WTO E-Learning. WTO E-Learning Copyright April Accession to the WTO

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1 WTO E-Learning WTO E-Learning Copyright April 2013 Accession to the WTO

2 Glossary ACCESSION PACKAGE The accession package is composed of the draft Report, including a draft Decision and draft Protocol of accession, the draft Schedule of Concessions (or Goods Schedule), and the draft Schedule of Specific Commitments on Services (or Services Schedule). ACCESSION WORKING PARTY When a request for accession is considered acceptable by the General Council or Ministerial Conference, a Working Party is established to examine the government s application and negotiate the terms of accession. For more information, see chapter IV of Module 1. ACTION PLANS Working Party members may request that action plans dealing with a specific subject be submitted to the Working Party when they wish to understand what has to be done to bring the acceding government s regime into conformity with WTO rules and practices in a particular area. Such action plans are sometimes submitted at the initiative of the acceding government. Action plans on specific subjects play an important role in the negotiation of transitional periods. Members generally use these action plans as a basis for the negotiations of transitional periods. See below the example of an action plan for the implementation of a WTO agreement. Acceding governments may choose to include an additional column on technical assistance needs. Action e.g. Drafting of law... Establishment of an enquiry point on... Training of officials on... Deadline... AD VALOREM TARIFF Ad valorem tariffs are tariffs expressed as a percentage of the value of the imported goods (e.g. 10%). AGRICULTURAL PRODUCTS Annex 1 of initial offer are normally prepared in the national nomenclature applied by the acceding government at the time the document is prepared. Acceding governments are expected to have a national nomenclature based on the HS nomenclature. AMBER BOX The amber box covers domestic support measures which have an important trade distortive effect. Pursuant to Article 6 of the Agreement on Agriculture, all domestic support measures not covered by the blue and green boxes, and the provisions of Article 6.2, fall into the amber box.

3 Amber box measures include: measures directly related to production quantities, and measures to support prices. Because they have an important trade-distortive effect amber box measures are subject to binding and reduction commitments. Measures falling into the amber box benefit, however, from a "de minimis" (minimal) allowance which is not subject to reduction commitments. The Agreement on Agriculture sets the de minimis level at : 5% of the value of agricultural production for developed countries; 10% for developing countries. See also chapter I.B.1. of Module 2 AMS See "Total AMS". ARTICLE 6.2 OF THE AGREEMENT ON AGRICULTURE Article 6.2. of the Agreement on Agriculture covers developmental measures of assistance which are fundamental for developing countries. They include: investment subsidies, generally available to agriculture; agricultural input subsidies, generally available to low-income or resource poor producers; and domestic support to producers in developing country Members, to encourage agricultural and rural development, such as diversification from growing illicit narcotic crops. These measures are exempt from reduction commitments. See also chapter I.B.1. of Module 2. ARTICLE XII OF THE MARRAKESH AGREEMENT Article XII is the Article of the Marrakesh Agreement governing accession. Article XII is modelled on Article XXXIII of the GATT 1947 which regulated accession to the GATT. It is one of the shortest articles of the Marrakesh Agreement. For a detailed explanation see chapter I of Module 1. ARTICLE XIII OF THE MARRAKESH AGREEMENT A WTO Member may choose to invoke Article XIII of the Marrakesh Agreement before adoption of the accession package by the General Council/Ministerial Conference in order not to be bound by the WTO rules vis-à-vis the new Member. Article XIII states that the WTO Agreement and the multilateral Agreements annexed to it shall not apply as between any member and any other member if either of the members, at the time either becomes a Member, does not consent to such application.

4 This Article has been invoked eight times. Five invocations have been withdrawn and, as of early 2008, only three were still maintained (United States vs. Moldova - WT/L/395; El Salvador vs. China - WT/L/429; Turkey vs. Armenia - WT/L/501). BILATERAL AGREEMENT In the context of accession negotiations, the term bilateral agreement refers to the agreement signed between the acceding government and any interested WTO Member when the bilateral market access negotiations on goods and/or services with a particular Member are over. The bilateral agreement contains the concessions on goods and/or the specific commitment on services that the acceding government grants to the Member. Once all bilateral have been signed, the Secretariat consolidates them into Goods and Services Schedules. While there is no standard format for a bilateral agreement, the cover letter usually follows the following lines: The Permanent Mission of country 1 and the Permanent Mission of country 2 (WTO Member) hereby inform the Director-General of the World Trade Organization that they have concluded their bilateral market access negotiations in the context of the accession of country 1 to the WTO. They accordingly attach hereto the original of the list of concessions on goods which country 1 grants to country 2 (Attachment 1). Country 1 also grants to country 2 Initial Negotiating Rights for goods negotiated with country 2 as identified in Column [7] of the attached list of concessions at the rate which country 1 binds its schedule. The specific commitments on services that country 1 will grant to country 2 will be those contained in WTO document WT/ACC/SPEC/... of [date], as modified in Attachment 2 hereto. For country 2 For country 1 Ambassador Head of the Delegation Done in Geneva, date Bilateral negotiations Bilateral negotiations are negotiations on conditions of access to the applicant s market for goods and services. These negotiations take place on a one-to-one basis between interested Members and the acceding government. The Secretariat is not involved. BLUE BOX The blue box is defined in Paragraph 5 of Article 6 of the Agreement on Agriculture. The blue box covers direct payments to producers under production-limiting programmes, i.e. if such payments are: made on fixed areas and yields; made on 85% or less of the base level of production; or livestock payments are made on a fixed number of head.

5 In the blue box, the actual payments are not directly linked to the current quantity of production. At present there are no limits on spending on blue box subsidies. Limitations are discussed in the current round of negotiations. BOUND RATE See "Tariff binding". CEILING BINDING A ceiling binding is a bound rate that is higher than the applied tariff. CHEMICAL HARMONIZATION INITIATIVE See "Harmonization initiative". COMMITMENT PARAGRAPHS Commitment paragraphs contain the terms of entry of an acceding government. These paragraphs are typically at the end of the various descriptive sections of the Draft Report. They normally start with "the representative of [government X] confirmed that..." and always end with the sentence "the Working Party took note of this/these commitment(s)". COMPENSATION Once a rate is bound, it may not be raised without compensating the affected parties in accordance with Article XXVIII of the GATT Compensation usually takes the form of a new concession, i.e. a lower bound rate, on products of interest to Members who are entitled to negotiate a compensation, i.e. to Members having: 1. An initial negotiating right (INR); 2. A principal supplying interest; or 3. A substantial interest. COMPOUND DUTY A compound duty is a customs duty comprising an ad valorem tariff to which a specific duty is added or, less frequently, subtracted. Example: 10% + $2 per kg. CONCESSION In the WTO context, this term is used to refer to the lowering of a tariff or the removal to an impediment to trade in goods or services, usually at the request of another party. In its narrowest sense, it only covers the binding of a tariff item. CONSENSUS The WTO is a consensus-based organization. The consensus principle is a legacy from the GATT. Article IX of the Marrakesh Agreement, which governs decision-making in the WTO, says: "the WTO shall continue the practice of decision-making by consensus followed under GATT 1947".

6 Footnote 1 of Article IX, defines consensus: "The body concerned shall be deemed to have decided by consensus on a matter submitted for its consideration, if no member, present at the meeting when the decision is taken, formally objects to the proposed decision". Consensus allows Members to ensure that their interests are properly taken into account. Although Article IX specifies that where a consensus is not possible, voting is permitted, and foresees voting in four specific situations, in practice all decisions are taken by consensus. Four specific situations: 1. To adopt an interpretation of a multilateral agreement (3/4 majority); 2. To waive an obligation imposed on a Member by a multilateral agreement (3/4 majority); 3. To take a decision to amend provisions of a multilateral agreement (2/3 majority, in some cases only depending on provisions of the agreement); and 4. To admit a new Member (2/3 majority). DE MINIMIS LEVEL/DE MINIMIS ALLOWANCE Domestic support measures which fall into the amber box benefit from a de minimis (i.e. minimal) allowance which is not subject to reduction commitments. The Agreement on Agriculture sets the de minimis level at : 5% of the value of production of a particular product for developed countries; 10% for developing countries. DOMESTIC SUPPORT Term used to describe measures aimed at supporting farmers. In the WTO, domestic support measures are classified by boxes depending on their distortive effect on trade: green, for domestic support measures considered to have no, or minimal distortive effect on trade; blue, for direct payments under production-limiting programmes; amber, for measures considered trade-distortive. In addition, Article 6.2 [3] of the Agreement on Agriculture envisages development programmes for developing countries. DRAFT DECISION Once the Working Party has approved the accession package, which comprises the Draft Report, including a draft Decision and draft Protocol of Accession and the Goods and Services Schedules, the letter is forwarded to the GC/MC for adoption. The Decision taken by the General Council/Ministerial Conference when the accession package is adopted invites the applicant to accede on the terms set out in the Protocol of Accession, the Working Party Report and the Schedules on Goods and Services. The text of the Draft Decisions is standard.

7 DRAFT PROTOCOL OF ACCESSION See "Protocol of accession" DRAFT REPORT The structure of the draft Report is identical to that of the Factual Summary. The main difference between the Factual Summary of Points Raised and the draft Report is that the latter contains commitment paragraphs while the former simply brings together the factual information that has been presented to the Working Party during the fact-finding stage. The Draft Report also includes a draft Decision and a draft Protocol of accession. Sometimes Members request the Secretariat to prepare an intermediary document before moving to the draft Report: the Elements of a draft Report. DRAFT WORKING PARTY REPORT See "Draft Report". EC European Communities EXPORT SUBSIDIES Export subsidies are subsidies contingent upon export performance. For more information on export subsidies in agriculture, see chapter I.B.2 of Module 2. FACTUAL SUMMARY OF POINTS RAISED At an appropriate stage of the accession process, the Secretariat is asked to prepare a Factual Summary of Points Raised which consolidates the information submitted by the acceding government and identifies the issues raised by Members. The purpose of the Factual Summary is to facilitate the discussions. As negotiations advance and the contours of the final entry terms become clearer, the Factual Summary evolves into a Draft Report. GENERAL COUNCIL (GC) The General Council is the decision-making body of the Organization in-between two Ministerial Conferences. The General Council carries out the functions of the WTO and takes action in the intervals between meetings of the Ministerial Conference. It meets approximately every two months. Decisions, in practice, are taken by consensus. The GC is composed of: Representatives of the WTO Members Observers - they cannot participate in the decision-making process but can attend all formal meetings There are three categories of observers: 1. International organizations; 2. Acceding governments; and 3. Governments having only requested observer status, and not accession

8 Note: non-governmental organizations do not qualify for observer status. GOODS SCHEDULE See "Schedule of concessions". GREEN BOX The green box contains measures which do not distort or cause minimal distortion to trade. These measures are defined in Annex 2 of the Agreement on Agriculture [link to Annex 2 of the Agreement on Agriculture] and are allowed without limits. To qualify for the green box, support: must be provided through government funded programmes; must not involve transfers from consumers; and must not have the effect of providing price support to producers. The green box covers general government service programmes (see Green box - General government service programmes) and direct payments to producers (see Green box - Direct payments to producers) which are not linked to production. GREEN BOX - DIRECT PAYMENTS TO PRODUCERS Pursuant to Annex 2 of the Agreement on Agriculture, direct payments to producers covered by the green box include: 1. decoupled income support measures; Payments under these measures shall not be related to, or based on: the type of production undertaken by the producer; the prices, domestic or international, applying to any production undertaken in any year after the base period; the factors of production employed. 2. income insurance and safety-net programmes; Eligibility is determined solely on the basis of an income loss, taking into account only income derived from agriculture, which exceeds 30 per cent of average gross income or the equivalent, in net income terms, in the preceding three-year period, or a three-year average based on the preceding five-year period excluding the highest and the lowest entry. 3. natural disaster relief; 4. structural adjustment assistance (producer retirement, resource retirement, investment aids); 5. environmental programmes; and 6. regional assistance programmes.

9 GREEN BOX - GENERAL GOVERNMENT SERVICE PROGRAMMES Pursuant to Annex 2 of the Agreement on Agriculture, general government service programmes covered by the green box include: research; pest and disease control programmes; agricultural training services; extension and advisory services; inspection services; marketing and promotion services; infrastructural services; public stockholding for food security; and domestic food aid. GUIDELINES FOR LEAST-DEVELOPED COUNTRIES Noting that none of the least-developed countries had joined the WTO under the procedures of Article XII since the establishment of the Organization, at the Doha Ministerial Conference in 2001 trade ministers discussed ways to facilitate the accession of least-developed countries (paragraphs 42 and 43 of the Doha Declaration). As a result, accession was included in the Work Programme of the Sub-Committee on least-developed countries. The implementation of this Programme led to the adoption by the General Council of the Guidelines for Accession of Least-Developed Countries in December HARMONIZATION INITIATIVE The Harmonization initiative is a sectoral market access initiative which aims to harmonize tariffs on chemical products: bound tariffs on chemical products are set at zero, 5.5 or 6.5% depending on the product HS NOMENCLATURE The Harmonized Commodity Description and Coding System, generally referred to as Harmonized System or simply HS, is an international product nomenclature developed by the World Customs Organization (WCO) which is used as a basis for customs tariffs, trade negotiations, transport tariffs and statistics, and as a vital element in customs controls and procedures. The International Convention on the Harmonized System (HS Convention) entered into force in 1988 (HS 1988). The HS nomenclature has been revised four times (in 1992, 1996, 2002 and 2007) in order to adjust to technological advances. The HS nomenclature comprises about 5,000 commodity groups arranged by chapters (there are 99 chapters - each chapter is given a two-digit numerical code), headings (four-digit numerical codes) and subheadings (six-digit numerical codes). Although WTO Members that are not signatories of the HS Convention are free to use whichever nomenclature they consider appropriate, provided it is non-discriminative, abusive or represents an unjustified barrier to trade, the majority of WTO Members tend to use the Harmonized System. Members expect acceding governments to apply the HS nomenclature.

10 INFORMATION AND TECHNOLOGY AGREEMENT(ITA) The Information and Technology Agreement (ITA) is one of the outcomes of the December 1996 Singapore Ministerial Conference. The ITA provides for the elimination of customs duties and their binding at zero on a wide range of information technology products through equal annual reductions beginning in 1997 and ending in Because of its wide membership, the ITA covers more than 90% of world trade in information technology products, including computers, telecommunications equipment, semiconductors, software, scientific equipment, etc. INITIAL NEGOTIATING RIGHT (INR) An initial negotiating right is the right for a Member to negotiate compensation under GATT Article XXVIII if a trading partner decides to permanently increase a bound duty. Initial Negotiating Rights (INRs) are granted to Members with whom a concession was initially negotiated in the course of bilateral negotiations. In the case of acceding governments, INRs are granted to Members upon request in the course of their accession bilateral market access negotiations. Initial negotiating rights are registered in the Schedule of Concessions of the Member who granted the concession itself - in the case of acceding governments, within the Schedule of the acceding government. Members to whom an initial negotiating right has been granted are identified by a two letter country code, e.g. US (United States), MA (Morocco) etc. For more information, see chapter I.A.1 of Module 2. ITA See "Information and Technology Agreement". LDC'S - LEAST-DEVELOPED COUNTRIES Since 1971, the United Nations has denominated least-developed countries a category of States (presently 50 States) that are deemed highly disadvantaged in their development process (many of them for geographical reasons), and facing more than other countries the risk of failing to come out of poverty. As such, the leastdeveloped countries are considered to be in need of a higher degree of attention on the part of the international community. Least-developed countries have been classified on the basis of three criteria: their Gross National Income, their level of human resources (based on indicators of nutrition, health, education and adult literacy rate), and their economic vulnerability. These indicators and the list of countries designated as LDCs are reviewed by the ECOSOC every three years. The WTO uses the UN list of LDCs for purposes such as accession, special and differential treatment etc. LEGISLATIVE ACTION PLAN Acceding governments are invited to submit a legislative action plan listing all trade-related laws recently adopted or in preparation. Legislative action plans are expected to be updated on a regular basis. Standard format of a legislative action plan: Law/Regulations Corresponding WTO Agreement Deadline e.g Law on plant quarantine SPS...

11 MARKET ACCESS Market access can be defined as the extent to which an imported product or service is able to compete with locally-made products or services. In the WTO context, this relates to the totality of government-imposed conditions under which a product or service may enter a foreign market without suffering discrimination. MEMORANDUM ON THE FOREIGN TRADE REGIME The Memorandum on the Foreign Trade Regime is the first document that the applicant has to submit. Without this document the accession negotiations cannot begin. The format of the Memorandum can be found in Attachment I of document WT/ACC/1. The Memorandum should cover the following issues: Economic Policies and Foreign Trade; Framework for Making and Enforcing Policies; Policies Affecting Trade in Goods (import regulation, export regulation, internal policies affecting trade in goods, policies affecting trade in agricultural products); Intellectual property rights; Services; and Trade Agreements with Third Countries. Additional information on import licensing, implementation of the Customs Valuation Agreement, technical barriers to trade, services and State trading should be annexed to the Memorandum. The Memorandum must be submitted in one of the official languages of the Organization - English, French, and Spanish. MFN PRINCIPLE See Most-favoured-nation treatment. MINISTERIAL CONFERENCE (MC) The Ministerial Conference is the decision-making body of the Organization. It carries out the functions of the WTO and take actions necessary to this effect. The Ministerial Conference is composed of representatives of all the Members. It shall meet at least once every two years. See Article IV of the Marrakesh Agreement. MIXED DUTY A mixed duty is a duty where a minimum or a maximum tariff protection is ensured by the choice between an ad valorem duty and a specific duty. Example: 10% minimum $2 per kg; 10% or $2 per Kg whichever is lower. MODE OF SUPPLY The General Agreement on Trade in Services (GATS) does not define what a service is, but it defines four modes through which a service can be supplied, i.e. four "modes of supply". 1. Cross-border supply (also referred to as mode 1): the service is supplied from the territory of one Member into the territory of another Member;

12 2. Consumption abroad (mode 2): the service is supplied in the territory of one Member to the service consumer of another Member; 3. Commercial presence (mode 3): the service supplier of one Member establishes a commercial presence in the territory of another Member; 4. Movement of natural persons (mode 4): the service supplier of one Member travels in person to the market of another Member to provide a service. MOST-FAVOURED-NATION TREATMENT (MFN TREATMENT) The MFN treatment is one of the basic principles of the WTO. It is the rule according to which a Member gives any other Member the best treatment it gives to any of them, i.e. it cannot discriminate between its trading partners. All trading partners should be treated equally. This principle is laid down in Article I of the GATT, Article 2 of the GATS and Article 4 of the TRIPS Agreement. MULTILATERAL NEGOTIATIONS Multilateral negotiations are negotiations on WTO rules and disciplines. These negotiations take place within the framework of the Working Party and cover all WTO Agreements in accordance with the Single Undertaking principle. NATIONAL TREATMENT It is one of the basic principles of the WTO. Under this principle, foreign products, services and nationals should not be granted less favourable treatment than domestic products and services, and than its own nationals i.e. a Member should not discriminate between its own and foreign products, services and nationals. This principle is laid down in Article III of the GATT, Article 17 of the GATS and Article 3 of the TRIPS Agreement. NON-APPLICATION OF THE MARRAKESH AGREEMENT See "Article XIII of the Marrakesh Agreement". NON-TARIFF CONCESSION Non-tariff concessions are concessions which do not take the form of a tariff. Examples of a non-tariff concessions are: the removal of an existing quantitative restriction; a tariff rate quota on non-agricultural goods, e.g. salt. NON AD VALOREM TARIFF Non ad valorem tariffs are tariffs which are not expressed as a percentage of the value of the imported goods. Non ad valorem tariffs can take the form of specific duties, mixed duties or compound duties. NON AGRICULTURAL PRODUCTS See Agricultural products.

