If the affected Members are not satisfied with the measures taken or the compensation given, they have the option to suspend substantially equivalent concessions or other obligations. But, the right to such suspension cannot be exercised for the first three years of the safeguard measure, provided that:
· the safeguard measure had been taken as a result of an absolute increase in imports;
· the safeguard measure conforms to the provisions of the Agreement on Safeguard;
In other cases, the stipulation of deferment for three years does not apply. In such cases, suspension can be effected on the expiry of 30 days after the notice of suspension has been received by the Committee on Safeguards.
Termination of pre-existing measures:
A Member must terminate a pre-existing measure, i.e. Grey-Area Measures, within 8 years of the date on which it was first applied or within 5 years of 1 January 1995, whichever comes later.
Grey-Area Measures refer to voluntary export restraints (VER) and orderly marketing arrangement (OMA). VER means an affected country consults with the exporting developing countries and persuades them to limit their export of a product to a specified quantity or value so as to avoid the normal procedure and compensation negotiation. The exporting countries would generally agree to restrain their exports of the particular product in order to avoid more severe unilateral import restraint by the importing country. In fact, there is nothing voluntary about it.
OMA means several importing and exporting countries would arrive at arrangements of the same nature together, under almost similar situations, such as the Multi-Fibre Arrangement (MFA). Sometimes, enterprises of two countries enter into their own agreements resulting in restrictions on exports or imports. Members are required not to encourage or support the adoption or continuance of such non-governmental measures.
Non-discrimination or selectivity:
The raising of tariffs or the use of other tariff-type charges as a safeguard measure has to be applied to all Members. While applying quantitative restrictions, the safeguard measures shall be applied to a product being imported “irrespective of its source”, that is, safeguard measures cannot target only a few selected Members supplying the product. Though a quantitative restriction has to be applied globally, that is, to all exporting countries, under certain conditions, the shares of the quota may be reduced in the case of some countries and increased in the case of others.
In the past, restraints have been applied as a safeguard measure to the import of products below a particular price level. Though apparently the measures were applied on a non-discriminatory basis, in actual practice, these measures might have had a selective impact on low-cost suppliers. So far, there is no decisive view as to whether or not measures linked to prices are in conformity with Article XIX of GATT 1994.
Notification:
A Member has to notify its laws, regulations and administrative procedures as well as their modification regarding safeguard measures. A Member may send a notification if it finds that another Member has not fulfilled its obligations.
Notifications have to be sent when:
· an investigation is started;
· existence of serious injury or its threat is determined;
· a decision is taken to apply or extend a safeguard measure
· before taking a provisional safeguard measure
All in all, everything a Member has done in the process of taking safeguard measures should be notified to the Council for Trade in Goods.
Provisions for developing countries:
No safeguard action will be taken against a product originating in a developing country Member as long as its share of imports of the product in the importing country concerned does not exceed 3%.
If several developing country Members are exporting the product to this particular Member country and their individual shares are less than 3% each, safeguard measures will not be taken against the product concerned from these developing country Members so long as their shares collectively account for not more than 9% of the total import of the product in the importing Member country proposing to take safeguard measures.
Special safeguard provisions: There are special safeguard measures in the Agreement on Agriculture and Textiles.
Summary: A safeguard measure is an import restriction which can be adopted in emergency circumstances, when imports have increased in such quantities and conditions that they are the cause of serious injury or threat of such injury to a domestic industry producing a like or directly competing product. An agreement on safeguards, setting out conditions and criteria for these actions, is one of the multilateral trade Agreements. Measures affecting prices, i.e., tariffs, are preferable to quantitative restrictions. However, quantitative restrictions can be applied as safeguard measures in specific cases.
In case of emergency, the importing Member will be free to suspend the obligation or withdraw or modify the concession provided it fulfills certain requirements, i.e.
The suspension of the obligation, or the withdrawal or modification of the concession, shall be temporary, that is, “…to the extent and for such time as may be necessary to prevent or remedy such injury…”.
