 WORLD TRADE  
ORGANIZATION  WT/TPR/OV/9 
20 February 2004 
  
 (04-0721) 
Trade Policy Review Body  
 
 
OVERVIEW OF DEVELOPMENTS IN THE 
INTERNATIONAL TRADING ENVIRONMENT 
 
Annual Report by the Director-General1 
 
1. Introduction 
1. Global output is forecast to pick up to some  4% in 2004, improving steadily from the sharp 
slowdown in 2001, and returning close to trend.2  As a consequence of a pick up in demand, 
particularly in the United States, Japan and some As ian countries, growth is likely to be stronger, up 
from around 3.2% in 2003.  World trade too has recovered, roughly in line with global output, with the volume of trade in goods and services expected  to increase by about 3% in 2003, with an 
acceleration to between 7-8% in 2004.  Although encour aging, the situation is not without a certain 
downside risk, especially the persistence of large fi nancial imbalances.  These complicate trade policy 
formulation and add emphasis to the need to ma ke progress in the Doha Development Agenda.  
Against this background, this paper presents devel opments in major trade policy instruments.   
2. Tariffs … considerable unfinished business 
2. Since the establishment of the General Agreem ent on Tariffs and Trade (GATT) in 1947, 
successive rounds of multilateral tr ade negotiations have greatly re duced impediments to trade, 
especially tariffs.  One of the main principles underl ying the GATT is that trade barriers, insofar as 
they are used at all, should involve tariffs rath er than non-tariff barriers (NTBs); negotiations could 
then concentrate on binding tariff rates and securing multilateral reductions therein.  As a result of such negotiations, tariff levels on industrial goods have declined dr amatically.  Once commitments 
made under the Uruguay Round (UR) are fully impl emented, the overall import-weighted tariff 
average on industrial products will ha ve reached less than 4% in industrial countries, compared with 
about 40% at the time of GATT's establishment.
3   
3. Notwithstanding the considerable achievement s of the Uruguay Round and previous rounds 
of negotiations, tariffs remain an  important impediment to intern ational trade and consequently a 
source of inefficiency.4  Even in industrialized countries,  where average MFN tariff rates are 
seemingly low5, the existence of tariff "p eaks" in certain sectors, notably agricultural products, 
textiles, clothing, and footwear, constitutes prima facie  evidence that the dead-weight and net welfare 
losses caused by tariff protection could, if eliminat ed, raise incomes by 5% in developing countries, 
                                                      
1 As explained to the Trade Policy Review Body (TP RB), this Report is an abridged version of that 
prepared for distribution in November 2003.  The Report is now presented for the record, but remains subject to comment from Members, either at a future meeting of the TPRB or in writing.  A report for 2004, self-standing 
but complementary to the World Trade Report and the WTO Annual Report, is being prepared for discussion by 
the TPRB in late 2004. 
2 International Monetary Fund (2003), World Economic Outlook September , p. 3. 
3 See Blackhurst, R., A. Enders and J. Francois  (1996), "The Uruguay Round and Market Access:  
Opportunities and Challenges for Market Acce ss", in W. Martin and A. Winters (eds), The Uruguay Round and 
Developing Countries , Cambridge University Press. 
4 Tariffs are not only a barrier to imports but also co nstitute, insofar as they are levied on inputs, export 
taxes to the extent that the final products are tradeable. 
5 The measured overall level of tariff protection can vary considerably depending on the tariff rates and 
especially the weighting method used (Annex 1) WT/TPR/OV/9 
Page 2  
 
 thereby lifting 300 million people out of poverty by 2015, the target date for achieving the UN Millennium Development Goals.
6 
4. Particular attention is focused on the so- called "Quad" group of major traders (the 
United States, the European Union, Japan, and Ca nada) as these four Members' tariffs can have 
serious repercussions for their trading partners, especially developing and least developed countries 
(LDCs). This may also be true in the case of China, which became a Member of the WTO in December 2001 and, during the past two years, h as overtaken Canada as the world's fourth largest 
trader.  The use of tariffs by the Quad and China to  impede access to their markets can therefore lead 
to welfare losses not just domestically, but on a global  scale, because they tend to hamper countries' 
efforts to efficiently allocate their resources.  It s hould also be noted that the use of generally higher 
tariffs by developing countries also contributes to an inefficient domestic allocation of their resources. 
5. Some simple summary indicators that capture the level and structure of tariffs in the Quad are 
reported in Table 1 for 1995, prior to the implementa tion of the UR tariff cuts (or 1996, if data for 
1995 were not available), and for 2002.
7  They are also reported under full implementation of the UR 
(and ITA); the latter indicators provide a benchmar k for the current negotiations on tariffs at the 
WTO.  Similar indicators are reported for selected developing countries including those reviewed in 2002/03 (China, Indonesia, Chile, and South Afri ca) in Table 2 and for selected LDCs (Burundi, 
Haiti, Niger, and Zambia) in Table 3.
8 
Bound MFN tariffs 
6. Bindings are a key element of trade liberalization as they reduce the uncertainty concerning 
Members' trade regimes.  In addition to achieving hi gher levels of bindings on industrial products, all 
Members bound 100% of their tariff lines on agricultu ral items as a result of the WTO Agreement on 
Agriculture; the outcome was the "tariffication" of non-tariff barriers (NTBs) for agricultural 
products.9 
7. The Quad have bound close to 100% of their tariff lines.  Full implementation of their 
bindings results in relatively low simple averag e bound rates for industrial products, although wide 
differences exist across products.  While the simple  average of final bound MFN rates is in the range 
of 4.6% in the United States to 8.4% in Japan, th e average bound rate for agricultural products is two 
to three times higher;  this reflects the frequent  "peaks" in bound tariffs for more "sensitive" 
agricultural product categories. Among industrial pr oducts, bound rates are highest for textiles and 
clothing, with the final bound rate average rangi ng from 6.7% in Japan to 12.2% in Canada.  
8. China too has bound 100% of its tariff lines;  with full implementation, its average bound rate 
will be 9.9%, compared with 12.4% at present, although the average bound rate for agricultural 
products will be 14.5% and that for textiles and clothing will be 11.5%. 
9. Whereas Indonesia, Chile, Niger and South Africa ha ve bound most, if not all, of their tariff 
lines, Burundi and Haiti have each bound roughly one fifth (Tables 2 and 3). As regards other major 
developing and least developed countries, Brazil ha s bound most of its tariff lines, while India has 
bound less than three quarters and  Bangladesh some 13%.10 
                                                      
6 World Bank, 2002 Global Economic Prospects . 
7 The methodology used to construct the tariff indicators found in this and other tables is outlined in  
Daly, Michael, and Hiroaki Kuwahara, 1998, "The Imp act of the Uruguay Round on Tariff and Non-Tariff 
Trade Barriers in the Quad", The World Economy  21(1), pp. 207-234. 
8 Except in the case of China, Tr ade Policy Reviews were conducted for these Members during the past 
year. 
9 Notable initial exceptions to tariffication included rice in Japan and Korea. 
10 See WTO (2002), Trade Policy Review – India ;  and WTO (2000), Trade Policy Review – 
Bangladesh . WT/TPR/OV/9 
Page 3 
 
 
 
Table 1 
Structure of MFN tariffs in the "Quad" 
(Per cent) 
  United Statesa European Union Japan Canada 
  1996 2002 F.B.b,c 1995d 2002 F.B.b,e 1996f 2002f F.B.b,g 1995d 2002 F.B.b,h 
1 Bound tariff lines (% of all tariff 
lines) 100i 100i 100i .. 100 100 98.9 98.9 98.9 .. 99.8 99.7 
2 Duty free tariff lines (% of all 
tariff lines) 18.2 31.2 37.6 9.4 21.5 28.0 34.9 36.7 40.6 18.2 49.0 29.6 
3 Non-ad valorem tariffs (% of all 
tariff lines) 14.1 12.2 10.8 10.2 9.7 10.1 7.1 7.2 6.2 7.4 3.9 5.1 
4 Tariff quotas (% of all tariff lines) 1.9 1.9 1.9 3.3 3.1 3.3 1.6 1.7 1.7 2.2 2.2 2.2 
5 Non-ad valorem tariffs with no 
AVEs (% of all tariff lines) 3.1 0.0 0.2 2.0 2.6 3.5 .. 1.2 0.8 5.8 0.5 1.4 
6 Simple average bound rate .. .. 4.6 .. 6.5 6.3 10.3 8.5 8.38 .. .. 8.4 
 Agricultural products (HS01-24) .. .. 8.1 .. 16.2 16.3 .. 26.6 26.5 .. .. 23.1 
 Industrial products 
 (HS25-97) .. .. 4 .. 3.8 3.6 .. 4.1 3.9 .. .. 5.8 
 WTO agricultural products .. .. 8.3 .. 16.1 16.3 .. 28.9 28.9 .. .. 24.4 
 WTO non-agricultural products .. .. 4.0 .. 4.2 4.0 .. 3.9 3.8 .. .. 5.7 
 Textile and clothing .. .. 9.0 .. 8.4 8.0 9.8 7. 1 6.7 .. .. 12.2 
7 Nuisance bound rates (% of all 
tariff lines )j .. .. 6.7 .. 12.9 6.4 .. 6.7 1.1 .. .. 1.1 
8 Simple average applied rate 6.4 5.1 .. 10.2 6.4 .. 9.0 6.9 .. 13.2 6.8 .. 
 Agricultural products  
(HS01-24) 10.0 9.5 .. 23.7 15.9 .. .. 18.6 .. 28.6 21.2 .. 
 Industrial products  
(HS25-97) 5.7 4.2 .. 6.6 3.8 .. .. 3.9 .. 10.5 4.2 .. 
 WTO agricultural products 10.3 9.8 .. 24.5 16.1 .. .. 20.0 .. 30.3 21.7 .. 
 WTO non-agricultural products 5.7 4.2 .. 6.9 4.1 .. .. 3.9 .. 10.4 4.2 .. 
 Textile and clothing 11.5 9.7 . 10.4 8.4 .. 8.7 7.0 .. 18.4 9.9 .. 
9 Domestic tariff "peaks" (% of all 
tariff lines)k 4.0 5.3 .. 4.0  5.2 .. .. 6.0 .. 1.4 1.6 .. 
10 International tariff "peaks" (% of 
all tariff lines)l 8.9 6.3 .. 11.0  7.7 .. .. 7.6 .. 17.0 9.8 .. 
11 Overall standard deviation of 
tariff rates 13.4 12.3 .. 16.5 11.3 .. 40.8 32.6 .. 30.0 24.4 .. 
12 Coefficient of variation of tariff 
rates 2.1 2.4 .. 1.6 1.8 .. .. 4.7 .. 2.3 3.6 .. 
13 Nuisance applied rates (% of all 
tariff lines)j 8.9 12.6 .. 1.0 12.9 .. .. 6.1 .. 1.2 2.2 .. 
.. Not available.  
F.B. Final bound 
a. The United States levies its ad valorem  duties on the 
basis of the "f.o.b." ("free on board") price, thereby 
excluding the costs of insurance and freight.  By 
contrast, most other WTO Members, including the EU, Japan and Canada, levy ad valorem  import duties on the 
"c.i.f." price, which includes these costs.  As the c.i.f. 
price exceeds the f.o.b. price by the amount of insurance 
and freight costs, a tariff levied on the f.o.b. price affords less protection than one levied at the same rate on the c.i.f. price. 
b. Including ITA. 
c. Based on 1998 tariff schedule. d. Pre-Uruguay Round tariff. e. Based on 1999 tariff schedule. 
f. Fiscal year. 
g. Based on 2002 tariff schedule. 
h. Based on 2000 tariff schedule. i. Two lines, applying to crude petroleum, are not bound. j. Nuisance rates are those greater than zero, but less than 
or equal to 2%. 
k. Domestic tariff peaks are defined as those exceeding 
three times the overall simple average applied rate (indicator 8). 
l. International tariff peaks are defined as those exceeding 
15%. 
 
Note: AVEs have been used as available.  In case of unavailability, the  ad valorem  part is used for compound and alternate rates.  For the 
European Union 2003 tariff data is available but does not include AVEs. 
Source : WTO Secretariat calculations, based on data provided by the Members. 
 WT/TPR/OV/9 
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Table 2 
Structure of MFN tariffs in selected developing countries 
(Per cent) 
  China Indonesia Chile South Africa 
  1996 2002 F.B.a 1998 2002 F.B.b,c2000 2002 F.B.d 1997 2002 F.B.e 
1 Bound tariff lines (% of all 
tariff lines)f n.a. 100.0 100.0 93.2 93.2 93.2 100.0 100.0 100.0 96.3 96.2 96.3 
2 Duty free tariff lines (% of all 
tariff lines) 1.9 4.8 7.6 20.2 21.9 1.7 0.4 1.2 0.0 42.4 43.4 9.9 
3 Non-ad valorem tariffs (% of 
all tariff lines) 0.0 0.7 0.0 0.0 0.2 0.0 0.0 0.5 0.0 25.6 25 0 
4 Tariff quotas (% of all tariff 
lines) .. 0.8 0.8 0.0 0.0 0.0 0.0 0.0 0.0 4.2 3.8 3.8 
5 Non-ad valorem tariffs with no 
AVEs (% of all tariff lines) 0.0 0.7 0.0 0.0 0.2 0.0 0.0 0.0 0.0 25.6 25 0 
6 Simple average bound rate .. 12.4 9.9 .. .. 37.6 25.1 .. 25.1 .. .. 20.9 
 Agricultural products  
(HS01-24) .. 17.9 14.5 .. .. 47.3 25.6 .. 25.6 .. .. 46.8 
 Industrial products (HS25-97) .. 11.4 9.1 .. .. 35.9 25.0 .. 25.0 .. .. 18.1 
 WTO agricultural products .. 18.2 15.2 .. .. 47.7 25.7 .. 25.7 .. .. 43.5 
 WTO non-agricultural products .. 11.5 9.0 .. .. 35.9 25.0 .. 25.0 .. .. 18.1 
 Textile and clothing .. 17.6 11.5 .. .. 29.3 25.0 .. 25.0 .. .. 26.8 
7 Nuisance bound rates (% of all 
tariff lines)g .. 1.9 2.4 .. .. 0.0 0.0 .. 0.0 .. .. 0.0 
8 Simple average applied rate 23.6 12.3 .. 9.5 7.2 .. 9.0 5.9 .. 15.0 11.4 .. 
 Agricultural products  
(HS01-24) 35.4 18.0 .. 8.6 8.3 .. 9.0 6.1 .. 11.3 11.5 .. 
 Industrial products (HS25-97) 21.7 11.3 .. 9.7 7.0 .. 9.0 5.9 .. 15.4 11.4 .. 
 WTO agricultural products 33.8 18.2 .. 8.8 8.3 .. 9.0 6.1 .. 9.4 9.6 .. 
 WTO non-agricultural products 22.1 11.3 .. 9.6 7.0 .. 9.0 5.9 .. 15.7 11.6 .. 
 Textile and clothing 32.8 17.5 .. 14.6 10.5 .. 9.0 6.0 .. 35.1 24.4 .. 
9 Domestic tariff "peaks" (% of 
all tariff lines)h 1.1 1.8 .. 1.8 1.5 .. 0.0 0.1 .. 4.0 3.9 .. 
10 International tariff "peaks" (% 
of all tariff lines)i 55.2 29.5 .. 14.5 3.4 .. 0.0 0.1 .. 39.3 34.8 .. 
11 Overall standard deviation of 
tariff rates 17.4 9.1 .. 15.7 11.1 .. 0.5 1.2 .. 17.8 12.6 .. 
12 Coefficient of variation of tariff 
rates 0.7 0.7 .. 1.7 1.5 .. 0.1 0.1 .. 1.2 1.1 .. 
13 Nuisance applied rates (% of all 
tariff lines)g 1.0 1.6 .. 0.0 0.0 .. 0.0 0.0 .. 0.2 0.0 .. 
n.a. Not applicable. 
.. Not available. 
F.B. Final bound 
a. Based on 2002 tariff schedule. 
b. Including ITA. 
c. Based on 1998 tariff schedule. 
d. Based on 2000 tariff schedule e. Based on 2001 tariff schedule. f. Including fully bound and partially bound rates. g. Nuisance rates are those greater than zero, but less than 
or equal to 2% 
h. Domestic tariff peaks are defined as those exceeding 
three times the overall simple average applied rate (indicator 8). 
i. International tariff peaks are defined as those exceeding 
15%. 
Note: Calculations exclude specific rates and include the ad valorem  part for compound and alternate rates. 
Source: WTO Secretariat calculations, based on data provided by the Members. 
 WT/TPR/OV/9 
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Table 3 
Structure of MFN tariffs in selected least-developed countries 
(Per cent) 
  Burundi  Haiti   Niger  Zambia  
  2003 F.B.a 2002 F.B. 2002b F.B.c 2002 F.B.d 
1 Bound tariff lines (% of all tariff lines)e 21.6 21.6 .. .. 96.9 96.9 16.2 16.2
2 Duty free tariff lines (% of all tariff lines) 0.1 0.7 66.6 .. 0.0 0.5 20.9 0.0
3 Non- ad valorem  tariffs (% of all tariff lines) 0.0 0.0 0.0* .. 0.0 0.0 1.3 0.0
4 Tariff quotas (% of all tariff lines) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
5 Non- ad valorem  tariffs with no AVEs (% of all tariff lines) 0.0 0.0 0.0* .. 0.0 0.0 1.3 0.0
6 Simple average bound rate 68.4 68.3 .. .. .. 44.6 .. 107.3
 Agricultural products (HS01-24) 94.0 94.0 .. .. .. 80.1 .. 122.8
 Industrial products (HS25-97) 37.7 37.5 .. .. .. 38.0 .. 67.8
 WTO agricultural products 95.1 95.1 .. .. .. 82.2 .. 123.0
 WTO non-agricultural products 28.1 27.9 .. .. .. 37.9 .. 43.3
 Textile and clothing 26.0 26.0 .. .. .. 36.0 .. 40.0
7 Nuisance bound rates (% of all tariff lines)f 0.0 0.0 .. .. .. 0.0 .. 0.0
8 Simple average applied rate 23.4 .. 2.9 .. 14.6 .. 13.4 ..
 Agricultural products (HS01-24) 35.4 .. 5.2 .. 17.5 .. 19.6 ..
 Industrial products (HS25-97) 21.6 .. 2.5 .. 14.1 .. 12.5 ..
 WTO agricultural products 32.6 .. 5.5 .. 16.7 .. 18.5 ..
 WTO non-agricultural products 22.1 .. 2.5 .. 14.3 .. 12.7 ..
 Textile and clothing 35.2 .. 5.0 .. 19.8 .. 18.3 ..
9 Domestic tariff "peaks" (% of all tariff lines)g 0.0 .. 17.8 .. 0.0 .. 0.0 ..
10 International tariff "peaks" (% of all tariff lines)h 42.9 .. 0.0* .. 41.3 .. 31.0 ..
11 Overall standard deviation of ta riff rates 14.4 .. 4.8 .. 6.9 .. 9.5 ..
12 Coefficient of variation of ta riff rates 0.6 .. 1.6 .. 0.5 .. 0.7 ..
13 Nuisance applied rates (% of all tariff lines)f 0.0 .. 0.0* .. 0.0 .. 0.0 ..
.. Not available. 
* Negligible. F.B. Final bound. 
a Based on 2003 tariff schedule. 
b Based on tariff actually applied:  MFN custom duties  plus a statistical charge  and community solidarity 
 levies. 
c Based on 2002 tariff schedule. d Based on 2001 tariff schedule. 
e Including fully bound and partially bound rates. f Nuisance rates are those greater than zero, but less 
 than or equal to 2%. g Domestic tariff peaks are defined as those exceeding 
 three times the overall simple average applied rate 
 (indicator 8). h International tariff peaks are defined as those 
 exceeding 15% 
Note: Calculations exclude specific rates and include the ad valorem  part for compound and alternate rates. 
Source : WTO Secretariat calculations, based on data provided by the Members. 
Applied MFN tariffs 
10. Applied MFN tariffs are generally at, or close to, bound rates in the Quad.  Thus, like bound 
tariffs, the level of applied tariff protection, alt hough declining, also varies widely.  The average 
applied MFN rate (2002) for all products ranges fro m 5.2% in the United States to 6.9% in Japan.11  
Nonetheless, these low average applied tariff levels disguise much higher rates applied to agricultural 
products and textiles, clothing, and footwear.  
                                                      
