2. GATT
• General Agreement on Tariffs and Trade
(GATT) was established in Geneva in 1947.
• The objective was to create a framework
that would regulate international trade and
stimulate international commerce.
3. Objectives of GATT
• The objectives of the 1947 Agreement were
to establish an orderly and transparent
framework within which barriers to trade
could be gradually reduced, and
international trade thereby expanded.
4. Objectives of GATT
• The most important elements of the
Agreement included those of:
– non-discrimination: the Most Favored
Nation (MFN) principle
– reciprocity
– transparency
– tariff reduction.
5. Exception and Waivers
• developing countries were given special
status.
• countries that offer each other more
favorable treatment within a custom's union
were allowed to waive full adherence to the
MFN clause.
• agricultural trade was given special
treatment, especially with regard to non-
tariff barriers.
6. The GATT Negotiating Rounds
Round Date No. of
Member
Value of Trade
in Billion
No of Tariff
Concession
Geneva 1947 23 10 45,000
Annecy 1949 33 - 5,000
Torquay 1950 34 - 8,700
Geneva 1956 22 2.5 -
Dillion 60-61 45 4.9 4,400
Kennedy 62-67 48 40 -
Tokyo 73-79 99 300 -
7. Reasons For Exclusion of Agriculture
from Earlier Rounds of GATT
• The general consensus of opinion was that
agriculture was a unique sector of the economy,
that, for reasons of national food security, could
not be treated like other sectors.
• With the expansion of the manufacturing
economy, agriculture was in relative decline.
Political and social pressures demanded, however,
that the decline be halted or slowed down, and that
agriculture be protected from the full rigors of the
international market.
8. Special Treatment for Agricultural Trade
• Quantitative import restrictions, banned for all
other commodities, could be used in the case of
agricultural commodities
• The use of agricultural export subsidies was
explicitly permitted
• Other mechanisms for protecting agriculture, such
as variable import levies and domestic subsidies,
were not explicitly covered by the GATT, and
provided additional loopholes for agricultural
policy makers wishing to protect the agricultural
sector.
9. The Latest GATT Round
• Uruguay Round
– Place : Uruguay.
– Date : 1986-93
• Doha Round just started in November 2001
10. Uruguay Round
• The Uruguay round was launched at a
meeting of trade ministers in Punte del Este,
Uruguay, in October 1986.
• It was expected to last for four to five years
and instead took around eight years (until
December 1993).
• What made the Uruguay round so
contentious?
11. • comparative advantage
• world market instability
• The effects of protectionism
Reasons for inclusion of agriculture
within the GATT framework
12. • The objectives with regard to agriculture
were described as follows: To achieve
greater liberalization of trade in agriculture
and bring all measures affecting import
access and export competition under
strengthened and more operationally
effective GATT rules and disciplines
Agriculture in the Uruguay round
negotiations
13. • The USA was enthusiastic about promoting
greater liberalization in agricultural trade, and was
keen to reduce the protection and support enjoyed
by producers in the EC under the CAP.
• The EC was much less amenable to far reaching
liberalization, but was keen to reach a workable
compromise, that could be enshrined in the
GATT, in order to minimize future trade friction
between itself and the USA.
• The Cairns Group
The Main Players in the Agricultural
Negotiations
14. ∀ • For the large group of developing countries
which were net importers of food, the main
concern was over the impact of the Round on the
cost of food imports.
• Two other countries with a major interest in the
outcome of the round were Japan and the Republic
of Korea. These countries had highly protected
domestic rice markets, and a strong domestic
opposition to reform of the sector.
Other Players in the Agricultural
Negotiations
15. Initial Positions of US in the
Uruguay Round
• USA opened the negotiation with an
unrealistic demand for the “zero-zero”
option.
– All agricultural subsidies and all quantitative
restrictions on agricultural imports be phased
out over a period of ten years, and that world
health and safety measures be harmonized.
• This proposal found support among Cairn
groups but the EC totally opposed it.
16. Positions of Other Players
• The EC's demands focused primarily on the
concept of "rebalancing“.
• Japan, like the EC was keen to protect its
farmers from international competition.
• The demands of developing countries were
focused on their need for special and
differential treatment within the
negotiations.
