Increased market access

The multilateral trading system is an attempt by governments to provide investors, employers, employees and consumers with a business environment which encourages trade, investment and job creation as well as choice and low-prices in the market place. Such an environment needs to be stable and predictable, particularly if businesses are to invest and thrive. Predictable and growing access to markets for goods and services is an essential principle of the WTO.

Binding of tariffs:

The existence of secure and predictable market access is largely determined by the use of tariffs, or customs duties. While quotas are generally outlawed, tariffs are legal in WTO and are commonly used by governments to protect domestic industries and to raise revenues. However, they are subject to disciplines - for instance, that they are not discriminatory among imports - and are largely “bound”. Binding means that a tariff level for a particular product becomes a commitment by a WTO member and cannot be increased or raised beyond the bound level without compensation negotiations with its main trading partners. Thus, it can be the case that the extension of a customs union can lead to higher tariffs in some areas for which compensation negotiations are necessary. The bound tariff on a product can be higher than the tariff actually applied. The developed countries have normally bound their tariffs at the applied levels. Developing countries, however, have adopted commitments on “ceiling bindings”, that is, bindings at levels higher than the applied rates. This has allowed developing countries to substantially increase their bound commitments, thus underpinning their open markets policies, while keeping a certain margin for protection in case of need.

Prohibition of quantitative restrictions:

While tariffs are legal in WTO and are commonly used by governments to protect domestic industries and to raise revenues, quotas are generally outlawed. Article XI of GATT 1994 sets out a general prohibition of quantitative restrictions, whether on imports or exports. In some special cases and for specific reasons, such as safeguard action, balance-of-payment, protection of public health or national security, quantitative restrictions can be introduced under strictly defined criteria.

Article XIII of GATT 1994 stipulates that prohibitions and quantitative restrictions, when applied, should be administered on a non-discriminatory basis, i.e. to all trading partners equally. In applying import restrictions, Members should aim at a distribution of trade approaching as closely as possible the shares various supplying countries would have obtained in the absence of the restrictions. Furthermore, quotas should be allocated among supplying countries based upon the proportions supplied by the various supplying countries during a previous representative period.

The “tariffication” of all non-tariff import restrictions for agricultural products provided a substantial increase in the level of market predictability for agricultural products. More than 30% of agricultural produce had been subject to quotas or import restrictions. Virtually all such measures have now been converted to tariffs which, while initially providing substantially the same level of protection as previous non-tariff measures, are being reduced during the six years of implementation of the Uruguay Round agricultural agreement. The market access commitments on agriculture will also eliminate previous import bans on certain products.

Tariff negotiations and progressive reduction in protection:

Following the establishment of the GATT in 1948, average tariff levels fell progressively and dramatically through a series of seven trade rounds. The Uruguay Round added to that success, cutting tariffs substantially, sometimes to zero, while raising the overall level of bound tariffs significantly. The commitments on market access through tariff reductions made by over 120 countries in the Uruguay Round are contained in some 22,500 pages of national tariff schedules.

Tariff reduction, for the most part phased in over five years, will result in a 40% cut in developed countries’ tariffs on industrial products, form an average of 6.3% to 3.8%, and a jump from 20 to 44% in the value of imported industrial products that receive duty-free treatment in developed countries. At the higher end of the tariff structure, the proportion of imports into developed countries from all sources that encounter tariffs above 15% will decline from 7 to 5% and from 9 to 5% for imports from developing countries.

The Uruguay Round increased the percentage of bound product lines from 78 to 99% for developed countries, 21 to 73% for developing economies and from 73 to 98% for economies in transition results which are providing a substantially higher degree of market security for traders and investors.

Tariff renegotiations and compensation:

The contractual nature of a bound tariff concession lies in the fact that the tariff rate cannot be increased beyond the bound level. However, countries would not enter into this kind of commitment without the possibility of revision when the situation of a domestic industry so requires. The GATT 1994 allows for the possibility of renegotiations. A Member desiring to withdraw or modify tariff bindings has to renegotiate them with other interested Members and provide compensation, that is, substantially equivalent tariff concessions on other products.

Transparency.

The principle of transparency is realized through four schemes:

1) The obligation of notification: A WTO Member should notify the relevant WTO committees and explain any changes in trade policy, legislation and judicial decisions so long as they fall within the administration of the WTO.

2) Consultation: When a Member brings a charge against another over a trade dispute, the dispute should first be solved through consultation, political decision and mediation and then be handled by expert groups. For example, if the commodity trading council of the WTO discovers a change in the rise of tariff duties of car imports to Japan or more difficulties in auto importing by its sale networks, the council will conduct consultation among its members so as to demand that the Japanese government make changes within a rational time limit.

3) Transparency in domestic law making: Transparency should be reflected in domestic law making. Whenever a domestic law or regulation is created, opinions of the relevant departments should be solicited extensively. In addition, the opinions and suggestions concerning the same trades and industries abroad should also be considered. The Chinese government, for example, has begun housecleaning of rules, regulations, administrative documents, and internal documents of every department in line with the requirements of the basic rules of the WTO.

4) Unified implementation: Laws and regulations affecting trade are to be implemented uniformly in every region of the Member-state. Treatment has to be nondiscriminatory, enabling equal conditions for market participants to engage in fair competition.