TERMS RELATED TO TRADE POLICY AND NEGOTIATIONS
Kennedy Round. The sixth GAIT Round of multilateral trade negotiations, held
in Geneva from June 1963 to June 1967 with 48 countries participating.
Tariff reductions -- based for the first time on a formula
approach --covered $40 billion in trade and led to
an average tariff reduction among the participating countries
of about 35 percent. The Kennedy Round was the first GATT negotiation
in which the member states of the European Community participated
as a single entity. Moreover, developing countries for the first
time played an important part in the negotiations, which resulted
in the addition of Part Four to the GATT. The Round was named for President
John F. Kennedy, who first sounded the call for the negotiations.
Kyoto Convention. Formal name is the International Convention
on the Simplification and Harmonization of Customs Procedures.
An international agreement sponsored in 1973 by the Customs
Cooperation Council (Sec. Ill) to
harmonize the methods and procedures of national customs authorities.
The convention consists of a set of principles, which apply
to all signatories, together with 30 individual annexes dealing
with various aspects of customs and administrative entry
procedures, rules of origin, transshipment, duty drawback, and
free trade zones. A
signatory may accept or reject any of the annexes, but must
adopt at least one of them and must endeavor to implement all
of the annexes as soon as feasible.
Law of Similars. Regulations limiting importation of a product or altering
its tariff treatment if a "similar" item is produced
domestically. Also known as Market Reserve Policies.
LDCs. See developing countries.
Developed Countries (LLDCs).
Refers to those developing countries experiencing no significant economic growth, very low per capita
incomes, and low literacy rates. The UN General Assembly has
designated 46 countries as LLDCs: Afghanistan, Bangladesh, Benin,
Bhutan, Botswana, Burkina Faso, Burma, Burundi, Cambodia, Cape
Verde, Central African Republic, Chad, Comoros, Djibouti, Equatorial
Guinea, Ethiopia, The Gambia, Guinea, Guinea-Bissau, Haiti,
Kiribati, Laos, Lesotho, Liberia, Madagascar, Malawi, Maldives,
Mali, Mauritania, Mozambique, Nepal, Niger, Rwanda, Sao Tome
and Principe, Sierra Leone, Solomon Islands, Somalia, Sudan,
Tanzania, Togo, Tuvalu, Uganda, Vanuatu, Western Samoa, Yemen,
Zaire, and Zambia.
An alternative term for developing countries.
See fair value and
Licensing. See import licensing. See also cross-licensing (Sec.II). Licensing
Code. See Import Licensing Code.
A tariff negotiating procedure based on reduction of tariffs
by a specified percentage on an entire range of goods (also
known as horizontal reduction). A linear reduction in tariff negotiations
is the simplest form of a formula approach, and is far broader than an item-by-item
Formal name is the United Nations Code of Conduct for Liner
Conferences. Adopted in 1974, the Code seeks to allocate international
shipping among ship owners in industrial and developing countries.
The 59 signatories of the Code account for about 30 percent
of world liner tonnage; the United States is not a signatory.
See also liner conference (Sec.II).
Government-imposed conditions on inward direct investments,
requiring that a minimum proportion of value-added of the resulting
output be derived from host-country goods or services. See performance
requirements. Similar measures applying to imports are
referred to as domestic content requirements.
A series of preferential trade and economic assistance agreements
-- the first of which was signed in 1975 in Lome, Togo --between
the European Community and 69 former colonies of the EC member
states (the ACP countries). Superseded the Yaounde Conventions of 1963
Formal name is the Madrid Agreement Concerning the International
Registration of Marks. An international agreement signed in
1891 establishing a system for standardized registration of
and protection for trademarks and service marks (see intellectual
property rights). The
agreement is administered by the World Intellectual Property
Organization (Sec.lll) and
is open to all states adhering to the Paris Convention.
Formal name is the Madrid Agreement for the Repression of False
or Deceptive Indications of Source on Goods. An international
agreement, signed in 1891 and revised several times subsequently,
concluded for the purpose of suppressing false or misleading
origin markings on internationally traded goods. Signatories
are obligated to seize and deny importation to merchandise bearing
false markings indicating origin in any other signatory country.
The agreement is administered by the World Intellectual Property
Organization (Sec.III) and is open to all states adhering to the
Paris Convention. See
also commercial counterfeiting.
The difference between the duty paid under a system of tariff
preferences and the duty payable on an MFN basis.
Some LDCs have complained that as average tariff levels in the
industrial countries have been lowered through successive GATT
Rounds, the margin of preference enjoyed by GSP
has been eroded.
The ability of foreign flnI1s to compete in a country's markets
for given products, reflecting the extent of formal trade barriers
--including tariffs as well as non-tariff barriers --and the
government's willingness to tolerate unimpeded foreign competition
with domestic firms (see national treatment).
