I. TERMS RELATED TO TRADE POLICY AND NEGOTIATIONS
Obligations. In the context of GATT, the principal obligations of contracting parties are; (a) to use only approved instruments of protection, primarily tariffs; (b) to use those instruments in a nondiscriminatory way, extending any opening of a market to all GATT trading partners; and (c) to submit all protection to a long-term process of non-reversible reductions through negotiations with other GATT members. For specific substantive obligations, see disciplines.
Observer. An observer to the GATT is a country or international organization that has been authorized by the GATT Council (Sec. Ill) to attend but not participate in sessions of the Council and various GATT committees and negotiating groups. Most countries in transition have been accepted as observers to GATT, which allows officials from these countries to familiarize themselves with Western trade practices and consultation procedures. The International Monetary Fund and UNCTAD (Sec. Ill) are among the institutional observers to GATT.
Offer List. Concessions offered by a country in trade negotiations, or a list of selected commodities on which a country proposes to make concessions. An offer list may cover proposed exceptions if a formula approach is being used in a tariff negotiation, or it may offer to accept expanded coverage under a proposed GATT Code.
Offsets or Offset Requirements. Requirements imposed by governments on foreign exporters as a condition for approval of major sales agreements. Offsets can be intended either to reduce the adverse trade-balance impact of a major sale or to "leverage" specific industrial benefits for the importing country .In one type of offsets, an exporter may be required to purchase a specified amount of locally-produced goods or services from the importing country .In a second form, the exporter may be required to establish manufacturing facilities in the importing country or to secure a specified percentage of the components used in manufacturing the product from producers based in the importing country.
Orderly Marketing Agreement (OMA). A contractual agreement between two or more governments to restrain the export growth of specific products. OMAs are supposed to ensure that export surges do not disrupt, threaten, or impair sensitive sectors in the importing country or countries. OMAs usually entail establishment of an export licensing system and export or import quotas for the goods in question. The economic effect of an OMA is similar to that of a quota --with the important difference that real income is also transferred from consumers in the importing country to established producers in the exporting country. See also Voluntary Restraint Agreements.
Packaging, Labeling, and Marking Regulations. National requirements that importers must package their goods in certain kinds of containers or identify the contents in a particular way. Such measures are normally intended to meet domestic policy objectives, such as consumer protection, but may be regarded as a non-tariff barrier to the extent that they pose more problems for producers of imported goods than for domestic producers.
Panel of Experts. In the GATT dispute settlement process, an ad hoc group of impartial and knowledgeable trade experts --usually three to five, serving in their personal capacity and not as representatives of governments --commissioned by the GATT Council to hear opposing arguments and investigate the facts involved in a dispute, and to issue findings and make recommendations as appropriate. Although a GATT dispute panel may superficially resemble an international tribunal, its findings have no legal force; rather, its essential function is to set the stage for the disputing parties to achieve a negotiated resolution between themselves.
Parallel Imports. Goods, which are authorized by the owner of intellectual properly rights for sale in one country, but which are then subsequently shipped to another country without the owner's permission. Traders who engage in such activities are known as parallel traders. Parallel imports are likely to occur when a trader can purchase a particular good in one country and resell the good in another country at a price which is sufficiently higher to cover the costs of the operation; such activities take place at the expense of the rights owner and of authorized licensees. Many LDCs have laws that prevent intellectual property owners from enforcing restrictions on licensees' exports (see compulsory licensing and the exhaustion principle).
Paris Convention. Formally known as the Paris Convention for the Protection of Industrial Property. An international agreement on protection of industrial property such as patents, trademarks, and appellations of origin, concluded in 1883 and administered by the World Intellectual Property Organization (Sec. III). The Convention provides for national treatment (also known as "assimilation") in signatories' patent and trademark laws, and provides a means of determining priority between competing claims (see right of priority). LDC participants in the Uruguay Round negotiations on intellectual property rights (IPR) generally prefer the Paris Convention to the Berne Convention because the former permits exception from patent coverage for foods, drugs, and chemicals, and because it allows them autonomy in establishing national IPR systems in accordance with their development objectives and strategies.
Part Four of GATT. Articles 36, 37, and 38, added to the GATT in 1966 to address the development needs of less-developed contracting parties. These Articles are essentially exhortative, as they contain no binding obligations on GATT members.