Action can only be taken after written notification and opportunity for consultation with the WTO (in practice, with its Committee on Safeguards) and with the countries having a substantial interest as exporters of the product concerned. In critical circumstances, where delay would cause damage difficult to repair, action can be taken provisionally without prior consultation, on condition that consultation take place immediately afterwards.
If no agreement is reached during consultations, the Member proposing the action shall be free to do so, and the affected Member or Members shall also be free to suspend the application of substantially equivalent concessions or other obligations under the Agreement to the trade of the party taking the action. The suspension of substantially equivalent concessions or other obligations has to be notified previously to the WTO, and not be disapproved by it.
3. Balance-of-Payments Provisions
The Balance of Payment is a summary statement in which, in principle, all the transactions of the residents of a nation with the residents of all other nations are recorded during a particular period of time, usually a calendar year. Obviously, the millions of transactions of the residents of a nation with the rest of the world cannot appear individually in the balance of payments. As a summary statement, the balance of payments aggregates all merchandise trade into a few major categories. The balance of payments includes some transactions in which the residents of foreign nations are not directly involved, for example, when a nation’s central bank sells a portion of its foreign currency holdings to the nation’s commercial banks. Gifts are also included in a nation’s balance of payments. Diplomats, military personnel, tourists, and workers who temporarily migrate are residents of the nation in which they hold citizenship. International institutions such as the United Nations, IMF, the World Bank, and the WTO are not residents of the nation in which they are located.
Article XII of GATT 1994 allows a Member to restrict the quantity or value of merchandise permitted to be imported in order to safeguard its external financial position and its balance of payments. Article XVIII sets out a separate provision on restrictions for balance-of-payments purposes in relation to developing countries.
In the 1979 Tokyo Round Declaration on Trade Measures Taken for Balance-of-Payment Purposes, it was recognized that restrictive trade measures are in general an inefficient means to maintain or restore the balance-of-payments equilibrium. It was also provided that in applying restrictive import measures preference should be given to the measure which has the least disruptive effect on trade.
Article XVIII:B of GATT 1994 permits the use by developing countries of measures to control the general level of imports by restricting the quantity or value of merchandise permitted to be imported in order to safeguard their external financial position and to ensure a level of reserves adequate for the implementation of their programs of economic development. The Uruguay Understanding on Balance-of-Payments Provisions of GATT 1994 encourages all Members, including developing countries, to give preference to “price-based measures” such as import surcharges, import deposit requirements or other equivalent trade measures with an impact on the price of imported goods.
Members adopting, maintaining or intensifying such measures have the obligation to notify and to consult with the Committee on Balance-of-Payments Restrictions. Consultations with Members maintaining balance-of-payments restrictions under Article XII have to be held annually; for those maintained under Article XVIII: B, they are held every two years. The IMF also participates in these consultations and presents findings of statistical and other facts relating to foreign exchange, monetary reserves and balance of payments.
Purpose: To provide developing countries with some relief and flexibility when they face problems of low inflow and small reserves of foreign exchange.
Provisions: Article XVIIIB permits limiting the quantity or value of imports in order to:
· safeguard the country’s external financial position, and
· ensure a level of reserves needed for economic development programs.
Permissible actions:
Price-based measures: The Uruguay Understanding on Balance-of-Payments Provisions of GATT 1994 encourages all Members, including developing countries, to give preference to “price-based measures” such as import surcharges, import deposit requirements or other equivalent trade measures with an impact on the price of imported goods. If the duty on a product is not bound, a Member is free to raise the duty.
Quantitative restrictions: A Member may totally stop the import of a product or limit the import of a product to a specified volume or value. While applying quantitative restrictions on imports, Members have to justify why price-based measures are not adequate to deal with the problem.
Choice of products: A Member has to justify which products should be covered by the measures. Essential products such as basic consumption goods, capital goods should normally be out of the coverage.
Limitations on BOP:
· Not more than one type of restrictive measure may be applied on the same product.
· The restrictions should not be excessive.
