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A REPORT ON the general agreement on tariffs & trade, Uruguay round with focus on environment & agriculture

G. H. PATEL P.G. INSTITUTE OF BUSINESS MANAGEMENT SARDAR PATEL UNIVERSITY VALLABH VIDYANAGAR

Subject: International environment organization

Submitted by: Purohit Hardik P. Nadiyapara Nayan Dave samir 11F16 11F23 11m34

MBA 2nd year (Div: A) 2011-13 Submitted to: Dr. Y. C. JOSHI Associate professor G.H. Patel PG Institute of Business Management Sardar Patel University
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Preface

The General Agreement on Tariffs and Trade came into force on 1 January 1948. This report contains the complete text of the General Agreement together with special reference to Uruguay Round. An Analytical Index, containing notes on the drafting, interpretation and application of the articles of the Agreement has been prepared. The alleged conflict between the General Agreement on Tariffs and Trade (GATT) trade rules and the protection of the environment by GATT members is examined. The principal objective of the GATT rules on non-tariff trade restrictions is to eliminate government interventions that promote the commercial interests of domestic producers and consumers in a way that discriminates against foreign producers and consumers in either domestic or international markets. This objective fundamentally does not conflict with protecting GATT members' domestic environment or the global environment. The GATT should explicitly recognize the objectives of environmental protection and natural resource conservation, either by an amendment to the GATT articles or by resolution of the GATT Council. GATT members, in the interest of protecting their national and the global environment, should be free to impose restrictions on imports or exports so long as the interventions conform to certain conditions.

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1. Introduction Toward the end of World War II representatives of the US and its allied forces endeavored to work out the arrangements for a new world order in the past war era. As a result of these negotiations, the US & its allies planned to establish three important international institutions to liberalize trade and payment. They were IMF, IBRD and ITO. The General Agreement on Tariffs and Trade (GATT) was originally created by the Bretton Woods Conference as part of a larger plan for economic recovery after World War II. The GATTs main purpose was to reduce barriers to international trade. This was achieved through the reduction of tariff barriers, quantitative restrictions and subsidies on trade through a series of different agreements. The GATT was an agreement, not an organization. Originally, the GATT was supposed to become a full international organization like the World Bank or IMF called the International Trade Organization. However, the agreement was not ratified, so the GATT remained simply an agreement. The functions of the GATT have been replaced by the World Trade Organization. According to the Preamble of GATT, the objectives of the contracting parties include, raising standards of living; ensuring full employment; a large and steadily growing volume of real income and effective demand; developing the full use of the resources of the world; Expanding the production and exchange of goods.

The Preamble also states the contracting parties belief that reciprocal and mutually advantageous arrangements directed to the substantial reduction in tariffs and other barriers to trade and to the elimination of discriminatory treatment in international commerce would contribute toward these goals. Importantly, free trade is not the stated objective of GATT. The role of GATT in integrating developing countries into an open multilateral trading system is also of major consequence. The increasing participation of developing countries in the GATT trading system and the pragmatic support provided to them through the flexible application of certain rules helped developing countries to both expand and diversify their trade. It could now be said that a great number of these countries have already become full partners in the system as can be witnessed by their active participation in the Uruguay Round. The task of helping to integrate further the least-developed countries is one of the challenges that lie ahead in the WTO. Similarly, the full integration of countries with economies in transition into the trading system must be achieved in order to strengthen economic interdependence as a basis for greater prosperity and world peace. These negotiations were critical to ensure the future health of the world economy and the trading system. The globalization of the world economy over the past decade has created a greater reliance than ever on an open multilateral trading system. Free trade has become the backbone of economic prosperity and development throughout the world. Partly as a result of this, there has been a shift in trade policy mechanisms from border measures to internal policy measures, substantially affecting the management of trade relations. The Uruguay
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Round sought to establish a new balance in rights and obligations among trading nations as a result of this phenomenon. We are gradually moving towards a global marketplace, and for that, we need a global system of rules for trade relations among partners in that market place. The Indian economy has experienced a major transformation during the decade of the 1990s. Apart from the impact of various unilateral economic reforms undertaken since 1991, the economy has had to reorient itself to the changing multilateral trade discipline within the newly written GATT/WTO framework. The unilateral trade policy measures have encompassed exchange-rate policy, foreign investment, external borrowing, import licensing, custom tariffs and export subsidies. The multilateral aspect of Indias trade policy refers to Indias WTO commitments with regard to trade in goods and services, trade related investment measures, and intellectual property rights. The multilateral trade liberalization under the auspices of the Uruguay Round Agreement and the forthcoming WTO negotiations is aimed at reducing tariff and non-tariff barriers on international trade. The purpose of our study is to provide a computational analysis of the impact of such changes in trade barriers on the economic welfare, trade, and the intersectional allocation of resources in India and its major trading partners. 1.1 Objectives of the study