11 Average applied MFN rates are below 5% in Au stralia, Iceland, and Ne w Zealand and zero in 
Hong Kong, China and Macau, China;  Singapore applies tariffs to six tariff lines. WT/TPR/OV/9 
Page 6  
 
 11. Applied MFN tariffs tend to be much higher in developing countries; for example, the 
average applied MFN tariff rate for China is 12. 3%, although this is roughly half the level in 1996 
(Table 2).  However, China's current average is  rather low compared with some other major 
developing countries.  Furthermore, by the time its bound rates are fully im plemented, China is 
committed to an average bound rate of 9.9%, which means that applied rates will need to be brought 
down so as not to exceed this level. In selected  African countries (Tables 2 and 3), applied MFN 
tariffs average range from 11.4% in South Africa to  23.4% in Burundi.  By contrast in Haiti and 
Indonesia the averages are 2.9% and 7.2%, respectiv ely.  The averages in India (2001/02), Bangladesh 
(1999/2000), and Brazil (2002), are around 32%, 22%, and 14%, respectively.  
12. One important reason for such high rates in these and other developing-country Members is 
that tariffs often serve a dual purpose;  they prot ect domestic industries from foreign competition and 
are a major source of revenue.  It follows that tariff reform can have important revenue implications in 
such Members, and reductions in average tariffs can depend heavily on tax reform.  However, the 
possible fall in the revenues resulting from across-the-boa rd cuts in tariff rates can be mitigated by the 
elimination of exemptions and other concessions in Members' tariffs; moreover, to the extent that 
broad tariff cuts are reflected in lower domestic prices for imported products , the amount of revenue 
collected (from the tariff and internal indirect tax es) could rise insofar as demand for such products is 
sufficiently responsive.  Financial support (from in stitutions such as the IMF or World Bank) could 
help developing countries to manage any lo ss of tax revenues arising from tariff cuts. 
13. Whereas in developed countries applied MFN tariffs  are generally at, or close to, bound rates, 
they are often significantly below bound rates in developing countries, thus providing considerable 
scope for applied tariffs to be ra ised and thereby imparting a degree of unpredictability to the tariff.  
This gap is the result of two factors:  the negotiation of ceiling bindings in the GATT 1994, and unilateral reductions in applied tariffs since the WT O came into existence.  Such unilateral trade 
liberalization has been undertaken by a number of Members.  
14. So called "nuisance" tariffs (applied rates ex ceeding zero and no more than 2%) involve as 
many as 12.3% of all tariff lines in the United States, 12.9% in the EU, and 6.1% in Japan.
12  I n  
China, however, they cover only 1.9% of all tariff lin es.  In general such tariffs seem to be negligible 
in developing countries and LDCs.  
Tariff dispersion and "peaks" 
15. The efficiency losses associated with tariffs de pend not just on average applied MFN rates, 
but also on their dispersion across products. For any given average tariff, the wider the dispersion in 
applied MFN rates, the greater the likelihood that co nsumers' and producers' decisions are distorted by 
the tariff structure.  
16. Among the Quad, applied MFN tariff rates thre e or more times the average continue to 
protect certain sectors from imports.  These "peaks" cover from 1.6% of tariff lines in Canada to 
between 5.2% and 6% in the EU, Japan and the United States.  By and large, tariff peaks are 
concentrated in agriculture and food products, part ly due to tariffication, as well as textiles, clothing, 
and footwear (Chart 1), which tend to be labour in tensive. Many of these products are of major export 
interest to developing countries; indeed, exports by LDCs are disproportionately affected by tariff 
peaks in the Quad.13  Not surprisingly, therefore, the problem  of tariff peaks features prominently in 
the Doha Development Agenda (DDA).  
                                                      
12 Canada has a mechanism whereby "nuisanc e" rates are automatically eliminated. 
13 The value of Quad imports subject to international tariff peaks (that is, rates exceeding 15%) was 
nearly US$93 billion in 1999, roughly 60% of which origin ated in developing countries.  This represents about WT/TPR/OV/9 
Page 7 
 
 
 17. In major developing and least developed countries, such tariff peaks tend to be less pervasive, 
largely due to the higher overall levels of tariff pr otection in these countries. In China, for example, 
peaks cover only 1.8% of tariff lines (Table 2).  In Indonesia and South Africa, the proportions are 1.5% and 3.9%, respectively, while they are ne gligible in Burundi, Chile, Niger, and Zambia. 
Although such peaks in these countries do arise in ag riculture and food products, textiles, clothing and 
footwear, they are less pronounced than in the Quad (Charts 2 and 3). 
18. In general, a movement towards a lower and mo re uniform tariff in de veloped and developing 
Members alike would tend to improve resource allocation and thereby raise economic welfare.
14  High 
and disparate tariffs foster inefficiency by pe nalizing efficient activities, including exports; by 
promoting a high-cost economy, they impair the comp etitiveness of exporters.  Border taxes levied on 
imports are, in effect, shifted onto exports.  Reducing tariff dispersion will tend to reduce these 
adverse effects.   
19. It is estimated that if Quad Members were  to accord LDCs duty -free access for products 
currently subject to tariff peaks, LDCs' exports to these major markets would rise by between 30% 
and 60%, or by as much as US$2.5 billion; the latter is equivalent to an 11% increase in LDCs' total 
exports.15  Part of this increase in LDCs' exports would be at the expense of other developing 
countries. 
Specific tariff rates 
20. Tariff peaks are often concealed by specific rates,  which are an important feature of the Quad 
Members' tariff schedules, particularly for agricu ltural products and especially in the United States 
and the EU, where they account for 12.1% and 9.7% of tariff lines, respectively.  This is partly the 
consequence of the "tariffication" of agricultural NT Bs, which were largely c onverted into specific or 
mixed duties16, rather than into pure ad valorem  tariffs, and often combined with tariff quotas.   
                                                                                                                                                                     
5% of  developing countries' total exports to the Quad.  Pr oducts subject to peaks acco unted for 15% to 30% of 
these countries' total exports to Canada, the EU, and th e United States.  Up to US$22 billion of tariff revenue 
may be collected by Quad Members on those imports subject to such tariff peaks; half of this amount is 
contributed by developing country exporters and LDC expo rters may pay up to US$200 million in tariff revenue 
notwithstanding tariff preferences (H oekman, Bernard, Francis Ng and Ma rcelo Olarreaga, 2002, "Reducing 
Agriculture Tariffs Versus Domestic Support: What's  More Important to Developing Countries?", CEPR 
Discussion Paper No. 3576). 
14 Strictly speaking, a uniform, non-zero nominal tariff minimizes the net welfare cost of such 
protection only if import demand elasticities are unifo rm across commodities and cross-price effects are 
negligible.  Tariff uniformity may be desirable, however,  on administrative simplicity and political grounds.  For 
a discussion of these and related matters, see Panagariya, A. and D. Rodrik, 1993, "Political Economy 
Arguments for a Uniform Tariff", International Economic Review  34(3), 685-703.;  WTO (1999), Trade Policy 
Review – Solomon Islands;  and WTO (2000), Trade Policy Review – Papua New Guinea .  A notable example 
of a country with a nearly uniform tariff sinc e the late 1970s is Chile (see WT/TPR/S/124, Trade Policy Review 
– Chile );  in addition, as mentioned, Hong Kong, China and Macau China have zero tariffs, while Singapore's 
tariff is virtually zero. 
15 See Hoekman, Ng and Olarreaga (2002), p.25. 
16 Mixed (or alternative) tariff rates ensure a minimum (or maximum) level of protection through a 
choice between an ad valorem  rate and a specific rate (e.g., 15% or US$5 per kg., whichever is more). WT/TPR/OV/9 
Page 8  
 
 
0% 10% 20% 30% 40% 50% 60%212019181716151413121110987654321Chart 1
Simple average MFN tariff rates for the "Quad", by HS Section
HS Section
Calculations include AVEs where available;  where they are not available, the  ad valorem  part is used for 
alternate and compound rates.  WTO Secretariat calculations, based on information provided by Members.Note:
Source : Canada 2002Japan 2002/03United States 2002
European Union 2002
01 Live animals and prods       
02 Vegetable products03 Fats and oils      04 Prepared food, etc.
05 Mineral products
06 Chemicals and prods07 Plastic and rubber
08 Hides and skins09 Wood and articles10 Pulp, paper, etc.
11 Textiles and articles
12 Footwear, headgear, etc.13 Articles of stones
14 Precious stones, etc.15 Base metals and prods16 Machinery, etc.
17 Transport equipment
18 Precision instruments19 Arms and ammunition
20 Miscellaneous manufs21 Works of art, etc.
 WT/TPR/OV/9 
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0% 5% 10% 15% 20% 25% 30%212019181716151413121110987654321Chart 2
Simple average MFN tariff rates for selected developing countries, by HS section
HS Section
Calculations exclude specific duties and include the ad valorem  part for alternate and compound rates.  
WTO Secretariat calculations, based on information provided by the Members.Note:
Source : 01 Live animals and prods       
02 Vegetable products
03 Fats and oils      04 Prepared food, etc.05 Mineral products
06 Chemicals and prods07 Plastic and rubber
08 Hides and skins
09 Wood and articles10 Pulp, paper, etc.11 Textiles and articles
12 Footwear, headgear, etc.13 Articles of stones
14 Precious stones, etc.
15 Base metals and prods16 Machinery, etc.17 Transport equipment
18 Precision instruments19 Arms and ammunition
20 Miscellaneous manufs
21 Works of art, etc.South Africa 2002Chile 2003China 2002
Indonesia 2002WT/TPR/OV/9 
Page 10  
 
 
0% 5% 10% 15% 20% 25% 30% 35% 40%212019181716151413121110987654321Chart 3
Simple average MFN tariff rates for selected least developed countries, by HS section
HS Section
Calculations exclude specific duties and include the ad valorem  part for alternate and compound rates.  
WTO Secretariat calculations, based on information provided by the Members.Note:
Source : 01 Live animals and prods      
02 Vegetable products
03 Fats and oils      04 Prepared food, etc.05 Mineral products
06 Chemicals and prods07 Plastic and rubber
08 Hides and skins
09 Wood and articles10 Pulp, paper, etc.11 Textiles and articles
12 Footwear, headgear, etc.13 Articles of stones
14 Precious stones, etc.
15 Base metals and prods16 Machinery, etc.17 Transport equipment
18 Precision instruments19 Arms and ammunition
20 Miscellaneous manufs
21 Works of art, etc.Zambia 2002Niger 2002Burundi 2003
Haiti 2002
 WT/TPR/OV/9 
Page 11 
 
 
 21. By contrast, China's tariff appears to be relativ ely transparent in this regard, with only 0.7% 
of all tariff lines subject to specific rates.  Like wise, specific duties are neg ligible in Burundi, Chile, 
Haiti, Indonesia, Niger, and Zambia.  Such duties curre ntly apply to roughly one quarter of tariff lines 
in South Africa, although they are expected to disappear once the UR is fully implemented.   
Tariff quotas 
22. As a consequence of the UR, and especially the tariffication of agricultural NTBs, tariff rate 
quotas as a proportion of all tariffs increased consider ably in Canada, Japan and the United States, 
they were already significant in the EU prior to  the UR.  As a consequence, tariff quotas account for 
1.7% of tariff lines in Japan to 3.2% in the EU.  Out-of-quota rates (and even in-quota rates) in the 
Quad, often entail potentially prohibitive tariff peak s. By contrast, China's tariff schedule contains 
relatively few tariff quotas.  While tariff rate quotas were necessary to administer minimum access 
requirements under the UR, they have left considerab le scope for discretion in the allocation of quota 
volumes, thereby retaining a number of the draw backs associated with previous quantitative 
restrictions, which reduce the benefits of tariffication.   
Tariff escalation 
23. A non-uniform tariff is often used to provide an escalating degree of tariff protection so as to 
encourage downstream processing.  This may be ac complished by levying relatively low duties on 
raw materials with progressively higher tariffs applied to more processed goods involving greater 
value added.  The outcome is that the level of effective protection increases as goods undergo further 
processing.
17  What may be mild escalation in nominal tariff terms can provide very high effective 
(net) assistance to downstream activities.  
24. Tariff escalation is a feature of industrial-product tariffs in the Quad.  Such escalation is 
present in the same sectors that are affected by peaks, most notably textiles and clothing, leather and 
footwear products (Table 4) . Tariff escalation is also a feature of China's tariff, for several categories of products, especially textiles and clothing, leathe r and footwear, wood and furniture, paper, printing 
and publishing, non-metallic minerals (tariff escala tion in selected developing counties and LDCs is 
shown in Annex 2.)  Tariff escalation is a potential im pediment to the efficient allocation of resources 
in the importing country, and it can constitute an obstacle to local processing of domestically 
produced primary products and of semi-finished goods  in the exporting country;  consequently, it 
impedes the industrialization of developing countries and LDCs seek ing to export products with 
higher value added, if not mitigated  by the GSP or other preferences. 
                                                     
 
17 The effective rate of protection (ERP) measures the protection provided by the entire structure of 
tariffs, taking into account those levied on inputs as well as those on outputs.  It is defined as ERP = (V D – 
VW)/V W, where V D is the value added in the given sector at domestic prices, which includes tariffs, and V W is 
value added at world prices.   If the nominal tariff on the final product is t, the share of each imported input i in 
the total value of the final product is ai, and the nominal tariff on each imported input is ti, then the effective rate 
of protection can be written as:  ERP = ( t - Σaiti)/(1 - Σai).   Thus, if  t = 10%, ti  = 5% for all inputs and Σai = 
0.8, ERP = 30%.  See Corden, W.M., 1971, The Theory of Protection  (London: Oxford University Press) for a 
full discussion of  the concept of effective protection.   WT/TPR/OV/9 
Page 12  
 
 
Table 4 
Tariff escalation in the Quad by 2-digit ISIC industry 
  United States EU15 Japan Canada 
  2002 2002 2002/03 2002 
Food beverages and tobacco First st age of processing 3.1 13.2 23.6 10.2 
 Semi-processed 7.4 19.1 20.3 6.8 
 Fully processed 12.4 18.7 22.6 34.1 
      
Textiles and leather First stage of processing 2. 9 1.0 10.2 1.1 
 Semi-processed 9.1 6.7 6.8 6.9 
 Fully processed 10.0 9.8 12.0 13.5 
      
Wood and furniture First stage of processing 0.1 0.0 0.0 0.0 
 Semi-processed 2.1 3.0 4.3 2.1 
 Fully processed 2.2 2.1 2.0 5.1 
      
Paper, printing and publishing First stage of processing 0.0 0.0 0.0 0.0 
 Semi-processed 0.5 2.1 0.5 0.4 
 Fully processed 0.6 1.5 0.3 1.0 
      
Chemicals First stage of processing 1.9 1.7 2.4 1.5 
 Semi-processed 4.3 4.5 2.8 3.0 
 Fully processed 3.9 3.8 2.0 4.8 
      
Non-metallic mineral products First st age of processing 0.0 0.0 0.4 0.0 
 Semi-processed 2.1 2.9 1.5 0.7 
 Fully processed 5.6 4.0 1.1 3.8 
      
Basic metal First stage of processing 0.4 0.0 0.4 0.0 
 Semi-processed 1.7 1.9 1.1 0.9 
 Fully processed 2.5 2.4 0.5 3.7 
      
Fabricated metal products and  Semi-processed 2.7 1.9 1.8 1.5 
machinery Fully processed 2.2 2.5 0.3 2.6 
      
Other First stage of processing 1.6 1.2 0.2 1.2 
 Semi-processed 0.4 1.8 0.1 0.0 
 Fully processed 3.6 3.0 2.8 4.8 
      
Total First stage of processing 3.8 8.1 14.5 5.0 
 Semi-processed 4.7 4.9 4.9 3.9 
 Fully processed 5.5 7.0 7.8 8.9 
Note: For countries with non- ad valorem  rates AVEs have been used as ava ilable.  In case of unavailability, the ad valorem  part is used 
for compound and alternate rates.  Averages differ from those in the DG's Overview 2002, due to changes in concordance 
between HS and ISIC. 
Source : WTO Secretariat calculations, based on data provided by the Members.  
Preferences for developing and least developed countries 
25. Applied tariff rates may be lower than MFN rates owing, inter alia , to non-reciprocal 
preferences granted to developing countries under th e Generalized System of Preferences (GSP) and 
other preferences for LDCs.  Such preferences are pr ominent forms of special and differential (S&D) 
treatment aimed at increasing export opportunities fo r developing and least developed countries.  WT/TPR/OV/9 
Page 13 
 
 
 26. Under GSP, developed countries discriminate in favour of qualifying developing ones by 
granting them non-reciprocal tariff reductions belo w MFN rates for certain products. For example, 
Quad Members' average GSP rates range from 4.2% to 5.7%;  their average applied MFN rates range 
from 5.2% to 6.9% (Table 5).  Recent Trade Po licy Reviews of other major providers of GSP 
preferences show a similar pattern;  the differentials between MFN and GSP rates are, however, 
considerably smaller for "sensitive" sectors such as agriculture, and textiles and clothing, both of 
which are frequently excluded from GSP and other unilateral preferences. 
Table 5 
MFN and developing country  preferential tariffs 
(Per cent) 
 MFN  GSP a LDCb 
United States 2002 5.2 3.7 2.7 
 WTO agricultural products 10.4 8.4 6.2 
 Textiles and clot hing 9.7 9.4 9.4 
    
EU 2002c 6.4 4.5 1.7 
 WTO agricultural products 16.1 14.5 9.0 
 Textiles and clot hing 8.4 7.2 0.0 
    
Japan 2002/03 6.9 5.7 3.6 
 WTO agricultural products 20.0 19.3 18.3 
 Textiles and clot hing 7.0 5.4 0.1 
    
Canada 2002d 6.8 5.4 4.1 
 WTO agricultural products 21.7 20.8 18.2 
 Textiles and clot hing 9.9 8.9 7.1 
    
Australia 2001/02e 4.3 3.9 1.8 
 WTO agricultural products 1.3 1.0 0.0 
 Textiles and clot hing 12.3 12.3 8.6 
    
New Zealand 2002 4.1 3.5 0.0 
 WTO agricultural products 2.1 1.6 0.0 
 Textiles and clot hing 9.5 9.0 0.0 
    
Czech Republic 2001 6.1 5.1 .. 
 WTO agricultural products 13.4 13.2 .. 
 Textiles and clothing 6.6 6.2 .. 
    
