This article has been written by Oishika Banerji of Amity Law School, Kolkata. This article provides a detailed analysis of the General Agreement on Tariffs and Trade (GATT) which was a legal arrangement designed for lowering trade barriers by eliminating or reducing quotas, tariffs, and subsidies while keeping significant limitations in place.
This article has been published by Shoronya Banerjee.
Table of Contents
The General Agreement on Tariffs and Trade (GATT), which was signed on October 30, 1947, by 23 nations, was a legal agreement that aimed to reduce trade barriers by abolishing or decreasing quotas, tariffs, and subsidies while retaining considerable restrictions. The GATT was created to help the world economy recover after World War II by rebuilding and liberalising global commerce. On January 1, 1948, the GATT came into effect. It has been developed since then, culminating in the founding of the World Trade Organization (WTO) on January 1, 1995, which integrated and expanded it. By this time, 125 countries had signed on to its accords, which covered almost 90% of world commerce. The GATT is overseen by the Council for Trade in Goods (Goods Council), which is made up of representatives from all WTO member nations. Market access, agriculture, subsidies, and anti-dumping measures are among the topics addressed by the council’s ten committees. This article helps the readers understand GATT in a better way.
General Agreement on Tariffs and Trade : an understanding
The GATT was established to set out regulations to eliminate or limit the most costly and inefficient characteristics of the pre-war protectionist period, notably quantitative trade barriers like trade restrictions and quotas. The agreement also established a mechanism for resolving international commercial disputes, as well as a framework for multilateral tariff reduction discussions. In the post-war years, the GATT was seen as a great success. Trade without discrimination was one of the GATT’s major accomplishments. Every GATT signatory was to be treated on an equal footing with the others.
The ‘most-favoured-nation’ concept, as it is known, has been carried over into the WTO. As a result, once a nation had negotiated a tariff reduction with a few other countries (generally its most significant trade partners), the same reduction would be applied to all GATT members. There were escape provisions in place, allowing nations to negotiate exclusions if tariff reduction would disproportionately hurt domestic producers. When it came to determining tariffs, most countries used the most-favoured-nation approach, which virtually supplanted quotas. Other broad requirements were consistent customs laws and each signatory nation’s commitment to negotiate tariff reductions upon another’s request. Contracting nations might change agreements if their local producers incurred disproportionate losses as a result of trade concessions, according to an escape clause.
History behind the General Agreement on Tariffs and Trade
The GATT’s main focus was on resolving individual trade concerns affecting specific commodities or trading states, although large multilateral trade conferences were conducted on a regular basis to hammer out tariff reductions and other issues. From 1947 to 1993, seven such “rounds” were held, beginning with those in Geneva in 1947 (concurrent with the signing of the general agreement), Annecy, France, in 1949, Torquay, England, in 1951, and Geneva in 1956 and again in 1960–62. The Kennedy Round (1964–67), the Tokyo Round (1973–79), and the Uruguay Round (1986–94) were the most important rounds, all held in Geneva. These agreements were successful in lowering average tariffs on industrial goods throughout the world from 40% of their market value in 1947 to less than 5% in 1993.
The Uruguay Round was the most comprehensive collection of trade liberalization accords ever negotiated by the GATT. At the end of the round, a global trade deal was signed that dropped tariffs on industrial products by an average of 40%, decreased agricultural subsidies, and contained ground-breaking new accords on services trade. The agreement also established the World Trade Organization (WTO) as a new and stronger global organization tasked with monitoring and regulating international trade. With the completion of the Uruguay Round on April 15, 1994, GATT ceased to function. The WTO established its principles and the numerous trade agreements achieved under its auspices.
The 550-page “Final Act Embodying the Results of the Uruguay Round of Multilateral Trade Discussions,” signed by ministers in Marrakesh on April 15, 1994, comprised of legal provisions outlining the results of the negotiations since the Round began in Punta del Este, Uruguay, in September 1986. The Final Act also included texts of ministerial decisions and declarations that explained important terms of the agreements. With two notable exceptions, the final act covered all of the bargaining topics mentioned in the Punta del Este Declaration. The first was the outcome of “market access discussions,” in which individual nations had made legally enforceable pledges to decrease or abolish certain tariffs and non-tariff trade obstacles. National schedules, which were an important element of the Final Act, were used to record these concessions. The second was the “first pledges” on service trade liberalisation. These liberalisation pledges were also included in national schedules.
