Article XII of GATT 1994 allows a Member to restrict the quantity or value of merchandise permitted to be imported in order to safeguard its external financial position and its balance of payments. Article XVIII sets out a separate provision on restrictions for balance-of-payments purposes in relation to developing countries.
In the 1979 Tokyo Round Declaration on Trade Measures Taken for Balance-of-Payment Purposes, it was recognized that restrictive trade measures are in general an inefficient means to maintain or restore the balance-of-payments equilibrium. It was also provided that in applying restrictive import measures preference should be given to the measure which has the least disruptive effect on trade.
Article XVIII:B of GATT 1994 permits the use by developing countries of measures to control the general level of imports by restricting the quantity or value of merchandise permitted to be imported in order to safeguard their external financial position and to ensure a level of reserves adequate for the implementation of their programs of economic development. The Uruguay Understanding on Balance-of-Payments Provisions of GATT 1994 encourages all Members, including developing countries, to give preference to “price-based measures” such as import surcharges, import deposit requirements or other equivalent trade measures with an impact on the price of imported goods.
Members adopting, maintaining or intensifying such measures have the obligation to notify and to consult with the Committee on Balance-of-Payments Restrictions. Consultations with Members maintaining balance-of-payments restrictions under Article XII have to be held annually; for those maintained under Article XVIII: B, they are held every two years. The IMF also participates in these consultations and presents findings of statistical and other facts relating to foreign exchange, monetary reserves and balance of payments.
Purpose: To provide developing countries with some relief and flexibility when they face problems of low inflow and small reserves of foreign exchange.
Provisions: Article XVIIIB permits limiting the quantity or value of imports in order to:
· safeguard the country’s external financial position, and
· ensure a level of reserves needed for economic development programs.
Permissible actions:
Price-based measures: The Uruguay Understanding on Balance-of-Payments Provisions of GATT 1994 encourages all Members, including developing countries, to give preference to “price-based measures” such as import surcharges, import deposit requirements or other equivalent trade measures with an impact on the price of imported goods. If the duty on a product is not bound, a Member is free to raise the duty.
Quantitative restrictions: A Member may totally stop the import of a product or limit the import of a product to a specified volume or value. While applying quantitative restrictions on imports, Members have to justify why price-based measures are not adequate to deal with the problem.
Choice of products: A Member has to justify which products should be covered by the measures. Essential products such as basic consumption goods, capital goods should normally be out of the coverage.
Limitations on BOP:
· Not more than one type of restrictive measure may be applied on the same product.
· The restrictions should not be excessive.
· The measure for BOP reasons should not be taken to protect domestic production.
· Unnecessary damage to the commercial or economic interests of any other Member should be avoided.
· The restriction should not be applied to prevent the import of commercial samples or the import of any product in minimum commercial quantities.
· A member must progressively relax the restrictions as conditions improve and must eliminate the measures when conditions no longer justify their existence.
Notification: A Member applying measures because of BOP difficulties has to send notifications to the WTO Secretariat every year to indicate the types of measure applied, the criteria used for their application, the product coverage of the measures and the trade flows affected by the measures. Besides, a Member must notify the General Council when a new measure is introduced or any change is made in the application of existing measures or any modification is made in the time schedule for the elimination of the measures taken to address BOP difficulties. Significant changes must be notified prior to or not later than 30 days after their announcement.
Consultation: The Member explains the details of the measures and the justification for taking these measures. Other Members ask questions, seek clarifications and make comments.
Simplified consultation: this process may be applied when
· least developed country Members are involved;
· other developing country Members are pursuing liberalization efforts in conformity with the schedule presented in previous consultations;
· the trade policy review of a developing country Member is scheduled for the same calendar year in which the consultation is fixed.
Full consultation: more detailed Plan of Consultations is needed, including BOP position and prospects, alternative methods to restore equilibrium, system and methods of restriction and effects of the restrictions.
Definition: Governments lay down mandatory technical regulations on products or formulate or encourage the formulation of non-mandatory standards for products for reasons of security, health, environment or easy utilization. However, these regulations and standards may sometimes operate as barriers to imports, and thereby distort international trade.
