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Agreements
of Uruguay Round
The
World Trade Organization (WTO), which replaced GATT on January 1,
1996, is a new trade body with much wider scope and powers. First,
the legal status and enforcing power of the earlier GATT was very
weak. It could use only moral persuasion to redress disputes over
dumping or discriminatory tariffs that may be imposed by powerful
traders who had special laws like super 301. The WTO has greater
powers for arbitration and enforcement of its principles. The speed
and automaticity of dispute settlement procedures are greatly
increased.
Second,
as agreed upon by 117 nations after 7 years of negotiations under
the Uruguay Round, the purview of the WTO extends into several new
areas. The salient features of the WTO charter are listed below.
Trade
Liberalization:
The
intrinsic and prime motive of the new organization is indeed
liberalization of trade through scaling down tariff rates and
improving other trade distorted measures-cutting tariffs on
industrial goods over the next 5-10 years by 40 percent on the
average. Some high-tech industrial items will have tariffs cut by 70
to 100 percent.
MFA
(Multi-Fiber Agreement):
The
textile quota restrictions under the MFA, which was introduced and
brought under the purview of the GATT in 1974 for regulating world
trade in textiles and clothing, will be phased out in 10 years-16
percent on January 1, 1995, 17 percent in 1998, 18 percent in 2002,
and the remaining 49 percent by January 1, 2005.
Trade
in Agricultural Commodities:
Agriculture
was the most crucial and long debated sector in the Uruguay Round of
talks. Agriculture, which remained virtually untouched in all of the
GATT's earlier negotiations, has come for the first time under WTO
purview. Strong market orientation to trade of agricultural
commodities has been envisaged through (a) reducing direct export
subsidy by 36 percent and indirect support to farmers by 20 percent
over a 6-year period; (b) converting all nontariff barriers into
tariffs and then steadily reducing the latter by 36 percent over the
next 6 years in the case of developed countries and by 24 percent
over the next 10 years in the case of developing countries; and (c)
requiring countries with farm markets closed to foreigners to import
at least 3 percent of domestic consumption, which will rise to 5
percent over a period of 6 years.
Trade
in Services:
Like
trade in agriculture, trade in services has also been brought under
GATT/WTO purview for the first time. The most favored nation
(MFN)treatment clause has been extended to trade in services. It
prevents countries from discriminating among foreign suppliers of
services. The services include financial, telecommunications,
transportation, construction, audio visual, tourism, and
professional services, as well as the movement of workers.
Trade-Related
Intellectual Property Rights (TRIPS):
The owners of intellectual property have been improved and protected
by providing patents for 20 years and copyrights for 50 years.
The Agreement provides for improved levels of protection for the
rights of the owners of all types of intellectual property. These
levels are achieved principally by requiring countries to i) grant
national treatment, ii) provide certain minimum standards of
protection for all types of intellectual property, and iii)
institute procedures and remedies under national laws so that
foreigners can enforce their rights.(2)
Trade-Related
Investment Measures (TRIMS):
TRIMS refer to those measures which governments apply to local
investors. These include the use of local materials, the obligation
to export a certain proportion of output, the obligation of the
investor to export to certain countries or regions, trade balancing
or the use of export earnings to pay for imports, the commitment to
supply a certain proportion of output to the local market, etc. Many
countries, especially the developed countries, regard TRIMS as a
form of protection because these measures suppress market forces,
divert trade, and encourage inefficient production. On the other
hand, many developing countries maintain that TRIMS are necessary
for economic development. The Agreement requires the elimination of
certain restrictive measures (such as local content and foreign
exchange balancing requirements) that violate the GATT principles of
nationaltreatment and prohibition of quantitative restrictions.(3)
Anti-Dumping
Safeguards:
The
rules allow a government to put tariffs on imports that are being
dumped, especially when it is causing serious injury to domestic
industry.
Subsidies:
In
order to enhance the competitiveness of their products in the
international market, nearly all governments provide export
subsidies. However, the efficient suppliers in the international
market complain about export subsidies because they suppress the
international prices of their products. The Agreement defines three
categories of subsidies: i) the prohibited subsidies-those
contingent on export performance or the use of domestic over
imported goods; ii) the actionable subsidies-those that have
demonstrably adverse effects on other member countries; and iii) the
non-actionable subsidies, including those provided (with stipulated
limitations) to industrial research and precompetitive development
activity in disadvantaged regions, or to the existing facilities in
order to enable them to adapt themselves to new environmental
requirements. These subsidies will be prohibited except for civil
aircraft, programs of industrial research, and precompetitive
development activity defined in the agreement on agriculture. The
Agreement also puts restrictions on the use of countervailing
measures introduced in response to competitors' subsidies.(4)
Technical
Barriers:
The
Agreement seeks to ensure that technical negotiations and standards,
as well as the testing and certification procedures, do not create
unnecessary barriers to trade. To this end, it encourages countries
to use international standards, but does not include a harmonization
of standards. At the same time, it does recognize the right of
countries to establish protection-for example, for human, animal, or
plant life, health, and the environment-at levels they consider
appropriate, and specifies that they should not be prevented from
ensuring that their desired standards are met.(5)
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