Uruguay Round Protocol (GATT 1994)
The outcomes of market access talks in which countries agreed to abolish or lower tariff rates and non-tariff barriers to goods trade are documented in national schedules of concessions appended to the Uruguay Round Protocol, which is an important element of the Final Act. On the day that the Agreement establishing the WTO entered into effect for a Member, the schedule appended to the Protocol dealing with that member became a Schedule to the GATT 1994 relating to that member. The Protocol has five appendices:
- Appendix I Section A: Agricultural Products: Tariff concessions on a Most-Favoured Nation basis;
Appendix I Section B: Agricultural Products: Tariff Quotas;
- Appendix II: Tariff Concessions on a Most-Favoured Nation Basis on Other Products;
- Appendix III: Preferential Tariff: Part II of Schedules (if applicable);
- Appendix IV: Concessions on Non-Tariff Measures: Part III of Schedules;
- Appendix V: Agriculture Products: Commitments Limiting Subsidisation: Part IV of Schedules,
- Section I: Domestic Support: Total AMS Commitments,
- Section II: Export Subsidies: Budgetary Outlay and Quantity, Reduction Commitments
- Section III: Commitments Limiting the Scope of Export Subsidies.
Except as otherwise indicated in a Member’s Schedule, the tariff reduction agreed upon by each member for non-agricultural items shall be implemented in five equal rate reductions. The first such decrease will take effect on the day the World Trade Organization (WTO) Agreement enters into force. Each succeeding decrease will take effect on January 1 of the following year, with the final rate taking effect no later than four years after the WTO Agreement enters into force. Participants may, however, implement a reduction in fewer phases or at earlier dates than those specified in the Protocol.
The staging of reductions for agricultural goods, as stipulated in Article 2 of the Agreement on Agriculture, was to be carried out as was indicated in the relevant portions of the schedules. A related decision on Least-Developed Country measures specified, among other things, that these countries would not be obliged to make any obligations or concessions that are incompatible with their unique development, financial, and trade needs. It also permitted them to complete their schedules of concessions and promises under Market Access and Services by April 1995 rather than 15 December 1993, in addition to other more specific provisions for flexible and favourable treatment.
Agreements that were responsible for the formation of the World Trade Organization
The World Trade Organization (WTO) accord asks for a unified institutional framework that includes the GATT, as amended by the Uruguay Round, all agreements negotiated under its auspices, and the Uruguay Round’s entire outcomes. A ministerial conference meets at least once every two years to lead the organization. On a regular basis, a General Council monitors the agreement’s operation and ministerial decisions. This General Council serves as a Dispute Settlement Body and a Trade Policy Review Mechanism and has developed subsidiary bodies such as a Goods Council, a Services Council, and a TRIPs Council to deal with the complete spectrum of trade concerns covered by the WTO.
Articles and their purpose under the General Agreement on Tariffs and Trade
All contracting parties applied the General Agreement ‘provisionally.’ The GATT is applied under the Protocol of Provisional Application by the original contracting parties, as well as former territories of Belgium, France, the Netherlands, and the United Kingdom that acceded to the General Agreement after gaining independence under Article XXVI:5(c). Chile implemented the General Agreement with a September 1948 Special Protocol. The General Agreement was applied by the contracting countries that have acceded since 1948 under their separate Protocols of Accession. The contracting parties altered the title of the head of the GATT secretariat from ‘Executive Secretary’ to ‘Director-General’ by a decision dated March 23, 1965. However, because the General Agreement had not been amended to reflect this change, the term ‘Executive Secretary’ had been kept in the wording of Articles XVIII:12(e), XXIII:2, XXVI:4, 5, and 6. The General Agreement’s responsibilities and powers “must be executed by the person holding the office of Director-General, who shall, for this purpose, also hold the position of Executive Secretary,” according to the decision of March 23, 1965. GATT Articles that are included in the Final Act have been provided hereunder:
- Article II (Schedules of Concessions): Agreement to record “additional levies or charges” paid in addition to the recorded tariff in national schedules and bind them at the levels in effect at the time the Uruguay Round Protocol was signed.
- Article XVII (State-trading Enterprises): By enforcing stricter notification and review procedures, they will be able to keep a closer eye on their operations.
- Articles XII and XVIII:B (Balance-of-payments provisions): Agreement that contracting parties should impose balance-of-payments limitations in the least trade-distorting way possible, preferring price-based measures such as import surcharges and import deposits over quantitative limits. The agreement was also reached on protocols for GATT Balance-of-Payments (BOP) Committee discussions and notification of BOP measures.
