The Rise in Protectionism

Back Matter

Back Matter

Author(s):
International Monetary Fund
Published Date:
January 1978
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    Appendices
    I. Measurement of Protection: A Note

    It is theoretically conceivable, using an econometric model of the world, to estimate the levels of trade, incomes, prices, and employment that would prevail in the various economies in a situation of free trade, i.e., absence of all protective measures. The differences between these hypothetical levels and the actual levels may then be interpreted as the effects of protection. An approach using this methodology would be a mammoth and difficult undertaking. It would require a highly disaggregated input-output model of the world and a complete inventory of all the trade barriers applied. In addition to tariffs, the secretariat of the gatt has listed 33 categories of nontariff practices, and the identification of those with restrictive effects in given contexts is not often straightforward. Moreover, even if all restrictive practices were identified, their integration into the model would involve additional difficulties because such measures are not equally amenable to quantitative assessment, an issue discussed further below.

    Because of these considerations, empirical studies on protection have been more selective in focus. Using less complicated, partial equilibrium models of individual national economies, these studies have attempted to measure the effects of changes in the restrictiveness of certain trade barriers to imports, as well as such other variables as domestic employment and production. In general, only the “impact” effects have been measured because the determination of the total effects (i.e., the effects after the repercussions of initial shocks have worked through the economy) has been beyond the scope of the models used. Despite their limitations, such studies nevertheless provide a useful quantitative approximation of the magnitudes involved.

    The attempts to measure the effects of protection may be divided into three basic approaches: (1) methods using nominal tariffs and estimated nominal tariff-equivalents of nontariff barriers; (2) methods using implicit nominal tariffs; and (3) effective protection methods using variables in the first category. Each is discussed in turn below. Also briefly discussed are attempts to measure the protection provided by nontariff barriers through an index based on the frequency of such barriers per tariff line.

    Nominal Tariffs and Tariff-Equivalents

    Methods using nominal tariffs and estimated nominal tariff-equivalents are fairly common.1 The crudest version of such methods postulates that increases in tariffs raise the domestic prices of imports proportionately and that the effect on import demand could be estimated by simply multiplying the tariff changes by the corresponding estimated price elasticities of demand for imports; by extension, the effect of changes in nontariff barriers could be determined in a similar fashion after calculating their nominal tariff-equivalents. More complex specifications involving, for instance, the elasticity of foreign supply of an import in question and the elasticity of domestic supply of import substitutes would result in a more complex formula without changing the essence of the approach.

    The estimation of the nominal tariff-equivalents of nontariff barriers is difficult, but it has been reasonably successful for a wide variety of nontariff barriers expressed in quantitative terms—such as import quotas, tariff quotas, variable levies, advance import deposits, border tax adjustments, surcharges, and minimum prices. Nontariff barriers expressed in nonquantitative terms—health and sanitary standards, quality and measurement standards, packaging and labeling conventions, consular formalities, customs valuation procedures, and the like—would require estimates of the costs of compliance and a per unit distribution of such costs in order to obtain their respective nominal tariff-equivalents. In the case of government procurement, the discriminatory or protective effect involved has been approximated through the use of the differentials between governmental and private propensities to import by sector.2

    Implicit Nominal Tariffs

    The problem of identifying nontariff barriers and their nominal tariff-equivalents has long been recognized. One way of getting around this problem was proposed by a gatt panel of experts headed by Professor Gottfried Haberler and applied by the UN Economic Commission for Europe in a study of protection on agriculture in Western Europe.3 On the premise that, in the absence of trade barriers, market forces would tend to equalize domestic and international prices, the proposed method interprets the observed differentials between such prices (less the normal costs of trade) to be proxies for the combined effect of tariffs and nontariff barriers. Such price differentials divided by the corresponding international prices may thus be seen as implicit nominal tariffs, which could be used in the same fashion as nominal tariffs to estimate the protection involved.

    The simplicity of this approach is appealing. However, its application could be questioned in cases where the observed domestic prices are artificial in the sense that they do not clear the corresponding markets. Furthermore, this approach shares a deficiency with the first approach in that both deal with nominal rather than effective protection.

    Effective Protection

    The first two methods described above are open to the objection that the resulting estimates of protection would be biased because the methods implicitly and unrealistically assume that imports are finished products, or, in other words, that imported inputs are not used in domestic production. In effect, the methods ignore the impact of the tariff structure on the various stages of domestic production.

    Intuitively, it may be seen that a tariff on a finished import increases the protection on domestically produced substitutes (in the sense that such a tariff would permit domestic output prices to be raised relative to international prices) and that tariffs on imported inputs incorporated in the domestic production of import substitutes would reduce the protection on such production (in the sense that input tariffs would raise input costs without permitting an increase in output prices). The concept of effective protection relates to the balance of these opposing effects. Formally, the effective protective rate on the jth import (Ej) is defined to be equal to the tariff on the jth import (tj) less the aggregate of input tariffs (ti) weighted by the respective shares of inputs in total costs (aij), divided by the proportion of domestic value-added (vj).4 This rate represents the amount by which the cost of domestic value-added could exceed the cost of foreign value-added and still remain competitive with it in the domestic market. Empirical studies have shown that effective protective tariff rates are usually higher than the corresponding nominal tariffs, although in rare cases negative effective protective rates have been observed.5

    If the effective protective rates corresponding to nominal tariffs could be estimated through the use of input-output models, the next logical step would be to estimate the effective protective rates of the nominal tariff-equivalents of nontariff barriers. The main difficulty involved in this type of exercise would be the enormous amount of information required.

    Inventory Approach

    The conceptual and statistical problems involved in estimating the protective effect of nontariff barriers by the methods described above have spurred research into alternative methods. Several recent studies have used the so-called inventory approach, in which indices of the frequency of all or selected nontariff barriers per tariff line are used to measure the restrictive-ness of such barriers.6 The utility of these indices is questionable because they implicitly assume all nontariff barriers to have equivalent impacts. In effect, if a nontariff barrier that acts to reduce imports under a tariff line by $100 million is replaced by another that acts to reduce imports under the same tariff line by only $50 million, such indices would register no change in restrictiveness; moreover, if the replacement consists of two nontariff barriers that act to reduce imports by $50 million, such indices would perversely register an increase in restrictiveness.

    Conclusion

    Clearly, the measurement of protection should be based on the concept of effective protection. The information required for this approach is such that only a few full-scale studies have been made, and for the most part they refer only to tariffs. However, as tariffs become less and less important in protective structures, and as the need to negotiate reductions of nontariff barriers becomes more and more urgent, the quantification of the effective protective effects of the latter, no matter how imperfect, will become indispensable.

    II. Trade Actions: Methods and Procedures

    The survey of trade actions in recent years that was made for this study demonstrates that countries have resorted to a variety of instruments and that the methods of restriction are becoming increasingly ad hoc, complex, and sophisticated. It is difficult to document fully the growing use of the numerous nontariff measures that have been used—or used inappropriately—to restrict imports.1 This appendix is therefore limited to observations on certain specific methods and instruments of trade restriction.

    Safeguard Measures Under GATT (Art. XIX)

    Emergency actions taken under the safeguard provisions of the gatt (and notified to that body) to protect domestic industries against injury from import competition are shown in Table II—1. Such actions in recent years have been relatively few and have taken the form of quantitative restrictions (and occasionally embargoes) on imports as well as of tariff increases. A major reason often cited for the infrequent invocation of these provisions is that they may be applied only on a nondiscriminatory basis, whereas countries often prefer measures that can be applied selectively with respect to the source of the import. There have, however, been two recent instances of the use of the safeguard provisions on a selective basis—the invocation of the Art. XIX provisions of the gatt by the United States in 1977 in connection with its bilateral agreement with the Republic of Korea limiting imports of nonrubber footwear (see p. 26 above), and their invocation by the eec in 1977 in regard to imports of television sets from the Republic of Korea into the United Kingdom (see p. 32 above).

    Table II–1.Actions Taken Under Safeguard Provisions (Art. XIX) of GATT, 1971–771
    CountryProductMeasure2Year
    Introduced
    AustraliaFootwearQR1974
    Motor vehiclesQR1975
    Certain apparel itemsT1975
    Sheets and plates of iron and steelQR1975
    Ophthalmic frames, sunglassesQR1975
    Files and raspsQR1976
    Knitted and woven dressesT1976
    Electric freezer chestsQR1976
    Passenger motor vehiclesQR1977
    BrandyT and TQ1977
    Fired resistorsQR1977
    CanadaStrawberriesT1971
    Men’s and boys’ shirts, woven or knittedQR1971
    Fresh cherriesT1973
    Live cattle and beefT1973
    Cattle, beef, vealQR1974
    Worsted spun acrylic yarnsQR1976
    Work glovesQR1976
    Certain textured polyester yarnsT1976
    Fresh and frozen beef and vealQR1976
    Double-knit fabricsQR1976
    A range of clothing itemsQR1976
    Certain footwearQR1977
    EECTomato concentratesQR1971
    Timber (Germany only)QR1973
    Magnetophones (Italy only)QR1973
    Bovine meat and live cattleQR/E1974
    PeachesE1974
    Preserved mushroomsQR1974
    Frozen hake fillets (France only)E1975
    Tunny (France only)E1975
    Portable TV sets from KoreaQR1977
    Squids (Italy only)QR1977
    FinlandWomen’s pantyhoseT1976
    IsraelRadio equipmentT1971
    JapanBovine meatQR1974
    New ZealandFabricsQR1975
    SwitzerlandBottled white winesQR1975
    Bottled red winesTQ1976
    United StatesCeramic tablewareT1972
    Ball bearingsT1974
    Certain dried milkE1976
    Stainless and alloy tool steelQR (OMA)1976
    FootwearBRA1977
    Source: GATT secretariat.

    Not all of the notifications to the gatt that are listed here specifically mentioned Art. XIX.

    Letters indicate the following: BRA=bilateral restraint agreement; E=embargo; OMA=orderly marketing agreement: QR=quantitative restriction: T=tariff; TQ=tariff quota.

    Measures Under National Legislation

    United States: “Escape clause” actions2

    “Escape clause” actions (to provide temporary import relief so as to facilitate orderly adjustments to import competition by producers) are taken when the U.S. International Trade Commission determines, on the basis of a petition from an industry or a group of workers, that imports have increased (relatively or absolutely), that the industry in question is suffering or threatened with serious injury, and that increasing imports are “a substantial cause” of the injury. In the event of a negative finding, the case is dismissed. In the case of an affirmative finding, the Trade Commission specifies remedial measures, which could take the form of higher tariffs, tariff quotas, import quotas, orderly marketing agreements, or any combination of these. The President has the final authority to accept or modify the recommendation of the Commission, although if his action differs from the recommendation, Congress can impose the recommendation by a majority of both Houses.

    United States: Antidumping duties

    Under U.S. procedures, investigations to determine whether a particular class or kind of foreign goods is being or is likely to be sold in the United States at less than “fair value” are initially undertaken by the Treasury, usually in response to petitions by domestic producers.3 When the Treasury determines that imported goods are sold at less than “fair value,” the results of the investigation are communicated to the U.S. International Trade Commission, which in turn determines whether imports at less than “fair value” have caused, or are threatening to cause, injury to the import-competing domestic industry. If an affirmative finding is made, an antidumping duty equal to the difference between the “fair value” and the price of the imported article is assessed. A product is considered to be sold at less than “fair value” if the purchase price or the exporter’s sales price of an imported product in the United States is less than the “foreign market value.”

    The amendments to the Antidumping Act of 1921 (contained in Section 321 of the Trade Act of 1974) created a new option for complainants in cases where the export price is not below the price in the exporter’s home market: a complainant may argue that a commodity is being dumped if the export price is demonstrably below “the cost of production,” i.e., the manufacturer’s full costs, even though the export price may not be below the domestic price in the exporting country. If it can be shown that the sales in the exporter’s domestic market are being made over “an extended period of time and in substantial quantities, and … are not made at prices which permit recovery of all costs within a reasonable period of time in the normal course of trade,” then such sales may be disregarded in the determination of “fair value,” effectively raising the level of the “fair value.” Furthermore, if the remaining sales are inadequate for determining “fair value,” then “constructed value” becomes the basis for a determination of dumping; and if export prices are below this for a reasonable period of time, dumping is established.4 There is no precise definition of production costs in the Trade Act of 1974, but they have been interpreted to mean average unit costs.