Patent Cooperation Treaty. An international agreement which permits nationals and residents of a signatory country to seek patent protection in any or all of the signatories by means of a single patent application. See intellectual property rights.
Performance Requirements. Government-imposed rules or conditions requiring foreign investors to serve particular national objectives. Trade-related performance requirements --such as commitments to export a specified amount of the output of a new plant, or to incorporate a minimum share of local content in its production --can have the same effect as export-stimulating or import-restricting non-tariff measures, but without being subject to GA TT rules. Nearly all major trading partners of the United States, impose performance requirements on at least some local affiliates of foreign corporations. See Trade Related Investment Measures.
Petition. A request to investigate alleged dumping by foreign companies or export subsidies by a foreign government. Petitions are usually filed with a designated governmental agency of the importing country by private firms or industry associations, although sometimes governments independently initiate unfair trade investigations.
Phytosanitary Measures. See Sanitary and Phytosanitary Measures.
Pipeline Protection. In international negotiations on protection of intellectual property rights, refers to the protection of patents for products that are still in the testing phase. Because pharmaceuticals require up to 10 years to test, many drugs that are 'tin the pipeline" would not otherwise qualify for patent protection because they would no longer be considered novel at the time laws pursuant to a Uruguay Round IPR agreement come into force. Also known as transitional protection.
Plurilateral. In GATT parlance, refers to a consultation or negotiating session involving more than two countries (bilateral) but less than the full membership of GATT (multilateral).
Preemption. The prerogative of customs authorities to seize and sell merchandise that an importer has deliberately undervalued to avoid payment of duties.
Preferences. Special trade advantages granted by an importing country to certain trading partners, in contrast to nondiscriminatory treatment conforming to the most-favored- nation principle. Most preferences are granted to LDCs by industrial countries to promote export growth and development (see GSP). In addition to preferential tariff rates, preferential application of other measures such as licensing practices, quotas, or taxes may also be granted. The term is not normally applied to special trade treatment granted by a country to its partners in a free trade area, customs union, or common market.
Preferential Arrangement. A group of countries that grant each other special trade advantages, such as preferential tariff rates, in order to promote member countries' export growth. Special licensing practices, quotas, or preferential application of taxes and other measures are sometimes granted. Many such arrangements are non-reciprocal, in which beneficiary members --usually LDCs --are accorded preferential access to markets of preference-granting countries without making similar market access commitments themselves. Because preferential arrangements violate the most favored-nation principle, a waiver is required for establishing any such arrangement in which GATT members participate.
Preliminary Duties. Duties imposed on a provisional basis during the course of an antidumping investigation, following a preliminary finding of dumping and injury to domestic industries.
Previously Centrally Planned Economies. See countries in transition.
Price Bands. A form of variable levy linked to a system of domestic price controls. Countries such as Chile and Colombia allege that their price-band systems are a more transparent alternative to high import duties and quotas for stabilizing prices and protecting domestic producers.
Price Undertaking. An agreement by an exporting firm with the government of an " importing country to raise the price of its products to a level sufficient to avoid injury to producers of similar goods in the importing country, in order to forestall imposition of antidumping duties. See also suspension agreement.
Principal Supplier. The country that accounts for the largest portion of total GATT trade in a product imported into a given country. In multilateral GATT negotiations, a country offering to reduce import duties or other barriers on a particular item will generally expect the principal supplier of that item to reciprocate by offering reductions of barriers on some other item. Any tariff concessions exchanged through such negotiations are extended automatically to all other countries, which enjoy MFN status. The principal supplier --along with any country holding initial negotiating rights --has first claim to negotiate compensation in the event that an importing country raises a tariff above its bound rate (see binding and modification). See also substantial supplier.
Prior Deposits. A requirement as a condition for importing that an importer deposit a specified sum of money --in domestic or foreign currency, and usually a percentage of the value of the imported goods --in a commercial bank or central bank for a specified length of time. Prior deposits are usually administered in conjunction with import licensing, with deposits required at the time a license is granted. Since such funds are often held without interest from the time an order is placed until the import transaction has been completed, prior deposits are usually regarded as non-tariff barriers to trade.