- Article XXIV (Customs Unions and Free-Trade Areas): Agreement defining and reinforcing the criteria and processes for evaluating the implications of new or expanded customs unions or free-trade zones on third parties. In the event that contracting parties join a customs union and wish to increase a binding tariff, the agreement defines the method to be followed to achieve any necessary compensating adjustment. Contracting parties’ duties in relation to actions implemented by regional or local governments or authorities within their jurisdictions are also defined.
- Article XXV (Waivers): Agreement on new processes for awarding exemptions from GATT disciplines, including the specification of termination dates for any future waivers and the fixation of expiry dates for current waivers. However, the major clauses addressing the granting of exemptions are included in the WTO Agreement.
- Article XXVIII (Modification of GATT Schedules): Agreement on new processes for discussing compensation when tariff bindings are amended or removed, including the establishment of a new negotiating right for the nation whose exports are dominated by the goods in issue. Smaller and developing nations will be better able to engage in discussions as a result of this.
- Article XXXV (Non-application of the General Agreement): After entering tariff discussions with each other, an agreement to allow a contracting party or a newly acceding nation to exercise GATT’s non-application provisions against the other party. Any use of the WTO Agreement’s non-application provisions must apply to all multilateral agreements, according to the agreement.
Agreements under GATT
- Agreement on Agriculture: The Agriculture Agreement (AoA) is a World Trade Organization (WTO) international treaty. It was negotiated at the Uruguay Round of the General Agreement on Tariffs and Trade, and it went into effect on January 1, 1995, when the WTO was established.
- Agreement on Sanitary and Phytosanitary Measures: The Sanitary and Phytosanitary Measures Agreement lays down the groundwork for food safety as well as animal and plant health requirements. It empowers countries to create their own standards, which should only be used to preserve human, animal, plant life or health.
- Agreement on Textiles and Clothing: The Uruguay Round of Trade Negotiations produced the Agreement on Textiles and Clothing (ATC). From the date of the WTO Agreement’s entrance into effect, all existing textile and garment trade barriers were to be disclosed and abolished over a 10-year period.
- Agreement on Technical Barriers to Trade Agreement on Trade Related Aspects of Investment Measures: Certain investment measures can limit and distort trade, according to the Trade-Related Investment Measures Agreement (TRIMS). It stipulates that members of the WTO may not take any action that discriminates against foreign products or results in quantitative limits, both of which are in violation of fundamental WTO principles.
- Agreement on Implementation of Article VI (Anti-dumping): In written applications for anti-dumping relief, the Anti-Dumping Agreement establishes requirements for evidence of dumping, injury, and causality, as well as other information about the product, industry, importers, exporters, and other matters, and specifies that, in special circumstances when authorities initiate without a written application from domestic industry, they shall proceed only if they have sufficient evidence of dumping, injury, and causality.
- Agreement on Implementation of Article VII (Customs Valuation): The WTO Agreement on customs valuation aspires for a fair, uniform, and impartial system for valuing products for customs purposes, one that is based on business reality and prohibits the use of false or arbitrary customs values.
- Agreement on Preshipment Inspection: Private firms are hired to examine shipping data such as pricing, quantity, and quality of items bought from another country. The Preshipment Agreement acknowledges that the GATT Agreement’s principles apply to the aforementioned action.
- Agreement on Rules of Origin Agreement on Import Licensing Procedures: Import licencing should be straightforward, clear, and predictable, according to the Agreement on Import Licensing Procedures, so that it does not constitute a trade barrier. It also explains how nations should inform the WTO when they implement new or amend current import licencing processes.
- Agreement on Subsidies and Countervailing Measures: The World Trade Organization’s (WTO) Agreement on Subsidies and Countervailing Measures (Subsidies Agreement) establishes standards for the use of government subsidies as well as the implementation of remedies to address subsidised trade that has negative commercial consequences.
- Agreement on Safeguards: The Safeguards Agreement establishes the regulations for using safeguard measures under Article XIX of the GATT 1994. Safeguard measures are described as ‘emergency’ procedures taken in response to increasing imports of certain items that have caused or threatened to cause substantial harm to the domestic industry of the importing Member.
- General Agreement on Trade in Services (GATS): The Uruguay Round’s outcomes went into force in January 1995, and one of the most significant successes was the founding of the GATS. The GATS was founded on the same principles as its merchandise trade counterpart, the General Agreement on Tariffs and Trade (GATT) with the purpose of establishing a credible and reliable system of international trade rules, ensuring fair and equitable treatment of all participants (principle of non-discrimination), stimulating economic activity through guaranteed policy bindings and promoting trade and development through progressive liberalisation.
