minimizing negative effects on trade. Thus, the SPS
Agreement aims to strike a balance between the two.
The Preamble of the SPS Agreement recognises:
à
No Member should be prevented from adopting or enforcing measures necessary to protect human,
animal or plant life or health; and,
à
Members are not required to change their appropriate level of protection of human, animal or plant
life or health;
At the same time SPS measures are not to be applied in a manner that constitutes:
à
A means of arbitrary or unjustifiable discrimination between Members where the same conditions
prevail; or,
à
a disguised restriction on international trade.
21
III.B.3.
a.
THE SCOPE OF APPLICATION OF THE SPS AGREEMENT
Substantive Scope
The SPS Agreement applies to all SPS measures that directly or indirectly affect international trade
(Article 1.1). SPS measures as set out in Annex A of the SPS Agreement include those which have the purpose
to protect, within the territory of a Member:
à
Animal or plant life o health from risks arising from the entry, establishment or spread of pets,
diseases, disease-carrying or disease-causing organisms;
à
human or animal life or health from risks arising from additives, contaminants, toxins or
disease-causing organisms in food, beverages or feedstuffs;
à
human life or health from diseases carried by animals, plants or products thereof, or from the entry,
establishment or spread of pests; or,
à
a country from damage caused by the entry, establishment or spread of pests.
Sanitary and phytosanitary (SPS) measures are also taken to protect the health of fish and wild fauna, as well
as of forests and wild flora, from the risks stated above.
b.
According to the "type of measure"
Annex A states that SPS measures include all relevant laws, decrees, regulations, requirements and procedures
including, inter alia, end product criteria; processes and production methods (PPMs - explained in the box
below); testing inspection, certification and approval procedure; quarantine treatments including those
associated with transport of animals or plants; and, packing and labelling requirements directly related to food
safety.
c.
According to the "body" subject to the Agreement
The SPS Agreement applies to all levels of government, including central, local and regional governmental
bodies, as well as to non-governmental bodies (Article 13).
d.
Temporal Scope
The SPS Agreement applies to existing SPS measures adopted before and after the entry into force of the SPS
Agreement (EC – Hormones, Appellate Body Report, para. 128).
Processes and Production Methods (PPMs)
Processes and production methods (PPMs) are referred to product standards
focused on the production
methods rather than product characteristics. The term was originated in the GATT Agreement on TBT of
1979 Annex 1A, Article 2.12. Processes and production methods (PPMs) are commonly classified into two
categories: product-related and non-product related. The first category includes PPMs used to assure
the functionality or quality of the product, or to safeguard the consumer who uses the product.
22
The second one refers to PPMs that are not detectable in the final products and are often designed to
achieve a social purpose, like for example the protection of the environment.
Besides the SPS Agreement, the TBT Agreement and some GATT provisions (Articles III and XX) are also
concerned with PPMs.
Many SPS measures concern product-related PPMs, because it is often more effective to ensure the
safety of a final product by requiring that it be produced and processed appropriately.
The first dispute
which addressed the SPS Agreement, EC - Hormones (WT/DS21 and WT/DS48) dealt with PPMs. The EU
requirements prohibited the use of growth-promoting hormones in the production of cattle for meat
purposes. This prohibition was questioned by Canada and the United States, in part, because three of the
hormones identified in the dispute were naturally occurring hormones, and some level of these was found in
all beef, whether or not the cattle had been treated for growth-promotion or other purposes
III.B.4.
BASIC DISCIPLINES OF THE SPS AGREEMENT
The basic rights and obligations are set out in Article 2 of the Agreement and are elaborated in subsequent
articles. Article 2.1 provides that Members have the right to adopt SPS measures to achieve their
self-determined appropriate level of protection.
However, the right to adopt SPS measures to achieve a
self-determined level of protection is accompanied by basic obligations.
Basic Disciplines of the SPS Agreement
The right to adopt SPS measures to achieve a self-determined level of protection is accompanied by basic
obligations. Essentially Members may adopt SPS measures provided the measures:
à
Are applied only to the extent necessary to protect human, animal or plant life or health
(Article 2.2);
à
are based on scientific principles and not maintained without sufficient scientific evidence, except
emergency or provisional measures (Article 2.2 – further elaborated in Article 3.3); and,
à
do not unjustifiably or arbitrarily discriminate between Members where identical or similar
conditions prevail, including their own territory and that of other Members; and are not applied in a
manner which would constitute a disguised restriction on international trade (Article 2.3).
a.
The Measure must be "Necessary" to protect human, animal or
plant life or health
Article 2.2 of the SPS Agreement requires an SPS measure to be applied only to the extent necessary to
protect human, animal or plant life or health.
The ''Necessity'' requirement is further elaborated in Article 5.6 and Footnote 3 of the SPS Agreement.
Article 5.6 obliges Members to adopt measures "not more trade restrictive than required" to achieve the
appropriate level of SPS protection, considering technical and economic feasibility. For example, if a country
23
wants to avoid the introduction of an insect associated with fruit imports, requiring fumigation might be a less
trade-restrictive alternative to an import ban.
The Appellate Body in Australia - Salmon (para. 194) agreed with the Panel that Article 5.6 contains a
three-pronged test for determining whether a measure is more trade restrictive than required. This is the case
if there is another SPS measure which: (i) is reasonably available taking into account technical and economic
feasibility; (ii) achieves the Member's appropriate level of SPS protection; and, (iii) is significantly less
restrictive to trade than the SPS measure contested.
The concept of necessity has never been tested in dispute settlement proceedings in the SPS context.
However, there has been an evolving interpretation of necessity in the context of Article XX of the GATT 1994
(General Exception), paragraphs (b) and (d).
In Brazil-Retreaded Tyres, the Appellate Body ruled that the determination of whether a measure is
'"necessary" involves in every case a process of weighing and balancing a series of factors which prominently
include: (i) the contribution made by the measure to the achievement of its objective; (ii) the importance of
the interests or values at stake; and, (iii) the trade-restrictiveness of the measure. An explanation of each of
these criteria is found in Module 8 (Exceptions).
b.
Based on "Scientific evidence"
The requirement under Article 2.2 that a SPS measure must have a scientific basis and not be maintained
without sufficient scientific evidence is the cornerstone of the SPS Agreement and is further elaborated in
Articles 5.1 and 5.2 on risk assessment.
Where a measure conforms to an internationally developed standard, as will be explained below on
Harmonization, the measure is presumed to be based on sufficient scientific evidence and a Member may not
need to provide further evidence. However, for a measure not based on an international standard, Members
need to provide not only evidence but also a risk assessment. Thus, Members have two options to show that
their measures are based on science. They may either:
(i)
base their measures on international standards (Article 3.1); or,
(ii)
base their measures on scientific risk assessment (Article 3.3).
As the Appellate Body stated in EC – Hormones (para. 177), the requirement on scientific evidence (combined
with the requirements of a risk assessment under Article 5.1) is essential for the maintenance of the delicate
and carefully negotiated balance in the SPS Agreement between the shared interests of promoting international
trade and of protecting life and health of humans, animals and plants.
1.
HOW MUCH EVIDENCE IS ''SUFFICIENT''?
As explained by the Appellate Body in Japan - Agricultural Products II (para. 73), for evidence to be sufficient,
there must be a sufficient or adequate relationship between the SPS measure and the scientific evidence
available.
This has to be determined on a case-by-case basis and will depend upon the particular
circumstances of the case, including the characteristics of the measure at issue and the quality and quantity of
scientific evidence.
24
The burden of proof rests with the complaining party to raise a prima facie case that there is "not sufficient
scientific evidence" for the measure.
The Member adopting the Measure has then to bring forward the
scientific evidence on which it has based its SPS measure (Japan – Agricultural Products II, Appellate Body
report para. 137).
2.
IS IT ALLOWED TO APPLY A MEASURE WITHOUT SUFFICIENT SCIENTIFIC EVIDENCE?
In the fields of food safety, plant and animal health protection, precaution in the face of scientific uncertainty
and incomplete scientific knowledge has long been addressed through the use of safety margins and
provisional measures. Precaution is a notion which supports taking protective action before there is scientific
proof of a risk; that is, action may be taken in order to protect society against potential risks, without waiting
for the conclusive results of scientific analysis (to know more about the precautionary approach or principle see
the box below).
Article 5.7 of the SPS Agreement allows Members to adopt provisional SPS measures in cases where the
scientific evidence available is insufficient. The Appellate Body in Japan - Agricultural Products II (para. 73)
has ruled that four conditions must be cumulatively met for this provision to be legitimately invoked: (i) an
Article 5.7 SPS measure must be imposed in respect of a situation where relevant scientific information is
insufficient; (ii) the provisional measure must be adopted on the basis of available pertinent information;
(iii) the Member adopting the measure must seek to obtain the additional information necessary for a more
objective assessment of risk; and, (iv) the Member must review the SPS measure accordingly within a
reasonable period of time.
Provisional measures could be taken, for example, as an emergency response to a sudden outbreak of an
animal disease suspected of being linked to imports, while further information about the source of the outbreak
and its extent are gathered. Another example is the case of new food processing techniques where sufficient
evidence regarding safety does not yet exist.
The SPS Agreement and the Precautionary Principle
The "precautionary principle", or "precautionary approach", has been incorporated into several international
environmental agreements, and some claim that it is now recognized as a general principle of international
environmental law.
In EC - Hormones, the Appellate Body noted that the "precautionary principle" was
reflected in the SPS Agreement, but that it did not override the specific obligations in the
Agreement. The Appellate Body considered that the notion of precaution was, in particular, incorporated in
paragraph 6 of the Preamble, Article 3.3, and Article 5.7 of the SPS Agreement.
25
c.
1.
Basing measures on international standards - harmonization
PROVISIONS RELATING TO HARMONIZATION
Harmonization is a central discipline in the SPS Agreement and takes place in situations when Members base
their SPS measures on relevant international standards, guidelines or recommendations (Article 3.1), or when
Members recognize each other's measures as equivalent (Article 4). Note that, even with harmonization, each
Member adopts its own measure to reflect its appropriate level of protection, but without necessarily doing a
risk assessment.
According to Article 3.4 and Annex A(3) of the SPS Agreement, there is an express recognition of three
standard-setting bodies as relevant for SPS-related purposes: (i) the Codex Alimentarius Commission (Codex)
for food safety; (ii) the International Office of Epizootics (OIE) for animal health and zoonoses (now named the
World Organization for Animal Health); and, (iii) the International Plant Protection Convention Secretariat
(IPPC) for plant health.
The SPS Committee can identify other relevant international standard-setting
organizations, but has not done so to date.
The Agreement encourages Members to participate, within the
limits of their resources, in the work of relevant international organizations for the development and review of
standards, guidelines and recommendations, which have equal status under the SPS Agreement (Article 3.4).
2.
''BASED ON'' INTERNATIONAL STANDARDS
The Appellate Body in EC – Hormones has interpreted that the term ''based on'' is quite different from
"conform to".
While Members are required to base their measures on international standards, there is no
mandatory rule requiring Members to "conform to" international standards.
To be treated as "based on", a
measure may adopt some, not necessarily all, of the elements of the international standard (EC-Hormones,
Appellate Body Report, para. 165).
Although ''conform to'' international standards, guidelines or recommendations is not mandatory, measures
which conform to them are "presumed" to be necessary and be consistent with the SPS Agreement
(Article 3.2).
Nonetheless, Members are still entitled to challenge SPS measures based on international
standards, guidelines and recommendations by claiming, for example, that the measure is applied in a manner
that results in a violation of the SPS Agreement.
