I.INTRODUCTION
Market access for goods in the WTO stands for the totality of government-imposed conditions under which a product may enter a country under non-discriminatory conditions. It is often, but not exclusively, determined by border measures, such as tariffs, tariff rate quotas(TRQs), and quantitative restrictions (QRs).
Most WTO Agreements have rules on market access that apply to both, agricultural products (defined in Annex 1 of the Agreement on Agriculture) and to non-agricultural products (all other products).
As you certainly imagine, there is a wide variety of measures which influence market access for goods. The two main categories of barriers to market access for goods are:
(1) Tariffs; and,
(2) Non-tariff barriers (NTBs).
The progressive reduction of tariff and NTBs, together with non-discrimination and transparency, constituteone of the main objectives of the WTO. The aim of multilateral trade negotiations has been to make market access more liberal, as well as more predictable.
We will first examine the main issues relating to tariff barriers. We will start by presenting tariff and tariff schedules. We will, then, study how tariff barriers are dealt within the GATT/WTO framework, by introducing the outcome of the Uruguay Round on tariff negotiations (reductions of tariffs and tariff ''bindings'') and elaborating the relevant WTO rules on tariffs (in particular ArticleII of the GATT1994Schedules of Concessions).
We will, finally, explain some of the main issues surrounding the concept of NTBs, with a focus on QRs.
The Committee on Market Access, established by the General Council in January 1995, is the WTO Body in charge of monitoring market access related issues for goods.
II.in Brief: TRADE IN GOODS: MARKET ACCESS
Market access for goods in the WTO stands for the totality of government-imposed conditions (tariff and nontariff measures) under which a good may enter into a Member. Most WTO Agreements have rules on market access that apply to both, agricultural products (defined in Annex 1 of the Agreement on Agriculture) and to non-agricultural products (all other products)[1]. The Agreement on Agriculture (explained below) includes provisions on market access applicable only to agricultural products.
II.A.Tariff Barriers
Under the WTO, tariffs are regarded as the most common and widely used barriers to market access for goods. The WTO does not prohibit the use of tariffs. However, Members recognise that tariffs often constitute serious obstacles to trade. Tariffs are subject to negotiations, which have led to successive reductions of tariffs. Tariff negotiations should be conducted on a reciprocal and mutually advantageous basis, whereas developing country and LDC Members are not required to make full reciprocal concessions as made by developed country Members. Nevertheless, the concessions granted by a Member must be extended on a MFN basis, that is, to all WTO Members immediately and unconditionally.
Members had also agreed to bind their tariffs at reduced levels and to record such tariff bindings in their Schedules of concessions, which represent their legal commitments on tariffs under the WTO (ArticleII of the GATT 1994). WTO Members may apply a tariff which is lower than the bound level, however they cannot exceed the bound levels specified in their Schedules of concessions. Therefore, the applied tariff of a particular product (as reflected in a Members' national tariff schedule) can be different –lower— than the bound tariff rate for that product as specified in the Members' WTO Schedule of concessions.
A negotiated tariff binding may become too onerous to maintain over time due to changing circumstances. WTO Members are allowed to modify the concessions in their Schedules by using the renegotiation procedures outlined in the GATT 1994, provided that they compensate those Members holding special rights.
The value of tariff concessions is also protected through the operation of other GATT provisions – including ArticleIII of the GATT 1994 (national treatment on internal taxation and regulation) and the other multilateral Agreements on trade in goods included in Annex 1A of the Agreement Establishing the WTO (explained below).
II.B.Non Tariff Barriers (NTB)
Besides tariffs, various forms of non-tariff measures may constitute obstacles to market access for goods. There is no agreed definition of what constitutes a NTB. They include, in principle, all measures other than tariffs used to protect a domestic industry.