1. To study about the effect of Uruguay Round of GATT in Agriculture and Environment. 2. To study about the objectives of GATT. 3. To study about the different provisions of GATT. 4. To study about the achievements and problems of GATT. 5. To study about the impacts or implications of GATT on India. 1.2 Review of Literature 1. GATT Uruguay Round Trade Agreement and the Environment: A need for Vigilance David Blackwell (World Federalist of Canada Issues Action Briefing Paper No. 23, May 1995) David Blackwell covered the topics like introduction about GATT & WTO, provisions of the Uruguay Round Agreement, concerns about environment in the Uruguay Round Agreement and finally recommendations about the positive action on the environment. 2. The GATT Uruguay Round and the World Trade Organisations: Opportunities and Impacts for US Agriculture. (By Larrry D. Sanders, Oklahoma state University of California Berkeley Mechel Paggi Food & Agriculture Organisation, UN Barry Goodwin, North Carolina State University)

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In the article they have given the information about what is GATT, the Uruguay Round Agreement issues in the implementation etc. in detail. According to their research, the major accomplishment was in enlarging the scope of the negotiations to include many areas of trade not covered in the previous eight rounds. These include barriers to trade in agriculture, textiles and services, protection of intellectual property rights and international investment. 3. Agriculture and GATT: How the compromise was reached. By Joanna ORiordan It talks about the information of GATT and the Uruguay Round Agreement in detail. It also the aim & background implications of GATT and the Uruguay Round Agreement from the US perspective and the EU perspective. It gives information about the comparison between US & EU. 1.3 Research methodology Sources of Data: In order to fulfill our objectives, we are using secondary sources for the purpose of information and data collection. Type of Research: Exploratory Research Design

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2. General Agreement on Tariffs and Trade (GATT) The important role played in the world economy by GATT (and now its successor, the WTO) is widely accepted. Since its creation in 1947, GATT has grown in membership from an initial set of 23 countries to a roster that now exceeds 125 countries. The expanding GATT membership reflects the success that this organization has had in facilitating tariff reductions. Through the 8 rounds of trade-policy negotiations that have been sponsored by GATT, the average ad valorem tariff on industrial goods has fallen from over 40% to below 4%. In light of the significant impact that GATT has had on the world economy, it is therefore important to assess the progress that has been made toward providing a theoretical interpretation of GATT and its main features. While the past success of GATT justifies in its own right a theoretical interpretation of its main features, this task is perhaps even more important when the future of this multilateral institution is considered. A critical question in the coming years is whether the same set of principles on which post-war multilateral liberalization has been based can or should be applied under the WTO to a host of new trade-policy issues. These issues include the spread of preferential trading agreements, the treatment of labor and environmental standards, the subsidization of agricultural exports, the harmonization of competition policies, and the treatment of services, foreign direct investment and intellectual property. An understanding of why GATTs principles have worked well in the more traditional arena of multilateral tariff liberalization for industrial goods can lay the foundation for answers to this critical question. There have been eight conferences, referred to as rounds or cycles of GATT, each of these rounds resulted in new trade agreements. The most recent round is referred to as the Uruguay Round because it was launched at a conference in Punte del Este, Uruguay in 1986. These negotiations concluded with the signing by more than one hundred countries of the Uruguay Round "Final Act" in Marrakesh, Morocco in April 1994. The Uruguay Round Agreement has been described as the largest, most comprehensive trade pact in history. The United States had a number of objectives in entering into the Uruguay Round of trade negotiations. These included broadening procedures relating to trade in agricultural products, extending GATT rules to trade in services never before covered by GATT, increasing protection for patents, copyrights, and trademarks, and an improved way for settling disputes among GATT participants. Most of the objectives that the United States brought to the Uruguay Round were achieved. GATT was expanded to include services and new areas relating to the protection of patents and foreign investment. The Uruguay Round also cut tariffs worldwide by about one third; coverage for agriculture, textiles, and clothing was increased. And a new World Trade Organization was created to administer the agreement, oversee dispute settlements, and review countries' trade policies and practices. Nations signing the agreement must have it approved by their governments before they can be subject to its terms. In the U.S. Congress consideration for the agreement is taking place under the "fast track" procedure, meaning that the House and the Senate must vote up or down on the legislation dealing with the agreement, with no opportunity to introduce or consider amendments.

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The General Agreement on Tariffs and Trade (GATT) was originally created by the Bretton Woods Conference as part of a larger plan for economic recovery after World War II. The GATTs main purpose was to reduce barriers to international trade. This was achieved through the reduction of tariff barriers, quantitative restrictions and subsidies on trade through a series of different agreements. The GATT was an agreement, not an organization. Originally, the GATT was supposed to become a full international organization like the World Bank or IMF called the International Trade Organization. However, the agreement was not ratified, so the GATT remained simply an agreement. The functions of the GATT have been replaced by the World Trade Organization. According to the Preamble of GATT, the objectives of the contracting parties include, raising standards of living; ensuring full employment; a large and steadily growing volume of real income and effective demand; developing the full use of the resources of the world; Expanding the production and exchange of goods.

