|
Market access is one of the most basic concepts of international trade. It encompasses the extent to which goods or service can compete with locally made products in another market. In the WTO framework the term stands for the totality of government-imposed conditions under which a product may enter in a country under non-discriminatory conditions.
Tariff and non-tariff measures: In the WTO sense, market access in case of goods, is regulated through border measures i.e. tariffs, quantitative restrictions and other non-tariff measures. The aim of multilateral trade negotiations has been to make market access more liberal as well as more predictable.
Bindings of tariffs: Tariffs are the oldest and the most familiar of all trade measures. In principle, tariff is the only protection instrument permissible under the General Agreement of GATT.
Under Article-II, the contracting parties can 'bind' their tariffs, the rates bound after reduction or at a low level without reductions are referred to as "tariff concessions" and are included in schedule of tariff concessions. Each member of WTO has a schedule except one schedule for a Customs Union. A 'binding' is a commitment not to raise the tariff rate above the levels specified in the schedule of concessions. In each round of trade negotiation held so far since 1947, industrialized countries have lowered their level of average tariff protection considerably, there are still some peaks in the case of sensitive products, where tariffs are significantly high.
Tariff: A tariff is a duty or a levy levied at the border on goods going from one customs territory to another.
Ad-valorem duty: An ad-valorem duty is a customs duty expressed as a percentage of the value of the imported goods.
Specific duty: A specific duty is a customs duty which is not related to the value of the imported goods, but to the weight, volume etc. of the goods. It is levied as a fixed sum per unit of quantity:
Compound and mixed duty: A compound duty is a customs duty comprising an ad valorem duty to which is added or subtracted a specific duty. A mixed duty is a duty where a minimum or a maximum tariff protection is ensured by the choice between, an ad volorem duty and a specific duty.
Other duties and charges: "Other duties and Charges' include all taxes levied on imports in addition to customs duty which is not in conformity with Article-VIII of GATT 1994. Such other duties may be a 'development tax', a 'stamp tax' or a 'fiscal tax' etc. During the Uruguay Round negotiation it was negotiated that members should indicate in their schedules any other duty or charge existing on 15th April, 1994. Any duties and charges not notified by then had to be eliminated.
Non-tariff measures: Non-tariff measures include all measures, other than tariff, used to protect the domestic industry. One of the main principles of GATT is that protection to domestic industries should be given through tariffs and not through quantitative and other restrictions. While reduction or elimination of tariff takes place through specific commitments, non-tariff measures are dealt with by developing rules and disciplines to limit their trade restrictive effect.
Quantitative restrictions: Article XI of the GATT 1994 prohibits the use of quantitative restrictions in both imports and exports. However, exceptions to the general prohibition of the use of Quantitative restrictions (QRs) contained in Article XI, as well as in Articles XII, XVIII, XX and XXI under which QRs may be used. Several WTO Agreements contain provisions governing the use of QRs in certain other circumstances.
Predictable and growing access to markets for goods & services is an essential principle of the WTO. This principle is fulfilled through various provisions so as to guarantee security, predictability and continued liberalization of trade.
In case of goods, a basic GATT postulate is that tariffs should normally be the only instrument used to protect domestic industry. Further, tariff should be predictable and stable. Security and predictability in trade in goods are achieved through the commitments embodied in the "binding of tariffs". The binding of a tariff at a higher level than tariff actually applied is considered as a legitimate concession. In this case, the concession is the binding itself, i.e. commitment not to raise tariff beyond that level.
In the past, tariff negotiations were initiated under GATT. These negotiations served to reduce progressively the level of tariff protection in many countries. In future also tariff negotiation will be important at least in relation to agricultural products, where all non-tariff barriers have been eliminated and substituted by tariff and that at a very high level. Contractual nature of bound tariff says that tariff rate cannot be increased beyond bound rate, but countries would not enter into such kind of commitment without revision possibility, if situation so requires. The GATT 1994 allows scope for renegotiations. A member if so desires can renegotiate with other interested members and provide compensation equivalent to tariff concession on other products.
