General Agreement on Tariffs

and Trade: Origins and

Overview
Origins and Overview
 Antecedents to GATT
• After World War II, as with other aspects of post war
planning- like the creation of the UN, the necessity in the
trade field for the creation of a regime of non
discrimination- of MFN treatment, prohibition of
quantitative restrictions and reduction of trade barriers
and open markets was felt.
• Churchill and Roosevelt along with other Allied Powers
felt that the failure of the US to join the League of
Nations and the disaster of the League that failed to
prevent the WW II required the creation of multilateral
(universal) organizations that could serve both as a
forum of negotiations, as a guardian of rules to prevent
future conflict and foster mutual and universal
agreement.
 Institutions Prior to GATT
• Agreement on the creation of- IMF and
World Bank was reached in July 1944 at
the Bretton Woods Conference.
• Agreement on creating an international
Civil Aviation Organization was reached
on Chicago in December 1944.
• Agreement on the UN Charter was
reached in San Francisco on April 1945.
 Birth of GATT- Precursor
• In November 1945, the US government issued a
document titled ‘Proposals for Expansion of
World Trade and Employment,’ for consideration
by an International Conference on trade and
Employment, resulting from a consensus b/t US
and UK discussions.
• Most important aspect of the Proposals: Detailed
charter/code of conduct relating to governmental
restraints on International trade and creation of
the International Trade Organization.
 Gist of the Proposed Code
• Affirmation of the principle of unconditional most
favoured nation treatment and prohibition of quantitative
restrictions, (subject to several restrictions, including
agriculture).
• Limiting subsidies, conforming state trading to market
conditions, prevention of cartels, limited resort to
commodity agreements and exceptions to countries with
balance of payment problems
• International Trade Organization (ITO) was to administer
the code, to provide a forum for settlement of disputes,
collection/dissemination of trade statistics and
preparation of guidelines for customs valuation.
 UN ECOSOC
Proposal for International Conference on
Trade and Employment was taken up by
the UN ECOSOC at its 1st meeting in Paris
in February 1946.
In accordance with a resolution introduced
by the US, ECOSOC appointed a
Preparatory Committee of 19 countries to
draft the document to be considered at the
conference.
 Stages of creation of the Draft
Charter
• Preparatory Committee met in London on October-
November 1946, to continue work on the draft charter
suggested by the US.
• 1st draft of the Charter for International trade
Organization was produced at the London meeting
• 2nd draft was produced by a technical drafting committee
that met from January-February 1947 at UN temporary
seat in Lake Success, NY
• 3rd draft- Full Preparatory Committee met in Geneva from
April –August 1947 for the draft, which became the basis
for a Plenary Conference on trade and Development
convened by the UN in Havana in November 1947.
 US Initiative
• After the ‘Proposals’ were issued the US issued
an invitation to fifteen countries to enter into
negotiations for conclusion of multi lateral trade
agreement.
• 8 other countries joined and engaged in a tariff
cutting negotiation, simultaneously as the prior
drafting sessions for the ITO were going on.
• Negotiations were on a ‘one on one’ sessions
focusing on products where one was an
important market and other side was a principal
supplier, with concessions on products ‘paid for’
based on reciprocity.
 US Initiative Cont’d
• Total of 123 sets of negotiations took place in
Geneva in the period of April-October 1947
among 23 countries, 22 involving the US. About
50,000 items of trade were considered that
resulted in either a substantial reduction, low
rates of duties or duty free entry subject to
binding obligations.
• The General Agreement was opened for
signature on October 30, 1947, and entered into
effect-provisionally- on January 1, 1948.
 Consequences of the Negotiations
• 1st- Pace and volume of the negotiations were
maintained because they were all held at the same time,
spurred by the US statute that gave the executive branch
negotiating authority, which was due to expire in June
1948. Geneva rounds set the precedent for subsequent
rounds of GATT.
• 2nd- All ‘concessions’ i.e., negotiated reductions and
binding tariffs were generalized to all participants, in
implementation of MFN.
• 3rd- concessions were recorded on a single document-
General Agreement on Tariff and Trade which comprised
of binding tariff schedules and a code of conduct
designed to Safeguard (provisionally) the undertakings
given and a common standard of behaviour.
 Conference on Trade and
Employment (ITO)
• Havana Conference on Trade and Employment
opened on November 21, 1947.
• Agenda: Importantly, an elaborate structure for
the International trade Organization,
employment, economic development, restrictive
business practices, commodity agreements,
trade (commercial policy).
• After acrimonious debate, Final Act of the
Havana Conference embodying the ITO was
signed on March 24, 1948, on behalf of 53
states.
Reasons for non-implementation of
ITO Charter
• US Congress showed little enthusiasm for the Final Act
after the initial initiative. Other countries followed suit,
and waited for the US to first ratify the Charter.
• US was ambivalent, as they thought that the Charter
may impair support for high priority issues of foreign
affairs at the time, like the Marshall Plan for
reconstruction of Europe after WW II, establishment of a
program of controls on export of strategic materials and
war with Korea. ITO faded away.
• GATT 1947, provisionally crafted with some adjustments
agreed to at Havana, and not requiring parliamentary
approval remained in effect till 1995 till WTO came into
existence and included the GATT 1947 as the basic text
with later additions.
 Overview of GATT:
Architecture- Reasons for its
longetivity
• 1st- The problem of formal ratification, before domestic
implementation and changes in national substantive laws
by countries, especially the US., led the signatory states
to sign a Protocol of Provisional Application, with the
intention that formal ratification would be directed to the
forthcoming ITO Charter. But this provisional application
has outlasted all others as the primordial international
trade agreement, because of its depth and flexibility to
changing times, for 47 years. Responsibility of keeping
the informal structure of GATT together to change
policies, conduct meetings and grant waivers, etc., was
all up to the ‘CONTRACTING PARTIES.’
 Architecture cont’d
• 2nd- Protocol required signatories to apply Parts I and III without
reservation but Part II (‘only to the extent not inconsistent with
existing domestic laws).
• Part I contained the most basic provision- MFN treatment (Art. I),
binding of scheduled concessions (Art. II).
• Part III contained ‘procedural provisions’ like customs unions and
FTA’s (Art XXIV), waivers (Art XXV(5)) tariff negotiations (Art.
XXVIII).
• Part II contained substantive provisions of code of conduct- national
treatment in aspects like internal taxation regulation (Art. III),
antidumping and countervailing duties (Art VI), quantitative
restrictions (Art XI), measures to safeguard balance of payments
(Art. XII-XV), but subject to a ‘grandfather clause,’ which provided
national legislation inconsistent with GATT clauses was not unlawful
if required by legislation existing as of October 30, 1947, for original
and date of accession for states joining later.