The Preamble also states the contracting parties belief that reciprocal and mutually advantageous arrangements directed to the substantial reduction in tariffs and other barriers to trade and to the elimination of discriminatory treatment in international commerce would contribute toward these goals. Importantly, free trade is not the stated objective of GATT. The role of GATT in integrating developing countries into an open multilateral trading system is also of major consequence. The increasing participation of developing countries in the GATT trading system and the pragmatic support provided to them through the flexible application of certain rules helped developing countries to both expand and diversify their trade. It could now be said that a great number of these countries have already become full partners in the system as can be witnessed by their active participation in the Uruguay Round. The task of helping to integrate further the least-developed countries is one of the challenges that lies ahead in the WTO. Similarly, the full integration of countries with economies in transition into the trading system must be achieved in order to strengthen economic interdependence as a basis for greater prosperity and world peace. These negotiations were critical to ensure the future health of the world economy and the trading system. The globalization of the world economy over the past decade has created a greater reliance than ever on an open multilateral trading system. Free trade has become the backbone of economic prosperity and development throughout the world. Partly as a result of this, there has been a shift in trade policy mechanisms from border measures to internal policy measures, substantially affecting the management of trade relations. The Uruguay Round sought to establish a new balance in rights and obligations among trading nations as a result of this phenomenon. We are gradually moving towards a global marketplace, and for that, we need a global system of rules for trade relations among partners in that market place. The challenges that we face are therefore enormous. The only way back from this globalization in the world economy would be through depression and eventual chaos. We therefore have no choice but to move forward. In doing so, however, we must be sure to preserve to the highest extent possible the spirit and tradition of the GATT, which to a large extent was the key to its success.

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GATTs Round

Name

Start

Duration Countries Subjects covered

Achievements Signing of GATT, 45,000 tariff concessions affecting $10 billion of trade Countries exchanged 5,000 tariff concessions some

Geneva

April 1946

7 months 23

Tariffs

Currency April 1949

5 months 13

Tariffs

Turkey

September 1950 8 months 38

Tariffs

Countries exchanged some 8,700 tariff concessions, cutting the 1948 tariff levels by 25%

Geneva II January 1956

5 months 26

Tariffs, admission of $2.5 billion in tariff reductions Japan Tariff concessions worth $4.9 billion of world trade Tariff concessions worth $40 billion of world trade

Dillon

September 1960 11 months 26

Tariffs

Kennedy May 1964

37 months 62

Tariffs, Antidumping

Tokyo

September 1973 74 months 102

Tariffs, non-tariff Tariff reductions worth more measures, than $300 billion dollars "framework" achieved agreements
The round led to the creation of WTO, and extended the range of trade negotiations, leading to major reductions in tariffs (about 40%) and agricultural subsidies, an agreement to allow full access for textiles and clothing from developing countries, and an extension of intellectual property rights.

Uruguay September 1986 87 months 123

Tariffs, non-tariff measures, rules, services, intellectual property, dispute settlement, textiles, agriculture, creation of WTO, etc

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GATT and WTO: In 1993, the GATT was updated (GATT 1994) to include new obligations upon its signatories. One of the most significant changes was the creation of the World Trade Organization (WTO). The 75 existing GATT members and the European Communities became the founding members of the WTO on 1 January 1995. The other 52 GATT members rejoined the WTO in the following two years (the last being Congo in 1997). Since the founding of the WTO, 21 new non-GATT members have joined and 29 are currently negotiating membership. There are a total of 157 member countries in the WTO, with Russia and Vanuatu being new members as of 2012. Of the original GATT members, Syria and the SFR Yugoslavia has not rejoined the WTO. Since FR Yugoslavia, (renamed to Serbia and Montenegro and with membership negotiations later split in two), is not recognized as a direct SFRY successor state; therefore, its application is considered a new (non-GATT) one. The General Council of WTO, on 4 May 2010, agreed to establish a working party to examine the request of Syria for WTO membership. The contracting parties who founded the WTO ended official agreement of the "GATT 1947" terms on 31 December 1995. Serbia and Montenegro are in the decision stage of the negotiations and are expected to become the newest members of the WTO in 2012 or in near future. Whilst GATT was a set of rules agreed upon by nations, the WTO is an institutional body. The WTO expanded its scope from traded goods to include trade within the service sector and intellectual. Although it was designed to serve multilateral agreements, during several rounds of GATT negotiations (particularly the Tokyo Round) plurilateral agreements created selective trading and caused fragmentation among members. WTO arrangements are generally a multilateral agreement settlement mechanism of GATT. OBJECTIVES OF THE GATT In general terms, the goals and objectives of a treaty have always been considered of special relevance given that they express the common wishes and aspirations of those who reach a formal agreement at an international level. The aims and objectives of general agreement have played a vital role as the only reference for limiting the reach and jurisdiction of such an Organization. These objectives and goals not only limit its contents but also decide on the directives to follow during its development. The central objective of the general agreement is therefore progressive trade liberalization. The objectives of the general agreement are set forth in the preamble, where the contracting parties recognize that ... their relations in the commercial and economic matters should be directed towards raising standards of living, ensuring full employment and a large and steadily growing volume of real income and effective demand, the full utilization of global resources and increased production and trade of products and to the progressive development of the economies of all contracting parties. This sentence of the preamble of the GATT treaty, is sufficient in itself to demonstrate how ambitious the mission that the general agreement has set. Let us examine in detail some of these objectives.