- Agreement on Trade Related Aspects of Intellectual Property Rights, Including Trade in Counterfeit Goods: The TRIPS Agreement mandated that WTO members must offer a minimum degree of protection to the intellectual property of other WTO members. Copyrights, trademarks, patents, geographical indications (GI), industrial and layout designs, and concealed information (trade secrets) are among the topics covered in the TRIPS Agreement.
Agreement on agriculture
- The discussions’ (Uruguay Round Protocol) outcomes established a foundation for long-term agricultural trade and domestic policy change in the years to come. It takes a significant step toward achieving the goal of enhanced market orientation in agricultural commerce. The regulations that govern agricultural commerce have been reinforced, resulting in more predictability and stability for both importing and exporting nations.
- Many additional concerns of essential economic and political relevance to many members are addressed in the agriculture agreement. Provisions that encourage the use of less trade-distorting domestic support policies to maintain the rural economy, that allow actions to be taken to ease any adjustment burden, and that introduce strictly prescribed provisions that allow some flexibility in the implementation of commitments, are found in the agreement. Specific issues of developing nations, such as those of net food importers and least-developed countries, have been addressed. Commitments in the areas of market access, domestic assistance, and export competition are included in the agriculture agreement as well.
- Non-tariff border controls are replaced with tariffs that provide a similar degree of protection in the area of market access. Duties originating from this ‘tariffication’ process, as well as other tariffs on agricultural goods, are to be cut by an average of 36% in developed nations and 24% in developing countries, with minimum reductions necessary for each tariff line. In the case of rich nations, reductions will be made over a six-year period, while in the case of developing countries, reductions will be made over a ten-year period. Tariff reductions are not necessary for least-developed countries.
- Where present access is less than 3% of domestic consumption, the tariffication package also allows for the preservation of current access possibilities and the implementation of minimum access tariff quotas (at lower tariff rates). Over the course of the implementation term, these minimum access tariff quotas will be increased to 5%. In the event of ‘tariffied’ items, ‘special safeguard’ measures will allow for the imposition of extra tariffs if exports at prices denominated in domestic currencies fall below a specified reference level or if imports rise. The import surge trigger in the safeguard is determined by the present market’s ‘import penetration,’ i.e., when imports currently account for a substantial share of consumption, the import surge necessary to activate the special safeguard action is lower.
- Domestic policies that have a negligible influence on trade (known as ‘green box’ policies) are exempted from reduction obligations. General government services, such as research, disease control, infrastructure, and food security, are examples of such policies. Direct payments to producers, such as ‘decoupled’ (from production) income support, structural adjustment aid, direct payments under environmental programmes, and direct payments under regional assistance programmes, are also included.
- Other policies are not required to be included in the Total Aggregate Measurement of Support (Total AMS) reduction pledges, in addition to the green box policies. These policies include direct payments under production-limiting programmes, certain government assistance measures to encourage agricultural and rural development in developing countries, and other support that accounts for a small percentage of the value of individual product production or, in the case of non-product-specific support, the value of total agricultural production in developing countries.
- The agreement includes ‘peace’ provisions such as an understanding that certain actions available under the Subsidies Agreement will not be applied to green box policies, domestic support, and export subsidies maintained in accordance with commitments. These peace measures will be in effect for nine years.
- The agreement establishes a committee to oversee pledges and the execution of the decision on measures concerning the potential negative effects of the reform program on least-developed and net food-importing developing countries.
Agreement on Sanitary and Phytosanitary Measures
- The application of sanitary and phytosanitary measures, in other words, food safety and animal and plant health standards, is the subject of this agreement. The agreement acknowledges that governments have the right to take sanitary and phytosanitary measures, but that they should only be used to protect human, animal, or plant life or health, and that they should not be used arbitrarily or unjustifiably to discriminate between members where identical or similar conditions exist.
- Members are urged to base their sanitary and phytosanitary measures on international standards, guidelines, and recommendations where they exist, in order to harmonize sanitary and phytosanitary measures as much as practicable. Members may, however, keep or implement measures that result in higher criteria provided there is a scientific basis or if consistent risk judgments are made based on an adequate risk assessment. The Agreement lays forth the processes and criteria for risk assessment and determining suitable levels of sanitary and phytosanitary protection.