 Major Principles:

• 1. Universal MFN:
• Trade to be conducted on basis of non-discrimination.
• All contracting parties undertake in Art. I the obligation to
apply duties on imports of goods equally without regard
to origin of the goods
• 2. No Increased trade barriers:
• Governmental restraints on goods movement-minimum
and if changed should only be reduced.
• Art. II- all contracting parties to apply to others duties set
forth in Schedules submitted at the close of tariff
negotiations. Bound duties may be subject to unbinding
after discussions, every 3 years but balance in
concessions maintained.
 Principles cont’d
• 3. Tariffs Only as the accepted form of trade
restraints:
• Tariffs are easy to understand than other
quantitative restrictions like licenses, and other
NTB’s like quotas that are prohibited subject to
exceptions (Art. XI)
• Tariffs not prohibited- tariffs formulated as a % of
the value of the goods imported- ad valorem
tariff; specific tariffs i.e., based on per unit or
some other measure.
• Tariffs prohibited- tariff measured by the value of
competing products of domestic origin (Art VII).
 Principles Cont’d
• 4. National treatment:
• Internal Taxes, other regulations not to be imposed
discriminatorily b/t domestically produced and imported
products.
• States not barred from imposing sales taxes or
regulatory requirements, but neither in thought or effect
shall there exist a distinction b/t burden borne by
imported goods compared to domestic goods.
• US insisted upon this principle at Havana over
substantial objection.
• Together with MFN the national treatment principle
emphasizes tariffs as the sole accepted protectionist
instrument and non discrimination against goods based
on the country of origin.
 Principles Cont’d
• 5. Regular Negotiations:
• Regular negotiations b/t Contracting parties to
lower trade barriers on basis of reciprocity and
multilateral framework (Art. XXVIII).
• ‘Substantial Reductions of general tariff levels,’,’
was only included into the text of GATT at the
Review session held in Geneva in 1954-5, as it
was earlier thought that more regulations would
be included in the ITO Charter that failed to
materialize.
 Qualifications/ Exceptions
• (a) Preservation of Existing Preferences:
• Discussions b/t the US and UK preceding the war was
included as the qualifying Article I, (the fundamental
MFN article), by express authorization to maintain the
Imperial and Commonwealth preferences, and
comparable arrangements with other overseas
territories.
• Although, undermining MFN principle to some extent,
preferences were allowed to assuage te desire of
colonial powers to preserve some form of economic ties
with the countries, where such ties were dissolving.
• However, Article I cautions that the margin of preference
cannot be increased from that prevailing at the start of
the Geneva Conference, April 10, 1947. Declining role.
 Exceptions Cont’d
• (b) ‘Existing Legislation’ and Protocol of
Provisional Application:
• Contracting states were not obligated to change
existing legislation with respect to rules in Part II
relating to subsidies, Dumping, state trading,
customs valuations, national treatment and
provisional quantitative restrictions.
• One of the reasons why even the US a joined
GATT along with about a 100 other countries
acceding later, was b/c countries could join
GATT without submitting the Agrt., to their
individual parliaments.
 Exceptions Cont’d
• GATT panels interpreted the ‘not
inconsistent with existing legislation,’ to
only justify a measure contrary to GATT
provision that is required by national
legislation and as contrasted with merely
being authorized.
• Protocol does not include re-enacted laws.
 Exceptions Cont’d
• Eg: US anti subsidy statute adopted in
1897 and remained in effect as part of the
Tariff Act of 1930 until 1979. Statute
provided for imposition of countervailing
duties on subsidized imports- would have
violated GATT Art. VI(6) but for the
Protocol. Became an issue of contention
at the Tokyo round when the Subsidies
Code was discussed.
 Exceptions Cont’d
• (c) Political Exclusions (Art.XXXV):
• First proposed by India, Article XXXV added in 1948,
provided that when a state joins GATT it could announce
that it would not enter into tariff negotiations/and not
have GATT apply in relation to that state. Also,
contracting parties could not veto the accession of a new
party, but could announce its inapplicability of GATT to
that state.
• Eg: Abused when about 15 countries having no trade
relations with Japan at that time, like Australia, UK, the
Netherlands, France and Belgium, invoked Art XXXV
during Japan’s accession in 1955. Later rescinded, but
as part of negotiations for Japan to liberalize imports.
 Exceptions Cont’d
• (d) National Security (XXI):
• According to Art. XXI, nothing in the Agreement is to
prevent a contracting party from taking any action ‘which
it considers necessary for the protection of its essential
security interests.’
• Potential for misuse, since interpretation was subjective
with no objective criteria listed. But, its invocation by
countries was deemed reasonable based on facts
surrounding individual cases.
• Eg: US/Nicaragua during the Sandinistas control of
Nicaragua, and guerilla activities in neighbouring
countries (1984-5) EC/Yugoslavia after the breakup of
the erstwhile Yugoslav federation.
 Exceptions Cont’d
• (e) ‘General Exceptions:’
• Art. XX is designed to specifically justify-but to limit- exceptions to
general provisions of GATT. It includes reasonable restraints on
imports on the basis of health, safety, public morals, and subjects
excluded from GATT like, trade in gold and silver, national artistic
measures, products of prison labour, importantly, measures relating
to protection of laws and secure compliance relating to protection of
patents, trademarks and copyright, prevention of deceptive trade
practices and measures relating to the conservation of exhaustible
natural resources.
• Exceptions to follow the non discrimination principle and GATT
panels suggested that the importing state bears the burden to prove
that the challenged measure was not protectionist in nature but
necessary to accommodate state’s purpose, i.e., less restrictive
trade measures would not accomplish the purpose.
• Remained problematic till the Uruguay Round and agrts., relating to
Trade, sanitary and Phytosanitary Measures were enacted.
 Exceptions Cont’d
• (f) Permissible Quantitative Restrictions:
• According to Art. XI paragraph (I) the principle that all
quantitative restrictions are prohibited (see Sec. 3.3(b)
para. (4) supra,) paragraph (2)(c) permits contracting
parties to impose restrictions on imports on any
agricultural or fishing product when ‘necessary for
enforcement’ of a governmental program restricting
production.
• Art XI(2)(c)- permitted quota ‘shall not be such as will
reduce the total of imports relative to the total of
domestic production, compared to the actual proportion
effected…in absence of restrictions.’ Mere aim to
increase domestic market share is not a valid reason.
