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Aspects relating to trade in goods

The European Community undertakes to liberalise trade in industrial and agricultural goods under fair conditions of competition. To reduce tariff and non-tariff barriers to trade in goods.

ACT

Council Decision 94/800/EC of 22 December 1994 concerning the conclusion on behalf of the European Community, as regards matters within its competence, of the agreements reached in the Uruguay Round multilateral negotiations (1986-1994) [Official Journal L 336 of 23.12.1994].

SUMMARY

MARKET ACCESS

General Agreement on Tariffs and Trade (GATT 1994)

This is the basic text containing the general rules governing trade in goods, the specific rules being laid down in the sectoral agreements established in the Final Act. GATT 1994 encompassed GATT 1947 and all of the legal instruments adopted before the Agreement establishing the World Trade Organisation (WTO).

The General Agreement lays down a number of fundamental principles based on GATT 1947, in particular:

  • The general principle of most favoured nation treatment: according to this principle, each WTO member accords to products of any other member treatment no less favourable than that it accords to like products of any other country (concept of non-discrimination).
  • The principle of national treatment with regard to taxation and internal regulations: according to this principle, each WTO member accords products of another member regulatory and fiscal treatment no less favourable than that accorded to products of national origin.

The Agreement also provides for the reduction and binding of customs duties, the elimination of quantitative restrictions on imports and exports and the notification requirement for State trading enterprises. The Agreement covers anti-dumping duties and regulates subsidies and safeguard measures. The provisions concerning consultations and dispute settlement are dealt with in the WTO rules on dispute settlement.

In addition, it sets out a number of criteria concerning free trade areas and customs unions as well as requirements for the members of these areas and unions. Provisions added in 1965 lay down special rules and privileges for developing countries.

Marrakesh Protocol

The Marrakesh Protocol annexed to GATT 1994 is the legal instrument that incorporates into GATT 1994 the schedules of concessions and commitments for goods negotiated during the Uruguay Round, and establishes their authenticity and the arrangements for their implementation. Each WTO member draws up a schedule of goods concessions. This schedule forms an integral part of GATT 1994. Each schedule lists all of the concessions offered by the member concerned during the Uruguay Round or previous negotiations. In accordance with Article II of GATT 1994, each member must accord to the commerce of the other members treatment no less favourable than that provided for in the appropriate part of the corresponding schedule.

Industrial products

As far as industrial products were concerned, the aim of the Uruguay Round was to reduce tariff barriers by at least one third in five years and to increase the number of bound customs duties (where governments agree not to raise the level of duty). Thus, the tariff reductions agreed upon by each member are being implemented in five equal rate reductions, as of 1 January 1995, except as may be otherwise specified in the schedules of concessions.

As a result of these commitments, customs duties levied by developed countries on industrial products imported from all regions of the world have fallen by 40 % on average, from 6.3 % to 3.8 %.

As regards the European Community, almost 40 % of its industrial products will be free of duty. In fact, the customs duties levied by the EC on industrial products are amongst the lowest in the world and most of them will have disappeared by 2004, in line with the commitments made by the Community during the Uruguay Round.

Agricultural products

In accordance with the Agreement on Agriculture, access to agricultural markets is now covered by a regime based solely on customs duties. Non-tariff border measures are replaced by customs duties ensuring equivalent protection. The new customs duties resulting from the 'tariff fixing' process, together with the other duties levied on agricultural products, should be reduced by an average of 36 % in six years for developed countries and 24 % in ten years for developing countries. The least advanced countries are not obliged to reduce their duties.

WTO members are also required to reduce spending on export subsidies and the quantities of exports that are subsidised with regard to specific products. For products not subject to commitments regarding a reduction in export subsidies, the Agreement on Agriculture stipulates that no such subsidy may be used in the future. Developed countries are obliged to reduce the level of direct export subsidies by 36 % in relation to the 1986-1990 base period levels over an implementing period of six years and to decrease the quantity of exports subsidised by 21 % over the same period. Developing countries must ensure reductions equivalent to two thirds of the reductions carried out by developed countries, over a period of ten years (no reductions for the least advanced countries).

As regards domestic support measures for farmers (price support), these are regulated through a reduction in the total aggregate measurement of support (total AMS). Developed countries are committed to reducing their total AMS by 20 % over six years (1986-1988 being the base period used to calculate the reductions). Developing countries must reduce their total AMS by 13 % over ten years. These commitments do not apply to measures with a zero or minimal impact on trade (so-called 'green category' measures, such as agricultural research or training provided within the framework of public programmes).

This set of measures is designed to be a continuous process with the long-term aim of securing gradual substantial reductions in support and protection in the field of agriculture.

Textiles and clothing

The 1973 Multifibre Arrangement (MFA), which covers natural and synthetic fibres and related products, had left trade in textile products outside the common GATT system. In fact, this agreement had set up a derogatory system by legalising bilateral voluntary restraint agreements between states, in other words quantitative restrictions, prohibited by the GATT.