13 OBSERVERS There are three categories of observers to the WTO: acceding governments - which are granted observer status automatically when a Working Party is established - international organizations and, governments having requested observer status. OBSERVERS - ACCEDING GOVERNMENTS Acceding governments are automatically granted observer status upon acceptance of their request for accession. They have rights and obligations, and must pay an annual financial contribution for services received (CHF26,685 in 2008). Acceding governments can make proposals within the framework of the Doha negotiations but cannot take part in the decision-making process (paragraph 48 of the Doha Declaration). OBSERVERS - INTERNATIONAL ORGANIZATIONS International Organizations which have competence and a direct interest in trade policy matters, or which pursuant to paragraph V:1 of the Marrakesh Agreement, have responsibilities related to those of the WTO can request observer status in the WTO. (WT/L/161 Annex 3) Requests for observer status are considered on a case-by-case basis by each WTO body to which the request is addressed. Examples of international organizations that have been given observer status in some accession Working Parties are: the UN, UNCTAD, WIPO, the IMF, the EBRD, EFTA and the World Bank. OBSERVERS - NON-ACCEDING GOVERNMENTS Before requesting accession, a government may wish to request observer status in the WTO. The purpose of this status is to allow a government to better acquaint itself with the WTO and its activities, and to prepare and initiate negotiations for accession to the WTO Agreement (Guidelines for Observer Status for Governments in the WTO, Annex 2 of document WT/L/161). A government wishing to request observer status shall address a communication to the General Council expressing its intention to initiate negotiations for accession to the WTO within a maximum period of five years, and provide a description of its current economic and trade policies, as well as any intended future reforms. Observer status is granted for five years, but observers may request an extension. Observer governments have the right to attend formal meetings of the General Council and its subsidiary bodies, with the exception of the meetings of the Committee on Budget, Finance and Administration. They are also invited to sessions of the Ministerial Conference. In addition, they have access to the main WTO document series and can request technical assistance from the Secretariat. Unlike acceding governments, they cannot however make proposals in the framework of the Doha negotiations (paragraph 48 of the Doha Declaration).

14 Observers have an obligation to pay an annual financial contribution for the services provided to them in relation to their observer status in the WTO. In 2008, this contribution amounted to CHF 26,685CHF. Governments which have not requested observer status in the General Council are not invited to attend Ministerial Conferences. They can, however, seek observer status to participate in the Ministerial Conference by addressing a communication to that body. OFFER ON GOODS Acceding governments are expected to submit offers on goods and services for the negotiation of their market access commitments on goods and services. Initial offers are usually submitted after the first Working Party meeting. For general information on bilateral negotiations, see chapter V.B. of Module 1. For information on the format of the goods offer, see chapter I.A.4. of Module 2. OFFER ON SERVICES Acceding governments are expected to submit offers on goods and services for the negotiation of their market access commitments on goods and services. Initial offers are usually submitted after the first Working Party meeting. For general information on bilateral negotiations, see chapter V.B. of Module 1. For information on the format of the goods offer, see chapter II.C.2. of Module 2. ORDINARY CUSTOMS DUTIES Ordinary customs duties also referred to as "applied duties" or "applied tariffs" are duties collected on goods that cross the border. Ordinary customs duties are not negotiated within the framework of the WTO. Only bound duties are. OTHER DUTIES AND CHARGES (ODCS) "Other duties and charges" include all taxes levied for revenue purposes on imported products, in addition to ordinary customs duties. Such duties and charges are not imposed on locally-produced goods. The Understanding on the Interpretation of Article II:1(b) of the GATT 1994 required WTO Members to indicate in their Schedules "any other duty or charges" in force on 15 April Duties and charges not notified by then had to be eliminated. Acceding governments are expected to eliminate existing other duties and charges and to bind them at zero in their Goods Schedule. PLURILATERAL AGREEMENTS Plurilateral agreements are binding only upon Members that accept them. They are not part of the Single Undertaking (see Glossary "Single Undertaking principle"). Annex 4 of the Marrakesh Agreement contains four plurilateral agreements: the Agreement on Dairy Products, the Agreement on Bovine Meat, the Government Procurement Agreement, and the Civil Aircraft Agreement.

15 The first two were terminated at the end of Only the last two remain in force. PRINCIPAL SUPPLYING INTEREST Having a principal supplying interest gives the right to negotiate compensation under GATT Article XXVIII if a trading partner decides to permanently increase a bound duty. The Member with the largest import share of a particular product in the market of the Member wishing to renegotiate a concession - in the absence of discriminative quantitative restrictions - has a principal supplying interest (Article XXVIII, paragraph 1:4). According to the Understanding on the Interpretation of Article XXVIII of the GATT, the Member who has the highest ratio of exports affected by the concession to total exports (paragraph 1) also has a principal supplying interest. For more information, see chapter I.A.1 of Module 2. PROTOCOL OF ACCESSION The Protocol of Accession sets out the terms on which the applicant will be invited to accede. It incorporates the main commitment paragraphs of the Working Party Report. The Working Party Report and the Goods and Services Schedules are annexed to the Protocol. In some exceptional cases, specific provisions have been included in the Protocol. REQUEST FOR ACCESSION Request for accession should be sent to the Director General of the WTO. See Module 1, Chapter IV, for the format of the request. Examples of requests for accession: Request from the Kyrgyz Republic (WT/ACC/KGZ/1) Request from Georgia (WT/ACC/GEO/1) Request from Oman (WT/ACC/OMN/1) Request from Cape Verde (WT/ACC/CPV/1) Note: all the other governments having joined the Organization since 1995 had originally requested accession before 1995, i.e. under the procedures of Article XXXIII of the GATT In early 1995, their GATT accession Working Parties were automatically transformed into WTO accession Working Parties. SCHEDULE OF CONCESSIONS A Schedule of concessions is a list of tariff and sometimes non-tariff concessions negotiated under WTO auspices. No additional duties or charges may be imposed at the border other than internal taxes also imposed on domestic products anti-dumping measures, countervailing duties and fees for services rendered. The concessions listed in the Schedule are applied on an MFN basis. For the format of the Schedule of concessions, see chapter I.A.8. of Module 2.

16 SCHEDULE OF SPECIFIC COMMITMENTS ON SERVICES Schedules of specific commitments on services indicate the level of market access each GATS Member is willing to accord to other Members and whether national treatment is offered. These Schedules perform a function similar to the Schedules of concessions under the GATT. For the format of the Schedule of specific commitments on services, see chapter II.C.2. of Module 2. SECTORAL MARKET ACCESS INITIATIVES Sectoral market access initiatives are initiatives negotiated by groups of interested contracting parties to the GATT during the Uruguay Round to accelerate the reduction of tariffs in certain areas. The reduced tariff bindings implemented under sectoral initiatives are extended to all Members by virtue of the MFN principle. The product coverage of some of these initiatives is being renegotiated as part of the Doha Round and new initiatives are being discussed. SERVICES SCHEDULE See "Schedule of specific commitments on services". SINGLE UNDERTAKING PRINCIPLE All multilateral Agreements of the WTO are binding as a whole. Members cannot choose to apply certain Agreements selectively. This is known as the Single Undertaking principle. The WTO Multilateral Trade Agreements are contained in Annexes 1, 2, and 3 of the Marrakesh Agreement. Plurilateral agreements are not part of the Single Undertaking. They are binding ONLY upon Members that accept them. Single Undertaking document. 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. Example: $10 per kg. STABLE NEGOTIATING TEAM The composition of the negotiating team should be carefully thought through. The Ministry of Economy or Trade is usually the ministry in charge of accession. A few acceding governments, however, have preferred to entrust the Ministry of Foreign Affairs with this task. An accession team, responsible for the day-to-day management of the accession process, should be established within the ministry in charge. It is essential to ensure that the accession team is composed of trade experts and is headed by a chief negotiator who has a clear negotiating mandate on all aspects of the accession negotiation.

17 In addition to the accession team, acceding governments are advised to put in place an inter-agency process bringing together the accession team, representatives of the various ministries and agencies dealing with trade-related issues (e.g. the Central Bank, agencies responsible for SPS and TBT issues, etc.), parliamentarians, and representatives of the business community (e.g. Chamber of Commerce). The close involvement of all these actors is essential at all stages of the process. Ideally, the inter-agency process should be headed by the Minister in charge of the accession negotiations. SUBSTANTIAL INTEREST Having a substantial interest gives the right to negotiate compensation under GATT Article XXVIII if a trading partner decides to permanently increase a bound duty. Members with a significant import share of a particular product in the market of the Member wishing to renegotiate a concession have a substantial interest. A 10 % share is considered sufficient. For more information, see chapter I.A.1 of Module 2. TARIFF BINDING The concept of tariff binding is set forth in Article II:1(b) of the GATT 1994: "The products [...] shall, on their importation into the territory to which the Schedule relates, and subject to the terms, conditions or qualifications set forth in that Schedule, be exempt from ordinary customs duties in excess of those set and provided therein." Pursuant to Article II:1(b), a tariff binding is a commitment not to increase a rate of duty beyond the level specified in the Schedule of Concessions of the Member concerned. There are, however, a few exceptions. See also chapter I.A.1. of Module 1. TARIFF RATE QUOTA (TRQ) A tariff rate quota is the application of a reduced tariff rate for a specified quantity of imported goods. All imports above this quantity face a higher tariff rate (i.e. the out of quota rate). Tariff rate quotas are normally used only for agricultural products. However, there have been a few exceptions, e.g. Viet Nam negotiated a TRQ on salt during accession. Acceding governments are requested to provide full and complete factual information on any tariff rate quotas maintained, and must be prepared to discuss these in the Working Party as well as on a bilateral level. Some WTO Members are reluctant to negotiate tariff rate quotas, as they are considered to distort trade and to be difficult to administer. TARIFF SCHEDULE See "Schedule of concessions".

18 TOTAL AMS The Total Aggregate Measurement of Support (Total AMS) means the sum of all domestic support provided in favour of agricultural producers subject to reduction commitments, i.e. the sum of all product-specific and non product-specific measures and all equivalent measurements of support, with the exception of measures regulated by Article 6.2, Article 6.5 (blue box) and the green box, and of measures falling under the de minimis level (Articles 6.1 and 6.4). The Total AMS, if any, must be bound in Part IV of the Goods Schedule. See also chapter I.B.1. of Module 2. WORKING PARTY See "Accession Working Party". WORKING PARTY REPORT See "Draft Report". ZERO-FOR-ZERO INITIATIVES Zero-for-zero initiatives are sectoral market access initiatives which aim at reducing tariffs to zero in certain sectors. Ten zero-for-zero initiatives were negotiated during the Uruguay Round. They cover the following sectors: Pharmaceuticals Agricultural equipment Construction equipment Medical equipment Paper Toys Furniture Beer Distilled spirits Steel The product coverage of some of these initiatives is being renegotiated as part of the Doha Round and new initiatives are being discussed.

19 Table of Content MODULE 1 HOW TO BECOME A MEMBER OF THE WTO?... 3 I. WHAT IS THE ACCESSION PROCESS?... 4 I.A. THE AIM... 4 I.B. ARTICLE XII OF THE MARRAKESH AGREEMENT... 4 II. GETTING READY FOR THE JOURNEY... 7 II.A. BUILD POLITICAL SUPPORT... 7 II.B. PUT IN PLACE A STABLE NEGOTIATING TEAM... 7 II.C. HAVE A NEGOTIATING STRATEGY... 8 II.D. KNOW YOUR RIGHTS AND OBLIGATIONS... 8 II.E. LEARN FROM OTHERS... 8 III. SOME FIGURES... 9 IV. STEP 1: REQUEST FOR ACCESSION IV.A. REQUEST FOR ACCESSION IV.B. CIRCULATION OF THE REQUEST IV.C. TRANSMISSION TO THE GENERAL COUNCIL IV.D. ESTABLISHMENT OF THE WORKING PARTY IV.E. THE WORKING PARTY (WP) V. STEP 2: THE ACCESSION NEGOTIATIONS V.A. MULTILATERAL NEGOTIATIONS V.B. BILATERAL NEGOTIATIONS V.C. PLURILATERAL NEGOTIATIONS V.D. SUMMARY OF STEP VI. TECHNICAL ASSISTANCE AND TRAINING VI.A. THE WTO SECRETARIAT VI.B. OTHER INTERNATIONAL ORGANIZATIONS VI.C. WTO MEMBERS VII. GUIDELINES FOR LDCS VII.A. WHAT DO THESE GUIDELINES SAY ON MARKET ACCESS? VII.B. WHAT DO THESE GUIDELINES SAY ON WTO RULES? VII.C. WHAT DO THESE GUIDELINES SAY ON THE PROCESS OF ACCESSION VII.D. WHAT DO THESE GUIDELINES SAY ON TECHNICAL ASSISTANCE VIII. INVOCATION OF ARTICLE XIII IX. THE FINAL STEP IX.A. ADOPTION OF THE ACCESSION PACKAGE BY THE WORKING PARTY IX.B. TRANSMISSION TO THE GENERAL COUNCIL IX.C. GENERAL COUNCIL'S APPROVAL IX.D. SIGNING CEREMONY... 29

20 IX.E. ACCEPTANCE OF THE PROTOCOL OF ACCESSION IX.F. MEMBERSHIP X. A LONG AND DEMANDING PROCESS X.A. THE INTERNAL POLITICAL SITUATION X.B. COORDINATION AT THE NATIONAL LEVEL X.C. TECHNICAL CAPACITY AND SCOPE OF REFORM MODULE 2 NEGOTIATIONS ON GOODS AND SERVICES INTRODUCTION I. NEGOTIATIONS ON GOODS I.A. MARKET ACCESS NEGOTIATIONS ON GOODS I.B. DISCUSSION ON AGRICULTURE II. MARKET ACCESS NEGOTIATIONS ON SERVICES II.A. WHAT DO THESE NEGOTIATIONS COVER? II.B. HOW DO THESE NEGOTIATIONS PROCEED? II.C. WHAT IS NEGOTIATED? MODULE 3 OVERVIEW OF COMMITMENTS ON GOODS AND SERVICES INTRODUCTION I. OVERVIEW OF WTO RULES I.A. COMMITMENTS ON MULTILATERAL RULES AND DISCIPLINES I.B. COMMITMENTS ON PLURILATERAL RULES AND DISCIPLINES II. OVERVIEW OF COMMITMENTS ON GOODS AND SERVICES II.A. COMMITMENTS ON GOODS II.B. COMMITMENTS ON SERVICES

21 MODULE 1 How to become a member of the WTO? ESTIMATED TIME: 2 ½ hours OBJECTIVES OF MODULE 1 In module 1, you will learn that accession negotiations involve negotiations on WTO rules and disciplines, which take place multilaterally; negotiations on market access for goods and services, which are bilateral; and In addition, discussions on domestic support and export subsidies in agriculture are carried out plurilaterally. 3

22 I. WHAT IS THE ACCESSION PROCESS? I.A. THE AIM Governments wishing to become a Member of the WTO have to go through an accession process involving complex negotiations. The raison d être of the accession process is connected to the nature of the WTO. The WTO is a contractual organization. All its Members are bound by the rules and disciplines laid down in the WTO Agreements and their individual market access commitments. When a Member fails to comply with its obligations, it may be liable before the Dispute Settlement Body. The WTO accession process aims to ensure that an acceding government s legislation and practices will be compliant with WTO rules and that it becomes a full and effective player from its first day of membership. The accession process is one of learning and preparation for WTO membership. But how does this process work? Let s have a look at the provisions of the Marrakesh Agreement governing accession to the WTO. I.B. ARTICLE XII OF THE MARRAKESH AGREEMENT The Article of the Marrakesh Agreement governing accession is Article XII. Art.XII is modelled on Art.XXXIII of the GATT 1947 which regulated accession to the GATT. It is one of the shortest articles of the Marrakesh Agreement. Let s have a detailed look at this Article. MORE ABOUT ARTICLE XII 1. Any State or separate customs territory possessing full autonomy in the conduct of its external commercial relations and the other matters provided for in this Agreement and the Multilateral Trade Agreements may accede to this Agreement, on terms to be agreed between it and the WTO. Such accession shall apply to this Agreement and the Multilateral Trade Agreements annexed thereto. 2. Decisions on accession shall be taken by the Ministerial Conference. The Ministerial Conference shall approve the agreement on the terms of accession by a two-thirds majority of the Members of the WTO. 3. Accession to a Plurilateral Trade Agreement shall be governed by the provisions of that Agreement. 4