Slovak Republic 2001 6.1 5.2 4.6 
 WTO agricultural products 13.2 13.0 13.0 
 Textiles and clot hing 6.7 6.2 5.9 
.. Not available. 
a Generalized System of Preferences. 
b Least developed countries preferences. 
c Data for the EU's GSP and LDC rates are based on the 2001 tariff nomenclature. 
d Canada has provided duty- and quota-free access to imports of textiles and clot hing products from LDCs as of 1 January 2003. 
e As of 1 July 2003, Australia has removed all tariffs on LDCs. 
Note: Calculations include AVEs where availa ble;  where they are not available, the ad valorem  part is used for alternate and 
compound rates. 
Source : WTO Secretariat calculations, base d on data provided by Members. 
27. This exception to MFN treatment under the GATT was authorized through a ten-year waiver 
in 1971 and given permanent legal status in 197 9 under the Enabling Clause.   Such preferences are WT/TPR/OV/9 
Page 14  
 
 perceived to enhance the ability of developing countr ies' exporters to compete in developed countries' 
markets.  More than 30 years after the GATT first authorized the GSP as a "temporary" measure, it appears to remain highly popular among developing countries as an important instrument for ensuring 
their "special and differential treatment" within the multilateral trading system through improved 
access to developed countries' markets without recipr ocal liberalization.  Recently, Quad and other 
industrialized countries have passed legislation providing improved, if not duty-free, access for LDCs for almost all products.  More specifically , the United States enacted the African Growth 
Opportunities Act (AGOA) in May 2000 and the EU  enacted the Everything But Arms (EBA) scheme 
in March 2001.
18  New Zealand (as of 1 July 2001), Norway (as of 2002) and most recently Australia 
(as of 1 July 2003), have also granted LDCs duty-free access to their markets for all products.19   
28. However, as Table 5 and numerous studies have shown, protectionist interests in the major 
developed Members of the WTO greatly curtail the be nefits of the GSP so that this scheme is not as 
advantageous to developing countries as it appears;  the broad conclusion of these studies is that GSP 
has at best yielded only a "modest" increase in impor ts from beneficiary countries, with some of those 
gains due merely to trade diversion rather than trade creation.20  Even in the cases of more recent 
supplementary initiatives, such as the AGOA and the EB A, analyses suggest that market access will 
be only slightly improved for the countries concerned.21  There are several possible reasons for this 
outcome.  First, such preferences are seldom gene ralized; they frequently exclude precisely those 
products (e.g. textiles, clothing and footwear) in  which developing countries have the greatest 
comparative advantage, and moreover, where their expor ts tend to face tariff pe aks in major markets.  
This is evident from preferential tariff rates for LDCs provided by the Quad and other countries in 
textiles and clothing and agriculture (Table 5).  Further, as such preferences are beyond the purview 
of the binding rules of the GATT/WTO system, they can be unilaterally revoked or modified at any 
time by the according Member, thereby leading to un certainty.  In particular, a developing country 
may be "graduated" out of a preference for a produc t just as it begins to achieve significant success in 
an export market, thereby discour aging efforts to expand exports.22  Moreover, conditions may be 
attached to these preferences in order to obtain concessions from developing countries, sometimes in 
non-trade areas.23  Even when eligibility is not a problem, fu ll use of the GSP system and other recent 
initiatives is hampered by the complexity of the system and technical capacity of developing 
                                                      
18 Under AGOA, 38 African countrie s currently qualify for preferential treatment;  in order to qualify 
for AGOA, the country must already be eligible for GSP treatment.  AG OA extends GSP for eligible sub-
Saharan African countries until 1 September 2008.  The EBA grants duty-free and quota-free access for all 
products from LDCs except arms and munitions and three agricultural products (bananas, rice, and sugar);  tariffs and quotas on the three agricultural products will be  liberalized gradually (tariffs will be removed in 2006 
for bananas and 2009 for rice and sugar). 
19 Announcement by Hon. Mark Vaile, Minister for Trade on 27 May 2003 [Online].  Available at:  
http://www.trademinister.gov. au/speeches/2003/030527_deve lopment.html, [8 July 2003].  This follows 
publication by the Australian Productivity Commission in 2002 of a report concluding that the removal of all 
barriers to trade with LDCs would have a small impact on Australia (Productivity Commission, 2002, Removing 
Tariffs on Goods Originating from Least Developed Countries , Research Report, October). 
20 See, for example, studies cited in Ozden and Rei nhardt (2003), "The Pervers ity of Preferences:  GSP 
and Developing Country Trade Policies 1976-2000" , World Bank Working Paper no. 2955, January. 
21 See, for example, Mattoo, Aaditya, Devesh Ro y and Arvind Subramaniam (2002), "African Growth 
and Opportunity Act and Its Rules of Origin:  Generosity Undermined?", World Bank Research Working Paper 
2908, October;  and Brenton, Paul (2003), "Integratin g the Least Developed Countries into the World Trading 
System: The Current Impact of EU Preferences under Everything But Ar ms", World Bank Policy Research 
Working Paper no. 3018, April. 
22 For example, since the GSP scheme of the United States was introduced in 1976, 36 of the 154 
eligible countries have graduated. 
23 In some instances, the EU explicitly links its granting of preferences in addition to those provided by 
the GSP to beneficiary countries' adherence to labour and environmental standards (see for example, 
WTO, 2000, Trade Policy Review – European Union ).  Likewise, U.S. trade laws  allow the President to use 
GSP to promote labour standards and intellectual property  rights;  this has been extended to the AGOA Act. WT/TPR/OV/9 
Page 15 
 
 
 countries' exporters.  In particular, certain rules of  origin must be satisfied by exporting countries;  
these rules usually involve a minimum amount of va lue added, which can be a deterrent to small 
countries with limited technological capacity.  Also, rules of origin often require beneficiaries to use 
inputs produced in the country granting the pref erence, with potential adverse effects on their 
exporters' competitiveness.
24  Last, but not least, developing c ountries' exports are often impeded by 
supply-side constraints, including lack of trade fi nance (possibly owing to market failure) and poor 
infrastructure.  
29. A more fundamental problem with GSP and si milar preferences might be that such non-
reciprocal preferences may have the effect of de laying trade liberalization by recipients; that is, 
developing countries removed from GSP tend to a dopt more liberal trade policies than those 
remaining eligible.25  The reason is that with trade barriers reflecting the Government's balancing of 
political support from import-competing and export sectors, the non-reciprocity feature of the GSP 
shifts the balance in favour of the import-competi ng sectors in developing countries; it does this by 
reducing one of the main incentives that devel oping countries' export industries have to oppose 
protectionist trade policies at home instead of trying to secure the export sectors' support for more 
liberal trade policies.  Further, given that the value of GSP preferences tends to be eroded by 
negotiated multilateral reductions in MFN rates, th ey can provide the wrong signal to exporters in 
developing countries regarding their long-term comparative advantage and might even deter 
developing countries from agreeing to reductions in MFN rates.  The non-reciprocal preferences such 
as the ACP and AGOA also create a systemic risk by excluding some countries that are already 
recipients of preferences under a different GSP arra ngement;  the resulting complex set of preferential 
trading arrangements arbitrarily exclude certain countries and reduces predictability and stability in 
the multilateral trading system.26  This raises the question of what measures, if any, might be taken to 
help developing countries adjust to the erosi on of the tariff preferences they currently enjoy.27 
30. It is arguable that developing countries mi ght be better served by becoming more fully 
engaged as WTO Members, with full obligations and rights under the WTO Agreements, than by 
special GSP-style tariff preferences.  Developing countries have no legal avenues to protect their 
rights under such schemes, and there is evidence that  they also tend to prolong protectionist polices 
among recipient countries.  Certain more temporary and targeted forms of special and differential 
(S&D) treatment might be appropriate, where thes e are designed to address constraints on developing 
countries' institutional capacity to implement ex isting as well as new WTO Agreements and their 
                                                      
24 Such sourcing may not be the cheapest available, thus raising the production costs of exporters and 
affording protection to preference-granting producers of the inputs involved. 
25 See Ozden and Reinhardt (2003). 
26 Page, S. and A. Hewitt ((2002), "The New European  Trade Preferences:  Does  'Everything but Arms' 
(EBA) Help the Poor?", Development Policy Review , 20 (1), pp. 1-13) point out that in addition to countries 
such as Guyana and Kenya, other major "losers" from su ch trading arrangements are th e large, poor, developing 
countries such as India, Pakistan, and Indonesia.  However, Pakistan was granted special EU and other 
preferences and debt relief (for its support in the war in Afghanistan) and has now been added to the list of 
countries in Latin America who receive  additional "super GSP" preferences as part of the war on drugs;  
Indonesia, as a member of OPEC also receives speci al preferences.  As for the above-mentioned additional 
preferences under the EU's GSP scheme as part of the war on drugs, the Panel in EC-Tariff Preference  recently 
found that the EC measure is inconsistent with Article  I.1 of GATT 1994 because it failed to demonstrate that 
the measure is justified under the Enabling Clause or Ar ticle XX(b) of GATT 1994.  The EU has appealed this 
ruling. 
27 According to the IMF, in most LDCs the welfare losses associated with pr eference erosion are likely 
to be relatively modest – less than 2% of LDCs' aggregate exports; hence,  the countries most affected by the 
adverse effects of such erosion could be comfortably compensated through increased assistance.  Such assistance would be especially impor tant for LDCs that are currently most heavily dependent on such 
preferences (see "Communication from the IMF:  Fi nancing of Losses from Preference Erosion", WTO 
document WT/TF/COH/14, 14 February 2003). WT/TPR/OV/9 
Page 16  
 
 different developmental priorities, or where add itional time and possible assistance might be required 
to allow the appropriate sequencing of various macr oeconomic and structural reforms (including trade 
liberalization), and for their economies to adjust to these and other reforms. 
Bilateral and regional preferences 
31. The proliferation of bilateral and regional agre ements since the WTO was established in 1995 
has eroded the scope of application of MFN tariffs; such discriminatory agreements, which are mainly  
among developed countries and thereby effectively ex clude many developing countries and especially 
LDCs, constitute a systemic threat to the MFN prin ciple, one of the cornerstones of the WTO.  The 
outcome is that MFN tariffs tend to be the exce ption rather than the rule, especially for the 
United States, the EU, and Canada.   
3. Agriculture … the most distorted sector 
Overview 
32. Agriculture is important in developing countri es' economies, accounting for some one quarter 
of their GDP and about half of their employment;
28 by contrast, agriculture in OECD countries 
accounts for around 2% of GDP and 7.3% (in 2001) of em ployment.  With nearly three quarters of the 
world's poor concentrated in rural areas, mainly in developing countries, and depending heavily on agriculture for their livelihoods, trade liberalization in agriculture is crucial to the alleviation of 
poverty.  The conversion of non-tariff barriers in to tariffs (through a process of tariffication), the 
curtailment of subsidies and the establishment of strengthened rules covering market access, domestic support and export competition, were among the major achievements of the Uruguay Round as 
regards agriculture;  tariffication of agricultura l NTBs, in particular, paved the way for future 
reductions in agricultural tariffs.
29  Nonetheless, both tariffs and domestic support for agriculture are 
still relatively high, especially in many OECD countri es.  In the "Quad" group of major traders, for 
example, applied MFN tariffs on agricultural products  are far higher than those on non-agricultural 
products.  According to the OECD, total support to agriculture by OECD countries is close to 
US$1 billion per day, more than six times all developm ent assistance.  Much of this support is linked 
to production; this encourages higher output resu lting in large surpluses, especially in several 
countries where such support is most generous.  Support linked to production in combination with 
export subsidies drives down world prices of agricultu ral products and leads to the displacement of 
developing countries' products, not just from subsidiz ing countries' markets, but also from their own 
and third markets, to the detriment of poor farm ers in developing and least developed countries.  
Consequently, agriculture remains the most protected, subsidized, and thus distorted sector of many 
Members' economies, with far-reaching social and economic repercussions, not just domestically, but globally.  According to estimates by the World Bank, phasing out these measures world-wide would raise annual income by over US$350 billion.
30   
                                                      
28 This suggests that, on average, labour productivity in agriculture in developing countries is roughly 
one third of the overall level in their economies. 
29 The Uruguay Round Agreement of 1994 resulted in significantly strengthened disciplines of trade-
related agricultural policies.  The Uruguay Round Agreement on Agriculture (U RAA), replaced non-tariff 
import barriers by bound tariffs, obliged Members to open  closed markets, curbed e xport subsidies, categorized 
domestic programmes  on the basis of their potential to di stort trade, and disciplined the most trade-distorting 
forms of support.  Agriculture was also affected by other agreements, notably SPS and TBT, which aimed was 
to forestall the use of such measures for purposes of protection.   
30 Liberalization of the sugar market, for example,  would result in an increase of some 20% in 
international trade and income gains of some US$4.7 billion, most of which would go to the poor (World 
Bank, 2004, Global Economic Prospects , 2004). WT/TPR/OV/9 
Page 17 
 
 
 33. Agricultural support programmes are justified by some Members using them as necessary to 
address non-trade concerns, including income support for agricultural households, preservation of the 
environment, and food security.  While this vi ew is widely shared among WTO Members, some 
attach more importance to them than others.  Th e debate, therefore, has been largely about the 
magnitude of total support to agriculture together  with the appropriateness and effectiveness of  
various measures aimed at achieving these objectives.  Trade-distorting measures are unlikely to be effective instruments in addressing non-trade concerns. 
34. Clearly, domestic agricultural policies and inte rnational trade are closely intertwined;  
protective border measures are often necessary for the maintenance of domes tic support programmes.  
In particular, a domestic support programme that holds the domestic pric e above the world level 
requires accompanying import restrictions, such as tari ffs.  Furthermore, to the extent that domestic 
support programmes are high enough to generate a pr oduction surplus, export subsidies are frequently 
used to help dispose of the surplus. 
Indicators of government assistance 
35. Total support to agriculture by OECD countri es, as measured by the total support estimate 
(TSE), remains high; indeed, it is es timated to have increased slightly , from US$311 billion in 2001 to 
US$318 billion in 2002, roughly equivalent to sub-Saharan Africa's annual GDP.
31  The EU, Japan, 
and the United States collectively account for over four fifths of such support, although as a percentage of the value of gross farm receipts, support is highest in Switzerland, Norway, Korea, Iceland, and Japan.  Total support was the equivalent of 1.2% of GDP in the OECD area, compared 
with an annual average of 2.3% in the peak 1986-88 period, when the Uruguay Round negotiations 
were under way. Agriculture's contribution to GDP in the OECD area is currently about 2%.  In 
Japan, Korea, Norway, and Switzerland,  total support to agriculture is  close to, or even exceeds, the 
sector's contribution to GDP.  
36. Nearly three quarters of total support is provide d to farmers.  Such support, as measured by 
the producer support estimate (PSE), rose slightly from US$231 billion in 2001 to US$235 billion in 
2002; this represents 31% of total farm receipts, th e same as in 2001, but down from 38% in 1986-88. 
The corresponding PSEs for Japan, the EU, Canada , and the United States were 59%, 36%, 20% and 
18%, respectively.  Thus, for every 100 yen a Japanese farmer earned in 2002, 59 yen came from support measures.  Support levels in  2002 were the lowest in New Zealand (1%) and Australia (5%)
32;  
they were highest in Iceland, Korea, Norway, and Switzerland, where they ranged between 63% and 
75%. Rice, sugar, and milk are the most supported commodities, with transfers to producers close to, 
or exceeding, half of gross receipts for these products.   
37. As reflected in the producer nominal protection coefficient (NPC), prices received by OECD 
farmers in 2002 were on average 31% above worl d prices (compared with 57% in the mid-1980s), 
thereby shielding farmers in many countries from world market signals.  Whereas in Australia and 
New Zealand, prices received by farmers were, on aver age, the same as those at the border, they were 
10% higher in the United States, 35% higher in the EU, and more than double in Iceland, Japan, Korea, Norway, and Switzerland.   
                                                     