- Members are required to recognize other countries’ sanitary and phytosanitary measures as equivalent, if the exporting nation can show the importing country that its measures provide an acceptable degree of health protection.
Agreement on Textiles and Clothing
- The goal of this negotiation was to ensure the future inclusion of the textiles and apparel industry into the GATT, based on reinforced GATT rules and regulations, where much of the trade is now subject to bilateral quotas established under the Multifibre Arrangement (MFA).
- Products that accounted for at least 17% of 1990 imports would be integrated at the start of Phase 2 on January 1, 1998. Products that accounted for at least 18% of 1990 imports would be integrated on January 1, 2002. At the completion of the transition phase, on January 1, 2005, all remaining goods would be merged. At each of the first three stages, products should be chosen from each of the following categories,
- Tops and yarns,
- Made-up textile products, and
- While the agreement is primarily focused on the phase-out of MFA limitations, it also acknowledges that certain members maintain non-MFA restrictions that are not justified by a GATT clause. These would likewise be brought into compliance with GATT within one year of the Agreement’s entry into force, or phased out gradually over a period not exceeding the Agreement’s term (that is, by 2005).
- It also includes a transitional safeguard mechanism that might be used at any time to apply to items that have not yet been included in the GATT. Individual exporting countries could face action under the safeguard mechanism if the importing country could show that overall imports of a product were entering the country in such large quantities as to cause serious damage, or threaten it, to the relevant domestic industry, and that imports from the individual country concerned had increased sharply and significantly. The agreement has procedures to deal with probable commitment circumvention via transshipment, rerouting, fraudulent declarations about nation or place of origin, and fabrication of official documents.
- As part of the integration process, all members must take such actions in the area of textiles and clothing as may be necessary to comply with GATT rules and disciplines in order to improve market access, ensure the application of policies relating to fair and equitable trading conditions, and avoid discrimination against imports when taking general trade policy measures.
- A Textiles Monitoring Body (TMB) is in charge of overseeing commitment implementation and preparing reports for the key reviews indicated above. Certain kinds of nations, such as those that have not been MFA members since 1986 (new entrants, small suppliers, and least-developed countries), will receive preferential treatment under the agreement.
Agreement on Technical Barriers to Trade
- This agreement will expand and clarify the Tokyo Round Agreement on Technical Barriers to Trade. Its goal is to guarantee technical agreements and standards, as well as testing and certification procedures to avoid obstruction in commerce. It does, however, acknowledge that nations have the right to provide protection at levels they deem appropriate, such as for human, animal, or plant life, health, or the environment and that they should not be prohibited from taking the steps necessary to guarantee that such levels are fulfilled. As a result, the agreement encourages nations to utilise international standards where appropriate, but it does not oblige them to adjust their protection levels as a result of such standardisation.
- The revised agreement is unique as it includes processing and production processes that are relevant to the product’s attributes. The scope of conformity assessment procedures has been expanded, and disciplines have been refined. The notification rules for local governments and non-governmental organizations are more detailed than those in the Tokyo Round agreement. As an annexe to the agreement, a Code of Good Practice for the Preparation, Adoption, and Application of Standards by Standardizing Organisations is included, which is available for approval by both commercial and public sector bodies.
Agreement on Trade-Related Aspects of Investment Measures
- Certain investment policies impede and distort trade, according to the agreement. It states that no contracting party may use a TRIM that is incompatible with the GATT’s Articles III (national treatment) and XI (quantitative limits ban). To that aim, the agreement includes an example list of TRIMs that have been determined to be incompatible with these articles. The list contains measures that demand a certain level of local procurement by an entity (“local content requirements”) or limit the volume or value of imports a company can buy or use to a level that is proportional to the number of products it exports (“trade balancing requirements”).
- All non-conforming TRIMs must be reported and eliminated within two years for affluent nations, five years for developing countries, and seven years for least-developed countries, according to the agreement. It creates a TRIMs Committee, which will oversee, among other things, the execution of these pledges. The agreement also allows for future discussion of whether it should be supplemented with more comprehensive measures on investment and competition policy, or not.
Agreement on Implementation of Article VI (Anti-dumping)
- Article VI of the GATT gives contracting parties the right to impose anti-dumping measures, which are tariffs against imports of a product at a price below its ‘normal value’ (usually the price of the product in the exporting country’s domestic market) if the dumped imports harm a domestic industry in the importing contracting party’s territory. An Anti-dumping agreement signed at the end of the Tokyo Round has more precise guidelines guiding the use of such measures. The Uruguay Round negotiations resulted in a revision of this agreement that addresses many of the areas where the existing agreement was lacking in accuracy and depth.
