Back Matter
  • 1 https://isni.org/isni/0000000404811396, International Monetary Fund

ANNEX I

Table 19.

Members (116) of the World Trade Organization

(as of January 1996)

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Source: WTO, 1996Note: (*) self-proclaimed developing country status
Table 20.

GATT Members not yet WTO Members: 13 countries

(as of January 1996)

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Source: WTO, 1996
Table 21.

GATT/WTO Accessions: currently 27 requests

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Source: WTO, 1995
Table 22:

Members of the World Customs Organization

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Source: WCO, 1995
Table 23:

Tariff Bindings on Industrial Products for Selected Developing Countries

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Source: GATT, The Results of the Uruguay Round of Multilateral Trade Negotiations, Geneva, 1994.Note: Petroleum products are not included.

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1/

The author prepared this paper when he was employed during the summer of 1995 as a summer intern at the Office in Geneva. He is grateful for the valuable guidance and comments of Mrs. P. Sorsa and of numerous colleagues at the Fund, the World Bank, and the WTO.

1/

The term “country” in the WTO also refers to customs territories that are members of the WTO. Throughout this paper, country classification follows the WTO practice: least-developed countries (LDCs): United Nations classification (unless otherwise specified); (other) developing countries: under the WTO, developing country status is self-proclaimed. In the WTO, Korea, Hong-Kong, and Singapore are developing countries, and South Africa an industrial country. Also, Romania considers itself a developing country; the Czech Republic, Hungary, Poland, Slovakia, and Slovenia are transition economies.

2/

IMF document EB/CGATT/95/1, March 9, 1995.

1/

The phase-out periods referred to in the text are maximum WTO-consistent deadlines. They should not be understood as minimum deadlines constraining Fund policy advice, which is formulated on the ground of economic efficiency considerations.

1/

Formally “The Agreement on Implementation of Article VII of the GATT 1994.”

2/

However, some other developing countries claim to use the BDV.

3/

From a practical perspective, the invoice price is normally used.

1/

The order of the sequence must be respected, except for 3 and 4, which can be reversed at the request of the importer.

1/

New requests to delay the application of the Agreement will not be accepted.

1/

The WCO was established in 1952 as the “Customs Cooperation Council”, and renamed itself “World Customs Organization” in 1994. The WCO is completely autonomous and has 137 members, some of whom are not members of the WTO. Likewise, some WTO members are not members of the WCO. See in Annex I, Table 22.

2/

The best example is discounts. Under the Agreement, the value is the price actually paid. If the buyer receives a discount, it will be reflected in the customs value. Under the BDV, the discount would be ignored if it was not freely available to all buyers. Other differences may arise in the area of marketing (advertising) expenses. In addition, with the BDV, transportation and insurance costs are included; the value is thus automatically c.i.f. By contrast, countries applying the Agreement may choose between c.i.f., f.o.b., or another form (e.g., ex-factory for the treatment of transportation costs).

3/

For a detailed analysis, see Conseil de Coopération Douanière, “La Définition de la Valeur de Bruxelles et l’Accord sur l’Evaluation du GATT: une comparaison”, Bruxelles, 1985.

1/

With “voluntary” or non-binding minimum prices, customs officials use reference prices as a benchmark only, together with other indicators to assess the accuracy of the declared value of goods.

1/

Except with respect to the strict order of the alternative methods of valuation.

2/

Parties to the BDV no longer receive technical assistance from the WCO, except for answers to ad hoc queries.

3/

Note, however, that preshipment inspection must take into account the recipient country’s commitments vis-à-vis the WTO.

4/

Preshipment inspection rules are dealt with in a separate agreement under the WTO.

1/

The value refers to the wholesale domestic sale price, at which goods are offered freely on the principal markets of the exporting country. This system is also referred to as the current domestic value system.

2/

As indicated in the previous section, these problems include among other things under-invoicing, invoice falsification, and, more generally, poor administrative capacities.

1/

Senegal and Pakistan notified that they want a five-year delay. Rwanda’s and Zaire’s ratification of the WTO is still pending, which shifts the start of the transition period, Algeria is currently negotiating its GATT/WTO accession.

1/

Trade Policy Review (Uganda), GATT, July 27-28, 1995.

2/

The financial contribution may involve a direct transfer of funds, potential direct transfer of funds or liabilities (e.g., loan guarantees), tax credit, the purchase of goods by the government or its provision of goods and services other than general infrastructure.

1/

The category of actionable subsidies can be divided into two subcategories, depending on the intensity or nature of the subsidy: as the details of Article 6 indicate, the first one encompasses those subsidies for which one has to demonstrate the adverse effect; the second category includes those subsidies, whose level or nature is such that there is no need to establish the (obvious) causal link between the subsidy and the prejudice. Rather, a rebuttable presumption of adverse effect arises from the nature or intensity of the subsidy itself.

2/

Except, once again, for subsidies maintained on agricultural products, which are covered in a separate agreement.