• But, domestic price support progs.- permitted justification
 Exceptions Cont’d
• 2nd reason for import quotas- ‘to safeguard its external
financial position and its ‘balance of payments’ (Art XII).
• In early stages, critics of GATT felt that Art XII could
undercut Art. XI, as most countries, other than the US
had significant balance of payments problems, but by
1960s major currencies had become convertible and Art.
XII did not effect the basic thrust of Art XI.
• Restriction on Quotas- fear of contravention with the non
discrimination cls. GATT architects stated under Art XIII
that quantitative restrictions to be applied on a non
discriminatory basis, with provision for public notification
and consultation with interested suppliers.
 Exceptions Cont’d
• (g) Escape Clause: Art. XIX authorizes emergency
action to impose a restriction on import of a particular
product if, ‘as a result of unforeseen developments and
of the effect of the obligations incurred by a contracting
party, including concessions, any product is being
imported into the territory of that contracting party in
such increased quantities as to cause or threaten
serious injury to domestic producers of like or directly
competitive products.’
• Efforts to streamline this ‘safeguard mechanism’ with
respect to defining injury, causation, if measures would
be subject to the MFN cls. succeeded in the Uruguay
round, and the 1994 Subsidies Code did not require the
tariff concessions to be the causation factor.
 Exceptions Cont’d
• (g) Customs Unions & Free Trade Areas:
• Debate- CUs and FTAs by definition,
inconsistent with the MFN principle but at the
same time they entail eliminating trade barriers
inter se, and thus consistent with GATT
objectives.
• In 1947-48 the Netherlands, Belgium,
Luxembourg, founding members of GATT were
already part of a CU and the idea of a ‘unified
and democratic greater Europe,’ was being
debated in the context of the reconstruction of
Europe.
 Exceptions Cont’d
• Art XXIV, as revised at the first of the
Contracting parties during the Havana
Conference in 1948, was to permit contracting
parties to enter into CUs and FTAs provided-
• (i) that the arrangement must cover substantially
all the trade b/t/ amongst parties (to avoid
preferential or discriminatory deals);
• (ii) on the whole, tariff and other non tariff
barriers be no higher or restrictive than the
average of tariffs of the constituent territories
before formation of CUs or FTAs.
 Exceptions Cont’d
• (iii) if formation of CUs leads to the unbinding of
prior bound duties then there is an obligation to
negotiate with the beneficiaries of the
concessions , in order to re-establish the prior
balance.;
• (iv) if the CU is to be phased in there must be a
plan and schedule to do so within a reasonable
timeframe.
• Eg: European Economic Community (EEC) was
the most important CU during the the age of
GATT.
• NAFTA is one of the most successful CU.
 Exceptions Cont’d
• (h) Dumping and subsidies:
• GATT drafters generally agreed that ‘dumping,’
defined, ‘sales by an exporter at prices less than
the home market price,’ was an unfair trade
practice and anti dumping duty by a importing
country to offset was an apt defense.
• Drafters were not, though, in agreement that
government subsidized exports was unfair, but
they did agree that an importing country was
entitled to offset the negative effect by imposing
a countervailing duty to balance the market.
 Exceptions Cont’d
• Fears of anti dumping and countervailing duties
becoming protectionist. Import quotas and
punitive tariffs were not accepted.
• Anti dumping and Countervailing duties
permitted as an exception to the MFN and
bound duty obligations, provided duties did not
exceed the amount of dumping or subsidy and
provided authorities of the importing country had
made an explicit determination that as a result of
dumping/subsidy an industry in the importing
country had suffered or was threatened with
material injury (Art VI(6)).
 Exceptions Cont’d
• Subsidies Article was expanded as a result of
the 1954-5 review session of the GATT to
include a statement that a subsidy on the export
of a product may have harmful effects for the
other contracting parties, a statement that
contracting parties should seek to avoid
subsidies on primary products, but that in any
event such subsidies shall not be applied to
bestow more than an equitable share of world
export trade in that product and for other
products CPs shall cease to grant subsidies.
 Exceptions Cont’d
• (i) Waivers:
• Art XXV(5)- waivers could be granted by CPs acting
together, upon approval by 2/3 majority, ‘in exceptional
circumstances not elsewhere provided for in this Agrt.’
• Benefits- avoidance of conflict of priorities.
• Eg: European Coal and Steel Community was granted a
waiver in 1952, a CU, contrary to Art XXIV. Waiver was
subject to detailed annual reporting requirement and
commitment that customs duties would be lower that
general incidence. When EEC was formed in 1958 Art.
XXIV was applied without any waiver, being sought.
• US had waivers covering virtually all agri’l products for
40 yrs till phased out pursuant to agricultural settlement
reached at the Uruguay round since granted in 1955.
 Dispute Settlement
• Originally conceived, GATT (and ITO) could facilitate
disputes b/t CPs if possible through direct consultations,
and help of the secretariat or a small group of neutral
GATT experts to act as an arbitration panel.
• Art XXII- each CP ‘shall accord sympathetic
consideration’ to representations regarding any matter
that may be made by another CP.
• Art XXIII- if any CP should consider that ‘any benefit,’
accruing directly/indirectly is being ‘nullified/impaired,’
matter may be referred to CPs, to make
recommendations or give an appropriate ruling. No
procedures laid out, but if CPs think matter is serious
then successful CP can suspend the application of any
trade concessions on the aberrant CP, as determined.
Brief points- Dispute Resolution
• 1st- If determined, a challenged measure violated GATT/
GATT Codes, the preferred solution is a
recommendation that the aberrant state modify or
withdraw the violating act. Retaliation in the form of the
complainant state withdrawing some of the concessions
was disfavoured as it would result in two barriers to
trade.
• 2nd- The previous dispute resolution through panels
made up of delegates from third countries, with the
Secretariat participating gave way to the legal division
after 1981.
• 3rd- Object-restoration of balance of payments.
Retaliation- rare, and only for the purpose of
compensation.
 Evolution of GATT and GATT Law
GATT Negotiating Rounds
First Five Rounds (1947-61)
• Manner of negotiating: Each pair of countries
exchanged ‘request list,’ and subsequently
exchanged ‘offer lists.’ After the lists were
exchanged, they were made available to all
participants, to be taken into a/c in their own
bilateral negotiations and preparation of revised
lists. If an exporting country may benefit from a
proposed concession, importing country might
make its offer subject to being ‘paid,’ by potential
beneficiaries.
• Except, the 1st round, the subsequent rounds
had small but significant reductions in duties.