The Uruguay Round negotiations aimed to ensure the smooth integration of the textiles and clothing sector into GATT 1994. Thus, the Agreement on Textiles and Clothing (ATC) provides for the gradual dismantling of the Multifibre Arrangement by 1 January 2005. This involves the gradual elimination of quantitative restrictions, especially the bilateral quotas negotiated under the MFA. Integration means that once the product is integrated, trade in that product is governed by the general rules of GATT 1994. The integration programme has four stages and all products must be integrated no later than 1 January 2005. The Agreement also stipulates that all restrictions on imports of textiles and clothing not covered by the MFA must be notified and brought into line with the GATT within one year of the entry into force of the ATC or gradually eliminated over a period not exceeding the duration of the agreement (by 2005).

Safeguard measures may be applied for countries whose local industries will have difficulties adjusting. These measures may last no longer than three years and will be strictly monitored by the Textiles Monitoring Body.

RULES CONCERNING NON-TARIFF MEASURES

Technical barriers to trade

The Agreement on Technical Barriers to Trade (TBT) aims to ensure that technical regulations and standards and conformity assessment procedures do not create unnecessary obstacles to international trade. The Agreement recognises the right of countries to adopt such measures in order to fulfil a legitimate objective, for example the protection of human health or safety or the protection of the environment. Technical regulations and standards must not discriminate between national products and like products that are imported. Indeed, the Agreement encourages the use of international standards and the harmonisation and mutual recognition of technical regulations, standards and conformity assessment procedures.

The Agreement contains a Code of Good Practice for the Preparation, Adoption and Application of Standards by central government bodies together with provisions concerning the preparation and application of technical regulations for local government bodies and non-governmental organisations. The Agreement stipulates that procedures for assessing conformity of products with national standards must not discriminate against imported products. The Agreement also provides for the establishment of national enquiry points to facilitate access to information on the technical regulations, standards and conformity assessment procedures in each member country.

Sanitary and phytosanitary measures

The Agreement on the Application of Sanitary and Phytosanitary Measures (SPS) relates to all SPS measures which may, directly or indirectly, affect international trade. SPS measures are defined as measures applied to protect human and animal life or to protect plant life from risks associated with additives, contaminants, toxins or diseases present in foodstuffs, or to protect a country in the event of the entry, establishment or spread of pests.

The Agreement affords members the right to take SPS measures based on scientific principles, but they must ensure that those measures do not discriminate against other countries. Moreover, the SPS measures must not be used for protectionist purposes. Members are encouraged to base their measures on international standards, guidelines or recommendations wherever possible. The application of standards may be contested and a dispute settlement procedure is established.

CUSTOMS AND TRADE ADMINISTRATION

Customs valuation

Where customs duties are levied on an ad valorem basis, it is important to establish a clear procedure to determine the customs value of the goods imported. Indeed, when carried out according to unfair rules, the customs valuation may have the effect of a non-tariff protective measure and be more restrictive than the customs duty itself.

The Agreement on customs valuation recognises that this value should, in principle, be based on the transaction value, in other words the real price of the goods. In very specific cases where the transaction value cannot be used as a basis for determining the customs value, the Agreement provides for five other methods of customs valuation, which must be applied in a particular hierarchical order.

Preshipment inspection

In order to prevent fraud and compensate for the shortcomings of their administrative structures, a number of developing countries have recourse to the services of private companies for the verification of the quality, quantity, price and/or customs classification of imported goods before they are exported from supplying countries. The Agreement on Preshipment Inspection sets out the requirements for user countries, mainly as regards non-discrimination, transparency, the protection of confidential business information and price verification.

Rules of origin

As necessary criteria for determining the country of origin of a product, rules of origin must not create unnecessary obstacles to international trade. The Agreement on Rules of Origin establishes disciplines for the application of these rules. It covers the rules used in non-preferential commercial policy instruments. The main objective of this Agreement is to harmonise non-preferential rules of origin so as to ensure that the same criteria are applied by all WTO members, irrespective of the purpose of their application.

Pending this harmonisation and during a transition period, WTO members must ensure that the conditions for determining origin are clearly defined and that the rules of origin do not create restrictive, distorting or disruptive effects on international trade. The rules should not pose unduly strict requirements or require the fulfilment of a certain condition not related to manufacturing or processing as a prerequisite for the determination of the country of origin.

After the transition period, and within three years, members must establish harmonised rules of origin. These rules must be applied equally and they must be objective, understandable and predictable. This harmonisation work is carried out within the WTO's Committee on Rules of Origin and a Technical Committee established under the auspices of the World Customs Organisation.

Annex 2 to the Agreement contains a Common Declaration with regard to Preferential Rules of Origin.

Import licensing procedures

Import licences may be defined as administrative procedures requiring the submission of an application or other documentation to the relevant administrative body as a prior condition for importation into the customs territory of an importing country. The main objectives of the Agreement on Import Licensing Procedures are to simplify these procedures and to ensure that they are transparent and predictable so that they can be applied and administered fairly and equitably.