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3. The Uruguay Round The Uruguay Round was the 8th round of multilateral trade negotiations (MTN) conducted within the framework of the General Agreement on Tariffs and Trade (GATT), spanning from 1986 to 1994 and embracing 123 countries as "contracting parties". The Round transformed the GATT into the World Trade Organization. The Round came into effect in 1995 and has been implemented over the period to 2000 (2004 in the case of developing country contracting parties) under the administrative direction of the newly created World Trade Organization (WTO). The Uruguay Round Agreement on Agriculture, administered by the WTO, brings agricultural trade more fully under the GATT. It provides for converting quantitative restrictions to tariffs and for a phased reduction of tariffs. The agreement also imposes rules and disciplines on agricultural export subsidies, domestic subsidies, and sanitary and phytosanitary (SPS) measures. The Uruguay Round Agreement holds out the prospect of enhanced of goods and services worldwide and perhaps greater access to investment capital and overseas markets by poorer countries. Despite the potential this olds for raised living standards, many deeply felt concerns have been expressed about the Agreement. It took seven and a half years, almost twice the original schedule. By the end, 123 countries were taking part. It covered almost all trade, from toothbrushes to pleasure boats, from banking to telecommunications, from the genes of wild rice to AIDS treatments. It was quite simply the largest trade negotiation ever, and most probably the largest negotiation of any kind in history. At times it seemed doomed to fail. But in the end, the Uruguay Round brought about the biggest reform of the worlds trading system since GATT was created at the end of the Second World War. And yet, despite its troubled progress, the Uruguay Round did see some early results. Within only two years, participants had agreed on a package of cuts in import duties on tropical products which are mainly exported by developing countries. They had also revised the rules for settling disputes, with some measures implemented on the spot. And they called for regular reports on GATT members trade policies, a move considered important for making trade regimes transparent around the world. The seeds of the Uruguay Round were sown in November 1982 at a ministerial meeting of GATT members in Geneva. Although the ministers intended to launch a major new negotiation, the conference stalled on agriculture and was widely regarded as a failure. In fact, the work programme that the ministers agreed formed the basis for what was to become the Uruguay Round negotiating agenda. Nevertheless, it took four more years of exploring, clarifying issues and painstaking consensusbuilding, before ministers agreed to launch the new round. They did so in September 1986, in Punta del Este, Uruguay. They eventually accepted a negotiating agenda that covered virtually every outstanding trade policy issue. The talks were going to extend the trading system into several new areas, notably trade in services and intellectual property, and to reform trade in the sensitive sectors of agriculture and textiles. All the original GATT articles were up for review. It was the biggest negotiating mandate on trade ever agreed, and the ministers gave themselves four years to complete it.

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Two years later, in December 1988, ministers met again in Montreal, Canada, for what was supposed to be an assessment of progress at the rounds half-way point. The purpose was to clarify the agenda for the remaining two years, but the talks ended in a deadlock that was not resolved until officials met more quietly in Geneva the following April. Despite the difficulty, during the Montreal meeting, ministers did agree a package of early results. These included some concessions on market access for tropical products aimed at assisting developing countries as well as a streamlined dispute settlement system, and the Trade Policy Review Mechanism which provided for the first comprehensive, systematic and regular reviews of national trade policies and practices of GATT members. The round was supposed to end when ministers met once more in Brussels, in December 1990. But they disagreed on how to reform agricultural trade and decided to extend the talks. The Uruguay Round entered its bleakest period. Despite the poor political outlook, a considerable amount of technical work continued, leading to the first draft of a final legal agreement. This draft Final Act was compiled by the then GATT director-general, Arthur Dunkel, who chaired the negotiations at officials level. It was put on the table in Geneva in December 1991. The text fulfilled every part of the Punta del Este mandate, with one exception it did not contain the participating countries lists of commitments for cutting import duties and opening their services markets. The draft became the basis for the final agreement. Over the following two years, the negotiations lurched between impending failure, to predictions of imminent success. Several deadlines came and went. New points of major conflict emerged to join agriculture: services, market access, anti-dumping rules, and the proposed creation of a new institution. Differences between the United States and European Union became central to hopes for a final, successful conclusion. In November 1992, the US and EU settled most of their differences on agriculture in a deal known informally as the Blair House accord. By July 1993 the Quad (US, EU, Japan and Canada) announced significant progress in negotiations on tariffs and related subjects (market access). It took until 15 December 1993 for every issue to be finally resolved and for negotiations on market access for goods and services to be concluded (although some final touches was completed in talks on market access a few weeks later). On 15 April 1994, the deal was signed by ministers from most of the 123 participating governments at a meeting in Marrakesh, Morocco. The delay had some merits. It allowed some negotiations to progress further than would have been possible in 1990: for example some aspects of services and intellectual property, and the creation of the WTO itself. But the task had been immense, and negotiation-fatigue was felt in trade bureaucracies around the world. The difficulty of reaching agreement on a complete package containing almost the entire range of current trade issues led some to conclude that a negotiation on this scale would never again be possible. Yet, the Uruguay Round agreements contain timetables for new negotiations on a number of topics. And by 1996, some countries were openly calling for a new round early in the next century. The response was mixed; but the Marrakesh agreement did already include commitments to reopen negotiations on agriculture and
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services at the turn of the century. These began in early 2000 and were incorporated into the Doha Development Agenda in late 2001. Impact on GATT The WTO replaced GATT as an international organization, but the General Agreement still exists as the WTOs umbrella treaty for trade in goods, updated as a result of the Uruguay Round negotiations. Trade lawyers distinguish between GATT 1994, the updated parts of GATT, and GATT 1947, the original agreement which is still the heart of GATT 1994. Confusing? For most of us, its enough to refer simply to GATT. Many of the Uruguay Round agreements set timetables for future work. Part of this built -in agenda started almost immediately. In some areas, it included new or further negotiations. In other areas, it included assessments or reviews of the situation at specified times. Some negotiations were quickly completed, notably in basic telecommunications, financial services. (Member governments also swiftly agreed a deal for freer trade in information technology products, an issue outside the built-in agenda.) The agenda originally built into the Uruguay Round agreements has seen additions and modifications. A number of items are now part of the Doha Agenda, some of them updated. There were well over 30 items in the original built-in agenda. This is a selection of highlights: 1996

