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WTO agreements

The World Trade Organization was established as a result of theUruguay Roundnegotiations which lasted for many years and ended in December 1993.

Officially WTO came into being in Marrakesh in April 1994.Agreement establishing the World Trade Organizationis also known asMarrakesh Agreement.

Besides the main text the document contains 4 annexes:

Annex1A Multilateral Agreements on Trade in Goods

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Name of agreement


1

General agreement on tariffs and trade (GATT, 1994)


GATT, 1994 is the basic document containing the key principles and norms regulating international trade in goods. More thoroughly these rules are stated in sectoral agreements attached to the Agreement on WTO establishment. GATT, 1994 includes the text of its predecessor, GATT, 1947, as well all legal instruments adopted till conclusion of Agreement on WTO establishment (protocols on accession to GATT, lists of tariff concessions, conformation of member-countries on interpretation of GATT, 1947 articles etc.).

GATT specifies a number of fundamental principles the international trade system based on, in particular:

• Most favored nation treatment in compliance with which every WTO member treats the goods of any other WTO member with no less favored regime than it grants to similar products of any other member (conception of non-discrimination trade activity).

National regime in respect of taxation and internal legislation in compliance with which regarding taxation and requirements of domestic legislation every WTO member treats the goods of another WTO member with no less favored regime than it grants to the goods of national origin (conception of national regime).

GATT, 1994 also includes important provisions on mutual reduction and «binding» the customs tariffs, elimination of import and export quota restrictions and submission of notifications about state trading enterprises activity. A number of GATT, 1994 articles define the overall order of subsidies application as well use of such instruments as antidumping and compensational duties and protective measures.

Finally it states a number of criteria and requirements which shall be observed by member-countries upon making agreements on free trade or custom unions. In 1965 a separate section (Part IV) was supplemented to GATT text stating special more favorable rules being used by developing countries in international trade.

2General agreement on tariffs and trade (GATT, 1947)

Sets basic principles of trade in goods, rights and obligations of WTO members in this sphere
3

Agriculture


In compliance with the Agreement on Agriculture an access to agricultural products market is nowadays regulated exclusively with customs tariffs. Non-tariff measures (quota restrictions) as per special formula have been replaced with customs duties securing the same extent of domestic markets protection.

Agreement on Agriculture stipulates that for the sake of liberalization of international agricultural trade all customs duties shall be decreased by developed countries per 36% within the period of six years. At that minimal reduction for any product shall amount to15%. Average and minimal reduction for developing countries shall come to 24% and10% correspondingly and fulfilled within ten years. The least developed countries are exempted from the obligation to reduce their customs duties.

The Agreement also envisages an entire set of obligations of WTO member-countries on the reduction of agricultural production subsiding volume. These obligations are expressed in the terms of the so-called ‘aggregative supportive measures’(ASM). The Agreement states in details the procedure of ASM calculations. According to the Agreement within six years the developed countries shall reduce the ASM level for 20%. Initial level of reduction is considered to be the level of domestic agriculture support which existed in the period of 1986–1988. For developing countries corresponding obligations are made up of ASM reduction for 13% within ten years. These obligations do not regard the measures of domestic support which are called the measures of green basket. This category includes definite state programs stipulating rendering the services of general purpose (financing of scientific researches, training the personnel, improving the infrastructure) and makes a minimal influence on agricultural products trade.

Finally the Agreement defines obligations of member-countries on reduction of expenditures on export subsidies as well physical quantity of subsidized export. . As for the agricultural products which were not denoted by every country in their individual lists of obligations on export subsiding reduction the member-countries had taken upon such subsidies shall not be granted. Developed countries undertook an obligation to reduce the quantity of direct export subsidies for 36% within six years. Within the same period they shall decrease physical quantity of subsiding export for 21%. As a reference point for export subsidies quantity reduction there is accepted the average volume of export financing within the base period of 19861990. Developing countries obliged within 10 years to reduce budget financing of agricultural export for 24%, volumes of subsiding export for 14%.

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Textiles and Clothing


By force of prevailing conditions within several decades the world trade in textile and clothing has remained out of the bounds of GATT system, and since 1973 it is regulated with the so-called Arrangement on multifibre materials (Multifibre Arrangement). This Arrangement has lead to actual withdrawal of trade in textile items and clothing from common rules of international trade having legalized the system of bilateral agreements on voluntary restriction between importing and exporting states, i.e., mechanism of quota restrictions prohibited by GATT.