23 M1 a. SEPARATE CUSTOMS TERRITORY International inter-governmental organizations are normally made up of sovereign States. This is also the case of the WTO. However, Article XII opens up a possibility for trading partners who are not fully-fledged sovereign States to accede. Two conditions must be fulfilled: 1. they must be separate customs territories, and 2. they must possess full autonomy in the conduct of their external commercial relations. Separate customs territories have the same rights and obligations as any other Member. Examples of separate customs territories: Chinese Taipei; Macao, China; Hong Kong, China. b. TERMS TO BE AGREED Article XII gives no guidance on the terms to be agreed or the procedures to be followed. Why is that? The aim of the drafters was to provide flexibility to ensure that the terms of each individual accession would provide for a balance between the specific needs of the acceding government concerned on the one hand and the credibility and viability of the rules-based WTO system on the other. Each accession is, therefore, unique and negotiated on a case-by-case basis. The terms of accession always depend on the legal and institutional framework of the acceding government and are different for each applicant. Although Article XII does not prescribe specific procedures to join the Organization, a set of procedures has been developed by the Secretariat in consultation with WTO Members and also through customary practice. These procedures are explained in the present module. c. MINISTERIAL CONFERENCE Decisions on accession shall be taken by the Ministerial Conference... or the General Council, which is the decision-making body of the Organization in-between two Ministerial Conferences (Art.IV:2 of the Marrakesh Agreement). d. TWO-THIRDS MAJORITY Although Article XII refers to a two thirds majority, since 1995 decisions on accession have been taken by consensus in accordance with WTO practice (Art.IX:1 of the Marrakesh Agreement). It is worth noting that paragraph 2 of Article XII refers to the final stage of the accession process, when the accession documents are adopted by the Ministerial Conference - or in-between two Ministerial Conferences by the General Council (Article IV:2 of the Marrakesh Agreement). 5

24 The formulation of paragraphs 1 ("...on terms to be agreed..") and 2 ("...the Ministerial Conference shall approve the agreement on the terms of accession...") of Article XII show that there must be "an agreement" on the terms of the accession package before the accession package can be submitted to the General Council/Ministerial Conference for approval. e. PLURILATERAL TRADE AGREEMENT Plurilateral Trade Agreements are not part of the "Single Undertaking"[G], therefore these Agreements are only binding on those Members that have accepted them. There are two plurilateral agreements in force: The Agreement on Trade in Civil Aircraft, and The Agreement on Government Procurement. 6

25 II. GETTING READY FOR THE JOURNEY The preparation for a negotiation is as important, if not more, as the negotiation itself. Below are a few tips to help you get ready: A. Build political support B. Put in place a stable negotiating team C. Have a negotiating strategy D. Know your rights and obligations E. Learn from others Do you feel ready? Take the plunge and request accession! To know who is already on the road, have a look at the next chapter. II.A. BUILD POLITICAL SUPPORT The decision to apply for membership should have broad support among the principal stakeholders. Sometimes you may find that the internal negotiations are even more strenuous than those held with WTO Members. II.B. PUT IN PLACE A STABLE NEGOTIATING TEAM A stable negotiating team should be put in place as early as possible, ideally before the actual process begins. The composition of the negotiating team should be carefully thought through. The Ministry of Economy or Trade is usually the ministry in charge of accession. A few acceding governments, however, have preferred to entrust the Ministry of Foreign Affairs with this task. An accession team, responsible for the day-to-day management of the accession process, should be established within the ministry in charge. It is essential to ensure that the accession team is composed of trade experts and is headed by a chief negotiator who has a clear negotiating mandate on all aspects of the accession negotiation. In addition to the accession team, acceding governments are advised to put in place an inter-agency process bringing together the accession team, representatives of the various ministries and agencies dealing with trade-related issues (e.g. the Central Bank, agencies responsible for SPS and TBT issues, etc.), parliamentarians, and representatives of the business community (e.g. Chamber of Commerce). The close involvement of all these actors is essential at all stages of the process. Ideally, the inter-agency process should be headed by the Minister in charge of the accession negotiations. 7

26 II.C. HAVE A NEGOTIATING STRATEGY Before starting the negotiations, make sure you have a negotiating strategy and know your red lines. To negotiate effectively, you need to have a clear idea of the objectives to be achieved, of the country's economic priorities, and of the interests of your trading partners. Negotiating strategies and priorities must spring from the domestic reform process underway. You should make sure you arrive at the negotiating table well equipped to answer questions and defend your country's interests. II.D. KNOW YOUR RIGHTS AND OBLIGATIONS The development of a strategy requires knowing your rights and obligations. Do not wait until the actual negotiations begin to build your knowledge! Technical assistance can be provided by various organizations and Member governments to help you strengthen your technical capacity (see chapter VI on technical assistance). II.E. LEARN FROM OTHERS A good way to prepare yourself is to learn from others. Do not hesitate to establish contacts with governments having completed accession to learn from their experience and the challenges they faced during the accession process. 8

27 III. SOME FIGURES The WTO came into force on 1 January 1995 with 128 original members. Since then, 25 governments have joined the multilateral trading system bringing the membership of the WTO to 153. As of September 2008, 29 countries were in the process of acceding, including 12 Least-Developed Countries (LDCs).[N] In addition, one country has requested accession. Its request is pending approval by the General Council. Note: LDCs : Since 1971, the United Nations has denominated least developed countries a category of States (presently 50 States) that are deemed highly disadvantaged in their development process (many of them for geographical reasons), and facing more than other countries the risk of failing to come out of poverty. As such, the least developed countries are considered to be in need of a higher degree of attention on the part of the international community. Least-developed countries have been classified on the basis of three criteria: their Gross National Income, their level of human resources (based on indicators of nutrition, health, education and adult literacy rate), and their economic vulnerability. These indicators and the list of countries designated as LDCs are reviewed by the ECOSOC every three years. The WTO uses the UN list of LDCs for purposes such as accession, special and differential treatment, etc. 9

28 Status Countries NEW MEMBERS Albania - 8 September 2000 Armenia - 5 February 2003 Bulgaria - 1 December 1996 Cambodia - 13 October 2004 Cape Verde - 23 July 2008 China - 11 December 2001 Chinese Taipei - 1 January 2002 Croatia - 30 November 2000 Ecuador - 21 January 1996 Lithuania - 31 May 2001 Estonia - 13 November 1999 FYROM - 4 April 2003 Georgia - 14 June 2000 Jordan - 11 April 2000 Kyrgyz Republic - 20 December 1998 Latvia - 10 February 1999 Moldova - 26 July 2001 Mongolia - 29 January 1997 Nepal - 23 April 2004 Oman - 9 November 2000 Panama - 6 September 1997 Saudi Arabia - 11 December 2005 Tonga - 27 July 2007 Ukraine - 16 May 2008 Viet Nam - 11 January 2007 ACCESSIONS IN PROGRESS Afghanistan (LDC) Iran Sao Tomé & Principe (LDC) Algeria Iraq Seychelles Andorra Kazakhstan Sudan (LDC) Azerbaijan Lao PDR (LDC) Tajikistan (LDC) Bahamas Liberia (LDC) Uzbekistan Belarus Libya Vanuatu (LDC) * Bhutan (LDC) Republic of Lebanon Yemen (LDC) Bosnia and Herzegovina Republic of Montenegro *Mandate of the Working Party completed Comoros (LDC) Equatorial Guinea (LDC) Ethiopia (LDC) Republic of Serbia Russian Federation Samoa (LDC) in October 2001, but accession documents not forwarded to the General Council/Ministerial Conference. PENDING REQUESTS Syria (3 requests for accession: October 2001, January 2004, September 2005) 10

29 IV. STEP 1: REQUEST FOR ACCESSION IV.A. REQUEST FOR ACCESSION A government wishing to become a WTO Member should send a letter to the Director General of the WTO expressing its wish to join the Organization. FORMAT OF THE REQUEST The letter can be as simple as: I have the honour to inform you of the wish of [my government] to accede to the Agreement establishing the World Trade Organisation and to the multilateral trade agreements annexed thereto, in accordance with Article XII of the said Agreement. The acceding government simply needs to express its wish to join under the procedures of Article XII of the Marrakesh Agreement. Would you like to have a look at real examples? See the requests from the Kyrgyz Republic, Georgia, Oman, or Cape Verde.[N] Note: All the other governments having joined the Organization since 1995 had originally requested accession before 1995, i.e. under the procedures of Article XXXIII of the GATT In early 1995 their GATT accession Working Parties were automatically transformed into WTO accession Working Parties. IV.B. CIRCULATION OF THE REQUEST The letter is then circulated to all WTO Members as an official document. Accession documents are circulated as WT/ACC and WT/ACC/SPEC documents series, in which each acceding government is generally given a three-letter identification code (e.g. CHN for China). The request for membership is received by the Director General and circulated to all WTO Members as the first document of the WT/ACC series. Documents relating to accession Working Parties are restricted during the accession process and shall be automatically de-restricted once the government becomes a Member of the WTO (WT/L/452). 11

30 IV.C. TRANSMISSION TO THE GENERAL COUNCIL The letter is transmitted to the Chairman of the General Council [G] for consideration at a future General Council meeting. IV.D. ESTABLISHMENT OF THE WORKING PARTY Once the General Council [G] considers the request for accession, and finds it acceptable it establishes a Working Party to examine the application further. Consideration of the request for accession is generally the first item on the agenda of the General Council. A representative of the government having requested accession is expected to attend the meeting. At the meeting, the representative will be invited to make a statement to present the reasons why their government wishes to become a Member of the WTO. The statement may include a brief overview the economic situation of the country and the reforms underway. IV.E. THE WORKING PARTY (WP) IV.E.1. TERMS OF REFERENCE The terms of reference of accession Working Parties are standard: "to examine the governments application and to submit to the General Council or Ministerial Conference recommendations which may include a Draft Protocol of accession". These terms correspond to the terms of reference of GATT accession Working Parties. IV.E.2. CHAIR OF THE WORKING PARTY Chairpersons are appointed by the General Council. Accession Working Parties are generally chaired by Geneva-based Ambassadors of WTO Members. A Chairperson whose tenure in Geneva has ended may remain as Chair if his/her government so agrees and the continuation of his/her functions is carried out at no cost to the WTO. Chairpersons are selected in consultation with the acceding government and Members. The usual practice is that consultations to select a Chairperson are carried out by the Accessions Division, on behalf of the General Council s chair. The role of the Chairperson is to facilitate the discussions of the Working Party in an impartial and objective manner. 12

31 The Chairperson may be invited to visit the acceding government at important stages of the process to help accelerate and reactivate the negotiations. IV.E.3. MEMBERSHIP OF THE WORKING PARTY Working Party membership is open to all interested WTO Members. The initial list of Working Party members is established after the first meeting (the list is circulated as a WT/ACC document). Interested WTO Members may join a Working Party at any stage of the process. A WTO Member wishing to join an accession Working Party must notify its interest to the Accessions Division of the Secretariat and request that its name be added to the Working Party list. The size of a Working Party varies significantly from one accession to another. The largest had 62 members (China), and the smallest only 17 (Tonga), counting the European Communities and its Member States as one Working Party member. Not all Working Party members are active participants. International organizations [G], acceding governments [G] and non-acceding governments having observer status [G] can attend formal Working Party meetings as observers. 13

32 V. STEP 2: THE ACCESSION NEGOTIATIONS Acceding governments must be equipped for two types of negotiations: Multilateral negotiations, and Bilateral negotiations. These two types of negotiations proceed more or less in parallel. The accession procedures are outlined in document WT/ACC/1, which was developed by the Secretariat in close consultation with Members as a practical, non-binding guide. a. MULTILATERAL NEGOTIATIONS Multilateral negotiations are negotiations on WTO rules and disciplines. These negotiations take place within the framework of the Working Party and cover all WTO Agreements in accordance with the Single Undertaking principle [G]. b. BILATERAL NEGOTIATIONS Bilateral negotiations are negotiations on conditions of access to the applicant s market for goods and services. These negotiations take place on a one-to-one basis between interested Members and the acceding government. The Secretariat is not involved. V.A. MULTILATERAL NEGOTIATIONS Multilateral negotiations take place within the framework of the Working Party. They aim at understanding the applicant s foreign trade regime and at ensuring the conformity of the applicant s laws and practices with WTO rules and disciplines. These negotiations first involve the collection of factual information. They result in the negotiation of commitments on WTO rules and disciplines. V.A.1. THE FACT-FINDING PHASE The first phase of the multilateral negotiations is one of "fact-finding" phase. Its purpose is to collect information on the applicant s foreign trade regime and identify any changes necessary to bring the acceding government's laws and practices into conformity with WTO rules, and to provide a basis for the negotiation of the applicant s terms of entry into the WTO. 14

33 During this phase, the applicant is requested to submit a number of documents to explain how its foreign trade regime works. a. SUBMISSION OF THE MEMORANDUM The applicant first has to submit a Memorandum on its foreign trade regime. Without this document the negotiations cannot begin. FORMAT OF THE MEMORANDUM The format of the Memorandum can be found in Attachment I of document WT/ACC/1. The Memorandum should cover the following issues: Economic Policies and Foreign Trade; Framework for Making and Enforcing Policies; Policies Affecting Trade in Goods (import regulation, export regulation, internal policies affecting trade in goods, policies affecting trade in agricultural products); Intellectual property rights; Services; and Trade Agreements with Third Countries. Additional information on import licensing, implementation of the Customs Valuation Agreement, technical barriers to trade, services and State trading should be annexed to the Memorandum. The Memorandum must be submitted in one of the official languages of the Organization - English, French, and Spanish. SUBMISSION OF COPIES OF LEGISLATION In addition to the Memorandum, the acceding government is encouraged to submit copies of legislation in one of the official languages of the Organization, i.e. English, French, or Spanish. The purpose is to enable Working Party members to ensure that the laws and regulations are in compliance with WTO requirements. Acceding governments are expected to submit copies of WTO-related legislation throughout the process. Members often invite acceding governments to present draft legislation for review. This has sometimes been questioned by governments sensitive of their sovereignty. Members have argued that this is aimed at facilitating the accession process by ensuring that texts in the pipeline were in compliance with WTO rules. Some governments have chosen to supply copies of draft legislation directly to interested Members rather than through the Secretariat. 15

34 b. CIRCULATION OF THE MEMORANDUM The Memorandum - and the copies of legislation, if any - are circulated to all WTO Members. Members seeking clarifications and additional information on the issues covered in the Memorandum can send their questions to the Secretariat. Members are usually given up to one month to submit their questions. c. FIRST SET OF QUESTIONS AND REPLIES These questions are then sent to the acceding government for reply. d. FIRST WORKING PARTY MEETING Once the first set of questions and replies has been circulated, the first Working Party meeting can take place. Having welcomed the acceding government, Working Party members begin the examination of the applicant s foreign trade regime on the basis of the Memorandum, the questions and replies and other documents submitted by the acceding government with a view to seeking any further clarifications that may be required. DOCUMENTS TO BE SUBMITTED In addition to the Memorandum and copies of legislation, other documents to be submitted during the accession process (ideally as early as possible in the process) include: A legislative action plan; If appropriate, action plans for the implementation of specific agreements (typically for sanitary and phytosanitary measures, technical barriers to trade, intellectual property, and customs valuation); Information on domestic support and export subsidies in agriculture (WT/ACC/4); Information on services (WT/ACC/5); A checklist on SPS and TBT (WT/ACC/8); A checklist on TRIPS (WT/ACC/9 and Corr. 1); A draft notification on industrial subsidies; and A draft notification on State trading entities. LEGISLATIVE ACTION PLAN Acceding governments are invited to submit a legislative action plan listing all trade-related laws recently adopted or in preparation. Legislative action plans are expected to be updated on a regular basis. 16

35 Standard format of a legislative action plan: Laws/Regulations Corresponding WTO Agreement Deadline e.g. Law on plant quarantine SPS -- SPECIFIC ACTION PLANS Working Party members may request that action plans dealing with a specific subject be submitted to the Working Party when they wish to understand what has to be done to bring the acceding government s regime into conformity with WTO rules and practices in a particular area. Such action plans are sometimes submitted at the initiative of the acceding government. Action plans on specific subjects play an important role in the negotiation of transitional periods. Members generally use these action plans as a basis for the negotiations of transitional periods. Acceding governments may choose to include an additional column on technical assistance needs. Example of an action plan for the implementation of a WTO agreement: Action Deadline e.g. Drafting on law... Establishment of an enquiry point on... Training of officials on INDUSTRIAL SUBSIDIES Applicants are requested to submit information on any subsidies granted to their industries by completing a draft notification, using the framework set out in Art.25 of the Agreement on Subsidies and Countervailing Measures. The notification should include information on the purpose of the subsidies; their form, amount and duration; and the recipient(s). STATE TRADING ENTERPRISES Acceding governments are asked to complete a draft notification on State trading enterprises, listing all the enterprises with exclusive or special rights or privileges and the products concerned. The notification should include an explanation of the reason or purpose for establishing or maintaining State trading enterprises, a description of their functioning and statistical data. 17

36 V.A.2. THE NEGOTIATING PHASE a. FURTHER QUESTIONS AND REPLIES After each Working Party meeting, Members are invited to provide questions in writing. These will be sent to the acceding government for reply. b. FURTHER WORKING PARTY MEETINGS When a new set of Questions and Replies and other requested documents are available a Working Party meeting is organized to review the documentation. c. PREPARATION OF FACTUAL SUMMARY At an appropriate stage of the process, the Secretariat is asked to prepare a Factual Summary of Points Raised which consolidates the information submitted by the government and identifies the issues raised by Members. The purpose of the Factual Summary is to facilitate the discussions. d. DRAFT REPORT As negotiations advance and the contours of the final entry terms become clearer, the Factual Summary evolves into a Draft Report. V.A.3. THE DRAFT REPORT The Draft Report is a key document of the accession package. Its structure is identical to that of the Factual Summary. The main difference between the Factual Summary of Points Raised and the Draft Report is that the latter contains commitment paragraphs while the former simply brings together the factual information that has been presented to the Working Party during the fact-finding stage. The Draft Report also includes a draft Decision and a draft Protocol of Accession. Sometimes Members request the Secretariat to prepare an intermediary document before moving to the Draft Report: the Elements of a Draft Report. a. COMMITMENT PARAGRAPHS Commitment paragraphs contain the terms of entry of an acceding government. These paragraphs are typically at the end of the various descriptive sections of the Draft Report. They normally start with the representative of [government X] confirmed that... and always end with the sentence the Working Party took note of this/these commitment(s). 18