Objectives: national security, prevention of deceptive practices, protection of human, animal and plant life or health or safety and protection of environment
Technical regulations: a set of rules which lay down:
· the characteristics of a product
· related processes and production methods
· applicable administrative provisions
Standards: formulations approved by a recognized body, providing for rules and guidelines on characteristics of products and related processes and production methods.
Disciplines on technical regulations and standards:
· use of international standards for technical regulations: If there are international standards for regulations in a specific field, Members are obliged to use them as a basis for their own technical regulations. Exceptions are provided when the international standards will be ineffective or inappropriate.
· National treatment and MFN treatment must be applied
· The regulations must not create unnecessary obstacles to international trade
Procedure for formulation of regulations:
· send notice to the WTO Secretariat
· publish a notice indicating its proposal
· other Members make comments
There is, however, an exception for situations where urgent problems of safety, health, environment or national security might arise.
Obligations:
· A reasonable interval between the publication of the regulation and its actual entry into force must be allowed so that the producers in exporting countries will have time to adapt themselves to the new requirements.
· Regulation specifications should be based on product performance rather than design or descriptive characteristics.
· The technical regulations of other Members should be accepted as equivalent if they fulfill the desired objectives.
· Regulations of local government bodies and non-government bodies must be in conformity with the WTO disciplines.
· A Member must establish an enquiry point which is able to respond to enquiries from other Members and interested parties and provide relevant documents relating to central government bodies, local government bodies and non-government bodies.
SPS means trade-restrictive measures for the protection of human life or health and for the protection of plant or animal life or health. Sanitary measures are related to human or animal health, and phytosanitary measures deal with plant health.
Nature and coverage of SPS measures:
SPS measures may be in the form of laws, regulations, requirements, procedures or decrees and may cover products, processes and production methods (PPMs), testing, inspection, certification and approval procedures, requirements for transport of animals or plants, sampling procedures, packaging and labeling requirements directly related to food safety. Some of these measures, like processing requirements or certification, may take place in the exporting country and not upon arrival in the importing country. However, although the measure may be imposed outside the territory of the importing country, its purpose must be to protect health within the territory of the importing country.
Situations: Sanitary and phytosanitary (SPS) measures are those which are applied in order to:
· protect human life or health, or animal life or health from risks arising from additives, contaminants, toxins or disease-causing organisms in foods, beverages or feedstuffs;
For example, restrictions on imports of oranges containing a certain level of pesticide residues, or regulations applied to imports of poultry products containing salmonella (rod-shaped bacteria causing food poisoning, typhoid, and paratyphoid fever in human beings and other infectious diseases in domestic animals) are typical SPS measures. Veterinary drugs given to farm animals are also covered in so far as they may pose a threat to humans later consuming the meat.
· protect animal life or health, or plant life or health from risks arising from the entry, establishment or spread of pests, diseases, disease-carrying organisms or disease-causing organisms;
For example, an import ban on live cattle originating from herds infected by Bovine tuberculosis would be one example of an SPS measure taken with the objective of avoiding the introduction and spread of the disease to domestic cattle. Another example might be restrictions on certain fruit from areas plagued by the fruit fly.
· protect human life or health from the risks arising from diseases carried by animals, plants or their products, or the entry, establishment or spread of pests;
For example, the spread of rabies (an acute, infectious, often fatal viral disease of most warm-blooded animals, especially wolves, cats, and dogs, that attacks the central nervous system and is transmitted by the bite of infected animals) will be prevented or the banning of imports of meat and meat products originating from foot-and-mouth disease regions will be imposed.
· prevent or limit other damage from the entry, establishment or spread of pests.
For example, the undesired importation of certain weeds can cause major damage in terms of crowding out domestic animal and plant species without necessarily causing a disease.
Purpose: to reduce the possible arbitrariness of governments’ decisions in the field of sanitary and phytosanitary measures by clarifying which factors should be taken into account when imposing health protection measures. The SPS Agreement also encourages consistent and transparent decision-making in determining an appropriate level of health protection, and should not result in unjustified barriers to trade.