One of the main goals of Uruguay Round has become the gradual spread of GATT principles and rules to the world trade in the sector herein. The aim of concluded Agreement on Textiles and Clothing is to provide the gradual expiry of Multifibre Arrangement by January 1, 2005. This aim has being implemented by means of gradual elimination of quota restrictions, particularly bilateral quotas, agreed in the frame of the Arrangement. Put it otherwise, cease of quota allocation on importation of any textile item means the spread of common rules established in GATT, 1994 on trade in goods herein.

Program of integration of world trade in textiles and clothing consisted of four stages and assumed that this total segment of international trade had to be included into the common system of principles and rules of GATT, 1994 no later than January 1, 2005.

As it was envisaged with the provisions of the Agreement on textiles and clothing on January 1, 2005 all import quotas in the international trade in textiles and clothing were eliminated and the agreement itself ceased to exist. Henceforth the world trade in goods herein is regulated with common WTO provisions.

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Sanitary and Phytosanitary Measures


Agreement on application of sanitary and phyto-sanitary measures comprises all corresponding measures which can directly or indirectly affect the international trade. Sanitary and phyto-sanitary measures are defined as measures applied with an objective to protect people and animals life or to protect plants against the risks connected with different supplements, toxins or diseases, which can be found in food as well to protect the country in case of insect-pest expansion onto its territory.

Agreement allows the members to introduce sanitary and phyto-sanitary measures having a scientific basis but such measures shall not represent a discrimination instrument against imported products. Moreover sanitary and phyto-sanitary measures shall not be applied in protectionistic goals. Upon elaboration of new sanitary and phyto-sanitary measures the Partiers of the Agreement are stimulated to exercising the existing international standards, manuals and recommendations. Application of such measures by any country can be disputed by other countries through the procedure of WTO disputes settlement.

6Technical Barriers to Trade

The goal of the agreement on technical barriers in trade is prevention of additional obstacles to trade which can be created by technical standards and regulations as well by conformity assessment procedure. Agreement acknowledges that member-countries have a right to apply such measures to protect life and safety of the people or of the environment. Exercising the technical regulations and standards shall not bring to discrimination of foreign goods in favor of domestic commodities. Procedure of assessing the goods conformity to the requirements of national standards shall not serve either as an instrument for discrimination of imported goods. Agreement impetuses the members to application of international standards and to harmonization and mutual recognition of technical regulations, standards and procedure of conformity assessment.

In compliance with provisions of the agreement on technical barriers in trade every WTO member-country shall found a special information bureau to facilitate an access to the information on technical regulations, standards and procedures of conformity assessment available in each country.
7Trade-Related Investment Measures

Agreement on Trade-Related Investment Measures (TRIMS) acknowledges that some measures of national investment policy may have a deterrent or a distorting affection on trade.

Under the Agreement WTO members are committed not to implement such measures which would contradict to the principle of national treatment recorded in the GATT 1994 or to the obligation to eliminate quantitative restrictions in trade.

The Attachment to the Agreement is an indicative list of measures of investment policy contradicting to the provisions of GATT 1994 (for example, the requirement to purchase a certain quantity of goods of national production).

All such measures shall be notified to the WTO Committee on Trade-Related Aspects of Investment Policy measures and eliminated during the transition period. For developed countries - two years from the date the Agreement enters into force, for developing countries five years.

One of the provisions of the Agreement specifies that after five years since the commencement of the Agreement WTO members must take a decision whether to expand the scope of the Agreement including provisions concerning the investment policy and competition policy or not.
8Customs Valuation (Implementation of Article VII of the General Agreement on Tariffs and Trade 1994)

In circumstances where the customs duty is collected based on imported commodity value the most important factor is a clear-cut procedure of its customs value determination. In case the customs value determination is executed unfairly such procedure can easily become a non-tariff barrier in trade and has more protectionistic affect than customs duty collecting itself.

Agreement on implementation of Article VII of GATT, 1994 or as it is more often called Agreement on Customs Valuation envisages customs value determination of the imported commodity on the basis of transaction cost or, in other words, on the basis of actual cost of commodity. In some specific events that transaction cost cannot be used at customs value determination the Agreement stipulates five other methods of customs value determination which shall be applied one after another in a definite escalation path.
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Preshipment Inspection


To prevent defrauding and compensate incompetence of administrative arrangements certain developing countries resort to services of private companies to check the quality, quantity, price and/or customs classification of imported goods prior to their shipment by exporting country. Agreement on pre-shipment inspection contains a special number of requirements to the countries applying the procedure herein in compliance with which the procedure herein shall be used on non-discrimination basis as well transparency, protection of confidential business information and commodity price inspection shall be observed.

10Rules of Origin

Rules of origin mean laws, regulations and administrative norms used by the countries to identify products country of origin. At that it is important not to apply those rules for creation of barriers in trade.