37 Negotiations on commitments are often initiated by Working Party members who propose texts for inclusion into the Draft Report. Such texts can also be put forward by acceding governments. b. DRAFT DECISION The Decision taken by the General Council/Ministerial Conference when the accession package is adopted invites the applicant to accede. The Decision invites the applicant to accede on the terms set out in the Protocol of Accession, the Working Party Report and the Schedules on Goods and Services. The text of the Draft Decisions is standard. c. DRAFT PROTOCOL OF ACCESSION The Protocol of Accession sets out the terms on which the applicant will be invited to accede. It incorporates the main commitment paragraphs of the Working Party Report. The Working Party Report and the Goods and Services Schedules are annexed to the Protocol. In some exceptional cases, specific provisions have been included in the Protocol. V.B. BILATERAL NEGOTIATIONS Bilateral meetings are held with interested Working Party members to negotiate tariff bindings and services commitments. These negotiations are explained in more detail in Module 2, but let s see how they proceed. V.B.1. BILATERAL CONTACTS In order to establish contact and get an idea of the interests of their trading partners, acceding governments are advised to hold initial bilateral contacts with interested Members on the fringes of the first Working Party meeting. V.B.2. SUBMISSION OF INITIAL OFFERS Bilateral negotiations commence after the acceding government has submitted initial offers on goods and services to the Secretariat for consultation by Members. Such offers are generally submitted after the first Working Party meeting. BILATERAL NEGOTIATIONS Bilateral negotiations usually take place on the fringes of Working Party meetings. These negotiations can, however, take place at any time in Geneva or in the capitals. 19

38 V.B.3. REVISION OF OFFERS After each round of negotiations, the acceding government is invited to revise its offers, first multilaterally and, at a more advanced stage, bilaterally, taking into account the requests formulated by Members. The revised offers are then discussed bilaterally with interested Members. V.B.4. BILATERAL AGREEMENT Once an agreement has been reached with a Member (usually after several rounds of negotiations), a bilateral agreement is signed. V.B.5. DRAFT GOODS AND SERVICES SCHEDULES The Secretariat then consolidates all bilateral agreements (which remain confidential) into Draft Goods and Services Schedules. These form an integral part of the accession package. V.C. PLURILATERAL NEGOTIATIONS To facilitate agreement at the Working Party level, certain issues of multilateral and systemic interest are discussed plurilaterally, i.e. in informal consultations with a number of interested Members. This is typically the case for discussion on the technical aspects of domestic support and export subsidies in agriculture. Discussions on agricultural commitments are based on information provided by the acceding government in the format of WT/ACC/4.[N] Plurilateral meetings on complex issues such as SPS, TBT and TRIPS are also sometimes organized to help the discussions in such areas move forward. Plurilateral meetings are usually held on the fringes of the Working Party meetings. Note: Given the complexity of the issues involved (classification of the various types of domestic support) these tables may have to be revised several times during the accession process to incorporate the comments formulated by Members during the plurilateral meetings. When a new set of tables or other required documentation is available, a new plurilateral meeting is called. The results of the discussions on domestic support and export subsidies in agriculture are incorporated into the Goods Schedule. 20

39 V.D. Summary of Step 2 V.D. SUMMARY OF STEP 2 Multilateral negotiations Bilateral negotiations 22

40 VI. TECHNICAL ASSISTANCE AND TRAINING As you have seen from the first part of this module, WTO accession involves complex negotiations and the preparation of numerous documents. Technical assistance plays a key role in helping acceding governments face the challenges of the accession process. Technical assistance is provided by: A. The WTO Secretariat, B. Other International Organizations, C. WTO Members. VI.A. THE WTO SECRETARIAT Technical assistance provided by the WTO Secretariat takes the form of: 1. Accession-related Technical Assistance; 2. Participation in WTO Technical Assistance activities - WTO only activities; and 3. Multi-agency programmes. Requests must be sent to the Director of the Accessions Division and/or to the Director of the Institute for Training and Technical Cooperation. Priority for technical assistance is given to least-developed countries. This was made explicit in paragraphs 42 and 43 of the Doha Declaration. VI.A.1. ACCESSION-RELATED TECHNICAL ASSISTANCE A large part of the technical assistance provided to acceding governments is delivered from Geneva by the Accessions Division (by , phone, in face-to-face meetings). The Accessions Division assists acceding governments in the preparation of documents, and answers questions regarding WTO rules and requirements. National activities are carried out upon request. These activities can take the form of technical missions (to help the acceding government prepare documents required in the accession process), workshops (to train experts), or public awareness seminars. 23

41 Least-developed countries are entitled to receive three national activities per year and developing countries two. Policy-level missions may be undertaken at appropriate stages to reactivate the negotiations. These are often carried out with the participation of the Chair of the Working Party. VI.A.2. PARTICIPATION IN WTO TECHNICAL ASSISTANCE ACTIVITIES WTO only activities include: Three weeks, three months and short (one or two weeks) Geneva-based Trade Policy Courses; Specialized courses on issues such as dispute settlement, sanitary and phytosanitary measures, trade negotiations, etc; A bi-annual event for non-resident delegations called Geneva week - this event aims to brief representatives from Members and observing governments without a representation in Geneva; Topic-based regional and sub-regional seminars; E-training programmes; and Trainee programmes and internships. For more information see the WTO technical assistance webpage. VI.A.3. MULTI-AGENCY PROGRAMMES In addition, the WTO participates in multi-agency programmes in which the agencies provide technical assistance to applicants, each within its own area of competence: Integrated Framework for Trade-Related Technical Assistance for Least-Developed Countries (IF), initiated by the WTO, the IMF, the ITC, UNCTAD, UNDP and the World Bank (WB). Joint Vienna Institute, launched by the Austrian authorities and several international organizations (WTO, IMF, WB, BIS, OECD, EBRD). Standards and Trade Development Facility (STDF) which is a joint initiative of the WTO, the UN Food and Agriculture Organization (FAO), the World Organization for Animal Health (OIE), the WB, and the WHO. VI.B. OTHER INTERNATIONAL ORGANIZATIONS International Organizations such as UNCTAD, the International Monetary Fund (IMF), the World Bank (WB), the World Customs Organization (WCO) and the World Intellectual Property Organization (WIPO) also provide trade-related technical assistance. The WTO and the World Bank also cooperate in the delivery of joint regional courses for acceding governments. 24

42 VI.C. WTO MEMBERS WTO Members also provide accession-related WTO technical assistance on a bilateral basis upon request. 25

43 VII. GUIDELINES FOR LDCS Noting that none of the least-developed countries had joined the WTO under the procedures of Article XII since the establishment of the Organization, at the Doha Ministerial Conference in 2001 trade ministers discussed ways to facilitate the accession of least-developed countries (paragraph 42 and 43 - Doha Declaration). As a result, accession was included in the Work Programme of the Sub-Committee on least-developed countries. The implementation of this Programme led to the adoption by the General Council of the Guidelines for Accession of Least-Developed Countries in December The implementation of the Guidelines is reviewed on a regular basis and the results are included in the Annual Report of the Committee on Trade and Development to the General Council. Let's have a look at what these Guidelines say. VII.A. WHAT DO THESE GUIDELINES SAY ON MARKET ACCESS? The Guidelines provide that in the area of market access, WTO Members are to "exercise restraint in seeking concessions and commitments on trade in goods and services from acceding least-developed countries, taking into account the levels of concessions and commitments undertaken by existing WTO least-developed countries Members." On the other hand, least-developed countries are to offer reasonable market access concessions and commitments on goods and services commensurate with their individual development, financial and trade needs. VII.B. WHAT DO THESE GUIDELINES SAY ON WTO RULES? In the area of WTO rules, special and differential treatment shall be applicable to all acceding least-developed countries from the date of accession. The Guidelines also provide: that "transitional periods to enable least-developed countries to effectively implement commitments and obligations, shall be granted in accession negotiations taking into account individual development, financial and trade needs". "transitional periods shall be accompanied by Action Plans for compliance with WTO rules, supported by Technical Assistance and Capacity Building measures for acceding least-developed countries". "commitments to accede to any of the Plurilateral Trade Agreements or to participate in other optional sectoral market access initiatives shall not be a precondition for accession to the acceding leastdeveloped countries interests in the Multilateral Trade Agreements". 26

44 VII.C. WHAT DO THESE GUIDELINES SAY ON THE PROCESS OF ACCESSION The Guidelines provide that the offices of the Director General shall be available to assist acceding leastdeveloped countries and Chairpersons of the least-developed country Accession Working Parties. VII.D. WHAT DO THESE GUIDELINES SAY ON TECHNICAL ASSISTANCE The Guidelines also stipulate that targeted and coordinated technical assistance and capacity building by the WTO and other relevant multilateral, regional and bilateral partners shall be provided on a priority basis to LDCs. 27

45 VIII. INVOCATION OF ARTICLE XIII A WTO Member may choose to invoke Art.XIII of the Marrakech Agreement before adoption of the accession package by the General Council/Ministerial Conference in order not to be bound by the WTO rules vis-à-vis the new Member. Article XIII states that the WTO Agreement and the multilateral Agreements annexed to it shall not apply as between any member and any other member if either of the members, at the time either becomes a Member, does not consent to such application. This Article has been invoked eight times. Five invocations have been withdrawn and, as of early 2008, only three were still maintained (United States vs. Moldova WT/L/395; El Salvador vs. China - WT/L/429; Turkey vs. Armenia WT/L/501). 28

46 IX. THE FINAL STEP IX.A. ADOPTION OF THE ACCESSION PACKAGE BY THE WORKING PARTY Once an agreement has been reached between Working Party members and the acceding government on the terms of accession contained in the accession package- which comprises the Draft Report, including a Draft Decision and a Draft Protocol of Accession, and the draft Goods and Services Schedules - the latter is adopted by the Working Party. The Working Party has then concluded its mandate. IX.B. TRANSMISSION TO THE GENERAL COUNCIL The accession package is then forwarded to the General Council/Ministerial Conference for adoption - provided the applicant has fulfilled its financial obligations vis-à-vis the WTO. Note: Acceding governments are required to pay an annual observer fee. In 2008 this fee amounted to CHF Acceding governments can only accede if they have duly paid their contribution to the WTO budget. The accession package is therefore forwarded to the General Council/Ministerial Conference once the acceding government has met its financial obligations vis-à-vis the WTO IX.C. GENERAL COUNCIL'S APPROVAL The General Council/Ministerial Conference approves the Working Party Report, the Schedules on Goods and Services, and the draft Protocol of Accession, and adopts the Decision inviting the applicant to accede on the terms set out in the accession package. IX.D. SIGNING CEREMONY Immediately after the adoption of the accession package by the General Council/Ministerial Conference a signing ceremony is organized. 29

47 IX.E. ACCEPTANCE OF THE PROTOCOL OF ACCESSION Once the Protocol of Accession has been accepted [N] by the acceding government the latter notifies acceptance of the Protocol to the Secretariat. Note: Depending on the constitutional law of the applicant acceptance may be effective through signature or ratification. The Protocol of Accession is open for acceptance during a limited period of time. In practice the applicant proposes the length of time needed to complete internal procedures and accept the terms of accession (usually around three to six months). IX.F. MEMBERSHIP The government officially becomes a Member thirty calendar days after the notification is received by the Secretariat. 30

48 X. A LONG AND DEMANDING PROCESS Accession to the WTO is a long and demanding process. The length of time between application and actual accession has varied from 2 years and 10 months (the Kyrgyz Republic) to 15 years and 5 months (China). The length of an accession process depends, to a large extent, on: 1. The internal political situation and the priority given to the accession file; 2. Coordination at the national level; and 3. The technical capacity of the acceding government and the scope of reforms to be undertaken. X.A. THE INTERNAL POLITICAL SITUATION Elections, cabinet reshuffles, political instability and evolving political priorities may lead to important delays in the preparation of accession documents, the adoption of laws, and the decision-making process. X.B. COORDINATION AT THE NATIONAL LEVEL Insufficient coordination at the national level can slow down progress in the negotiations. Good coordination is essential at three levels: At the government level between the national accession team and the various ministries and agencies involved in the process (e.g. the Central Bank). The documentation to be submitted by acceding governments is wide-ranging and touches upon issues that fall under the responsibility of various ministries and agencies. A lack of coordination between, for example, the accession team and the customs administration or the Ministry of Agriculture can lead to important delays in the submission of documentation and the development of a negotiating strategy. Between the executive and the legislative: decisions taken by the negotiating team during the accession process often entail legislative adjustments. Between the accession team and the business community: the latter will be the first affected by most of the decisions and trade-related measures taken during the accession process. X.C. TECHNICAL CAPACITY AND SCOPE OF REFORM A large number of technical documents on specific issues have to be prepared during the accession process. The compilation of data and their analysis requires time and expertise. 31

49 A number of laws and regulations may have to be amended or passed to bring the legal framework of the acceding government into compliance with WTO rules. New institutions (such as SPS and TBT enquiry points) will have to be put in place. This work is usually very time consuming. CONGRATULATIONS, YOU HAVE COMPLETED MODULE 1! Do you want to know more? Have a look at our accessions webpage! 32

50 TEST YOU KNOWLEDGE ON MODULE 1 1. Who can become a Member of the WTO? Correct Choice a NGOs and International Organizations. b Any State or separate customs territory. c States only. 2. Who can request observer status to the WTO? Correct Choice a International Organizations and NGOs. b Governments and International Organizations. c Only governments. 3. The Chairman of the Working Party is appointed by... Correct Choice a The Director-General of the WTO. b The General Council c The WTO Secretariat. 33

51 4. Which of the following can attend formal Working Party meetings as observers? Correct Choice a International organizations, acceding and non-acceding governments having observer status. b International organizations, and acceding governments. c Non governmental organizations and acceding governments having observer status only. 5. What is the Memorandum on the Foreign Trade Regime? Correct Choice a A document containing commitment paragraphs which is part of the accession package. b A document submitted by the applicant which describes its economic and trade policies and is used as a basis for the multilateral negotiations. c A document containing the questions and replies resulting from the work of the Working Party. 6. In practice, decisions on accession are taken... Correct Choice a By consensus. b By simple majority voting. c By a two-thirds majority of the Members of the WTO. 34

52 7. Which of the following sentences regarding membership of Accession Working Parties is NOT true? Correct Choice a The size of Accession Working Parties varies from one accession to another b Membership of Accession Working Parties is open to all interested Members. c WTO Members must join the Working Party as soon as it is established by the General Council/Ministerial Conference. 8. Which of the following sentences regarding the Factual Summary of Points Raised is true? Correct Choice a It is a document submitted by the applicant on all aspect of its foreign trade regime. b It brings together the factual information that has been presented to the Working Party during the fact-finding stage. c It spells out the terms of entry of the acceding government. 9. What does the expression "Single Undertaking" mean? Correct Choice a That all multilateral agreements of the WTO are binding as a whole. b That members must apply all agreements of the WTO, including plurilateral trade agreements. c That all plurilateral trade agreements are binding on Members. 10. The results of the bilateral market access negotiations are contained in: Correct Choice a The Draft Report. b The Goods and Services Schedules. c The Working Party Report. 35

53 11. The elements of an accession package are... Correct Choice a The Memorandum and the questions and replies. b The draft Goods and Services Schedules, the Memorandum and the Factual Summary of Points Raised. c The Draft Report (including a draft Decision and a draft Protocol) and the draft Goods and Services Schedules. 12. The acceding government becomes a Member of the WTO... Correct Choice a Thirty calendar days after it has notified acceptance of the Protocol of Accession to the Secretariat. b Immediately after adoption of the accession package by the General Council/Ministerial Conference. c Once the draft Goods and Services Schedules are signed. 36

54 TEST YOU KNOWLEDGE ON MODULE 1 - FEEDBACK 1. Correct answer: b. Article XII of the Marrakesh agreement provides that "Any State or separate customs territory having full autonomy... may accede to this Agreement". See Section "More about Article XII" of the present module. 2. Correct answer: b. There are three categories of observers to the WTO: acceding governments - which are granted observer status automatically when a Working Party is established - international organizations, and governments having requested observer status. See the Glossary of terms for more information on these categories and Section III of the present module. 3. Correct answer: b. The Chairman of the Working Party is appointed by the General Council. See Section IV of the present module. 4. Correct answer: a. There are three categories of observers to the WTO: acceding governments - which are granted observer status automatically when a Working Party is established - and international organizations and governments having requested observer status. See the Glossary of terms for more information on these categories and Section III of the present module. 5. Correct answer: b. The Memorandum on the Foreign Trade Regime is a document submitted by the applicant which describes its economic and trade policies and is used as a basis for the multilateral negotiations. See Section V.A.1 of the present module. 6. Correct answer: a. In practice, decisions on accession are taken by consensus. The WTO is a consensus-based organization. The consensus principle is a legacy from the GATT. Article IX of the Marrakesh Agreement, which governs decision-making in the WTO, says: "the WTO shall continue the practice of decision-making by consensus followed under GATT 1947". For more information, see the Glossary. 7. Correct answer: c. Working Party membership is open to all interested WTO Members. Interested WTO Members may join a Working Party at any stage of the process. A WTO Member wishing to join an accession Working Party must notify its interest to the Accessions Division of the Secretariat and request that its name be added to the Working Party list. The size of a Working Party varies significantly from one accession to another. See Section IV of the present module. 8. Correct answer: b. The Factual Summary is a document prepared by the Secretariat, which brings together the factual information that has been presented to the Working Party during the fact-finding phase. 37