 
31 OECD (2003), Agricultural Policies in OECD Countr ies:  Monitoring and Evaluation, 28 April 2003 
(AGR/CA/APM(2003)1/FINAL).  These esti mates include "Green Box" measures. 
32 While government support in Australia and New Zealand is low, these countries have relatively strict 
sanitary and phytosanitary regulations, which they consid er necessary to ensure that the reputation of these 
island economies as reliable exporters of high quality agricultural products is not jeopardized by pests and 
diseases, but which nonetheless tend to impede imports of such products.  (See WTO, 2003, Trade Policy 
Review – Australia;  and WTO, 2003, Trade Policy Review – New Zealand ). WT/TPR/OV/9 
Page 18  
 
 38. At the same time, the prices paid by OECD  consumers (consumer NPC) in 2002 were on 
average 37% higher than world prices. Whereas in  Australia prices paid by consumers were, on 
average, the same as those at the border, they were  10% higher in the United States, 42% higher in the 
EU, and more than double in Japan, Korea, Norway, and Switzerland.  Overall, consumers in OECD 
countries were implicitly taxed at a rate of 24% (percentage consum er support estimate (CSE)).  The 
implicit tax rates are negligible in Australia, New Ze aland, and the United States;  they exceed 50% in 
Japan, Korea, Norway, and Switzerland. 
39. Output-based support (market price support (M PS) and output payments (OP)) and input 
subsidies remain the dominant forms of produ cer support in most OECD countries, together 
accounting for more than three quarters of support to producers, compared with 90% in 1986-88.  
These measures are the most distorting forms of produc tion and trade assistance;  they contribute to 
over-production in the OECD area to the detrimen t of the supporting countries themselves, of OECD 
Members, where support is relatively low, and of developing countries.
33   
40. Government intervention in agriculture is also extensive in many developing countries.  Tariff 
bindings on agricultural products can be just as high or even higher in developing as in OECD 
countries, although applied rates are often below bou nd rates.  Subsidies in developing countries tend 
to be lower than those in developed countries owing to budgetary constraints.34  In a number of 
developing countries, agriculture is actually "taxed" due to factors such as overvalued exchange rates, 
low government procurement prices or export taxes levied on agricultural commodities.    
Objectives of support and related measures 
41. Farm support programmes have mu ltiple domestic objectives, including: income support for 
agricultural households; preservation of the environment, notably traditional rural life and amenities; 
food security; and food safety. 35  Some of these objectives result from situations where markets alone 
may fail to achieve a socially desirable outcome ow ing to the existence of "externalities" or "public 
goods".36  Accordingly, two broad types of agricultura l policies can be distinguished;  those intended 
to redistribute income, and those aimed more at ad dressing market failure. In this regard, there would 
appear to be a serious mismatch between these obj ectives and the policy measures designed to achieve 
them, thus casting doubt on the appropriateness and effectiveness of such measures.  In designing 
policy, income support objectives need to be di stinguished clearly from those concerning the 
correction of market failure.  Moreover, one inst rument needs to be targeted at one objective. 
                                                      
33 Under the WTO Agriculture Agreement, domestic s upport measures that are considered to distort 
production and trade (with some exceptions) fall into the so -called "amber box", which is defined in Article 6 of 
the Agreement as all domestic support ot her than that in the "blue" and "g reen" boxes.  The "blue" box covers 
support under production-limiting programmes.  "Green" box subsidies are those that do not distort production 
or involve minimal distortion.  Whereas in the United States and Japan "amber" box subsidies accounted for less than one quarter of total domestic support in 1998 (the latest year for which such data are available), such 
subsidies accounted for more than half of total support in Canada and the EU. 
34 Some developing countries, including India, are heavy users of certain forms of subsidies, notably 
for inputs such as fertilizer, power and water  (WTO, 2002, Trade Policy Review – India,  p.106). 
35 OECD (2002), "Agricultural Policies in OECD Countries:  A Positive Reform Agenda", 
6 November 2002  (COM/AGR/TD/WP(2002)19/FINAL). 
36 An externality arises where a decision by one ag ent, whether a producer or consumer, has side-
effects that impinge on others.  For example, farm s may produce excessive pes ticide residues (negative 
externalities) as well as crops; they may also produ ce environmental as well as aesthetic benefits (positive 
externalities).  In these cases, the market-determined output may be highe r than optimal because of unpaid 
external costs or sub-optimal owing to uncompensated external benefits.  A p ublic good, such as clean air or an 
attractive countryside, is a good for which the use by one agent does not diminish the amount available to 
another.  A public good may be a joint output, and therefor e an externality, of private production.  As in the case 
of positive externalities, the market tends to result in too few public goods.    WT/TPR/OV/9 
Page 19 
 
 
 
Income support 
42. Policy measures linked to production and consump tion are relatively inefficient instruments 
for delivering income support to rural households. A ccording to OECD estimat es of income transfer 
efficiency, no policy measure linked to agricultural activity succeeds in delivering more than half of 
the monetary transfers from consumers and taxp ayers as additional income to farm households.37  The 
proportion is one quarter or less in the cases of market price support and deficiency payments, and less than one fifth for input subsidies. Notwithstandi ng its low income transfer efficiency, roughly two 
thirds of agricultural support in OECD countri es involves measures that keep product prices above 
levels that would otherwise prevail.  An intrinsi c feature of measures based on agricultural activity is 
that they cannot be targeted at relatively poor households.  In the case of open-ended price support, 
the size of the transfer is directly proportional to the level of production.  Consequently, the bulk of 
the support that reaches farmers goes to the larger one s, many of whom already have higher incomes.  
It is not surprising, therefore, that under the CAP,  70% of support (that is, market price support plus 
payments to producers) is allocated to  the largest 25% of the EU's farms
38; in the United States, 
Canada, and Japan the corresponding amounts of suppor t allocated to the largest 25% of farms are 
89%, 75% and 68%, respectively. In contrast to th e above measures, direct  income payments are 
much more efficient in delivering income support, especially if they are de-coupled from agricultural 
activity; such payments can also be targeted more eas ily at those households felt to be most in need of 
assistance.  If the current production-based suppor t measures were replaced by direct income 
payments, efficiency costs could be halved w ithout reducing the incomes of farm households.39  The 
savings would be even greater if support were targ eted at lower income farm households through the 
income tax system or social security programmes.  The more a policy measure pays to domestic farmers without affecting their production decisions, th e greater the share of income retained by farm 
households and the lower the impact on production and trade. 
43. In addition, by distorting production and trade, such support, including export subsidies, has a 
negative impact on farm incomes in third countries, including developing countries, because such 
support drives down international prices and increa ses their volatility.  Consequently, returns from 
agriculture in developing countries are lowe r than otherwise, thus exacerbating poverty. 
Correction of market failure 
44. Governments also justify assistance for agri culture on the grounds that market-oriented 
agriculture would fail to take due  account of externalities, such as th e protection of the environment, a 
non-trade concern explicitly mentioned in the Preambl e of the WTO Agreement on Agriculture.  In 
their view, a certain level of domestic support and border protection is necessary to maintain 
agricultural production, especially in areas with low agricultural potential, and thus ensure provision 
of environmental externalities.  This reflects a pe rception that there is a very close relationship 
between agricultural production and the provision of  positive externalities, including those associated 
with public goods.  In fact, there is very little ev idence on the extent of the externalities generated by 
agriculture, which makes it very difficult to meas ure the full benefits of government support measures 
and thus to ensure that these benefits are not outweighe d by their costs.  Hence, it is also difficult to 
compare the effectiveness of different support measur es in achieving their objectives.  In any event, 
there are very few cases or circumstances where jo intness in production exists and even in such 
instances, trade-distorting measures are unlikely to be effective instruments for addressing the 
problem. 
                                                     
 
37 OECD (2002), The Incidence and Efficiency of Farm Support . 
38 Farms are classified according to the size of th eir gross sales (for more details, see OECD, 2002, 
"Farm household income issues in OECD countries: a synthesis report", AGR/CA/APM(2002)FINAL, Paris).   
39 OECD (2002), "Agricultural Policies in OECD Countries:  A Positive Reform Agenda", 
6 November 2002  (COM/AGR/TD/WP(2002)19/FINAL, p. 34. WT/TPR/OV/9 
Page 20  
 
 45. The externalities generated by agriculture are not exclusively positive, however; there may 
also be some significant negative externalities, di rectly linked to production.  Thus, protection and 
domestic support policies may encourage environmen tally harmful agricultural practices, including 
high use of fertilizers and pesticides.  The outcome is resource degradation and environmental stress, 
such as adverse effects on the ground water, the so il, and biodiversity.  Furt hermore, by depressing 
incomes and exacerbating poverty in developing countr ies, such policies make it more difficult for 
farmers in these countries to move towards more environmentally sustainable practices. 
46. Governments may also be concerned by the possi ble failure of market forces to ensure food 
security;  this may be threatened by sharp incr eases in food prices, which make food unaffordable 
owing to supply shocks caused by adverse climat ic conditions, diseases, wars or embargoes. As 
highlighted above, however, in most OECD countries domestic prices are already considerable higher than world prices.  Heavy reliance on domestic pr oduction exposes countries to the risk of domestic 
crop failure due, for example, to floods and droughts, as well as to interruptions in the supply of key inputs (such as fuel) that are essential for food pro duction.  The effects of supply shocks can be 
mitigated more effectively by a combination of  domestic production, maintenance of domestic 
production capacity, stockholding, and access to  a wide range of foreign suppliers.   
47. Multilateral trade liberalization of agriculture, in cluding the removal of subsidies, may result 
in higher world prices, and thus cause food import bills to rise in some developing countries, with a potentially negative short term effect on food security, and the poor being the hardest hit.  However, 
these negative short-term terms of trade effects have  to be weighed against the benefits associated 
with the longer-term allocation effects; that is, higher food prices would encourage greater production 
in developing countries and result in higher incomes,  including for poor farmers, and thus increased 
purchasing power.  Even in developing countries, food security is achieved most effectively at the 
household level by alleviating poverty and then by allowing households to buy food from domestic or 
foreign sources at prices that are not artificially inflated by import barriers.  In India, where food 
security has long been a major policy objective,  support has contributed to burgeoning costs 
associated with the accumulation of grain stoc ks that greatly exceed food security needs.
40 
Agriculture and the Doha Development Agenda 
48. More careful design and better targetting of ag ricultural policies would enable governments 
not only to pursue their multiple objectives in a more cost-effective manner, but with minimal disruption to international markets for agricultu ral products. The Doha De velopment Agenda (DDA) 
presents Members with the opportunity to achieve  such reforms multilaterally, thereby benefiting 
industrialized and developing countries alike.  Acco rding to the IMF, removal of agricultural support 
(tariffs and subsidies) as part of a comprehensiv e effort to lower trade barriers would raise global 
economic welfare by US$128 billion annually, the bulk of which appears to be due to the removal of 
tariffs.
41  While nearly US$98 billion of this welfar e gain would accrue to industrial countries, 
through more efficient production and lower food prices for many consumers, the benefits to 
developing countries would also be substantial, at some US$30 billion.42  These gains are particularly 
large for food-exporting regions, including sub-Saha ran Africa, where many of the world's poorest 
live. 
                                                      
40 WTO (2002), Trade Policy Review – India , p. x. 
41 The estimated US$128 billion relates only to static gains;  dynamic gains (from higher investment 
and faster productivity growth) may well be several times larger (IMF, World Economic Outlook, 2002, 
September, p. 85). 
42 According to a recent study by  Hoekman, Bernard, Francis Ng  and Marcelo Olarreaga, 2002, 
"Reducing Agriculture Tariffs Versus Domestic Support: What's More Important to Developing Countries?", 
CEPR Discussion Paper No. 3576), a 50% cut in tariffs would have a much greater positive effect on the exports 
and welfare of developing countries than a 50% cut in domestic support. WT/TPR/OV/9 
Page 21 
 
 
 49. Despite the large overall gains from liberalizati on of agriculture, some  developing countries 
may gain very little, or even be harmed, by liber alization – unilateral or multilateral – of commodity 
markets particularly in the short-term.    For example, there is some evidence that the long-run 
benefits of liberalization in the cocoa market, where changes have been most pronounced, accrue 
largely to consumers in developed countries at th e expense of the exporting countries (owing to loss 
of implicit or explicit export taxes) and farmers in  non-liberalizing countries;  farmers in liberalized 
African markets are broadly neither better nor worse off.
43  However, the DDA addresses all 
agricultural products, including processed produc ts, and reducing tariff escalation will create 
opportunities to move up the value-added chain and away from commodities that are undergoing 
long-term price declines anyway and are often subject  to significant price fluctuations.  Some of the 
greatest losses would affect developing countries th at depend on preferences to gain access to their 
main export markets.  The value of these preferen ces is already being eroded through regional trade 
agreements and preferences granted to other de veloping and least-developed countries, but tariff 
reductions under the multilateral process would also contribute to preference erosion.  As production 
and export subsidies are reduced, net food-importin g countries may also face increased food import 
bills as prices rise, at least in the short term.  For these, and others that may lose out in liberalization, 
it may be necessary to develop complementary policies and, in some cases, assistance from international agencies designed to redress the unfavourable effects.
44  
50. While agriculture is of great immediate im portance to developing countries, commodity 
prices have been in long-term decline, with occasional price peaks, for at least forty years.  This trend 
has been exacerbated by the high levels of prot ection throughout the world, including production and 
export subsidies in many OECD countries.45  Reducing competition fro m production and export 
subsidies and improving access to export markets will benefit efficient producers in developing 
countries.  However, as prices and terms of trade co ntinue to decline, agricultural exporters will find 
that they have to export increasing volumes of  commodities in exchange  for the same value of 
manufactured goods and services.  Therefore deve loping countries need to look beyond exporting 
primary agriculture and towards processed products  and even beyond agriculture, in the current 
negotiations.  Furthermore, for developing count ries to fully benefit from lower protection of 
agriculture (and other sectors), they also need to overcome a wide range of supply constraints on their 
exports.  These constraints include a lack of finan ce and poor infrastructure but also national policies 
that discourage agricultural development. 
4. Market access in textiles and clothing 
Introduction 
51. Overall, the implementation of the Agreement on Textiles and Clothing (ATC) is on track.  
The Agreement will terminate on 31 December 2004.  As scheduled, the quantitative restrictions 
                                                      
43 Whereas producer prices have tended to rise as a share of f.o.b. prices, as intermediation costs and 
tax have declined, the downward shift in the aggregate supply curve in conjunction with inelastic demand results 
in lower world prices.  Farmers thus get a larger shar e of a lower price (see Gilb erts, Christopher, and Panos 
Varangis, 2003, Globalization and International Commodity  Trade with Specific Refere nce to the West African 
Cocoa Producers" in R.E. Baldwin and L.A. Winters, Eds, Challenges to Globalization , NBER). 
44 The vulnerabilities of poor countries and net food importing nations has been recognized in the WTO 
through the Decision on Measures Concerning the Possible Negative E ffects of the Reform Programme on 
LDCs and net food importing countries. 
45 The above example concerning cocoa highlights the limits to the benef its accruing to producer 
countries from the liberalization of trade in commod ities whose demand is not very elastic.  As noted, a 
deterioration in the terms of trade ca n reduce the beneficial impact of gr owth on economic welfare in an open 
economy.  If the deterioration in the terms of trade more than outweighs the primary gain from growth, the 
outcome is "immiserizing" growth (see Bhagwati, J., 1958, "Immiserizing Growth:  A Geometrical Note", 
Review of Economic Studies , 25, pp. 201-205). WT/TPR/OV/9 
Page 22  
 
 covered by the Agreement will be eliminated and tr ade in the sector will be integrated into normal 
GATT/WTO rules at the end of 2004.  The expiry of the ATC will be a landmark for the multilateral 
trading system, marking the completion of the implementation of one of the major results of the Uruguay Round.  Multilateral rules will be re-asser ted over trade in the sector.  Implementation will 
contribute to growth in the global economy through e fficiency gains.  Nonetheless, at the same time 
as the termination of the Agreement draws closer, questions are being posed and issues being raised 
about:  the adjustment costs; competitive challenges; and, the evolution of the structure and trade flow 
patterns in the post-ATC trading environment. 
Quotas to be phased out 
52. The Agreement on Textiles and Clothing (ATC ) envisages a removal of all quantitative 
restrictions on imports of textiles and clothing by  31 December 2004.  Quotas are being integrated 
into GATT/WTO Rules in three stages (1995-1997;  1998-2001; and 2002-2004).  At the beginning of each stage, Members were required to integrate a minimum 16%, 17%, and 18%, respectively, of their total volume of imports of textiles and clothing in 1990 that were covered by the ATC.  Each stage 
had to include products from each of the four main categories (tops and yarns;  fabrics;  made-up 
textile products;  and clothing), although the combin ation of these products to be liberalized could be 
chosen by each Member concerned.  Finally, th e remaining quotas had to be increased by at least 
16%, 25%, and 27%, respectively, in each of the three stages, to provide improved market access to 
exporting countries. 
53. In the WTO, developing countries argue that the integration thus far, while in line with the 
phases envisaged by the ATC, has been based on "b ackloading" with a majority of imports (both 
products and quotas) to be liberalized only in the fi nal stage.  Reviews of the first and second stages 
of integration, undertaken by the WTO's Textile s Monitoring Body, found that all countries that 
undertook the integration programme as well as those applying quotas under the ATC (Canada, the European Union, Norway, and the United States), had met the minimum integration requirements.  
Norway, moreover, phased out all its restrictions  between 1996 and 2001.  For the other three 
Members, however, the overall elimination of r estrictions maintained under the ATC had been 
relatively modest.  The reviews also found that the products selected for integration had been 
concentrated in the lower value added range of pr oducts suggesting, first, escalation in non-tariff 
protection (greater protection extended to higher value products), and second, that the concentration 
on lower value added products w ould impede developing countries ' efforts to move up the value 
added chain.  To address some of the concerns  of the developing countries, Ministers at Doha 
requested the Council for Trade in Goods to ex amine and make recommendations to the General 
Council for appropriate action proposals concerning the calculation of quota levels for the remaining 
period up to 31 December 2004.
46  However, consensus could not be reached on this issue and the 
discussions concluded without agreement.47 
Tariffs are an additional barrier to trade 
54. While the ATC's quotas are the most restrictive as pect of international trade in textiles and 
clothing,  the sector is also subject to rela tively high tariff protection in most developed and 
developing countries.  In the Quad, for instance,  while the overall simple average MFN tariff ranges 
from 5.2% to 6.9%, the simple average for textiles and clothing is higher, ranging from 7% to almost 10%.  Textiles, clothing and leather (along with food , beverages and tobacco) is also subject to higher 
escalation than other sectors (Table 4) .  In addition, the textiles and cl othing sector is often subject to 
                                                     