3.
CAN A MEASURE RESULT IN A HIGHER LEVEL OF PROTECTION BEYOND INTERNATIONAL
STANDARDS?
There is an explicit authorization for Members to introduce or maintain an SPS measure which results in a
higher level of protection than would be achieved by measures based on the relevant international standards,
guidelines or recommendations (Article 3.3).
However, Members can do so only if: (i) there is a scientific
justification; or, (ii) as a consequence of the level of SPS protection a Member determines to be appropriate, in
accordance with the relevant provisions of Article 5 (risk assessment).
According to footnote 2 of the SPS Agreement, there is a scientific justification if, on the basis of an
examination and evaluation of available scientific information in conformity with the relevant provisions of the
SPS
Agreement,
a
Member
determines
that
the
relevant
international
standards,
guidelines
or
recommendations are not sufficient to achieve its appropriate level of SPS protection.
26
4.
RISK ASSESSMENT
Members do not always base their measures on internationally-agreed standards because they may desire to
adopt SPS measures that achieve a higher (or lower) level of health protection than that achieved by the
international standards or, because there are no relevant international standards to use as a basis.
Article 5.1 sets out the basic obligations which require Members to ensure their SPS measures to be based on
risk assessment, as appropriate to the circumstances, taking into account the techniques developed by the
relevant international organizations. The requirement that SPS measures shall be based on a risk assessment
is qualified by the sentence "as appropriate to the circumstances", which provides for a certain degree of
flexibility in meeting the requirements of Article 5.1. As stated by the Panel in Australia – Salmon, the manner
of carrying out a risk assessment may vary according to the source and subject of the risk, product involved,
origin and destination, including country specific situations.
In EC - Hormones, the Appellate Body clarified the following aspects of the obligations of undertaking a risk
assessment: (i) the requirement that an SPS measure be ''based on'' a risk assessment is a substantive
requirement – that is, there must be a rational relationship between the measure and the risk assessment
(para. 193); (ii) the risk need not to be quantified but can be expressed qualitatively (para. 186); (iii) it is not
sufficient for a risk assessment to show a general risk of harm (paras. 199-200); and, (iv) Members may base
their measures on a risk assessment carried out by another Member or by relevant international organizations
(para. 190).
The risk assessment and the results of the risk assessment have to sufficiently warrant the SPS measure. The
only qualified exception to this rule is contained in Article 5.7, which allows Members to adopt provisional SPS
measures in cases where the scientific evidence available is insufficient (examined above).
d.
Non-discrimination
As mentioned at the beginning, SPS measures shall not: (i) arbitrarily or unjustifiably discriminate;
(ii) between Members, including between the Member imposing the measure and other Members; (iii) if
identical or similar conditions prevail. In EC – Hormones, the Appellate Body identified these three elements,
cumulative in nature, necessary to find a violation of Article 5.5 (paras. 214-215).
In Australia – Salmon (Article 21.5), the Panel found that discrimination under this Article may occur not only
between like products, but also between different products if these pose the same or similar health risks (which
would justify them being treated in the same way) (para. 7.112).
This non-discrimination provision is complemented by Article 5.5 on ''Consistency'', according to which each
Member shall avoid arbitrary or unjustifiable distinctions in the levels it considers to be appropriate in different
situations, if such distinctions result in discrimination or a disguised restriction on international trade.
27
III.B.5.
RELATIONSHIP BETWEEN THE SPS AGREEMENT AND OTHER
WTO AGREEMENTS
Relationship between the SPS Agreement and Other WTO Agreements
à
The provisions of the TBT Agreement do not apply to SPS measures as defined in Annex A of the
SPS Agreement (Article 1.5 of the TBT Agreement and Article 1.4 of the SPS Agreement).
The
relationship between the two Agreements will be further elaborated after our explanation of the
TBT Agreement.
à
The SPS Agreement complements the Agreement on Agriculture by bringing more "discipline" to
very specific areas (such as food safety and the protection of human, animal and plant life or
health from pests or diseases) and ensuring governments do not go beyond what is necessary for
the accomplishment of SPS objectives (Article 14 of the Agreement on Agriculture). Furthermore,
SPS measures cover sanitary and phytosanitary risks arising from all goods in international trade
whereas the product coverage of the Agreement on Agriculture is limited to agricultural products
listed in Annex 1 of the Agreement.
à
The SPS Agreement further elaborates on Article XX(b) of the GATT 1994.
Furthermore, SPS
measures which conform to the relevant provisions of the SPS Agreement shall be presumed to be
in accordance with the obligations of the Members under the provisions of GATT 1994, which relate
to the use of SPS measures, in particular Article XX(b).
III.C. THE AGREEMENT ON TECHNICAL BARRIERS TO TRADE (THE
TBT AGREEMENT)
III.C.1.
INTRODUCTION
In recent years, the number of technical regulations and standards adopted by countries has grown
significantly. Technical regulations and standards are important, but they can vary from country to country.
Having many different regulations and standards makes life difficult for producers and exporters.
If the
standards are set arbitrarily, they could be used as an excuse for protectionism.
Rationale Behind the TBT Agreement
Although it is difficult to give a precise estimate of the impact on international trade of the need to comply
with different foreign technical regulations and standards, it certainly involves significant costs for producers
and exporters. In general, these costs arise from the translation of foreign regulations, hiring of technical
experts to explain foreign regulations, and adjustment of production facilities to comply with the
requirements.
In addition, there is the need to prove that the exported product meets the foreign
regulations. The high costs involved may discourage manufacturers from trying to sell abroad.
In the absence of international disciplines, a risk exists that technical regulations and standards could be
adopted and applied solely to protect domestic industries.
28
Indeed, technical measures may well have the aim to correct for market failures like information
asymmetries or network externalities and well-designed standards can play an important role in
guaranteeing the smooth functioning of markets. Technical measures however, are also likely to affect the
outcome of international transactions and thus trade.
If they are designed to do so, i.e. if technical
measures are employed as a “disguised” form of protectionism, this would be in conflict with the principles of
the multilateral trading system. The challenge for the system is to strike a balance between the right to
take measures to achieve a legitimate objective, and the obligation not to create unnecessary obstacles
to trade.
III.C.2.
OBJECTIVE OF THE TBT AGREEMENT
According to the Preamble of the TBT Agreement, it is intended to ensure that technical regulations, standards
and conformity assessment procedures do not constitute unnecessary barriers to international trade. It
recognizes that no country shall be prevented from taking measures necessary to ensure, among others: the
quality of exports; the protection of human, animal or plant life or health; the protection of the environment;
the prevention of deceptive practices.
Members may protect other legitimate objectives while using the
measures prescribed under the TBT Agreement.
These measures shall not be applied in a manner which would constitute a means of arbitrary or unjustifiable
discrimination between countries where the same conditions prevail or a disguised restriction on international
trade.
III.C.3.
a.
THE SCOPE OF APPLICATION OF THE TBT AGREEMENT
Substantive Coverage
The TBT Agreement applies to technical regulations, standards and conformity assessment procedures (See
Article 1.1 and Annex 1):
à
Technical Regulations: measures which lay down product characteristics or their related processes
and production methods, with which compliance is mandatory;
à
standards: measures approved by a Recognised Body that provide, for common and repeated use,
rules, guidelines or characteristics for products or related processes and production methods, with
which compliance is voluntary (i.e. not mandatory);
à
conformity Assessment Procedures: procedures used, directly or indirectly, to determine the
fulfilment of relevant requirements contained in technical regulations or standards.
The Appellate Body has set out three criteria that a regulation must meet to fall within the definition of
"technical regulation" in the TBT Agreement: (i) the document must apply to an identifiable product or group
of products; (ii) the document must lay down one or more characteristics of the product; and, (iii) compliance
with the product characteristics must be mandatory'' (EC – Sardines, Appellate Body, para. 176).
29
The TBT Agreement does regulate technical regulations and standards focused on PPMs, when these are
related to the characteristics of products covered by the TBT Agreement (see definition above).
The issue
whether the Agreement covers PPMs not-related to the characteristics of products (PPMs that are not
detectable in the final product) has been subject of a complex debate among Members. To know more about
PPMS (see the explanatory box included for the SPS Agreement).
It is important to know the scope of application of the TBT Agreement, to be able to verify if it applies to a
certain measure, since there are two other WTO Agreements, the GATT 1994 and the SPS Agreement which
also regulate technical and internal measures (such as domestic technical regulations). The TBT Agreement
applies to goods - services are excluded from its coverage.
Additionally, according to Article 1.5, the TBT
Agreement does NOT apply to SPS measures as defined in Annex A of the SPS Agreement (the differences
between the SPS and TBT Agreement are explained at the end of this section). Furthermore, Article 1.4 of the
TBT Agreement provides that it is not applicable to purchasing specifications prepared by government bodies
for production or consumption requirements of governmental bodies, which are covered by the plurilateral
Agreement on Government Procurement (see Module 11).
b.
Product Coverage
The TBT Agreement applies to all products, including industrial and agricultural products (Article 1.3).
c.
Institutional Coverage
As in the case of the SPS Agreement, the TBT Agreement applies to a wide range of bodies, both governmental
and non-governmental. Members are responsible for the implementation of the TBT Agreement, but their
obligation to ensure compliance varies according whether if it is a central, local or regional body, or a
non-governmental entity.
d.
Temporal Coverage
The TBT Agreement applies to measures currently in legal force, regardless of the date they were enacted by
the Member.
III.C.4.
MAIN DISCIPLINES OF THE TBT AGREEMENT
Main Disciplines Provided in the TBT Agreement
The main disciplines provided in the TBT Agreement are:
à
Non-discrimination;
à
avoidance of unnecessary obstacles to international trade;
à
harmonisation and equivalence;
à
transparency; and,
à
special and differential treatment, including technical assistance (TA) to developing country
and LDCs Members.
30
a.
Non-discrimination
As we discussed in Module 2, Articles I and III of GATT 1994 contain the two components of the core principle
of non-discrimination: the Most-Favoured Nation (MFN) and the National Treatment principles.
These two principles are also incorporated into the TBT Agreement – Article 2.1 (for technical regulations),
Annex 3 (D) (for standards), and Article 5.1.1 (for conformity assessment procedures).
According to these
articles, the overall examination of compliance of the non-discrimination principles under the TBT Agreement
involves the determination of "likeness" between products and the determination of whether "no less
favourable treatment" ("access" in the case of conformity assessment procedures) has taken place between
these products.
b.
Avoidance of unnecessary obstacles to international trade
With respect to technical regulations, Article 2.2 of the TBT Agreement provides that Members shall ensure that
technical regulations are not prepared, adopted or applied with a view to or with the effect of creating
unnecessary obstacles to international trade.
Thus, as it was the case of the SPS Agreement, the TBT Agreement sets out a ''Necessity'' requirement, that
is, technical regulations shall not be more trade-restrictive than necessary to fulfil a legitimate objective.
Such legitimate objectives include, inter alia: national security requirements; the prevention of deceptive
practices; and protection of human health or safety, animal or plant life or health, or the environment. This
list of legitimate objectives is not exhaustive. The concept of necessity has never been tested in dispute
settlement in the TBT context. Although the concept of necessity in the TBT Agreement does not have the
same application and meaning as in Article XX, paragraphs (b) and (d), the criteria developed for the
interpretation of the latter might provide useful guidance (see Module 8).
While assessing the necessity of a measure to fulfil a legitimate objective, Members shall take into account the
risks that the non-fulfilment of that legitimate objective would create.