 Negotiating Rounds Cont’d
• The 1st round, held in Geneva, simultaneously
resulted in the drafting of the General Agrt., in
April-Oct., 1947 and had an underlying theme
that the Contracting Parties should meet
regularly to negotiate tariff reductions and other
trade barriers.
• 2nd and 3rd round (Annecy, France, 1949;
Torquay, England 1950-51)- modest tariff cutting
and conditions of new accessions, including the
recently established Federal Republic of
Germany.
 Negotiations Cont’d
• 4th Round- restrained by the fact that in the
Trade Agreements Extension Act, 1955, the US
Congress had authorized President to negotiate
duty reduction by only 15% of the duties in effect
on January 1, 1955 or to 50 % ad valorem.
• Due to the fact that the US could not offer
greater reductions, the MFN and reciprocity
principle u/GATT meant other states could not
offer substantially more reductions.
 Negotiation Cont’d
• Close of the 4th round the Benelux countries,
France, Italy and Federal Republic of Germany
met in Venice to consider and approve Spaak
report for the est. of the European Common
market.
• Creation of the European Eco. Market changed
but did not weaken GATT.
• European Eco. Community created pursuant to
the Treaty of Rome was in complete compliance
with the CU requirements under GATT, and
became a principle force to be reckoned with in
GATT.
Negotiations Cont’d (Dillon Round)
• 5th ( Douglas ‘Dillon’ Round) : 2 aspects-
• Another effort in multilateral tariff cutting,
continuing from the prior rounds, but encouraged
by the new US negotiating authority, permitting
duty reductions of up to 20% from the January
’58 level.
• Negotiation b/t the European Community and
other GATT CPs u/Art. XXIV(6) about
compensation for unbinding of duties of member
states of the EEC, bound in prior GATT rounds.
 Dillon Round Cont’d
• EEC position- common external tariff on an item
created by arithmetic average of previous duties
of constituent states, as called for by Treaty of
Rome, did not require any compensation to third
countries, as it would balance out among the
member states.
• Rejected. Principle was established that 3rd
parties were entitled to make ‘item-by-item
claims for compensation pursuant to Art.
XXIV(6) when CU was established/enlarged with
admission.
 Results of the Dillon Round
• Aside from agriculture, Dillon XXIV(6) round was
regarded as successful, as the EEC was integrated into
GATT, with no friction.
• Reduction of duties modest, and product-by-product
negotiation-tedious. EEC had used across the board
adjustments to complete eliminations inter se in
transition and had suggested the same technique to
GATT, but such a technique was inconsistent with US
negotiating authority, which required individual reports by
US Tariff Commission. Evinced interest to find an
acceptable alternative.
• Object- preserve reciprocity and Non discrimination.
Impetus from the US in the form of Trade Expansion Act
of 1962 that stimulated the Kennedy Round.
 Kennedy Round (1964-7)
• US embraced EEC politically, as a way to solve the
Germany Problem and a way to strengthen Western
democracies against the threat of Communism, but
economically it feared that EEC would become a self
directed, high tariff zone detrimental to the US trading
interests.
• Trade Expansion Act of 1962, in the words of President
Kennedy, was to be ‘a new and modern instrument of
trade negotiations; as the architects understood the
effect of CUs even when they meet the Art. XXIV
requirements may deprive an outsider of the MFN and
concessions previously paid for.
 Kennedy Round Cont’d
• US government wanted to seek to limit the ‘trade
diversion effect’ that will depend on the height of the
common external tariff. This meant moving away from
the prior article-by-article negotiation and securing
authority for across-the-board/ linear negotiations.
• US Cong. Granted authority to reduce duty by up to 50%
of rate existing on July 1, ’62 until June 30, ’67.
• The decision to hold a new round of trade negotiations
on the principle of linear or across-the-board tariff
negotiations was finalized in a formal Ministerial
Decision, in May 1963.
• The manner in which tariff rates could be uniformly
brought down, so as to have reciprocity b/t states was a
problem, but states remained keen on implementing it.
 Kennedy Round Cont’d
• Issue of reciprocity became dominant in the
negotiations, when the EC pointed out that the
tariffs on industrial products- by averaging
member countries’ tariffs in the process of
forming a common external tariff were in the
medium range of 10-20% ad valorem, whereas
British and US tariffs were widely distributed,
and a 50% linear cut would leave most of its
tariffs at relatively low levels compared to UK
and the US, who would still constitute substantial
restraint.
 Kennedy round Cont’d
• Solution: ‘écrêtement’- leveling of the peaks- a
formula whereby the contracting parties would
agree on target rates by major categories, and
then would undertake to cut their duties by an
agreed % of the difference b/t the actual and the
target rate.
• But, the above formula was unacceptable as
inconsistent with reciprocity and the US law
requirements of ‘mutual trade benefits.’
• As linear reductions might fall unevenly on
different products, tariff structures and countries,
reciprocity in this context was not discussed.
 Kennedy Round Cont’d
• US Congress granted the executive negotiating power,
i.e., 50% reduction for 5 year periods, but excluding
products subject to the escape cls., and national security
provs., thus excluding about 12% of imports from
negotiations.
• Compromise Ministerial meeting- tariff negotiations
would be based upon a plan of substantial linear tariff
reductions with bare minimum of exceptions which shall
be subject to confrontation and justification. Linear
reductions were to be equal, and in case of significant
disparities, they will be based on special rules of
general/automatic application.
• Disparities- partial return to bilateral negotiations, with
offers subject to reservations.
 Results of the Kennedy Round
• Negotiating round was a hybrid of product-
by-product and linear negotiations.
• Resulted in duty reductions on 20% of the
dutiable products of the industrial
countries, about 2/3rd by 50% or more.
• But, principle of reciprocity remained
something to aspire for economically at
the close of the round.
 Tokyo Round and the Separate
Codes (1973-9): Expanded Agenda
• In the aftermath of the Kennedy round and its results that
became fully effective in 1970s, tariffs on industrial
products had been reduced substantially.
• The new item on the agenda that needed attention was
the Non Tariff Barriers.
• A Joint Declaration by the US and EC to the Director
General of GATT urging a new round of negotiations was
issued in February 1972, and through a formal Ministerial
Meeting in Tokyo in September 1973, another round was
declared open.
• Declaration stressed- Overall Reciprocity and adherence
to MFN cls.
 Separate Codes and MFN
• Overall reciprocity and well-balanced package
suggested that since equality in all agreements
is not possible, parties should aim for an overall
settlement satisfactory to all participants.
• Eg: A CP might agree to open up opportunities
for non-nationals to bid for its govt., procurement
projects to a greater extent than its own
nationals would be allowed in the other country,
as a ‘concession,’ to enable it to prevail on the
issue of dumping.