- The agreement enhances the criteria for the importing countries to demonstrate a clear causal link between dumped imports and local sector harm. The impact of dumped imports on the business must be examined in conjunction with other relevant economic factors affecting the status of the industry. The agreement confirms how the phrase “domestic industry” is currently defined. The domestic industry refers to domestic producers of similar items as a whole or to those whose overall output of those products accounts for a significant share of total domestic production of those products.
- All preliminary or final anti-dumping measures must be notified to a Committee on Anti-dumping Practices promptly and in detail, according to the agreement. Parties to the agreement will be able to consult on any topic relevant to the agreement’s operation or the achievement of its goals, as well as propose the formation of panels to investigate disagreements.
Agreement on Implementation of Article VII (Customs Valuation)
The Customs Valuation Decision would allow customs administrations the power to ask importers for more information if they have grounds to dispute the claimed worth of imported goods. If the administration retains a reasonable doubt, notwithstanding any further information, it may be found that the customs value of the imported products cannot be established on the basis of the reported value, and customs must calculate the value in accordance with the Agreement’s terms. In addition, two supplementary texts explain specific sections of the Agreement that affect developing nations, such as minimum values and imports by sole agents, sole distributors, and sole concessionaires.
Agreement on Preshipment Inspection
- Preshipment inspection (PSI) is the practice of using specialist private organizations to evaluate shipment details, primarily the pricing, quantity, and quality of products bought from another country. The goal of this tool, which is used by developing country governments, is to protect national financial interests for example, (by preventing capital flight, commercial fraud, and customs duty evasion) and to compensate for administrative infrastructure deficiencies.
- The agreement acknowledges that GATT principles and duties apply to the actions of government-mandated pre-shipment inspection organizations. Nondiscrimination, transparency, preservation of sensitive business information, avoidance of undue delay, adoption of particular rules for performing price verification, and avoidance of conflicts of interest by PSI agencies are among the requirements imposed on PSI-user governments.
- Non-discrimination in the implementation of domestic rules and regulations, quick publishing of such laws and regulations, and the provision of technical help to PSI users are among the duties of exporting contractual parties towards PSI users. The agreement provides an impartial review system to settle disputes between an exporter and a PSI agency, which will be handled jointly by an organization representing PSI agencies and an organization representing exporters.
Agreement on Rules of Origin
- The agreement intends to achieve long-term harmonisation of rules of origin that aren’t related to the awarding of tariff advantages, as well as ensure that such regulations don’t generate additional trade barriers. The agreement establishes a harmonisation programme that will begin as soon as practicable once the Uruguay Round is concluded and will be completed within three years. It would be founded on a set of principles, including the objective, intelligible, and predictable nature of origin rules. A WTO Committee on Rules of Origin (CRO) and a technical committee (TCRO) under the aegis of the Customs Cooperation Council in Brussels would carry out the job.
- Much work has been done in the CRO and TCRO, and significant progress has been made in the three years set out in the Agreement to complete the task. However, due to the complexities of the challenges, the HWP was unable to be completed by the scheduled date. In the year 2000, the CRO resumed its operations. The General Council Special Session voted in December 2000 to designate the Fourth Session of the Ministerial Conference, as the new timetable for completing the remaining work.
- Contracting parties would be expected to ensure that their rules of origin are transparent, that they do not restrict, distort, or disrupt international trade, that they are administered in a consistent, uniform, impartial, and reasonable manner, and that they are based on a positive standard until the harmonisation programme is completed. In other words, they should state what confers origin rather than what does not. An annexe to the agreement contains a ‘common statement’ on the application of origin regulations to commodities eligible for preferential treatment.
Agreement on Import Licensing Procedures
- The updated agreement tightens the rules for users of import licencing systems, which are in any case far less common currently than in the past, and improves openness and predictability. The agreement, for example, requires parties to provide enough information to allow traders to understand the basis on which licences are given. It includes new guidelines for notifying the institution of import licensing proceedings, as well as revisions to such procedures. It also provides advice on how to evaluate submissions.
- The revised agreement establishes criteria under which automated licensing procedures are deemed not to have trade-restrictive implications. Importers and exporters should only have to deal with the administrative burden of non-automated licensing processes if it is absolutely essential to administer the measures to which they apply. The updated agreement also stipulates that applications will be examined for a maximum of 60 days.