    United States: Countervailing duties

    The procedures dealing with countervailing duties are similar to those pertaining to antidumping duties. On the basis of petitions submitted by producers, the U.S. Treasury conducts an investigation to determine whether imported products are receiving government subsidies in the country of production (in the form of either export or production subsidies). A final determination is made by the Treasury within a year. When a product is found to be subsidized, the International Trade Commission is asked to determine, within three months, whether an industry is being or is likely to be injured, or is prevented from being established, by reason of importation of subsidized products. If the determination of the Trade Commission is in the affirmative, a countervailing duty equal to the estimated amount of subsidies is assessed on imported products. Under the Trade Act of 1974, the Secretary of the Treasury is, however, authorized to waive the imposition of countervailing duties until January 1, 1979, if he finds that there is a reasonable prospect that an international agreement on the use of export subsidies will be reached in the Tokyo Round of the multilateral trade negotiations.

    European Economic Community (EEC)

    The basis for protective measures implemented by the eec is Art. 113 of the Treaty of Rome and Regulations EEC 1439/74 (for gatt countries) and 109/70 (for state-trading countries). These laws and regulations, in conformity with the safeguard (Art. XIX) provisions of the gatt, empower the Commission of the European Communities to act on its own initiative or at the request of a member state. Safeguard measures taken may apply to imports into the eec as a whole or into certain member countries. In practice, the eec invokes Art. XIX of the gatt for products liberalized at the Community level, while Regulation 1439/74 is generally invoked for products liberalized by individual member states but not by the entire Community. Actions under Regulation 1439/74 need the approval of Committee 113 of the eec, whose decisions depend on such considerations as the ratio of imports to demand in the affected country concerned and any decline in output, employment, and exports. As regards products that are not included in the common liberalization list, member states have the option of invoking Art. XIX of the gatt at the national level. Until mid-1977, Denmark, Ireland, and the United Kingdom could take certain independent actions against nonmember states.

    With respect to antidumping cases, complaints may be directed either to member countries or directly to the Commission of the European Communities. If the complaint is adequately substantiated by evidence, the Commission initiates an investigation along the criteria mentioned in the gatt, namely, that the product being dumped must cause material injury, threaten such injury, or materially retard the development of an industry. Interested parties must be given a hearing. In emergencies, temporary duties may be imposed for three months; they are definitively imposed if an affirmative finding is made. Similar procedures apply with respect to the adoption of countervailing duties against subsidized imports.

    In April 1977 a recommendation by the Commission was adopted containing precise definitions of dumping and subsidies, and of damage suffered by a Community industry in respect of products covered by the Treaty of the European Coal and Steel Community.5 For the above purposes, a variety of trade measures may be taken, including quantitative restrictions, increases in duties, limitations on the validity of import documents, and the subjecting of imports to authorization. In addition, limitations on imports of many products take place through bilateral agreements with exporting countries.

    Canada: Countervailing duties and antidumping duties

    Canadian producers who believe that imports which are dumped or which benefit from foreign subsidies are causing or threatening material injury to their production may register a complaint with the Deputy Minister of National Revenue, Customs and Excise. In this complaint the injurious foreign subsidy or dumping practice must be outlined and evidence of material injury must be provided. On the basis of this information, the Deputy Minister may initiate an investigation to establish whether the per unit amount of subsidy or the dumping margin and the actual or potential volume of imports is greater than negligible. On an affirmative finding, a provisional countervailing or antidumping duty is imposed or a bond equal to the estimated applicable duties is required. The Anti-Dumping Tribunal subsequently reports on whether or not the subsidized imports are causing or threatening material injury, and thus on whether the countervailing or antidumping duty should be ratified or rescinded. During the course of domestic procedures, consultations are held with affected foreign countries, generally within the framework of the gatt.

    Canada: “Escape clause”

    Under Canadian legislation, safeguard actions of an emergency or temporary nature may be taken when imports cause or threaten serious injury to domestic production. Decisions to resort to safeguard measures are taken after an examination by the senior policy officials concerned and only after consideration by ministers concerned, often in full Cabinet. In reaching a decision, ministers take into consideration a whole range of questions involving the effects of potential action on Canada’s trade and economic relations with other countries.

    Japan

    As in other countries, there are regulations in Japan that apply to various aspects of importing and, in addition, informal procedures that affect imports. While most of these measures—such as those relating to quality control, health standards, measurement specifications, and the like—are designed for specific internal purposes, exporters to Japan have at times claimed that such measures may have an indirect trade-retarding effect on their exports.6 It is very difficult to assess the overall quantitative effect of such measures with any degree of accuracy; it is therefore equally difficult to determine whether there has been an increase in this form of protectionism in recent years.

    Japanese health and sanitary regulations and quality standards, which are strictly enforced, are not intended as measures to restrict imports, although they may indirectly have a trade-impeding effect. Another feature that may also have an indirect effect on imports is the domestic distribution system in Japan. There are no restrictions on the activity or expansion of medium-sized and small retail outlets. The expansion of large outlets, however, is regulated in each local area by a committee composed of small and medium-sized retailers, consumers, and an outsider. An important consideration of the committee is the protection of small and medium-sized retailers. However, about 300 large retail stores are established each year, and the proportion of these to total retail outlets (currently 20 per cent) is growing.

    The distribution system for manufactures consists of traditional distributors (wholesalers that distribute textiles and general merchandise); manufacturers (distributing new products, such as cars, electrical appliances, and whiskey); and large retailers. One of the facets of exporting to Japan confronted by exporters is that imports into Japan of new products are at times distributed through the distributing system of Japanese noncompeting manufacturers (for example, some air conditioners manufactured in the United States are distributed by a major Japanese automobile manufacturer). A further aspect is that the imported goods are frequently distributed through “sole agents,” which operate with high mark-ups and low volume, and for this reason some imported goods are sold at very high prices in the domestic market.

    III. Protectionism in Textile Trade

    Background

    In addition to tariffs, international trade in various textile products has been restricted over the past 17 years under the bilateral agreements concluded between importing and exporting countries in the framework of multilaterally negotiated arrangements, viz., the Short-Term Arrangement (1961/62), the Long-Term Arrangement (1962–73), and the Multifiber Arrangement (1974–81).

    Protectionism in this field is of particular concern for several reasons. First, the multilateral arrangements, which may have been devised initially to deal with “short-run” problems in the textile sector, have become more or less permanent. Despite the declaration of the participating countries that the restrictive features of these arrangements should not be considered as a model for application in other fields, there are indications that the concepts of “orderly marketing” and “market sharing” implicit in these arrangements are being applied to other sectors, e.g., footwear, steel, and electronics. Second, in the course of negotiation and review, the arrangements have been criticized by participating countries, both importers and exporters, as having failed to solve the fundamental problems of the textile trade. Yet not only has the number of countries participating in the arrangements increased, but the product coverage also has expanded over the years. Third, restrictions on trade in textiles have a particularly negative effect on the trade and development prospects of many developing countries. The development of the textile industry has been an important element (often the leading sector) of the industrialization efforts of developing countries, and the amount of capital invested in modern technology has been substantial. As a result, the textile industry in many developing countries has been able to improve its competitive position in the world market and has become an important source of foreign exchange earnings and of jobs for semiskilled labor.

    Developments Before 1962

    The first multilateral arrangement aimed at regulating international trade in textiles—the Short-Term Arrangement on Cotton Textiles—was negotiated in 1961 under the auspices of the gatt and remained in force for one year beginning October 1, 1961. The 19 participants agreed that international action was needed

    • (i) to significantly increase access to markets where imports are at present subject to restriction;

    • (ii) to maintain orderly access to markets where restrictions are not at present maintained; and

    • (iii) to secure from exporting countries, where necessary, a measure of restraint in their export policy so as to avoid disruptive effects in import markets.1

    A participating importing country was allowed to request any participating exporting country to restrain exports of any covered cotton textile product to a level not lower than the level prevailing during the 12-month period ended June 30, 1961, if such products were causing or threatening to cause a disruption in the domestic market of the importing country. The participating importing country had the right to restrict imports unilaterally to a specified level if no agreement was reached with the participating exporting country within 30 days. The Short-Term Arrangement referred to an earlier decision of the Contracting Parties to define what constituted market disruption, as follows:

    • … These situations [market disruption] generally contain the following elements in combination:

    • (i) a sharp and substantial increase or potential increase of imports of particular products from particular sources;

    • (ii) these products are offered at prices which are substantially below those prevailing for similar goods of comparable quality in the market of the importing country;

    • (iii) there is serious damage to domestic producers or threat thereof;

    • (iv) the price differentials referred to in paragraph (ii) above do not arise from governmental intervention in the fixing or formation of prices or from dumping practices.

    • In some situations other elements are also present and the enumeration above is not, therefore, intended as an exhaustive definition of market disruption.2

    Several notable structural changes that had taken place in the cotton textile industry and trade of the world and had led to the negotiation of the arrangement may be noted briefly.3 World production of cotton textiles and clothing (excluding the U.S.S.R., Eastern Europe, and the People’s Republic of China) during 1953–60 fell behind the rate of expansion in the output of manufacturing industries as a whole; while the latter expanded by 37 per cent, output of the cotton textile and clothing industries expanded by only 28 per cent. During the same period, whereas the value of world exports of all manufactures nearly doubled, the value of world exports of cotton textiles and clothing rose by 32 per cent.

    A declining growth in the demand for these products during this period created a situation of excess supply. Although the per capita consumption of cotton textiles varied considerably from one country to another, on the whole it rose very little. In contrast, the per capita consumption of man-made fibers increased significantly during the period.

    At the same time, the structure of world trade in cotton textiles and clothing underwent a significant transformation: exports of developed countries (excluding Japan) that participated in the 1961/62 Short-Term Arrangement declined by 5 per cent, while exports of developing countries expanded by 88 per cent and exports of Japan by 155 per cent.

    Long-Term Arrangement (1962–73)

    While the Short-Term Arrangement was being negotiated, the participating countries began to work on a longer-term solution. The outcome was the conclusion of the Long-Term Arrangement Regarding International Trade in Cotton Textiles, which entered into force for a period of five years following the expiry of the Short-Term Arrangement at the end of September 1962.4 It was subscribed to by 29 countries. Although the definition of cotton textiles remained basically unchanged,5 the provisions were considerably more elaborate than those of the Short-Term Arrangement. The new arrangement not only contained a provision dealing with domestic market disruption, but also attempted to regulate the expansion of trade in cotton textiles over the five-year period. It drew a fundamental distinction between the obligations of countries that maintained restrictions on cotton textile imports and countries that did not. The former were to grant a specified percentage increase in market access to the participating exporting countries between the base year 1962 and the terminal year of the arrangement.6 Where bilateral arrangements existed, although the freedom to determine the percentage of annual increase in market access was reserved to the negotiating parties, it was stated that it would be desirable that such percentages should correspond as closely as possible to one fifth of the overall target rate of increase in market access.

    As under the Short-Term Arrangement, the participating importing countries in the Long-Term Arrangement that were not maintaining restrictions on cotton textile imports were permitted to enter into mutually acceptable bilateral agreements with the participating exporting countries and to impose restrictions on imports to remedy or avoid a situation of market disruption. When restrictions were introduced for this purpose, however, the level of imports restricted during the first year was not to be lower than the actual level during a preceding 12-month period, and if restrictions were maintained during subsequent years they were to allow, as a rule, for an annual increase in the level of imports of 5 per cent. In exceptional cases, an increase of less than 5 per cent was allowed to be applied in consultation with the exporting country concerned, but in no case was the percentage to be less than zero. The standards to be applied in defining market disruption were the same as set out in the Short-Term Arrangement.