 Separate Codes and MFN Cont’d
• Industrial Countries- US, UK, EC, Canada and Japan
were interested in all the subjects on the agenda for
negotiations, many other countries had no interest in
NTBs.
• Therefore, to assuage all countries including the ones
not in favor of some of the proposals set for negotiations
on the agenda, the idea of developing ‘codes,’ nominally
in the implementation of provs., of the General Agrt., to
create more specific understanding came up.
• Although codes would be open to all CPs, no particular
no., of signatories would be required to bring them into
effect. Codes would be binding only on signatories and
they could pick the ones they wanted to adhere to.
 Codes and MFN Cont’d
• Industrial states understood that such non compulsory
codes, to some extent undermined the claim of GATT as
a universal orgn.
• Government Procurement Code and Subsidies Code
that conferred benefits on signatories, replaced the
principle of unconditional MFN with a form of conditional
MFN, top some extent.
• Advantage of Separate codes- international legislation
could be completed in time, a a package deal could be
put together where benefits granted, could be used to
offset a perceived unsatisfactory result for that state on
another subject.
 Effect of Conditional MFN
• Although the conditional MFN cls. And the separate code
were designed to offer incentives for CPs to sign on,
they had negative repercussions as well.
• Eg: in return for a stricter definition of subsidies and
prohibition of export subsidies o non-primary goods in
the Subsidies Code, the US agreed to amend its law to
require independent finding of material injury to a
domestic injury before imposing a countervailing duty.
But, Brazil abused this benefit, by signing on to the agrt.,
as it had a vast subsidies program and wanted to
prevent US from imposing countervailing duties on its
exports.
• Left a bad taste, but the Tokyo round Codes bridged the
gap b/t GATT 1947 to GATT 1994.
 Achievements and Failures of the
Tokyo Round
• Final Act of the Tokyo Round was submitted for
signature on April 12, 1979. All industrial
countries signed, but only Argentina, amongst
the developing countries signed at first, as a
silent boycott to show their disappointment at the
minor role that developing countries played, but
later in that year more countries signed after a
resolution was passed to ensure ‘unity and
consistency,’ of GATT & that existing
rights/benefits would be upheld and not affected
by these separate agrts.
 Achievements and Failures Cont’d
• Greatest achievement- Maintenance of ‘unity and
consistency’, in the face of other uncertainties like the
collapse of the international monetary system, recession
and energy crises throughout both the developed and
less developed world.
• International legislation on Subsidies and Countervailing
Duties, on Dumping and Anti Dumping, Govt.
Procurement, Technical Standards, Customs Valuation
and Import Licensing. These agrts., contained
substantive rules, and established committees of
signatories to oversee their implementation and dispute
settlement as well. The fact of creation of a large body of
law that was technical and important is the major
achievement of the Tokyo Round
 Tariff Cutting u/Tokyo round
• Although not the principle issue on the agenda, it
was understood that agricultural tariffs would not
be subjected to any tariff cutting formula.
• Tariff cutting principle- higher the initial tariff,
higher the % by which it would be cut, subject to
an 8 year period of staging.
• In spite of agricultural exceptions and others, the
principle of linear tariff reductions was accepted
and overall reciprocity was the guiding principle.
 Failures of the Tokyo Round
• Biggest drawback- Failure to achieve agrt., on Code of Safeguards,
i.e., measures of relief against sudden and unforeseen imports of a
given product, in the form of a quantitative restraint. Safeguards
were imposed by importing state acting alone, or agrt., b/t importing
and exporting states, or by industries in one/both countries with the
tacit approval of the govts.
• States agreed that an international discipline for safeguards was
needed, and several versions of draft Code or an ‘Outline of an
Arrangement’ on safeguards was published near the close of the
Tokyo Round.
• CPs agreed that serious injury to domestic products was required,
but ‘the cause,’ or ‘principle cause,’ was being debated.
• Most argued issue- ‘Selectivity.’ Whether safeguards must be
imposed on an MFN basis or could be imposed against a source of
increased/excessive import only?
• EC wanted safeguards imposed selectively, developing countries,
including Japan were not in favour and US was in the middle.
 Uruguay Round (1986-93)
Heavy Agenda for the Round
• In 1982, even before the developments from the Tokyo round were
tried and tested, US urged another round of GATT negotiations.
Supporters sought to undercut the protectionist trends in the US and
chose to focus on new areas for the first time- services, IP and
investment.
• US urged that the new areas, along with agriculture and safeguards
be the agenda for the new round.
• Opposition came from the developing countries who felt let down by
the Tokyo round and EC, who feared that its ‘Common Agricultural
Policy,’ would be in jeopardy.
• US persisted, and in 1985, a Preparatory Committee was charged
with drafting a program for a new GATT round for submission at the
Ministerial Meeting.
• Ministerial Meeting- Convened at Punta del Este in September 1986.
, but was not harmonious to begin with. After 5 days of arguments, a
Ministerial Declaration was agreed to initiating the 8th round of
Multilateral trade negotiations.
 Heavy Agenda Cont’d
• Most ambitious round dealing with tariffs, NTBs, trade related
aspects of investment regulations; of IP and of services, including
banking, a/cing, insurance, shipping and even legal services.
• Reform trade in agriculture, and reduce the pattern of subsidies and
overproduction in some countries, while famine existed in others.
• Address the safeguards problem and bring trade in textiles under
the nominal GATT regime.
• ‘Standstill’- commitment not to take any trade restrictive/distorting
measure, or take any measure in exercise of GATT rights ‘that
would go beyond requirement,’ to remedy specific situations.
• ‘Rollback’- elimination of trade restrictive/distorting measures
previously taken without requesting GATT concessions.
• At the behest of India and Brazil, negotiations on trade in services
was separated into Part II of the Declaration.
• US proposed a more definite and predictable method of enforcing
rules and resolving disputes. (dispute resolution).
 Developments of the Uruguay
Round
• 15 subjects, both old and new were the topics of
negotiation groups. After meetings in 1987 and 1988, a
Midterm Ministerial meeting was held in Montreal and
agrt., was reached on 11 out of 15 topics. 4 topics
evaded any agrt.,- agriculture, textiles, protection of IP
and safeguards. A final meeting Ministerial meeting of
the Uruguay round was to be held at Brussels in
December 1990, and the 4 contentious topics would also
be negotiated.
• July 1990- Group of Seven Eco., Summit held in
Houston was stormy as US wanted reduction/elimination
of subsidies of the Common Agricultural Policy followed
by the EC in 3 imp., elements- levels of domestic
support, import barriers, and export subsidies.