In assessing such risks, relevant
elements of consideration are, inter alia: available scientific and technical information, related processing
technology or intended end-uses of products.
c.
Use of international standards - harmonization
The TBT Agreement does not define harmonization, but the importance of international standards is recognized
in the Agreement and its Preamble. As with the SPS Agreement, the harmonization effort takes place in the
TBT Agreement when WTO Members base their regulations, standards or conformity assessment procedures on
the relevant international standards, guidelines or recommendations, or when WTO Members recognize each
other's measures as equivalent (equivalence will be addressed below).
31
1.
USE OF INTERNATIONAL STANDARDS
When a WTO Member decides to create a new TBT measure - or revise one which is already in place - it should
start its task by verifying if an international standard exists for the product and/or measure in question. If it
exists, the WTO Member has the obligation to base its measure on international standards, unless the
relevant international standard is an ineffective/inappropriate means to fulfil a legitimate objective
(Articles 2.4, 5.4 and Annex 3(F) of the TBT Agreement).
The possibility to depart from international
standards when these are ineffective constitutes a difference with the SPS Agreement.
International standards (guides and recommendations) are those prepared by international standardizing
bodies (ISB). The TBT Agreement offers a broad definition of an "international body or system" as ''body or
system whose membership is open to the relevant bodies of at least all Members'' (Annex 1.4).
As with the SPS Agreement, whenever a technical regulation is prepared for one of the legitimate objectives
listed in Article 2.2 and is in accordance with relevant international standards, it will be "presumed" (rebuttably
presumed in the case of the TBT Agreement) to meet the ''Necessity'' requirement (Article 2.5).
However,
WTO Members have the right to challenge any technical regulation which they believe does constitute an
unnecessary obstacles to international trade.
Additionally, Article 2.5 also stipulates that Members, upon
request, shall explain the justification of the measures they are preparing, adopting or applying.
WTO Members are also required to play a full part, within the limits of their resources, in the preparation of
international standards, guides and recommendations by appropriate international standardizing bodies, with a
view to harmonizing technical regulations (Article 2.6). A similar provision exists for conformity assessment
procedures (Article 5.5).
Regarding the burden of proof, in EC- Sardines, the Appellate Body held that the complainant (seeking a ruling
on the inconsistency with Article 2.4) has the burden of proving that: (i) an international standard has not
been used ''as a basis for'' a TBT measure at issue; and, (ii) the international standard is effective and
appropriate to fulfil the ''legitimate objectives'' pursued by the respondent through the TBT measure
(para. 275).
2.
EQUIVALENCE AND MUTUAL RECOGNITION
Equivalence refers to the situation whereby a WTO Member accepts a technical regulation from another WTO
Member as equivalent, even if it differs from its own, provided that it adequately fulfils the objective of its own
regulation. It does not require measures to be identical (Article 2.7).
The TBT Agreement encourages Members to engage in mutual recognition of each other's conformity
assessment procedures (Article 6.3). In this respect, two or more Members may enter into Mutual Recognition
Agreements which involve the reciprocal acceptance of the results of conformity assessment procedures taking
place in the territory of Members concerned.
32
III.C.5.
RELATIONSHIP BETWEEN THE SPS AGREEMENT AND THE TBT
AGREEMENT
SPS AGREEMENT
à
requirement
that
TBT AGREEMENT
a
measure
shall
not
be
more
trade-restrictive than necessary;
à
basic obligations of non-discrimination;
à
encourage the use of international standards in order to
promote harmonization;
Similarities
à
requirements
for
the
advance
notification
of
proposed
measures and the creation of information offices or "enquiry
points" (so-called transparency requirements – explained
below);
à
special
and
differential
treatment
to
developing
and
least-developed countries (explained below); and,
à
special provisions regarding dispute settlement.
SCOPE OF COVERAGE
Differences
all measures, whose purpose is
all
to protect human or animal life
standards
or health from food-borne risks;
assessment procedures, except
human health from animal or
when these are SPS measures
plant-carried diseases; animals
as
and
Agreement.
plants
from
pests
or
technical
defined
regulations,
and
by
conformity
the
SPS
(Example:
diseases; or to prevent other
requirements
damage from pests.
pharmaceuticals or the labelling
for
of cigarettes.)
TBT OR SPS? AN EXAMPLE – ORANGES:
33
SPS AGREEMENT
TBT AGREEMENT
OBJECTIVES
exhaustive
objectives:
non-exhaustive list of legitimate
only be applied to the extent
list
objectives: may be applied and
necessary
maintained to fulfil a legitimate
to
of
protect
human,
animal or plant life or health
objective,
from food-borne risks, animal or
protection of human health or
plant-carried diseases, pests.
safety,
including
the
protection
the
of
the
environment or the prevention
of deceptive practices.
DEFERENCE TO INTERNATIONAL STANDARDS & SCIENCE
WTO Members are obliged to use
WTO
international
obligation to base their measure
they
can
standards
show
a
unless
specific
on
Members
have
international
the
standards,
scientific justification based on a
unless the relevant international
risk assessment.
standard is an inappropriate or
International
standardizing
bodies are explicitly mentioned
ineffective
means
to
fulfil
a
legitimate objective.
in the SPS Agreement (Codex,
Does
OIE, IPPC).
international
not
explicitly
identify
standardizing
bodies.
III.C.6.
SPECIAL AND DIFFERENTIAL TREATMENT UNDER THE SPS
AGREEMENT AND THE TBT AGREEMENT
Both the SPS Agreement and the TBT Agreement acknowledge the particular difficulties and challenges that
developing country Members may face in the formulation and implementation of SPS measures and TBT
measures. Several provisions were envisaged to assist them in this regard.
a.
Implementation of the SPS Agreement and the TBT Agreement
Both Agreements require Members to pay consideration to the financial, trade and development needs
(including lack of technical expertise, infrastructure and resources) of developing country Members
in the implementation of the Agreements (Article 10.3 of the SPS Agreement and Article 12.2 of the TBT
Agreement).
Under the SPS Agreement and the TBT Agreement, the Committee is enabled to grant developing
countries, upon request, specified time – limited exceptions in whole or in part from the obligations
under the Agreement (Article 10.3 of the SPS Agreement and Article 12.8 of the TBT Agreement).
34
TO KNOW MORE... PECULIARITY OF THE SPS AGREEMENT
Longer implementation periods (Article 14) - Compliance with SPS rules and principles was delayed for
LDcs (five years) and for other developing countries (two years) with respect to their SPS measures.
b.
Preparation and application of SPS measures and TBT measures
Both Agreements require Members to take into account the special needs of developing country
Members in the preparation and application of SPS measures and TBT measures.
Such measures
shall not create unnecessary obstacles to exports from developing countries (Article 10.1 of the SPS
Agreement and Article 12.3 of the TBT Agreement).
TO KNOW MORE... PECULIARITY OF EACH AGREEMENT
The SPS Agreement allows longer time-frames for compliance in cases of phased introduction of a new
SPS measures by developing country Members (Article 10.2).
TBT Agreement
à
Recognizes that developing Members shall not be expected to use international standards as a
basis for their technical regulations or standards, when these are not appropriate to their
development, financial and trade needs (Article 12.4).
à
Allows developing country Members to adopt TBT measures aimed at preserving indigenous
technologies and production methods and processes compatible with their development needs
(Article 12.4).
à
Members shall take reasonable measures as may be available to them to ensure that standardizing
bodies, upon request of developing countries, examine the possibility of, and if practicable, prepare
international standards for products of special interest to developing countries (Article 12.6).
35
c.
Technical assistance
Both Agreements requires that in the provision of technical assistance, special consideration should be
paid to developing countries (Article 9 of the SPS Agreement and Articles 11 & 12.7 of the TBT Agreement).
Technical assistance covers:
TO KNOW MORE... PECULIARITY OF EACH AGREEMENT
Technical assistance covers:
SPS Agreement: processing technology, research or infrastructure, and may take the form of technical
advice, training and equipment to allow such countries to adjust and comply with SPS measures.
TBT Agreement: the preparation of technical regulation; the establishment of national standardizing
bodies, establishment of regulatory bodies or bodies for the assessment of conformity with technical
regulations, etc. Priority should be given to the needs of the least-developed country Members (Article 11).
Technical assistance is also provided at an informal level when governments seek additional information or
legal advice directly from the WTO Secretariat.
The Secretariat regularly assists Members in developing an
effective understanding of SPS and TBT provisions, including the notification procedures, and helps them to
appreciate their roles, responsibilities, rights and obligations in the context of the Agreements.
III.C.7.
TRANSPARENCY PROVISIONS UNDER THE SPS AGREEMENT AND
THE TBT AGREEMENT
The SPS and TBT Agreement include the following main obligations on transparency (Article 7 and Annex B of
the SPS Agreement, and Article 2.9, 2.10, 2.11, 2.12, 5.6, 5.7, 5.8, 5.9 and 10 of the TBT Agreement,
paragraph C J, L and O of the Code of Good Practice):
à
Notification of proposed SPS measures and TBT technical regulations or conformity assessment
procedures to the relevant Committee through the WTO Secretariat, according to the chart below.
à
Notification in case of SPS and TBT measures adopted for urgent reasons.
à
Allow a reasonable interval of time between the publication of the SPS measure or technical
regulation or conformity assessment procedure and its entry into force to allow producers to adapt to
the new measures (except in urgent circumstances).
à
Publish all adopted SPS regulations and TBT technical regulations and conformity assessment
procedures.
à
Establish enquiry points responsible for providing information and documents to interested Members.
In addition, the TBT Agreement contains provisions for the notification of the agreements between WTO
Members related to technical regulations, standards or the acceptance of conformity assessment results, to the
WTO Secretariat. It also set out transparency obligations related to standards.
36
In particular:
à
Standardizing bodies shall notify their acceptance of the Code of Good Practice.
à
Standardizing bodies shall notify the existence of a work programme.
à
Standardizing bodies shall allow a period of 60 day for comments on draft standards.
à
Adopted standards have to be published.
NOTIFICATION OF SPS MEASURES & TBT MEASURES
Common Features
Peculiarities
TBT Agreement
General Rule
Notify proposed SPS measures (Annex B(5)) /
Local Governments are required
proposed
to notify technical regulations
TBT
regulations
(Article 2.9)
or
conformity assessment procedures (Article 5.6)
and
conformity
which are not substantially the same as the
procedures which have not been
content of relevant international standards and
previously
have a significant effect on trade of other
central government authorities
notified
assessment
by
their
Members (see Item F in G/SPS/7/Rev.1 and
(Articles 3.2 and 7.2 of the TBT
page 15 in G/TBT/1/Rev.8).
Agreement).
Publish all adopted SPS regulations and TBT
Notify
technical
regulations
Agreement
and
(Annex
Article
B
2.11
of
of
agreements
between
the
SPS
Members on issues related to
the
TBT
technical regulations, standards
or
Agreement).
conformity
assessment
procedures which may have a
Emergency
When urgent problems of health protection arise
significant
Situation
or threaten to arise (Annex B(6) of the SPS
(Article 10.7
Agreement) / urgent problems of safety, health,
Agreement).
effect
of
on
the
trade
TBT
environmental protection and national security
arise or threaten to arise (Articles 2.10 and 5.7 of
the TBT Agreement), Members may not notify the
proposed SPS or TBT measures, provided that:
à
Immediately notify Members through
the Secretariat indicating the objective
of the measure and the nature of the
urgent
problem
(see
Item
G
in
copies
of
G/SPS/7/Rev.1).
