WTO: agreement on trade in goods

The decision approves on behalf of the European Community (today the European Union - EU) the agreement which established the World Trade Organization (WTO).

KEY POINTS

The multilateral agreement on trade in goods includes GATT 1994 (General Agreement on Tariffs and Trade) and 13 sectoral agreements. These cover 4 fields:

• market access;
• rules governing non-tariff measures;
• customs and trade administration;
• trade protection measures.

General Agreement on Tariffs and Trade (GATT 1994)

• This basic text contains the general rules governing trade in goods. The specific rules are laid down in the sectoral agreements established in the Final Act. GATT 1994 included GATT 1947 and all of the legal instruments adopted before the agreement establishing the WTO.
• The general agreement lays down a number of fundamental principles based on GATT 1947, whose aim is notably to ensure fair competition, such as:
  • the general principle of most-favoured-nation treatment : according to this principle, each WTO member treats products of another member country no less favourably than similar products of any other member country (concept of non-discrimination);
  • the principle of national treatment with regard to taxation and internal regulations: according to this principle, each WTO member treats products of another member country no less favourably, with regard to taxation and internal regulations, than its own national products.
  • the reduction and commitment as regards the maximum level of customs duties;
  • the elimination of quantitative restrictions on imports and exports;
  • the notification requirement for state trading enterprises;
  • anti-dumping measures*;
  • anti-subsidy measures*;
  • safeguard measures*;
  • consultation and dispute-settlement procedure;
  • a number of criteria concerning free trade areas and customs unions; as well as
  • requirements for the members of these areas and unions.

  The Marrakesh Protocol annexed to GATT 1994 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.

  • As far as industrial products were concerned, the aim of the Uruguay Round was to reduce tariff barriers by at least one third in 5 years and to increase the number of bound customs duties (where governments agree not to raise the level of duty).
  • 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 EU, almost 40 % of its industrial products were to be free of duty. In fact, the customs duties levied by the EU on industrial products are amongst the lowest in the world.
  • The Agreement on Agriculture aimed at reform of trade in farming products and establishment of a fair market-oriented system.
  • This way, access to agricultural markets is now covered by a regime based solely on customs duties. WTO members were also required to reduce export subsidies and the quantities of exports that are subsidised with regard to specific products. Support measures for farmers (price support) were also to be reduced.
  • The agreement had taken into account the level of economic development of the WTO members. Developing countries did not have to cut their subsidies or lower their tariffs as much as developed countries and had more time to implement their obligations. Least-developed countries were exempted from those reduction commitments.

  Textiles and clothing

  • The 1973 Multifibre Arrangement (MFA), which covers natural and synthetic fibres and related products, meant that trade in textile products was outside the common GATT system. In fact, this agreement set up an exception for textiles by allowing members of the WTO to conclude between themselves bilateral agreements restricting their mutual textile exports. Such agreements would be prohibited under general GATT rules.
  • 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) provided for the gradual dismantling of the MFA by 1 January 2005. This meant that the bilateral restrictions had to be gradually eliminated.
  • Safeguard measures may be applied for countries whose local industries will have difficulties adjusting. These measures may last no longer than 3 years and will be strictly monitored by the Textiles Monitoring Body.

  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 do not follow the principle of national treatment established by the GATT or with the elimination of restrictions on quantities. The annex to the agreement contains examples of TRIMs that do not follow these rules, for example, a requirement to purchase a specified quantity of products of national origin.
  • All TRIMs had to be notified and eliminated within 2 years for developed countries, 5 years for developing countries and 7 years for the least-developed 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 rules on investment policy and competition policy.

  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 confirms that countries can adopt such measures for a legitimate reason, for example to protect human health or safety or to protect the environment. Technical regulations and standards must however not discriminate between national products and similar imported products. The agreement encourages the use of international standards and the harmonisation and mutual recognition of technical regulations, standards and conformity assessment procedures.
  • The Agreement also provides for the establishment of national enquiry points to facilitate access to information on the technical regulations.