 Developments of the Uruguay
Round Cont’d
• The developing countries, made it clear that that
if they were not granted greater access for their
agricultural products by the industrial countries,
they were not going to open their markets to
Western services, liberalize investment regimes,
or grant IP protection (including patents on
pharmaceutical and software).
• Warning in the Punta del Este declaration
against ‘unwarranted cross sectoral demand,’
was disregarded. Trade in agriculture and
agricultural subsidies seemed to be the most
contentious issues.
 Developments of the Uruguay
Round Cont’d
• November 1990- trade ministers from 107 countries met
in brussels to bring the Uruguay round to a conclusion,
but US wanted precedence given to security concerns,
EC tried to buy out the Cairns Group, with individual
concessions, but to no avail. Latin American Countries
withdrew their delegates from working groups on IP and
services to protest the deadlock on agriculture.
• GATT groups continued to meet, and at year end 1991,
Director-General, Arthur Dunkel issued a
Comprehensive Draft Final Act, a document containing
either agrts., or feasible compromises. At a first appraisal
meeting scheduled for January 1992, much of the draft
was tacitly agreed, with the understanding that nothing is
agreed, unless everything is agreed.
 Developments Cont’d
• Agriculture and particularly efforts to limit the subsidy
programs of the European Community, turned out to be
a major and continuing obstacle in 1992, but 3 elements
led to major eventual changes. The proposals are-
• (i) that the Balkanization of GATT law of the Tokyo round
be reversed and all agrts., to be signed by all parties.
• (ii) Integrated system of dispute settlement, covering
GATT, and inclusive of all the associated agrts., and
codes with authority to9 retaliate.
• (iii) GATT to be placed in a firm organizational footing,
what eventually became the WTO.
 Final Stage
• After NAFTA was passed, a renewed effort to
complete the Uruguay Round was made. The
continuing controversy over agriculture was
resolved with EEC agreeing to cut back on
export subsidies more slowly, than previously
understood, in return for imposed access to the
European market for the US and other suppliers.
• On December 15, 1993, last day of the ‘fast
track authority,’ of the US executive branch, the
successful completion of the Uruguay Round,
covering important new areas of world economy
was announced, by DG, Peter Sutherland.
 Summary of the Negotiating
Rounds
• (1947-61)- First 5 rounds- Emphasis was on tariff
reduction based on MFN treatment and ‘mutual
exchange of benefits,’ (reciprocity).
• Kennedy Round (1964-7)-attempt for linear tariff
reductions based on reciprocity.
• Tokyo Round (1973-9)- crafting rules applicable to NTBs
affecting trade in goods, and negotiation of codes
(agreements) on subsidies, antidumping and
countervailing measures, govt., procurement, customs
valuation.
• Uruguay Round (1986-93)- CPs moved well beyond
trade in goods to include services, IP, transnational
investment, agrt., on safeguards, agrt., on trade in
agriculture and the creation of the WTO.
 GATT and Developing Countries
• Why has GATT failed to address the
development needs of developing countries?
– a) the passive and defensive role of developing
countries
– b) the lack of participation of developing countries in
the exchange of concessions
– c) the focus of developing countries on Special and
Differential treatment for developing countries as their
main objective
Alleged that for the large part developing countries had
to become bystanders and many had acceded under
article XXVI 5(c), which exempted them from having
to negotiate concessions in order to enter.
 GATT during the ITO
• GATT originally started out with 23 CPs out of
which 10 were from developing countries. By the
Uruguay Round there were 76 developing
countries participating and in the Doha round
over 70% of the 153 members are currently
developing countries.
• Due to colonization and nascent newly
independent countries a lot of the early
bargaining/negotiations were done by the
developed countries who ‘represented,’ the
developing countries, a trend unfavourable to
the developing countries.
 ITO negotiations by developing
countries: reciprocity and MFN
• Notwithstanding the dominance of developed countries,
developing countries, did participate actively in the ITO
negotiations.
• They tabled a wide range of proposals. The very first
draft of the ITO charter proposed by the USA in
December 1945, had no provisions on economic
development, nor were there any rules or exceptions for
developing countries.’
• Principle of reciprocity was debated, with developing
countries raising concerns that they lacked the
bargaining power to enable them to extract concessions
of value from developed countries on a reciprocal basis
and the developing countries inability to grant reciprocal
tariff cuts of equal value should be considered.
 ITO negotiations cont’d
• ITO Charter negotiations in London in 1947- US put
forward its ‘proposed charter.’
• Brazilian delegation also put forth a ‘proposed charter,’
on behalf of the developing nations and engaged with
the US on the MFN clause, stating that this should be
adhered to unconditionally ‘only,’ by countries in the
advanced stage of development, and need for special
measures to assist with development.
• Both charters were in agrt., as to a ban on quantitative
restrictions, but the US proposed a broad exemption on
the ban for any agricultural product.
 ITO Cont’d.
• During negotiations of the ITO in the UN ECOSOC,
developing countries were able to insert some
amendments that called for the ITO negotiations to take
into ‘a/c the special conditions that prevail in countries
whose manufacturing industry was still in the initial
stages of development.’ US rejected this amendment,
and so was never included in the final draft of the ITO
Charter.
• However, some of the concerns of importance to
developing countries was included in the final draft of the
Charter at the Havana conference in 1948. It is partly
this reason and the fact that the US did not have all its
interests accepted that the US Congress rejected the
ITO Charter initiated by it.
 Early GATT rounds
• 3 major obstacles in the process of tariff
bargaining/ exchange of concessions:
– (a) Principle of reciprocity
– (b) Principle-Supplier rule
– (c) Internal taxes and quotas of developed
countries.
 Early rounds cont’d
• US made it clear that it wanted MFN and reciprocity to be the foundational
GATT principle and developing countries like India argued that due to the
limited size of their domestic market their bargaining power was inadequate
to induce concessions from developing countries, and they also wanted to
protect their infant industries that were in the early stages of development.

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

• Developing countries at the time were seldom principle suppliers of any

product except raw materials that entered industrialized countries duty free.
Developing countries were effectively locked out and prevented from
requesting concessions on products, they did not produce in large
quantities.
 Early rounds cont’d
• Internal taxes and quotas of the developed
countries posed another problem as they were
as high as 500% for products such as sugar. But
they were never on the agenda and quotas only
increased for products that were of interest to
the developing countries.
• Thus, industrialized countries increased their
exports of manufactured goods and followed a
policy of protectionism through a blend of GATT
waivers on agriculture, textiles and clothing.