In the context of the Uruguay Round as
well as bilateral trade negotiations, refers broadly to efforts
to lower tariffs and non-tariff barriers on manufactured and
A situation arising when a surge of imports of a particular
product causes sales of domestically produced goods to decline
to such an extent that the domestic producers and their employees
suffer major economic reversals. The existence of market disruption
is the basis for escape clause actions providing temporary import relief.
As specified in Section 406
of the Trade Act of 1974
disruption is considered to exist within a US industry whenever
imports "are increasing rapidly, either absolutely or relatively,
so as to be a significant cause of material injury, or threat thereof' to that industry.
See Law of Similars.
directives concerning the size and quality of fresh fruits and
vegetables, which may be marketed during specified periods within
a given region. The effect of marketing orders is to maintain
prices at high levels by restricting supply. In the United States,
marketing orders are issued by regional boards established by
the Department of Agriculture, and include agricultural producers
A special charge on imported good, in addition to normal duties,
imposed on merchandise not properly marked so as to indicate
the country of origin. Under US law, marking duties are not
considered to be penalty duties, and are not eligible for drawback
should the foreign article be re-exported.
Physical markings indicating where an article was produced,
as required by most countries' customs regulations (see rules
See variable levy.
A form of valuation for tariff purposes in which all items below
a certain threshold value in an import category are valued as
if they were of the minimum value.
A decision by trade ministers of GATT members to launch a GATT
Round of multilateral trade negotiations, establishing
the agenda for the negotiations and setting out general objectives.
Exceptionally liberal financing terms for an export sale. Ostensibly
provided for foreign aid purposes, mixed credits can have effects
similar to export subsidies.
Modifications. Alteration or withdrawal of trade concessions
previously made within GATT. Contracting Parties are permitted
by Article 28 to modify concessions in their tariff schedules
every three years by renegotiating changes with those GATT members
that would be primarily affected. By introducing some flexibility
to the structure of GATT obligations, this provision allows
members to adapt to changing conditions in world trade while
proscribing frequent tariff changes that would create uncertainty
and instability. See also rectifications.
Full title is the Montreal Protocol on Substances That Deplete
the Ozone Layer. Signed in 1987, the Montreal Protocol was the
first major international agreement to establish environmental
trade measures. Under the Protocol, trade with non-signatory countries of products
containing chlorofluorocarbons (CFCs) --principally used in
refrigerators and air conditioners --and fire-extinguishing
halons are to be limited or banned. The Protocol also discouraged
relocation of CFC plants to non-signatory countries. As of September
1993,94 industrial countries and LDCs were parties to the Protocol.
An artist's ability to control use of creative works such as
books and films, even after relinquishing economic rights to
another copyright holder such as a publisher or producer. Differences
in countries' treatment of moral rights pose obstacles to international
negotiations on protection of intellectual property rights.
The principle according to which each signatory of a trade agreement
will apply its trade restrictions or concessions equally among
all other signatories. MFN is the fundamental principle of the
GATT; all Contracting Parties agree to apply MFN treatment to one another,
although exceptions exist --for example, in granting preferential
treatment to developing countries, or for members of a customs
union or free trade area (see waiver). When
a country agrees to reduce tariffs on a particular product imported
from one country, the tariff reduction automatically applies
to imports of that product from any other country eligible for
MFN treatment. Because of this, MFN serves as a powerful inducement
for countries to join GA 1T , as well as a facilitator of trade
liberalization generally. MFN terminology dates from the sixteenth
century --when it was used in commercial agreements according
the most advantageous customs treatment extended by a government
to any trading partner, i.e., to the "most- favored nation"
--but in modern usage it refers to nondiscrimination in international
trade relations. Despite occasional misinterpretation in press
reports, MFN does not entail "favored" (i.e., preferential)
treatment of a trading partner.
See multilateral trade negotiations.
(See textiles, Sec. II.) Full
name is the Multifiber Arrangement Regarding International Trade
in Textiles. An international arrangement under which GATT members
apply quantitative restrictions on imports of textiles and clothing
when importing countries consider them necessary to prevent
market disruption. The MFA --covering cotton, wool, and man-made fiber textiles
and apparel products -- establishes a framework for negotiating
bilateral voluntary export restraints (VERs) or
orderly marketing agreements (OMAs) among textile exporting and importing countries to prevent
market disruption or to counter market-disruptive import
surges originating from low-wage producing countries.
It provides standards for determining market disruption, minimum
levels of import restraints, and annual growth of imports. The
MFA also provides that restrictions should not reduce imports
to levels below those of the preceding year; because of this
--and the fact that an importing country may impose quotas unilaterally
to restrict rapidly rising textile imports from countries with
which it .has no bilateral agreements --most important textile
exporting countries consider it advantageous to negotiate bilateral
agreements under the MFA with the principal textile importing
countries. Critics claim that the MFA amounts to a bureaucratically
rigged market that distorts prices; proponents argue that it
is the only realistic alternative to more draconian protection
of a politically sensitive sector. Under the proposed Uruguay
the MFA would be phased out over a 10-year period.