 
46 Paragraphs 4.4 and 4.5 of the Doha Ministerial Decision on Implementation-Related Issues and 
Concerns (WTO document, WT/MIN(01)/17, 20 November 2001). 
47 WTO documents WT/GC/M/75, 27 September 2002;  and WT/GC/70, 14 February 2003. WT/TPR/OV/9 
Page 23 
 
 
 non-ad valorem  tariffs, such as specific, compound or alternative duties
48;  these rates often tend to 
conceal tariff peaks and also render the tariff more co mplex and make an analysis of the level of tariff 
protection in the sector difficult.  The sector is most frequently excluded from preferential tariff rates granted to developing and LDCs under programmes such as the Genera lized System of Preferences 
and other preferences for LDCs;  with the exception of the EU and New Zealand, whose rates on 
textiles and clothing are zero for LDCs, and Japan  (0.1%), other countries provide relatively few 
preferences for this sector;  Australia announced r ecently that as of 1 July 2003, it was removing all 
tariffs on imports from LDCs, while Canada removed all tariffs and quotas on imports of textiles and 
clothing from LDCs on 1 January 2003  (Table 5).
 49  Insofar as the import prices of textiles and 
clothing decline, they can also result in an increase in "real" tariff protection.50 
55. The situation regarding MFN rates is similar in  developing countries.  Of countries reviewed 
recently under the TPRM, developing countries that have a significant textiles and clothing sector 
continue to protect against competition through relativ ely high tariffs.  South Africa's simple average 
MFN rate for textiles and clothing, for example, w as 24.4% in 2002, compared with an overall simple 
average rate of 11.4%.  Morocco also has relatively high protection at 39.2%, and the tariff for textiles 
and clothing in China is 17.5%, compared with an ov erall rate of 12.3% in 20 02.  Tariffs on textiles 
and clothing are high in other major developing country exporters also:  31.5% in Bangladesh (1999/2000);  31.3% in India (2001/02);  26.4% in  Pakistan (2001);  24% in Mexico (2001);  and 
21.7% in Thailand (2003).  Developing c ountries maintain a high percentage of non- ad-valorem  
tariffs for the sector, including South Africa (77.2% ), Thailand (40.9%), a nd India (32.7%).   
56. Thus, while quotas and tariffs are major barrier to exports to industrialized  countries, tariffs in 
several developing countries are extremely high.  This  is especially true for major exporters of textiles 
and clothing.  For many such countries, moreover, wi th the major exception of China, tariffs for these 
products were bound at considerably higher rates than the current applied rates.  Therefore, they will 
not necessarily fall from their present rates and will con tinue to be barriers to trade in the post-ATC 
period.   These tariff peaks will have negative im plications for market access for other developing 
countries and LDCs and could prevent expansion of south-south trade. 
Preparing for the end of the ATC:  Are Members Ready? 
57. Much of the discussion in the WTO has been on monitoring the stages of integration and less 
on whether countries (both importers and exporters) are sufficiently prepared for a post-ATC, quota-free regime.  Considerable research has been done recently to try and quantify the welfare gains and 
losses in importing and exporting countries.  In genera l, there appears to be consensus that welfare 
gains from the integration of textiles and clothi ng into GATT 1994 are likely to be considerable.  
Moreover, the major importers that maintain quot as have accepted that the quotas will be removed at 
the end of 2004 and that appropriate adjustments will have to be made.
51  However, given that most 
quota holders have only liberalized the minimum 51% sh are of their trade volume, implying therefore, 
the removal of the remaining 49% by the end of 20 04, this will require a major readjustment over a 
relatively short period.  It is not clear what the welfare implications of a possible surge in imports 
                                                      
48 Amongst the Quad countries, for example, the range is wide:  the percentage of ad valorem  rates in 
textiles and clothing is 99.8% for the European Union, 98.8% for Canada, 92.1% for the United States, and 88% 
for Japan. 
49 WTO (2003), Trade Policy Review – Canada , WTO Geneva. 
50 In the United States, for example, the ad valorem  equivalents of specific rates applied to certain 
clothing items increased between 1997 and 2002. 
51 This was reaffirmed at a recent meeting on te xtiles and clothing organized by the European 
Commission in May 2003.  Online information available at:  http://trade-info.cec.eu.int/textiles/prog_en.pdf, 
[10 July 2002]. WT/TPR/OV/9 
Page 24  
 
 resulting from this relatively short period of libera lization will be and whether such surges may lead 
to the use of other forms of protection.
52  
58. There have been several quantitative studies on the welfare impact of textiles-trade 
liberalization on an overall basis and also for groups  of, and individual, countries.  In general they 
find that the overall welfare impact will be positiv e although the size of the overall gains depends on 
the basic assumptions of the models and their specifications.53  The overall welfare effects on 
developing countries will also depend on the loss of quota rents associated with the ATC.  In most countries whose exports are currently constrained un der the ATC, higher prices paid by consumers in 
the importing countries are transferred to the exporting country in the form of quota rents.  These will 
be eliminated once the quotas are removed.  There will also be adjustments within the textiles and 
clothing sector and between it and other sectors in the economy as economic resources adjust to changing demand conditions.  There may even be shifts  within the textiles and clothing sector itself as 
exporters base their output on comparative advantage rather than pre-set quotas.
54  Thus, while it is 
true that overall welfare  is likely to be increased  as a result of a removal of quotas under the ATC, 
there will be benefits and losses as firms in vari ous countries adjust to changing market conditions 
and a different set of economic signals.  In addition, there will be an impact on upstream producers of cotton, an industry which is currently suffering from overproduction and a long-term downward trend 
in commodity prices. 
59. China's accession to the WTO brought it within the rules of the ATC.  Therefore, quotas on 
China's exports of textiles and clothing are scheduled to be removed by 2005
55, except for the 
safeguard measures that its trading partners could use.56  The removal of these quotas is expected to 
bring about significant welfare changes for major im porters of textiles and clothing, for the Chinese 
textiles and clothing sector, for China's major comp etitors and lower consum er prices globally.  
Various analyses have been carried out using di fferent models and methodologies, most of which 
point to major market share gains for China with the removal of quotas.57  
60. While the overall impact on welfare (especially consumer welfare) of a removal of quotas in 
the major importing and quota-holding countries is positive58, a removal of quotas will necessitate 
considerable industrial restructuring in these countri es.  As is the case for developing countries, the 
                                                      
52 As discussed further below, pressure is already growing on governments to deal with such surges 
through safeguard measures. 
53 For a review see OECD (2003), "Liberalizing Trade in Textiles and Clothing:  A Survey of 
Quantitative Studies", Working Party of the Trade Comm ittee, Trade Directorate,  (TD/TC/WP(2003)2/Rev 1), 
1 April. 
54 One of the reasons given by exporting countries for their inability to fill quotas in some subsectors is 
that they do not have comparative adva ntage in those particular products;  they argue that once the constraints 
are removed, production will shift into subsectors in which they do have comparative advantage (but are 
currently constrained). 
55 See WTO Press/243, 17 September 2001, "WTO successfully concludes negotiations on China's 
entry". 
56 These are listed in China's Protocol of Accession to the WTO;  textiles safeguards can be used for an 
eight-year period and the Transitional Product Specific Safeguard measures can be used for a 12-year period 
following  China's accession in 2001. 
57 See for example, Ianchovichina, E. and W. Ma rtin (2001), "Trade Liberalization in China's 
Accession to the World Trade Organization", World Bank Working Paper no. 2623, June;  Ianchovichina, 
E. and W. Martin (2003), "Economi c Impact of China's Accession to the World Trade Organization", World 
Bank Working Paper no. 3053, May;  and T. L. Walmsley and T. W. Hertel (2001), "China's Accession to the 
WTO:  Timing is Everything", World Economy , August 24(8), pp. 1019-1049.   
58 For example, the annual welfare gains for co nsumers in the EU were estimated at some 
ECU 25 billion based on tariffs and quotas in 1997, Fran cois, J.F., H. H. Glismann, D. Spinanger (2000), "The 
Cost of EU Protection in Textiles and Clothing" Kiel Institute of World Economics, Working Paper no. 997, 
August. WT/TPR/OV/9 
Page 25 
 
 
 size of the impact varies depending on the assu mptions used, although various studies expect a 
contraction in textiles and clothing subsectors in these countries.
59  Some of the studies point out, 
however, that while the textiles and clothing sector will contract, there will be positive readjustment 
effects in other sectors.60  
61. The considerable adjustment costs of dismantli ng quotas and the fact that 49% of quotas must 
be removed over a relatively short period, raises the question of whether the adjustment can be made in an orderly manner.
61  The importing countries have reaffirmed their commitment to removing all 
quotas by the end of 2004, as planned under the ATC.  However, developing countries worry that the backloading of the ATC, whereby most quotas are to be liberalized only at the end 2004, may lead to 
a surge in imports of textiles and clothing into i ndustrialized countries and therefore to the imposition 
of trade defence measures such as  anti-dumping and safeguard measures.
62  Several Members have 
already expressed concern about the use of anti- dumping measures against their exports of textiles 
and clothing products.  China, as one of the larg est exporters of textiles and clothing and a recent 
Member of the WTO may be particularly vulnerabl e as, under its protocol of accession to the WTO, 
other WTO Members may take special safeguard measures to protect themselves from surges in 
imports of textiles and clothing from China.  An adde d concern is the complexity of rules of origin 
concerning preferential access to markets.  Ministers,  at the Fourth Ministerial Conference, held in 
Doha in 2002, agreed that Members would exerci se restraint for a period of two years following the 
end of the ATC, on their use of anti-dumping measures and would also notify any changes to their rules of origin concerning textiles and clot hing to the Committee on Rules of Origin, for 
examination.
63 
62. An added concern among a number of developing countries is that despite having 
comparative advantage in the sector, they will continue  to be at a disadvantage because of a growth in 
regional and bilateral preferential trading arrangeme nts.  They argue that these arrangements have 
already eroded market access for third countries be cause the ATC and MFN tariffs are higher than 
preferential tariffs, sometimes by a considerable margin.64  The end of the ATC will remove the quota 
but market access will still be impeded by the di fference between MFN and preferential tariffs for 
countries outside such agreements;  this includes la rge exporters such as China, India, and Pakistan, 
although Pakistan was recently granted duty-free (but  not quota-free) access to some markets.  Recent 
research on preferential agreements between the EU and countries bordering the Mediterranean Sea, 
                                                      
59 See for example, Francois, J. F., H.H. Glisma nn and D. Spinanger (2000), "The Cost of EU 
Protection in Textiles and Clothing,"  Kiel Institute of World Economics, Working Paper, no. 997, August;  
Cline, W. (1987), The Future of World Trade in Textiles and Apparel , Institute for International Economics, 
Washington DC;  and Hanson, K.A. an d K.A. Reinert, (1997), "The Distri butional Effects of U.S. Textile and 
Apparel Protection" International Economic Journal , Vol. 11, No. 3, Autumn. 
60 Francois, J. F., H.H. Glissman and D. Spinanger (2000), find that while textiles and clothing will be 
affected negatively, positive readjustment affects will be  felt in other industries, notably heavy manufacturing. 
61 Spinanger, D. (1999), "Faking Liberalization and Finagling Protectionism:  The ATC at its Best", 
Background Paper for ERF/IAI/World Bank Worksh op, "Preparing for the WTO 2000 Negotiations:  
Mediterranean Interests and Perspectives", Cairo, 14-15 July, points out that in addition, the 49% probably 
includes the most sensitive pr oducts, which are thus still subject to market access restrictions;  these are also 
products that have the highest tariff rates and were reduced less in the course of the Uruguay Round 
negotiations. 
62 This was claimed recently by the Small Indus tries Development Bank of India (SIDBI) and 
supported by the Secretary General of the Indian Cotton Mills Federation ("Rich Nations Likely to Resort to Non-tariff Barriers after Quotas", Financial Express , 4 March 2003).  See also Spinanger, D. (1999), "Faking 
Liberalization and Finagling Protectionism:  the ATC at its Best". 
63 WTO document WT/MIN(01)/17, 20 November 2001. 
64 That preferential agreements, notably NAFTA,  impeded market access for exports from other 
countries, was one of the reasons put forward by India for some of its quotas remaining unfilled (WTO, 2002, 
Trade Policy Review – India 2002 ). WT/TPR/OV/9 
Page 26  
 
 for example, suggests that there are considerab le advantages to being in such preferential 
agreements.
65  
63. There is also concern that LDCs will be least able to adjust to a post-ATC world and it has 
been suggested that preferentia l access for these countries should be maintained by the major 
importers.66   
5. Contingency measures 
64. Trade remedies, such as anti-dumping and countervailing measures and safeguards, are 
permitted under the WTO Agreements subject to certa in prescribed rules.  For instance, if a 
government has sufficient evidence that importe d goods are dumped and causing injury to the 
domestic industry producing a like product, it may initiate  an investigation;  the investigation may or 
may not lead to definitive measures being take n against the dumped goods.  WTO Members have 
resorted mostly to anti-dumping measures, w ith much less use being made of countervailing 
measures, which are intended to “c ountervail” subsidies when it is determined, after investigation, 
that subsidized imports cause injury to th e domestic industry producing a like product. 
65. Initiations of anti-dumping investigations, a lthough falling to 310 in 2002 from 366 in 2001, 
remain high (Chart 4).  (In the first half of 2003, 78  investigations were initiated.)  About half of the 
investigations initiated in 2002 were in chemicals an d articles thereof, and base metals.  Base metals 
has also been the category most affected by anti-dumping investigations (some 31%) since 1995 (Chart 5).  The largest number of initiations in 2002 were reported by India, followed by the United 
States, China, Thailand, and the European Union.  Overall, since 1995, India h as also been the largest 
initiator of anti-dumping investigations, with a cu mulative total of around 15% of all initiations, 
followed by the United States, the European Union and Argentina. 
66. The number of measures taken in 2002, as repor ted by WTO Members was higher (212) than 
in 2001 (Chart 4).  (In the six months through June 2003, 113 measures were taken.)  India took the 
largest number of measures (63) in 2002, follo wed by the EU (25), Argentina (24), and the 
United States (24).  The countries most affected were China (37), followed by Chinese Taipei (14), 
the Republic of Korea (13), and the United States ( 10).  As at 30 June 2003, a total of 1,323 anti-
dumping measures were in force, compared with 1,1 89 as at June 2002.  The United States maintained 
278, followed by India (210), the European Union (204), and South Africa (96). 
67. Countervailing measures have been used signi ficantly less by Members, 161 initiations during 
the period 1995-June 2003, compared with 2,28 4 for anti-dumping.  In 2002, ten countervailing 
investigations were initiated, a considerable decline,  from 27, in 2001;  seven were initiated in the first 
half of 2003.  Since 1995, the main user has b een the United States (65 between 1995 and end-June 
2003, of which three in the first half of 2003).  The countries mainly aff ected by countervailing 
investigations are India (36), and Korea (13);  the EU (9) and its members (altogether 39) have also 
been affected.   
                                                     
 
65 Fouquin, M., P. Morand, R. Avisse, G. Minville  and P. Dumont (2002), "Mondialisation et 
régionalisation:  le cas des industries du textile et de l'habillement", Centre d'Etudes Prospectives et 
d'Informations Internationales, No. 2002-08, Septembre. 
66 A recent meeting on textiles and clothing organized by the European Commission examined the 
impact of a removal of quotas maintained under the ATC.  Among the major conclusions was a suggestion that 
preferential access should be maintain ed or even accelerated for LDCs. WT/TPR/OV/9 
Page 27 
 
 
 
157224243257356
294366
310
119
90124162183236
166212
050100150200250300350400
1995 1996 1997 1998 1999 2000 2001 2002NumberChart 4
Anti-dumping:  initiations of investigations and measures taken, 1995-2002
Source :WTO Secretariat.Initiations
Measures taken
 
Per cent
Base metals & articles thereo f
31.2
Chemicals & articles thereof 
19.1
Plastics, rubber & articles 
thereof
12.3Chart 5
Anti-dumping initiations by sector, 1995-June 2003
Source :  WTO Secretariat.Mineral products   2.5
Textile & articles thereof   6.6Articles of stone   3.1
Pulp of wood, paper, paperboard   4.3Other  9.8Machinery & mechanical/electrical appliances
8.7
Misc. manufactured articles  2.4
Note:     Other includes live animals & products (1.6%);  vegetabl e products (1.4%);  fats & oils (0.2%);  prepared foodstuffs,  
              beverages, tobacco (1.8%);  raw hides & skins (0.1%);   wood & articles (1.4%);   footwear & headgear, etc.  (0.9 %);
              precious stones etc. (0.1%);  transport equi pment (0.8%);  precision instruments (1.2%);  and works of art (0.5%) .
 