55 See Section V.A.2 of the present module. 9. Correct answer: a. The Single Undertaking principle is the principle according to which all multilateral agreements of the WTO are binding as a whole. Members cannot choose to apply certain multilateral agreements selectively. Plurilateral agreements are not part of the Single Undertaking. They are binding only upon Members that accept them. For more information, see the Glossary. 10. Correct answer: b. The results of the bilateral market access negotiations are contained in the Goods and Services Schedules. The draft Working Party Report - or Working Party Report once adopted by the Working Party - is a document discussed multilaterally, which describes the foreign trade regime of the applicant and sets out the applicant's terms of entry. See Section V.B. of the present module. 11. Correct answer: c. The Memorandum and the questions and replies are documents submitted by the acceding government to help Members have a better understanding of the foreign trade regime of the acceding government. The Memorandum and the first round of questions and replies are then used to prepare a Factual Summary of Points Raised. As negotiations advance and the contours of the final entry terms become clearer, the Factual Summary evolves into a Draft Report. See Section V of the present module. 12. Correct answer: a. The acceding government becomes a Member of the WTO 30 calendar days after it has notified acceptance of the Protocol of Accession to the Secretariat. See Section IX of the present module. 38

56 MODULE 2 Negotiations on goods and services ESTIMATED TIME: 5 hours OBJECTIVES OF MODULE 2 In this module you will learn about Bilateral market access negotiations on goods and services; and Plurilateral negotiations on domestic support and export subsidies in agriculture. 39

57 INTRODUCTION In module 1, you learnt that accession negotiations involve: negotiations on WTO rules and disciplines, which take place multilaterally; and negotiations on market access for goods and services, which are bilateral. In addition, discussions on domestic support and export subsidies in agriculture are carried out plurilaterally. This module will concentrate on bilateral market access negotiations on goods and services and plurilateral negotiations on domestic support and export subsidies in agriculture. 40

58 M2 I. NEGOTIATIONS ON GOODS Accession negotiations on goods cover: Market access issues (tariff bindings and non-tariff measures); and Discussions on agriculture (domestic support and agricultural export subsidies). I.A. MARKET ACCESS NEGOTIATIONS ON GOODS WHAT IS MARKET ACCESS? Market access can be defined as the extent to which an imported product or service is able to compete with locally-made products or services. In the WTO context, this relates to the totality of government-imposed conditions under which a product or service may enter a foreign market without suffering discrimination. I.A.1. BACKGROUND INFORMATION The main objective of the multilateral trading system is to ensure transparency, predictability and freer trade through the reduction of trade barriers, in particular non-tariff barriers, and the binding of commitments. In the case of goods, a basic GATT postulate is that tariffs should normally be the only instrument used to protect domestic industry. Furthermore, tariffs should be predictable and stable. Security and predictability are achieved through the binding of tariffs. Let's have a closer look at these concepts. THE CONCEPT OF TARIFF BINDING The concept of tariff binding is set forth in Article II:1(b) of the GATT 1994: "The products [...] shall, on their importation into the territory to which the Schedule relates, and subject to the terms, conditions or qualifications set forth in that Schedule, be exempt from ordinary customs duties in excess of those set and provided therein." Pursuant to Article II:1(b), a tariff binding is a commitment not to increase a rate of duty beyond the level specified in the Schedule of Concessions of the Member concerned. There are, however, a few exceptions. A bound rate that is higher than the applied tariff is commonly referred to as "ceiling" binding. Bound rates are extended to all WTO Members by virtue of the MFN Principle. 41

59 SCHEDULE The specific commitments on market access for goods made by acceding governments/members are listed in documents titled "Schedule of Concessions" (or "Goods Schedules"). ORDINARY CUSTOMS DUTIES Ordinary customs duties - i.e. applied tariffs (duties collected on goods that cross the border) - are not negotiated within the framework of the WTO. Only bound rates - i.e. the maximum level of tariff that can be applied - are negotiated in the WTO. EXCEPTIONS Applied tariffs may be raised above the bound level in the following circumstances: Imposition of safeguard measures (Art.XIX of the GATT 1994); Balance-of-payments difficulties (Art.XII and XVIII.B of the GATT 1994); Imposition of countervailing or anti-dumping duties; (Art.VI of the GATT 1994); and Waiver (Art.IX:3 of the Marrakesh Agreement). Such measures are temporary. The obligations contained in the Schedule of Concessions, therefore, remain unchanged. MFN PRINCIPLE Pursuant to Art.II:1(a) of the GATT 1994, "each contracting party shall accord to the commerce of the other contracting parties treatment no less favourable than that provided for in the appropriate part of the appropriate Schedule annexed to this Agreement". ARTICLE XXVIII AND THE PRINCIPLE OF COMPENSATION Once a rate is bound, it may not be raised without compensating the affected parties in accordance with Article XXVIII of the GATT Compensation usually takes the form of a new concession, i.e. a lower bound rate, on products of interest to Members who are entitled to negotiate a compensation, i.e. to Members having: 1. An initial negotiating right (INR); 2. A principal supplying interest; or 3. A substantial interest. Of course, Members wishing to reduce their bound tariffs are free to do so without invoking Article XXVIII. 42

60 INITIAL NEGOTIATING RIGHT Initial Negotiating Rights (INRs) are granted to Members with whom a concession was initially negotiated in the course of bilateral negotiations. In the case of acceding governments, INRs are granted to Members upon request in the course of their accession bilateral market access negotiations. Initial negotiating rights are registered in the Schedule of Concessions of the Member who granted the concession itself - in the case of acceding governments, within the Schedule of the acceding government. Members to whom an initial negotiating right has been granted are identified by a two letter country code, e.g. US (United States), MA (Morocco) etc. Let's have a look at an example: In the example below, initial negotiating rights are granted to the United States (US) and Morocco (MA). If country A decides to increase its bound rate for couscous to 40%, it will have to negotiate compensation with the Members listed in the initial negotiating rights column, i.e. the United States and Morocco, as well as Members having a principal supplying interest or a substantial interest. HS number Description Bound rate at date of accession Final bound rate Initial Negotiating Rights (INRs) Couscous US, MA PRINCIPAL SUPPLYING INTEREST The Member with the largest import share of a particular product in the market of the Member wishing to renegotiate a concession - in the absence of discriminative quantitative restrictions - has a principal supplying interest (Article XXVIII, paragraph 1-4). According to paragraph 1 of the Understanding on the Interpretation of Article XXVIII of the GATT, the Member who has the highest ratio of exports affected by the concession to total exports also has a principal supplying interest. SUBSTANTIAL INTEREST Members with a significant import share of a particular product in the market of the Member wishing to renegotiate a concession have a substantial interest. A 10 % share is considered sufficient. 43

61 VARIOUS TYPES OF TARIFFS INTRODUCTION Tariffs can be: 1. Ad valorem tariffs, i.e. tariffs expressed as a percentage of the value of the imported goods (e.g. 10%). 2. Non ad valorem tariffs, i.e. Specific duties; Compound duties; or Mixed duties. Members are usually reluctant to negotiate non ad valorem tariffs as part of accession negotiations as these are less transparent than ad valorem tariffs. Furthermore, under the Doha negotiations, it was agreed that WTO Members would convert all non ad valorem duties for non-agricultural products to ad valorem equivalents and bind them in ad valorem terms (see Annex B, paragraph 14 of the Hong Kong Declaration) Specific duties 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. Example: $10 per kg. Compound duties A compound duty is a customs duty comprising an ad valorem tariff to which a specific duty is added or, less frequently, subtracted. Example: 10% + $2 per kg. Mixed duties A mixed duty is a duty where a minimum or a maximum tariff protection is ensured by the choice between an ad valorem duty and a specific duty. Example: 10% minimum $2 per kg; 10% or $2 per Kg whichever is lower. 44

62 SELF-ASSESSMENT Gama, a WTO Member, wants to increase the bound tariff of product 1. With which country will Gama have to negotiate a compensation? Country Share of Market Export of products (in tons) 1 Total exports (in tons) Ration of Exports Initial Negotiating Rights (INRs) A 3% % Yes B 15% % No C 30% % No D 5% % No 45

63 SELF-ASSESSMENT FEEDBACK Gama will have to negotiate a compensation with all of them! Explanation: Country A is the holder of an initial negotiating right. Country B has a substantial interest: its exports of product 1 represent more than 10% of Gama's importation of this product (15% precisely). As country C has the largest share in the market concerned, it is the holder of a principal supplying interest. Country D has the highest ratio of exports affected by the concession to total exports, so it also has a principal supplying interest. Country Share of Market Export of products (in tons) Total exports (in tons) Ration of Exports Initial Negotiating Rights (INRs) Country's right A 3% % Yes INRs B 15% % No Substantial interest C 30% % No Principal supplying interest D 5% % No Principal supplying interest 46

64 I.A.2. COVERAGE OF THE NEGOTIATIONS Accession market access negotiations on goods essentially cover tariff bindings and initial negotiating rights (INRs). Depending on the foreign trade regime of the applicant, tariff rate quotas (TRQs) and non-tariff concessions can also be discussed. a. TARIFF RATE QUOTAS (TRQS) A tariff rate quota is the application of a reduced tariff rate for a specified quantity of imported goods. All imports above this quantity face a higher tariff rate (i.e. the out of quota rate). Tariff rate quotas are normally used only for agricultural products. However, there have been a few exceptions, e.g. Viet Nam negotiated a TRQ on salt during accession. Acceding governments are requested to provide full and complete factual information on any tariff rate quotas maintained, and must be prepared to discuss these in the Working Party as well as on a bilateral level. Some WTO Members are reluctant to negotiate tariff rate quotas, as they are considered to distort trade and to be difficult to administer. b. NON-TARIFF CONCESSIONS Examples of a non-tariff concessions are: the removal of an existing quantitative restriction; a tariff rate quota on non-agricultural goods, e.g. salt. I.A.3. HOW DO THESE NEGOTIATIONS PROCEED? a. BILATERAL CONTACTS Acceding governments are advised to hold initial bilateral contacts with interested Members on the fringes of the first Working Party meeting. This will allow them to familiarize themselves with the interests of their trading partners. 47

65 b. INITIAL OFFER Bilateral negotiations on goods begin once the acceding government has submitted its initial offer on goods to the Secretariat for multilateral circulation. Initial offers are usually presented after the first and prior to the second Working Party meeting. All offers are circulated as official WT/ACC/SPEC series documents. c. BILATERAL NEGOTIATIONS The initial offers are then discussed bilaterally with interested Members, usually on the fringes of the Working Party meetings. Bilateral negotiations may, however, take place at anytime in Geneva or in the capital of the acceding government or of the Member concerned. Bilateral meetings can be organized by the Secretariat upon request or, alternatively, by the applicant's mission. d. REVISED OFFER After each round of negotiations, the acceding government is invited to revise its offer, first multilaterally and, at a more advanced stage, bilaterally, taking into account the requests formulated by Members. e. FURTHER BILATERAL NEGOTIATIONS The revised offers are then discussed bilaterally with interested Members. f. BILATERAL AGREEMENT Once an agreement has been reached with a Member (usually after several rounds of negotiations), a bilateral agreement is signed. g. DRAFT GOODS SCHEDULE The Secretariat then consolidates all bilateral agreements (which remain confidential) into a Draft Goods Schedule. This forms an integral part of the accession package. Let's now have a look at these different steps. 48

66 I.A.4. FORMAT OF THE INITIAL OFFER The format of initial goods offer has not been standardized. However, practice shows that basic initial offers should contain the information indicated above. HS number (national nomenclature of the applicant) 1 Description (of each product) Current applied rate 2 Proposed bound rate at accession 3 Other duties and charges (ODCs) Yoghurt Initial offers must be submitted in one of the official languages of the Organization - English, French, or Spanish. Acceding governments may choose to list agricultural [G] and non-agricultural products in one single file or separately. Applicants wishing to maintain existing TRQs after accession may choose to submit additional information on these TRQs as part of their initial offer on goods. 1) HS NUMBER Initial offers are normally prepared in the national nomenclature applied by the acceding government at the time the document is prepared. Acceding governments are expected to have a national nomenclature based on the HS nomenclature [G]. 2) CURRENTLY APPLIED RATE Information on applied rates can be submitted as part of the initial and revised offers, or in a separate file. In practice, Members prefer that information on applied rates be included in the offer as this facilitates the analysis of the offer itself. 3) PROPOSED BOUND RATE AT ACCESSION This is the rate that the applicant proposes to bind on an MFN basis. According to Article II:1(a) of the GATT 1994, "each contracting party shall accord to the commerce of the other contracting parties treatment no less favourable than that provided for in the appropriate part of the appropriate Schedule annexed to this Agreement." It is important to recall that WTO rules cover non-preferential trade only. 49

67 4) OTHER DUTIES AND CHARGES (ODC) According to Article II:1(b) all products "shall, on their importation into the territory to which the Schedule relates, and subject to the terms, conditions or qualifications set forth in that Schedule, be exempt [...] from all other duties and charges of any kind imposed or in connection with the importation in excess of those imposed on the date of this agreement". "Other duties and charges" include all taxes levied for revenue purposes on imported products, in addition to ordinary customs duties. Such duties and charges are not imposed on locally-produced goods. The Understanding on the Interpretation of Article II:1(b) of the GATT 1994 required WTO Members to indicate in their Schedules "any other duty or charges" in force on 15 April Duties and charges not notified by then had to be eliminated. Acceding governments are expected to eliminate existing other duties and charges and to bind them at zero in their Goods Schedule. I.A.5. FORMAT OF A REVISED OFFER As discussions proceed, implementation periods for the reduction of tariff bindings, interim rates, initial negotiating rights and so forth, can be negotiated and additional columns may be added as part of revised offer(s). The format of a revised offer may therefore look as follows: HS number Description Bound rate at date of accession Final bound rate Implementation period Other Duties and Charges (ODCs) Initial Negotiating Rights (INRs) Yoghurt years 0 IMPLEMENTATION PERIODS When implementation periods for the reduction of tariff bindings are negotiated, it is assumed that the reductions are implemented in equal stages from the date of accession. If, for example, a bound rate of 10% has been negotiated, to be reduced to 5% within five years, unless otherwise specified, it is assumed that one year after accession the rate will be reduced to 9%, two years after accession to 8% and so forth. 50

68 Important note: Do not negotiate a specific year. If the accession process lasts longer than expected you may find yourself in a situation where you will benefit from a much shorter period than anticipated - if any at all! Always indicate a number of years. I.A.6. PARTICIPATION IN SECTORAL INITIATIVES Sectoral market access [G] initiatives are initiatives negotiated by groups of interested contracting parties to the GATT during the Uruguay Round to accelerate the reduction of tariffs in certain areas. The reduced tariff bindings implemented under sectoral initiatives are extended to all Members by virtue of the MFN principle [G]. Acceding governments may be asked to join sectoral market access initiatives. a. ZERO FOR ZERO INITIATIVES Ten of these initiatives, also called "zero for zero initiatives", led to the binding of tariffs on the products concerned at zero. The sectors covered include: Pharmaceuticals Agricultural equipment Construction equipment Medical equipment Paper Toys Furniture Beer Distilled spirits Steel The product coverage of some of these initiatives is being renegotiated as part of the Doha Round and new initiatives are being discussed. 51

69 b. HARMONIZATION INITIATIVE Another initiative, called "harmonization initiative", aims to harmonize tariffs on chemical products: bound tariffs on chemical products are set at zero, 5.5 or 6.5% depending on the product. c. TRADE IN INFORMATION TECHNOLOGY PRODUCTS "A Ministerial Declaration on Trade in Information Technology Products" (ITA) was concluded at the Singapore Ministerial Conference in December 1996 (WT/MIN (96)/16). The ITA provides for participants to completely eliminate duties on IT products covered by the Agreement. d. CIVIL AIRCRAFT In addition to these sectoral initiatives, acceding governments are often asked to join the plurilateral Agreement on Civil Aircraft which requires them to bind their tariffs on items covered under this Agreement at zero. Some acceding governments did not commit to join the Civil Aircraft Agreement but nevertheless agreed to bind their tariffs on civil aircraft at zero. I.A.7. FORMAT OF THE BILATERAL AGREEMENT While there is no standard format for a bilateral agreement, here is an example of a cover letter for a bilateral agreement on goods: The Permanent Mission of country 1 and the Permanent Mission of country 2 (WTO Member) hereby inform the Director-General of the World Trade Organization that they have concluded their bilateral market access negotiations in the context of the accession of country 1 to the WTO. They accordingly attach hereto the original of the list of concessions on goods which country 1 grants to country 2 (Attachment 1). Country 1 also grants to country 2 Initial Negotiating Rights for goods negotiated with country 2 as identified in Column [7] of the attached list of concessions at the rate which country 1 binds its schedule. The specific commitments on services that country 1 will grant to country 2 will be those contained in WTO document WT/ACC/SPEC/... of [date], as modified in Attachment 2 hereto. For country 2 For country 1 Ambassador Head of the Delegation Done in Geneva, date 52

70 a. ATTACHMENT 1 The attachment on goods of the bilateral agreement is generally presented as follows: HS number Description Bound rate at date of accession Final bound rate Implementation period Other duties and Charges (ODCs) Initial Negotiating Rights (INRs) b. INFORMATION ON TRQS If tariff rate quotas are negotiated, information on those is usually presented in another attachment. HS number Description of production Initial quota quantity and unquota tariff rate Final quota quantity and unquota tariff rate Implementation period Initial Negotiating Rights (INRs) c. ADDITIONAL SPECIFIC LANGUAGE Some countries may choose to add specific language to address issues of particular interest to them, e.g. to specify that certain products should be treated no less favourably than other products. Should such language be used in the bilateral agreement, it is included in a head note in the corresponding section of the Goods Schedule and the corresponding tariff rates are adjusted accordingly, if needed. Example: Let's assume that the following head note was included in a bilateral agreement: "Government "X" shall maintain its bound rates, including other duties and charges, for HS 1205 (rape or colza (canola) seeds), whether or not broken, at a level no higher than for HS 1201 (soya beans) whether or not broken". If, after consolidation of all the bilateral agreements, HS 1201 is bound at 5% in the draft Goods Schedule and HS 1205 at 10%, then HS 1205 will have to be reduced to 5%. Such language is often included in bilateral agreements, typically concerning rape or colza vs. soya seeds or oil, and meat (beef, poultry, pork). These provisions aim at safeguarding a Member's right, under the MFN provision in Article I:1 of the GATT 1994, to receive no less favourable treatment than that accorded to like products. 53