Agreement on Subsidies and Countervailing Measures
- The Subsidies and Countervailing Measures Agreement is designed to expand on the Tokyo Round’s Agreement on the Interpretation and Application of Articles VI, XVI, and XXIII. Unlike its predecessor, the agreement includes a definition of subsidy and adds the idea of a ‘particular’ subsidy, which is a subsidy that is offered exclusively to a single firm, industry, or group of companies or industries within the jurisdiction of the awarding body. Only specified subsidies would be subject to the agreement’s restrictions.
- Subsidies are divided into three categories under the agreement. First, it considers the following subsidies to be “prohibited”; those contingent, in law or in fact, on export performance, whether solely or in conjunction with one or more other conditions; and that contingent, solely or in conjunction with one or more other conditions, on the use of domestic over imported goods. New dispute resolution processes apply to prohibited subsidies. The primary elements include an accelerated time frame for action by the Dispute Settlement Body, and if the subsidy is judged to be unlawful, it must be revoked promptly. The complaining member is entitled to take countermeasures if this is not done within the stated time frame.
Subsidies that are “actionable” fall under the second group. The agreement states that no member should use subsidies to harm the interests of other signatories, such as injury to another signatory’s domestic industry, nullification or impairment of benefits accruing directly or indirectly to other signatories under the General Agreement (particularly the benefits of bound tariff concessions), and serious prejudice to another member’s interests.
Non-actionable subsidies fall into the third category, which can be either non-specific or specific, such as assistance for industrial research and pre-competitive development, assistance to disadvantaged regions, or certain types of assistance for adapting existing facilities to new environmental requirements imposed by law and/or regulations.
- The Agreement stipulates that if repayment of funding in the civil aviation industry is contingent on the number of product sales, and sales fall short of expectations, this does not automatically result in a presumption of substantial disadvantage.
Agreement on Safeguards
- A GATT member can take a “safeguard” action under Article XIX of the General Agreement to protect a specific domestic industry against an unanticipated surge in imports of any product that is causing, or is likely to cause, substantial harm to the industry. The agreement establishes a bar on so-called “grey area” measures and a “sunset clause” on all safeguard acts, both of which are significant. On the export or import side, the agreement states that a member may not seek, take, or maintain any voluntary export limitations, orderly marketing agreements, or other similar measures.
- All current safeguard measures implemented under Article XIX of the General Agreement 1947 must be discontinued no later than eight years after they were originally implemented or five years after the WTO agreement enters into force, whichever occurs first. Safeguard measures would not apply to a product from a developing country member if the developing country member’s share of the product’s imports does not exceed 3%. Developing country members with less than 3% import shares collectively account for no more than 9% of total imports of the product in question.
- The agreement would create a Safeguards Committee to supervise the implementation of its provisions and, in particular, to ensure that its pledges are met.
General Agreement on Trade in Services
- Three pillars support the Services Agreement, which is included in the Final Act. The first is a Framework Agreement, which contains essential responsibilities that all member nations must adhere to. The second concerns national commitment schedules, which contain particular additional national obligations that will be subject to a continual liberalisation process. The third section has a variety of annexes that address the unique circumstances of various service sectors.
- The agreement includes duties about recognition requirements (such as educational background) for the purpose of obtaining authorizations, licences, or certification in the services field. It promotes conditions for recognition that are met by harmonisation and internationally agreed-upon criteria. Parties are also expected to guarantee that monopolies and exclusive service providers do not abuse their positions, according to the regulations.
- Decisions were made in the last days of the services negotiations on financial services, professional services, and natural person movement. The Financial Services Decision stated that obligations in this sector will be implemented on an MFN basis, and it allows Members to adjust and complete their commitment schedules and MFN exclusions six months after the Agreement enters into effect.
Agreement on Trade Related Aspects of Intellectual Property Rights including Trade in Counterfeit Goods
- The agreement acknowledges that the lack of a multilateral framework of principles, rules, and disciplines dealing with international trade in counterfeit goods, as well as widely differing standards in the protection and enforcement of intellectual property rights, has become a growing source of tension in international economic relations. To deal with the tensions, rules and disciplines were required. The agreement addresses the applicability of basic GATT principles as well as those of relevant international intellectual property agreements, the provision of adequate intellectual property rights, effective enforcement measures for those rights, multilateral dispute settlement, and transitional arrangements.