17. Slow Initial Progress in the
Negotiations
• At the mid-term review in Montreal at the end of
1988, the negotiating parties in the agricultural
group were as far apart as ever.
• In April 1989, U.S. negotiators dropped their
demand for zero-zero option.
• In 1991, finally arrived at a consensus, whereby
countries agreed to make concessions in each of
the following three areas:
– import access
– domestic support
– export subsidies.
18. Dunkel Draft Act
• At the end of 1991, the director-general of
the GATT presented a comprehensive
Draft Final Act, known as the Dunkel
Draft.
• It included the first complete text on
agriculture, in which quantitative proposals
were presented with respect to concessions
in each of the three major disciplines
19. The Blair House Accord
• the 24 percent cut in the volume of subsidized
exports that was originally proposed, was reduced
to 21 percent.
• direct payments made under production limiting
programs, such as those made under the EC's CAP
reform, and the USA's policy of deficiency
payments and land set-aside, were made exempt
from domestic support reduction commitments;
• commitments to reduce domestic support on a
product by product basis were replaced by a
commitment to reduce overall support to the
agricultural sector.
20. Major Areas of GATT Disciplines
Market Access Domestic Support Export Subsidies
21. Market Access Commitments
• Tariffication, Tariff Binding and Reduction.
– Non Tariff Barriers to be converted to Tariff
Equivalent.
– All Tariffs to be bound.
– Reduce existing and new tariffs by 36 percent,
on a simple average basis, in equal installments
in six years.
– Reduce tariffs for each commodity by a
minimum of 15 percent .
22. Market Access (cont.)
• Minimum and Current Access Commitment
– Minimum access import opportunities to be
provided for products with import below 5
percent of domestic consumption
– Increase minimum access quotas from 3 percent
of domestic consumption to 5 percent over the
implementation period.
24. Domestic Support Commitments
Amber Box Policies Blue Box Policies Green Box Policies
Largest effect
on production and trade
Least effect
on production and trade
Compromise between
these two
25. AMS Support Level for 24
Countries (1986-88 vs 1995)
0
50
100
150
200
250
1986-88 1995
BillionDollars
26. Export Subsidies Commitment
• Under GATT agreement, both United States and
the European Union agreed to reduce the quantity
and budgetary outlay ceilings for subsidized
exports wheat, durum, wheat flour and semolina
by 21 percent and 36 percent respectively.
• The final year (2000) commitments are the
required 21% and 36% below the 1986-90 base
for the quantitative and budgetary commitments,
respectively
28. EU GATT Commitments for
Subsidized Exports
• The European Union will reduce the
quantity and budgetary outlay for export
subsidies from the current level. In the year
2000, the EU's maximum allowable
quantity of subsidized wheat and wheat
flour exports will be 13.4 MMT, 6.8 MMT
less than the quantity of subsidized exports
in 1991-92.
29. Uruguay round GATT
Negotiations vs Old GATT
• The old GATT was often criticized because it
lacked an enforcement mechanism
• One of the most sustentative achievement of the
Uruguay round was the creation of a new
international institutions, the WTO.
• The WTO is responsible for enforcing existing
international trade agreements and serve as a host
for new talks to liberalize trade.
30. The WTO
• As of 1999, 135 countries had become members
of WTO. Another 30 countries are in the process
of applying for membership.
• As of 1999, the WTO dispute settlement system
had been remarkably active and successful.
• Between 1995 to 2000, more than 190 cases has
been notified to the dispute settlement process
31. The Conduct of U.S. Commercial
Policy
• Since 1934, Congress has authorized
systematic reduction in trade barriers. On
the other hand, Congress has provided
American business with alternative
mechanisms for seeking and obtaining relief
from foreign competition.
• In this section, we will discuss some of
these measures.
32. Dumping
• It is defined as selling a product in a foreign
country at a price that is lower than the
price charged by the same firm in the home
country.
34. Antidumping Law
• Current antidumping law provides that
under certain conditions, a special tariff be
imposed on foreign goods if it is found to
be sold less than fair value.
35. Antidumping Cases Initiated
Worldwide, 1999
Number of Antidumping cases
Country By Against
Australia 42 1
European Union 41 57
Canada 14 3
China 0 31
Japan 0 12
United States 16 15
Mexico 6 NA
Total 233 233