71 d. NEGOTIATION OF NON-TARIFF CONCESSIONS If non-tariff concessions (e.g. the removal of a ban on a particular product) are negotiated bilaterally, the negotiated concessions are recorded in the bilateral agreement. Such language is then included in the corresponding section of the Goods Schedule. e. MISCELLANEOUS Bilateral agreements must be signed in three copies. One is sent to the Secretariat, and the other two are kept by the acceding government and its negotiating partner. Bilateral agreements deposited with the Secretariat remain confidential. The Secretariat uses them to prepare the consolidated Goods and Services Schedules. Let's now have a look at the format of a Goods Schedule. 54

72 I.A.8. FORMAT OF THE GOODS SCHEDULE The format of the Goods Schedule is the following: Part I: MFN rates Section I: Agricultural products IA: Duties IB: Tariff Rate Quotas Section II: Other products Part II: Preferential Tariffs Part III: Non-Tariff Concessions Part IV: Agricultural products: Commitments limiting subsidization All Members undertake MFN bindings (Part I) and agricultural commitments (Part IV), while concessions on preferential tariffs (Part II) and non-tariff concessions (Part III) are seldom made. The concessions contained in the Goods Schedule are applicable on an MFN basis [G] (Article II:1(a) of the GATT 1994). Let's have a closer look at the various parts of a Goods Schedule. a. PART I: SECTION IA: AGRICULTURAL MFN DUTIES Part I, Section IA of the Goods Schedule deals with MFN tariff concessions on agricultural products [G]. The Head notes at the beginning of the Schedule contain general obligations or obligations that do not find their place elsewhere in the standard format. The section contains a description of the products concerned, their HS number, and indicates for each the bound rate at accession and the final bound rate (if no reduction is negotiated - that is, if the bound rate at accession is the same as the final bound rate, this column remains blank), the implementation period (if any), the concession established, the initial negotiating rights (if any) and the other duties and charges (usually bound at zero). b. PART I: SECTION IB: TARIFF RATE QUOTAS Part I, Section IB of the Goods Schedule deals with MFN tariff rate quotas on agricultural products. This section includes a description of each product subject to a TRQ and its tariff item number. Information on initial/final quota quantity and in-quota tariff rates is included in the third and fourth columns. The out-of quota rate is specified in Part I, Section IA of the Schedule. 55

73 SECTION II: OTHER PRODUCTS Part I, Section II of the Goods Schedule deals with "other products", i.e. non-agricultural products. It provides a description of the products concerned, their HS number, and indicates the bound rate at accession, the final bound rate (if no reduction is negotiated - that is, if the bound rate at accession is the same as the final bound rate, this column remains blank), any implementation period, any initial negotiating rights, and other duties and charges. The format of this section is identical to the format of Section I on agricultural products. c. PART II: PREFERENTIAL TARIFFS Part II of the Goods Schedule deals with preferential tariffs. When no preferential tariffs have been negotiated "NIL" is inscribed in the Schedule. This part is not relevant in the case of acceding governments. d. PART III: NON-TARIFF CONCESSIONS Part III of the Goods Schedule deals with non-tariff concessions. It defines the products concerned and lists the concessions negotiated on each one of the products. Examples of non-tariff concessions are: binding of tariff rate quotas on specified non-agricultural products; commitment to remove quantitative restrictions on certain non-agricultural products; commitment to eliminate licenses on certain agricultural and non-agricultural products. e. PART IV: AGRICULTURAL PRODUCTS: COMMITMENTS LIMITING SUBSIDIZATION Part IV of the Schedule deals with commitments on agriculture, as described in section I.B of this module. 56

74 TEST YOU KNOWLEDGE ON GOODS 1. A tariff binding is: Correct Choice a A rate that is higher than the applied rate. b A commitment not to increase a rate of duty beyond the agreed level. c A commitment to reduce the applied rate. 2. Let's assume that country X negotiates the following tariff bindings on product 1: Which of these tariff bindings will be included in country X's Goods Schedule? Correct Choice a 4% with country A. b 14% with country B. c 24% with country C. 3. Chose the appropriate definition. Word Definitions Substantial interest granted to the Member who has the largest share in the market of the Member wishing to renegotiate a concession or the Member who has the highest ratio of exports affected by the concession to total exports. Initial Negotiating Rights (INRs) granted to the Member who has a significant share in the market of the Member wishing to re-negotiate a concession. Principal supplying interest re-negotiating rights granted to Members with whom the concession was initially negotiated. 57

75 4. Ad valorem tariffs are: Correct Choice a Tariffs expressed as a percentage of the value of the good. b Tariffs based on the weight of the good. c Tariffs which are not related to the value of the good. 5. Specific duties are: Correct Choice a Ad valorem tariffs. b Non-ad valorem tariffs. 6. Match the different types of duties to the correct example: Types of duties Example Specific duties 10$ + 2$ per kg Compound duties 10% or 2$ per Kg whichever is lower Mixed duties 10% per kg 7. A tariff rate quota is: Correct Choice a The application of additional quotas added to tariff bindings. b The application of a reduced tariff rate for a specified quantity of imported goods. c The application of a tariff rate to the imported goods. 58

76 8. Other duties and charges are: Correct Choice a Taxes levied on imported goods in addition to ordinary customs duties for revenue purposes. b Another expression for customs duties. c Taxes levied on exported goods. 9. Which of the following statement on sectoral initiatives is NOT true? Correct Choice a Sectoral initiatives aim at accelerating the reduction of tariffs in certain areas. b Sectoral initiatives were negotiated by a group of countries during the Uruguay Round. c Tariff bindings implemented under the sectoral initiatives are not extended to all Members on an MFN basis. 59

77 TEST YOUR KNOWLEDGE ON GOODS - FEEDBACK 1. Correct answer: b. A tariff binding is a commitment not to increase a rate of duty beyond the agreed level. The concept of tariff binding is set forth in Article II:1(b) of the GATT 1994: "The products [...] shall, on their importation into the territory to which the Schedule relates, and subject to the terms, conditions or qualifications set forth in that Schedule, be exempt from ordinary customs duties in excess of those set and provided therein." See also chapter I.A.1. of Module Correct answer: a. As the 4% tariff binding is considered to be the most favourable, this will be included in country X's Goods Schedule, in accordance with the MFN principle. 3. See the Glossary or Section I.A.1 "Article XXVIII and the principle of compensation". 4. Correct answer: a. Ad valorem tariffs are tariffs expressed as a percentage of the value of the good (e.g. 10%). See the Glossary or Section I.A.1. "Various types of tariffs" of the present module. 5. Correct answer: a. Specific duties are duties which are not related to the value of the good, but to the weight, volume, etc. of the good (e.g. $15 per kg). See the Glossary or Section I.A.1. "Various types of tariffs" of the present module. 6. See the Glossary or Section I.A.1 "Various types of tariffs". 7. Correct answer: b. A tariff rate quota is the application of a reduced tariff rate for a specified quantity of imported goods. All imports above this quantity face a higher tariff rate (i.e. the out-of-quota rate). See the Glossary or Section I.A.2 of the present module. 8. Correct answer: a. Other duties and charges are taxes levied on imported goods in addition to ordinary customs duties for revenue purposes. See the Glossary or Section I.A.4 of the present module. 9. Correct answer: c. Sectoral market access initiatives are initiatives negotiated by groups of interested contracting parties to the GATT during the Uruguay Round to accelerate the reduction of tariffs in certain areas. The reduced tariff bindings implemented under sectoral initiatives are extended to all Members by virtue of the MFN principle. See the Glossary or Section I.A.6 of the present module. 60

78 I.B. DISCUSSION ON AGRICULTURE Unlike tariffs, commitments on domestic support and export subsidies in agriculture are not negotiated bilaterally, but plurilaterally. Discussions usually take place on the fringes of the Working Party meetings. The results of these discussions are included in Part IV of the Goods Schedule. Let's have a look at the rules governing domestic support and export subsidies in agriculture and at what the discussions on these issues involve. I.B.1. DOMESTIC SUPPORT: BACKGROUND INFORMATION a. THE BOXES In the WTO, domestic support measures are classified by "boxes" depending on their distortive effect on trade: green, for domestic support measures considered to have no, or minimal distortive effect on trade; blue, for direct payments under production-limiting programmes; amber, for measures considered trade-distortive.[n] In addition, Article 6.2 of the Agreement on Agriculture envisages development programmes for developing countries. Note: Some measures, in particular those which support domestic prices, encourage over-production and have an important trade-distortive effect. b. THE GREEN BOX The green box contains measures which do not distort or cause minimal distortion to trade. These measures are defined in Annex 2 of the Agreement on Agriculture and are allowed without limits. To qualify for the green box, support: must be provided through government funded programmes; must not involve transfers from consumers; and must not have the effect of providing price support to producers. The green box covers general government service programmes [G] and direct payments to producers [G] which are not linked to production. 61

79 c. THE BLUE BOX The blue box is defined in Paragraph 5 of Article 6 of the Agreement on Agriculture. The blue box covers direct payments to producers under production-limiting programmes, i.e. payments which are: made on fixed areas and yields; made on 85% or less of the base level of production; or made on a fixed number of head (in the case of livestock payments). In the blue box, the actual payments are not directly linked to the current quantity of production. At present there are no limits on spending on blue box subsidies. Limitations are discussed in the current round of negotiations. d. ARTICLE 6.2 Article 6.2. covers developmental measures of assistance which are fundamental for developing countries. They include: investment subsidies, generally available to agriculture; agricultural input subsidies, generally available to low-income or resource poor producers; and domestic support to producers in developing country Members, to encourage agricultural and rural development, such as diversification from growing illicit narcotic crops. These measures are exempt from reduction commitments. e. THE AMBER BOX The amber box contains measures considered to distort trade and production. Pursuant to Article 6 of the Agreement on Agriculture, all domestic support measures not covered by the blue and green boxes, and the provisions of Article 6.2, fall into the amber box. Amber box measures include: measures directly related to production quantities; and measures to support prices. These measures have an important trade-distortive effect and are therefore subject to binding and reduction commitments. Measures falling into the amber box benefit, however, from a "de minimis" (minimal) allowance which is not subject to reduction commitments. 62

80 The Agreement on Agriculture sets the de minimis level at: 5% of the value of production of a particular product for developed countries; 10% for developing countries. REDUCTION COMMITMENTS Reduction commitments are expressed in terms of a "Total Aggregate Measurement of Support" (Total AMS). The Total AMS means the sum of all domestic support provided in favour of agricultural producers subject to reduction commitments, i.e. the sum of all product-specific and non product-specific measures and all equivalent measurements of support, with the exception of measures regulated by Article 6.2, Article 6.5 (blue box) and the green box, and of measures falling under the de minimis level (Articles 6.1 and 6.4). The Total AMS, if any, must be bound in Part IV of the Goods Schedule. I.B.2. EXPORT SUBSIDIES: BACKGROUND INFORMATION According to Article 1(e) of the Agreement on Agriculture, export subsidies are "subsidies contingent upon export performance, including the export subsidies listed in Article 9". The Agreement on Agriculture prohibits the use of export subsidies listed in Article 9.1 unless the subsidies are listed in a Member's Goods Schedule (Art.3.3). Where export subsidies are listed in a Member's Goods Schedule, the Agreement requires WTO Members to cut both the amount of money they spend on export subsidies and the quantities of exports that receive the subsidies. a. EXPORT SUBSIDIES LISTED IN ARTICLE 9.1 Subsidies listed in Art.9.1 of the Agreement on Agriculture include: 10. direct export subsidies contingent on export performance; 11. sales of non-commercial stocks of agricultural products for export at prices lower than the comparable price charged for the like product to buyers in the domestic market; 12. producer-financed subsidies, i.e. programmes financed by the government which require a levy on all production which is then used to subsidize the export of a certain portion of that production; 13. cost reduction measures, i.e. subsidies to reduce the cost of marketing goods for export; 14. internal transport subsidies applying only to exports, such as those designed to bring exportable produce to one central point for shipping; and 15. subsidies on agricultural products contingent on their incorporation in exported products. 63

81 b. RECENT DEVELOPMENTS At the Hong Kong Ministerial Conference, Ministers committed to eliminate agricultural export subsidies by 2013 (2018 for developing countries). They also agreed to prolong the provisions of Art.9.4 of the Agreement on Agriculture, which allowed developing countries to use certain of the subsidies listed in Article these aimed at reducing the cost of marketing and transporting exports (paragraph 6 of the Hong Kong Declaration). c. ANTI-CIRCUMVENTION PROVISION In addition, the Agreement on Agriculture contains provisions designed to prevent the use of export subsidies not specifically listed in Article 9 in such a way as to circumvent reduction (Art.10). I.B.3. HOW DO DISCUSSIONS ON AGRICULTURAL SUPPORT PROCEED? WTO Members are required to notify their domestic support and export subsidies in agriculture. In the case of acceding governments, the discussions on agricultural commitments are based on the information provided by the acceding government in the format of document WT/ACC/4. These discussions proceed as follows: a. SUBMISSION OF WT/ACC/4 Acceding governments are required to submit data on domestic support and export subsidies in agriculture in the format of WT/ACC/4. This document is generally referred to as "domestic support tables". Members expect acceding governments to submit data in their national currency, for the most recent three-year period for which data is available. b. PLURILATERAL MEETING Discussions on the support tables usually take place plurilaterally with the acceding government and interested WTO Members. Plurilateral meetings are usually held on the fringes of Working Party meetings. 64

82 c. REVISION OF SUPPORTING TABLES Given the complexity of the issues involved (classification of the various types of domestic support) the tables submitted may have to be revised several times during the accession process to incorporate the comments formulated by Members during the plurilateral meetings. d. FURTHER PLURILATERAL MEETINGS When a new set of tables, or other required documentation is available, a new plurilateral meeting is called. e. COMMITMENTS ON AGRICULTURE The results of the discussions on domestic support and export subsidies in agriculture are incorporated into Part IV of the Goods Schedule. I.B.4. FORMAT OF PART IV OF THE GOODS SCHEDULE Part IV of the Goods Schedule of each WTO Member is entitled "Agricultural products: commitments limiting subsidization" and is divided into three sections: Section I Domestic support: total AMS commitments; Section II Export subsidies: budgetary outlay and quantity reduction commitments; Section III Commitments limiting the scope of export subsidies. a. FORMAT OF SECTION I Section I features the Base Total AMS, if any, and any commitment made to reduce the AMS level over a certain number of years. The very last column refers to the relevant support tables in the format of WT/ACC/4. b. FORMAT OF SECTION II Section II generally only refers to the relevant support tables where data on budgetary outlays during the base period and quantity reduction commitments on export subsidies are indicated. When no export subsidies have been granted during the base period, "NIL" is generally indicated. 65

83 c. FORMAT OF SECTION III Section III includes commitments undertaken to limit the scope of export subsidies. When export subsidies have been bound at zero, "NIL" is indicated in this section. 66

84 TEST YOUR KNOWLEDGE ON DOMESTIC SUPPORT 1. Which of the following measures are covered by the green box? Correct Choice a All trade-distortive measures. b Measures which do not distort trade or cause minimal distortion. c All development programmes exempt from reduction. 2. Which of the following is NOT a general government service covered by the green box? Correct Choice a Domestic support to producers in developing country Members. b Domestic support to research. c Domestic support to agricultural training services. 3. Which of the following is NOT a direct payment to producers covered by the green box? Correct Choice a Decoupled income support measures. b Natural disaster relief. c Direct payment made on fixed areas or yields. 67

85 4. Measures which are considered to have the most trade-distortive effect are those contained in: Correct Choice a The blue box. b The amber box. c The red box. 5. A "de minimis" allowance is envisaged for measures covered by which of the following boxes? Correct Choice a The green box. b Article 6.2. c The amber box. 6. Agricultural input subsidies generally available to low-income or resource poor producers are covered by: Correct Choice a The green box. b The blue box. c Article Direct payments to producers under production-limiting programmes are covered by: Correct Choice a The blue box. b The amber box. c Article

86 8. Which of the following statements on export subsidies is NOT true? Correct Choice a Export subsidies are not subject to reduction commitments. b At the Hong Kong Ministerial Conference, Ministers committed to eliminate export subsidies by c Developing countries are allowed to provide export subsidies to reduce the cost of transporting exports. 9. Which of the following statements on the "Total AMS" is true? Correct Choice a The Total AMS is the sum of domestic support subject to reduction commitments. b The Total AMS is the sum of domestic support not subject to reduction commitments. 69

87 TEST YOUR KNOWLEDGE ON DOMESTIC SUPPORT 1. Correct answer: b. The green box covers measures which do not distort trade or cause minimal distortion. Trade-distortive measures fall within the amber box while development programmes exempt from reduction fall under the provisions of Art.6.2. See the Glossary ("green box") or Section I.B.1 of the present module. 2. Correct answer: a. Domestic support to research and agricultural training services are green box measures. See the Glossary ("green box") or Section I.B.1 of the present module. 3. Correct answer: c. Direct payments to producers covered by the green box include decoupled income support measures and natural disaster relief. The last option (direct payment made on fixed areas or fields) refers to a measure contained in the blue box. See the Glossary ("green box") or Section I.B.1 of the present module. 4. Correct answer: b. Measures which are considered to have the most trade-distortive effect are those contained in the amber box. See the Glossary ("amber box") or Section I.B.1 of the present module. 5. Correct answer: c. A "de minimis" allowance is envisaged for measures covered by the amber box. See the Glossary ("amber box") or Section I.B.1 of the present module. 6. Correct answer: c. Agricultural input subsidies generally available to low-income or resource poor producers are covered by Art.6.2. See the Glossary ("Article 6.2") or Section I.B.1 of the present module. 7. Correct answer: a. Direct payments to producers under production-limiting programmes are covered by the blue box. See the Glossary ("blue box") or Section I.B.1 of the present module. 8. Correct answer: a. The correct answer is "Export subsidies are not subject to reduction commitments". The Agreement on Agriculture prohibits the use of export subsidies listed in Article 9.1 unless the subsidies are listed in a Member's Goods Schedule (Art.3.3). Where export subsidies are listed in a Member's Goods Schedule, the Agreement requires WTO Members to cut both the amount of money they spend on export subsidies and the quantities of exports that receive the subsidies. See Section I.B Correct answer: a. The "Total AMS" is the sum of all domestic support subject to reduction commitments, i.e. all domestic support measures with the exception of measures regulated by Art.6.2, Art.6.5 (blue box), and Annex 2 (green box), and of measures falling under the "de minimis" level. See the Glossary ("AMS") or Section I.B.1 "reduction commitments". 70