Procedural Protectionism. Abusive administration of import control procedures allowed under GATT (especially those related to unfair trade practices) so that domestic industries are protected in ways never intended by signatories to the GATT or the relevant GATT Codes.
Process and Production Methods (PPMs). In the context of environmental trade measures, refers to factors other than a commodity's physical characteristics --such as processes and methods used in its production --that have an impact on pollution levels or loss of endangered species, and that are regulated by national product standards or other restrictions in order to meet environmental objectives.
Producer Subsidy Equivalent (PSE). The share of a producer's total revenue that is attributable to direct or indirect government transfers.
Prohibitive Duty. A tariff rate that is sufficiently high that it effectively precludes most or all imports. Prohibitive duties are usually intended to protect infant or ailing industries from foreign competition or to retaliate against another country's trade practices.
Protection. Government measures --including tariffs and non-tariff barriers --that raise the cost of imported goods or otherwise restrict their entry, and thus strengthen the competitive position of domestic producers vis-a-vis foreign producers. See protectionism (Sec. II).
Protective Tariff. See tariff
Protocol of Accession. A legal document that recognizes the rights and obligations agreed to as a consequence of a country's signing an international agreement or joining an organization, such as the GATT.
Protocol of Provisional Application. The legal device that enabled the original Contracting Parties of the GATT to accept general GATT obligations and benefits, despite the fact that some of their existing domestic legislation discriminated against imports in a manner that was inconsistent with certain GATT provisions (see grandfather clause). Although the protocol was intended to be temporary, it has remained in effect since 1947 (see International Trade Organization, Sec. III). Countries that acceded to the GATT after 1947 do not have recourse to the protocol.
Protocol Relating to Trade Negotiations Among Developing Countries. An agreement negotiated under GATT auspices in 1973, providing for reciprocal tariff and other trade concessions among developing countries.
Punta del Este Declaration. A declaration adopted by trade ministers of GATT member countries in September 1986 at Punta del Este, Uruguay, launching the Uruguay Round of multilateral trade negotiations.
Quadrilateral ("Quad"). In GATT parlance, a meeting involving senior trade officials or ministers from the United States, Japan, the European Community, and Canada, convened to discuss trade policy matters and review the status of multilateral negotiations. In trade policy, a Quad meeting at the ministerial level is the equivalent of a 0-7 finance ministers' meeting, since the EC speaks for Germany, France, Italy, and the United Kingdom on trade matters.
Quantitative Restriction (QR). A term that applies to a quota or other administratively determined ceiling on imports or exports, usually expressed in volume terms, and sometimes specifying the amount that may be imported from each supplying country. QRs are distinguished from trade restrictions that operate through the price mechanism, "T such as a tariff or surcharge. GATT Article 11 generally prohibits QRs, although several exceptions are made.
Quota. See import quota.
Quota Auctioning. See import quota auctioning.
Rebalancing. A term used in GATT agriculture negotiations, referring to the ability to shift import protection from one product sector to another following an international agreement to cut overall subsidy levels.
Reciprocity. The principle traditionally underlying GATT negotiations, according to which trading partners exchange comparable concessions by negotiating mutually advantageous reductions in import barriers. GATT rules specify that LDC Contracting Parties are not expected to offer fully reciprocal concessions in negotiations with industrial countries. The term "relative reciprocity" is sometimes used to characterize the practice by industrial countries to seek less than full reciprocity from LDCs in trade negotiations. See also sectoral reciprocity and selective reciprocity.
Rectifications. Changes made in a country's schedule of GATT concessions, usually .involving correction of errors but occasionally involving duty changes or withdrawal of items from a schedule as a result of the negotiated settlement of a dispute with another country .See also modifications.
Reference Price. See Common Agricultural Policy.
Regional Cooperation Organization. A group of countries that have established a mechanism for trade-related discussions and negotiations with outside countries and regional groupings, and for ongoing consultation and cooperation on economic and trade issues of mutual concern. Such organizations sometimes serve as a forum for negotiating trade liberalization or policy harmonization among members.
Regional Trade Arrangement. See trade bloc.
Related Specificity. A rule of customs law that when two or more tariff provisions might be applied to an imported item, the one that most specifically describes the article shall be applied.
Relative Reciprocity. See reciprocity. Remission. See duty remission.