    The Long-Term Arrangement differed from the Short-Term Arrangement in certain additional respects: (1) the obligations of the participating countries not to introduce new import restrictions on cotton textiles or to intensify existing ones inconsistently with their obligations under the gatt were more explicitly spelled out; (2) the participating countries invoking the market disruption clause mentioned above were obliged to report at least once a year to the Cotton Textiles Committee (a newly established gatt body entrusted with the responsibility of administering the arrangement) regarding liberalization measures they had taken.

    Although the United Kingdom maintained restrictions on cotton textile imports and would therefore have been obliged to increase access to its markets, it was permitted to accept the arrangement with a reservation that excluded this obligation. The reservation was permitted on the grounds that (1) in the decade preceding the entry into force of the arrangement, there had been a substantial contraction in the cotton textile industry of the United Kingdom; and (2) the ratio of U.K. imports, particularly from the developing countries and Japan, to domestic production had been raised.

    As a result of the Kennedy Round of the multilateral trade negotiations, the Long-Term Arrangement was extended for three years beginning October 1, 1967.7 The commitments of the participating importing countries that were maintaining restrictions to increase their import quotas during the three years October 1, 1967-September 30, 1970 were increased substantially, particularly those of the eec (to 154 per cent) and Austria (to 152 per cent).

    The Long-Term Arrangement was renewed for a second three-year period until September 30, 1973.8 No changes were introduced. During the three years, Austria, Denmark, Norway, and Sweden agreed to increase market access by percentages higher than those agreed during the previous three years. As the eec decided to proceed with an arrangement whereby its commitment regarding future market access would be determined under bilaterally negotiated agreements, it was deleted from the list of countries to which the general market access formula applied. When the Long-Term Arrangement expired in 1973, 33 countries, representing about three fourths of world trade in cotton textiles, were parties to it.

    The operation of the Long-Term Arrangement was frequently criticized by participating countries, both exporting and importing. Exporting countries, the majority of which were developing countries, expressed disappointment that an arrangement that was initially regarded as an “exceptional and transitional measure” designed to deal with special trade problems in the cotton textile sector had become a permanent one, depriving them of opportunities to increase their export earnings. The growing number of restrictive bilateral agreements concluded within the framework of the Long-Term Arrangement, the lack of objective criteria and of uniformity in the interpretation of the provisions on “market disruption” by importing countries, and rigid administration of quotas were pointed out as the basic problems of the arrangement. Participating importing countries, on the other hand, complained that some exporting countries had failed to observe their commitments under the arrangement by not limiting exports or by exporting through third countries.

    Background to Multifiber Arrangement 9

    A number of significant changes in the patterns of world production of and trade in cotton textiles occurred during the lifespan of the Long-Term Arrangement. During the decade ended 1972, world production of textiles and clothing expanded at a much slower rate (52 per cent and 46 per cent, respectively) than overall industrial production (92 per cent). Production of textiles and clothing in developing countries continued to expand at a considerably faster rate (58 per cent and 66 per cent, respectively) than in developed countries (46 per cent and 24 per cent, respectively).

    A major structural change in the textile and clothing sector during the decade preceding the negotiation of the Multifiber Arrangement was that production of man-made fibers expanded at a much faster rate than cotton and wool varieties, and as a result, the share of natural fibers in total fiber production declined from 78 per cent in 1960 to 59 per cent in 1971 (Table III–1). This appears to have been due to price developments in favor of man-made products and the creation of new varieties of such products for specific requirements.

    Table III–1.World Production of Principal Textile Fibers, 1960 and 1971
    World Production, 1960World Production, 1971
    Thousand metric tonsAs % of totalThousand metric tonsAs % of total
    Cotton10,1136811,77152
    Wool1,463101,5537
    Artificial2,607173,44115
    Synthetic70255,89426
    Total14,88510022,659100
    Source: GATT, Study on Textiles: Report of the Working Party on Trade in Textiles, L/3797, December 29, 1972, 3 vols.

    The shift in the production and consumption of textile products from pure cotton and wool varieties to man-made fibers and blends was reflected in the international trade in textile products in the 1960s. The share of man-made fibers in the yarn trade rose from 44 per cent to 69 per cent between 1960 and 1970, and the share of man-made fibers in the fabric trade rose from 17 per cent to 38 per cent over the same period (Table III–2).

    Table III–2.Shares of Cotton, Wool, and Man-Made Fibers in World Trade in Yarns and Fabrics, 1960 and 19701(In per cent, based on value)
    19601970
    Yarns
    Cotton fibers3523
    Wool fibers219
    Man-made fibers4469
    Fabrics (woven)
    Cotton fibers6854
    Wool fibers158
    Man-made fibers1738
    Source: GATT, Study on Textiles: Report of the Working Party on Trade in Textiles, L/3797, December 29, 1972, 3 vols.

    Excludes trade of Eastern European countries, but includes intra-EEc trade.

    With regard to the distribution of trade in man-made fiber yarns and fabrics (woven), the share of developing countries increased only in respect of fabrics (Table III–3). The share of developing countries in the trade in natural fiber fabrics also showed a small increase between 1960 and 1970. However, their share in trade in man-made fiber yarns showed a significant decrease, from 38 per cent to 23 per cent between 1960 and 1970, that in trade in cotton yarns remained unchanged, and that in trade in wool yarn showed a significant gain, from 13 per cent to 22 per cent, over the same period.

    Table III–3.Shares of Developed and Developing Countries in World Imports of Yarns and Fabrics, 1960 and 19701(In per cent, based on value)
    CottonWoolMan-Made FibersTotal
    19601970196019701960197019601970
    Yarns
    Developed countries6967845954736570
    Developing countries2222132238232721
    Fabrics (woven)
    Developed countries8074798066638374
    Developing countries161961022351726
    Source: GATT, Study on Textiles: Report of the Working Party on Trade in Textiles, L/3797, December 29, 1972, 3 vols.

    Percentages do not add to 100 because the shares of Eastern European countries are excluded. Imports of industrial countries include intra-EEC trade.

    As a result of these structural developments in world production of and trade in textile products, pressures developed to expand the coverage of textile products under the Long-Term Arrangement.

    Multifiber Arrangement (1974–81)

    The Arrangement Regarding International Trade in Textiles (Multifiber Arrangement, or MFA) was negotiated in the course of 1973 and entered into force on January 1, 1974 for a period of four years.10 It had 42 signatories (counting the EEC as one), compared with 29 signatories to the Long-Term Arrangement originally and 33 when it expired. The basic difference between the two arrangements was that the product coverage was expanded to include not only cotton textiles but also those made of man-made fibers and wool. Textile products covered by the Multifiber Arrangement were “tops, yarns, piece-goods, made-up articles, garments and other textile manufactured products (being products which derive their chief characteristics from their textile components) of cotton, wool, man-made fibres, or blends thereof, in which any or all of those fibres in combination represent either the chief value of the fibres or 50 per cent or more by weight (or 17 per cent or more by weight of wool) of the product.” 11 Artificial and synthetic staple fibers were explicitly excluded, but the arrangement provided for the application of restraints on imports of these products in cases of market disruption. The arrangement excluded exports of fabrics manufactured by cottage industries in developing countries, such as handloom fabrics or handmade products of such fabrics and traditional folklore handicraft products.

    Like the Long-Term Arrangement, the Multifiber Arrangement set out two distinct obligations regarding the use of quantitative restrictions on textile imports. Existing quantitative restrictions were required to be notified to the Textiles Surveillance Body (a body entrusted with the responsibility of over-seeing the administration of the Multifiber Arrangement, discussed below), and such restrictions were required to be terminated within a year unless one of the following conditions was met: (1) the country concerned adopted a program for the phased elimination of the restrictions within three years, with a “major effort” being made in the first year; (2) the restrictions represented part of a bilateral agreement, in conformity with the Multi-fiber Arrangement, and provided for an increase in imports of at least 6 per cent a year; or (3) the restrictions were imposed as a result of market disruption in accordance with the criteria established under a separate provision of the Multifiber Arrangement.

    With respect to the use of quantitative restrictions aimed at remedying a situation of market disruption, the Multifiber Arrangement contained much more objective criteria for the determination of market disruption and of the procedures regarding the introduction of new restrictions than did the Long-Term Arrangement. The determination of a situation of market disruption was to be based on the existence of serious damage to domestic producers or actual threat of such damage, and such a situation had to be caused by a sharp and substantial increase in imports of particular products from particular sources offered at abnormally low prices, and not by changes in technology or consumer preference. The Multifiber Arrangement enumerated the economic factors that the examination of the conditions of the domestic industry should cover: turnover, market share, profits, export performance, employment, volume of disruptive imports, production, utilization of capacity, productivity, and investment. When an importing country believed that its market was being disrupted by an excessive increase in imports, it was obligated to consult with the exporting countries concerned regarding the level of exports to be restrained. In the course of these consultations, which had to be completed within a period of 60 days, the consulting countries were to reach understandings regarding the removal of the cause of the market disruption, including the level to which imports could be restricted. The formula defining the maximum permissible degree of restriction in the Multifiber Arrangement was that the level of imports must not be restricted to a level below the actual level of imports during a preceding 12-month period. In cases where restrictions were maintained for more than a year, the level of restricted imports for subsequent 12-month periods following the first 12-month period must provide for an annual rate of import growth of at least 6 per cent. If consultations did not result in an agreement, the importing country was permitted, after the lapse of a 60-day period, to restrict the level of imports. The formula to be applied in such cases was the same as that described above. The arrangement provided that in exceptional cases, where the 6 per cent rule regarding the annual rate of increase in imports was likely to result in a recurrence of market disruption, or where the 6 per cent rate would cause damage to a country’s “minimum viable production,” a lower rate of growth could be agreed upon after bilateral consultations.

    In the area of international surveillance, the Multifiber Arrangement, as already mentioned, introduced an important institutional arrangement by establishing a standing committee, the Textiles Surveillance Body, consisting of a chairman and eight members. There was no comparable institutional arrangement for multilateral surveillance under the Long-Term Arrangement. The Textiles Surveillance Body was entrusted with the broad responsibilities for supervising the implementation of the Multifiber Arrangement. Its main functions included the formulation of recommendations for the settlement of disputes among participating countries concerning the interpretation and enforcement of the provisions of the arrangement as well as the terms of bilateral agreements concluded within the framework of the arrangement. The participating countries were to try to accept in full the recommendations of the Textiles Surveillance Body, and whenever they found it not possible to do so, they were required to inform it of the reasons and of the extent to which they would be able to follow its recommendations. Another important function of the Textiles Surveillance Body was to maintain a complete record of all restrictions reported by the participating countries, and to review such restrictions with a view to determining their conformity with the Multifiber Arrangement. Since the coming into force of the arrangement, 105 bilateral agreements have been concluded between participants, and 21 unilateral actions to restrain imports have been notified.

    It is difficult to relate the operation of the Multifiber Arrangement to the rate of growth or change in the pattern of world trade in textiles and clothing since 1974.12 It appears, however, that world trade 13 in these products has been expanding at a reasonable rate. The value of world imports of textiles and clothing rose by 21 per cent in 1974, somewhat less than in preceding years. In 1975, however, only imports of clothing rose (11 per cent), and imports of textiles declined (7 per cent). The value of world imports of textiles and clothing combined remained unchanged in 1975 (see Table III–4). In the first half of 1976, world trade in clothing continued to expand at a rapid rate and world trade in textiles recovered slightly. Developments in the trade of developed and developing countries as groups, however, showed considerable divergence from these overall trends, as Table III–4 shows.