MFA was negotiated under GATT auspices even though its provisions
for quantitative import restrictions would otherwise be illegal
under GATT. It went into effect in 1974, superseding the Long-term
Agreement on International Trade in Cotton Textiles, which had
been in effect since 1962. As of September 1993,43 countries
were participating in the MFA: Argentina, Austria, Bangladesh,
Brazil, Canada, China, Colombia, Costa Rica, Czech Republic,
Dominican Republic, the European Community, Egypt, El Salvador,
Fiji, Finland, Guatemala, Honduras, Hong Kong, Hungary, India,
Indonesia, Jamaica, Japan, Korea, Lesotho, Macau, Malaysia,
Mexico, Norway, Pakistan, Panama, Peru, Philippines, Poland,
Romania, Singapore, Slovakia, Sri Lanka, Switzerland, Thailand,
Turkey, the United States, and Uruguay. See also Textiles
Surveillance Board and International Textiles and Clothing
Bureau (Sec. /V).
Acceptance of Test Data.
Recognition by signatories of the GATT Standards Code of test data and certification markings
from other signatories. The Code recognized that governments
may require prior consultations with other signatories to arrive
at mutually acceptable understanding of testing methods and
results. Negotiations in the Uruguay Round to
strengthen and expand the Code are considering ways to improve
arrangements for acceptance of foreign-generated test data.
Steel Agreement (MSA).
A proposed agreement that would phase out tariffs, eliminate
non-tariff barriers, and end direct state subsidies to the steel
sector. MSA negotiations collapsed in March 1992 and resumed
in mid-1993 among 37 steel-producing nations.
See GATT Round. The
1974-79 Tokyo Round was
referred to formally as the Multilateral Trade Negotiations
(MTN). As a result, the various GATT Codes negotiated
during the Tokyo Round are sometimes referred to as "MTN
Trade Organization (MTO).
A proposed organizational arrangement that would implement the
results of the Uruguay Round, including
agreements in areas such as services and intellectual property rights that would go beyond the scope of the existing
GATT .See discussion under Multilateral Trade Organization
in Section Ill.
Exchange Rates (also known as Differential Exchange Rates). A system of officially prescribed rates
of exchange for a country's currency that varies depending on
the type of transaction involved. For example, a government
may assign its currency a given value for capital transfers,
but provide for a less favorable rate of exchange for imports
of luxury items, thereby increasing the price of the latter
and discouraging their importation. As with other forms of exchange
controls, multiple exchange rates can function as
a disguised trade barrier, and their use is discouraged by the
Trade Estimate (NTE) Report.
A report on significant foreign trade barriers published in
the spring of each year by the Office of the US Trade Representative,
with contributions from other Executive Branch departments and
agencies and US embassies overseas. The NTE Report is required
by the Trade Act of 1974, as amended by the Trade Acts of
1984 and 1988 (Sec.IV), and inventories the most important barriers
affecting US exports of goods and services, US direct investment
in other countries, and foreign protection of intellectual
property rights. The NTE Report covers barriers deemed to
have a significant bearing on US interests, whether or not they
are consistent with international trading rules. Many countries
are excluded from the NTE Report, due either to the relatively
small size of their markets or to the lack of major complaints
from US industry and agriculture groups.
The principle that foreign goods, services, or investment are
to be treated "no less favorably" within a nation's
domestic markets than competing products or services produced
locally, once import duties have been paid and applicable customs
regulations are satisfied. National treatment is one of the
fundamental principles of the GATT.
Designation for one of the negotiating groups in the Uruguay
Round that focused on trade barriers affecting
non-agricultural primary products, including forestry products,
fishery products, and nonferrous metals and minerals.
A group of country delegates in a GATT Round charged
with planning and managing multilateral negotiations concerning
a particular issue or product sector. At the outset of the Uruguay
Round, two major groups were established --the
Group on Negotiations of Goods (GNG) and the Group on Negotiations
of Services (GNS) --with 14 issue-oriented subgroups. In Apri11991,
these activities were consolidated into seven negotiating groups;
work in the final phase of the Round has been organized within
four major issue-clusters or Tracks.
A proposed modification of rules governing application of countervailing
duties, whereby an importing country could impose
duties on the margin by which export subsidies exceed subsidies
provided to producers of competing goods in the importing country.
See Framework Initiative.