Request/Offer Approach. A tariff negotiating procedure whereby specific requests (e.g., cuts of a specified amount in the tariff on particular products) are submitted to a trading partner identifying the concessions sought and those proposed to be given in return. Counter-offers are exchanged and negotiated by the countries involved and, once the deal is struck, results are extended to all other GATT members in accordance with the MFN principle. In contrast with the formula approach, the request/offer approach tends to concentrate negotiating efforts in areas of primary commercial interest to participating countries. A potential drawback is that it may forego opportunities to achieve broad, across-the-board trade liberalization.
Residual Restrictions. Quantitative restrictions maintained since before 1947 by governments that were original signatories of the GATT, and hence were permitted under the grandfather clause. Most residual restrictions were maintained by industrial countries against imports of agricultural products.
Restitutions. Certain payments made under the European Community's Common Agricultural Policy (CAP) to exporters of processed agricultural products made from raw materials for which the processor paid higher than world prices. In principle, restitution payments are not supposed to subsidize exports, but only to lower their selling prices to the levels that would have prevailed in the absence of CAP price distortions.
Retaliation. Punitive action taken to limit imports from a trading partner that has violated or reneged on a trade agreement. The GATT Council may authorize retaliation if the dispute settlement process has been exhausted without success. In principle, the value of trade subjected to retaliation should approximately equal the value of trade affected by the offending action, but there are no accepted guidelines in GATT practice for determining the extent of trade damage suffered by an injured contracting party. Although the threat of retaliation --especially by a major trading country --can have considerable persuasive force, actual imposition offers little economic remedy to the injured party; in some cases it can provoke counter-retaliation (see trade war). US authority for taking retaliatory trade actions is provided by Section 301 of the Trade Act .of 1974, as amended (see Section IV).
Revenue Tariff. See tariff.
Reverse Consensus. A proposed modification of the GATT dispute settlement procedures establishing the principle that the report and recommendations of a GATT panel would be adopted by the GATT Council unless consensus existed to reject them. Reverse consensus would thus remove a major weakness inherent in current consensus-based procedures, which allow a disputing party to block adoption of a panel report with which it disagrees.
Reverse Countertrade. See Countertrade.
Reverse Preferences. Tariff advantages once offered by LDCs to imports from certain industrial countries that have granted them preferences. Reverse preferences have largely been superseded by the GSP system.
Review. See administrative review and judicial review.
Right of Priority. The principle according to which an owner of industrial property applying for protection in any country adhering to the Paris Convention is permitted -- within a prescribed period of time (twelve months for patents, six months for industrial designs and trademarks) --to apply for protection in any other signatory country and have that application treated as though it were filed at the time of the first application.
Road Taxes. Excise taxes imposed on the sale or operation of motor vehicles, which have the effect of discriminating in favor of one type of vehicle over another.
Rollback. A commitment to phase out all trade restrictions or policies that distort trade or bring them into conformity with GATT rules. Under the rollback commitment made at the outset of the Uruguay Round, participants are not to seek compensatory concessions for rollback measures.
Round (of trade negotiations). See GATT Round
Rules of Origin. The laws, regulations, and administrative practices that are applied to ascribe a country of origin to goods in international trade. Rules of origin include those applicable for administering country-based quotas and for establishing eligibility for preferential tariff programs, as well as for statistical reporting Safeguards. Import restrictions to prevent commercial injury to a domestic industry from a sudden surge in imports, providing temporary protection while workers and firms in the importing country adjust to the increased foreign competition. Safeguards can take the form of tariffs or quotas. Unlike antidumping duties or countervailing duties, safeguard measures are not based on a claim of unfair trade actions on the pan of exporters; their economic effects are similar, however. Article 19 of the GATT sets important limits on the use of safeguards --especially that they must be temporary, degressive, and applied equally to imports from all sources --and requires the country imposing safeguard measures to extend compensatory trade benefits to exporting countries adversely affected by the action. Critics charge that excessive strictures of Article 19 have resulted in few countries applying GATT -sanctioned safeguards, resorting instead to more distortive grey area measures. Because safeguards usually involve imports from rapidly-growing, export-oriented developing countries, however, efforts to reform or modify the provisions of GATT Article 19 have been among the most divisive areas of negotiation between industrial countries and LDCs. See selectivity.
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