Consideration: SPS Agreement should be applied without unjustified discrimination, or be in line with MFN principles and National Treatment principle. SPS Agreement recognizes, however, that the animal and plant disease status may differ among supplying countries, and this must be taken into consideration in the trade measures applied.
1) FAO/WHO Codex Alimentarius Commission: based in Rome, is a subsidiary organ of the Food and Agriculture Organization of the UN (FAO) and the World Health Organization (WHO). The SPS Agreement designates Codex as the authority for all matters related to international food safety evaluation and harmonization (Harmonization means the establishment of national sanitary and phytosanitary regulations must be consistent with international standards, guidelines and recommendations). Codex develops scientific methodologies, concepts and standards to be used worldwide for food additives, microbiological contaminants, veterinary drug and pesticide residues to be used worldwide.
2) Office International des Epizooites (OIE): based in Paris, is the world animal health organization. The OIE develops manuals on animal diseases, standards for diagnosis, vaccination, epidemiological surveillance, disease control and eradication, etc.
3) International Plant Protection Convention (IPPC): based in Rome, is a subsidiary body of the FAO. The IPPC develops international plant import health standards, basic principles governing phytosanitary laws and regulations, and harmonized plant quarantine procedures.
Conformity with international standards: Generally, Members must base their SPS measures on international standards, guidelines and recommendations if there exist. A Higher level of protections is permitted if a Member has conducted an examination and evaluation of available scientific information and determined that the international standards are not sufficient to achieve an appropriate level of protection.
Equivalence: Ways of ensuring food safety or animal and plant health protection in different countries may be varied, but Members should accept each other’s regulations as equivalent whenever the same level of protection is achieved. For this purpose, bilateral consultations and negotiations are essential. For example, if Country A is concerned with food-and-mouth disease in Country B, the latter must cooperate by letting experts from Country A visit its farm operations and inspect its meat processing facilities.
Risk assessment: Members must establish SPS measures on the basis of an evaluation of the actual risks involved.
Risk assessments may be qualitative or quantitative, and quantitative risk assessment can be very costly. WTO Members have the right to determine what they consider to be an appropriate level of health protection, so long as this level does not protect domestic producers from competition.
Selection of an SPS Measure: Once the government has determined its appropriate level of sanitary and phytosanitary protection, it should not choose a measure that is more stringent and trade-restrictive than necessary. For example, a complete ban on imports of wheat may be one way to limit pesticide residue levels causing certain health risks to consumers, but random testing for maximum residue levels at the port of entry may be a less trade-restrictive measure, and wheat complying with the relevant residue requirements could safely be distributed on the domestic market.
Disease-free areas: Governments should recognize disease- or pest-free areas. These areas may be only part of a country or may cover parts of several countries. In the past, importing countries often required the whole exporting country to be free from a disease before it could be granted access. Today, products from disease-free areas within a given country should be grantee market access. The burden rests on the exporting Member to demonstrate that given areas within an exporting country are free from a disease.
Transparency: SPS measures must be published by Members so that interested Members can become acquainted with them. A Member must establish an enquiry point which will be responsible for providing answers to various questions. A national central government authority will be designated in each Member to notify the WTO Secretariat any new SPS regulations or modification to existing laws.
The Agreement on TRIMs covers conditions on investment which are related to trade in goods. Sometimes, governments impose conditions on investment, some of which are trade-related, others are not. For example, a government may prescribe that investment can only be made in a firm owned by resident nationals, or it may impose restrictions on the import of raw materials or the export of products. The restrictions on import and export relate to trade in goods, whereas the restrictions in respect of firm ownership relate to non-trade matters.
Background: Prior to the Uruguay negotiations, the linkage between trade and investment received little attention in the framework of the GATT. The Punta del Este Ministerial Declaration included this subject, stating that further provisions are necessary to avoid the trade-restrictive and trade-distorting effects of investment measures. The Uruguay negotiations on TRIMs were marked by strong disagreement among participants over the coverage and nature of possible new disciplines. The compromise that eventually emerged from the negotiations is essentially limited to an interpretation and clarification of the application to trade-related investment measures of GATT provisions on national treatment for imported goods (Article III) and on quantitative restrictions on imports or exports (Article XI).