II.B.1.Quantitative Restrictions (QRs)
A QR is one of the best-known NTBs. Quantitative restrictions impose specific limits on the quantity or value of goods that can be imported (or exported) during a given period. Whereas tariffs are allowed as long as they do not exceed the scheduled bound levels and are applied on an MFN basis, Members are in general prohibited to apply QRs. The general prohibition of QRs reflects the preference for tariffs over QRs among forms of border protection. While QRs impose absolute limits on imports, tariffs do not. ArticleXI:1 of the GATT 1994, which provides the general elimination of quantitative restrictions, refers to restrictions made effective through quotas, imports or export licenses or other measues. The list of measures included in ArticleXI is not exhaustive. It is important to distinguish between QRs and tariff-rate-quotas (TRQs), which are permitted.[2]
Despite the general rule prohibiting QRs, there are some specific exceptions which allow the imposition of QRs in certain circumstances and subject to certain conditions. In such cases, QRs must be applied on a nondiscriminatory basis, according to ArticleXIII of the GATT 1994. This requirement applies equally to the allocation of TRQs.
II.B.2.Other NTBs
In addition to QRs, NTBs (e.g. lack of transparency in trade regulation, unfair and arbitrary application of trade regulations, customs formalities, technical barriers to trade and arbitrary practices of customs valuations) can also restrict or impede market access of goods. Most of these NTBs are presented in the box below.
Several WTO provisions are aimed at eliminating or minimizing the trade effect of non-tariff measures. In those cases where non-tariff measures are based on a legitimate goal (e.g. measures on food safety – sanitary and phytosanitary measures (SPS) - or technical standards), Members need to follow specific provisions to ensure their compatibility with WTO rules. In general, the disciplines on NTBs are set out in various WTO Agreements contained in Annex 1A of the Agreement Establishing the WTO (multilateral Agreements on trade in goods).
Agreement / ObjectiveAgreement on the Application of Sanitary and Phytosanitary Measures (SPS) / Restricts the use of SPS measures for the purpose of trade protection. It is a separate Agreement covering the basic rules on food safety, as well as animal and plant health protection. The SPS Agreement explicitly recognizes the right of Members to take measures necessary to protect human, animal and plant life or health, as long as such measures are based on science and do not unjustifiably discriminate between Members.
Agreement on Technical Barriers to Trade (TBT) / Recognizes Members’ rights to adopt technical regulations and standards, as long as these do not constitute unnecessary barriers to trade. and do not discriminate against products from other Members. The TBT Agreement covers technical regulations not covered by the SPS Agreement.
ArticleVII of the GATT & Agreement on Customs Valuation / Aim for a fair, uniform and neutral system for the valuation of goods for customs purposes — a system that conforms to commercial realities and outlaws the use of arbitrary or fictitious customs values.
Agreement on Import Licensing Procedures / Aims to simplify and bring transparency to, import licensing procedures, to ensure their fair and equitable application and administration, and to prevent procedures applied for granting import licences having, in themselves, restrictive or distortive effects on imports.
Agreement on Rules of Origin / Aims at long-term harmonization of rules of origin (criteria used to define where a product was made). It ensures that such rules do not have restricting, distorting or disruptive effects on international trade and that they are administered in a consistent, impartial and reasonable manner.
ArticleVIII of the GATT on Customs Fees and Formalities / Concerns various forms of fees or charges and formalities imposed on or in connexion with importation (or exportation), associated with the services rendered at the border. It aims to prevent such fees and formalities from impeding market access in the form of non-tariff barriers and to reduce costs of transactions for importers and exporters.
In July 2004, WTO Members formally agreed to launch negotiations on trade facilitation, which should be completed under the overall DDA timeline. Negotiations on trade facilitation are directed to clarify and improve some of the provisions on non-tariff barriers contained in the GATT 1994 (freedom of transit, customs fees and formalities and publication of trade regulations). These negotiations are widely seen as a necessary complement to broader liberalization efforts. The negotiations also aim at enhancing trade-related technical assistance and capacity building on trade facilitation to enable developing countries and LDC Members to fully participate in and benefit from the negotiations. Moreover, the results of the negotiations shall take fully into account the principle of special and differential treatment for developing country and LDC Members.