à
Upon
request,
provide
regulation to other Members.
à
Allow Members to make comments in
writing and take these into account.
Table 2:
Notification of SPS measures & TBT measures
37
TO KNOW MORE... NOTIFICATION FORMATS
Note there are notification formats adopted by the SPS and TBT Committees for the purpose of notification.
Different notification formats should be used for the notification of different measures.
Notification of Technical Regulations and Conformity Assessment Procedures (G/TBT/1/Rev.8)
Notification of Standards (G/TBT/W/4/Rev.1)
Notification of SPS Measures (G/SPS/7/Rev.2)
Recommended Procedures for Implementing the Transparency Obligations of the SPS Agreement
(Draft G/SPS/W/215/Rev.2)
APPENDIX 1: EXAMPLE - WTO SCHEDULE OF COMMITMENTS
(AGRICULTURAL PRODUCTS)
This Schedule is authentic only in the English language
PART I – MOST-FAVOURED NATION (MFN) TARIFF
SECTION I – Agricultural Products
SECTION I – A Tariffs
Tariff item
Description
Base rate
Bound
Implementa-
Special
Initial
Other
number
of products
of duty
rate of
tion period
safeguard
Negotiating
duties
(U/B)
duty
Rights
and
charges
1
0101
2
3
4
12%+1454
7.7%+931
ECU/T
ECU/T
5
6
7
8
Live horses,
asses, mules
and hinnies
0101.20.10
Asses
SSG
38
SECTION I – B TARIFF QUOTAS
Description
Tariff Item
of products
Number(s)
1
2
Live bovine
0102.90.30 Ex
animals
Initial quota
quantity
tariff
rate
Final quota
quantity
3
34.300 t
tariff
rate
4
10%
34.300 t
Implementation period
5
10%
INR*
Other terms and
conditions
6
7
"High quality" meat,
(product
(product
with or without bone,
weight)
weight)
allocated to supplying
countries as follows:
Argentina 17.000 t;
USA / Canada 10.000 t;
Australia 5.000 t;
Uruguay 2.300 t
* INR= Initial Negotiating Rights
EXERCISES
6.
What is the purpose of the SPS Agreement?
7.
What is the purpose of the TBT Agreement?
8.
What are the main similarities and differences between the SPS Agreement and the TBT Agreement?
39
ILLUSTRATION
SCENARIO
Let us assume that Vanin and Tristat are WTO Members. Vanin is a major exporter of apples and Tristat a
major importer of apples. Last year, Vanin's producers of apples experienced loss derived from increasing
competition and decreasing international prices for apples, as well as the spread of a pest that affected apple
crops in Vanin.
At the beginning of this year, the government of Vanin approved Law No. 1858 (known as the "Apple
Support Reform" – ASR), which launched a government programme directed to provide support to apple
producers by providing payments contingent on exports. During the Uruguay Round of negotiations, Vanin
did not inscribe any export subsidies for apples in its Schedule of commitments.
With the support of the ASR program, Vaninian apple producers started increasing their production and
exports of apples. They also increased the use of pesticides for prevention of another spread of pests in
their apple farms.
In face of the growing amount of imported apples with high levels of pesticides residue, Tristat promulgated
a regulation setting a maximum residue level (MRL) for all imported apples.
In addition, it requested a
labelling for each apple informing the materials used to grow it, aiming at protecting the health of
consumers. Worth to mention that Codex Alimentarius Commission has set a MRL for pesticides in apples,
however it is not clear whether Tristat has based its measure on the Codex standard or not.
Tristat believes that Vanin's ASR program violates the WTO Agreement on Agriculture. Vanin claims that
Tristat's regulation is not consistent with the WTO Agreements.
QUESTION
Assume you are an expert on WTO law, what would you advise Tristat to argue before a WTO Panel? For
Vanin, which WTO Agreements would you consider relevant to its claim?
PROPOSED ANSWERS
Vanin's Apple Support Reform "ASR" - payments contingent on exports
Article 1(e) of the Agreement on Agriculture defines "export subsidies" as subsidies contingent upon export
performance. Thus, Tristat can argue that the payments contingent on exports provided by Vanin to apple
producers constitute export subsidies.
Article 8 of the Agreement provides that each Member undertakes not to provide export subsidies otherwise
than in conformity with the Agreement and with the commitments as specified in that Member's Schedule.
Articles 3.3 states that Members shall not provide export subsidies listed in Article 9.1 in respect of the
agricultural products or group of products of its Schedule in excess of the budgetary outlay and quantity
commitment levels specified therein.
40
Accordingly, the payments contingent on exports provided by Vanin to apple producers shall be listed in
Vanin's Schedule and, if so, they shall be provided within the limits set out in such Schedule. Since Vanin
did not inscribe any export subsidy for apples in its Schedule of commitments, the ASR programme providing
payments contingent on exports to apple producers would be inconsistent with the Agreement on
Agriculture.
Tristat's regulations which requires to reduce the amount of pesticides to the MRLs and disclose
the materials used to grow apples for the purpose of protecting the health of consumers
Vanin can invoke the SPS Agreement.
The SPS Agreement covers all measures, whose purpose is to
protect, among others, human, animal or plant life or health within the territory of the Member from risks
arising from additives, contaminants, toxins or disease-causing organisms in foods, beverages or feedstuffs
(Annex A). Thus, Tristat's regulation which requires all imported apples to reduce the amount of pesticides
to the MRLs during their growth and to be attached with labels disclosing the materials having been used to
grow apples for the purpose of protecting the health of consumers could be argued as an SPS measure
covered by the SPS Agreement.
For Tristat's measure to be in conformity with the SPS Agreement, it will need to meet certain requirements:
(i) be applied only to the extent necessary to protect human, animal or plant life or health; (ii) be based on
sufficient scientific evidence; and, (iii) does not unjustifiably or arbitrarily discriminate between Members
where identical or similar conditions prevail; and not be applied in a manner which would constitute a
disguised restriction on international trade.
Regarding the second requirement (based on scientific
evidence), the measure would be presumed to be based on sufficient scientific evidence if it conforms to an
international standard.
Otherwise, Tristat will need to provide not only scientific evidence but also risk
assessment in order to be in conformity with the SPS Agreement.
Remember that, under the SPS Agreement, Members are allowed to apply a measure without sufficient
evidence only if the evidence available is insufficient.
In such cases, Members are allowed to apply
provisional measures subject to the requirements provided in Article 5.7 of the SPS Agreement.
Note that labelling requirements may also fall under the TBT Agreements, which covers all technical
regulations, standards and conformity assessment procedures, except when these constitute SPS measures
as defined in the SPS Agreement. Since the labelling requirement applied by Tristat is covered by the SPS
Agreement, the TBT Agreement will not apply.
41
III.D. RULES FOR THE VALUATION OF GOODS AT CUSTOMS –
ARTICLE VII OF THE GATT 1994 & AGREEMENT ON CUSTOMS
VALUATION
III.D.1.
INTRODUCTION
Customs valuation is the procedure applied to determine the customs value of imported goods when the
rate of duty is ad valorem. In this case, the customs value is essential to determine the duty to be paid on
an imported good.
The Agreement on Customs Valuation aims for a fair, uniform and neutral system for the valuation of goods for
customs purposes — a system that conforms to commercial realities, and which outlaws the use of arbitrary or
fictitious customs values.
42
Why are the rules on custom valuation only relevant when referred to ad valorem duties?
As we saw in Module 3, customs duties can be designated in either specific or ad valorem terms or as a mix
of the two. In case of a specific duty, a concrete sum is charged for a quantitative description of the good,
for example USD 1 per item or per unit. The customs value of the good does not need to be determined, as
the duty is not based on the value of the good but on other criteria.
In this case, no rules on customs
valuation are needed and the Agreement on Customs Valuation does not apply.
In contrast, an ad valorem duty depends on the value of a good. Under this system, the customs valuation
is multiplied by an ad valorem rate of duty (e.g. five per cent) in order to arrive at the amount of duty
payable on an imported item.
III.D.2. RATIONALITY BEHIND THE AGREEMENT ON CUSTOMS
VALUATION
For importers, the process of estimating the value of a product at customs presents problems that can be just
as serious as the actual duty rate charged. Access to the importing Member's market can be denied if the duty
payable at customs is inflated because the imported goods are overvalued by the customs authorities.
Importers may also face increasing transaction costs derived from the lack of uniformity on customs valuation
rules.
Without the Agreement on Customs Valuation, the outcome of the tariff negotiation would be undermined if the
importing countries are allowed to adopt valuation rules and methodology arbitrarily and discretionarily.
In
other words, the arbitrary adoption of valuation rules could constitute a non-tariff barrier, which would offset
the effects of tariff concessions.
III.D.3. HISTORICAL BACKGROUND
The GATT CONTRACTING PARTIES has attempted to standardize the practice of customs valuation since 1947.
Article VII:2(a) of GATT 1947 only required that the value for customs purposes of imported merchandise
should be based on the actual value of the imported merchandise on which the duty is assessed and should not
be based on the value of merchandise of national origin or on arbitrary or fictitious values. This provision left
room for considerable different methods of valuing goods and for arbitrary and protectionist procedures.
Therefore, in the Tokyo Round negotiations, new rules were negotiated on customs valuation with the aim to
establish a predictable system that would reflect commercial realities as closely as possible. Accepted by most
developed countries, but by less than a dozen developing countries, it became one of the plurilateral codes
governing non-tariff trade measures. This Code was re-examined during the Uruguay Round and replaced by
the WTO Agreement on Implementation of Article VII (Agreement on Customs Valuation). In contrast to the
Tokyo Code, the Agreement on Customs Valuation is binding for all WTO Members.
43
III.D.4.
MAIN RULES ON CUSTOMS VALUATION
The Agreement on Customs Valuation aims for a fair, uniform and neutral system for the valuation of
goods for customs purposes, which conforms to commercial realities and outlaws the use of arbitrary or
fictitious customs values. It provides a set of valuation rules, expanding and giving greater precision to the
provisions on customs valuation in the original GATT.
a.
Basic principle – method 1
The primary basis for customs value under this Agreement is "transaction value", defined in Article 1 as the
price actually paid or payable for the goods when sold for export to the country of importation,
adjusted in accordance with Article 8 which provides, inter alia, when certain specific elements are incurred by
the buyer but are not included in the price. The transaction value is the first and most important method of
valuation referred in the Agreement.
Customs valuation based on the transaction value method is mainly based on documentary input from the
importer. Article 17 of the Agreement on Customs Valuation confirms that customs administrations have the
right to request further information in cases where they have reasons to doubt the accuracy of the declared
value of imported goods.
The "Decision Regarding Cases Where Customs Administrations Have Reasons To
Doubt The Truth Or Accuracy Of The Declared Value" spells out the procedures to be observed in such cases.
If the reasonable doubt still exists after reception of further information (or in absence of a response), customs
may decide that the value cannot be determined according to the transaction value method. Before a final
decision is taken, customs must communicate its reasoning to the importer, who, in turn, must be given
reasonable time to respond.
In addition, the reasoning of the final decision must be communicated to the
importer in writing.
b.
Other methods
For cases in which there is no transaction value (for example, there is no sale or an invoice), or where the
transaction value is not acceptable as the customs value because the price has been distorted as a result of
certain conditions (specified in Article 1 of the Agreement), the Agreement on Customs Valuation lays down
five other methods of customs valuation, to be applied in the prescribed hierarchical order:
à
Method 2 - Transaction Value of Identical Goods (Article 2): the customs value is determined on
the basis of the transaction value of previously imported identical goods.