Historical background: Tariff on imports are the oldest and most familiar of all trade measures. While they give revenues for the country, they also protect domestic goods from price competition of cheap products from abroad. Protection through tariff reached its peak in the 1930 resulting in the deepening of the worst economic depression of modern times.
Geneva round of negotiation (1947): The first round of multilateral trade negotiations was held in Geneva in 1947, while the Havana Charter was being drafted. 23 countries which accepted the Havana Charter negotiated tariff cuts covering half of world trade. At that time over 45,000 concessions were exchanges.
Three rounds of tariff negotiations were held in between 1949 to 1956. However, no significant actions had taken place except a tariff reduction of around 25% in Torquay Round.
Dillon round (1961-62): European Community (E.C.) was established in 1957 under the Treaty of Rome. It came into effect from 1958. Following the establishment of E.C. large scale negotiations were held between 1960-61 under Article XXIV-6 of the GATT. These negotiations were supplemented by a round of tariff negotiations proposed by Douglas Dillon, Under Secretary of State of U.S. The Dillon Round yielded modest results allowing on 4400 tariff concessions. However, agriculture and some sensitive products were left out.
Kennedy round (Nov-1963 - May 1967): A new approach to tariff negotiation was introduced from the Kennedy Round. It was the adoption of a linear reduction formula by which developed countries agreed to reduce tariff by 50%. However, this was not applicable for agricultural products. During Kennedy Round, for the first time Anti-Dumping issue was included. This Round was also the starting point for recognizing non-reciprocity concept in trade negotiations.
Tokyo Round (Sept-1973 ~ Nov.1979): Tokyo Round negotiation went far beyond the scope of previous negotiations in the field of non-tariff measures. In case of tariff, developed nations agreed to cut tariff by 34% on trade-weighted average.
Uruguay Round: Uruguay Round was the last round of trade-negotiation so far held under GATT/WTO. The Round outlined the procedures for negotiations. The process of tabling preliminary offers before submission of final schedules started in 1990. However, after submission of the schedules there was no visible progress in the multilateral negotiations as negotiations were continued bilaterally and plurilaterally. However, move by QUAD countries boosted the negotiations on elimination of duties on 20 sectors, harmonization in other sectors, 50% reduction in tariff peaks and 1/3 reduction in residual items. Further bilateral negotiations helped in the improvement of schedules. The Marrakesh Protocol was signed as an integral part of the Uruguay Round Final Act on 15-04-1994. It entered into force, along with Agreement to establish WTO on 01-01-1995
Eighty-nine schedules were annexed to Marrakesh Protocol including the schedule of the European Communities. Schedule annexed to the Protocol became a Schedule of GATT, 1994. LDCs were allowed to submit their schedules of concessions and commitments on goods and services by one year after the date of Marrakesh Protocol.
Now if we summarise the history of the GATT techniques of tariff negotiation, we will find that bilateralism of the 1930s was replaced by multilateral item-by-item negotiation from 1947 to 1962. The negotiating techniques were :
(a) Bilateral item-by-item/country by country technique.
(b) Linear reduction
(c) Harmonisation formula
(d) Sectoral approach
(e) Reciprocity in trade negotiations
(f) Measurement of reciprocity
(g) Reciprocity in Kennedy & Tokyo Rounds.
(h) Concept of non-reciprocity
(i) Modification of schedules
(j) Product classification
(k) Special and differential treatment for Developing countries.
(l) Special flexibility for LDCs (Ministerial Declaration in favour of LDCs), Plan of Action for LDCs, and Integrated Frame Work for Trade Related Technical Assistance).
Conclusion: Market access under WTO Frame Work has gained momentum with the conclusion of each round of trade negotiation. However, it would take time to have complete tariff and non-tariff free market access. To achieve such a goal LDCs and developing countries should join together and be a formidable force in the future Trade Negotiation Round.
The writer is the secretary-general
of the BTMA
|