 WT/TPR/OV/9 
Page 28  
 
 68. As with other trade defence measures, safe guards are being used more frequently by 
Members.  In 2001/02 (30 October 2001 to 28 Oc tober 2002), Members notified the initiation of 
33 safeguard investigations and 16 in the same pe riod 2002/03, a sharp increase over 2001 (13).  The 
number of definitive measures imposed has also risen steadily, from eight in 2001 to 14 in 2002 and 
20 between October 2002 to Octobe r 2003.  While the use of trade defence measures in general 
appears to be on the rise, some Members, such as Australia and New Zealand, in the context of their 
bilateral free trade agreement (ANZCERTA), and me mbers of the European Union have chosen to 
deal with the issue of "unfair" competition through the application of competition policy, rather than 
through the use of trade defence measures;  they continue, however, to use trade defence measures 
against imports from third countries.
67   
6. Technical regulations, and sani tary and phytosanitary measures 
69. As tariff and non-tariff barriers are being removed progressively, there are some fears that 
certain technical, safety, and health standards may be used instead to deter imports.  Standards are 
used in order to, inter alia , guarantee certain quality, facilitate  production and trade (by providing 
information regarding characteristics, quality a nd compatibility with other systems), and provide 
public goods (such as clean air through emission standards).  Under the WTO Agreements on 
Technical Barriers to Trade (TBT) and Sanitary and Phytosanitary (SPS) Measures, Members may 
impose on imports national standards (equivalent to those on domestic goods) related to technical, 
health, safety, environmental, and SPS requirements.  Imports of such goods are permitted subject to 
presentation of the appropriate health or confor mity assessment certificates or upon completion of 
inspection procedures at the border.   
70. While permitted under the WTO Agreements, th e use of standards and SPS measures appears 
to have become more contentious in recent year s.  An increasing number of measures have been 
notified to the WTO, both by developing and deve loped countries, and an increasing number of such 
measures have become subject to dispute settlement in the WTO:  the number of technical regulations 
notified increased to 581 in 2002, from 538 in 2001, although the degree of conformity with 
international norms varies from country to country (see below).  The largest number of notifications 
were made by the EU and its member states (96) followed by Brazil (45), the Czech Republic (43), and Argentina (39).  Since 1995, WTO Members have  made 4,666 notifications;  over half of these 
have been made by developed countries.
68  Members notified 660 SPS measures to the WTO 
Secretariat in 2002.  The largest number were notified by the United States (126), followed by New 
Zealand (35), the EU (34), and Cana da (33);  for the period January to  end July 2003, the figures were 
493 in total, with 126 for the United States, 56 fo r New Zealand, 28 for the EU, and 23 for Canada. 
The number of SPS and TBT measures that have beco me the source of disputes in the WTO has risen 
between July 2002 and December 2003 from 21 to 30 and 25 to 31, respectively. 
71. Standards and SPS measures, like other regulat ory measures, exist mainly to achieve 
important public policy goals, such as protecting pub lic health and the environment, and ensuring that 
products of high quality reach consumers.  However, th ere are concerns that they could also be used 
as a potential barrier to imports, not just in terms of  an additional requirement that must be met by 
foreign producers but also in inefficient a nd duplicative testing and conformity assessment 
requirements.69  While most countries acknowledge that standards and SPS measures are necessary, 
and impose certain additional costs on the exporter,  developing country Members in particular 
complain that multiple testing requirements associated  with similar standards in different markets as 
                                                      
67 See for example, WTO (2002), Trade Policy Review – Australia ;  and WTO (2003), Trade Policy 
Review – New Zealand . 
68 Based on WTO document G/TBT/12, 21 February 2003. 
69 The concept of national treatment in the WTO Agreements plays an important role in ensuring that 
these measures do not discriminate in favour of domestic producers and against importers. WT/TPR/OV/9 
Page 29 
 
 
 well as the rising complexity of conformity assess ment requirements make these costs prohibitive.
70  
Conformity assessment, in particular, according to  some, presents the largest potential technical 
barrier to trade.71  In addition, many LDCs simply do not have the technical or financial means to 
upgrade their production facilities in order to meet these standards.  An added problem is the 
increasing use of mutual recognition agreements (M RAs) between countries, which aim to reduce the 
costs associated with st andards, but discriminate against countries outside the MRA grouping.   
72. The proliferation of standards and SPS meas ures in both industrialized and developing 
countries has led to efforts to try to quantify  these measures and to understand their effects on trade.  
The first problem for researchers is to find a comm on standard or benchmark by which to measure a 
particular standard.  While the WTO Agreements en courage the use of international agreements, such 
as CODEX Alimentarius for SPS measures and ISO a nd IEC codes for standards, several countries 
use their own national standards, which may diffe r from international standards.  Trade Policy 
Reviews show, for example, that while there is  an overall trend toward s adopting international 
standards, several Members have standards that ha ve no international equivalents.  For example, 
among the Quad countries, 90% of Japan's standa rds were based on international standards on 
31 March 2001, while 40% and 80% of standards issu ed by the EU's standards setting organizations 
CEN and CENELEC, respectively, were harmonized with  international standards;  data for Canada 
and the United States were not available, although both countries state that they are attempting to harmonize their standards with international norms as much as possible.  Among other industrialized 
countries, standards that have equivalent intern ational standards are around 80% in Australia, and 
around one-third in New Zealand;  around 87% in Sw itzerland are equivalent to international or EU 
standards.  Most of the transition economies revi ewed are moving towards basing their standards on 
EU standards, while for some developing countri es, the extent of harmonization varies (42% for 
Indian standards issued during 1998-2001;  60% at least partial concordance for Mexico;  over half 
for Pakistan;  31% overall and 80% for standard s issued in 1998 and 1999 for Malaysia;  and 
generally equivalent for South Africa).  Maskus, Wilson and Otsuki (2000) describe four approaches 
in the literature to measuring standards and other regu lations affecting trade:  surveys of firms' cost 
responses to regulations;  econometric analyses of standards and trade at a macroeconomic level;  
partial equilibrium models;  and general equilib rium models.  Methodologies to measure sanitary, 
phytosanitary, and technical barriers to trad e have also been discussed in the OECD.
72  Some studies 
have also looked at the additional costs imposed by  a standard that is higher than the international 
norm.73  A more comprehensive study has also been launched recently by the World Bank. 
                                                      
70 Even amongst countries at similar levels of industrialization different standards can be problematic. 
Research on the EU Single Market programme illustrates the costs associ ated with meeting standards in EU 
member States, and research by the OECD found that the costs of meeting differing standards and technical 
regulations in its member states along with testing and certification could range from 2-10% of overall product 
costs. Wilson, J.S. (2002), "Standards, Regulation and Trade:  WTO Rules and Developing Country Concerns", in Hoekman, B., A. Mattoo and P. English Eds, Development, Trade and the WTO:  A Handbook , World Bank, 
pp. 428-438). 
71 For example, Governments in importing countries may refuse to recognize tests performed by 
exporting firms or their public author ities, may not accept conformity declar ations made by the exporter, and 
may insist on performing their own inspections of exporters' premises associated with time delays, bureaucratic 
non-transparency, etc. Maskus, K.E., J. S. Wilson and T. Otsuki (2000), "Quantifying the Impact of Technical 
Barriers to Trade:  A Framework for Analysis", World Bank Working Paper no. 2512, December. 
72 Beghin, J.C. and J-C Bureau (2001), Measurement of Sanitary, Phytosanitary and Technical 
Barriers to Trade" :  A Consultant's Report prepared for the Food , Agriculture and Fisher ies Directorate, OECD, 
17-18 September. 
73 See for example, Otsuki , T., Wilson, J.S. and M. Sewedeh (2 001), "A Race to the Top?  A Case-
study of Food Safety Standards and African Exports", World Bank Working Paper, no. 2563, World Bank, 
February.  This paper finds that high standards in the EU on aflatoxins, which would reduce health risks in the 
EU by approximately 1.4 deaths per billion per year, woul d cost African countries US$670 million in lost export WT/TPR/OV/9 
Page 30  
 
 73. An important question that aris es is how developing countries in particular can meet these 
requirements and maintain market access for thei r exports.  The Doha Ministerial Decision on 
Implementation-Related Issues and Concerns, inter alia , urged Members to provide technical and 
financial assistance to ease implementation issues faced by least developed country Members.  In this 
regard, the Standards and Trade Development Facility has been established by the Food and 
Agriculture Organization (FAO), the World Animal Health Organization (OE), the World Bank, the 
World Health Organization (WHO) and the WTO.  Th e Facility provides for:  small grants for pilot 
projects to build capacity in standards in developi ng countries;  assistance to government and private 
sector in meeting international standards;  and stronger inter-agenc y coordination and donor 
collaboration in the delivery of technical assistance in standards.
74  In addition, as noted, the adoption 
of international standards by countries would en sure a common standard, and reduce unnecessary and 
duplicative testing and certification requirements,  which add to the cost of meeting divergent 
standards across importing countries.  Difficulties rema in in assessing the impact on trade of national 
standards that are not equivalent  to international standards. 
7. Market Access for Services 
74. Services account for some 65% of world GDP, w ith just under 70% in industrialized countries 
and around 50% in developing countries.75  Growth in world trade in commercial services averaged 
almost 5.5% during the period 1992-2002.  Rapid gr owth of FDI in services has also been a major 
source of expansion;  the World Bank estimates that  services account for more than half of the stock 
of FDI in most industrialized countries.76  International trade in ser vices is classified under four 
"modes of supply" in the WTO's General Agreement on Trade in Services (GATS).  Data on trade for 
all four modes of supply are subject to statisti cal limitations and, for some modes, only rough 
estimates are available.  Estimates by the WTO's Economic Research and Statistics Division indicate that the largest mode of supply is commercial pr esence (around 56% of the total value of services 
trade), followed by cross-border supply (some 28%), and consumption abroad (14%)  In comparison, 
the share of services traded through mode 4 (moveme nt of natural persons) is relatively small, some 
1.4%.
77  
75. The economic and trade performance of an econom y is often dependent on the efficiency of 
the services sector.  Economic growth in many c ountries, especially developing countries, may well 
be hampered by supply and regulatory bottleneck s in services, including telecommunications, 
transport, and utilities.  (Services also tend to be one of the largest sources of employment in the 
                                                                                                                                                                     
revenue (a decrease of 64%) compared with the situa tion where international standards were used. Another 
study, on divergent aflatoxin standards in 15 importing countries (of which four were developing) found that use of a worldwide standard (based on current internationa l guidelines) would increase ce real and nut trade between 
the countries studied by US$61 billion from 1998 levels and that total world exports would rise by US$38.8 
billion if an international standard based on Codex were adopted.  Wilson, J.S. and T. Otsuki (2001), "Global 
Trade and Food Safety:  Winners and Losers in a Fragmented System", World Bank Working Paper N0. 2689, 
October.   
74 Standards and Trade Development Facility, "Background" [Online].  Available at:  
http://www.standardsfacility.org/backg round.htm [12 August 2003]. 
75 Data from WTO Economic Research and Statistics Di vision.  The largest shares of world trade in 
services are accounted for by the Eu ropean Union (45%), North America (22%) and Asia (21%), together 
accounting for some 88% of world trade in services (M cGuire, 2002, "Trade in Services:  Market Access 
Opportunities and the Benefits of Liberalization for Developing Economies", Policy Issues in International 
Trade and Commodities, Study Series no. 19 , United Nations Conference on Trade and Development 
(UNCTAD), Geneva). 
76 World Bank (2003), Global Economic Prospects 2003 , World Bank, Washington DC. 
77 Based on IMF balance of payment statistics on compensation of employees (Karsenty, G., 2002, 
Trends in Services Trade Under GATS:  Recent Developments , presentation at the Symposium on Assessment of 
Trade in Services, WTO, 14-15 March). WT/TPR/OV/9 
Page 31 
 
 
 economy.)  Thus, the actual measures of the contribution of services to GDP may underestimate their importance. 
76. Unlike merchandise trade, where the quantification of barriers to trade, including tariffs and 
non-tariff barriers such as quotas, and licensing, is well advanced, this is a much more difficult task in 
services.  Given the potential gains from liberalizati on of trade in services, as well as the spillover 
effects from such liberalization on other economic activities, it is, however, necessary to try and quantify these barriers.
78  Some recent efforts have been made  to quantify barriers to trade in 
services.79  Early work done by Hoekman (1996) used information provided by the GATS Schedule to 
develop a numerical index on barriers to trade in se rvices.  This has since been developed further, 
especially by the Australian Productivity Commission,  and alternative methodologies, such as the use 
of price impact measures and quantity impact measures, have also been developed.80  A more recent 
discussion of barriers to trade in services can be found in WTO (2003).81  
77. Recognizing the contribution of services to trade and economic growth, WTO Members 
agreed to make commitments in services at the multilateral level.  The General Agreement on Trade 
in Services (GATS) is a multilateral framework with in which WTO Members can negotiate with each 
other and obtain commitments on liberali zation in a wide range of services.82  Although Members can 
liberalize their services and set up the appropriate regulatory mechanisms unilaterally, as many have 
indeed done, Members have chosen to schedule co mmitments in the GATS.  There are several ways 
in which the GATS complements the growth of trade in services.  As is the case with tariff bindings, 
GATS commitments offer security of market access and a set of rul es governing trade in services that 
all Members agree to.  GATS commitments may also be used to advance the domestic liberalization 
agenda.  Barriers to market acc ess abroad can also be lowered through multilateral negotiations, 
which are more beneficial to smaller countries th an bilateral negotiations.  Finally, the rapid 
expansion of trade in services has hastened the need  for a multilateral framework of rules such as the 
GATS within which Members can pursue further liberalization and improved market access. 
78. All WTO Members submitted a Schedule of Specific Commitments under the GATS.  The 
Schedule indicates the sectors in which Members agree to market access and national treatment 
commitments;  the Schedule also indicates any limitations imposed by the Member under the four 
modes of supply (cross-border supply or Mode 1;  consumption abroad or Mode 2;  commercial 
presence or Mode 3;  and the presence of natural pers ons or Mode 4).  All services, except air traffic 
                                                      
78 Most studies that have attempted to model the gains from liberalizing trade in services have found 
major positive gains, especially for the less liber alized economies (see for example, OECD, 2001, 
Quantification of the Costs to National Welfare from Barriers to Services Trade:  A Literature Survey , OECD 
Trade Directorate, Working Party of the Trade Committee, 14 November). 
79 Stern, R.M. (2002), "Quantifying Barriers to Trade in Services", in Hoekman, B., A. Mattoo, P. 
English (eds), Development, Trade and the WTO:  A Handbook , World Bank, pp. 247-258 for example classifies 
these into quantitative restrictions, price based instruments, standards, licensing and procurement and discriminatory access to distribution networks. 
80 Instead of the GATS Schedule, for example, the negative list of barriers to investment in services has 
been used to develop quantitative restrictions on trade in services maintained by APEC countries (Hardin and Holmes, "Assessing barriers to service sector investment" in Warren, T. and C. Findlay (eds) (2000) 
Impediments to Trade in Services:  Measurement and policy implications , Routledge Studies in the Growth 
Economies of Asia, London, pp. 52-70.  They found that restrictions were greatest in communication and 
financial services.  Price impact measures and quantity impact measures have been used by Bosworth, M., C. 
Findlay, R. Trewin and T. Warren "Pri ce impact measures of impediments to services trade", in Warren and 
Findlay (2000), pp. 42-51 and also applied to telecommunication services, banking and maritime services in the 
same volume.  The quantity impact approach is applied to telecommunication services barriers in Warren, T., 
"The impact on output of impediments to trade and investment in telecommunication services", in Warren and Findlay (2000), pp. 85-100. 
81 WTO (2003), World Trade Report , Geneva. 
82 The GATS covers most services sectors (with th e exception of a few services discussed later). WT/TPR/OV/9 
Page 32  
 
 and directly related services and all services pr ovided in the exercise of governmental authority
83, are 
covered by the GATS, reflecting some 160 sectors.   However, Members have thus far made 
commitments in a range of 1 to 140 sectors.  Deve loping countries have, in general, scheduled fewer 
sectors although the range of commitments is high fo r least developed and developing and transition 
Members.  The largest number of commitments were made in tourism related services, financial 
services, business services, communication and transport services.  Fewer Members made commitments in what are traditionally regarded as "social services" such as health and education. 
79. The concept of successive rounds of negotiati ons, aimed at "achieving a progressively higher 
level" of liberalization is enshrined in the GATS it self.  According to Article XIX:1, the first such 
round was to start not later than five years from the date of entry into force of the Agreement, i.e. 1 
January 2000.  An important step was taken when , in March 2001, the Council for Trade in Services 
adopted Guidelines and Procedures for the Services Negotiations.
84   New elements in the Guidelines 
include:  (i) the need to give "due considerati on to the needs of small and medium-sized service 
suppliers, particularly to those of developing co untries";  (ii) conclusion of the negotiations on 
emergency safeguards by 15 Marc h 2002 (extended to 15 March 2004) and the negotiations in other 
rule-making areas under GATS – domestic regulation, government procurement, and subsidies - prior 
to concluding the negotiations on specific comm itments;  (iii) preference for the request-offer 
approach as the main method of negotiation;  and (i v) the continuation of the assessment of trade in 
services, provided for under Article XIX:3, as an ongoing activity of the Services Council.   
80. Another important step in the negotiations, up to the Doha Ministerial, concerned the 
submission of negotiating proposals by individual or groups of Members.  Most of these proposals 
(more than 100 were received befo re the Doha Ministerial Conference) were devoted to explaining 
trade problems, policy concerns and negotiating objec tives in sectors and areas of interest.  The Doha 
Declaration of November 2001 reaffirmed these gui delines as a basis for continuing the negotiations 
and integrated services into the general context of the negotiations.  Initial requests and initial offers 
were to be submitted by 30 June  2002 and 31 March 2003, respectiv ely.  As at 6 October 2003, 
38 offers, from 52 Members, have been received by the Secretariat.85  Of these 52 Members, almost 
half are developing and transition economies.86  
81. The highest number of offers has been in business services, followed by transport services, 
financial services, tourism, and telecommunication ser vices (Chart 6).  Twenty of the offers propose 
to improve horizontal commitments and 11 offer either  to withdraw MFN exemptions or to reduce the 
scope of such exemptions.  Relatively few offers pertain to education or health services, and these 
offers tend to be from developing and transition economi es.  This may be attributable to concerns that 
commitments may unduly limit governments' scope to pursue basic social policy objectives.  Offers 
and existing commitments in these sectors have aime d, for example, to foster greater competition 
amongst private service suppliers and to attract fore ign investment (and foreign consumers) in areas 
of particular interest, e.g., language schools. 
                                                      
83 These latter services are defined in Article 1: 3 of the GATS as those supplied neither on a 
commercial basis nor in competition with other suppliers. 
84 WTO document S/L/93, 29 March 2001.  The Guidelines offer parameters to the negotiations, 
building on key principles already contained in the text of the Agreement such as increasing participation by 
developing countries in services trade and an obligati on to respect national policy objectives and to accord 
appropriate flexibility in the scheduling process. 
85 These Members are:  Argentina;  Australia;  Bahrain; Bolivia;  Canada;  Chile;  China;  Chinese 
Taipei, Colombia;  Czech Republic;  Eu ropean Communities;  Fiji; Guatemala;   Hong Kong, China;  Iceland;  
Israel;  Japan;  Republic of Korea;  Liechtenstein;  Macao, China;  Mexico ;  New Zealand;  Norway;  Panama;  
Paraguay;  Peru;  Poland;  Senegal;  Singapore;  Slovak Republic;  Slovenia;  St Kitts and Nevis;  Sri Lanka;  Switzerland;  Thailand;  Turkey;  United States;  and Uruguay. 
86 The majority of the 38 offers originate from developing or transition economies, since the European 
Communities submitted one offer for 15 Members.   WT/TPR/OV/9 
Page 33 
 
 
 
051015202530
Horizontal
commitments
Improvements to list of
MFN exemptions
Business 
Telecommunication
Other communication
Construction
Distribution
Education
Environmental
Financial
Health
Tourism
Recreational
Maritime transport
Air transport
Other transportNumber of membersChart 6
Offers by sector and issue (as at 6 October 2003)
Developed economies
Developing and transition economies
Source :    WTO Secretariat. 
82. Most modifications to schedules in initial offers  take the form of improvements of existing 
commitments in sectors such as telecommunications  and financial services, where a number of 
Members already have commitments.  New specific co mmitments tend to be concentrated in business 
services, transport (including auxiliary maritime service), and environmental services (Chart 7).  Overall, the initial offers received from 52 Memb ers include 322 new specific commitments and 
improvements to 435 existing specific commitments.   Regarding improvements to existing specific 
commitments, 117 were with respect  to market access for mode 4, and 43 specific commitments that 
were left "unbound" for market access under mode 1 and/or mode 2 are proposed to be bound (either 
fully or with some limitations).  In addition, 28  economic needs test are proposed to be withdrawn 
from schedules. 
83. Other areas of negotiations relate to nego tiating mandates under Articles VI (Domestic 
Regulation), X (Emergency Safeguard Measure s), XIII (Government Procurement), and XV 
(Subsidies).  The Special Session of the Council fo r Trade in Services adopted the Modalities for the 
Treatment of Autonomous Liberalization Measures u ndertaken by WTO Members since the previous 
multilateral negotiations, in March 2003, and the Modalities for the Special Treatment for Least-Developed Country (LDC) Members in the Negotiati ons on Trade in Services, in September 2003.  
The modalities for autonomous liberalization establis h criteria and procedures for Members' granting 
of negotiating credit for liberalization measures unde rtaken autonomously since the previous round, 
and the modalities for special treatment of LDC Member s stipulate ways for providing special priority 
to concerns and interests of LDC Members.    WT/TPR/OV/9 
Page 34  
 
 
0510152025
Business 
Telecommunication
Other communication
Construction
Distribution
Education 
Environmental
Financial
Health
Tourism
Recreational
Maritime transport
Air transportNumber of membersChart 7
Offers by Members on new specific commit ments and/or improvements to existing 
specific commitments, by sect or (as at 6 October 2003)
New commitments
Improvements in existing commitments
Source :    WTO Secretariat.
 