Maritime services: market access negotiations to end (30 June 1996, suspended to 2000, now part of Doha Development Agenda) Services and environment: deadline for working party report (ministerial conference, December 1996) Government procurement of services: negotiations start

1997

Basic telecoms: negotiations end (15 February) Financial services: negotiations end (30 December) Intellectual property, creating a multilateral system of notification and registration of geographical indications for wines: negotiations start, now part of Doha Development Agenda

1998

Textiles and clothing: new phase begins 1 January Services (emergency safeguards): results of negotiations on emergency safeguards to take effect (by 1 January 1998, deadline now March 2004)

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Rules of origin: Work programme on harmonization of rules of origin to be completed (20 July 1998) Government procurement: further negotiations start, for improving rules and procedures (by end of 1998) Dispute settlement: full review of rules and procedures (to start by end of 1998)

1999

Intellectual property: certain exceptions to patentability and protection of plant varieties: review starts

2000

Agriculture: negotiations start, now part of Doha Development Agenda Services: new round of negotiations start, now part of Doha Development Agenda Tariff bindings: review of definition of principle supplier having negotiating rights under GATT Art 28 on modifying bindings Intellectual property: first of two-yearly reviews of the implementation of the agreement

2002

Textiles and clothing: new phase begins 1 January

2005

Textiles and clothing: full integration into GATT and agreement expires 1 January

Implementation Issues Although the Uruguay Round will result in some far-reaching improvements in the world's trading system, it left some issues and concerns unresolved. They include the following:

Effective enforcement. The relationship between the provisions of the Uruguay Round and other agreements made before the Uruguay Round was completed, such as NAFTA; Whether safeguard provisions will result in serious inequities in market access and industry protection; Whether safeguard provisions can be applied effectively when perishable commodities are dumped;

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Whether the U.S. government will aggressively pursue trade dispute settlement when phyto-sanitary restrictions or trade issues conflict with other political or non-economic objectives; How the United States can protect itself if abuses occur under the developing nation exemptions that favor competitors over U.S. producers; Whether U. S. rules on country of origin marking can be made consistent with GATT rules; Whether agricultural intellectual property rights will be effectively protected; and What impact the agreement will have on the U.S. government budget and the U.S. trade policy debate.

Enforcement. Under section 301 of the U.S. Trade Act of 1974, as amended, the U.S. Trade Representative (USTR) may take action to enforce U.S. trade agreement rights or eliminate trade practices unfairly burdening U.S. commerce. The Uruguay Round sustains this use, subject to due restraint, to enforce a WTO decision that a U.S. trading partner is violating its commitments. There are no restriction on applying Section 301 procedures against countries that are not part of the WTO or in areas where there are no agreed WTO rules. A question arises, however, as to whether the United States can use the section 301 remedy to enforce existing bilateral agreements such as the canned fruit agreement or the wine accord with the EU.

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4. GATT and its impact on Agriculture: The WTOs Agriculture Agreement was negotiated in the 198694 Uruguay Round and is a significant first step towards fairer competition and a less distorted sector. WTO member governments agreed to improve market access and reduce trade-distorting subsidies in agriculture. In general, these commitments were phased in over a six years from 1995 The Agriculture Agreement: new rules and commitments The objective of the Agriculture Agreement is to reform trade in the sector and to make policies more market-oriented. This would improve predictability and security for importing and exporting countries alike. The new rules and commitments apply to:

market access various trade restrictions confronting imports domestic support subsidies and other programmes, including those that raise or guarantee farmgate prices and farmers incomes export subsidies and other methods used to make exports artificially competitive.