 Article XVIII of GATT
But, at the review session of GATT (1954-55), Art. XVIII was revised to
provide developing countries additional flexibility. Titled “Govt.,
Assistance to Economic Development,” created significant provs.
Section A- developing CPs to modify or withdraw scheduled
tariff concessions to promote est. of a particular industry.
Section B- recognition of the balance of payment problems of
developing CPs and flexibility for use of quantitative restrictions.
LDCs should use least trade disruptive measures and should use
price based measures, like import surcharges and deposits rather
than quantitative restrictions. Consultations by GATT BOP
committee.
Section C- enabled with certain conditions to use any measure
not consistent with other provs., for promotion of a particular
industry.
 Haberler Report
• AT 1957 Ministerial session an expert panel headed by Prof. Gottfried
Haberler was established to examine the trends in IT, specifically “failure of
the trade of less developed countries to develop as rapidly as that of
industrialized nations, excessive short term price fluctuations of primary
products and widespread resort to agricultural protectionism” Report
produced in October 1958.
• CPs adopted a ‘Declaration on the Promotion of trade of less developed
countries in December 1961. Declaration called for sympathetic analysis of
reciprocity of developing countries and technical assistance to expansion of
trade among developing countries, improvement in production and
marketing methods. Call for action in 7 areas-
• Speedy removal of quantitative restrictions effecting exports of LDcs
• Special attention to tariff reductions of products of primary benefit to LDCs
• Removal/reduction of fiscal duties in DCs
• Improved access of developing countries in purchases made by state agencies.
• Preferences in market access for developing countries.
• Limitation of subsidies on export of primary products.
• Careful observance of GATT or UN mandated limitations on disposal of commodity
surpluses/ strategic stocks.
 Dillon Round (1960-61)
• Haberler report recommended inclusion of internal taxes, and
together with pressures from India and Brazil, internal taxes were
included in the Dillon round. US and EEC fiercely opposed it.
• Increasing barriers on agriculture and exclusion of agriculture from
negotiations resulted in disappointing results for Developing
countries
• In 1963 a Nigerian led group of developing countries (G21)
proposed CPs to focus on targeting those barriers to trade identified
as directly affecting LDCs. Resolution adopted on May 1963 called
for a standstill on new tariff and non-tariff barriers.
• However, EEC sought exception for its emerging common external
tariff. Austria and Japan stated inability to comply by the December
1965 deadline and US stated that its national legislation only
allowed for a reductions in tariffs over 5 year periods.
• Thus, 1963 resolution only resulted in a committee to investigate the
revision of GATT for the benefit of developing nations.
 Kennedy Round
• US Trade Expansion Act (1962) authorized US to negotiate across
the board formula based negotiations. US chose a hybrid method
that utilized across the board formula combined with substantial
bilateral negotiations over the exception list, b/t principle suppliers to
ensure reciprocity.
• Developing countries could not participate as they were once again
hampered by their lack of bargaining power, which resulted in far
greater concessions for the developed countries.
• Resulted in appro., 35% tariff reduction in manufactured goods of
industrial countries, while tariff cuts on cotton textiles was only 18%
from the US and 22% from the EEC for developing countries. Also,
they made the cut conditional on renewal of LTA that were imposed
against the largest supplying developing countries into the
developed markets.
• However, in spite of little progress on agriculture, and semi finished
industrial products, there were about 14 developing countries who
made binding tariff concessions included in the GATT schedules.
 Part IV of GATT
• After a Special session of the contracting parties, (17th
November to 8th February 1965), the CPs drew up a
protocol amending GATT, and introduced a fourth
protocol known as Part IV of GATT on trade and
development. 3 articles:
– Principles and objectives (Art. XXXVI)- need for conscious and
purposeful effort on the part of CPs individually/jointly to improve
access to the world markets for products of interest to
developing countries. ‘Non reciprocity,’ (para.8) where
developed nations do not expect similar reciprocity for
commitments from developing countries
– Commitments (Art. XXXVII)- introduces prov., for CPs to take
certain measures in respect of trade interests of developing
countries.
– Joint Action (Art. XXXVIII)- mandated access to world markets of
primary products of developing countries.
 Result
• A significantly reduced version of provisions submitted
by the LDCs. Important aspects:
– High priority to the reduction/ elimination trade barriers for goods
of export interest to developing countries.
– Refrain from introducing tariffs/ non tariff barriers on these
products
– Remove requirement for reciprocity
– Create a Committee on trade and development to monitor
progress being made in these areas.

Part IV also created the basis for preferences for developing

countries, both b/t developed and developing, and b/t developing
countries themselves.
 Part IV of GATT and UNCTAD
• Committee on Trade and Development was established in 1964,
review application of provisions of Part IV. But, Part IV was best
regarded as best endeavour undertaking with no legal force.
• The process of decolonization led to the creation of UNCTAD
(1964). Part IV of GATT also agreed to establish institutional
arrangements, “to collaborate with the UN and its organs in matters
of trade and development policy.”
• ITC (International Trade Center) was established to become an
agency of UNCTAD and GATT.

• On 8th December 1971, a protocol relating to trade negotiations

relating to GSPs b/t developing countries was finalized along with
trade negotiations b/t developing countries.
 Tokyo Round
• Developing countries participated by
implementing restrictions in certain areas, as the
round went beyond tariff reductions to include
non tariff barriers.
• Problem for developing countries- (Voluntary
export restraint- VER’s). Dominated the cotton
sector and other primary products of importance
developing countries. More than 800-850 NTB
restrictions were in place by that time
Committee examining Quantitative
Restrictions
• 2 reports: one synthesizing the proposals of
developing countries, represented by Brazil and
the 3 chairs; of GATT CPs, the Council and the
Committee on Trade and Development. Called
for gradual liberalization and elimination of QRs.
• 2nd report presented by the US- made a
distinction b/t legal and illegal QRs, with only
illegal QRs being subject to negotiations. This
definition and distinction was not accepted by
majority of the countries- scrapped.
• Thus multilateral approach to negotiations on
QRs was abandoned in favour of bilateral talks.
 Tokyo Round Cont’d
• Developed countries made extension of MFA (Multi Fiber
arrangement) a precondition for reduction of tariffs on
textiles. US further restricted the growth of its quota for
developing countries further from 6% to 1-3% per yr.
• EEC required the clothing and textile exports from the
developing countries to be reduced to below 1976 levels
requiring cuts of 9%, 7% and 25% respectively from
Hong Kong, Korea and Taiwan.