International Economic Order (NIEO). An
agenda for discussions between industrial and developing countries
focusing on restructuring of the world's economy to permit greater
participation by and benefits to LDCs (also known as the "North-South
Dialogue"). The term is derived from the Declaration for
the Establishment of a New International Economic Order, adopted
by the United Nations General Assembly in 1974, and refers to
a wide range of trade, financial, commodity, and debt-related
issues. While the term continues to have currency in academia,
it has fallen into disuse in policy-related discussions.
Industrialized Countries (NICs).
Now generally obsolete term; has been superseded by NIEs,
since inclusion of Taiwan and Hong Kong
made use of the word "countries" inappropriate.
Industrializing Economies (NIEs).
A subgroup of developing countries that
have experienced particularly rapid industrialization of their
economies, with industrial production and exports expanding
accordingly. Current usage tends to limit the term NIEs to Hong
Kong, South Korea, Singapore, and Taiwan, although texts dating
from the early 1980s often extended the related term NICs
to Mexico and Brazil, and sometimes India
and Argentina. The East Asian NIEs are sometimes referred to
as the Four Tigers or Four Dragons. See also Dynamic Asian
Independent States (NIS).
The successor states to the former Soviet Union, i.e., Armenia,
Azerbaijan, Belarus, Estonia, Georgia, Kazakhstan, Kyrgyzstan,
Latvia, Lithuania, Moldova, Russia, Tajikistan, Turkmenistan,
Ukraine, and Uzbekistan.
Nomenclature. See customs classification.
Non-application. In the context of Uruguay Round discussions of a proposed Multilateral
Trade Organization, refers
to a signatory's right to "non-apply" portions of
the MTO agreements to any other country at the time it becomes
a member. Preservation of such a right can have an important
effect on ongoing negotiations in various areas that would be
incorporated in an MTO --e.g., on market access for goods and
services, and on intellectual property protection --because
it prevents free-riders and
maintains incentives for countries to exchange reciprocal concessions
within each area.
Nondiscrimination. Equal application of tariffs, quotas, or
other trade restrictions to products from different trading
partners. The principle of nondiscrimination is enshrined in
Article 1 of the GATT (see most-favored-nation principle).
A document or notation on a shipper's invoice attesting that
the merchandise described is being sold at a price no lower
than that applying to sales of ~ similar products in the country
A country in which economic activity is regulated by central
planning, in contrast to a market economy that relies principally
upon market- based prices to allocate productive resources.
In such a country, tariffs have no meaningful impact on import
decisions. In GATT contexts, the term applies to members that
were not market economies at the time of their accession --i.e.,
Poland, Hungary, and Romania. These countries joined under special
provisions designed to prevent disruption of other members'
trade, together with arrangements to ensure steady expansion
of the nonmarket-economy country's imports from other GATT members.
Poland is renegotiating its accession protocol in light of its
abandonment of central planning, and Hungary has announced its
intention to follow suit. See also State Trading Nation.
parlance, a proposed agreement or negotiating text circulated
informally among delegations for discussion without committing
the originating delegation's country to the contents.
Measures other than tariffs that burden or restrict international
trade. NTBs may be financial (e.g., internal taxes and customs
fees) or non-financial (e.g. quantitative restrictions and excessive
documentation requirements). The term is sometimes used in reference
to nongovernmental actions or impediments to trade, such as
internal distribution systems that discourage imports, but in
GATT contexts the term refers to measures imposed by governments.
Negotiations involving reduction of NTBs are generally more
difficult than tariff negotiations since NTBs are almost always
closely linked to other national policies or programs.
A broader term than NTBs, including
not only import-restricting barriers but also measures that
distort trade by stimulating exports. See GATT Codes.
In GATT dispute settlement negotiations,
refers to provisions allowing the Contracting Parties to investigate
and rule upon complaints concerning measures that are not in
violation of GATT or are outside its scope, but which may affect
the balance of a member's rights and benefits under the General
Agreement. Because any country that considers itself harmed
by such measures would claim the right to alter its GATT legal
obligations in response, Article 23 provides a way of adjudicating
such situations in a multilateral forum. Nevertheless, GATT
supervision of nonviolation complaints has proven difficult
to implement since it implies altering GATT legal relationships
already consented to among contracting parties.
See Common Agricultural Policy.
An alternative term for fair value.
New International Economic Order (NIEO ).
In the parlance of the 1970s and 1980s, trade between the developed
market economies ("the North") and developing countries
A formal diplomatic communication delivered orally to an official
representative of another country. The written form is a demarche.
Notification. In the context of GATT, refers to the procedure
of informing the GATT Secretariat of a change in a country's
trade policies, such as application of a new or revised trade-restrictive
measure, and of subsequently informing other member countries
of the change by the Secretariat.
or Impairment. The
adverse effect on a GA TI member's trade interests caused by
changes in the trade regime of another member, or by another
member's failure to carry out its obligations under GATI .In
GATT parlance, "nullification or impairment" is the
basis for initiating formal action under the dispute settlement