TERMS RELATED TO TRADE POLICY AND NEGOTIATIONS
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.
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.
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.
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.
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.
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.
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).
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
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.
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.
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,
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
See Sanitary and Phytosanitary Measures.
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.
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
required for establishing any such arrangement in which GATT
Duties imposed on a provisional basis during the course of an
antidumping investigation, following a preliminary finding
of dumping and
Centrally Planned Economies.
See countries in transition.
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.
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.
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.
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
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.
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
Subsidy Equivalent (PSE).
The share of a producer's total revenue that is attributable
to direct or indirect government transfers.
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
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).
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.
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
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.
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.
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.
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.
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.
See Common Agricultural Policy.
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.
See trade bloc.
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.
See reciprocity. Remission. See duty remission.
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.
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).
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
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.
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.
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.
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.
(of trade negotiations).
See GATT Round
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.