• Safeguards: Developing countries had a big interest, so
Brazil and Nigeria presented proposals, but negotiations
broke down, as developing countries refused to accept
EECs demand that each member should have the right
to impose unilateral safeguards on individual countries
without multilateral approval.
 Tokyo Round and the Enabling
clause of 1979
• Preferential treatment cls., that started at the
end of the Kennedy round was provided a firmer
legal basis through adoption of the Enabling
Clause in 1979.
• US had agreed in 1969 to expand the GSP
system to create its own GSP for developing
countries that the EEC already had in place, at
the time of GATT formation. (colonial
preferences). Led to the formal legal recognition
of the derogation from the MFN principle.
 Provisions of the Enabling cls.
• Permanent legal authorization for the GSP
preferences
• Preferences b/t developing countries
• Special treatment for developing countries from
GATT rules and special treatment for LDCs.
• Developing countries refused to sign the codes
reached by the Tokyo round until developed
countries reached an agrt., to include special
and differential treatment provisions for
developing countries. US and other developed
countries agreed under the guise of non binding
assurances of technical assistance.
 Result of the Tokyo round for
developing countries
• Part IV (1965) and the subsequent enabling clause
(1979) created a basis for the special and differential
treatment prov., as a direct response to the failure of the
developed countries to address key issues of interest to
the developing countries, although the developing
countries had already contributed to tariff reduction and
exchange of concessions. They were mostly a best
endeavour exercise without legal force.
• The US and EEC negotiated mutually acceptable
outcomes with other members of the Quad (Japan and
Canada).
Therefore, exchange of concessions by the developing
countries should be seen from the perspective of the
stakes against them- agriculture, principle-supplier prob.,
 Uruguay Round
• Developing countries understood the dangers posed by the new
issues that were proposed by the US for inclusion into the new
round. This is why they opposed the inclusion of these issues in the
agenda.
• Developing countries, such as India and Brazil opposed the
proposed extension of GATTs remit into services, IP and
investment, as they argued that first action should be taken to
remove VERs, the MFA and restrictions in Agriculture. This
opposition was a major factor that resulted in the collapse of the
1982 Ministerial meeting.
• US pursued with threats of imposing unilateral restrictions under
sec. 301 and also introduced subsidies to challenge the EEC.
• However, a group of 24 countries opposed the new agenda of
services, TRIPs and investment, and instead called for a round that
was confined to industrial products and agriculture, together with a
standstill and rollback of protectionist measures that were not
inconsistent with GATT.
 Uruguay Round
• Agrt., by developing countries only after having secured
agrt., that these issues would be discussed on a
separate track from the negotiations on goods.
• Long negotiations at Punta del Este, b/t US, India and
Brazil as principle participants, resulting in the
emergence of a detailed procedural agrt., that ensured
coverage of all the three subjects but separated them
from traditional areas to be acceptable to India, brazil
and other allies.
• Fact remains that Uruguay round was launched 5 years
after the original call for a new round by the US was due
to the stiff resistance by the developing countries.
 UR cont’d
• Final Act embodied on ministers in Marrakesh on April
15, 1994. in addition to the text of the Final Act, it
contains texts of Ministerial Declarations, clarifying
certain provs.
• Final Act covers all aspects negotiated at Punta del Este,
with 2 exceptions. 1st- results of “market access
negotiations,” in which individual countries have made
binding commitments to reduce/eliminate specific
tariffs/NTBs to merchandise trade. Concessions
recorded in national schedules of concessions annexed
to the UR Protocol GATT 1994, forming an integral part
Final Act. 2nd- “initial commitments,” on liberalization of
trade in services, also recorded in the national
schedules.
 Agreement on Agriculture
• 4 main portions- (1) agrt., on Agriculture (2) concessions and
commitments members are to undertake on market access (3)
domestic support and export subsidies (4) agrt., on Sanitary and
Phytosanitary measures (5) Ministerial Decision concerning least-
developed countries and Net Food importing Developing countries.
• Regarding market access, NT border measures replaced by tariffs
that provide substantially the same level of protection. ‘Tariffication’
process tariffs and other tariffs on agricultural products to be
reduced by 36% for developed countries, 24% in case of developing
countries, with mini., reduction for each tariff line being required.
Reductions to be undertaken over a period of 6 years for developed
countries and 10 years in case of developing countries and LDCs
were not required to reduce tariffs at all.
• Tariffication process also provides for maintenance of current
access opportunities and est., of mini., access tariff quotas where
current access is <3% of domestic consumption, which is to be
extended 5% over implementation period.
 Agriculture cont’d
• Agrt., sets up a committee that will monitor the
implementation of commitments, and monitor
follow up to the Decision on Measures
Concerning the Possible Negative Effects of the
reform programme on LD and Net Food
Importing developing countries.
• Package calls for further negotiations in the 5 th
year, of implementation which would also
consider special and differential treatment for
developing countries.
Decision on Measures Concerning
Possible Negative Effects of the
Reform Prog., on LD and NFIDcs
• Problems recognized. Therefore, a special
decision sets out objectives with regards
to prov., of food aid, prov., of basic
foodstuffs in full grant form and aid for
agricultural development.
• Also refers to assistance from the IMF and
WB with respect to short term financing of
commercial food imports. Committee on
Agriculture monitors the decision followup.
 Agrt. On Textiles and Clothing
• Object- Eventual integration of the textiles and clothing sector-
where much of the trade is currently subject to bilateral quotas
negotiated under (Multifibre Arrangement) (MFA) into the GATT on
the basis of strengthened GATT rules and disciplines.
• This integration is going to be in a phased manner (Stage 1- 1995-
97 inclusive, Stage 2- 1998-2001 inclusive an Stage 3- 2002-2004
inclusive). All MFA restrictions as applicable would be carried over
into new agrt., and maintained until restrictions are removed/product
integrated into GATT.
• Contains specific transitional safeguard mechanism which could be
applied to products in yet integrated into GATT. Action u/safeguard
mechanism could be taken by mutual agrt., or unilaterally subject to
review by Textile Monitoring Body. TMB- responsible gor
implementation of commitments, as agrt, also provides for special
treatment for certain categories of countries- new entrant small
suppliers and LDcs.
 Agrt. On TRIMS
• Recognition that certain investment measures restrict
and distort trade. Provides that no CP shall apply any
TRIM inconsistent with Art III (national treatment) and
Art. XI ( prohibition of QRs).
• Exceptions to the above present, including measures
which require local procurement by an enterprise etc.,
• Mandatory notification of all non-conforming TRIMS and
elimination within 2 years for developed countries and 5
years for developing countries and 7 years for LDCs.
• Establishes a Committee on TRIMS to monitor
implementation.