The agreement does allow governments to support their rural economies, but preferably through policies that cause less distortion to trade. It also allows some flexibility in the way commitments are implemented. Developing countries do not have to cut their subsidies or lower their tariffs as much as developed countries, and they are given extra time to complete their obligations. Leastdeveloped countries dont have to do this at all. Special provisions deal with the interests of countries that rely on imports for their food supplies, and the concerns of least-developed economies. Peace provisions within the agreement aim to reduce the likelihood of disputes or challenges on agricultural subsidies over a period of nine years, until the end of 2003.

Market access: tariffs only The new rule for market access in agricultural products is tariffs only. Before the Uruguay Round, some agricultural imports were restricted by quotas and other non-tariff measures. These have been replaced by tariffs that provide more-or-less equivalent levels of protection if the previous policy meant domestic prices were 75% higher than world prices, then the new tariff could be around 75%. (Converting the quotas and other types of measures to tariffs in this way was called tariffication.)

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Numerical targets for agriculture The reductions in agricultural subsidies and protection agreed in the Uruguay Round. Only the figures for cutting export subsidies appear in the agreement. Developed Developing countries countries 6 years: 1995-2000 10 years: 1995-2004 Tariffs average cut for all agricultural products minimum cut per product Domestic support total AMS cuts for sector (base period: 1986-88) -20% Exports value of subsidies subsidized quantities (base period: 1986-90) -36% -21% -24% -14% -13% -36% -15% -24% -10%

Least developed countries do not have to make commitments to reduce tariffs or subsidies. The base level for tariff cuts was the bound rate before 1 January 1995; or, for unbound tariffs, the actual rate charged in September 1986 when the Uruguay Round began. The other figures were targets used to calculate countries legally-binding schedules of commitments.

The tariffication package contained more. It ensured that quantities imported before the agreement took effect could continue to be imported, and it guaranteed that some new quantities were charged duty rates that were not prohibitive. This was achieved by a system of tariffquotas lower tariff rates for specified quantities, higher (sometimes much higher) rates for quantities that exceed the quota. The newly committed tariffs and tariff quotas, covering all agricultural products, took effect in 1995. Uruguay Round participants agreed that developed countries would cut the tariffs (the higher out-of-quota rates in the case of tariff-quotas) by an average of 36%, in equal steps over six years. Developing countries would make 24% cuts over 10 years. Several developing countries also used the option of offering ceiling tariff rates in cases where duties were not bound (i.e. committed under GATT or WTO regulations) before the Uruguay Round. Least developed countries do not have to cut their tariffs. (These figures do not actually appear in the Agriculture Agreement. Participants used them to prepare their schedules i.e. list of commitments. It is the commitments listed in the schedules that are legally binding.)
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For products whose non-tariff restrictions have been converted to tariffs, governments are allowed to take special emergency actions (special safeguards) in order to prevent swiftly falling prices or surges in imports from hurting their farmers. But the agreement specifies when and how those emergency actions can be introduced (for example, they cannot be used on imports within a tariff-quota). Four countries used special treatment provisions to restrict imports of particularly sensitive products (mainly rice) during the implementation period (to 2000 for developed countries, to 2004 for developing nations), but subject to strictly defined conditions, including minimum access for overseas suppliers. The four were: Japan, Rep. of Korea, and the Philippines for rice; and Israel for sheepmeat, wholemilk powder and certain cheeses. Japan and Israel have now given up this right, but Rep. of Korea and the Philippines have extended their special treatment for rice. A new member, Chinese Taipei, gave special treatment to rice in its first year of membership, 2002. Domestic support The main complaint about policies which support domestic prices, or subsidize production in some other way, is that they encourage over-production. This squeezes out imports or leads to export subsidies and low-priced dumping on world markets. The Agriculture Agreement distinguishes between support programmes that stimulate production directly, and those that are considered to have no direct effect. Domestic policies that do have a direct effect on production and trade have to be cut back. WTO members calculated how much support of this kind they were providing per year for the agricultural sector (using calculations known as total aggregate measurement of support or Total AMS) in the base years of 1986-88. Developed countries agreed to reduce these figures by 20% over six years starting in 1995. Developing countries agreed to make 13% cuts over 10 years. Least-developed countries do not need to make any cuts. (This category of domestic support is sometimes called the amber box, a reference to the amber colour of traffic lights, which means slow down.) Measures with minimal impact on trade can be used freely they are in a green box (green as in traffic lights). They include government services such as research, disease control, infrastructure and food security. They also include payments made directly to farmers that do not stimulate production, such as certain forms of direct income support, assistance to help farmers restructure agriculture, and direct payments under environmental and regional assistance programmes. Also permitted, are certain direct payments to farmers where the farmers are required to limit production (sometimes called blue box measures), certain government assistance programmes to encourage agricultural and rural development in developing countries, and other support on a small scale (de minimis) when compared with the total value of the product or products supported (5% or less in the case of developed countries and 10% or less for developing countries). Export subsidies: limits on spending and quantities The Agriculture Agreement prohibits export subsidies on agricultural products unless the subsidies are specified in a members lists of commitments. Where they are listed, the agreement requires WTO members to cut both the amount of money they spend on export subsidies and the
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quantities of exports that receive subsidies. Taking averages for 1986-90 as the base level, developed countries agreed to cut the value of export subsidies by 36% over the six years starting in 1995 (24% over 10 years for developing countries). Developed countries also agreed to reduce the quantities of subsidized exports by 21% over the six years (14% over 10 years for developing countries). Least-developed countries do not need to make any cuts. During the six-year implementation period, developing countries are allowed under certain conditions to use subsidies to reduce the costs of marketing and transporting exports. The least-developed and those depending on food imports Under the Agriculture Agreement, WTO members have to reduce their subsidized exports. But some importing countries depend on supplies of cheap, subsidized food from the major industrialized nations. They include some of the poorest countries, and although their farming sectors might receive a boost from higher prices caused by reduced export subsidies, they might need temporary assistance to make the necessary adjustments to deal with higher priced imports, and eventually to export. A special ministerial decision sets out objectives, and certain measures, for the provision of food aid and aid for agricultural development. It also refers to the possibility of assistance from the International Monetary Fund and the World Bank to finance commercial food imports.