The main goal of the Agreement on rules of origin is to create conditions for harmonizing the rules of origin by member-countries using non-preferential tools of trade policy.

Put the other way round these rules shall be applied by WTO member-countries to collect customs duties, envisaged for most-favored-nations regime in trade, in the course of antidumping and anti-subsidy investigations and at subsequent charging of antidumping and compensational duties, for introduction of protective measures, etc.

Agreement as well provides fulfillment of same criteria for identifying the goods country of origin by all WTO member-countries independent on the goals of applying the rules.

Unless and until the work on harmonization is completed WTO members shall secure that provisions for identifying the goods country of origin were clearly cut and the rules of origin do not create restricting or distorting affect on international trade. Rules of origin shall not contain unreasonably strict requirements or conditions unrelated to production or processing of commodities as necessary terms of identifying the goods country of origin.

Work on harmonizing the rules of origin is being conducted at WTO Committee for rules of origin and Technical Committee of the World Customs Organization (WCO).

Attachment 2 to the Agreement contains Joint declaration on preferential rules of origin. Those are laws, regulations and administrative norms applied by member-countries with the aim of defining whether preferential regimes are enlarged upon different goods in the frame of which the goods are imported at preferential regimes (incentive) rates or altogether exempted from duties.
11Import Licensing Procedures

Import licensing is understood as administrative procedures in compliance with which, as preliminary terms of goods importation into the importing countrys customs territory, the importer shall submit a special application to the authorized administrative body. The main goal of the Agreement on the procedures of import licensing is to facilitate to the maximum the procedure herein and make it transparent and predictable.
12Subsidies and Countervailing Measures

Agreement on Subsidies and Countervailing Measures gives a definition of the term "subsidy" and establishes that its provisions cover only specific subsidies. In the previous similar agreement that was worked out during the "Tokyo Round" there was provided only an indicative list of methods of financial support from state agencies, which could be considered as subsidies.

In addition, the current agreement contains criteria for determining whether a subsidy is "specific" for a single undertaking or group of undertakings or industries. The Agreement identifies three categories of subsidies: (1) prohibited (2) permitted, but allowing the introduction of Countervailing Measures ("actionable"); and (3) permitted and not allowing the introduction of Countervailing Measures ("non-actionable").

The agreement also contains provisions regulating the use of Countervailing Measures, that is, additional customs duties which according to the results of the investigations are collected in the importing country to offset the negative effects of subsidies.

These procedures are very similar to the same procedures used in collecting anti-dumping duties.
13Anti-dumping (Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994)

Article VI of GATT 1994 allows WTO Members to apply anti-dumping measures. However, these measures can be imposed only under the following three conditions:

Export price of goods is lower than its "normal value". In other words, the export price of goods is lower than the comparable price for similar product sold in the domestic market of the exporting country;

Goods imported at dumping prices inflict harm or threaten to make a harm to the industry of the importing country producing similar goods;

There is a clear-cut cause-effect relation between the goods imported at dumping prices and the harm being inflicted to industry of the importing country.

Agreement on Implementation of Article VI of GATT 1994 (the "Agreement on Anti-Dumping") is based on a similar agreement that was worked out during the "Tokyo Round" of multilateral negotiations under the GATT. However, in comparison with the previous agreement, this agreement contains more precise and clear rules for ascertaining the export of goods at dumping prices, the criteria that must be considered upon defining losses of industry, as well as the procedures under which anti-dumping investigations should be initiated and carried out.

In addition, the Agreement more clearly spelled out the role of WTO dispute settlement mechanism for disputes in respect of anti-dumping investigations.
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Safeguards


Agreement on Safeguards establishes rules for the application of protective measures in trade, which are permitted under Article XIX of GATT 1994. This article authorizes WTO members under certain conditions to introduce Safeguards in trade on a nondiscriminatory basis in order to limit imports. The main purpose of this procedure is to protect national industries from the "serious damage" or "threat of serious damage" caused by sudden and unexpected increase in imports of competing products.

Agreement prohibits the so-called "grey area measures" such as voluntary export restraints or market-sharing agreements.

The agreement also spelled out in detail investigation procedures to be carried out to substantiate the possibility and feasibility of the introduction of Safeguards.

Annex1B General Agreement on Trade in Services (GATS)

Annex1CTrade-Related Aspects of Intellectual Property Rights (TRIPS)

Annex2Dispute Settlement Understanding

Annex3 Trade Policy Review Mechanism

Annex4 Plurilateral Trade Agreements

Annex4(a) Agreement on Trade in Civil Aircraft


Annex4(c) International Dairy Agreement

Annex4(d) International Bovine Meat Agreement