3/

According to Article 9.1, non-actionable subsidies may face counter-measures in case of serious adverse effects on the domestic industry. Consultations between parties may be requested, and, in the absence of a satisfactory outcome, the Committee may take up the issue and make recommendations. In case of non-compliance with such recommendations, appropriate counter-measures may be authorized by the Committee. However, this case is expected to be the exception rather than the rule.

4/

The necessary conditions for countervailing the effects of prohibited or actionable subsidies are: first, the existence of the subsidy must be demonstrated; second, the competing domestic industry must be injured; and third, a causal link between the subsidy and the injury must be clearly established. At least 25 percent of the firms in the domestic industry must support the launching of a countervailing investigation.

5/

The definition of “negligible” import levels and “de minimis” tends to vary, depending on the category of the subsidizing country.

1/

This means that, as Article 27.8 indicates, serious prejudice must be demonstrated by positive evidence in the case of a subsidy granted by a developing country member.

2/

A “product” is defined as a section heading in the Harmonized System Classification (2 digits).

1/

Such subsidies are non-actionable multilaterally (i.e., based on serious prejudice or nullification or impairment of benefits). However, as for the other exceptions, countervailing duties are possible.

2/

This applies “when such subsidies are granted within and directly linked to a privatization programs of a developing country member, provided that both such programme and the subsidies involved are granted for a limited period and notified to the Committee and that the programme results in eventual privatization of the enterprise concerned” (Article 27.13).

3/

Among developing countries, as of April 1995, Chile, Honduras, Malaysia, and Singapore had notified prohibited subsidy programs as such.

1/

A good example of such misallocation of resources is provided by the Soviet economy in which decades of subsidized energy prices have resulted in the use of energy-intensive technologies in all economic sectors.

2/

See Corden (1980), Chapters 1 and 2.

1/

Assuming that one country specializes in few products with export subsidy programs, an export boom could conceptually result in reaching the threshold of 3.25 percent of world trade in these product lines (defined as a section heading (i.e., 2 digits) in the Harmonized System classification). If so, the subsidies concerned would have to be removed in two years in developing countries, and in eight years in LDCs. However, in practice, it seems that no reliable export statistics are available at the required digit level, even at the WTO, which renders the implementation of this provision doubtful.

1/

For instance, it is more difficult to grant compensatory export subsidies to countries where the currency is overvalued. This could increase the importance of active exchange rate policies, with potential balance of payment implications (see Rom (1994)).

2/

Export promotion schemes include, inter alia, fiscal incentives extended to export-oriented enterprises, preferential discount rates applied to export credits, export insurance, and financial assistance to specific firms. See Trade Policy Review (Tunisia), GATT, 1994.

3/

The details of Annex I of the Agreement (the illustrative list of export subsidies) provides useful indications.

1/

Taken from Turkey’s notification to the WTO Committee in Subsidies and Countervailing Measures, received August 3, 1995.

2/

This simply indicates that if exporters can have access to a given product either on world markets or through the government scheme, at the same price, there is no specific benefit conferred by the government scheme.

3/

Personal estimation based on GNP and population estimates in the International Financial Statistics, August 1995.

4/

The WTO procedure is not very precise in this respect. The Agreement only indicates that the phase-out should commence on the date when GNP per capita reaches US$1,000 on the basis of World Bank data, thus apparently ignores possible lags between production performance and data availability.

1/

See L. Ebrill et. al. “Poland: the Path to a Market Economy”, IMF Occasional Paper No. 113, Washington DC, October 1994, Chapter VI, and the Polish Ministry of Foreign Economic Relations, Guidelines for Export Promotion Policy, Foreign Trade Research Institute, Warsaw, October 1993, pages 6-8.

2/

These countries are Afghanistan, Algeria, Armenia, Azerbaijan, Belarus, Bolivia, Brazil, Cambodia, Colombia, Ecuador, Egypt, Ethiopia, Georgia, Ghana, Guatemala, Guinea-Bissau, Guyana, Iran, Kazakhstan, Kenya, Lao, Moldova, Poland, Somalia, Suriname, Sudan, Tajikistan, Thailand, Ukraine, Yemen, and Zaire (see IMF, Exchange Arrangements & Exchange Restrictions, Annual Report 1994, Washington, D.C.).

1/

The term “serious injury” is defined as a significant overall impairment in the position of a domestic industry, and the term “threat of serious injury” is defined as serious injury that is clearly imminent.

2/

These include the rate and amount of the increase in imports, the share of the domestic market taken by increased imports, changes in the level of sales, production, productivity, capacity utilization, profits, losses and employment.

3/

However, the Agreement appears to open the possibility of selective application of the “escape clause” that was previously prohibited. See Section 3, below.

1/

Each member may maintain one non-conforming measure until December 31, 1999. Only one case has been registered to-date, namely the EU-Japan Agreement in the motor vehicle sector.

2/

Provided that developing country members, each of which accounts for less than 3 percent share, collectively account for not more than 9 percent of total imports of the product concerned.