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5. GATT and its impact on Environment Over the past decade, the GATT's dispute settlement process has adjudicated only five conflicts over trade restrictions in the interest of environmental protection alleged to be in violation of GATT rules. Three of these cases had to do with fish products. The best known concerned the U.S. ban on imports of yellow fin tuna from Mexico on the grounds that Mexican fishermen violated the U.S. Marine Mammal Protection Act, which limits dolphin kills. The Mexican government argued that the U.S. embargo on yellow fin tuna violated GATT rules. The United States countered that article III of the GATT permitting national treatment allowed the embargo, since the U.S. act applies to both U.S. and foreign fishing practices relating to dolphin catches. However, the GATT panel found in favor of Mexico because GATT rules do not permit a member to ban imports merely because the exporting country pursues environmental policies different from its own. The GATT secretariat report argued that permitting such actions would greatly weaken, if not destroy, the GATT. Members might attempt to impose their own standards on other members, and this would lead to widespread retaliation with a consequent general breakdown of GATT rules. The GATT secretariat report (1992) includes a summary of the U.S.Mexico tuna-dolphin dispute. The GATT panel decision led the U.S. environmental community to charge that adherence to GATT rules would render nations powerless to oppose crimes against the global commons. If negotiated today, the GATT might well provide exceptions to the rules in the interest of protecting the global environment. For example, article XXI of the GATT provides a general exception to "traffic in arms, ammunitions and implements of war and to such traffic in other goods and materials as is carried on directly or indirectly for the purpose of supplying a military establishment." Restricting exports of materials or equipment that would assist Cuba (a GATT member) in making a nuclear bomb is not a violation of the GATT, but restricting trade in products using CFCs, which could cause great harm to global welfare, may be a violation. The GATT also allows specific exemption to its rules for "the products of prison labor" (article XX), which has to do with how the products are made. The point is that the GATT recognizes some international objectives that override adherence to basic GATT rules. Conservationists believe that environmental protection also should take precedence over trade rules. The GATT is not an agreement mandating free trade. It is mainly a system of trade rules--with many exceptions--based on the premise that governments should not intervene to promote the commercial interests of their producers or consumers in a manner that would discriminate against foreign producers or consumers in either domestic or international markets. Government intervention in this context includes not only import restrictions, but subsidies to domestic producers and quotas or bans on exports in the interest of resource conservation. Do circumstances exist under which rules against such discrimination would prevent GATT members from protecting their own or the global environment? A frequently cited case is that of a GATT member imposing restrictions on imports produced under environmental standards substantially lower than domestic standards. The grounds for the restrictions were that the country's domestic producers face "unfair competition" from imports.

