Page 279 - DMGT401Business Environment

Business Environment

Notes 13.3 Rules of WTO (Agreements)

WTO agreements include goods, services and intellectual property. It has an objective of reducing
tariffs to zero. It enables liberalisation and allows limited exemption regarding duties. It
establishes a system to resolve disputes and ensures transparency regarding the trade policy of
government. The present WTO system is based on the Uruguay Round Agreements, which are
as follows:

Binding and Cutting of Tariff

This includes commitment to cut and 'bind' custom duty rate on import of goods. In some cases,
tariff is being cut to zero. There is significant increase in the bound tariffs.

Developed countries' tariff cut were for the most part phased in over five year from January 1,
1995.
On March 26, 1997, 40 countries which account for more than 92% of the old trade in information
technology products, agreed to eliminate import duties and other charges on the product by
2000 (by 2005 in a handful of case).

More Bindings

Developed countries increased the number of import whose tariff rate are "bound" (committed
and difficult to increase) from 78% of product line to 99%. For developing countries, the increase
is considerable: from 21% to 73%.

Tariff on Agriculture

Tariff on all agricultural products are now bound. Almost all import restrictions besides tariffs
have been converted to tariffs, a process known a "tariffication". The first step in "tariffication" is
to replace these restrictions with a tariff that represents about the same level of protection. Then,
over six years from 1995 to 2000, the tariff gradually reduced (the reduction period for developing
countries end in 2005). In addition, it includes countries' commitment to reduce domestic support
and export subsidies on agricultural product.

Standard and Safety

Article 20 (GATT) allows governments to make necessary arrangements to protect human,
animal or plant life or health, provided they do not use it to discriminate or use it as tool to
protectionism. In WTO, there are specific arrangements regarding food, safety and animals.
Textiles

From 1974 until the end of the Uruguay Round, trade was governed by the quota system (Multifibre
Arrangement). This is against the spirit and principle of GATT. Since 1995, WTO has replaced the
Mulltifibre Arrangement with the Agreement on Textile and Clothing (ATC). By January 1,
2005, the sector is to be fully integrated into the normal GATT rule. That is, the quota will come
to an end, and importing countries will no longer be able to discriminate among exporters. The
Agreement on Textile and Clothing itself no longer exists.

Services

The General Agreement on Trade in Service (GATS): (GATS) is the first and only set of multilateral
rules governing international trade in service. Negotiated in the Uruguay Round, it was

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