- In terms of trademarks and service marks, the agreement establishes what sorts of signs must be qualified for trademark or service mark protection, as well as the minimum rights that must be granted to their owners.
In terms of geographical indications, the agreement stipulates that all parties shall provide methods to prohibit the use of any indicator that misleads consumers about the origin of goods, as well as any usage that would be considered unfair competition.
For a period of ten years, industrial designs are also protected under the agreement. Owners of protected designs would be allowed to restrict goods bearing or embodying a design that is a duplicate of the protected design from being manufactured, sold, or imported.
There is a universal responsibility to follow the substantive provisions of the Paris Convention (1967) when it comes to patents. Furthermore, the agreement mandates that all inventions, whether goods or processes, in practically all disciplines of technology be granted 20-year patent protection. The agreement requires parties to guarantee protection for layout designs of integrated circuits based on the Washington Treaty on Intellectual Property in Respect of Integrated Circuits, which was opened for signing in May 1989.
Commercially valuable trade secrets must be safeguarded from breaches of confidence and other unethical business activities.
- The agreement’s final clause deals with anti-competitive conduct in contractual licences. It allows for government-to-government dialogues when there are grounds to think that licencing procedures or conditions relating to intellectual property rights are an infringement of such rights and have a negative impact on competition.
Understanding Rules and Procedures Governing the Settlement of Disputes
- The GATT’s dispute settlement mechanism is widely regarded as one of the multilateral trade order’s pillars. Reforms agreed upon during the Mid-Term Review Ministerial Meeting in Montreal in December 1988 have already improved and simplified the system. Disputes now before the Council are subject to these new rules, which include increased automaticity in decisions on panel creation, terms of reference, and composition, so that these decisions are no longer reliant on the parties’ permission.
- The Uruguay Round Agreement on Rules and Procedures Governing Dispute Settlement (DSU) greatly enhanced the present system, expanding the more automaticity agreed in the Mid-Term Review to the implementation of panels’ and a new Appellate Body’s conclusions. Furthermore, the DSU provides an integrated system that will allow WTO Members to base their claims on any of the multilateral trade agreements included in the WTO’s Annexes. The General Council, as well as the councils and committees of the covered agreements, shall exercise their jurisdiction in this regard through a Dispute Settlement Body (DSB).
- The DSU stresses the significance of discussions in obtaining conflict settlement by requiring a member to engage in consultations within 30 days of another member’s request for consultations. If no resolution is reached within 60 days following the request for discussions, the aggrieved party may request the formation of a panel. If a disagreement cannot be resolved through discussions, the DSU mandates the installation of a panel at the DSB meeting following the one at which a request is made, unless the DSB unanimously decides against it.
- The DSU also establishes particular procedures and timelines for determining terms of reference and panel membership. Unless the parties agree to specific conditions within 20 days of the panel’s formation, the standard terms of reference shall apply. If the parties cannot agree on the panel’s membership within 20 days, the Director-General has the authority to make the decision. Panels are usually made up of three people with relevant backgrounds and expertise from nations that are not parties to the dispute. One of the DSU’s core clauses underlines that members must use the DSU’s dispute resolution norms and processes to determine whether or not there have been breaches or concessions suspended.
Difference between GATT and WTO
The most significant list of differences between GATT and WTO have been discussed hereunder:
- The GATT is an international multilateral treaty signed by 23 countries to promote international commerce and eliminate trade obstacles between countries. WTO, on the other hand, is a worldwide organisation that replaced GATT and regulates international commerce between member countries.
- GATT is a basic agreement with no institutional structure, but it does have a small secretariat. WTO, on the other hand, is a permanent organisation with a secretariat.
- In the GATT, the participating countries are referred to as contracting parties, whereas in the WTO, they are referred to as member nations.
- GATT agreements are temporary in nature, with the government having the option of treating them as permanent commitments after 47 years. WTO obligations, on the other hand, have been in place since the outset.
- The WTO’s scope is broader than the GATT’s in the sense that the GATT’s regulations apply only when products are traded, unlike the WTO, which has laws that apply to both commodities and services, as well as parts of intellectual property.
- The GATT agreement is essentially multilateral, although it is subsequently expanded to include plurilateral agreements. WTO accords, on the other hand, are completely multilateral.
After World War II, the fundamental goal of implementing GATT was to enhance global cross-country commerce in order to strengthen economic stability. It is the bedrock of the World Trade Organization (WTO), which established unrestricted trade between States while maintaining some barriers for the benefit of everyone.
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