à
Method 3 – Transaction Value of Similar Goods (Article 3): the customs value is determined on
the basis of the transaction value of previously imported similar goods.
à
Method 4 – Deductive Method (Article 5): the customs value is determined on the basis of the
price at which the imported goods or identical or similar goods are sold to an unrelated buyer in the
country of importation minus certain deductions.
à
Method 5 – Computed Method (Article 6): determines the customs value on the basis of the cost
of production (value of the materials and fabrication), plus an amount for profits and general
expenses.
44
à
Method 6 – Fall Back Method (Article 7): determines the customs value using reasonable means
consistent with the principles and general provisions of the Agreement and Article VII of GATT
(available only if none of the other methods can be used).
c.
Special and differential treatment
The Agreement on Customs Valuation recognizes the particular difficulties and challenges that developing
country Members may face in the implementation of the Agreement and thus, provides special and differential
treatment to them (see Article 20 and Annex 3 of the Agreement).
à
Longer Implementation Periods: developing country Members (which were not party to the Tokyo
Round Code) were allowed to delay application of the provisions of the Agreement for 5 years from
the date on which the developing country became a member of the WTO (Article 20.1). An extension
of the five-year period is also allowed based on request from such developing country Members,
which must show good cause (Annex III:1).
à
Technical Assistance (TA) from developed country Members: under Article 20.3 developed
country Members shall furnish, on mutually agreed terms, technical assistance to developing country
Members that so request. On this basis, developed country Members shall draw up TA programmes
which may include, inter alia, training of personnel, assistance in preparing implementation
measures, access to sources of information regarding customs valuation methodology and advice on
the application of the provisions of the Agreement.
The Agreement on Customs Valuation also allowed developing country Members to make reservations to some
provisions of the Agreement (which are not applicable to them) as well as to request a special application of
certain provisions.
III.E. FEES AND FORMALITIES CONNECTED WITH IMPORTATION
AND EXPORTATION – ARTICLE VIII OF THE GATT 1994
III.E.1.
INTRODUCTION
Article VIII of GATT 1994 includes specific legal obligations applicable to fees and formalities and to the
penalties that may be imposed for breaches of customs procedures. It also recognizes the need to
reduce the number and complexity of import and export-related fees and formalities.
The aim of Article VIII is to help expedite the movement, release and clearance of goods by preventing the use
of fees and formalities as a form of non-tariff barrier. In order to lower transaction costs for traders, fees and
formalities should not be applied in a manner which would restrict the flow of goods across
borders.
III.E.2.
MAIN PROVISIONS
Article VIII:1(a) makes clear that the disciplines set forth in Article VIII apply to all fees and charges of
whatever character imposed on or in connection with importation or exportation except for: (i) import and
45
export duties; and, (ii) internal taxes within the scope of Article III of GATT 1994. It also applies to import and
export formalities.
Typical fees and charges include licence fees and inspection fees, while import-related
formalities refer to requirements relating to the documentation needed for import and customs clearance.
Article VIII of GATT 1994 includes the following obligations:
à
Fees and charges shall be limited in amount to the approximate cost of services rendered and shall
not represent an indirect protection to domestic products or a taxation of imports or exports for fiscal
purposes (Article VIII:1(a));
à
recognizes the need for reducing the number and diversity of fees and charges (Article VIII:1(b));
à
recognizes the need for minimizing the incidence and complexity of import and export formalities and
for decreasing and simplifying import and export documentation requirements (Article VIII:1 (c));
à
requires Members to review the operation of their laws and regulations, upon request by another
Member, in the light of Article VIII (Article VIII:2); and,
à
prohibits the imposition of "substantial" penalties for minor breaches of customs regulations or
procedural requirements - e.g. omission or mistake in customs documentation which is easily
rectifiable- (Article VIII:3).
III.E.3.
ARTICLE VIII AND TRADE FACILITATION
In July 2004, WTO Members formally agreed to launch negotiations on trade facilitation on the basis of
modalities contained in Annex D of the so-called “July 2004 Package” (see below).
Under this mandate,
Members are directed to clarify and improve the following Articles of the GATT 1994: Article V (Freedom of
Transit), Article VIII (Fees and Formalities connected with Importation and Exportation), and Article X
(Publication and Administration of Trade Regulations).
III.F. PUBLICATION AND ADMINISTRATION OF TRADE
REGULATIONS – ARTICLE X OF THE GATT 1994
III.F.1.
INTRODUCTION
We have made frequent reference to the principle of transparency during our previous Module on the basic
principles of the WTO - Module 1. We also have learned that the principle of transparency is embodied in many
WTO Agreements, such as the SPS Agreement and the TBT Agreement.
Article X of GATT 1994 lays down the general transparency obligation in the publication and
administration of trade regulations.
46
III.F.2.
MAIN RULES
In essence, Article X requires Members to:
à
Publish their trade-related laws, regulations, rulings and agreements in a prompt and accessible
manner (Article X:1);
à
refrain from enforcing measures of general application prior to their publication (Article X:2); and,
à
administer the above-mentioned laws, regulations, rulings and agreements in a uniform, impartial
and reasonable manner.
In this context, parties are required to institute or maintain tribunals or
procedures for, inter alia, the prompt review and correction of administrative action relating to
customs matters (Article X:3).
III.F.3.
ARTICLE X AND TRADE FACILITATION
As with Article VIII (Fees and Formalities connected with Importation and Exportation), Article X is part of the
trade facilitation negotiations, which will be further examined below.
III.G. TRADE FACILITATION
NEGOTIATIONS ON TRADE FACILITATION
Once formal trade barriers come down, other issues become more important. For example, companies need to
be able to acquire information on other countries’ importing and exporting regulations and how customs
procedures are handled.
Cutting red-tape at the point where goods enter a country and providing easier
access to this kind of information are two ways of "facilitating" trade".
The 1996 Singapore Ministerial Conference instructed the WTO Goods Council to start exploratory and
analytical work on the simplification of trade procedures in order to assess the scope for WTO rules in this
area" (Singapore Ministerial Declaration, para. 21).
In July 2004, WTO Members formally agreed to launch negotiations on trade facilitation, on the basis of
modalities contained in Annex D of the so-called "July Package" – Decision adopted by the General
Council on 1 August 2004 - WT/L/579). The negotiations on trade facilitation should be completed under
the overall Doha Development Agenda timeline.
In the Hong Kong Ministerial, Members reaffirmed the
mandate and modalities for the negotiations on trade facilitation contained in Annex D of the July Package.
47
Why Trade Facilitation?
The main objective for businesses and traders is to lower their transaction costs by increasing
their profit margins and saving time in concluding their business transactions. Saving time and money are
the two main determinant factors for businesses to succeed.
Some of the main problems traders face
include excessive documentation requirements, burdensome border-crossing procedures, transport and
transit impediments especially for landlocked countries, and lack of transparency and predictability in trade
laws and regulations.
As we will see, addressing these problems is what the negotiations on trade
facilitation is all about.
Negotiations on Trade Facilitation are seen as a necessary complement to broader liberalization
efforts –essential to reap the full benefits of freer trade.
1. Clarify and Improve Relevant Aspects of Articles V, VIII and X of the GATT 1994
Members are directed to clarify and improve Article V (Freedom of Transit), Article VIII (Fees and
Formalities
connected
with
Importation
and
Exportation),
and
Article X
(Publication
and
Administration of Trade Regulations) of the GATT 1994 with a view to further expediting the movement,
release and clearance of goods, including goods in transit ("July package", Annex D, para. 1).
2. Technical Assistance and Capacity Building
The negotiations also aim to enhance TA and capacity-building on trade facilitation ("July Package",
Annex D, para. 1). It was also recognized that the provision of TA and support for capacity-building is vital for
developing and LDC Members to enable them to fully participate in and benefit from the negotiations.
Members, in particular developed countries, therefore commit themselves to adequately ensure such support
and assistance during the negotiations. Support and assistance should also be provided to help developing and
LDC Members implement the commitments resulting from the negotiations, in accordance with their nature and
scope ("July Package", Annex D, paras. 5 and 6).
As an integral part of the negotiations, Members shall seek to identify their trade facilitation needs and
priorities, particularly those of developing and LDC Members, and shall also address the concerns of
developing and LDC Members related to cost implications of proposed measures ("July Package", Annex D,
paras. 4).
3. What are WTO Trade Facilitation Needs Assessments?
According to paragraph 4 of Annex D of the July Package, a TA programme has been established to assist WTO
Members and Observers in conducting trade facilitation self assessments.
The main objectives of the
self-assessments are to identify TRTA/capacity-building needs and priorities for the implementation
of a future WTO Agreement on Trade Facilitation and to participate more efficiently in WTO trade
facilitation negotiations. The needs-assessment programme is a joint undertaking by the WTO Secretariat
and relevant international organizations (in particular the World Bank, World Customs Organization (WCO),
UNCTAD, Organisation for Economic Cooperation and Development (OECD) and International Monetary
Fund (IMF)).
48
Why is Trade Facilitation important for Developing Countries?
Development aspects are at the heart of the WTO negotiations on trade facilitation.
Lowering
trade-related transaction costs can result in a significant improvements in a country's ability
to compete in the global economy.
This applies to all developing Members and in particular to
landlocked developing and LDC Members.
The range of benefits that can be realized by taking measures to facilitate trade include improved
revenue collection, improved border controls and security, lower administration costs, more trade and
foreign investment and enhanced competitiveness of domestic business in its home markets as well as
in export markets.
Developing countries also stand to benefit greatly from the aspired increase in transparency and
predictability of the trading environment.
The importance of development aspects in the trade facilitation negotiations is reflected in the
negotiating mandate, which includes the enhancement of TRTA and capacity-building, as well as the
recognition of the principle of special and differential treatment for developing country Members.
More specifically, the needs-assessment process will help each country to: 1. identify the compliance level for
each proposed trade facilitation measure; 2. determine its national negotiation position for each proposed
measure; 3. identify any special and differential treatment, TRTA and capacity-building needs and priorities;
4. develop the capacity to continue the assessment of needs and priorities; and, 5. provide more effective
continued assistance to Geneva-based negotiators as negotiations progress.
Needs, priorities and implementation capacities vary from country-to country.
Participants of needs
assessments have identified many benefits gained as a result of the assessments.
Some of these
benefits include: (i) the results provide a snapshot of the country's current trade facilitation situation;
(ii) better understanding of the proposed measures; (iii) the country is better prepared for implementation;
and, (iv) better understanding of the role and status of various border agencies and of the private sector.
A guide to assist developing and LDC Members to carry out their needs-assessments can be found in document
TN/TF/W/143/Rev.2.
4. Special and Differential Treatment
The results of the negotiations shall take fully into account the principle of special and differential
treatment for developing and LDC Members. Members recognize that this principle should extend beyond
the granting of traditional transition periods for implementing commitments. In particular, the extent and the
timing of entering into commitments shall be related to the implementation capacities of developing and LDC
Members.
It is further agreed that developing and LDC Members would not be obliged to undertake investments in
infrastructure projects beyond their means, in particular, LDC Members will only be required to undertake
commitments to the extent consistent with their individual development, financial and trade needs or their
The speed and scope of work in the area of trade facilitation, as in many other areas, will depend on progress
in other areas, mainly in the Agriculture and NAMA negotiations.