Negotiations on the reduction of tariffs in agriculture and non-agricultural market access (NAMA) are part of the mandates in the current Doha Round of negotiations. As set out in the Doha Ministerial Declaration, the current negotiations on NAMA aim "to reduce or as appropriate eliminate tariffs, including the reduction or elimination of tariff peaks, high tariffs, and tariff escalation as well as NTBs in particular on products of export interest for developing countries". The negotiations shall take fully into account the special needs and interests of developing and LDC Members, including through less than full reciprocity in reduction commitments.
III.AGRICULTURE
While the volume of world agricultural exports has substantially increased over recent decades, its rate of growth has lagged behind that of manufactures, resulting in a steady decline in agriculture's share in world merchandise trade. Among the agricultural goods traded internationally, food products make up almost 80 percent. The other main category of agricultural products is raw materials. Since the mid-1980s, trade in processed and other high value agricultural products has been expanding much faster than trade in the basic primary products such as cereals.
Agricultural trade remains an important part of overall economic activity in many WTO Members. Furthermore, agriculture plays an important role in the development of many Members. For a large number of developing countries and LDCs, agriculture makes a significant contribution to their economies, including to gross domestic production, export revenue and employment, as well as to rural development and livelihood security.
The Agreement on Agriculture allows governments to support their rural economies, but preferably through policies that are less "trade-distorting". A measures is considered to cause "distortions" when it shifts the market price of a product above or below what it would be if the product was traded in a competition market. The three "pillars" to which the rules and commitments as set out in the Agreement on Agriculture apply are: (i) market access; (ii) domestic support; and, (iii) export competition. The Agreement covers "agricultural products" as defined in Annex 1 of the Agreement. It allowed some flexibility in the way commitments were implemented by developing countries, which did not have to cut their subsidies or lower their tariffs as much as developed countries, and had extra time to implement their obligations. Least-Developed Countries were exempted from such reduction commitments.
The three Pillars under the Agreement on Agriculture1. Market Access: trade restrictions confronting imports of agricultural products (tariff and NTBs).
2. Domestic Support: subsidies and other programmes in favour of agricultural producers, including those that raise or guarantee farmgate prices and farmers' incomes.
3. Export Competition: include export subsidies and other methods used to make exports of agricultural products artificially competitive.
The market access rule for agricultural products is "tariffs only". Before the Uruguay Round, some agricultural imports were restricted by non-tariff border measures which were mainly in the form of quantitative import restrictions or import quotas. All these non-tariff measures were to be either removed or to be replaced by tariffs, reflecting substantially the same level of protection. Members committed to set tariff bindings to agricultural products and assumed reduction commitments on tariffs. Each WTO Member has a "Schedule" of tariff concessions covering all agricultural products. Besides tariffs, the Agreement allows the application of TRQs (explained above). The rules on market access for goods also allow the imposition of a special safeguard for agricultural products, subject to certain requirements. This mechanism is available only for those Members that reserved the right to use it and complied with some conditions. It is different from the general safeguard provided in ArticleXIX of the GATT 1994 and the Agreement on Safeguards (explained below).[3]
Under the Agreement on Agriculture, all domestic support in favour of agricultural producers is subject to rules. The Agreement distinguishes between two categories of domestic support: (i) support with no, or minimal, distortive effect on trade, not subject to reduction commitments; and, (ii) trade-distorting support, subject to limits/''bindings'' and reduction commitments (often referred to as "Amber Box" measures). The first category (support with no, or minimal, distortive effect on trade) includes: 1. green box measures (government service programmes such as research, disease control and food safety - as long as some criteria are met by each measure concerned); 2. blue box measures (certain direct payments to farmers under production limiting programmes); 3. measures of assistance adopted by developing countries; and, 4. domestic support that is de minimis. All domestic support measures considered to distort production and trade, with the exceptions mentioned above, fall into the "Amber Box". Domestic support measures falling into the "Amber Box" should not exceed the commitment levels specified in Members' Schedules and were subject to reduction commitments specified in Members' Schedules.
