1.1 Background
Any effort at understanding the current negotiation dynamics at the World Trade Organization (WTO) must be preceded by a thorough assessment of what happened during the Uruguay Round of multilateral trade negotiations (henceforth referred to as just the Uruguay Round).1 The reasons for this are given below:
- 1.Without any doubt, the Uruguay Round was the most comprehensive and far-reaching multilateral trade negotiations ever undertaken globally.
- 2.When it succeeded, it brought about the biggest reform of the multilateral trading system.
- 3.It resulted in the birth of a brand new international organization called the WTO.
- 4.Although many countries accepted the outcome of the Uruguay Round and thus became WTO Members, the truth was that actual negotiations were confined to a relatively small number of countries, in general, and a handful of developing countries, in particular.
- 5.It is fair to say that a large number of developing countries either did not fully grasp the nature and scope of obligations they were undertaking or were forced to undertake them under some sort of pressure.
- 6.The above has had a lasting effect on the functioning of the WTO. Indeed, one of the central points in this book is that the content, nature, scope and the manner in which the Uruguay Round was formulated and concluded has left an indelible imprint on the subsequent negotiation dynamics of the WTO.
1.2 The Earlier GATT Rounds
The period before the entry into force of the WTO, i.e. 1 January 1995, can be divided, for the sake of convenience, into three periods: 1947â1964, 1964â1973 and 1973â1986.
An excellent account of the early General Agreement on Tariffs and Trade (GATT) Rounds may be found in the book âThe World Trading Systemâ written by the trade guru John Howard Jackson. He cites a table in his book which is reproduced below:
Round | Dates | Number of countries | Value of trade covered | Average tariff cut (%) | Average tariffs afterward |
|---|---|---|---|---|---|
Geneva | 1947 | 23 | $10 Billion | 35 | NA |
Annecy | 1949 | 33 | Unavailable | 35 | NA |
Torquay | 1950 | 34 | Unavailable | 35 | NA |
Geneva | 1956 | 22 | $2.5 Billion | 35 | NA |
Dillon | 1960â1961 | 45 | $4.9 Billion | 35 | NA |
Kennedy | 1962â1967 | 48 | $40 Billion | 35 | 8.7% |
Tokyo | 1973â1979 | 99 | $155 Billion | 34 | 6.3% |
Uruguay | 1986â1994 | 120a | $3.7 Trillion | 38 | 3.9% |
As can be seen from the table the first period, i.e. 1947â1964 saw the GATT concentrate essentially on mutually beneficial and reciprocal reduction of tariffs. The membership remained a modest 45, with the actual negotiations confined to essentially the developed countries. They would negotiate the reduction of tariffs among themselves and then apply it on a Most Favoured Nation (MFN)-basis to other countries. Developing countries neither had a significant share of trade nor did they constitute an important market for the products of the developed countries. So, in effect, their lack of participation did not make a difference.
The Kennedy Round not only continued negotiations on tariff reductions but decided to have a go at the issue of non-tariff measures (NTMs) for the first time. Two developments were noteworthy. One was the Anti-Dumping Code and this was deemed necessary to counter the protectionist sentiment prevalent at the time.2 In effect, countries which were agreeing to reduction of tariffs in the negotiations, were using anti-dumping duties indiscriminately to nullify the advantage of tariff concessions. So, some regulation of anti-dumping was thought essential to safeguard the final outcome of the Kennedy Round tariff concessions estimated at $40 Billion.
A more important development, from developing countries point of view, was an agreement incorporated as Part IV of GATT which became effective in June 1966.3 This goes on to state that the developed countries do not expect reciprocity for commitments made by them in trade negotiations to reduce or remove tariffs and other barriers to the trade of less-developed (i.e. developing) countries. An interpretative note in the GATT adds that the developing countries should not be expected, in the course of trade negotiations, to make contributions which are inconsistent with their individual development, financial and trade needs, taking into consideration past trade developments. Developing country negotiators (particularly those belonging to India, Brazil, etc.) who were otherwise bystanders in tariff negotiations, deserve credit for negotiating such language in the early pre-Uruguay Round days of GATT. Their main motivation was to preserve, for their countries, full policy space so that they retain the potential to go forward unimpeded on the path towards industrialization and economic growth.
The third period coincides with the Tokyo Round, arguably the first major attempt to tackle trade barriers that do not take the form of tariffs and to improve the multilateral trading system. The Tokyo Round was significant because 102 countries participated in it and they exchanged tariff reductions covering more than $300 Billion worth of trade.4 While the Tokyo Round failed to make progress in the areas of Agriculture and Safeguards, it did break new ground with a series of new agreements on non-tariff barriers. Thus, there were âcodesâ on technical barriers to trade and on import licensing procedures.
For developing countries the Tokyo Round will be remembered, above all, for the âDecision on Differential and More Favourable Treatment, Reciprocity and Fuller Participation of Developing Countriesâ. This was an elaboration of the concept of non-reciprocity outlined in the Kennedy Round. The main outcome of this decision was: The developed countries do not expect reciprocity for commitments made by them in trade negotiations to reduce or remove tariffs and other barriers to the trade of developing countries, i.e. the developed countries do not expect the developing countries, in the course of trade negotiations, to make contributions which are inconsistent with their individual development, financial and trade needs. Developed contracting parties shall, therefore, not seek, neither shall less-developed contracting parties be required to make concessions that are inconsistent with the latterâs development, financial and trade needs.5 Having regard to the special economic difficulties and the particular development, financial and trade needs of the least developed countries, the developed countries shall exercise the utmost restraint in seeking any concessions or contributions for commitments made by them to reduce or remove tariffs and other barriers to the trade of such countries and the least developed countries shall not be expected to make concessions or contributions that are inconsistent with the recognition of their particular situation and problems.6 This was probably the first time when developing countries such as Brazil and India participated in the GATT negotiations in what was known as the Framework Group of the Kennedy Round. 7 This was significant for a variety of reasons. First, the sheer lack of economic clout by developing countries at the time meant that they were not in a position to make matching concessions (nor were they in a position to demand) to developed countries. Second, they did not really participate effectively in the tariff negotiations anyway. Tariff negotiations mainly happened between the developed countries themselves. Thus, at the Dillon Round, 96% of US tariffs cutsâalthough made on a MFN basisâwere on imports from countries that made concessions in return.8 Finally, a subtle distinction also appears to have been made between developing countries and least developed countries, perhaps based on both political and economic considerations.
There are two interpretations about the participation of develo...