    Multilateral discussions regarding the future of the Multifiber Arrangement began in late 1976. In the July 1977 meeting of the Textiles Committee of the gatt, the participating countries reiterated their complaints regarding the operation of the arrangement. From the viewpoint of the participating importing countries, the main shortcoming was that the provision for a 6 per cent annual rate of increase in market access had been too generous, especially in the case of suppliers with high market shares, and sufficient freedom had not been given to depart from this “norm” in the negotiation of bilateral agreements. The participating exporting countries, on the other hand, considered that the 6 per cent “norm” was not sufficient to allow for orderly expansion in their exports and that some of the provisions of bilateral agreements were too restrictive. Another major shortcoming pointed out by exporting countries was that there had been tendencies to impose unilateral restrictions on grounds of market disruption without prior consultation and without the provision of adequate data in support of the claims of market disruption. At the July 1977 meeting, the eec expressed strong opposition to an extension of the Multifiber Arrangement without revisions, by arguing that the level of imports into the eec as agreed under the arrangement caused excessive market penetration and aggravated the unemployment situation in the textile and clothing industries of the eec countries. The intention of the eec was to achieve the following objectives through bilateral agreements to be negotiated with individual countries before the end of 1977 or before a new Multifiber Arrangement became operative: (1) to vary the annual growth rate of imports inversely with their degree of market penetration; and (2) to stabilize certain textile imports at the 1976 level. The developing exporting countries were highly critical of the eec proposal. The outcome of this meeting was that the United States submitted a proposal calling for a renewal of the Multifiber Arrangement without textual changes but with an understanding that bilateral agreements to be negotiated under the arrangement would include “the possibility of jointly agreed reasonable departures from particular elements in particular cases.” The United States proposed further that countries supporting its compromise formula agree to renew the arrangement in its present form for four years by signing a protocol to that effect. This procedure was accepted by the eec, but it was opposed by a number of major developing exporting countries, which put an alternative proposal before the Textiles Committee. No final decision regarding a renewal of the Multifiber Arrangement was taken at this meeting.

    Table III–4.Summary of World Trade in Textiles and Clothing, 1974 and 1975(In per cent, based on value)
    Developed CountriesDeveloping CountriesWorld 1
    197419751974197519741975
    Textile imports
    Rate of expansion2171222−219−7
    Share in world total52493739
    Clothing imports
    Rate of expansion2241130532311
    Share in world total71711419
    Textile and clothing imports
    Rate of expansion218−225−1210
    Share in world total59582929
    Textile exports
    Rate of expansion225−718−9
    Share in world total61613029
    Clothing exports
    Rate of expansion21692413
    Share in world total32315253
    Textile and clothing exports
    Rate of expansion224−5202
    Share in world total51493839
    Sources: See footnote 12 in text.

    Excluding trade of Eastern European countries and the People’s Republic of China.

    Over the preceding year.

    The Textiles Committee reconvened in December 1977 following intensive rounds of bilateral discussions between the main exporting and importing countries. In the end, the committee agreed on a protocol providing for the extension of the Multifiber Arrangement in its present form for four years (until December 31, 1981). The protocol is open for acceptance to the parties to the Multifiber Arrangement, and it entered into force as from January 1, 1978 for the countries that had accepted it by that date and as from the date of acceptance for the countries accepting it later.14 In the conclusions adopted by the Textiles Committee, which were attached to the protocol, the difficulties that some importers and exporters had encountered in implementing the Multifiber Arrangement and the disagreement between certain participating countries on whether it needed modification were noted. It was emphasized, however, that any serious problems that existed in world trade in textile products should be resolved through consultations and negotiations; otherwise they could work to the detriment of countries participating in international trade in textile products, with adverse repercussions on trade relations in general and on the trade of developing countries in particular.

    French and EEC Measures in June and July 1977

    On June 23, 1977, France introduced quantitative restrictions on imports of the following textile products: untreated cotton yarn; undershirts, vests, T-shirts, and other undergarments for men; outer garments and blouses for women and children. The restrictions, which were to be effective until the end of 1977, limited the volume of imports of these products in 1977 to the level of 1976. Given the increase in imports during the first half of 1977, this implied a significant reduction during the second half. Market disruption and injuries to domestic industries arising from a substantial increase in imports were cited as the justification for this action. The action could not be considered as having been taken in the framework of the Multifiber Arrangement because it was not reported to the Textiles Surveillance Body and the consultation requirements of the arrangement were not observed. Furthermore, the measure was not notified to the gatt, and discussions did not take place within the gatt as to whether the requirements under Art. XIX of the gatt were being met.

    The eec objected to the French measures on the grounds that such action should have been taken in a Community context, and on July 13 it introduced less restrictive and more selective measures than the French ones as regards the countries affected, the products covered, and the level of quotas. These restrictions did not apply to countries that were signatories to the Multifiber Arrangement and that had entered into bilateral agreements with the eec, provided the agreed import ceilings had not yet been reached. The level of import quotas for the second half of 1977 was set at half the level for the whole year 1976. Taking into account the higher level of imports in the first half of 1977 compared with the corresponding period in 1976, this formula implied an increase during 1977 as a whole, and was therefore more liberal than the French measure.

    The products and countries affected by the eec measures were as follows: (1) Egyptian exports of cotton yarn to all eec countries; (2) Colombian, Spanish, and Indian exports of cotton yarn to France; (3) Spanish exports of T-shirts to the Federal Republic of Germany, France, and Benelux; (4) Malaysian exports of T-shirts to France and the Federal Republic of Germany; (5) Pakistani exports of T-shirts to France and Denmark; (6) Tunisian exports of T-shirts to France, the Federal Republic of Germany, and the United Kingdom; (7) Turkish exports of women’s blouses to France; and (8) Moroccan and Tunisian exports of T-shirts to France. Although the eec measures were intended to be effective until the end of 1977, they were initially applicable for a period of six weeks pending their approval by the Council of Ministers. On July 26 the Council approved the measures, following which France agreed to rescind its unilaterally imposed restrictions. The eec justified its measures under the safeguard clauses contained in the trade agreement with Spain, the Association Agreements with Turkey, Egypt, Morocco, and Tunisia, and bilateral agreements with Colombia, India, Malaysia, and Pakistan concluded in the framework of the Multifiber Arrangement.

    Appendices IV and V: Notes to Tables

    1. The tables were compiled (by Dawit Makonnen) on the basis of data provided by the gatt secretariat.

    2. All 1976 data are provisional.

    3. “Eastern trading area” denotes Albania, Bulgaria, Czechoslovakia, German Democratic Republic, Hungary, Poland, Romania, U.S.S.R., People’s Republic of China, Mongolia, North Korea, and Viet Nam.

    4. The totals include Australia, New Zealand, and South Africa.

    5. The category “E. Semimanufactures” in Appendices IV-A and V-A denotes nonferrous metals, iron and steel, chemicals, and other semimanufactures.

    6. The category “F. Manufactures” in Appendices IV-A and V-A includes engineering products, textiles, clothing, and other consumer goods.

    7. The category “G. Total Trade” in Appendices IV-A and V-A includes the residual, i.e., commodities and transactions not classified according to kind (SITC Section 9) as well as revisions and adjustments applied to the total trade data but not available in commodity breakdown.

    8. “Developing Countries” in the titles of Appendices V-A and V-B denotes non-oil exporting developing areas as classified by the gatt secretariat; see GATT, InternationalTrade, 1976/77 (Geneva, 1977), pp. 173-74.

    9. The data for 1963 and 1968 in Appendices V-A and V-B include data for oil exporting countries.

    Appendix IV–A. Japan: Share in World Imports by Commodity Groups, 1963–76

    (In per cent, based on value)

    19631968197019721973197419751976
    A. Food
    North America22233222
    Western Europe111
    Oil exporting countries32311
    Other developing areas42221
    Eastern trading area
    Total11111111
    B. Raw Materials
    North America21111111
    Western Europe11111111
    Oil exporting countries812111410
    Other developing areas68887
    Eastern trading area1111133
    Total11222322
    C. Ores and Minerals
    North America
    Western Europe
    Oil exporting countries
    Other developing areas23344
    Eastern trading area
    Total
    D. Fuels
    North America
    Western Europe
    Oil exporting countries65441
    Other developing areas11111
    Eastern trading area
    Total
    E. Semimanufactures
    North America1015181613181717
    Western Europe11222333
    Oil exporting countries1721212626
    Other developing areas1619212322
    Eastern trading area4899171412
    Total57898111110
    F. Manufactures
    North America1415182018181620
    Western Europe23344445
    Oil exporting countries1014141515
    Other developing areas1718191917
    Eastern trading area233355
    Total6991110111012
    G. Total Trade
    North America711131412111011
    Western Europe12232233
    Oil exporting countries101313151414
    Other developing areas121313121112
    Eastern trading area12333555
    Total35676767
    See Notes on p. 96.
    Appendix IV–B. Japan: Share in World Imports of Semimanufactures and Manufactures, 1963–76

    (In per cent, based on value)

    19631968197019721973197419751976
    A. Nonferrous Metals
    North America22443845
    Western Europe1121
    Oil exporting countries1085910
    Other developing areas1010101314
    Eastern trading area241264
    Total12222533
    B. Iron and Steel
    North America2735383329343842
    Western Europe22555567
    Oil exporting countries2736354342
    Other developing areas3339454439
    Eastern trading area4101212152116
    Total915171819232224
    C. Chemicals
    North America4691081188
    Western Europe11222211
    Oil exporting countries7991011
    Other developing areas1113131315
    Eastern trading area4810108911
    Total35565666
    D. Other Semimanufactures
    North America121111108767
    Western Europe12222111
    Oil exporting countries2118141517
    Other developing areas1111111315
    Eastern trading area5523244
    Total66655566
    E. Engineering Products
    North America1013182119201823
    Western Europe13456657
    Oil exporting countries912131414
    Other developing areas1517191916
    Eastern trading area2123345
    Total4891111121113
    F. Textiles
    North America2024231914141619
    Western Europe22221111
    Oil exporting countries2429293032
    Other developing areas3332302728
    Eastern trading area46111381510
    Total414141311111111
    G. Clothing
    North America2222221411866
    Western Europe21111
    Oil exporting countries911455
    Other developing areas108656
    Eastern trading area451111
    Total98743222
    H. Other Consumer Goods
    North America252218171311810
    Western Europe33333222
    Oil exporting countries811887
    Other developing areas101111109
    Eastern trading area122122
    Total89876555
    See Notes on p. 96.
    Appendix V–A. Developing Countries: Share in World Imports by Commodity Groups, 1963–76

    (In per cent, based on value)

    19631968197019721973197419751976
    A. Food
    North America5552464342494749
    Western Europe3327242221212022
    Japan3228282625293233
    Oil exporting countries2422273231
    Other developing areas32302829252426
    Eastern trading area22303023233035
    Total35322927262727
    B. Raw Materials
    North America3023191515171919
    Western Europe2724181617151415
    Japan4537323128282528
    Oil exporting countries1915161616
    Other developing areas47453938363532
    Eastern trading area38483429313430
    Total33292421222121
    C. Ores and Minerals
    North America4237374034413327
    Western Europe2925222421262729
    Japan4844404335393940
    Oil exporting countries33291525
    Other developing areas383032313631
    Eastern trading area13142314202822
    Total32292731283129
    D. Fuels
    North America7870192223232624
    Western Europe5463633344
    Japan72786889911
    Oil exporting countries21172761
    Other developing areas81822617151213
    Eastern trading area123222
    Total60651199911
    E. Semimanufactures
    North America1512121213131011
    Western Europe310967766
    Japan1829312930332627
    Oil exporting countries991098
    Other developing areas81010131195
    Eastern trading area343343
    Total910109997
    F. Manufactures
    North America77101113131415
    Western Europe22233444
    Japan581427222430
    Oil exporting countries78996
    Other developing areas5799101010
    Eastern trading area222222
    Total4456777
    G. Total Trade
    North America2822181719202021
    Western Europe1917989988
    Japan3839232224201921
    Oil exporting countries101011131110
    Other developing areas2120151515141415
    Eastern trading area69978988
    Total2118121112121212
    See Notes on p. 96.
    Appendix V–B. Developing Countries: Share in World Imports of Semimanufactures and Manufactures, 1963–76

    (In per cent, based on value)

    19631968197019721973197419751976
    A. Nonferrous Metals
    North America3527302024251518
    Western Europe3232292224262423
    Japan4356554548554048
    Oil exporting countries2015141818
    Other developing areas21232444342726
    Eastern trading area871078188
    Total30302924252722
    B. Iron and Steel
    North America33377855
    Western Europe11211122
    Japan2214252024292925
    Oil exporting countries117855
    Other developing areas5786655
    Eastern trading area121111
    Total2233333
    C. Chemicals
    North America777107998
    Western Europe22222222
    Japan35667141011
    Oil exporting countries67786
    Other developing areas689101099
    Eastern trading area1121122
    Total4444455
    D. Other Semimanufactures
    North America1110141517171716
    Western Europe117888666
    Japan4233425048424646
    Oil exporting countries716192219
    Other developing areas12111717181815
    Eastern trading area18101013119
    Total1191112131211
    E. Engineering Products
    North America2347777
    Western Europe1111111
    Japan2148101214
    Oil exporting countries44454
    Other developing areas3346787
    Eastern trading area
    Total1122343
    F. Textiles
    North America3130252628322727
    Western Europe77767888
    Japan27364151414757
    Oil exporting countries2124272423
    Other developing areas22232527262931
    Eastern trading area14212523191920
    Total16161516171817
    G. Clothing
    North America2744486163677375
    Western Europe912131619212224
    Japan50607077716773
    Oil exporting countries3644485250
    Other developing areas22252929353331
    Eastern trading area356566
    Total14202227303232
    H. Other Consumer Goods
    North America1014262127283135
    Western Europe64655556
    Japan7161730243038
    Oil exporting countries1117181815
    Other developing areas18161917212123
    Eastern trading area1122335
    Total991311131313
    See Notes on p. 96.
    Appendix V–C. Developing Countries: Share in World Trade, 19741

    Source: UN Trade Tapes.