1/

Safeguards actions were mostly used by Australia, Canada, the EU, and the United States. Prior to the completion of the Uruguay Round, among the 150 safeguards actions reported to the WTO, only one was used by a developing country (i.e., Chile).

1/

See UNCTAD 1995, pages 15-16.

2/

See Trade Policy Review (Cameroon), GATT, January 3, 1995.

1/

Formally, “The Agreement on Implementation of Article VI of the GATT 1994.”

1/

See Michael Leidy “Antidumping: Solution or Problem in the 1990s?” (IMF, 1994), pp. 53-67, and Mathisen (1994).

2/

See OECD, Predatory Pricing, Paris, 1989, page 81; also The Financial Times, September 21, 1995, page 5.

3/

For instance, 30 American antidumping duties have lasted more than 20 years (Mathisen (1994)).

4/

Three points deserve attention in this respect: first, safeguards are possible in case (or threat) of serious injury, whereas only material injury is required in antidumping; second, safeguards cannot be used in a discretionary way to target specific exports (except in relative terms through “quota modulation”), whereas antidumping actions are specific; third, the use of safeguards involves automatically compensation (or “retaliation” under specified circumstances), which is not true of antidumping actions.

1/

See The Financial Times, August 22, 1995, page 6.

2/

As quoted in The Financial Times, September 21, 1995, page 5, the OECD report is to be published later in the year.

1/

In the textbook case, dumping may arise in a situation of imperfect competition in the domestic market and perfect competition in international markets with segmented markets. A monopolistic domestic producer of exportable good submitted to a given foreign price (with an infinite price elasticity of foreign demand) will be able to discriminate between domestic and foreign consumers provided that no imports challenge the producer’s price-making power, and that domestic consumers have no access to goods exported. See Corden (1980).

2/

Some of the Contracting Parties attempted to set this margin equal to the sum of the injury to the domestic producers, but this failed.

1/

The Agreement requires members to justify averaging methods they have chosen, but the effectiveness of such requirement will depend on the quality of explanation given.

2/

Factors entering into the assessment include, inter alia, industry sales, output, profit, market share, capacity utilization, employment, wages, return on investments, factors affecting domestic prices, and productivity.

3/

This can also be illustrated by the fact that the Antidumping Code refers to “material injury” only, whereas Article XIX—the “escape clause”—refers to “serious injury”, which is definitely more constraining.

1/

Tunisiaś system, although not labeled “antidumping”, allows similar undertakings. See Trade Policy Review (Tunisia), GATT, 1994.

2/

Trade Policy Review (Pakistan), GATT, February, 1995.

3/

A tariff binding is a legal obligation in the GATT/WTO not to raise tariff rates on negotiated products above a specified level without compensating reductions in other tariffs. Such bindings help to enhance the sustainability of tariff liberalization.

4/

This cannot be done, however, in a discriminatory way.

1/

See the discussion in Leidy (1994)

1/

This has been apparently done in Poland where the competition authorities have ex-post and ex-ante responsibilities.

2/

The use of the public interest notion in Australia is interesting: in some cases, exporters were given a simple “warning” on the basis that an action would not have been in the public interest. Such clause exists also in the antidumping provisions of Zimbabwe as well.

1/

Although the UN classification is not explicitly referred to in the Agreement (in contrast with the Agreement on Subsidies on Countervailing Measures), it is logical to assume that this classification would apply.

2/

Chile, Indonesia, and South Africa notified their prohibited TRIMs after the required deadline.

1/

See Annex I, Tables 19, 20, and 21.

2/

One could also argue that some TRIMs aim at reducing excess profits that protection may give to foreign investors.

3/

See Chao & Yu (1994) for a recent review.

1/

For instance, Morrissey and Rai (1995) describe a situation in which transnational corporations engage in restrictive practices, among which transfer pricing (arising when the parent transnational corporation sell goods between themselves—internally—at non-clearing prices).

2/

Only Israel and Korea are signatories.

2/

Although failure to notify may result in a challenge under the WTO by another country member, the likelihood of such action heavily depends on its political and economic costs, as well as benefits.

3/

This list may not be exhaustive.

1/

The interpretation of this provision suggests indeed that new TRIMs that are inconsistent with the Agreement are prohibited.

1/

It should be noted that “mode 4” is actually very restrictive and limitative in the different countries’ commitments. Therefore, mode 4 sets up exceptions rather than rules.

1/

This is conceptually feasible under Article VI, although the Fund has never requested a country to impose restrictions on capital outflows, and it is highly unlikely it will do so in future.

1/

From their December 1993 schedules.

1/

By contrast, some African countries appear to be very liberal in all sectors, such as the Gambia, Ghana, Rwanda, Zambia, and Zimbabwe.

1/

This is conceptually feasible under Article VI, although the Fund has never requested a country to impose restrictions on capital outflows, and it is highly unlikely it will do so in future.

Selected WTO Rules and Some Implications for Fund Policy Advice
Author: Thierry D. Buchs