2. 2
The rule or convention of GATT requires that:
Any proposed changes in the tariff,or other types of
commercial policy of a member country,should not be
undertaken without consultation with other parties to the
agreement.
The countries that adhere to GATT should work towards
reduction of tariffs and other barriers to international
trade,which should be negotiated within the framework
of GATT.
5. GATT Principles: Non-Discrimination
Key rules--MFN and National Treatment Principles.
Most-Favoured Nation(MFN), embodied in Art. I:
A product made in one member country cannot be
treated less favourably than a like product originating
in any other country
Three areas of application under WTO: goods (GATT),
services (GATS) and intellectual property (TRIPs)
National Treatment, in Art. III having once passed
the border, foreign goods cannot be treated less
favourably than similar domestic goods in terms of
(i) internal (indirect) taxation and
(ii) non-tax policies (e.g. regulations)
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6. GATT Principles: Reciprocity
Rationale from the political economy literature:
Costs of liberalisation concentrated => loosing
industries organised
Benefits (although in the aggregate usually
greater than costs) dispersed lesser incentives
for consumers to defend expected welfare gains
Potential reciprocal sector-specific gains may thus
help sell trade liberalisation politically
To negotiate,a country has to gain more than from
unilateral liberalisation.
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7. GATT Principles: Enforceable Commitments
Liberalisation commitments useless if not enforceable.
Agreed-upon tariff commitments are enumerated in lists
termed Schedules of Concessions (Art. II)
Tariff ceilings are established
Members concerned cannot raise tariffs above bound
levels without negotiating(try to reach an agreement)
compensation with the principal suppliers of the
product concerned
If another government’s actions are
perceived(understand) to have the effect of
nullifying(make of no use) or impairing committed market
access => dispute settlement procedure.
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8. Elements of this procedure
Panel of impartial experts determines whether a
contested measure violates GATT/WTO or not
Since GATT/WTO is an intergovernmental agreement,
private parties do not have legal standing before its
dispute settlement body, only governments have the
right to bring cases.
Existence of dispute settlement procedure
precludes(prevent from happening) use of unilateral
retaliation(action taken in turn for an offense)
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9. GATT Principles: Transparency
Access to information on the trade regime of signatories
Internal transparency: requirement to publish national trade
regulations
External transparency: multilateral surveillance facilitated
by periodic country reports prepared by GATT/WTO
Secretariat (and discussed by its Council) so-called Trade
Policy Review (TPR) mechanism
Benefits of transparency, e.g. publishing TPRs and other
reports
Reduces pressure on the dispute settlement system
measures can first be discussed by the appropriate
GATT/WTO body before filing an appeal
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10. Strengthens GATT/WTO legitimacy(accordance with
the law) by informing civil society what is going on in
multilateral trade policy and what are the key
implications
According to studies in the 1990s, reduces trade-policy
uncertainty
Might otherwise result in low investment and growth
rates and shift to non-tradable
Reduces risk premium paid in capital markets for
likely trade regime(a government)/policy reversals.
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11. GATT Principles: Safety Valves
Government can restrict trade in specific
circumstances.There are three types of provisions/articles
(exceptions in GATT/WTO):
1. To attain noneconomic objectives: protect public health,
national security or industries so seriously injured by import
competition that social/political problems arise
2. To ensure “fair competition” often in conflict with market
access as its instruments are duties
Countervailing(Additional import duty imposed
to offset the effect of concessions and
subsidies granted by an exporting country to
its exporters.) duties on imports that have been
subsidised
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12. 12
Antidumping duties on imports that have been
dumped, i.e. sold at a price below the one charged in
the home market
1.To attain economic objectives
if serious balance-of-payments(A record of all
transactions made between one particular country and
all other countries during a specified period of time)
difficulties
or to support an infant industry (In economics, an
infant industry is a new industry, which in its early
stages is unable to compete with established
competitors abroad).
14. 14
Ever since World war2 the developing countries have
been expressing their dissatisfaction with the pattern of
world trade.This increased during 1960s.
The developing countries demanded for provision of
differential treatment to ensure that the world trading
system responds to the particular needs of the
developing countries.
Since 1970,the agreements designed to promote these
facilities were referred to as “differential”treatment.
15. Developing Countries:
India,China,Brazil,Egypt,Hongkong,Kenya,Korea,Iran,Iraq,
Malaysia,Mexico,Pakistan,Burma,Peru,Singapore,South
Africa,SriLanka,Thailand,etc..,
To improve trading following privileges were made:
- The right to renegotiate tariff buildings so as to raise tariffs
on products it desire to produce(infant industries)
- The privilege to use quantitative restrictions in balance-of-payments
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difficulties.
- A privilege to use any measure necessary to promote a
particular industry.
16. Continual reductions in tariffs helped spur
(incentives)very high rates of world trade growth during
the 1950s and 1960s — around 8% a year on average
Trade growth consistently out-paced production growth
The rush of new members during the Uruguay Round
demonstrated recognition of multilateral trading system
as the anchor for development and an instrument of
economic and trade reform.
GATT’s success in reducing tariffs to a low level,with a
series of economic recessions 1970-80’s drove
governments to devise other forms of protection for
sectors facing increased foreign competition
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17. High rates of unemployment and constant factory closures
led governments in Western Europe and North America to
seek bilateral market-sharing arrangements with
competitors and to embark on a subsidies race to maintain
their holds on agricultural trade
Both these changes undermined GATT’s credibility and
effectiveness.
The problem was not just a deteriorating trade policy
environment.
By the early 1980s the General Agreement was clearly no
longer as relevant to the realities of world trade as it had
been in the 1940s
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18. World trade had become far more complex and
important than 40 years before
The globalization of the world economy was
underway
Trade in services — not covered by GATT rules
Ever increasing international investments
Factors convinced GATT members that a new
effort to reinforce and extend the multilateral
system should be attempted.
That effort resulted in the Uruguay Round, the
Marrakesh Declaration, and the creation of the
WTO.
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