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Nevertheless, environmental groups have used this argument against both the GATT and the proposed NAFTA. Some environmentalists have justified using countervailing duties on imports produced under low environmental standards on the grounds that not requiring producers to internalize their pollution subsidizes these products Article XVI of the GATT does permit members to impose countervailing duties on imports to offset subsidies paid to foreign exporters. However, the GATT secretariat finds that countervailing duties on imports for environmental purposes violates the GATT, since failure to internalize environmental costs is not an overt subsidy. The argument for treating non-internalized adverse environmental costs as a subsidy does have a certain logic to it. However, the argument for imposing countervailing duties on imports in all such cases basically is an argument for trade protection rather than for protecting the environment. Every country produces many commodities having external impacts that are not internalized, or at least not to the degree they are in other countries. If the GATT permitted its members to impose some form of compensatory import charge to offset every difference in monetary costs between domestic and foreign production, a viable multilateral trade agreement would be impossible. Labor conditions--such as health, safety rules, and retirement benefits--differ greatly among countries. Countries at a lower stage of development are likely to have environmental and safety standards less strict than those in developed countries. Trade and foreign investment tend to reduce these disparities, but an attempt to force conformity in environmental standards by means of trade discrimination does not appear to be an effective way to promote either trade or the environment. The GATT secretariat report argues that allowing members to impose trade restrictions against other members because of their environmental practices would mean giving developed countries the power to dictate environmental policies to developing countries. However, the rules should allow exceptions in cases where the practices pose significant harm to the global environment and are subject to an international agreement or U.N. resolution. In such cases, international consensus rather than differences between environmental standards in individual countries would be the basis for trade restrictions. GATT members also should be free to impose restrictions on imports produced under conditions creating trans-border pollution. This is in line with the fundamental right of nations to protect their own environment. Thus, a country should not be forced to buy copper from a smelter across the border that is polluting its atmosphere. However, countries whose exports are affected by these restrictions should have the right to object if they believe that the alleged environmental damage cannot justify the restrictions but that the restrictions merely provide commercial protection to domestic producers. The GATT dispute mechanism should decide such cases. Environmental organizations have charged that GATT rules prevent members from taking actions to conserve their natural resources by restricting exports or by paying farmers not to produce crops in order to restore the soil. However, the GATT does permit members to make direct payments to farmers for soil conservation so long as the payments are not related to the production of specific crops. Also, article XX permits members to impose quantitative restrictions on exports in the interest of resource conservation so long as they proportionately restrict domestic consumption. Thus, bans on exporting logs in the interest of conservation presumably violates article XX of the GATT, unless domestic log consumers also face
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restrictions. In fact, Japan has complained that current U.S. restrictions on log exports violate GATT rules. The rationale for the GATT rule on exports of natural resource products is the same as that used by Adam Smith (1775) when he opposed the British practice of restricting exports of wool to foreign cloth and textile manufacturers. Such actions discriminate against foreign producers by increasing their raw material prices relative to those paid by domestic producers. Therefore, if the purpose of the U.S. curtailment of Northwest timber harvests is to conserve the resource and not to provide domestic lumber producers with a competitive advantage over Japan, the U.S. also should be willing to restrict domestic lumber consumption.

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6. CONCLUSIONS When highlighting the achievements of the GATT, the first aspect to be pointed out is the fact that, the system has managed to survive up until its recent substitution by the WTO. In its regulatory role of international trade it has, at least in theory, controlled more than 80% of world trade and has also settled multiple economic conflicts by coercing those contracting parties which wanted to adopt certain measures contrary to the established rules, through consulting and even through tolerating conduct of dubious legality (such as GATTs position). A second and undeniable achievement has been the continuous expansion of international trade, which began to take place from the moment that the arrangement was applied tariff reductions in those manufacturing sectors not considered as sensitive and with considerable access in these areas especially from the incorporation in the Kennedy round, of the lineal system in substitution for the product by product system. From then on and until the Uruguay round, such a system has been used with notable success. The GATT is both a collection of agreements and negotiations center. It might well reveal flaws that should be corrected. But I firmly believe that the GATT has altogether proved its great value for all trading countries, both developed, in developing or socialist. As a code of agreed principles of international trade, live and in constant evolution, it is the essential feature in which members operate and develop their trade and commercial relations. As a place of meeting, it gives way to solve trade problems as at when they arise, to prevent any relapse into protectionism that all nations would suffer greatly, and develop the international trading system as given necessities. Finally, today, where countries require development of imaginative measures to meet their needs of trade, the GATT is the effective tool with which governments seek to make agreement on measures to meet these needs. The GATT remained since the end of the Second World War as the only multilateral code governing international trade and for more than 40 years, several changes were made in trade relations between the different nations of the world. The GATT has, during this period, risen concrete positive actions; but in some areas, it remains to be done. The argument here is that restrictions designed to protect the environment and rules against trade discrimination do not necessarily conflict. The objective of environmental protection and natural resource conservation should be recognized explicitly in the GATT, either by an amendment to the articles or by a resolution of the GATT council. Such recognition does not sanction trade discrimination so long as domestic and foreign producers and consumers are subject to the same rules. The GATT should contain a statement of the conditions under which trade intervention in the interest of the environment and natural resource protection would be in accordance with GATT rules, and the dispute settlement process should observe these conditions. GATT members should be free to impose restrictions on imports or exports in the interest of protecting their national and the global environment so long as the interventions conform to the following conditions: (i) the restrictions do not have the intent or significant effect of discriminating against foreign producers or consumers in favor of domestic ones. (ii) The restrictions are in the interest of protecting the global environment, broadly interpreted to include the global commons (oceans, atmosphere and space), and wildlife threatened by extinction, where these global concerns are widely shared by other nations-as indicated by international agreement or resolution--and do not simply reflect unique and parochial views of the individual country imposing the restriction. (iii) The restrictions do not force trading partners to adopt
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burdensome and unreasonable environmental protection standards that may be similar to those of the country imposing the restrictions but that have no global or transborder pollution implications.

Bibliography:

http://www.gatt.org/ http://www.wto.org/english/tratop_e/gatt_e/gatt_e.htm http://www.wto.org/english/news_e/news10_e/gc_04may10_e.htm http://www.wto.org/trade_topics

General Agreement on Tariff & Trade