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The Uruguay Round,
How the WTO differs from GATT?
How the WTO differs from GATT? The World Trade Organisation is not a simple extension of the old General Agreement on Tariffs and Trade (GATT). It completely replaces its predecessor and has a very different character. Among the key differences are the following:
The Singapore meeting was the first WTO Ministerial Conference, the
highest authority in the WTO. The Conference, comprising representatives
of all WTO members, is required to be held at least every two years. It
can decide on all matters relating to multilateral trade agreements. In
Singapore, the various member countries, or groups of countries, got the
opportunity to express their views on a range of trade matters and to push
for—or block—specific initiatives.
Both yes and no. Many new initiatives were pushed, while the existing issues did not get the required attention. One of the reasons was that even in the run up to Singapore, developing countries could not raise the necessary debates cogently, as their limited resources did not permit them to do so. While the developed countries, with much bigger resources at their command, piled up proposals one after the other, putting developing countries on a defensive all the time. Thus, there were many major achievements for the developed countries. An agreement on trade in information technology products was agreed upon. The major trading nations—the US, the EU members and Japan—lobbied hard for an information technology agreement (ITA), which would abolish by 2000 the tariffs on a range of about 600 IT products, including personal computers, semi-conductors, networking equipment and supercomputers. This could be of major significance for many Asian countries, which are now industrialising, such as Singapore and Malaysia. The developed countries were also able to push for setting up a working group on transparency in government procurement practices (a plurilateral agreement) and on simplification of trade procedures. What were the other achievements at Singapore? Developed countries also pushed for new issues like investment policy and competition policy, but developing countries were able to tone down the Ministerial Declaration to only set up working parties to study/examine the linkages of trade and investment, and trade and competition. Further, for any negotiation on these issues the declaration also agreed that there must be explicit consensus. It was also agreed that the working groups would involve UNCTAD and other inter-governmental organisations in this work, as they are already engaged in such work. What was the agreement on trade and labour standards? The USA and Norway were behind the push for bringing in labour standards in the WTO, but developing countries were able to get the meeting to agree that the International Labour Organisation is the competent body to do such work. It has been feared that by bringing in the questions of labour standards into the WTO it would lead to further protectionism. The declaration took this concern into account, and therefore noted: “We reject the use of labour standards for protectionist purposes, and agree that the comparative advantage of couuntries, particularly low-wage developing countries, must in no way be put to question.”
Was there any agreement on trade and environment? No, but it was agreed that talks should continue. When the Uruguay Round was concluded, it was agreed to set up a committee on trade and environment to study the linkages between the two. It had a mandate to submit its conclusions before Singapore. However, the linkages being complex and the fear of developing countries that such measures could also be used as protectionist, not much could be achieved. At Singapore, it was agreed that the issue is very contentious and that more work needs to be done in this area. The mandate of the committee was thus extended for another two years. Environmentalists were disgusted with the outcome. But development activists argued that a holistic approach is required to examine the implementation of the whole WTO package in favour of developing countries, rather than open new avenues which may be protectionist. What about developing countries? According to the latest UNCTAD study, in spite of trade liberalisation, the share of the 48 least developed countries (LLDCs) in global trade in 1995 was just 0.4%, which is likely to increase marginally to 0.7% by 2000 AD. The total world trade in 1996 was estimated at $6 trillion by the WTO. While a plan of action was put forward for LLDCs to offer them zero tariff concessions, the same was opposed by the USA, and supported by developing countries like India and Pakistan. Ultimately, it was agreed that countries may voluntarily offer zero tariffs to LLDCs, and the matter of technical assistance etc were reiterated. No real commitment was made on on further liberalisation in sectors such as textiles & clothing and agriculture. This not only limits the potential for growth in developing countries but create higher costs for consumers in developed countries. Was the questions of net-food importers addressed? No, it was not addressed at all except in the general statements. According to an FAO study, in the WTO era, the total food import bill of the developing countries is projected to increase to $65 bn by 2000 from just $40 bn in 1987-89. About 15% or $3.6 bn is directly attributed to the Uruguay Round. For the low-income food deficit countries, the food import bill may rise by $10 bn of which 14% is directly attributable to the Uruguay Round. What were the main achievements of the Uruguay Round? At this point, it will be useful to look into the history of the Uruguay Round. The Uruguay Round, concluded at end-1993, was the most ambitious set of trade negotiations ever. It reduced tariff and non-tariff barriers to trade in goods, liberalised trade in major areas such as agriculture, textiles and clothing, and extended multilateral rules to new areas, notably services and intellectual property. It also established the WTO, which replaced the old General Agreement
on Tariffs and Trade (GATT) as the watchdog of the global trading system.