84. A key factor of the GATS is that it does not compel Members to make sector-specific 
commitments, but gives them the opportunity, should they so wish.  The few restrictions include:  
once a commitment has been made, it must be extended to all other WTO Members on a most-favoured-nation (MFN) basis
87;  and a scheduled commitment can only be modified or withdrawn 
once compensation with affected Members has been agreed.88   
85. While the objective of the GATS is progressive liberalization of trade in services, two 
services are excluded:  services provided in the exercise of governmental authority;  and the air transport sector, air traffic rights and all services dire ctly related to the exercise of air traffic rights.
89  
For some public services, the classification of gove rnment services is relatively clear, for example, 
defence.  In several Member countries, educati on and health services and utilities are also provided 
only by the government.  However, in recent years, there has been increasing pressure on 
                                                      
87 The MFN clause, which forms the basis of the WTO Agreements is a powerful instrument to protect 
the fairness of the system, ensuring that all countries ar e treated equally.  In the GATS negotiations, exceptions 
to MFN were permitted for a ten-year period (in principl e) provided they were scheduled when the GATS came 
into effect. 
88 Article XXI of the GATS allows Members to modi fy or withdraw any commitment in their Schedule 
at any time after three years from the date of entry into  force of the commitment.  If the parties are unable to 
agree an appropriate level of compensa tion, arbitration can be requested;  if  the Member does no t agree with the 
compensation amount set by the arbitrator, the Member requesting arbitration may withdraw or modify substantially equivalent benefits in conf ormity with the arbitrator's findings. 
89 Services provided in the exercise of government al authority are defined as any services that are 
supplied neither on a commercial basis nor in co mpetition with one or more service suppliers. WT/TPR/OV/9 
Page 35 
 
 
 governments to relax monopoly controls on certain se rvices for various reasons, including fiscal and 
supply bottlenecks.  The case of telecommunications, for example, shows that in most developed and 
several developing countries the incumbent public -sector supplier has gradually been exposed to 
competition from private-sector suppliers.  This may, at least in part, have helped contain prices and 
alleviate supply bottlenecks.  In the case of other pu blic services, for many Members that have aging 
populations and increased pressure on public health sy stems, the provision of health services is often 
mixed, with both public and private sector compone nts.  The definition of governmental services, 
therefore, has become less clear with  regard to such service sectors.   
86. The GATS and subsequent liberalization negotiations  have raised a number of fears regarding 
the erosion of consumer access to basic services.  In recent times this critic ism has been extended to 
sectors generally considered "public or social" such as health, education, and water.  In the current 
negotiations, as of end April 2003, two Members ha d made offers in health services and four in 
education services.  Critics of the current negotiations  allege that such commitments will lead to an 
erosion of the quality of some of these service s and will undermine c onsumer access through 
increased privatization and foreign investment  In  this context, it should be noted that making 
commitments in the GATS does not imply that Members can no longer regulate the service and ensure that certain standards are met through the appropriate policy framework.
90  For example, recent 
Trade Policy Reviews have found that in most Me mbers that have undertaken liberalization of 
telecommunications services, there is a universal service requirement, often funded by contributions 
from all or the main telecommunication operators.  Memb ers are free to restrict their offers to certain 
subsectors while not making offers in other subsectors.91 
87. There are similar fears about the inclusion of ot her sectors considered to be part of essential 
social services, such as water and electricity.  Here the concern expressed most frequently is that 
commitments would result in privatization, which in  turn would move them out of the reach of the 
poorer sections of society.  Again, the GATS doe s not advocate privatization but instead would 
require any Member making a commitment in these services to guarantee national and MFN treatment 
to other WTO Members. 
88. A key area of the GATS in which developing c ountries would like to see greater liberalization 
is in the movement of natural persons (mode 4).  It is the area in which Members made the fewest 
commitments;  moreover, the sectors in which co mmitments were made are frequently subject to 
market-access and national treatment restrictions.92  This mode of supply acc ounts for about 1.5% of 
trade in services, implying that there is consid erable scope for its liberalization and growth.93  The  
liberalization of mode 4 is also likely to play a crucial role for developing countries, some of which 
                                                      
90 In the case of telecommunications, for example, most evidence gathered from recent TPRs shows 
that rather than worsening services , reform in the sector has led to  improved access to telecommunication 
services and reduced user charges.  Moreover, the Telecommunications Reference Paper gives Members the 
flexibility to decide on appropriate policy mechanisms to ensure, inter alia , universal services etc. 
91 For example, in education services, offers may be restricted to certain education activities, such as 
adult education services, while excludi ng commitments in other education services.  The offer of course would 
depend on the needs of the particular Member and/or pressure from other Members to make such commitments. 
92 National treatment exemptions, for example, may relate to the import of labour from certain 
countries or regions only.  Market-access commitments often specify th e type of person that can enter the 
market, such as managers, specialists, and others for the purposes of establishing commercial presence. 
93 Data estimated by the WTO Economic Resear ch and Statistics Division and measured by 
compensation of foreign employees as shown in the bala nce of payments.  In comp arison, commercial presence 
accounts for 56%, cross-border supply for 28% and consumption abroad for 14% (these figures are all 
calculated from balance-of-payments statistics from the IMF and Foreign Affiliates Trade Statistics from the 
OECD).   WT/TPR/OV/9 
Page 36  
 
 are highly dependent on workers' remittances for foreign exchange.
94  These remittances are roughly 
equivalent to the total annual aid give n by industrialized to developing countries.95   However, several 
potential constraints may need to be addressed:  these relate mainly to domestic regulations and 
include immigration-related issu es, recognition of qualifications and training, differences in the 
treatment of domestic and foreign workers, and regulations in othe r modes.  Suggestions on dealing 
with some of these constraints include:  clear cr iteria and guidelines regarding the use of economic 
needs test;  distinction between administrative procedures for temporary workers and for those 
seeking more permanent immigration;  norms to d eal with social security and access to health 
insurance;  and a strengthening of norms and di sciplines on recognition of qualifications and for 
facilitating mutual recognition agreements among Members.96 
89. As the impact of domestic regulations on trade in services may be significant, the Council for 
Trade in Services was mandated under Article VI:4  of the GATS to develop necessary disciplines to 
prevent domestic regulations (qualification require ments and procedures, technical standards, and 
licensing requirements) from constituting unnecess ary barriers to trade.  The Guidelines and 
Procedures for the services negotiations, approved by  the Council for Trade in Services in March 
2001 and confirmed in the Doha Ministerial De claration, envisage that these negotiations be 
completed prior to the conclusion of the curre nt negotiations on specific commitments.  The 
negotiations are being conducted in the Working Pa rty on Domestic Regulation (WPDR).  Issues 
currently under consideration in the WPDR include a necessity test, transparency, equivalence, and 
the use of international standards as benchmarks.97 
8. Intellectual property rights 
90. Along with the GATT and the GATS, the Ag reement on Trade-Related Aspects of 
Intellectual Property Rights (TRIPS) is an important cornerstone of the WTO Agreement.  The TRIPS 
Agreement ensures inter alia  minimum standards for intellectual property rights protection for all 
WTO Members, with transition periods for developing and LDCs.   
91. Intellectual property rights recognize both the (private) rights of, and investment by, the 
inventor in developing the invention, and those of  the public to use the knowledge generated by the 
invention (a public good) for further scientific a dvancement which would pr ovide benefits to the 
society in general.98  The right conferred on the inventor is a monopoly on the use of the particular 
invention, for a limited period of time, for pate nts currently a minimum of 20 years under the TRIPS 
Agreement.  During this time the inventor ma y licence the invention upon negotiating appropriate 
remuneration;  there are also a number of exceptions  where the invention may be licenced, such as for 
                                                      
94 In 2001, it was estimated that remittances to developing countries from overseas resident and non-
resident workers amounted to around 1.3% of their GDP;  the remittances are particularly important for low-
income developing countries (World Bank, 2003, Global Development Finance , p. 158).  Such remittances may 
well be more targeted than official aid.  The definition used of workers remittances is broader than the one used 
by the WTO, and includes workers remittances recorded under the heading "current transfers" in the current 
account;  compensation of employees r ecorded under the income sub-catego ry of the current account;  and 
migrants' transfers recorded under "c apital transfers" in the capital account. 
95 According to the World Bank, workers' remittances  were US$72.3 billion in 2001, and for most of 
the 1990s these exceeded official develo pment assistance (World Bank, 2003, Global Development Finance 
2003,  pp. 157-8). 
96 See for example, India's proposals in the current negotiations (WTO document S/CSS/W/12). 
97 An overview of these issues is given in WTO document see S/C/W/96, 1 March 1999. 
98 Most intellectual property rights regimes thus require some information regarding the patent to be 
published, thereby becoming available for others to use. WT/TPR/OV/9 
Page 37 
 
 
 national emergencies.  In addition, the potential da ngers of granting such a monopoly with regard to 
competition are also recognized under the TRIPS Agreement.
99   
The Debate on the TRIPS Agreement and Public Health 
92. Trade, growth and the good health of a country's population are mutually reinforcing.  Trade, 
by helping to increase economic growth, contributes to  the alleviation of poverty, which is perhaps a 
major cause of the growth of HIV/AIDS and other forms of sickness and disease in developing countries.   At the same time, measures to improv e the health of a country's labour force increase 
labour productivity, and thus its competitiveness, thereby contributing to economic growth.  In 
August 2003, WTO Members reached a decision gran ting a waiver under Article 31(f) of the TRIPS 
Agreement enabling the export of pharmaceutical  products made under compulsory licences.  The 
decision effectively permits LDCs and other deve loping countries who do not have the means to 
produce pharmaceuticals required for pandemics such as HIV/AIDS, to import them from the cheapest source, thereby fulfilling one of the major goals of the DDA. 
Discussions in the TRIPS Council 
93. The debate on the TRIPS Agreement and Public Health arose essentially out of the current 
HIV/AIDS crisis and access to medicines, most of  which are still under patent and whose cost is 
therefore prohibitive for most least developed an d developing countries.  UNAIDS estimates that 
some 95% of HIV/AIDS sufferers are currently in developing and least developed countries with 
some 70% of them in sub-Saharan Africa alone.
100  In many countries, the economic and social cost of 
the disease has been enormous through its adverse effect on the productive population;  according to 
the latest data from UNAIDS, the average life expectan cy in sub-Saharan Africa is currently 47 years, 
when it was estimated to have been 62 years without AIDS.101  While the AIDS epidemic was the 
main factor behind the current debate on the TRIPS Agreement, other diseases widespread in 
developing countries make access to medicines a broa der problem.  With many developing countries 
required under the TRIPS Agreement to provide pate nt protection for most products by 2005 and at 
the latest by 2010, the need to address its long term  implications on public health policy has also 
become urgent. 
94. The Fourth Ministerial Conference of the WTO, held in Doha, Qatar, adopted a Declaration 
on the TRIPS Agreement and Public Health.  Th e purpose of the Declaration was to respond to 
concerns about the possible implications of the TR IPS Agreement for access to  medicines.  Although 
the TRIPS Agreement allows countries to take va rious kinds of measures that can qualify or limit 
intellectual property rights, including for public health purposes, some doubts had arisen about the 
nature and limitations of such flexibility. 
95. The Declaration responds to these concerns in a number of ways.  It emphasizes that the 
TRIPS Agreement does not and should not prevent countries from taking measures to protect public health, and reaffirms the right of countries to use,  to the full, the provisions of the TRIPS Agreement 
that provide flexibility for this purpose.  It signals an acceptanc e by all WTO Members that they 
would not seek to prevent other Members from interpre ting the Agreement in a pro-public health way.  
It contains a number of important clarifications of some of the flexibilities contained in the TRIPS 
                                                     
 
99 Under Article 40, governments may put into place measures to control anti- competitive practices, if 
it is believed that the monopoly rights conferre d through IPRs are detrimental to competition. 
100 UNAIDS (2002), Report on the Global HIV/AIDS Epidemic:  "The Barcelona Report" , July, 
[Online].  Available at:  http://www.unaids.org/ barcelona/presskit/embargo.htm, [16 June 2003]. 
101 UNAIDS (2002), HIV/AIDS:  Human resources and sustainable development , prepared for the 
World Summit on Sustainable Development, Johannesburg, South Africa, August. [Online].  Available at:  
http://www.unaids.org/whatsnew/con ferences/wssd, [16 June 2003]. WT/TPR/OV/9 
Page 38  
 
 Agreement, especially with respect to the freedom to determine the grounds upon which compulsory licences are granted, and the right to permit parall el imports.  This clarification on compulsory 
licences is, for example, a useful corrective to th e view sometimes expressed that some form of 
emergency is a pre-condition for compulsory licensi ng under the TRIPS Agreement.  The Declaration 
further makes it clear that each Member has the right to determine what constitutes a national 
emergency or other circumstances of extreme urgency (when a compulsory licence can be granted without a prior effort to obtain a voluntary licen ce), and that public health crises, including those 
relating to HIV/AIDS, tuberculosis, malaria, and other epidemics, can represent such circumstances. 
96. The Declaration contains an agreement of Ministers to accord least developed country 
Members an extension of their transition period, until the beginning of 2016, in regard to the 
protection and enforcement of patents and right s in undisclosed information with respect to 
pharmaceutical products.  The TRIPS Council took th e necessary action under Article 66.1 of the 
TRIPS Agreement to give effect to this in June  2002 and, at the same time, recommended a parallel 
waiver for these countries from obligations under the "exclusive marketing rights" provisions of 
Article 70.9.  The waiver was adopted by the General Council in July 2002. 
97. While emphasizing the scope in the TRIPS Agreement to take measures to promote access to 
medicines, the Declaration recognizes the importance of intellectual property protection for the development of new medicines and reaffirms the commitments of WTO Members in the TRIPS Agreement. 
Problem of countries with insufficient manufactu ring capacities in the pharmaceutical sector 
98. An issue that arose in the work on the Declar ation was the ability of countries with limited 
manufacturing capacities to make effective use of com pulsory licensing.  It is not in dispute that 
Members can issue compulsory licences for importation as well as for domestic production.  However, there was concern about whether suppli es would be available from generic producers in 
other countries to meet the demand for imports under a compulsory licence, given the requirement in 
Article 31(f) of the TRIPS Agreement that, normally , compulsory licences sh all be "predominantly 
for the supply of the domestic market of the Member" granting the compulsory licence.  This 
constraint might be increasingly felt after 2005 when countries with important generic industries, such 
as India, come under an obligation to provide pa tent protection for pharmaceutical products.  The 
Declaration recognized the problem in its paragraph 6 and instructed the Council for TRIPS to find an 
expeditious solution to it and to repo rt on this before the end of 2002. 
99. On 16 December 2002, following intensive work in the Council for TRIPS during the second 
half of 2002, the Chairman of the Council presen ted a draft Decision on the subject representing his 
best assessment of how to achieve a balanced resu lt, taking all positions and concerns into account.  
Not all Members were ready to adopt the Decision at that time, either because th ey considered that it 
was too open-ended and open to abuse, or that it wa s too burdensome in some respects.  After further 
work, the Chairman's proposal was adopted by the General Council on 30 August 2003, at which 
meeting a Chairman's statement containing several key shared understandings of Members was also put on record. 
100. The Decision grants three distinct waivers fro m the obligations set out in subparagraphs (f) 
and (h) of Article 31 of the TRIPS Agreement with  respect to pharmaceutical products, subject to 
certain conditions.  It covers any patented prod uct, or product manufactured through a patented 
process, of the pharmaceutical sect or needed to address the public health problems as recognized in 
paragraph 1 of the Doha Declaration on the TRI PS Agreement and Public Health, including active 
ingredients necessary for its manufacture and diagnostic  kits needed for its u se.  The three waivers 
are: WT/TPR/OV/9 
Page 39 
 
 
  (i) A waiver of the obligation of an exporting Member under Article 31(f) of the TRIPS 
Agreement to the extent necessary for th e purposes of production and export of the 
needed pharmaceutical products to countries that do not have sufficient capacity to 
manufacture them.  This waiver is subject to  certain conditions to ensure transparency 
in the operation of the system and that only countries with insufficient domestic 
capacity import under it, and to provide for safeguards against the diversion of products to markets for which they are not intended. 
  (ii) A waiver of the obligation under Ar ticle 31(h) of the TRIPS Agreement on the 
importing country to provide adequate remune ration to the right holder in situations 
where remuneration in accordance with Artic le 31(h) is being paid in the exporting 
Member for the same products.  The purpo se of this waiver is to avoid double 
remuneration of the patent owner for the same product consignment. 
 