49
TO KNOW MORE ABOUT TRADE FACILITATION, PLEASE REFER TO
http://www.wto.org/english/tratop_e/tradfa_e/tradfa_e.htm
A compilation of Members' proposals on trade facilitation can be found in document TN/TF/W/43 and its
respective revisions.
III.H. AGREEMENT ON IMPORT LICENSING PROCEDURES
III.H.1.
INTRODUCTION
Import licensing can be defined as administrative procedures requiring the submission of an
application or other documentation (other than those required for customs purposes) to the relevant
administrative body as a prior condition for importation of goods.
The Agreement on Import Licensing Procedures provides a set of principles and detailed rules intended to
prevent licensing procedures from being an obstacle to trade. The main objectives of the Agreement
are to simplify and bring transparency to import licensing procedures, to ensure their fair and equitable
application and administration, as well as to prevent that these procedures are applied in a manner that they
have restrictive or distortive effects on imports.
The Agreement on Import Licensing Procedures is related to Article X (Publication and Administration of Trade
Regulations), Article XI (General Elimination of QRs) and Article XIII (Non-discriminatory Administration of
Quantitative Restrictions (QRs)) of the GATT 1994, which you have studied in Module 3.
III.H.2.
HISTORICAL BACKGROUND
The Tokyo Round Import Licensing Code was one of the agreements covering non-tariff measures concluded
during the multilateral trade negotiations held between 1973 and 1979. The Agreement on Import Licensing
Procedures is a revised version of the Tokyo Code and is binding on all WTO Members.
III.H.3.
MAIN PROVISIONS
The Agreement contains provisions that apply specifically to non-automatic or automatic licensing, as well as
general provisions that apply to both types of import licensing.
50
a.
General provisions
The Agreement contains the following general rules, applicable to all types of import licensing procedures:
à
Neutral application, fair and equitable administration: import licensing procedures shall be
applied neutrally and administered in a fair and equitable manner (Article 1.3). Applications are not
to be refused for minor documentation errors as well as omissions or mistakes in documentation or
procedures made without fraudulent intent or gross negligence (Article 1.7).
à
Publication of Rules and Procedures: rules and all information concerning procedures for the
submission of applications are to be published, whenever practicable, 21 days prior to the effective
date of the requirement but in all events not later than the effective date (Article 1.4 (a)).
à
Simple Forms and Procedures: applications forms, renewal forms and procedures are to be simple
(Articles 1.5 and 1.6).
Applicants are to be allowed a reasonable period to submit licence
applications.
Institution or changes in import licensing procedures have to be notified and Members shall
complete the annual questionnaire before 30 September each year (Article 7.3 of the Agreement on Import
Licensing Procedures, see also Annex to G/LIC/3).
b.
Types of import licensing
According to the Agreement, licenses are classified as:
1.
AUTOMATIC IMPORT LICENSING
Import licensing procedures where the approval of the application is granted in all cases.
Their objective
generally refers to collecting statistical and other factual information on imports (Article 2.1). It is subject to
the following rules: (i) automatic licensing procedures are not to be administered in such a way as to have
restrictive effects on imports; (ii) any person fulfilling the legal requirements should be equally eligible to apply
for and obtain import licenses (no discrimination); and, (iii) the application shall be approved immediately on
receipt when feasible or within a maximum of 10 working days (Article 2.2 (a)).
2.
NON-AUTOMATIC IMPORT LICENSING
Non-automatic import licensing procedures are the ones not falling within the definition contained in
paragraph 1 of Article 2. They are used, among other policy objectives, to administer QRs and TRQs justified
within the WTO legal framework (explained in Module 3). Non automatic import licensing procedures must not
have restrictive or distortive effects on imports, additional to those caused by the imposition of the restriction
and shall correspond in scope and duration to the measure they are used to implement (Article 3.2). These
procedures are also subject, among others, to the following conditions: (i) Members are to publish all relevant
information concerning the granting and allocation of licences (Article 3.3); (ii) in the case of quotas allocated
among supplying countries, the Member applying the restrictions shall promptly inform all other Members
having and interest in supplying the product concerned (Article 3.5(c)); (iii) applications are subject to the
non-discrimination principle (Article 3.5(e)); and, (iv) the period for processing applications shall not be longer
than 30 days if applications are considered as and when received, or no longer than 60 days if applications are
considered simultaneously (Article 3.5 (f)).
51
III.I. AGREEMENT ON PRESHIPMENT INSPECTION (PSI)
III.I.1. INTRODUCTION
Pre-shipment inspection (PSI) is the practice of verifying shipment details (essentially price, quantity and
quality), at the point of exportation, of goods to be shipped overseas.
The verification is carried out by
private entities hired by importing governments for this purpose.
PSI companies are mostly used by developing countries and countries in transition to verify quantity and
quality as well as to prevent capital flight, commercial fraud and customs duty evasion (by ensuring that the
value is not under or over declared), as well as to compensate for inadequacies in administrative
infrastructure.
III.I.2. BASIC PROVISIONS
The Preamble of the Agreement on Preshipment Inspection recognizes the need of some developing countries
to make use of PSI for as long and in so far as it is necessary to verify the quality, quantity or price of goods.
It assumes that the inspection entity will be a private company. There is no obligation for a WTO Member to
use PSI or to allow a government entity of another country to operate in its territory (Footnote 1 of the
Agreement).
The PSI Agreement applies to all government-mandated PSI activities (Article 1.1).
It aims to establish a
framework of rights and obligations, based on non-discrimination and transparency, to provide guidelines for
the use of government-mandated inspection (as opposed to contracts by commercial firms) for quality,
quantity and price of goods destined for export to a country of import (Articles 1.3 & 2.1). The Agreement also
provides specific obligations to "Importing PSI-user Members" and "Exporting Members" (Articles 2 and 3).
Article 4 of the Agreement on Preshipment Inspection establishes an independent review procedure —
administered jointly by an organization representing PSI agencies and an organization representing exporters
— to resolve disputes between an exporter and a PSI agency.
III.J. AGREEMENT ON RULES OF ORIGIN
III.J.1. INTRODUCTION
Made in...
Suppose the production of a bicycle experienced the following process. All raw materials (e.g. alloy steels)
were from Vanin and then were further processed in Tristat, where the alloy steels were welded
mechanically so as to increase the availability of light and inexpensive frames. Finally, all of the processed
components (such as wheels, brakes and chains) were shipped to Alba for final assembling.
How should
Medatia, an importing country of bicycles, decide which country these bicycles come from?
52
Many traded products include materials or components from more than one country, or are products that
underwent processing in several countries.
Rules of origin are applied to determine the country of
origin of an imported good in such situations.
The Agreement on Rules of Origin aims at the
harmonization of non-preferential rules of origins and ensuring that such rules do not themselves
create unnecessary obstacles to trade. Rules of origin are important because they are used:
à
To determine whether imported products shall receive MFN treatment or not;
à
to implement instruments of commercial policy such as anti-dumping and safeguard measures (see
Module 5);
à
to determine which countries are entitled to import quotas (may have been filled for some supplying
countries, but not for others);
à
for the application of labelling and marking requirements;
à
for statistical reasons; and,
à
for government procurement.
III.J.2. BASIC PROVISIONS
Before the Uruguay Round, there were no specific provision in the GATT 1947 concerning rules of origin of
goods in international commerce. The GATT Contracting Parties gradually realized that the diversity of rules of
origin applied by each Party resulted in uncertainty and misuse of these rules.
This is the reason why the
Agreement on Rules of Origin was adopted by all Members during the Uruguay Round.
a.
General obligations – disciplines during the transitional period
Until the harmonization program (explained below) is completed, Members shall ensure that rules of origin and
the requirements to be fulfilled, including the specifications related to the substantial transformation test (see
box below), are clearly defined (Article 2(a)).
The Agreement also requires Members to ensure that their rules of origin are: (i) transparent; (ii) do not have
restricting, distorting or disruptive effects on international trade; (iii) administered in a consistent, uniform,
impartial and reasonable manner; and, (iv) based on a positive standard (they state what does confer origin,
rather than what does not); (v) published (laws, regulations, judicial decisions and administrative rulings);
(vi) provide assessment of origin upon request of an exporter with a justifiable cause; and, (vii) subject to
prompt revision in case of administrative action.
53
Methods for Determining Origin
Where more that one country is involved in the production of a good, most customs administrations apply
rules of origin according to which the origin of the good shall be conferred upon the country where the last
substantial transformation has been carried out.
The following criterions are used to decide what a
substantial transformation is:
Change of tariff classification: criterion attributes origin to a country if the product was
à
sufficiently changed as to move its customs classification from one heading to another. Members
using this criterion must clearly specify the subheadings or headings within the tariff nomenclature
that are addressed by the rule.
ad valorem percentage: measures how much value was added to the product in that particular
à
country. The method for calculating the ad valorem percentage shall be specified; and,
manufacturing or processing operation: origin depends on specific technical processes that can
à
be considered as an essential part in the production of the product. The operation that confers
origin on the good concerned shall be precisely specified.
b.
Harmonization
For the longer term, the Agreement aims for common (“harmonized”) rules of origin among all Members,
except in some kinds of preferential trade — for example, countries setting up a free trade area are allowed to
use different rules of origin for products traded under their free trade agreement.
The programme of negotiations between Members mandated by the Agreement began in July 1995 and was to
end three years later, however negotiations are still going on. It is being conducted by a Committee on Rules
of Origin in the WTO and a Technical Committee under the auspices of the World Customs Organization (WCO).
The outcome will be a single set of rules of origin to be applied under non-preferential trading conditions by all
Members in all circumstances.
The negotiating texts are contained in documents G/RO/45-series.
Its
consolidated text is contained in document G/RO/W/111/Rev.2. The results of the harmonization programme
are to be approved by the Ministerial Conference and they then become an annex to the Agreement.
III.K. AGREEMENT ON TRADE-RELATED INVESTMENT MEASURES
(TRIMS)
III.K.1.
INTRODUCTION
Governments sometimes impose requirements on enterprises so that the goods they produce, for example,
incorporate a minimum proportion of domestically produced inputs (limiting the use of imported inputs – local
content requirements), or limit the importation by an enterprise of products used in its local production. Such
requirements can affect international trade.
54
The objectives of the TRIMs Agreement include the progressive liberalization of world trade and to facilitate
investment across international frontiers so as to increase the economic growth of all trading
partners, particularly developing country Members, while ensuring free competition.
III.K.2.
HISTORICAL BACKGROUND
The Charter for the International Trade Organization (ITO Charter), contained provisions on the treatment of
foreign investment as part of a chapter on economic development.
As we have seen in Module 1, the ITO
Charter was never ratified and only its provisions on commercial policy were incorporated into the GATT.
Probably, the most significant development with respect to investment before the Uruguay Round was a ruling
by a Panel in a disputes settlement procedure - Canada — Administration of the Foreign Investment Review Act
(FIRA) (see box below).
The mandate of the Uruguay Round included the elaboration of provisions to avoid trade-restrictive and
trade-distorting effects of investment measures. The emphasis placed in this mandate on trade effects made it
clear that the negotiations were not intended to deal with the regulation of investment as such. Due to the
disagreement among participants (developed and developing countries), the negotiations were limited to an
interpretation and clarification of the application to TRIMS of GATT provisions on national treatment for
imported goods (Article III) and on quantitative restrictions on imports or exports (Article XI).
III.K.3.