    1 Excluding centrally planned economies. Also, the UN data for developing countries do not include data for the Republic of China nor for Yugoslavia and other European countries, but do include data for Turkey. The abbreviation n.e.s. stands for not elsewhere specified.

    Appendix VI. Import-Penetration Ratios of Selected Industrial Countries1

    (In per cent, based on value)

    EEC2United KingdomUnited StatesJapanTotal
    1959–19601971–19721973–19741959–19601971–19721973–19741959–19601971–19721973–19741959–19601971–19721973–19741959–19601971–19721973–1974
    A. Total Imports
    Primary products28.031.540.841.849.960.89.39.314.223.834.033.816.620.526.5
    Agriculture23.618.421.242.333.635.98.46.76.318.019.216.314.511.711.1
    Coal, crude petroleum, natural gas36.463.375.528.855.777.96.510.527.849.283.791.716.936.856.9
    Other mining and quarrying54.570.272.383.4156.5188.124.827.432.252.280.879.134.152.658.9
    Manufactures7.68.710.917.123.131.23.36.68.16.05.67.13.44.45.8
    Textiles6.110.514.114.026.834.65.59.48.71.19.012.73.07.59.8
    Clothing2.48.212.99.521.930.33.512.613.41.48.417.01.78.211.8
    Ferrous and non ferrous metals14.516.618.223.431.743.56.011.312.717.911.514.76.99.110.6
    B. Imports from Developing Countries3
    Primary products16.420.228.721.422.231.56.65.39.512.918.020.111.613.719.5
    Agriculture12.38.29.416.99.910.16.34.84.57.87.05.49.46.76.5
    Coal, crude petroleum, natural gas30.858.170.128.350.070.45.75.419.937.763.976.515.931.950.7
    Other mining and quarrying22.324.927.436.018.422.112.210.413.535.438.636.919.321.224.7
    Manufactures1.51.31.83.62.33.60.71.22.01.21.11.81.21.32.0
    Textiles0.92.33.55.25.26.41.62.83.30.11.63.11.62.63.6
    Clothing0.62.84.73.98.811.70.84.45.80.73.58.61.04.16.0
    Ferrous and non ferrous metals5.04.95.56.65.57.11.01.52.14.34.75.22.93.24.0
    Source: Unctad, Handbook of International Trade and Development Statistics, 1976 (New York, 1976), Table 7.1.

    The import figures used in the computation of the import-penetration ratio for the eec exclude intra-eec trade. Similarly, in the case of the three “total” columns, the import figures are defined to exclude trade between the eec, the United Kingdom, the United States, and Japan.

    Original six members only (Belgium, France, the Federal Republic of Germany, Italy, Luxembourg, and the Netherlands).

    Including oil exporting countries.

    Appendix VII. Developing Countries:1 Exports of Selected Products
    ExportsShare of World Market Economy 2
    197419711974
    SITCDescription(US$ million)(per cent)
    001.1Bovine cattle144.915.213.1
    OilMeat: fresh, chilled, frozen775.618.213.3
    651Textiles: yarn and thread1,056.910.214.4
    652Cotton fabrics: woven1,160.430.734.0
    653Woven textiles: noncotton1,136.311.013.8
    841Clothing: not of fur3,749.224.332.1
    841.11Men’s outerwear: not knit755.724.633.0
    841.12Women’s outerwear: not knit626.119.326.7
    841.13Men’s underwear: not knit536.961.367.0
    841.43Underwear knit: not elastic271.923.130.1
    841.44Outerwear knit: not elastic974.022.130.1
    851Footwear560.410.916.6
    851.01Footwear of rubber or plastic124.016.720.9
    851.02Footwear of leather393.08.114.5
    724.1Television receivers110.85.15.0
    724.2Radio broadcast receivers555.012.821.8
    724.92Microphones, loudspeakers, amplifiers55.41.77.1
    729Electrical machinery and parts31,162.95.38.4
    729.3Semiconductors, valves, etc.643.210.314.4
    Source: United Nations, Yearbook of International Trade Statistics, 1976 (New York, 1977), Vol. II.

    Developing countries exclude the Republic of China and Yugoslavia but include Turkey.

    Total exports to all market economies.

    Not elsewhere specified.

    Appendix VIII. France: Selected Import-Production Ratios, 1972 and 1976

    (In per cent)

    Trade With
    EEC CountriesNon-OECD CountriesWorld
    197219761972197619721976
    Carpets44.778.98.515.754.598.8
    Clothing items4.66.21.94.17.612.5
    Cotton and linen products, woven14.625.04.38.321.843.0
    Cotton textile articles17.925.92.44.722.536.0
    Cotton thread and yarn5.27.91.72.48.412.7
    Electrical household appliances36.850.72.79.750.388.3
    Hides and skins7.415.913.714.226.334.7
    Household equipment goods32.737.10.93.540.052.7
    Millinery products17.320.42.46.120.930.3
    Shoes8.116.81.84.011.324.7
    Underwear4.45.51.58.08.118.2
    Source: Based on data in Rapport fait au nom de la Commission d’enquête parlementaire chargée d’examiner les conditions dans lesquelles ont lieu des importations “sauvages” de diverses catégories de marchandises, by M. Limouzy, rapporteur (Paris, November 18, 1977).
    Appendix IX. Trade Restrictions for Balance of Payments Reasons, 1971-761
    CountryMeasureYear IntroducedYear of GATT Consideration
    ArgentinaImport suspensions; import surcharges of 15%19711972
    Import suspensions; administrative regulations1971,19751975
    BangladeshLicensing; import budget; 20% license tax on nonessentials19711974
    Licensing; import budget19711976
    BrazilTariff surcharges; cash payment; advance deposit; other measures1974–761976
    ChileImport prohibitions; advance deposits of up to 10,000%Pre-existing
    DenmarkImport surcharge of 10% on about 50% of imports19711971
    EgyptForeign exchange budget and allocations for various sectorsPre-existing1973, 1975
    FinlandIndividual licensing and global quotas on 15% of importsPre-existing1972, 1973
    Deposit of 5–30% covering 50% of imports (earlier measures continued)19751975
    Phasing out of deposit requirement19761976
    GhanaSurcharges increased in level and coverage: rates of 5–40% covering over 50% of imports19701971
    Import deposit of 0–65%; some import bans; 10% license fees for imports19741976
    Virtual elimination of open general license; some import bans; 5–30% license fees for imports19721974
    GreeceLicensing; deposits of 200% covering 8% of imports; increase in existing deposits1973, 19741973, 1974
    Licensing; state trading1973, 19741976
    IcelandLicenses and quotasPre-existing1971, 1972, 1973
    Import deposit of 25% covering all imports except some foodstuffs and raw materials19741974
    IndiaIncreases in duties; change in quotas within context of trade system characterized by quantitative and other restrictions19731973, 1975
    IndonesiaAdministrative restrictions; some prohibitions; other controls on importsPre-existing1973, 1975
    IsraelImport deposit; 20% import surcharge19701971
    Import surcharge extended, raised to 25%19731974
    Import deposit reintroduced; import surcharge raised to 35%19741974
    15% surcharge on some invisible payments19701977
    ItalyDeposit of 50% covering about 40% of imports; coverage later reduced to 28%19741974
    Deposit of 50% on purchases of foreign exchange19761976
    Korea, Rep. ofLicensing; quota restrictions; advance deposits on private sector imports of 10–200%; other restrictions; system modified, 1975–76Pre-existing1971, 1976
    New ZealandLicensing requirementsPre-existing1971, 1972
    Import deposit of of value of imports19761976
    PakistanLicensing; flood relief surcharge of 25%19731973
    New surcharge of 25% on 21 goods (old surcharge abolished)19751975
    PeruProhibition of nonessential imports; prior approval of imports; other restrictionsPre-existing1974, 1975
    PortugalSurcharges of 20% and 30% covering 38% of imports19751975
    Surcharges raised to 30–60%; 50% import deposit on nonessential imports19761976
    South AfricaReduction in liberalized imports; quota restrictions19711972
    Deposit of 20% on 60–65% of imports (earlier measures continued)19761976
    SpainQuota restrictions; special import requirementsPre-existing1973
    Sri LankaLicensing further tightened1971, 19721971, 1973, 1975
    TunisiaLicensing, quota restrictions, and prohibitions19751976
    TurkeyStamp duty of 9–10%; licensing and quota restrictions; guarantee depositsPre-existing1973, 1975
    United StatesSurcharge of 10% covering approximately 50% of imports19711971
    UruguayIncrease in surcharges; prohibition of some capital goods imports; new rates for depositsPre-existing1971, 1972, 1974
    Emergency surcharge of 7%; elimination of deposits19751976
    YugoslaviaQuota restrictions; surcharge increased and extendedPre-existing1973, 1974, 1976
    Surcharge renewed and raised; prior approval requirement19751976

    Limited to cases where trade measures were considered by gatt.

    Appendix X. Republic of China: Restrictive Trade Measures Affecting Exports
    ProductCountry
    Applying
    Measure
    Type of
    Measure
    Date
    Introduced
    Duration
    FootwearU.S.Tariff increaseJan. 1976Abolished May 10, 1976
    Nonrubber footwearU.S.Quota under orderly marketing agreement 1June 1977Expires June 1981
    FootwearIrelandTariff increaseNov. 1976In force
    FootwearCanadaIncrease in customs valuationMar. 1977In force
    FootwearU.K.QuotaAug. 1977To Dec. 1977
    Bicycle chainsEECAntidumping dutyNov. 19763 months
    Nuts and boltsEECMinimum import priceOct. 1977In force
    Tires and tubes for bicycles and motorcyclesEECMinimum import priceAug. 1977In force
    FerrochromiumEECQuotaFeb. 1977In force
    Frozen foodItalyImport prohibitionJuly 1977In force
    Louvre doorsU.K.AntidumpingMar. 1975In force
    Louvre doorsIrelandAntidumpingJune 1977In force
    TV sets (monochrome, 18 inches)U.K.QuotaOct. 1976Up to Dec. 31, 1977
    RadiosFranceImport prohibitionOct. 1976In force
    Umbrellas and partsFranceImport licenseDec. 1976In force
    UmbrellasGermany, F.R.QuotasApril 1977In force
    Cast iron pipe fittingsItalyQuotaJan. 1976In force
    CeramicsGreeceQuotaDec. 1976In force
    CeramicsU.K.QuotaMay 1977In force
    Steel pipesGreeceQuotaDec. 1976In force
    MushroomsU.S.QuotaMar. 1977In force
    HandbagsU.S.Countervailing dutyJune 1977In force
    BicyclesCanadaIncrease in customs valuationJan. 1977In force
    BicyclesCanadaTariff increaseFeb. 1977Abolished Sept. 20, 1977
    Canned tomatoesCanadaTariff increaseFeb. 1977In force
    AcrylicCanadaAntidumping dutyMay 1977Abolished Aug. 11, 1977
    Source: Data provided by the authorities of the Republic of China.