  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 protect humans, animals or plants from risks associated with additives, contaminants, toxins or diseases in food, or to protect a country in the event of the entry, establishment or spread of pests.
  • The agreement recognises that members can take SPS measures based on scientific principles, but those measure must not discriminate against other countries or be used for protectionist purposes. Members are encouraged to base their measures on international standards, guidelines or recommendations wherever possible.
  • If members choose not to follow international standards, they should scientifically prove this is necessary. The application of standards may be contested and a dispute settlement procedure is established.

  CUSTOMS AND TRADE ADMINISTRATION

  • Where customs duties are based on the value of goods, it is important to establish a clear procedure to determine the customs value of the goods imported. Indeed, if it is carried out unfairly, 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 the customs value should be based on the real price of the goods. In very specific cases where the price cannot be used to determine the customs value, the agreement provides other methods of customs valuation, which must be applied in a particular order of importance.
  • In order to prevent fraud and compensate for the shortcomings of their administrations, a number of developing countries use the services of private companies to check the quality, quantity, price and/or customs classification of imported goods before they are exported from supplying countries.
  • The Agreement on Pre-shipment 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

  • Rules of origin are necessary criteria for determining the country of origin of a product, but 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.
  • Until the harmonisation, 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.

  Import licensing procedures

  • Import licences are administrative procedures where an application or other documentation must be submitted to the relevant administrative authority before importing goods into a 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.

  The Agreement on Trade Facilitation aims to ease the movement, release and clearance of goods, including goods in transit, by effective cooperation between customs and other relevant authorities on trade facilitation.

  TRADE PROTECTION MEASURES

  • The Agreement on the Implementation of Anti-dumping Measures lays down the rules for applying anti-dumping measures provided for in Article VI of GATT 1994.
  • The agreement introduces specific, clear rules for determining dumping and the procedures to be followed when carrying out investigations.

  Subsidies and countervailing measures

  • The new Agreement on Subsidies and Countervailing Measures defines ‘subsidy’ and states that only those specific subsidies are subject to its rules. 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 3 categories:
    • clearly prohibited;
    • subsidies that can be challenged under WTO rules;
    • subsidies that are allowed.
    • The Agreement on Safeguards lays down the rules for application of the safeguard measures provided for in Article XIX of GATT 1994.
    • The agreement prohibits ‘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.
    • Annex 4 to the Marrakesh Agreement includes 4 plurilateral agreements (i.e. agreements only apply to the WTO members that have expressly accepted them):
      • agreement on bovine meat (in place only until December 1997)
      • agreement on dairy products (in place only until December 1997)
      • agreement on trade in civil aircraft
      • agreement on public procurement. The Agreement on Government Procurement aims to open government procurement to foreign companies.

      FROM WHEN DO THE DECISION AND THE AGREEMENT APPLY?

      • The decision has applied since 22 December 1994.
      • The agreement has applied since 1 January 1995.

      BACKGROUND

      For more information, see: EU and WTO ( European Commission ).

      * KEY TERMS

      Anti-dumping measures: measures, e.g. specific duties, applied to imports into the EU of ‘dumped products’, i.e. products exported to the EU at a lower price than their domestic price.

      Anti-subsidy measures: measures, e.g. countervailing duties (that neutralise the negative effects of subsidies), imposed by the EU on imports that are subsidised and thus injure EU industry producing the same product.

      Safeguard measures: these measures are introduced when an investigation by the European Commission concludes that imports have increased so much that they cause (or threaten to cause) serious harm to EU producers. They are temporary measures, such as quotas, applied to imports in order to offer EU industry time to make any necessary changes.

      MAIN DOCUMENTS

      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) (OJ L 336, 23.12.1994, pp. 1–2)

      Uruguay Round of Multilateral Trade Negotiations (1986-1994) — Agreement establishing the World Trade Organization (WTO) (OJ L 336, 23.12.1994, pp. 3–10)