SCOPE & BASIC OBLIGATIONS
The coverage of the Agreement is limited to TRIMS related to trade in goods (Article 1). The disciplines of the
TRIMs Agreement focus on discriminatory treatment of imported and exported products and do not govern the
issue of entry and treatment of foreign investment.
A local content requirement imposed on both, domestic and foreign enterprises, is inconsistent with the TRIMs
Agreement because it involves discriminatory treatment of "imported products" in favour of "domestic
products". The fact that there is no discrimination between domestic and foreign "investors" in the imposition
of the requirement is irrelevant under the TRIMs Agreement.
Article 2.1 of the Agreement requires Members not to apply any "TRIMs" that are inconsistent with Article III
(National Treatment) and Article XI (General Elimination of Quantitative Restrictions) of the GATT 1994.
The term "TRIMs" is not defined in the Agreement however, it contains in an Annex an illustrative list of
measures that are inconsistent with GATT Article III:4 or Article XI:1 of the GATT. The measures listed in the
Annex can be classified in:
à
Measures Inconsistent with GATT Article III:4: concern the purchase or use of products by
an enterprise.
They include: (i) local content TRIMs, which require the purchase or use by an
enterprise of products of domestic origin or from any domestic source (local content requirements);
and, (ii) trade-balancing TRIMs, which limit the purchase or use of imported products by an
enterprise to an amount related to the volume or value of local products that it exports.
In both
cases, the inconsistency with Article III:4 of GATT 1994 results from the fact that the internal
measure subjects the purchase or use of imported products to less favourable conditions than the
purchase or use of domestic products.
55
à
Measures Inconsistent with GATT Article XI:1: concern the importation or exportation of
products by an enterprise.
They cover border measures: (i) That restrict the importation by an
enterprise of products used in its local production in general terms or to an amount related to the
volume or value of local production exported by the enterprise; (ii) restriction of imports in the form
of a foreign exchange balancing requirement (the ability to import products used in or related to local
production is limited by restricting the enterprise's access to foreign exchange); and, (iii) restrictions
on the exportation of or sale for export by an enterprise, whether specified in terms of particular
products, volume or value of products or in terms of a proportion of volume or value of its local
production.
Members are also required to notify to the Council for Trade in Goods (CTG) any TRIMs that are not in
conformity with the Agreement (Article 5.1). Article 5.2 provides that these notified WTO-inconsistent TRIMs
are to be phased out in accordance with the transitional period (until 1 January 1997 for developed country
Members; 1 January 2000 for developing country Members and 1 January 2002 for least-developed country
Members).
These transitional periods may be extended (upon request made to the CTG) in the case of a
developing country or least-developed country Members which demonstrates particular difficulties in
implementing the provisions of the TRIMs Agreement (Article 5.3).
Finally, Article 3 of the TRIMs Agreement provides that all exceptions under GATT 1994 shall apply, as
appropriate, to the provisions of the Agreement.
TO KNOW MORE... GATT DISPUTE RELATED TO TRIMS – BEFORE THE URUGUAY
ROUND AND THE TRIMS AGREEMENT
Canada — Administration of the Foreign Investment Review Act (FIRA): A GATT dispute settlement Panel
considered a complaint by the United States regarding certain types of undertakings, which were required
from foreign investors by the Canadian authorities as conditions for the approval of investment projects.
These undertakings pertained to the purchase of certain products from domestic sources (local content
requirements) and to the export of a certain amount or percentage of output (export performance
requirements). The Panel concluded that the local content requirements were inconsistent with the national
treatment obligation of Article III:4 of the GATT 1947 but that the export performance requirements were
not inconsistent with GATT obligations. The Panel emphasized that at issue in the dispute before it was the
consistency with the GATT of specific trade-related measures taken by Canada under its foreign investment
legislation and not Canada's right to regulate foreign investment per se.
The panel decision in the FIRA case was significant because it confirmed that existing obligations under the
GATT were applicable to performance requirements imposed by governments in an investment context in so
far as such requirements involve trade-distorting measures. At the same time, the Panel's conclusion that
export performance requirements were not covered by the GATT also underscored the limited scope of
existing GATT disciplines with respect to such trade-related performance requirements.
56
III.K.4.
TRADE-RELATED INVESTMENT MEASURES (TRIMS)... URUGUAY
ROUND AND BEYOND
Article 9 of the TRIMs Agreement stipulates that, not later than five years after the date of entry into force of
the Agreement, the CTG shall review the operation of the Agreement.
The TRIMs Agreement was included in the Doha Round of negotiations as part of the ''Implementation-Related
Issues and Concerns'' (Paragraph 6 of the Ministerial ''Decision on Implementation-related Issues and
Concerns'' (WT/MIN(01)/17)).
The WTO Ministerial Conference held in Singapore in 1996, established working groups on trade and
investment and on trade and competition "having regard to the existing WTO provisions on matters related to
investment and competition policy and the built-in agenda in these areas, including under the TRIMs
Agreement". However, as we have introduced in Module 1, all Singapore issues (including investment), except
for trade facilitation, have been dropped from the negotiation table by the General Council in 1 August 2004.
The relationship between trade and investment will be further explained in Module 11.
III.L. AGREEMENT ON TEXTILE AND CLOTHING (ATC AGREEMENT)
III.L.1.
INTRODUCTION
Textiles, like agriculture, was one of the hardest-fought issues in the WTO, as it was in the former GATT
system. In the past, large portion of textiles and clothing exports from developing countries to the industrial
countries were subject to quotas under a special regime outside normal GATT rules.
Under the ATC
Agreement, WTO Members committed themselves to remove the quotas by 1 January 2005 and integrating the
sector fully into GATT rules.
III.L.2.
MULTIFIBRE ARRANGEMENT (MFA) 1974 - 1994
From 1974 until the end of the Uruguay Round, the trade was governed by the Multifibre Arrangement (MFA).
This provided for the application of "selective" quantitative restrictions when surges in imports of particular
products caused, or threatened to cause, serious damage to the industry of the importing country.
The quotas were the most visible feature. The Multifibre Arrangement was a major departure from the basic
GATT rules, particularly the principle of non-discrimination and the general preference for customs tariffs
instead of measures that restrict quantities (see Module 2 "The Principles of Non-Discrimination" and Module 3
"Tariff and Non-Tariff Barriers").
On 1 January 1995, it was replaced by the ATC Agreement, which set out a transitional process for the ultimate
removal of these quotas.
57
III.L.3.
THE WTO AGREEMENT ON TEXTILES AND CLOTHING (ATC)
1995 - 2004
The ATC Agreement was a transitional agreement aimed at integrating the textiles and clothing sector into the
GATT, which lapsed on 1 January 2005.
The expiry of the ten year transition period of ATC implementation means that trade in textile and clothing
products is no longer subject to quotas under a special regime outside normal WTO/GATT rules. Instead, this
sectors is now governed by the general rules and disciplines embodied in the multilateral trading system.
Accordingly, the quotas came to an end and importing countries are no longer able to discriminate between
exporters.
EXERCISES
9.
Which is the most important method of valuation referred in the WTO Agreement on Customs Valuation?
10.
Explain briefly why is trade facilitation important for international trade and what is being negotiated on
trade facilitation in the Doha Round of Negotiations.
11.
What are the objectives of the Agreement on Import Licensing Procedures?
12.
What is meant by rules of origin and when are these rules used?
13.
What kind of investment measures does the TRIMS Agreement prohibit?
58
IV.
SUMMARY
In this Module, we examined most of the Multilateral Agreements on Trade in Goods as contained in
Annex 1A of the Agreements Establishing the WTO.
The General Agreement on Tariffs and Trade 1994 (GATT 1994) as one of the most important
Agreements contained in Annex 1A, sets out the basic goods-related obligations of WTO Members.
As a
modified/updated version of the original GATT 1947, it maintains the principal rules contained in GATT 1947,
such as the MFN and the national treatment principles. The GATT 1994 also contains the most important
rules regulating tariffs and non-tariff barriers, which are further elaborated in the corresponding Multilateral
Agreements on Trade in Goods. In addition, the GATT 1994 contains other instruments and Uruguay Round
Understandings. In the event of conflict between a provision of the GATT 1994 and a provision of another
Agreement in Annex 1A, the provision of that other agreement (i.e. not the GATT 1994) shall prevail to the
extent of the conflict.
While most sectors of trade were incrementally liberalized over the years, trade in agricultural products
remained subject to restrictions and distortions due to high tariffs, few tariff ''bindings'', import quotas,
market-distorting domestic subsidies and export subsidies.
The Agreement on Agriculture concluded
during the Uruguay Round negotiation, represented a major break with the past. Members committed to set
tariff bindings to agricultural products and assumed reduction commitments on tariffs.
committed to reduce trade-distorting subsidies in agricultural products.
Members also
It is important to remind that
agricultural products are also subject to other WTO Agreements, such as the Agreement on Subsidies and
Countervailing Measures and the Agreement on Safeguards (both explained in Module 5). However, in case
of conflict between the rules of the Agreement on Agriculture and any provision under other Multilateral
Agreement on Trade in Goods contained in Annex 1 A, the Agreement on Agriculture prevails.
All countries maintain SPS measures to ensure that food is safe for consumers, and to prevent the spread of
pests or diseases among animals and plants. However, SPS measures can constitute barriers to trade when
these are imposed for protectionist purposes.
Similarly, technical regulations, standards and conformity
assessment procedures, may constitute unnecessary barriers to international trade. The SPS Agreement
and the TBT Agreement recognize the WTO Members' rights to impose SPS and TBT measures to the
extent necessary to achieve legitimate purposes as envisaged in each Agreement, subject to some
conditions.
One of the most important conditions is that such measures cannot be applied in a manner
which would constitute a means of arbitrary or unjustifiable discrimination between countries where the
same conditions prevail or a disguised restriction on international trade.
The SPS Agreement and the TBT Agreement have common features, but also differ in substantive aspects.
While the TBT Agreement covers technical regulations aimed at the fulfilment of a non-exhaustive list of
legitimate objectives, the SPS Agreement covers only measures concerned with the protection of human,
animal or plant life or health. Under the SPS Agreement, WTO Members are obliged to use international
standards unless they can show a specific scientific justification based on a risk assessment. Instead, under
the TBT Agreement, WTO Members have the obligation to base their measures on international standards,
unless the relevant international standard is an inappropriate or ineffective means to fulfil a legitimate
objective.
Due to the above-mentioned differences between the two Agreements, it is important to
determine which agreement applies in face of a particular measure. In this regard, measures covered by the
SPS Agreement are expressly excluded of the scope of application of the TBT Agreement.
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Besides those measures regulated by the SPS Agreement and the TBT Agreement, there are other measures
that could constitute non-tariff barriers to international trade, including: the arbitrary adoption of customs
valuation rules; excessive fees and formalities connected with importation and exportation; discriminatory
administration of laws, regulations, administrative and judicial decisions of general application; the unfair
and inequitable administration of import licenses and pre-shipment inspection; as well as arbitrary rules of
origin.
All these measures are regulated by the corresponding WTO Agreements on Trade in Goods
contained in Annex 1A.
The objectives of these Agreements are to prevent those measures from constituting non-tariff barriers,
which would offset the effects of tariff concessions. They aim to ensure non-discrimination and transparency
in the course of the application and administration of these measures.
Some of them (such as the
Agreement on Customs Valuation and the Agreement on Rules of Origin) are intended to harmonize
Members' practice in particular fields of international trade so as to reduce transaction costs as well as to
eliminate arbitrary practices.