    Providing for an increase in the volume of exports of the restricted items of 2.5 per cent a year.

    Appendix XI. Colombia: Restrictive Trade Measures Affecting Exports
    ProductCountry
    Applying
    Measure
    Type of
    Measure
    Date
    Introduced
    Duration
    BeefEECQuantitative restrictions, licenses, and other measuresFeb. 1974Being gradually liberalized
    Fresh flowers and budsU.S.Countervailing dutyMar. 19741975
    Textiles and clothing1U.S.Voluntary export restraint (quotas)July 1975June 1978
    Cotton yarn and textiles1EECQuotasJan. 1976Dec. 1977
    Cotton yarn and threadFranceQuotasJune 1977July 1977 2
    Textiles and clothing1EECVoluntary export restraint (quotas)Jan. 1978Dec. 1982
    Source: Data provided by the Colombian authorities.

    Concluded under the Multifiber Arrangement.

    Unilateral import restrictions superseded by a voluntary export restraint agreement concluded bilaterally with the eec.

    Appendix XII. Uruguay: Exports of Refrigerated Beef, 1972–77
    1972197319741975197619771
    Volume of total exports (thousand metric tons)103.698.4102.677.4145.785.2
    EEC share43%38%8%24%22%8%
    Value of total exports (million U.S. dollars)97.3119.2137.768.1108.877.9
    Average price per ton (US. dollars)940.01,211.01,342.0880.0747.0914.0
    Source: Data provided by the Uruguayan authorities.

    Nine months.

    Appendix XIII. Republic of Korea: Current Restrictive Trade Measures Affecting Exports
    ProductCountry Applying MeasureType of MeasureYear Introduced
    Whole textiles (cotton, wool, man-made, excluding silk)U.S.Bilateral quota1971
    Footwear, leather or vinylCountervailing duties1976
    Stainless (including sheets and strips, plates, bars and wire rods) and tool steelUnilateral imposition basket of quota1976
    Ginseng productsImport ban1977
    Nonrubber footwearBilateral quota and countervailing duty1977
    Luggage and handbagsCountervailing duty1977
    Mushrooms, except fresh or driedVoluntary export restraint1976
    Pants, unstructured or leisure suits, blouses, pajamas, raincoats, sportswear, foundation garments, swimwear, underwear, coats, men’s suits, leather coats, shirts and sweaters, etc.CanadaGlobal quota1977
    Filament polyester fabrics and wool fabricsBilateral quota1974
    HosieryBilateral quota1976
    Knit fabrics and acrylic yarnsGlobal quota1976
    Gloves, leather, for operationGlobal quota1976
    Nylon fabricsImport licensing1975
    Photo albumsAntidumping duties1975
    TowelsBilateral quota1977
    Yarns, certain textiles, leather clothingGlobal quota1977
    Leather handbagsAntidumping duty1977
    Bicycles and tricyclesAntidumping duty1977
    All footwear except plastic, rubber, or canvasGlobal quota1977
    Certain textiles (woven fabrics, yarns, undergarments, outer garments, trousers, jackets and suits, etc.)EECBilateral quota1975
    SaccharinU.K.Antidumping duties1976
    FootwearImport licensing1977
    TV sets (black and white)Unilateral quota1977
    RadiosFranceUnilateral quota1971
    Miscellaneous goods (toys and goods for carnival)Unilateral quota1974
    Umbrellas and sunshadesUnilateral quota1971
    Silk fabricsUnilateral quota1974
    Radios and umbrellasUnilateral quota1977
    Cassette recordersDenmarkImport licensing1974
    Stainless steel cutleryImport licensing1974
    Certain textiles (ankle-socks, shirts, blouses, sweaters, jackets, and trousers)SwedenBilateral quota1976
    Bed linenBilateral quota1976
    Rubber high-boots and ankle-bootsGlobal quota1974
    Leather apparelVoluntary export restraint1977
    Bed linenBilateral quota1977
    Woven fabrics and yarnsBilateral quota1974
    Certain textiles (woven fabrics, knit fabrics, stockings, garments, linen and curtains, etc.)NorwayBilateral quota1974
    Tableware of porcelainGlobal quota1975
    Rubber tires and inner tubesBilateral quota1974
    Footwear of leather, rubber, or plastic materials (other than footwear falling within No. 6401)Bilateral quota1974
    Stainless steel cutleryBilateral quota1974
    Certain textiles (cotton textiles, knitted goods, socks, stockings, shirts, undergarments, etc.)AustriaBilateral quota1974
    Socks of synthetic fabricsBilateral quota1976
    Shirts of synthetic fibersBilateral quota1976
    Certain textiles (yarn, woven or knitted fabric garments, knitted goods, ropes and fishing nets, etc.)FinlandImport licensing for ceiling system1975
    Rubber bootsImport surcharge1977
    Nearly all itemsNew ZealandImport licensing1976
    (90-100% of 1975 licenses)
    All footwearAustraliaImport licensing1975
    Yarns and woven fabrics (including nearly whole items)Tariff quota1974
    Various clothes (including nearly whole items)Tariff quota1975
    Bed linen and towelsTariff quota1975
    Bags and sacks of man-made fiberTariff quota1975
    PlywoodsTariff quota1976
    BrassieresTariff quota1977
    Files and raspsImport licensing1977
    Cold rolled sheets and plates (excluding hot rolled sheets in Mar. 1976)Tariff quota1975
    Galvanized or corrugated and galvanized sheets and platesTariff quota1975
    Electric refrigeratorsTariff quota1975
    Machinery for washing (whether or not combined with dryers)Tariff quota1975
    Electro-mechanical clothes dryersTariff quota1975
    Knitted and woven textilesTariff quota1977
    Hand toolsGlobal quota1977
    BrassieresGlobal quota1977
    Tire cord fabricsImport licensing1977
    Raw silkJapanImport quota1974
    Silk yarnImport quota1976
    Woven silk fabricsVoluntary export restraint1976
    Dried cuttle fishImport quota1973
    TunaVoluntary export restraint1975
    Dried laverImport quota1960
    Dried seaweedImport license1977
    Source: Data provided by the Korean authorities.
    Appendix XIV. Philippines: Current Restrictive Trade Measures Affecting Exports
    ProductCountry Applying MeasureType of Measure
    Tuna, prepared or preserved in any manner, not in oil or airtight containersU.S.Tariff quota minus 6% ad valorem if not exceeding 20% of U.S. pack of canned tuna
    Fermented alcoholic beveragesU.S.Import licensing
    Spirits, spirituous beverage preparationsU.S.Import licensing
    Textiles and clothingU.S.Quotas1
    Dried bananasFrance10% discretionary quota
    Coconuts, dessicated or notItalyDiscretionary licensing
    Pineapple in syrup, other than slices, half slices, or spiralsEECGlobal quota
    Pineapple juice and concentratesEECBilateral quota, import licensing
    Plywood, blackboard, laminboard, battenboard, and similar laminated wood products (including veneered panel and sheets), inlaid and wood marquetry of hardwoodEECZero tariff quota up to 282,600 cubic meters
    Textiles and clothingEECQuotas1
    Textiles and clothingNorwayQuotas1
    Tropical fish, fresh, chilled or frozen, or slightly saltedJapanImport quota, discretionary import licensing
    Crustaceans and molluscs, prepared or preserved (including alamang)JapanImport licensing
    Pineapples (prepared or preserved) containing added sugar in containers of not more than 10 kilograms eachJapanImport quota, discretionary import licensing
    Footwear (excluding slippers and for sports) with uppers of whole leather or of furskin and leather in partJapanImport quota
    Footwear (excluding slippers and for sports) with uppers of leather in partJapanImport quota
    Turkish-type tobacco, unmanufacturedCanadaLicensing and special duties
    All types of footwear except of waterproof plastic, rubber, or canvas and downhill ski bootsCanadaQuantitative restrictions
    Veneer sheets of Philippine mahoganyAustraliaQuantitative restrictions
    Plywood of Philippine mahoganyAustraliaQuantitative restrictions
    Coconut (copra) oil, in containers of capacity of 1 or more gallonsNew ZealandDiscretionary licensing
    Pineapples, prepared or preserved, containing added sugarNew ZealandDiscretionary licensing
    Plywood of Philippine mahoganyNew ZealandDiscretionary licensing
    Household utensils of woodNew ZealandDiscretionary licensing
    Source: Data provided by the Philippine authorities.

    Under the Multifiber Arrangement

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    IMF Pamphlet Series

    INTERNATIONAL MONETARY FUND PAMPHLET SERIES

    (All pamphlets have been published in English, French, and Spanish, unless otherwise stated)

    *1. Introduction to the Fund, by J. Keith Horsefield. First edition, 1964. Second edition, 1965. Second edition also in German.

    *2. The International Monetary Fund: Its Form and Functions, by J. Marcus Fleming. 1964. In English only.

    3. The International Monetary Fund and Private Business Transactions: Some Legal Effects of the Articles of Agreement, by Joseph Gold. 1965.

    4. The International Monetary Fund and International Law: An Introduction, by Joseph Gold. 1965.

    *5. The Financial Structure of the Fund, by Rudolf Kroc. First edition, 1965. Second edition, 1967.

    6. Maintenance of the Gold Value of the Fund’s Assets, by Joseph Gold. First edition, 1965. Second edition, 1971.

    7. The Fund and Non-Member States: Some Legal Effects, by Joseph Gold. 1966.

    8. The Cuban Insurance Cases and the Articles of the Fund, by Joseph Gold. 1966.

    9. Balance of Payments: Its Meaning and Uses, by Poul H0st-Madsen. 1967.

    *10. Balance of Payments Concepts and Definitions. First edition, 1968. Second edition, 1969.

    11. Interpretation by the Fund, by Joseph Gold. 1968.

    12. The Reform of the Fund, by Joseph Gold. 1969.

    13. Special Drawing Rights, by Joseph Gold. First edition, 1969. Second edition, with subtitle Character and Use, 1970.

    14. The Fund’s Concepts of Convertibility, by Joseph Gold. 1971.

    15. Special Drawing Rights: The Role of Language, by Joseph Gold. 1971.

    16. Some Reflections on the Nature of Special Drawing Rights, by J.J. Polak. 1971.

    17. Operations and Transactions in SDRs: The First Basic Period, by Walter Habermeier. 1973.

    18. Valuation and Rate of Interest of the SDR, by J.J. Polak. 1974.

    19. Floating Currencies, Gold, and SDRs: Some Recent Legal Developments, by Joseph Gold. 1976. Also in German.

    20. Voting Majorities in the Fund: Effects of Second Amendment of the Articles, by Joseph Gold. 1977.

    21. International Capital Movements Under the Law of the International Monetary Fund, by Joseph Gold. 1977.

    22. Floating Currencies, SDRs, and Gold: Further Legal Developments, by Joseph Gold. 1977. Concluding section also in German.

    23. Use, Conversion, and Exchange of Currency Under the Second Amendment of the Fund’s Articles, by Joseph Gold. 1978.

    24. The Rise in Protectionism, by Trade and Payments Division. 1978.

    25. The Second Amendment of the Fund’s Articles of Agreement, by Joseph Gold. 1978.

    26. SDRs, Gold, and Currencies: Third Survey of New Legal Developments, by Joseph Gold. 1979. Concluding section also in German.

    27. Financial Assistance by the International Monetary Fund: Law and Practice, by Joseph Gold. First edition, 1979. In English only. Second edition. 1980.