Export subsidies are presumed to have trade-distorting effects since they allow exporters benefited with such subsidies to sell below the cost of production and thus, reduce world prices; undercutting unsubsidised exporters in other countries. The Agreement on Agriculture allows the use of export subsidies only in two situations: (i) if a Member has reserved the right to use export subsides in their respective Schedules, subject to the limits and reduction commitments specified in the Schedule; or, (ii) if developing countries provide export subsidies consistent with the special and differential treatment provisions. In all other cases, the use of export subsidies for agricultural products is prohibited.
Agricultural products are also subject to other WTO Agreements. However, according to Article21 of the Agreement on Agriculture, the provisions of the GATT 1994 and of other multilateral Agreements on trade in goods (Annex 1A) shall apply subject to the provisions of the Agreement on Agriculture. In addition, Article3.1 of the Agreement on Subsidies and Countervailing Measures prohibits export and importsubstitution subsidies except as provided in the Agreement on Agriculture.
Members agreed to initiate negotiations for continuing the reform process in agricultural trade one year before the end of the implementation period, i.e. by the end of 1999. These talks have now been incorporated into the broader negotiating agenda set at the 2001 Ministerial Conference in Doha, Qatar.
IV.TARIFF BARRIERS
IV.A.WHAT IS A TARIFF?
What is a Tariff?A tariff is a financial charge in the form of a tax, imposed on goods transported from one customs area to another (often from one country to another).
Tariffs, also referred to as "customs duties", are the most commonly used and visible measures that determine market access for goods. Although tariffs on imports are the most common, there are also countries that apply tariffs on exports. Historically, the main interest of the GATT and the WTO has been on import tariffs and are the ones described in this section.
Import tariffs give a price advantage to similarly produced local goods and provide revenue for governments, as the entry of the good is conditional upon the payment of the custom duty. There are several ways in which tariffs can be classified. Following the manner in which tariffs are calculated, they can be specific, advalorem, mixed, compound or "technical".
Tariff/duty type / Description / ExampleSpecific / Calculated based on a unit of measure such as the weight, volume, etc. of the goods. / US$ 5 per kilogramme
Ad valorem / Calculated as a percentage of the value of the goods. / 7% (so the duty on a car worth US$ 7,000 would be US$490)
Mixed / Calculated as an alternative between an ad valorem duty and a specific duty. / 7% or US$ 5 per kilogramme whichever is less
7%, but not more than US$5 per kilogramme
Compound / Calculated as an ad valorem duty to which an specific duty is added or, less frequently, subtracted. / 7% plus US$ 5 per kilogramme
"Technical" / other / Some duties (sometimes referred to as "technical" duties) are calculated based on specific contents, the duties payable by its components or by making reference to the duties applicable to certain related items. / US$ 0.55/kg on the manganese content
US$ 0.48 each plus 4.6% on the case plus 3.5% on the battery
Difference between tariffs and other charges that may be levied at the Border
It is important to note the difference between tariffs and other charges that may be levied at the border on imports:
- A tariff is not an ''internal tax'' (e.g. value added tax). The latter is mainly regulated by ArticleIII:2 of the GATT 1994 on National Treatment;
- a tariff is not a ''fee'' or ''charge'' associated with an import service. The latter are mainly regulated by ArticleVIII of the GATT 1994 on Fees and Formalities connected with Importation and Exportation;
- a tariff is not an "other duty and charge" in the sense of the second sentence of ArticleII(1)(b) of the GATT 1994, which includes those taxes levied on imports in addition to the customs duties;and,
- a tariff is not an "antidumping" or "countervailing duty".
IV.A.1.THE EFFECT OF A TARIFF
As explained above, tariffs are sometimes used by governments to protect their domestic industries from the competition of imports (as a barrier to market access) or to collect revenue. However, tariffs may also impose costs on countries applying them. What are the economic effects of tariffs?