88 II. MARKET ACCESS NEGOTIATIONS ON SERVICES Market access negotiations on services constitute the "second track" of the accession bilateral negotiations. The regulation of trade in services is a relatively new issue compared to that of trade in goods. The General Agreement on Trade in Services (GATS) was negotiated in the Uruguay Round in response to the rapid growth of the services sector. The GATS established a multilateral framework of principles and rules which aimed at liberalizing trade in services and at improving trade predictability and security in the services area. II.A. WHAT DO THESE NEGOTIATIONS COVER? Under the GATS, each Member: is subject to a number of general obligations (publication of all relevant laws and regulations, establishment of an enquiry point etc.); and is required to undertake specific commitments which are set out in a Services Schedule. Within the framework of the accession process, compliance with the general obligations contained in the Agreement is reviewed multilaterally, while specific commitments are negotiated on a bilateral basis. 71

89 OVERVIEW: ACCESSION NEGOTIATIONS ON SERVICES II.A. What do these negotiations cover? Overview Accession negotiations on services GATS General obligations Specific commitments Accessions negotiations Multilateral Bilateral Results contained in: Report Services schedule 73

90 II.B. HOW DO THESE NEGOTIATIONS PROCEED? II.B.1. INITIAL OFFER Bilateral negotiations on services begin once the acceding government has submitted its initial offer. Initial offers are made available to Working Party members on a multilateral basis. The document is circulated as a WT/ACC/SPEC series document. Initial and subsequent revised offers follow the same format as the Services Schedule. The format of a Services Schedule is explained in section II.C. II.B.2. BILATERAL NEGOTIATIONS The initial offer is then discussed bilaterally with interested Members. Bilateral meetings usually take place on the fringes of Working Party meetings. II.B.3. REVISED OFFER After each round of negotiations the acceding government is invited to revise its offers, first multilaterally and, at a more advanced stage, bilaterally, taking into account the requests formulated by Members. II.B.4. FURTHER BILATERAL NEGOTIATIONS The revised offer is then discussed bilaterally with interested Members. II.B.5. BILATERAL AGREEMENT Once agreement is reached (usually after several rounds of negotiations), a bilateral agreement is signed. II.B.6. FORMAT OF THE BILATERAL AGREEMENT While there is no standard format for a bilateral agreement, below is an example of what the cover letter of a bilateral market access agreement may look like. Commitments on services are generally contained in Attachment 2 of the bilateral agreement (Attachment 1 covers goods). The Permanent Mission of country 1 and the Permanent Mission of country 2 (WTO Member) hereby inform the Director-General of the World Trade Organization that they have concluded their bilateral market access negotiations in the context of the accession of country 1 to the WTO. 74

91 They accordingly attach hereto the original of the list of concessions on goods which country 1 grants to country 2 (Attachment 1). Country 1 also grants to country 2 Initial Negotiating Rights for goods negotiated with country 2 as identified in Column [8] of the attached list of concessions at the rate which country 1 binds its schedule. The specific commitments on services that country 1 will grant to country 2 will be those contained in WTO document WT/ACC/SPEC/... of [date], as modified in Attachment 2 hereto. For country 2 For country 1 Ambassador Head of the Delegation Done in Geneva, date Bilateral agreements must be signed in three copies: one is sent to the Secretariat and the other two are kept by the acceding government and its negotiating partner. Acceding governments can choose to reproduce in Attachment 2 the latest offer referred to in the bilateral agreement incorporating the modifications negotiated bilaterally or to simply list the changes agreed with the Member concerned. II.B.7. DRAFT SERVICES SCHEDULE Bilateral agreements are then consolidated into a Schedule of Specific Commitments on Services which forms an integral part of the GATS (Art.XX) and the applicant's accession package. As in the case of goods, the specific commitments contained in the Services Schedule are bound on an MFN basis (Art.XVI:1). They cannot be modified without renegotiation with affected Members (Art.XXI) and they apply to all Members. As we will see in section II.C. MFN exemptions can be negotiated in accordance with Art.II of the GATS. II.C. WHAT IS NEGOTIATED? Now that you know how bilateral market access negotiations on services proceed, let's have a look at the substance of these negotiations. II.C.1. COVERAGE OF THE GATS The GATS covers any tradable service in any sector with the exception of the air transport sector, the majority of which is excluded from coverage. 75

92 Apart from this, the GATS provides a carve-out for services supplied "in the exercise of governmental authority" (e.g. police, justice) which, in turn, are defined as services that are supplied "neither on a commercial basis, nor in competition with one or more service suppliers". THE SERVICES SECTORS Services have been classified in 12 sectors. 1. Business 2. Communication 3. Construction 4. Distribution 5. Education 6. Environment 7. Financial 8. Health and social 9. Tourism 10. Recreational, cultural and sporting 11. Transport 12. Other services not included elsewhere These sectors are further subdivided into some 160 sub-sectors (see the Services Sectoral Classification list). 1. BUSINESS Professional services (including legal services; accounting, auditing and bookkeeping services; taxation services; architectural services; medical and dental services etc.); Computer and related services; Research and development services; Real estate, rental/leasing without operators services; and Other business services. 2. COMMUNICATION Postal, courier, telecommunication (including the Reference Paper on Telecommunications), audiovisual and other communication services. 3. CONSTRUCTION General construction for buildings and civil engineering, installation, assembly building completion and finishing work. 4. DISTRIBUTION Commission agents' wholesale trade and retailing services, franchising. 76

93 5. EDUCATION Primary, secondary, higher and adult education. 6. ENVIRONMENT Sewage, refuse disposal, sanitation and similar services. 7. FINANCIAL Insurance, banking and other financial services, including the Annex on Financial Services. 8. HEALTH AND SOCIAL Hospital, other human health, social services. 9. TOURISM Hotel and restaurants, travel agencies and tour operators, tourist guides services. 10. RECREATIONAL, CULTURAL AND SPORTING Entertainment, news agency, libraries, archives, museums, sporting services. 11. TRANSPORT Maritime, internal waterways, air, space, rail, road, pipeline and auxiliary transport services. II.C.2. FORMAT OF AN OFFER/SCHEDULE ON SERVICES The offer that acceding governments submit as a basis for the negotiations of their services commitments should follow the same format as a Services Schedule. All schedules conform to a standard format. Guidelines (S/L/92) for the scheduling of specific commitments under the General Agreement on Trade in Services (GATS) were adopted by the Council for Trade in Services in March 2001 to help Members and acceding governments draft their commitments on services. Let's have a look at the format of a Services Schedule. STRUCTURE Services offers/schedules are generally divided in two parts: "horizontal" commitments; and "sector-specific" commitments; i.e. commitments covering specific sectors. 77

94 Acceding governments may be asked to commit to apply the provisions contained in specific reference papers, such as the Reference Paper on Telecommunications. In such cases, the reference papers are attached to the offer/schedule immediately after the part on sector-specific commitments. Some offers/schedules may also contain a list of Article II (MFN) exemptions. HORIZONTAL COMMITMENTS These feature limitations that apply to all sectors listed in the Schedule. The purpose of having such a section is to avoid repeating the same entry in relation to each section contained in the Schedule. Any evaluation of sector-specific commitments must therefore take into account horizontal entries. SECTOR-SPECIFIC COMMITMENTS These cover some or all of the twelve services sectors identified in the Services Sectoral Classification list. An important feature of the GATS is flexibility. Members - and acceding governments - are under no obligation to undertake commitments in all sectors and sub-sectors and they can adjust the conditions of market entry and participation to their sector-specific objectives and constraints. The GATS functions like a "menu": Members - and acceding governments - are free to designate the sectors in which they will assume specific obligations. Sectors inscribed in this part are listed according to the Services Sectoral Classification list. In most cases, sectoral entries are accompanied by numerical references to items of the provisional Central Product Classification (CPC). ARTICLE II (MFN) EXEMPTIONS The Annex on Article II exemptions specifies the conditions under which a Member can be exempted from its obligations under Article II of the GATS (MFN treatment). All MFN exemptions are to be reviewed after five years by the Council for Trade in Services: after ten years they should in principle be terminated. Moreover, the exemptions are to be (re)negotiated in every services round. However, many countries have indicated in their list of Article II exemptions that their intended duration was indefinite. RECAPITULATION Hence, Services offers/schedules are arranged as follows: Horizontal commitments; Sector-specific commitments; Reference papers (e.g. on Telecommunications, Maritime Transport); and Article II (MFN) Exemption list. 78

95 THREE TYPES OF COMMITMENTS For each horizontal or sector-specific entry, three types of commitments can be undertaken: Market access commitments (Art.XVI); listed in the second column of the Offer/Schedule; National treatment commitments (Art.XVII); listed in the third column; and Additional commitments (Art.XVIII); listed in the fourth column. Sector or subsector Limitations on Market Access Limitations on National Treatment Additional commitments MARKET ACCESS Article XVI:2 lists six types of market access limitations which may not be adopted or maintained unless they are specified in the Schedule. These concern: the number of service suppliers; the value of transactions or assets; the number of operations or quantity of output; the total number of natural persons; the type of legal entity or joint venture; and foreign capital participation. All limitations on market access must fall into one of these categories. There is no need, however, to schedule access restrictions, such as bans on arms that fall under the General Exceptions of Article XIV of the GATS or prudential measures aimed at ensuring the stability and integrity of the financial services sector. NATIONAL TREATMENT The national treatment obligation under Article XVII requires the scheduling Member to "accord to services and service suppliers of any other Member treatment no less favourable than that it accords to like services and service suppliers of national origin". Any treatment that modifies the conditions of competition to the advantage of national services or service suppliers is considered to be inconsistent with this obligation. An acceding government wishing to impose limitations with respect to national treatment must include the relevant entry in the third column of its Schedule. 79

96 Measures which are inconsistent with both Articles XVI (market access) and XVII (national treatment) should be inscribed in the column relating to Article XVI (market access). ADDITIONAL COMMITMENTS If a Member decides to undertake commitments relating to measures other than those subject to scheduling under market access or national treatment - for instance, relating to qualification requirements, technical standards and licensing requirements - they should be included in the fourth column of its Schedule. FOUR MODES OF SUPPLY The GATS defines four modes through which a service can be supplied, also referred to as "modes of supply" (Article I.2 of the GATS): 1. Cross-border supply (also referred to as mode 1): the service is supplied from the territory of one Member into the territory of another Member; 2. Consumption abroad (mode 2): the service is supplied in the territory of one Member to the service consumer of another Member; 3. Commercial presence (mode 3): the service supplier of one Member establishes a commercial presence in the territory of another Member; 4. Movement of natural persons (mode 4): the service supplier of one Member travels in person to the market of another Member to provide a service. Let's have a look at some examples. 80

97 MODE 1: CROSS-BORDER SUPPLY The doctor (provider) in country A provides a service by phone to the patient (consumer) in country B. The service crosses the border. MODE 2: CONSUMPTION ABROAD The patient (consumer) in country B travels to country A where the doctor (provider) provides his services. The consumer crosses the border. 81

98 MODE 3: COMMERCIAL PRESENCE The legal person (provider) establishes a commercial presence in country B to provide its services. MODE 4: MOVEMENT OF NATURAL PERSONS The natural person travels to country B to provide his/her services. OR 82

99 The employee of a legal entity travels to country B to provide his/her services, either directly to the consumer or through the legal entity's commercial presence in country B. FORMAT OF THE SERVICES SCHEDULE A Services Schedule is, therefore, a relatively complex document, more difficult to read than a Goods Schedule. While a Goods Schedule, in its simplest form, lists one tariff rate per product, a Services Schedule contains at least eight entries per sector (more if additional commitments are listed): the commitments on market access and national treatment for each one of the four modes of supply. Sector or subsector Limitations on Market Access Limitations on National Treatment Additional commitments [...] a) Legal services 1)... 2)... 3)... 4)... 1)... 2)... 3)... 4)... refers to Mode 4 (movement of natural persons) THREE LEVELS OF COMMITMENTS Each entry indicates the presence or absence of limitations on market access or national treatment. There are three levels of commitments: None; Unbound; A limitation is scheduled. NONE None indicates the absence of limitations on market access or national treatment. UNBOUND Unbound is used to indicate that an acceding government does not intend making any commitment with respect to a particular service sector and mode of supply. In some cases, a particular mode of supply - such as the cross-border supply of bridge-building services - may not be technically possible or feasible. In such cases the term "unbound" has been used, usually in conjunction with an explanatory footnote stating "Unbound due to lack of technical feasibility". 83

100 A LIMITATION IS SCHEDULED If a limitation is scheduled, the entry describes the nature of the limitation, indicating the elements that make it inconsistent with Article XVI or XVII of the GATS. In some situations, Members have chosen to indicate a limited commitment by describing what they are offering rather than the limitations they are maintaining. Such an approach is often used to indicate the market access opportunities for the entry of certain categories of foreign natural persons who supply services. EXAMPLE OF A SERVICES SCHEDULE Sector or sub sector Limitation on market access Limitation on national treatment Additional commitments I. HORIZONTAL COMMITMENTS Commitments include all sectors 3. Branch offices can perform all kind of business activities, but are not considered to be independent legal entities 4. Unbound, except for the temporary stay of natural person as follows: [ ] II. SPECIFIC COMMITMENTS 1. BUSINESS SERVICES A. PROFESSIONAL SERVICES a) Services juridiques 1. None, except that consultancy on foreign law should be performed jointly with domestic firms. 2. Unbound 3. None 4. Unbound, except as indicated in the horizontal commitments. 1. None None 4. None 5. None 84

101 TEST YOUR KNOWLEDGE ON SERVICES 1. Which of the following is TRUE? Correct Choice a Members can undertake specific commitments and later decide to not abide by them. b Members are required to undertake commitments in the twelve sectors of the Services Sectoral Classification list. c Members are free to choose the sectors in which they will assume specific obligations. 2. What are horizontal commitments? Correct Choice a Limitations that apply to all sectors mentioned in the Schedule. b Limitations that apply to the sectors not covered in the Schedule. c Commitments that do not envisage any limitation. 3. For each specific service sector, which of the following commitments can be undertaken? Correct Choice a Market access and MFN commitments. b National treatment commitments only. c Market access, national treatment and additional commitments. 85

102 4. What does the GATS cover? Correct Choice a All tradable services. b All services but (most of the) air transport sector and services supplied in the exercise of governmental authority. c Only services supplied in the exercise of governmental authority. 5. Which mode of supply do the services rendered correspond to? Mode 1 Mode 2 Mode 3 Mode 4 A lawyer from country A provides advisory services by to a client located in country B. Bank A decides to open a branch in a neighbouring country. The biggest bank of country A has hired the services of Mr Wilkinson, a well-known architect who has to move to country A for the time of the project. You are on holiday and go to a local restaurant to have a dinner. A student from country A attends a postgraduate course offered by a University located in country B. Mr Wilkinson, a citizen of country A, lives at the border with country B. As no plumbers are available in his city, he decides to call a plumber located in country B. The plumber comes to repair the fault, and returns to country B once he has finished. 86

103 In order to pay the plumber for the services rendered, Mr Wilkinson asks his bank to make an e-transfer to the plumber's bank. You go to Country X on a shopping spree. 6. Is branching in the following case permitted? Market access National treatment Additional commitments Financial services Insurance services (1) None (2) None (3) None (4) Unbound (1) None (2) None (3) None (4) Unbound 7. Please indicate if the following government measures fall under market access (Article XVI), national treatment (Article XVII), or additional commitments. Market access National treatment Additional commitments Domestic voice telephone services are reserved to the governmentowned exclusive operator Foreign banks may not provide insurance services Hotels: foreign establishment must be staffed predominantly by nationals Residency requirements for foreign accountants 87

104 Market access National treatment Additional commitments Commitment to undertake the obligations contained in the Reference paper on Regulatory Services. The qualifying examination to determine the competence to supply the service will be conducted in the English language Hotel licensing is subject to a 300$ fee. Establishment is subject to an economic needs test. Foreigners must pass additional qualification exams. Commercial presence is subject to 51% foreign equity limitation. Establishment is allowed only in the form of a joint venture. 88

105 TEST YOUR KNOWLEDGE ON SERVICES FEEDBACK 1. Correct answer: c. Members are free to choose the sectors in which they will assume specific obligations. 2. Correct answer: a. Limitations that apply to all sectors mentioned in the Schedule. 3. Correct answer: c. Market access, national treatment and additional commitments. 4. Correct answer: b. All services but (most of the) air transport sector and services supplied in the exercise of governmental authority. 5. Mode of supply A lawyer from country A provides advisory services by to a client located in country B.: MODE 1 Bank A decides to open a branch in a neighbouring country.: MODE 3 The biggest bank of country A has hired the services of Mr Wilkinson, a well-known architect who has to move to country A for the time of the project.: MODE 4 You are on holiday and go to a local restaurant to have a dinner.: MODE 2 A student from country A attends a postgraduate course offered by a University located in country B.: MODE 2 Mr Wilkinson, a citizen of country A, lives at the border with country B. As no plumbers are available in his city, he decides to call a plumber located in country B. The plumber comes to repair the fault, and returns to country B once he has finished.: MODE 4 In order pay the plumber for the services rendered in country A, Mr Wilkinson asks his bank to make an e-transfer to the plumber's bank in his home country (country B).: MODE 1 You go to Country X on a shopping spree.: MODE 2 6. "Branching" is covered by the third mode of supply. Given that the term "none" indicates the absence of limitations on market access (or national treatment), in this case, branching is permitted. 7. Government measures Domestic voice telephone services are reserved to the government-owned exclusive operator: MARKET ACCESS Foreign banks may not provide insurance services: NATIONAL TREATMENT Hotels: foreign establishment must be staffed predominantly by nationals: NATIONAL TREATMENT Residency requirements for foreign accountants: NATIONAL TREATMENT Commitment to undertake the obligations contained in the Reference paper on Regulatory Services: ADDITIONAL COMMITMENTS The qualifying examination to determine the competence to supply the service will be conducted in the English language: ADDITIONAL COMMITMENTS Hotel licensing is subject to a 300$ fee: ADDITIONAL COMMITMENTS "Establishment is subject to an economic needs test": MARKET ACCESS 89