This Module also introduced the negotiations on trade facilitation, which are directed to clarify and improve
some of the provisions on non-tariff barriers contained in the GATT 1994 (freedom of transit, customs fees
and formalities and publication of trade regulations).
These negotiations are seen as a necessary
complement to broader liberalization efforts – essential to reap the full benefits of freer trade.
Lowering
trade-related transaction costs can result in a significant improvement in a country's ability to compete in
the global economy. This stands to all Members, but particularly to developing and LDC Members.
Finally, trade-related investment measures may impede international trade and competition.
The
Agreement on Trade-related Investment Measures (TRIMs) aims for the progressive liberalization of world
trade and to facilitate investment across international frontiers so as to increase the economic growth of all
trading partners, particularly developing country Members, while ensuring free competition. The Agreement
does not govern the issue of entry and treatment of foreign investment. Instead, it targets TRIMs which
provide discriminatory treatment between imported and exported products and thus, are inconsistent with
Article III:4 or Article XI:1 of the GATT 1994.
The TRMS Agreement does not address discriminatory
treatment between domestic and foreign investors or among foreign investors .
There are three Agreements contained in Annex 1A that we did not examine in this Module. These three
Agreements, which will be examined in Module 5, include the Agreement on Anti-Dumping, the Agreement
on Subsidies and Countervailing Measures and the Agreement on Safeguards. The Agreements contained in
Annex 1B (General Agreement on Trade in Services (GATS)) and Annex 1C (Agreement on Trade-Related
Aspects of Intellectual Property Rights (TRIPS) will be examined in Modules 6 and 7 respectively. It is worth
noting that the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU)
contained in Annex 2 applies to disputes concerning any measures contained in the Agreements mentioned
above. The DSU will be examined in Module 10, together with the Trade Policy Review mechanism (TPRM)
contained in Annex 3.
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PROPOSED ANSWERS
1.
Annex 1A attached to the Agreement Establishing the WTO contains the Multilateral Agreements on Trade
in Goods. These Agreements are the following:
2.
à
General Agreement on Tariffs and Trade (GATT) 1994;
à
Agreement on Agriculture;
à
Sanitary and Phytosanitary (SPS) Agreement;
à
Agreement on Textiles and Clothing (ATC Agreement);
à
Technical Barriers to Trade (TBT) Agreement;
à
Trade-Related Investment Measures (TRIMS) Agreement;
à
Agreement on the Application of Article VI of GATT 1994 (Anti-Dumping);
à
Agreement on the Application of Article VII of GATT 1994 (Customs Valuation);
à
Agreement on Pre-shipment Inspection (PSI);
à
Agreement on Rules of Origin;
à
Agreement on Import Licensing Procedures;
à
Subsidies and Countervailing Measures (SCM) Agreement; and,
à
Agreement on Safeguards.
The most important component of the GATT 1994 is the original GATT 1947 as rectified, amended or
modified up to 1 January 1995. Although the GATT 1947 is legally distinct from and has been superseded
by the GATT 1994, many of its key elements, including post-1948 legal instruments, have been carried
over to the GATT 1994 without change. The core provisions of the GATT 1994 (as a modified version of
GATT 1947) are the following:
à
The MFN principle (Article I);
à
the Schedule of Concessions (Article II);
à
the National Treatment principle (Article III);
à
disciplines on NTBs (Articles IV, V, VII to XVI);
à
trade remedies (Articles VI and XIX);
à
general and national security exceptions (Articles XX and XXI);
à
consultation and dispute settlement (Articles XXII and XXIII);
à
regional integration (Article XXIV);
à
negotiation and renegotiation of tariff concessions (Article XXVIII and XXVIII bis); and,
à
trade and development (Articles XXXVI to XXXVIII).
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3.
A general interpretative note to Annex 1A clarifies that "in the event of conflict between a provision of the
GATT 1994 and a provision of another Agreement in Annex 1A, the provision of that other agreement (i.e.
not the GATT 1994) shall prevail to the extent of the conflict". Consequently, in case of conflict between
a provision of the GATT 1994 and a special provision contained in any of the Multilateral Agreements on
Trade in Goods, the latter overrides the provision of the GATT 1994.
4.
Groundbreaking agreements were reached on trade in agriculture.
With respect to market access, all quantitative restrictions and other non-tariff measures affecting trade
in agriculture were eliminated and converted into tariffs. Each WTO Member has now a Schedule of tariff
concessions which include the "bound tariffs" for agricultural products.
With respect to domestic support, trade-distorting domestic support –in favour of agricultural producers
(often referred to as ''Amber Box'') should not exceed the commitment levels specified in Members'
Schedules and are subject to reduction commitments specified in Members' Schedules.
Export subsidies are generally prohibited under the WTO (except for those export subsidies consistent
with the special and differential treatment provisions), unless the subsidies are specified in a Member’s
list of commitments. The export subsidies listed shall remain within the limits provided in the Schedule
and cannot be transferred to other agricultural products. Moreover, where they are listed, the agreement
requires WTO Members to cut both the amount of money they spend on export subsidies and the
quantities of exports that receive subsidies.
5.
The Agreement on Agriculture recognizes the special situation faced by some Members in relation to food
security and provides for special and differential treatment for developing countries. It includes:
à
Significant improvement in market access conditions for agricultural products of interest to
developing country Members; and,
à
Ministerial Decision on Measures Concerning the Possible Negative Effects of the Reform Programme
on Least-Developed and Net Food-Importing Developing Countries.
For domestic support:
à
Lower reduction commitments & longer implementation periods (Schedules of Commitments);
à
greater de minimis allowance (ten per cent compared to five per cent for developed countries:
Article 6.4); and,
à
exclusion of some domestic support policies (measures of assistance) from the reduction
commitments (Article 6.2).
For export subsidies:
à
Lower reduction commitments & longer implementation periods (Schedules of commitments); and,
à
possibility to use transportation and marketing-cost reduction subsidies during a certain period
(Article 9.4).
6.
The SPS Agreement aims to improve the human health, animal health and phytosanitary situation in all
Members, while minimizing negative effects on trade. Thus, the SPS Agreement aims to strike a balance
between the two.
Annex A of the SPS Agreement defines SPS measures as those measures taken to protect human, animal
or plant life from risks arising from additives, contaminants, toxins or disease-causing organisms in their
food; or to protect a country from the damage caused by the entry, establishment, or spread of pests.
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The right to adopt SPS measures to achieve a self-determined level of protection is accompanied by basic
obligations. Members may adopt an SPS measure provided that: (i) the measure is applied only to the
extent necessary to protect human, animal or plant life or health; (ii) it is based on sufficient scientific
evidence; and, (iii) it does not constitute a disguised restriction on international trade.
7.
The TBT Agreement seeks to ensure that technical regulations, standards and conformity assessment
procedures do not constitute unnecessary barriers to international trade, while recognizing the right of
Members to take regulatory measures to achieve their legitimate objectives, inter alia: national security
protection of human health, protection of animal or plant life or health, protection of the environment,
prevention of deceptive practices.
This list of legitimate objectives is not exhaustive.
Members may
protect other legitimate objectives while using the measures prescribed under the TBT Agreement,
subject to the conditions provided therein (mainly non-discrimination and avoidance of unnecessary
obstacles to trade).
At the same time, it encourages the use of international standards, as well as the harmonization and
mutual recognition of technical regulations, standards and procedures for conformity assessment.
8.
Similarities - both the SPS Agreement and TBT Agreement:
à
Require a measure not to be more trade-restrictive than necessary and not to constitute a means of
arbitrary or unjustifiable discrimination between Members where identical or similar conditions prevail
or be applied in a manner that constitutes a disguised restriction on international trade;
à
à
encourage the use of international standards in order to promote harmonization;
contain requirements for the advance notification of proposed measures and the creation of
information offices (so-called transparency requirements);
à
contain provisions aiming at providing special and differential treatment to developing and
least-developed countries; and,
à
contain special rules on dispute settlement.
Differences:
à
Under the SPS Agreement, SPS measures may only be applied to the extent necessary to protect
human, animal or plant life or health from food-born risks, animal or plant-carried diseases and pests
(exhaustive list of objectives).
Under the TBT Agreement, technical regulations, standards and
conformity assessment procedures may be applied and maintained to fulfil a legitimate objective,
inter alia to protect human health or safety, to protect the environment or the prevention of
decesptive practices (non-exhaustive list of objectives); and,
à
under the SPS Agreement, WTO Members are compelled to use international standards unless they
can show a specific scientific justification based on an assessment of the possible risk. In contrast,
under the TBT Agreement, WTO Members have the obligation to base their measures on international
standards, unless the relevant international standard is an inappropriate means to fulfil a legitimate
objective.
9.
The Agreement on Customs Valuation provides that the primary basis for customs value is "transaction
value", defined in Articles 1 as the price actually paid or payable for the goods when sold for export to the
country of importation adjusted in accordance with Article 8 which provides, inter alia, for adjustments in
cases where certain specific elements are incurred by the buyer but are not included in the price. The
transaction value is the first and most important method of valuation referred in the Agreement.
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10.
Trade facilitation is seen as a necessary complement to broader liberalization efforts –essential to reap
the full benefits of freer trade. Some of the main problems traders face include excessive documentation
requirements, burdensome border-crossing procedures, transport and transit impediments especially for
landlocked countries, and lack of transparency and predictability in trade laws and regulations.
The
negotiations on trade facilitation address these problems. Lowering trade-related transaction costs can
result in a significant improvement in a country's ability to compete in the global economy. This applies
to all developing country Members and in particular to landlocked developing and LDC Members.
The negotiations on trade facilitation are aimed to: 1. clarify and improve relevant aspects of Articles V
(freedom of transit), VIII (fees and formalities connected with importation and exportation) and X
(publication and administration of trade regulations) of the GATT 1994; 2. technical assistance and
capacity-building (includes technical support and assistance during the negotiations and for the
implementation of the commitments resulting from the negotiations). According to paragraph 4 of Annex
D of the July Package, a TA programme has been established to assist WTO Members and Observers in
conducting trade facilitation self assessments.
11.
The main objectives of the Agreement on Import Licensing Procedures are to:
à
Simplify and bring transparency to import-licensing procedures;
à
ensure fair and equitable application and administration of such procedures; and,
à
prevent that procedures applied for granting import licenses have in themselves restrictive or
distortive effects on imports.
12.
Since many traded products include materials or components from more than one country, or are
products that underwent processing in several countries, rules of origin are applied to determine the
country of origin of an imported good.
The Agreement aims at the harmonization of non-preferential
rules of origins and at ensuring that such rules do not themselves create unnecessary obstacles to trade.
Rules of origin are important because they are used: (i) to determine whether imported products shall
receive MFN treatment or preferential treatment - the latter occurs, for example, when products come
from a free trade area (see Module 8); (ii) to implement instruments of commercial policy such as
anti-dumping and safeguard measures (see Module 5); (iii) to determine which countries are entitled to
import quotas (may have been filled for some supplying countries, but not for others); (iv) for the
application of labelling and marking requirements; (v) for statistical reasons; and (v) for government
procurement.
13.
The TRIMS Agreement recognizes that certain investment measures may restrict and distort trade. The
Agreement does not deal with the regulation of investment as such, but instead provides disciplines that
focus on discriminatory treatment of imported and exported products.
Members committed under the
TRIMS Agreement not to apply any investment measure which is inconsistent with Article III (National
Treatment) and Article XI (General Elimination of Quantitative Restrictions) of GATT 1994. An illustrative
list of TRIMs, considered inconsistent with these provisions, is annexed to the Agreement.
65