    28. Thoughts on an International Monetary Fund Based Fully on the SDR, by J.J. Polak. 1979.

    29. Macroeconomic Accounts: An Overview, by Poul H0st-Madsen. 1979.

    30. Technical Assistance Services of the International Monetary Fund. 1979.

    31. Conditionality, by Joseph Gold. 1979.

    32. The Rule of Law in the International Monetary Fund, by Joseph Gold. 1980.

    33. SDRs, Currencies, and Gold: Fourth Survey of New Legal Developments, by Joseph Gold. 1980.

    34. Compensatory Financing Facility, by Louis M. Goreux. 1980.

    35. The Legal Character of the Fund’s Stand-By Arrangements and Why It Matters, by Joseph Gold. 1980.

    36. SDRs, Currencies, and Gold: Fifth Survey of New Legal Developments, by Joseph Gold. 1981. in English and French. Spanish in preparation.

    37. The International Monetary Fund: Its Evolution, Organization, and Activities, by A.W. Hooke. First edition, 1981. Second edition, 1982. In English. French and Spanish in preparation.

    38. Fund Conditionality: Evolution of Principles and Practices, by Manuel Guitian. 1981. In English. French and Spanish in preparation.

    39. Order in International Finance, the Promotion of IMF Stand-By Arrangements, and the Drafting of Private Loan Agreements, by Joseph Gold. 1982. In English. French and Spanish in preparation.

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    Trade in agriculture has remained subject to considerable restriction, the maintenance of which is often related to domestic farm support programs. While protection in the agricultural sector as such is not discussed in this study, it must be recognized that the trade actions of industrial countries in this sector affect many developing and primary producing countries.

    Products subject to bound tariffs are those on which the maximum level of duties has been fixed by negotiation and formally incorporated in a binding legal instrument of the gatt. These duties can be raised only through renegotiation or the granting of a temporary waiver. See also the following subsection, “Protectionism and the Rules Governing World Trade.”

    The Committee of the Board of Governors of the International Monetary Fund on Reform of the International Monetary System and Related Issues (the Committee of Twenty) was established in July 1972 to advise and report on all aspects of international monetary reform. The Committee held six meetings, of which the meeting in Rome was the fifth. It was succeeded by the Interim Committee (see n. 7 below).

    International Monetary Fund, Annual Report of the Executive Directors for the Fiscal Year Ended April 30, 1977 (Washington, 1977), p. 2.

    GATT, International Trade, 1976/77 (Geneva, 1977), p. 22.

    Unctad, Interdependence of Problems of Trade, Development Finance and the International Monetary System, Trade and Development Board, 17th sess., TD/B/665/Add.l (Part II), July 25, 1977, p. 12.

    The Interim Committee of the Board of Governors on the International Monetary System (the Interim Committee) was established in October 1974 to succeed the Committee of Twenty (see footnote 3 above); the Joint Ministerial Committee of the Boards of Governors of the Bank and the Fund on the Transfer of Real Resources to Developing Countries (the Development Committee) was also established in October 1974.

    Address by Olivier Long, Director-General of the gatt, to the Zürich Economic Society, GATT Press Release No. 1199, November 9, 1977.

    The estimate of 5 per cent was based on trade in steel among industrial countries, newly restricted exports of synthetic textiles from developing countries, trade in ships, and imports of such items as ballbearings and television sets by the United Kingdom and the United States. The estimate of 3 per cent excluded trade in steel, restrictions on which were then under discussion.

    GATT, Basic Instruments and Selected Documents, Vol. IV, Text of the General Agreement (Geneva, March 1969), p. 1 (Preamble).

    The inclusion in the gatt of such an “escape clause” (under Art. XIX) was considered necessary to induce trading nations to embark upon more far-reaching efforts to liberalize trade with the assurance that there existed an internationally accepted means of dealing with possible adverse consequences on domestic employment and activity in particular sectors. Furthermore, the fact that Art. XIX could be invoked only in a restricted range of conditions was seen by the framers of the gatt as ensuring that, once countries had agreed to accept obligations under the gatt, recourse to restrictions authorized under Art. XIX would not be so widespread or common as to offset the benefits of progressive trade liberalization. For the same reason, actions taken under Art. XIX are seen as strictly temporary, since their aim is to ease shifts of resources to more efficient sectors and not to hinder such shifts.

    I.e., measures taken or approved by the Commission of the European Communities.

    No attempt has been made to analyze the trade liberalization schemes implemented under the Generalized System of Preferences (gsp); preference-giving countries include the members of the eec and Japan (since 1971), Canada (since 1974), and the United States (since 1975). Estimating the trade effects of these schemes, either individually or in the aggregate, is difficult because of their complexity and of frequent changes with respect to beneficiaries, product coverage, limitations on amounts eligible, and rules of origin. The Unctad secretariat, in a report on the implementation of the gsp, concluded with the general observation that developing countries’ eligible exports rose faster than ineligible exports, although how much of this difference was due to the preferences could not be established.—Unctad, Fourth General Report on the Implementation of the Generalized System of Preferences, TD/B/C.5/53, May 27, 1977.

    See Appendix I for a more detailed discussion of the problems associated with measurement.

    Subsidization practices may also be related to a number of other factors, including an overvalued exchange rate.

    Some details regarding the institutional framework and procedures for trade actions taken by major industrial countries will be found in Appendix II.

    For a more detailed analysis, see Council on Wage and Price Stability, Report to the President on Prices and Costs in the United States Steel Industry (Washington, October 1977).

    International trade in iron and steel alone (SITC 67) accounts for approximately 5 per cent of world trade.

    Published in U.S. Department of the Treasury, News (Washington), January 3, 1978.

    One major U.S. steel producer withdrew an antidumping complaint in response to the trigger price system in March 1978. See New York Times, March 2, 1978.

    Information on antidumping actions in the eec is based on “notices of investigations,” which are published in the Official Journal of the European Communities. Legally, such notices do not determine the existence of dumping but merely indicate the acceptance of a complaint containing prima facie evidence of dumping. However, only one case is known where an allegation of dumping, leading to a “notice of investigation,” was rejected because the complaint was unfounded. Thus, the terms “taken” and “initiated” in relation to antidumping actions are used interchangeably.

    According to the Eleventh General Report on the Activities of the European Communities in 1977 (Brussels, 1978), p. 87, the rationale for the eec scheme was as follows: “… towards the end of 1977 it was found that the rise in internal market prices—on which the profitability of steel firms depended—was being compromised by the pressure exerted by imports. [Accordingly], a batch of measures to stabilize imports at their traditional level and bring them within the Community price constraints [was approved]. The means to this end is the negotiation of bilateral agreements between the Community and exporting countries. For the duration of these negotiations, or until 1 April, whichever is the earlier, an interim anti-dumping scheme based on the gatt rules was brought into operation on 1 January, 1978.”

    The Long-Term Arrangement and the Multifiber Arrangement are described in greater detail in Appendix III.

    R. Blackhurst, N. Marian, and J. Tumlir, Trade Liberalization, Protectionism and Interdependence, GATT Studies in International Trade, No. 5 (Geneva, November 1977), p. 48.

    This subsection draws upon U.S. International Trade Commission, The History and Current Status of the Multifiber Arrangement (Washington, January 1978).

    Ratio of imports to domestic consumption (production minus exports plus imports).

    Based on Commission of the European Communities, Information, No. 131/76; Europe Documents, Agence Internationale d’Information pour la Presse (Brussels), various issues; Eleventh General Report on the Activities of the European Communities in 1977 (Brussels, 1978); and information provided by the eec staff.

    The EUR is a unit of account used by the eec and was equal to about US$ 1.22 at the beginning of 1978.

    In addition, the eec applies autonomous restrictions on imports from the Republic of China because a formal bilateral agreement cannot be concluded in the absence of diplomatic relations.

    Office of Special Import Policy, Background and Historical Development in Textile Imports, 1950–1975 (Ottawa, September 21, 1977, document), pp. 2–3.

    E.g., sweaters, cardigans, pullovers, suits, jackets, coordinates, pants, work gloves, hosiery, outerwear, raincoats, sleepwear, and sportswear.

    Conclusions of the Textiles Committee adopted on December 14, 1977, par. 5.3, GATT Press Release No. 1208, December 15, 1977.

    The conclusion was made as part of an “escape clause” investigation initiated in 1975 and reopened in October 1976 in response to a resolution of the Committee on Finance of the U.S. Senate.

    1971, 4 cases; 1972, 14 cases; 1973, 9 cases; 1974, 5 cases; 1975, 1 case; 1976, 4 cases; and 1977, 4 cases. Nineteen investigations initiated in 1977 were still pending as of February 1978.

    1971, 2 cases; 1972, 2 cases; 1973, 2 cases; 1974, 4 cases; 1975, 3 cases; 1976, 14 cases; and 1977, 10 cases. Five investigations initiated in 1977 were still pending as of February 1978.

    Complaints that imports were dumped or subsidized have also been raised in other sectors. While there has been an increase in antidumping and countervailing duty actions in recent years, it is difficult to arrive at clear-cut conclusions in this matter (see p. 8–9 above). Available data for oecd countries on overt public assistance to industry (i.e., grants to private firms and public corporations and grants to cover losses of government enterprises incurred as a consequence of policies to maintain prices below costs) show that while the ratio of direct subsidies to the gross national product varies considerably from country to country, there has been a tendency for the ratio in most countries to rise sharply in recent years. These data, however, refer to subsidies in general and not to export subsidies as such.

    See U.S. International Trade Commission, Reports to the President on various investigations under Section 201 of the Trade Act of 1974.

    The Prime Minister of France, Raymond Barre, in an article published in September 1977, said that certain exporters, taking advantage of the ready access to the European Community’s markets, actually flooded the French market during the first half of 1977, and that nearly one out of two men’s shirts and undergarments now sold in France was imported. On the basis of the rate for the first half of 1977, imports of these goods had risen by 50 to 100 per cent, depending on the article, over the previous year, when there had already been a considerable increase in these imports.—Raymond Barre, “Pour une liberté organisée des échanges,” Journal de Genève, September 15, 1977.

    A survey of the export performance of developing countries during the period 1967–75 showed that imports of manufactures from these countries, while modest in absolute terms, had increased rapidly: total imports of manufactures had risen from $85 billion to $313 billion, while imports of manufactures from developing countries had risen from $3.9 billion to $20.3 billion. The products in which developing countries already in 1967 had a high market share or increased their shares significantly between 1967 and 1975 included fruit juices, leather and fur clothing, textile clothing, silk yarn, ferronickel, alkaloids, and certain wood products, all of which are commodities in which resources or low labor costs favor developing countries. During the same period, developing countries also emerged as exporters of such products as television receivers, electromedical apparatus, gas turbines, anchors, photographic apparatus, and synthetic fiber yarns.—See Unctad, Improving the Capability of the Developing Countries to Supply Exports of Manufactures and Semi-Manufactures, TD/B/C.2/178, May 25, 1977. See also Appendix VII.

    This is reminiscent, in a somewhat different context, of the free trade controversy of an earlier period. At the beginning of the century Joseph Chamberlain said, “When Mr. Cobden preached his doctrine, he believed… that while foreign countries would supply us with our foodstuffs and raw materials, we should send them in exchange our manufactures. But that is exactly what we have not done. On the contrary, in the period to which I have referred, we are sending less and less of our manufactures to them and they are sending more and more of their manufactures to us.” Quoted in Nicholas Kaldor, “The Nemesis of Free Trade,” Spectator (London), August 27, 1977, p. 8.

    Commission du Textile et du Vêtement du Canada, Enquête sur les vêtements: un rapport au Ministre de l’Industrie et du Commerce (Ottawa, May 29, 1977), p. VI-10.