106 "Foreigners must pass additional qualification exams": NATIONAL TREATMENT "Commercial presence is subject to 51% foreign equity limitation": MARKET ACCESS "Establishment is allowed only in the form of a joint venture": MARKET ACCESS CONGRATULATIONS, YOU HAVE COMPLETED MODULE 2! Do you want to know more? Have a look at our accessions webpage! 90

107 MODULE 3 Overview of commitments on goods and services ESTIMATED TIME: 2 hours OBJECTIVES OF MODULE 3 This module presents the commitments undertaken by recently acceded Members in the course of their accession negotiations. 91

108 INTRODUCTION In modules 1 and 2, you learnt that accession negotiations involve: multilateral negotiations on WTO rules and disciplines, and bilateral negotiations on market access for goods and services. The accession process also includes discussions on domestic support and export subsidies in agriculture, which are generally carried out plurilaterally. This module will look at the commitments undertaken by recently acceded Members in the course of their accession negotiations. 92

109 I. OVERVIEW OF WTO RULES This chapter is divided into two sections: A. Commitments on multilateral rules and disciplines B. Commitments on plurilateral rules and disciplines I.A. COMMITMENTS ON MULTILATERAL RULES AND DISCIPLINES Commitments on multilateral rules and disciplines cover the following issues: 1. Economic policies 2. Framework for making and enforcing policies 3. Policies affecting trade in goods 4. Trade-related intellectual property regime 5. Policies affecting trade in services 6. Transparency 7. Trade agreements Click on below to view the corresponding number for more details on the commitments undertaken in these different areas, including an analysis of these commitments. I.A.1. ECONOMIC POLICIES This section of the Draft Report covers the following issues: Monetary and fiscal policies [analysis] Foreign exchange and payments [commitments and analysis] Investment regime [commitments and analysis] State ownership and privatization [commitments and analysis] Pricing policies [commitments and analysis] Competition policies [analysis] NON-STANDARD SUBSECTIONS: Non-discrimination (including national treatment) [commitments]. Balance-of-payments measures [commitments] 93

110 M3 I.A.2. FRAMEWORK FOR MAKING AND ENFORCING POLICIES This section of the Draft Report usually includes a description of the powers of the executive, legislative, judiciary and sub-central governments/authorities, as well as information on judicial review and uniform application of WTO rules. View the commitments undertaken by recently acceded Members in this area, as well as an analysis of these commitments. I.A.3. POLICIES AFFECTING TRADE IN GOODS Issues covered in this section include: Trading rights [commitments and analysis] NON-STANDARD SUBSECTIONS Advertising and trade in alcohol and tobacco products [commitments] Reference to Annexed Schedule to GATT 1994 containing Import Concessions, Export Concessions and Agriculture Commitments [commitments] a. IMPORT REGULATION: Customs tariff [commitments and analysis] Other duties and charges [commitments and analysis] Tariff rate quotas, tariff exemptions [commitments and analysis] Fees and charges for services rendered [commitments and analysis] Application of internal taxes on imports [commitments and analysis] Prohibitions, quotas, import licensing [commitments and analysis] Customs Valuation [commitments and analysis] Rules of origin [commitments and analysis] Other customs formalities [commitments and analysis] Pre-shipment inspection [commitments and analysis] Anti-dumping, countervailing, safeguard regimes [commitments and analysis] NON-STANDARD SUBSECTIONS Import regime [commitments] Customs code [commitments] 94

111 b. EXPORT REGULATION Customs tariffs, fees and charges for services rendered, application of internal taxes to exports [commitments and analysis] Export restrictions [commitments and analysis] Export subsidies [commitments and analysis] NON-STANDARD SUBSECTIONS Export processing zones/economic processing zones/export subsidies [commitments] c. INTERNAL POLICIES AFFECTING TRADE IN GOODS: Industrial policy, including subsidies [commitments and analysis] Technical barriers to trade and sanitary and phytosanitary measures [commitments and analysis] Trade-related investment measures [commitments and analysis] State-trading entities [commitments and analysis] Free zones, special economic areas [commitments and analysis] Transit [commitments and analysis] Agricultural policies [commitments and analysis] Textiles [commitments and analysis] NON-STANDARD SUB-SECTIONS Taxes and charges levied on imports [commitments] I.A.4. TRADE-RELATED INTELLECTUAL PROPERTY REGIME View the commitments undertaken by recently acceded Members in this area, as well as an analysis of these commitments. I.A.5. POLICIES AFFECTING TRADE IN SERVICES View the commitments undertaken by recently acceded Members in this area, as well as an analysis of these commitments. 95

112 I.A.6. TRANSPARENCY This section of the Draft Report is usually divided into two sub-sections on publication requirements and notification requirements. View the commitments undertaken by recently acceded Members in this area, as well as an analysis of these commitments. I.A.7. TRADE AGREEMENTS View the commitments undertaken by recently acceded Members in this area, as well as an analysis of these commitments. I.B. COMMITMENTS ON PLURILATERAL RULES AND DISCIPLINES As discussed in Module 1, plurilateral trade agreements are not part of the Single Undertaking [G]. Therefore, plurilateral trade agreements are binding only on Members that accept them. There are currently two plurilateral trade Agreements in force: the Agreement on Trade in Civil Aircraft; the Agreement on Government Procurement. The International Dairy Agreement and the International Bovine Agreement were both terminated at the end of Acceding governments are often asked to join the plurilateral Agreement on Civil Aircraft and the plurilateral Agreement on Government Procurement. I.B.1. COMMITMENTS UNDERTAKEN ON TRADE IN CIVIL AIRCRAFT Thirteen recently acceded Members 1 committed to join the Agreement: Eight governments upon accession; 2 One government (Oman) within a period of three years; One government (The Kyrgyz Republic) within "a reasonable period of time"; One government (Moldova) after accession; 1 Albania, Armenia, Chinese Taipei, Croatia, Estonia, FYROM, Georgia, The Kyrgyz Republic, Latvia, Lithuania, Moldova, Oman, Ukraine 2 Albania, Chinese Taipei, Croatia, Estonia, FYROM, Georgia, Latvia, Lithuania, 96

113 One government (Armenia) with no specified timeframe; One government by a certain date. (Ukraine (by 2010)) Four governments 3 did not commit to join the Agreement but agreed to bind most or all of their tariffs at zero on products covered by the Agreement. To have a look at the commitments undertaken by recently acceded Members in this area, click here. I.B.2. COMMITMENTS UNDERTAKEN ON GOVERNMENT PROCUREMENT Eighteen recently acceded Members committed to initiate negotiations for membership in the Government Procurement Agreement (GPA) either upon 4 or after 5 accession. Amongst these, 15 committed to complete their negotiations either by a certain date 6 or within a specific timeframe 7. One government (Chinese Taipei) noted that it had already initiated negotiations for membership in the GPA and committed to complete the negotiations within one year after accession. To have a look at the commitments undertaken by recently acceded Members in this area, click here. 3 Albania, The Kyrgyz Republic, Saudi Arabia, Cape Verde 4 Albania, Croatia, Estonia, FYROM, Georgia, Jordan, The Kyrgyz Republic, Latvia, Oman, Saudi Arabia 5 "AFTER ACCESSION": Moldova, Mongolia; WITHIN THREE MONTHS AFTER ACCESSION: Armenia, Lithuania; "ONE YEAR AFTER ACCESSION": Ukraine; "AS SOON AS POSSIBLE": China; BY A CERTAIN DATE: Bulgaria, Panama. 6 Albania, Armenia, Croatia, Bulgaria, Estonia, Georgia, The Kyrgyz Republic, Latvia, Lithuania, Panama. 7 WITHIN ONE YEAR: Jordan, Moldova, Oman, Saudi Arabia; WITHIN TWO YEARS: FYROM. 97

114 II. OVERVIEW OF COMMITMENTS ON GOODS AND SERVICES As explained in Module 2, commitments on goods and services are negotiated bilaterally, with the exception of commitments on agriculture which are discussed plurilaterally. Let s first have a look at the commitments on goods undertaken by recently acceded Members. II.A. COMMITMENTS ON GOODS Negotiations on goods cover tariff bindings for agricultural and non-agricultural products, non-tariff concessions and domestic support and export subsidies in agriculture. II.A.1. TARIFF BINDINGS Tariff bindings are featured in part I of the Goods Schedule. Part I, Section 1 covers agricultural products, while Part I, Section 2 deals with non-agricultural products. a. AGRICULTURAL PRODUCTS As explained in Module 2, acceding governments are expected to bind, and have generally bound, 100% of their tariff lines on agricultural products. Notes: Saudi Arabia prohibits importation and domestic production of some items for religious reasons. 98

115 AVERAGE FINAL BOUND TARIFFS ON AGRICULTURAL PRODUCTS The graph featured above shows the average final bound tariffs on agricultural products negotiated by recently acceded Members. As you can see, average final bound tariffs vary from a low of 9.4% (for Albania and Croatia) to a high of 41.4% (for Nepal). 99

116 AD VALOREM VS. NON-AD VALOREM TARIFFS As discussed earlier, WTO Members have shown a preference to negotiate ad valorem tariffs as part of accessions negotiations as these are more transparent than non-ad valorem tariffs. Twelve recently acceded Members negotiated non-ad valorem tariffs for agricultural products: Bulgaria Georgia Lithuania Croatia Jordan Moldova Chinese Taipei The Kyrgyz Republic Saudi Arabia FYROM Latvia Ukraine Click here for more detailed statistics on agricultural bound tariffs. TARIFF RATE QUOTAS (TRQS) A tariff rate quota is the application of a reduced tariff rate for a specified quantity of imported goods. All imports above this quantity face a higher tariff rate (see Module 2). Only eleven recently acceded Members 8 have negotiated the right to use TRQs (see details) Tariff rate quotas are normally used only for agricultural products. However, there have been a few exceptions: Viet Nam negotiated a TRQ on salt during its accession; and Chinese Taipei negotiated TRQs on passenger cars, light commercial vehicles and certain fish products. TRQs on non-agricultural products are bound in Part III of the Goods Schedule. b. NON-AGRICULTURAL PRODUCTS As explained in Module 2, acceding governments are expected to bind, and have generally bound, 100% of their tariff lines on non-agricultural products. 8 Bulgaria, China, Chinese Taipei, Ecuador, FYROM, Latvia, Lithuania, Panama, Saudi Arabia, Ukraine and Vietnam. 100

117 AVERAGE FINAL BOUND TARIFFS ON NON-AGRICULTURAL PRODUCTS The graph featured above shows the average final bound tariffs on non-agricultural products negotiated by recently acceded Members. As you can see, the final bound rate varies greatly from one accession to another (from 4.8% for Chinese Taipei to 23.7% for Nepal). 101

118 AD VALOREM VS. NON-AD VALOREM TARIFFS As discussed earlier, WTO Members have shown a preference to negotiate ad valorem tariffs as part of accessions negotiations as these are more transparent than non-ad valorem tariffs. Under the Doha negotiations, it was agreed that WTO Members would convert all non-ad valorem duties for non-agricultural products to ad valorem equivalents and bind them in ad valorem terms (see Annex B, paragraph 14 of the Hong-Kong Declaration). Only four governments 9 negotiated non-ad valorem tariffs in the non-agricultural sector. Click here for more detailed statistics on non-agricultural bound tariffs. c. SECTORAL INITIATIVES As explained in Module 2, sectoral market access initiatives [G] are initiatives negotiated by interested Members of the GATT during the Uruguay Round to accelerate the reduction of tariffs in certain areas. Acceding governments may be requested to join some sectoral initiatives. OVERVIEW OF PARTICIPATION IN SECTORAL INITIATIVES An analysis shows that participation among recently acceded Members has varied significantly: Only one government (Estonia) agreed to implement all sectoral initiatives. Four governments10 (including the first two Least-Developed Countries to accede to the WTO under Article XII) did not participate in any of the sectoral initiatives. All the other recently acceded Members agreed to participate in some, either fully or partially. Click here to view the number of sectoral initiatives that recently acceded Members have agreed to implement. PARTICIPATION IN THE ITA Seventeen recently acceded governments11 have become signatories to the ITA Agreement. One new Member (Cape Verde) have not formally joined the Agreement, but have agreed to bind its tariff lines on information technology products (ITA products) at zero. 9 Chinese Taipei, Croatia, FYROM, and Viet Nam. 10 Cambodia(LDCs ), Ecuador, Nepal (LDCs), and Tonga. 11 Albania, Bulgaria (EC), China, Chinese Taipei, Croatia, Estonia (EC), Georgia, Jordan, the Kyrgyz Republic, Latvia (EC), Lithuania (EC), Moldova, Oman, Panama, Saudi Arabia, Ukraine, Viet Nam. 102

119 PARTICIPATION IN THE CIVIL AIRCRAFT AGREEMENT Thirteen recently acceded governments 12 committed to join the Agreement, while four 13 only agreed to bind all or most of their tariffs at zero on products covered by the Agreement. d. OTHER DUTIES AND CHARGES Acceding governments are usually expected to eliminate existing other duties charges [G] and to bind them at zero in their Goods Schedule. Twelve recently acceded governments 14 have bound all other duties and charges at zero. Only two recently acceded governments (Chinese Taipei, Saudi Arabia) have bound some ODCs. One recently acceded government, which is a member of a customs union, has negotiated the right to retain ODCs on all tariff lines. As a Member of ECOWAS, Cape Verde negotiated the right to retain ODCs of 0.5 % on all tariff lines. II.A.2. NON-TARIFF CONCESSIONS Five recently acceded Members undertook commitments in Part III of their Goods Schedule (Non-tariff concessions): Two governments (Chinese Taipei and Viet Nam) committed to phase-out tariff quotas on specified non-agricultural products. One government (China) negotiated (i) tariff quotas on specified non-agricultural products during an implementation period, at the end of which the quota quantity will be subject to further negotiations; (ii) the elimination of licenses on certain products from the date of accession; and (iii) a tariff-quota only regime on some other products. 12 Albania, Armenia, Chinese Taipei, Croatia, Estonia, FYROM, Georgia, the Kyrgyz Republic, Latvia, Lithuania, Moldova, Oman, Ukraine. 13 Albania, the Kyrgyz Republic, Saudi Arabia, Cape Verde. 14 Albania, Armenia, Bulgaria, China, FYROM, Jordan, Mongolia, Nepal*, Cambodia, Tonga, Ukraine, Viet Nam * This government bound ODCs at zero in Part I of its Schedule with a staging matrix for the elimination of existing ODCs over a period of up to 10 years. 103

120 One government (Saudi Arabia) noted in Part III of its Goods Schedule that none of the agricultural products listed were subject to quantitative restrictions. One government (Ukraine) noted in Part III of its Goods Schedule that the products listed were exempted from sanitary and epidemiological control. II.A.3. COMMITMENTS ON AGRICULTURE Commitments on agriculture are contained in Part IV of the Goods Schedule. They cover domestic support and export subsidies issues DOMESTIC SUPPORT 5% OF DE MINIMIS About half of recently acceded Members negotiated a de minimis level of 5%, which is the level foreseen for developed countries in the Agreement on Agriculture. 10% DE MINIMIS Most others negotiated a de minimis level of 10%, claiming developing country status. Several Working Party Reports spell out specific provisions on this issue. SPECIFIC DE MINIMIS PROVISIONS Specific provisions: Armenia has negotiated a de minimis exemption of 10% until 2008, agreeing to apply a 5% de minimis thereafter. Latvia negotiated a transition period during which an amount equal to SDR 24 million would constitute Latvia s annual de minimis exemption until 2003, and committed to apply 5% thereafter. China negotiated a 8.5% de minimis exemption. NO AMS Fifteen recently acceded Members15 have no Base Total Aggregate Measurement of Support (Base Total AMS) specified in their Schedule. This means that all domestic support provided by these governments during the base period either satisfied the "green box" criteria, was provided in accordance with Article 6.2 (development programmes), or any type of "amber box" support provided did not exceed the de minimis level for such support. 15 Ecuador, Mongolia, Panama, the Kyrgyz Republic, Latvia, Estonia, Georgia, Albania, Oman, China, Armenia, Nepal, Cambodia, Tonga, Cape Verde 104

121 AMS NEGOTIATED Ten recently acceded Members have a Base Total AMS specified in their Schedule. Among these, seven governments 16 undertook commitments to reduce their Total AMS. The other three 17 governments have bound a Total AMS, which is not subject to reduction commitments. MORE INFO Click here to view the table containing a more detailed analysis of the commitments in agriculture undertaken by recently acceded Members. EXPORT SUBSIDIES Out of the 25 governments that have completed the accession process, eighteen recently acceded Members 18 did not provide agricultural export subsidies during the relevant base period and have bound these at zero in Part IV of their Schedules or undertaken a commitment in their Working Party Report not to provide any. Three governments 19 provided subsidies at some stage during the accession process, but all agreed to eliminate their agricultural export subsidies from the date of accession. Two governments 20 have undertaken export subsidy reduction commitments in Part IV of their Goods Schedules. Two governments 21 did not provide agricultural export subsidies during the relevant base period and did not undertake any commitment in this respect. 16 Bulgaria, Croatia, Chinese Taipei, Jordan, Lithuania, Moldova, Saudi Arabia. 17 FYROM, Ukraine, Viet Nam. 18 Albania, Armenia, Cambodia, Cape Verde, China, Chinese Taipei, Ecuador, Estonia, Georgia, Jordan, The Kyrgyz Republic, Moldova, Mongolia, Nepal, Oman, Saudi Arabia, Ukraine, Viet Nam. 19 FYROM, Latvia, Lithuania. 20 Bulgaria, Panama. 21 Croatia, Tonga. 105

122 II.B. COMMITMENTS ON SERVICES It is far more complicated in services than in goods to assess the level of market access liberalization. The easiest analysis is to determine the number of sub-sectors in relation to which recently acceded Members have made commitments. Such an analysis, however, does not say much about the actual level of liberalization. 106

123 The table above demonstrates that all recently acceded Members have assumed a relatively high level of commitments, in terms of sectors included. A more detailed analysis shows that acceding governments have usually made commitments in key sectors. 107