TRADE PROTECTION MEASURES

Anti-dumping measures

Article VI of GATT 1994 authorises members to apply anti-dumping measures. However, these measures may only be applied if three conditions are fulfilled:

  • the product is sold at an export price that is lower than its standard value, in other words at a price lower than the comparable price of the like product when destined for the exporting country;
  • the dumped imports cause or threaten to cause significant injury to the domestic industry of the importing country;
  • the existence of a causal relationship between the dumped imports and the significant injury to the domestic industry is clearly established.

The Agreement on the implementation of anti-dumping measures is based on the agreement negotiated during the Tokyo Round but it introduces more specific, clearer rules with regard to the method for determining dumping and the procedures to be followed when carrying out investigations. The Agreement provides greater transparency by stipulating that anti-dumping decisions must be notified immediately to the Committee on Anti-dumping Practices, established by the Agreement. It also provides for a dispute settlement procedure.

Subsidies and countervailing measures

The new Agreement on Subsidies and Countervailing Measures, contrary to that adopted at the Tokyo Round, defines the term 'subsidy' and stipulates that only those specific subsidies are subject to its provisions. It lays down the criteria for determining whether a subsidy is specific to an enterprise or industry or group of enterprises or industries. The Agreement divides the subsidies into the following three categories: prohibited, actionable and non-actionable. The Agreement provides for different remedies for each category of subsidies.

The Agreement also contains provisions concerning the use of countervailing measures, i.e. duties imposed by an importing country to compensate for the effect of a subsidy. These rules are similar to those that apply in the case of anti-dumping.

Safeguards

The Agreement on Safeguards lays down the rules for application of the safeguard measures provided for in Article XIX of GATT 1994. This article enables WTO members to apply safeguard measures on a non-discriminatory basis to limit imports where certain conditions are met in order to protect a domestic industry from serious injury or a threat of serious injury caused by an increase in imports.

The Agreement prohibits so-called 'grey zone' measures such as voluntary export restraint or other market sharing arrangements. The Agreement also provides for an extinction clause for all existing safeguard measures. In addition, it provides details on the procedures and rules to be followed when applying safeguard measures.

OTHER TRADE-RELATED RULES

Trade-related investment measures (TRIMs)

The Agreement on Trade-Related Investment Measures (TRIMs) recognises that certain investment measures may have a restrictive or distorting effect on trade. WTO members agree not to apply TRIMs that are inconsistent with the principle of national treatment established by the GATT or with the elimination of quantitative restrictions. The annex to the Agreement contains an illustrative list of TRIMs that are inconsistent with these provisions (requirement to purchase a specified quantity of products of national origin, etc.).

All TRIMs must be notified and eliminated within two years for developed countries, five years for developing countries and seven years for the least advanced countries. A Committee on Trade-Related Investment Measures is responsible for monitoring these commitments.

The members also decided to determine at a later date whether the Agreement should be complemented with provisions on investment policy and competition policy.

Balance-of-payments provisions

GATT 1994 authorises WTO members to impose restrictions on trade for balance-of-payments purposes. The Understanding on the Balance-of-Payments Provisions clarifies the GATT 1994 provisions and strengthens the procedures for consultations and notification of restrictive measures. It confirms the commitment made by the members at the Tokyo Round to give preference to price-based measures, such as import surcharges and import deposits, rather than quantitative restrictions applied for balance-of-payments purposes.

State trading enterprises

Article XVII of GATT 1994 governs the activities of State trading enterprises (government and non-government) with a view to ensuring that states do not use their enterprises as a mechanism to bypass the basic requirements they must fulfil under the GATT. The Understanding on the Interpretation of Article XVII contains a precise definition of State trading enterprises and aims to increase supervision of their activities through enhanced notification and review procedures.

Government procurement

The Agreement on Government Procurement is one of the four plurilateral agreements included in Annex 4 to the Marrakesh Agreement (in December 1997, two of these, dealing with bovine meat and dairy products, were terminated; the other agreement relates to trade in civil aircraft). These agreements only apply to the WTO members that have expressly accepted them. The European Community is one of the twenty or so WTO members that have signed and adopted these agreements.

The Agreement on Government Procurement, replacing the previous agreement from the Tokyo Round, aims to liberalise government procurement as far as possible at international level within a framework guaranteeing transparency and non-discrimination in relation to foreign products and suppliers. It covers procurement involving non-central administrations (states in a federal grouping, provinces, cantons, major towns) and relates to goods, works and services. The legal framework established by this Agreement reflects to a large extent the Community rules on government procurement.

The Agreement governs government procurement where the value exceeds a specific amount: SDR 130 000 (Special Drawing Rights, an IMF accounting unit) for the acquisition of goods and services by central government bodies, SDR 200 000 for sub-central governments, SDR 400 000 for public utility companies and SDR 5 000 000 for construction contracts.

The Agreement covers five sectors of activity: ports, airports, water, electricity and urban transport. It is based on the principle of reciprocity: countries must only open government contracts in the sectors indicated to signatories to the Agreement involved in the same sector.

REFERENCES

Act Entry into force Deadline for transposition in the Member States Official Journal
Decision 94/800/EC 1.1.1995 - OJ L 336 of 23.12.1994
Last updated: 10.04.2006

See also

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