What progress was made in cutting tariffs? Developed countries agreed to cut their average tariffs on industrial goods by about 38 per cent over five years, although the tariff cuts in sensitive sectors such as textiles, clothing, footwear and transport equipment were lower than average. The share of duty-free imports in total imports also went up from 20 to 43 per cent. Developing countries agreed to raise, from 21 per cent to 65 per cent, the share of their imports that would be covered by “bound” tariffs. Once tariffs are bound, they cannot be legally raised, but can be reduced further. The issue of tariff escalation, which is crucial for developing countries, was not addressed. It is a tax on development and environment. Tariff escalation encourages countries to export primary commodities and discourages them to export manufactured goods, reserving the more lucrative items for developed countries. For example, the tariff on leather goods is higher than finished leather, which in turn is higher than raw skins and hides. What was achieved in the areas of agriculture and textiles? In agriculture, most non-tariff barriers were to be replaced with tariffs, and the share of imports covered by bound tariffs increased. Domestic price supports, or “floor prices”, were to be reduced by 20 per cent (relative to a 1986-88 base) over six years in the case of developed countries and by 13 per cent over 10 years by developing countries. There were also commitments to reduce export subsidies. The Uruguay Round established that trade in textiles and clothing, would be gradually integrated into the WTO. Earlier, such trade was was governed by a separate Multifibre Arrangement, which set quotas on developing countries’ exports to developed countries. It was agreed that these quotas will be phased out by 2005. However, the phase-out will be back-loaded, about two-thirds of developed countries’ textile and clothing imports will remain subject to quotas till 2002. What deal was made in trade in services? In the area of services, the Uruguay Round came up with an accord called the General Agreement on Trade in Services (GATS). Under this, some basic principles of multilateralism were applied to trade in services, which accounts for about one-quarter of world trade. These principles include:
It also explicitly requires that liberalisation in services be taken further through successive rounds of negotiations. What was agreed on intellectual property and trade-related investment measures? The Uruguay Round also made intellectual property rights subject to national treatment and MFN. Moreover, it sought to strengthen the standards of intellectual property rights protection as well as enforcement procedures. Developed countries were allowed one year to bring their legislation and practices in line with the agreement, while developing countries were given five years, and least developed countries 11 years. The Agreement has no business to be here, but big business ensured that it was made a part of the WTO agreements. Now that it is there, its potential for harming the interest of developing countries needs to be monitored and checked. The Uruguay Round Agreement recognised that trade-related investment
measures (TRIMs)—such as requirements for minimum local procurement by
foreign companies, or for imports by companies to be matched by exports—can
distort trade. Under the agreement, such measures were required to conform
to certain rules and those that did not were to be eliminated within two
years in the case of developed countries and five years in the case of
developing countries.
In services, there were three major areas on which no agreement on liberalisation was reached during the Uruguay Round, and on which discussions are still continuing. These areas are financial services, basic telecommunication services and maritime services. At Singapore, it was agreed that:
Clearly, developed countries hijacked the agenda at Singapore and added to the burden of developing countries with newer issues of investment and competition policy. The existing issues were not addressed with any sincerity except lofty statements were made. It is an assymteric world, but there is a need for equity—which has to be pushed again and again. Before the Singapore meeting took place, Consumers International had worked out policy positions on some of the issues and suggested recommendations. These still remain valid and are: Transparency and Consultation Recent Guidelines by the General Council of the WTO leave consultation with non-governmental organisations (NGOs) on an ad hoc basis and the derestriction of documentation a matter of discretion. For a public institution whose decisions have wide ranging effects on people’s lives, proper consultation procedures with public interest NGOs need to be established. With regard to documents, a criteria for confidentiality should be developed to allow automatic derestriction of non-confidential documents. Competition Policy Consumers are already facing less choice and higher prices as transnational corporations (TNCs) dominate an ever-growing segment of national and regional economies. Without stricter legislation and enforcement of competition regulations, consumers and national economies suffer. With cross-border mergers and international cartels and a host of covert and overt anti-competitive practices, competition on a global level is in jeopardy in many industries. There is a need for an international competition policy that ensures both healthy competition between many players and benefits for consumers and domestic economies. Therefore the decision to set up a working group is welcome, but the agenda should also include anti-dumping policy, and the process must involve UNCTAD and NGOs. Investment Policy The push for an international framework for investment policy is fraught with risks, as the world is not homogenous. Different countries are at different stages of development, and there cannot be a universal prescription. Already TNCs have increased their influence over the world trade agenda and this issue will increase their influence much further than now. Now that the WTO will examine the linkages of trade and investment, we expect that it will allow countries to raise development concerns. We will also expect to see a balanced and wide ranging discussion of the rights and obligations of both investors and host countries with the vital participation of UNCTAD and NGOs. Agricultural Trade Whilst the Agreement on Agriculture called for a reduction of agricultural tariffs, the choice of base year for tariffication amongst other things has led to little trade liberalisation in the agricultural sector. Without this liberalisation, many developing countries suffer from constrained agricultural trade affecting the prices of their exports thus restraining the opportunities for development and growth. True liberalisation in agricultural trade is needed. Net Food-Importing Countries The results of the Uruguay Round were not equal for all countries. According to a FAO study, the total food Many of the poorest of the world’s nations are set to lose out and a higher food import bill for developing countries is the foreseen short term effect of the cuts in domestic and export subsidies mandated by the Agreement on Agriculture. An assessment of the implementation of the Ministerial Decision on Measures Concerning the Possible Negative Effects of the Reform Programme on the Least-Developed and Net Food-Importing Developing Countries must be done immediately, including the impact of price changes on national food security. Textiles and Clothing The Agreement on Textiles and Clothing concluded during the Uruguay Round provides for a gradual phase out of the Multifibre Arrangement (MFA) to bring this sector within the mainstream WTO/GATT disciplines. Some of the importing countries are slowing the process down to such an extent that one wonders whether they plan to adhere to the agreed phase out plan at all. As this sector is a crucial step in the ladder of industrialisation and development, a real commitment is needed from developed countries to adhere to the dismantling of the MFA.
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