    Even in these sectors, however, imports from developed countries may sometimes be a more serious source of competition for domestic producers. For example, reference may be made to a study by a parliamentary commission of the problem of a rapid increase of imports into France: Rapport fait au nom de la Commission d’enquête parlementaire chargée d’examiner les conditions dans lesquelles ont lieu des importations “sauvages” de diverses catégories de marchandises, par M. Limouzy, rapporteur (Paris, November 18, 1977). As Appendix VIII shows, while imports of certain products into France have increased very sharply as a percentage of production in the period 1972–76, the principal source by far of these imports, and in many cases of the increase in import penetration, has been the other eec countries.

    Council on Wage and Price Stability, Report to the President on Prices and Costs in the United States Steel Industry (Washington, October 1977).

    OECD Press Release, November 30, 1977.

    Commission des Communautés Européennes, Assainissement du secteur de la construction navale dans la Communauté (Brussels, December 6, 1977), pp. 1 and 5. Or see “Rationalization of Shipbuilding Sector in Community,” in Europe Documents, Agence Internationale d’Information pour la Presse (Brussels), No. 979, December 23, 1977, pp. 1 and 2.

    Ibid., p. 7 or p. 4. EUR 1 = US$1.22 approximately.

    The next renewal is due at the end of 1978.

    The effects of the decelerating population growth have been partially offset in some countries by increases in labor force participation rates (e.g., women) and by immigration.

    UN Economic Commission for Europe, Structure and Change in European Industry (New York, 1977); see also GATT, International Trade, 1976/77 (Geneva, 1977), and Blackhurst, Marian, and Tumlir, op. cit. (n. 24 above).

    Even when government policies attempt to differentiate between unemployment for structural and for cyclical reasons—for example by providing higher benefits to the former—practical problems arise when, during a recession, benefits for structural adjustment reasons engender strong resistance on the part of workers who feel unfavorably treated.

    Adjustment assistance refers to government measures to encourage or facilitate structural change. It is based on the premise that government intervention is justified when the costs of transfer are such as to cause hardship, as well as on the empirically observed fact that there is a considerable degree of resistance to and inertia in automatic adjustment. Adjustment assistance may operate on the labor market to promote geographic or occupational mobility; it may operate on the capital site by encouraging re-equipping or the scrapping of outdated capital equipment; or it may provide incentives to attract new industry to economically declining regions. Various measures may be used: assistance to affected firms (capital grants, subsidies, loans and loan guarantees, interest subsidies, tax concessions, etc.); assistance to workers whose employment is jeopardized (income support, relocation allowances, vocational training and testing, information and counseling, etc.); and general measures (government guidelines, regional development programs, etc.).

    OECD, Adjustment for Trade: Studies on Industrial Adjustment Problems and Policies (Paris, 1975), p. 11.

    From the point of view of the international economy, however, even if such expenditures were successful in increasing productivity sufficiently in these ailing industries to compensate for lower foreign labor costs, such investments still would hamper efficient allocation of resources.

    In recounting the major elements leading to “the present crisis in international commercial policy,” a gatt study included “the great inflation and eventual breakup of the international monetary system based on fixed parities; the payments difficulties in the wake of the oil-price increase …”—Blackhurst, Marian, and Tumlir, op. cit. (n. 24 above), pp. 48–49.

    International Monetary Fund, Annual Report of the Executive Directors for the Fiscal Year Ended April 30, 1977 (Washington, 1977), p. 28.

    The United States imposed a 10 per cent surcharge on about 50 per cent of imports, which was in effect from August to December 1971. Italy imposed a 50 per cent prior import deposit requirement with a retention period of six months for about 40 per cent of imports in May 1974; the requirement was abolished in March 1975. Beginning in May 1976, Italy imposed a 50 per cent, 90-day, deposit requirement on most purchases of foreign exchange by residents; the requirement was phased out on a gradual basis, and was terminated in April 1977.

    Unilateral, “genuine,” export controls, whether imposed to further the political aims of the government of the exporting country, to contribute to the profits of an export cartel, or to strengthen the balance of payments position, are excluded from the scope of this discussion.

    C. Fred Bergsten, “On the Non-Equivalence of Import Quotas and ‘Voluntary’ Export Restraints,” in Toward a New International Economic Order: Selected Papers of C. Fred Bergsten, 1972–1974 (Lexington, Mass., 1975), p. 158. According to this definition, orderly marketing agreements provided for in Section 203 of the U.S. Trade Act of 1974 would be regarded as one form of export restraint.

    The government of an importing country may take certain unilateral trade actions while bilateral export restraints are being negotiated, as in the case of the eec antidumping scheme for steel products, which was introduced in January 1978 for an interim period while bilateral agreements containing price and quantity stipulations are being concluded. Alternatively, the importing country may impose quantitative import restrictions while export restraints are in force, as in the case of the orderly marketing agreements for footwear concluded by the United States with the Republic of Korea and the Republic of China. Yet another possibility is that suppliers not covered by restraint agreements may be subject to import quotas, as in the case of the Canadian restrictions on textiles. Voluntary export restraints of any type may provide for a certain permissible rate of growth of export volume or value over a given base-year level and may contain carry-over and carry-forward provisions, giving the exporting country a degree of flexibility over the life of the agreement.

    Other purposes may also be given, e.g., in the United States the voluntary export restraint on steel has been defended on the grounds that maintenance of domestic production is a matter of national security and that the domestic industry must have a short period of time in which to adapt when competitive conditions change and imports rise sharply.

    See, e.g., Raymond Barre, “Pour une liberté organisée des échanges,” Journal de Genève, September 15, 1977; address by the Prime Minister of France, Raymond Barre, before the National Press Club, Washington, D.C., September 16, 1977; and an interview with T. de Montbrial, Chief, Centre d’Analyse et de Prévision, French Foreign Ministry, in Journal of Commerce (New York), September 15, 1977.

    A good recent example is W. R. Cline, N. Kawanabe, T. O. M. Kronsjö, and T. Williams, Trade Negotiations in the Tokyo Round: A Quantitative Assessment (Washington, 1978).

    See R. E. Baldwin, Nontariff Distortions of International Trade (Washington, 1970), and T. C. Lowinger, “Discrimination in Government Procurement of Foreign Goods in the U.S. and Western Europe,” Southern Economic Journal (Chapel Hill), Vol. 42 (1975–76), pp. 451–60.

    See GATT, Trends in International Trade: A Report by a Panel of Experts (Geneva, October 1958), pp. 83–84, and UN Economic Commission for Europe, Economic Survey of Europe in 1960 (Geneva, 1961), Chap. III, pp. 17–28.

    Thus:

    where vj=1aij

    Major empirical studies using this concept are B. Balassa, “Tariff Protection in Industrial Countries: An Evaluation,” Journal of Political Economy (Chicago), Vol. 73 (1965), pp. 573–94; G. Basevi, “The United States Tariff Structure: Estimates of Effective Rates of Protection of United States Industries and Industrial Labor,” Review of Economics and Statistics (Boston), Vol. 42 (1966), pp. 147–60; B. Balassa and associates, The Structure of Protection in Developing Countries (Baltimore, 1971); J. N. Bhagwati and P. Desai, India—Planning for Industrialization: Industrialization and Trade Policies Since 1951 (London, 1970); R. Soligo and J. J. Stern, “Tariff Protection, Import Substitution and Investment Efficiency,” Pakistan Development Review (Islamabad), Vol. 5 (1965), pp. 249–70; and J. R. Melvin and B. W. Wilkinson, Effective Protection in the Canadian Economy, Economic Council of Canada, Special Study No. 9 (Ottawa, August 1968).

    See I. Walter, “Nontariff Barriers and the Export Performance of Developing Economies,” American Economic Review, May 1971, pp. 195–205; I. Walter, “Non-Tariff Protection Among Industrial Countries: Some Preliminary Evidence,” Economia Internazionale (Genoa), Vol. 25 (1972), pp. 335–54; V. Roningen and A. Yeats, “Nontariff Distortions of International Trade: Some Preliminary Empirical Evidence,” Weltwirtschaftliches Archiv (Tübingen), Vol. 112 (1976), pp. 613–25.

    Such measures include various forms of informal restraint, licensing, quarantine regulations, health regulations, technical visas, customs valuation practices, customs classification, marks of origin, marketing standards, safety requirements, etc. The gatt inventory of nontariff measures contains more than 800 such practices.

    Measures are introduced in the United States under the provisions of different laws and thus different procedures are applied in the determination of injury to domestic producers and in the administration of the trade measures. “Escape clause” actions in the form of higher tariffs and import quotas (including those negotiated under orderly marketing agreements or voluntary export restraints) were applied under Section 301 of the Trade Expansion Act of 1962 before 1974 and have been applied under Sections 201–203 of the Trade Act of 1974 thereafter. Antidumping duties are applied under the Antidumping Act of 1921 as amended by Section 321 of the Trade Act of 1974, and countervailing duties under Section 303 of the Tariff Act of 1930 as amended by Section 331 of the Trade Act of 1974.

    However, under the system of trigger prices established at the end of 1977, antidumping investigations may be “self-initiated” by the U.S. Treasury.

    “Constructed value” is based on the direct costs of production, a minimum allowance for general (overhead) expenses of 10 per cent of direct costs, plus a minimum of 8 per cent of direct and overhead costs for profit.

    Official Journal of the European Communities, May 5, 1977.

    Among practices which reportedly restrain imports are lengthy import procedures, stringent marking and labeling requirements, limitations on the number of outlets for some foods, renewed testing requirements for some products, government contracts from which non-Japanese corporations are excluded, and “administrative guidance” which serves to discourage imports if the product in question is available domestically.

    GATT, Basic Instruments and Selected Documents, Tenth Supplement (Geneva, March 1962), p. 19.

    Decision of the Contracting Parties, adopted on November 19, 1960. See GATT, Basic Instruments and Selected Documents, Ninth Supplement (Geneva, February 1961), p. 26.

    Unless otherwise indicated, all statistical information given in this section is based on GATT, A Study on Cotton Textiles (Geneva, 1966).

    For the text of the Long-Term Arrangement, see GATT, Basic Instruments and Selected Documents, Eleventh Supplement (Geneva, March 1963), pp. 25–41.

    For the purpose of the Long-Term Arrangement, cotton textiles were defined as including “yarns, piece-goods, made-up articles, garments, and other textile manufactured products, in which cotton represents more than 50 per cent (by weight) of the fibre content, with the exception of hand-loom fabrics of the cottage industry.”—Art. 9 of the arrangement, ibid., p. 31.

    The following countries applying restrictions on imports of cotton textiles undertook to expand access to their markets so as to reach, by the end of the period of validity of the arrangement, for the products remaining subject to restrictions at that date taken as a whole, a level corresponding to the quotas opened in 1962 for such products, as increased by the following percentages: Austria, 95 per cent; eec, 88 per cent; Denmark, Norway, and Sweden, 15 per cent each. See Annex A to the arrangement, ibid., p. 32.

    For the text of the protocol extending the arrangement for the period October 1, 1967-September 30, 1970, see GATT, Basic Instruments and Selected Documents, Fifteenth Supplement (Geneva, April 1968), pp. 56–57.

    For the text of the protocol extending the arrangement for the period October 1, 1970-September 30, 1973, see GATT, Basic Instruments and Selected Documents, Eighteenth Supplement (Geneva, April 1972), pp. 18–19.

    Unless otherwise noted, statistical information given in this section is based on data from GATT, Study on Textiles: Report of the Working Party on Trade in Textiles, L/3797, December 29, 1972, 3 vols.

    For the text of the Multifiber Arrangement, see GATT, Basic Instruments and Selected Documents, Twenty-First Supplement (Geneva, February 1975), pp. 3–19.

    Art. 12(1) of the Multifiber Arrangement, ibid., p. 15.

    The discussions in this paragraph are based mainly on GATT, Textiles Committee, Report of the Fifth Meeting of the Textiles Committee, COM.TEX/8, March 14, 1977, and GATT, Textiles Committee, Production and Trade in Textiles and Clothing, 1974 to 1976: Report by the Secretariat, COM.TEX/W/35, October 29, 1976.

    Excluding trade of Eastern European countries and the People’s Republic of China.

    The arrangement had been accepted by 33 countries as of June 30, 1978.

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