· The measure for BOP reasons should not be taken to protect domestic production.
· Unnecessary damage to the commercial or economic interests of any other Member should be avoided.
· The restriction should not be applied to prevent the import of commercial samples or the import of any product in minimum commercial quantities.
· A member must progressively relax the restrictions as conditions improve and must eliminate the measures when conditions no longer justify their existence.
Notification: A Member applying measures because of BOP difficulties has to send notifications to the WTO Secretariat every year to indicate the types of measure applied, the criteria used for their application, the product coverage of the measures and the trade flows affected by the measures. Besides, a Member must notify the General Council when a new measure is introduced or any change is made in the application of existing measures or any modification is made in the time schedule for the elimination of the measures taken to address BOP difficulties. Significant changes must be notified prior to or not later than 30 days after their announcement.
Consultation: The Member explains the details of the measures and the justification for taking these measures. Other Members ask questions, seek clarifications and make comments.
Simplified consultation: this process may be applied when
· least developed country Members are involved;
· other developing country Members are pursuing liberalization efforts in conformity with the schedule presented in previous consultations;
· the trade policy review of a developing country Member is scheduled for the same calendar year in which the consultation is fixed.
Full consultation: more detailed Plan of Consultations is needed, including BOP position and prospects, alternative methods to restore equilibrium, system and methods of restriction and effects of the restrictions.
4. Technical Barriers to Trade
Definition: Governments lay down mandatory technical regulations on products or formulate or encourage the formulation of non-mandatory standards for products for reasons of security, health, environment or easy utilization. However, these regulations and standards may sometimes operate as barriers to imports, and thereby distort international trade.
Objectives: national security, prevention of deceptive practices, protection of human, animal and plant life or health or safety and protection of environment
Technical regulations: a set of rules which lay down:
· the characteristics of a product
· related processes and production methods
· applicable administrative provisions
Standards: formulations approved by a recognized body, providing for rules and guidelines on characteristics of products and related processes and production methods.
Disciplines on technical regulations and standards:
· use of international standards for technical regulations: If there are international standards for regulations in a specific field, Members are obliged to use them as a basis for their own technical regulations. Exceptions are provided when the international standards will be ineffective or inappropriate.
· National treatment and MFN treatment must be applied
· The regulations must not create unnecessary obstacles to international trade
Procedure for formulation of regulations:
· send notice to the WTO Secretariat
· publish a notice indicating its proposal
· other Members make comments
There is, however, an exception for situations where urgent problems of safety, health, environment or national security might arise.
Obligations:
· A reasonable interval between the publication of the regulation and its actual entry into force must be allowed so that the producers in exporting countries will have time to adapt themselves to the new requirements.
· Regulation specifications should be based on product performance rather than design or descriptive characteristics.
· The technical regulations of other Members should be accepted as equivalent if they fulfill the desired objectives.
· Regulations of local government bodies and non-government bodies must be in conformity with the WTO disciplines.
· A Member must establish an enquiry point which is able to respond to enquiries from other Members and interested parties and provide relevant documents relating to central government bodies, local government bodies and non-government bodies.
5. Sanitary and Phytosanitary Measures
SPS means trade-restrictive measures for the protection of human life or health and for the protection of plant or animal life or health. Sanitary measures are related to human or animal health, and phytosanitary measures deal with plant health.
Nature and coverage of SPS measures:
SPS measures may be in the form of laws, regulations, requirements, procedures or decrees and may cover products, processes and production methods (PPMs), testing, inspection, certification and approval procedures, requirements for transport of animals or plants, sampling procedures, packaging and labeling requirements directly related to food safety. Some of these measures, like processing requirements or certification, may take place in the exporting country and not upon arrival in the importing country. However, although the measure may be imposed outside the territory of the importing country, its purpose must be to protect health within the territory of the importing country.
Situations: Sanitary and phytosanitary (SPS) measures are those which are applied in order to:
· protect human life or health, or animal life or health from risks arising from additives, contaminants, toxins or disease-causing
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