 (iii) A waiver of the obligation under Article 31(f) of the TRIPS Agreement on any 
developing or least developed country that is party to a regional trade arrangement of 
which at least half of the current membership is made up of countries presently on the United Nations list of least developed countri es.  The purpose of this waiver is to 
enable such countries to better harnes s economies of scale for the purposes of 
enhancing purchasing power for, a nd facilitating the local production of, 
pharmaceutical products. 
 101. The Chairman's statement at the time of the adoption of the Decision was designed to meet 
the concerns of those who feared that the Decisi on was too open-ended and might be abused in a way 
that would undermine the benefits of the patent system.  For example, it recognizes that the system 
should be used in good faith to protect public health and not be an instrument to pursue industrial or 
commercial policy objectives;  it addresses some concerns  relating to the risk of diversion;  and it sets 
out ways in which any differences arising from the implementation of the system can be settled 
expeditiously and adequately.  The Decision also r ecords that 23 countries have agreed to opt-out of 
using the system as importers
102, to be joined by the ten count ries acceding to the European Union 
after their accession.  In addition, 11 other Member s have agreed to use the system as importers only 
in situations of national emergency or  other circumstances of extreme urgency.103 
102. The waivers provided for in the Decision will remain in force until an amendment to the 
TRIPS Agreement replacing its provisions takes e ffect.  The TRIPS Council will initiate work by the 
end of 2003 to prepare this amendment, with a view to its adoption within six months.  It is understood that the amendment will be based , where appropriate, on the Decision. 
103. The system established by the Decision is a sma ll component of a much larger effort required 
to address the grave public health problems afflic ting many developing and least-developed countries 
and to facilitate their access to medicines.  The international community is increasingly seized with 
these problems, but further concerted action is requi red in the relevant fora, including to increase 
funding, develop social and health infrastructure,  and to increase R&D for neglected diseases that 
afflict mainly the developing world. 
                                                     
 
102 Australia, Austria, Belgium, Canada, Denmark, Fi nland, France, Germany, Greece, Iceland, Ireland, 
Italy, Japan, Luxembourg, Netherlands, New Zealand, Norway, Portugal, Spain, Sweden, Switzerland, United Kingdom, and the United States of America. 
103 Hong Kong, China;  Isr ael;  Korea;  Kuwait;  Macao, China;  Mexico;  Qatar;  Singapore;  Chinese 
Taipei;  Turkey;  and the United Arab Emirates. WT/TPR/OV/9 
Page 40  
 
 
9. Special and differential treatment for developing countries in the WTO 
104. Few would dispute that the liberalization of trade in goods and services must be an essential 
element in any strategy to stimulate growth and economic development.  The Millennium Declaration, 
for instance, reflects this link in several of its sp ecific goals and targets.  The main contribution the 
WTO is expected to make in this regard is the fu lfilment of its mandate in all areas of work contained 
in the Doha Development Agenda.  Successful conc lusion of the Doha negotiations will amplify 
economic opportunities for all countries and increase secu rity and predictability as to the terms of 
market access and the rules of trade.   
105. There is, however, also a recognition that i ndividual countries may face constraints that 
impair their ability to benefit as rapidly from th e opportunities offered by trade liberalization as 
others.  Some may also experience difficulty in im plementing certain WTO rules, raising the question 
of the balance between the resource costs of implemen tation and the benefits of certain agreements to 
the economy.  With that in mind, Ministers at Doha also emphasized the notion of special and 
differential treatment (S&D) and mandated Members to strengthen S& D provisions and to make them 
more precise, effective and operational.  An importa nt part of what S&D provisions aim at is to 
address a lack of institutional capacity and resour ces for the management of trade policy and policy 
priorities.  They also seek to render the trad e policy regime as supportive as possible of the 
development aspirations of developing countries.   
S&D past and present  
106. The concept of S&D is not new.  The first S&D provisions can be found in the 1954-55 
GATT Review Session, following which Article XVIII(b) and (c) on balance-of-payments provisions 
were incorporated into the GATT.  As early as 195 8, the Haberler Report recognized the special trade 
needs of developing countries.
104  The discussion it engendered resulted in an eight-point Plan of 
Action as part of the Kennedy Round, which was,  however, never implemented to any significant 
degree.  Nevertheless, the success of developing countries in placing their issues centre-stage in the 
GATT contributed to the decision to establish Part IV in 1965, designed to promote development and 
developing-country interests in the trading system. 
107. During the Tokyo Round, the negative conseque nces of hitherto widely favoured import 
substitution policies began to be felt in many part s of the developing world.  These experiences gave 
rise to a greater outward orientation leading to bo th heightened demands for market access and an 
increased focus on developing countries’ own trade polic ies in order to remove an anti-export bias.  A 
new framework was established to define and codify  key legal rights and obligations of developing 
countries under the GATT.  The 1979 Decision on Di fferential and More Favourable Treatment, 
Reciprocity and Fuller Participation of Developi ng Countries, also known as the Enabling Clause was 
the first formal recognition of the LDCs as a group in the GATT, and provided permanent legal cover 
for the Generalized System of Preferences, for S&D provisions under GATT agreements, for certain 
aspects of regional or global preferential agreem ents among developing countries, and for special 
treatment for least-developed countries.  The Enab ling Clause also restated the principle of non-
reciprocity, as first spelled out in Part IV, and furt her stated that developing countries expected their 
capacity to make contributions, or negotiate commitments, to improve with the progressive 
development of their economies and improvement in their trade situation.  
108. At the conclusion of the Tokyo Round, deve loping countries were afforded considerable 
flexibility.  Yet, they had gained little from the syst em;  they had neither been helped in formulating 
better trade policies nor received much from their trading partners in view of their own limited 
commitments and obligations.  This situation chan ged drastically at the end of the Uruguay Round, 
                                                      
104 GATT (1958), Trends in International Trade:  A Report by a Panel of Experts , GATT Secretariat. WT/TPR/OV/9 
Page 41 
 
 
 when developing countries assumed a much higher level of commitments.  Already at the second WTO Ministerial Conference, held in Geneva in May 1998, developing countries raised concerns as 
to their capability to implement all of their obligatio ns.  The “implementation” debate, in the course of 
which more than 100 proposals for changes or clarif ications of existing agreements have been put 
forward, has since become a majo r element in WTO discussions.   
Developments in the DDA 
109. As part of the Decision on Implementation – and emphasized also by the Ministerial 
Declaration – a work programme on S&D was agreed upon at Doha.  This was established later by the 
Trade Negotiations Committee (TNC) in February 2002.
 105  To a certain extent, it has resulted in a 
parallel track to implementation discussions with another 88 Agreement-specific proposals being put 
on the table.  Their underlying motivation is similar to what has been driving implementation debates, and a quarter of the S&D proposals are virtually identical to implementation issues raised.  Developing countries have aimed in particular at  making best endeavour provisions mandatory and 
approval procedures for exemptions automatic, in or der to make them more  operationally effective 
and/or predictable in relation to the degree of policy flexibility afforded to them.  A number of 
proposals also seek extended time-periods given the difficulty some developing countries encounter in 
implementing their obligations, bearing in mind th e costs, administrative aspects and human capital 
requirements of implementation.   
110. After long debate, the Special Session of th e Committee on Trade and Development, by the 
beginning of 2003, requested the General Council for a clarification of its mandate.  It had failed to 
meet a second deadline to make clear recommenda tions after having missed already the original 
deadline of July 2002 set by ministers.  The wo rk done so far cannot leave any doubt about the 
importance for a significant segment of the Membersh ip of defining an appropriate approach to S&D 
and an adequate set of provisions thereon.  The fact  that there are more than 150 S&D provisions in 
the WTO Agreements greatly complicates matters, not least because taken individually, these 
provisions vary greatly in their degree of importa nce from a development perspective.  The tendency 
until recently to place practically all of these provi sions on the table has rendered more difficult the 
analytical task of identifying what matters most.  Developing countries have shown some reluctance 
to allow the discussion to move in the direction of  considering further the objectives, principles and 
modalities that should underlie the WTO’s approach to wards S&D.  This reluctance is partly driven 
by the concern that such a discussion will deflect attention from the specifics of what developing 
countries believe S&D provisions s hould comprise.  At the same time,  developed countries have been 
unwilling to consider some of the more far-reach ing proposals on how to improve S&D provisions 
outside a negotiating context.  Also, while goi ng along with the almost exclusive focus on the 
88 Agreement-specific S&D proposals, many developed countries found themselves unable to make S&D provisions legally enforceable in the absence of discussions on the broader systemic questions 
that also form part of the S&D mandate. 
111. In February 2003 Members agreed that the Chairman of the General Council would hold 
consultations on how to take the S&D discussions fo rward.  On the basis of his initial consultations 
with Members, the Chairman of the General Counc il put forward an approach based on the principle 
that all Agreement-specific proposals on S&D treatme nt were on the table and would be considered 
and that further progress could only be made by  rationalizing the work through an informal 
categorization of the 88 Agreement-specific proposal s that had been made.  Based on this approach, 
all the Agreement-specific proposals were divided in to three broad categories:  (i) those on which 
there appeared to be a greater likelihood of comi ng to an agreement and which appeared to have a 
greater developmental value;  (ii) those made in  areas where mandated negotiations were ongoing, or 
those whose operative part was already being c onsidered in the respective WTO bodies;  and 
                                                     
 
105 WTO document TN/C/1, 4 February 2002. WT/TPR/OV/9 
Page 42  
 
 (iii) those on which there appeared to be a wide divergence of views, and on which it seemed that 
progress may not be possible without a certain degree of redrafting.  Consultations were held on this 
basis and during the run-up to Cancún, Members agreed in principle to make recommendations on 25 Agreement-specific proposals;  this progress was reflected in the draft ministerial text sent to 
Cancún.  A further three recommendations were incl uded in the package at Cancún.  However, these 
28 Agreement-specific proposals are yet to be adopted by the Members. 
10. Regional trade agreements
106 
Introduction 
112. The post-Doha period has been one of the most pr olific in terms of no tifications of regional 
trade agreements (RTAs) since the creation of the WT O, and the trend is set to continue, perhaps even 
to accelerate in response to Cancún.107  Thus, Members, while working together in the DDA to 
improve the regulatory framework for global trade, are also building a patchwork of less-than-global 
trade agreements. 
113. The promotion of free trade by targeting multiple fronts, globally, regionally and 
bilaterally108,  may provide a certain logic in this situation:  while preserving the philosophy and 
principles underlying the WTO, it recognizes that the WTO is not the only platform from which to promote these objectives.  This approach is firmly grounded on the belief that RTAs complement the multilateral trading system (MTS) by encouraging trade liberalization.  Many economists, however, 
highlight the discriminatory nature of RTAs, their pot ential to distort trade flows, and the diversion of 
limited resources from multilateral to regional and bila teral trade negotiations.  The benefits of freer 
trade are not being questioned;  rather the conditio ns under which it is pursued are at issue.  The 
present proliferation of RTAs contains the seeds of a discordant regulatory environment for the 
development of world trade, disconnected from the spirit of WTO principles.  That WTO Members currently lack effective monitoring and coordina tion mechanisms on RTAs adds to that concern. 
114. Ministers at Doha put forward the objectives of promoting trade liberalization, fostering 
economic development, and complementing the multila teral trading system, as principles that should 
inform the current negotiations on RTA rules.  Propo sals have been made to enhance the transparency 
of RTAs, which, if agreed, would increase knowle dge on the interrelation between RTAs and the 
MTS.  A good step, but only a first step.  The broad Doha negotiating ma ndate on WTO provisions 
for RTAs also calls for Members to explore a number of systemic issues, and thus better balance the global and RTA options. 
A global view of RTAs 
115. The rapid surge in RTAs, which began in the early 1990s, has been such that virtually all 
WTO Members are engaged in furthering their RTA trade strategy.  As of January 2004, 281  RTAs have been notified to the GATT/WTO, of which 15 7 have been notified since January 1995.  Over 
                                                     
 
106 Regional trade agreements, even  when they link only two neighbouring or geographically distant 
countries, are intergovernmental treaties through which signatories agree to more advantageous conditions, in 
the conduct of their mutual trade relations, than those applied to other, non-signatory, WTO partners. 
107 Since 1 January 2002, 41 RTAs have been notified to the WTO and, although a number of these 
were under negotiation before the Fourth Ministerial in Doha, negotiations on many more RTAs have begun or 
have been considered since. 
108 Sometimes defined as "competitive liberalization". WT/TPR/OV/9 
Page 43 
 
 
 190 notified agreements are currently in force
109, and 70 or more are estimated to be operational but 
have not yet been notified.110  
116. The apparent rush to negotiate RTAs may reflect  a certain anxiety by countries of being left 
behind.  This has been particularly noticeable in  East and Southeast Asia, a traditional bastion for 
multilateral-only trade liberalization.  The United States is also actively pursuing the regional path, 
and China has recently negotiated RTAs with Hong K ong, China and Macau, China.  By contrast,  the 
EU has decided not to negotiate any new RTAs befo re the conclusion of the Doha Round.  However, 
the impending negotiation of Econom ic and Partnership Agreements  (EPAs) with the African, 
Caribbean and Pacific countries (ACP) show that  RTAs are still present on the EU policy agenda. 
117. The traditional imperative of RTAs for the econom ic integration of geogr aphically contiguous 
markets has considerably weakened.  Today, most agreements link pairs of partners, and an increasing 
number link countries thousands of miles apart.111  At the same time, however, initiatives to establish 
large regional economic groupings, such as the Free-Trade Area of the Americas, the eastern enlargement of the EU, and ASEAN + 3 (China, Japan, and Korea), are also being pursued. 
118. With regard to scope, earlier trends are bei ng confirmed.  Modern RTAs most often go far 
beyond traditional tariff-cutting exercises and even  beyond existing multilateral rules by including 
regional rules on investment, competition, environment, and labour.  Some WTO Members, as hubs of RTA networks, are increasingly taking advantage of RTA relations to break new ground in trade 
policy regulation.
112  
Why RTAs? 
119. Policy makers often emphasize the most cons picuous economic gains of RTAs, such as 
economies of scale, increased competition, and attraction of foreign direct investment113, to advocate 
that bilateral or regional trade liberalization comple ments multilateral liberalization.  By contrast, for 
RTA sceptics, preferential agreem ents encourage beggar-thy-neighbour trade practices and detract 
Members' focus and resources from multilateral liberalization and rule making. 
120. Analytical research on the impact of RTAs has been unable to produce solid responses to 
those arguments.  Building upon Jacob Viner's theoreti cal approach and the concepts of trade creation 
and trade diversion, most empirical research has focused on the economic costs and benefits of dismantling barriers within a specific RTA for the par ties and those left outside.  Assessments vary for 
different RTAs, sometimes even for the same RTA.
114 
121. Even more difficult to assess are the economic  effects of the increasing complexity of 
regulations introduced through these agreements.  For instance, RTA rules of origin are usually quite 
stringent, the more so for products for which the margin of preference (difference between the MFN 
                                                      
109 Included in these statistics are notifications ma de under GATT Article XXIV , GATS Article V, and 
the Enabling Clause, including accessions to existing RTAs. 
110 By the end of 2007, if RTAs reportedly planned or already under negotiation are concluded, the 
total number of RTAs in force might well surpass 300. 
111 These cross-regional RTAs forge strategic trade relationships at non-MFN terms between countries, 
wherever they are situated.  US-Jordan, EC-Mexico, and even New Zealand-Singapore FTAs, to take a few 
examples, hardly fit the geographical m eaning of "regional" trade agreements. 
112 The growing relevance of standards for market access makes RTAs very attractive in this respect. 
113 These gains, however, can also be attained through unilateral liberalization or multilateral 
negotiation.  Though politically more difficult to ensure, these gains are also potentially higher since MFN liberalization does not carry the discriminatory element of RTAs. 
114 For a thorough analysis of economic concep ts and available evidence, see WTO (2003) World 
Trade Report , Chapter I.B.3. WT/TPR/OV/9 
Page 44  
 
 and the preferential tariff) is larger.  Origin rules coul d then have an effect similar to that of a trade 
barrier protecting domestic production of final goods.  Ru les of origin may even be seen by traders as 
a factor of production per se , to be considered in the same ma nner as the availability and cost of 
inputs, labour costs, infrastructure, etc.  In that  sense, rules of origin can influence investment 
decisions, both with respect to input sourcing and lo cation of production, and thus reinforce an RTA's 
investment diversion. 
122. In the absence of a decisive ec onomic test in support of RTAs, and given that a plethora of 
RTA relations may entail a burden for business practi ce, why are countries currently putting so much 
energy into negotiating numbers of them? 
123. Adherents to the political economy perspective would argue that, factors other than the 
expansion of trade and investment are at play.
115  One such factor would be the use of RTAs to 
cement diplomatic ties and forge new geopolitical allia nces.  The economic side of this strategy is to 
deal with certain trade issues at the bilateral or  regional level while leaving the most sensitive ones 
(such as agriculture) at the multilateral level.  A "hub-and-spoke" RTAs web may be particularly 
effective in this respect as the leverage the hub has on the spokes at the bilateral level could be used to 
advance or resist specific issues at the multilateral le vel.  Hence, webs of RTAs can be effective in 
promoting "competitive liberalization", but the settin g of common standards and regulations among a 
group of countries may also produce vested inte rests and powerful constituencies that will resist 
advances at the multilateral level. 
124. Also, market-access concerns may have become a compelling factor in RTA negotiations.  By 
not adhering to the RTA "band-wagon", a country could find its products discriminated against by 
competitors in markets where it has no preferen tial access.  Economies with a relatively small 
domestic market are particularly vulnerable to th ese pressures and often have no alternative than to 
conclude RTAs despite the strain this may place on their limited administrative resources.116   
Multilateralizing regionalism? 
125. Do RTAs complement the MTS, helping to build and strengthen it, or do they undermine it?  
To ensure that regional initiatives are fully instru mental, alongside multilateral efforts, in furthering 
the development of world trade and balanced interna tional trade relations, there is a need for rules and 
mechanisms capable of driving RTAs on a firm inte rsecting road with the multilateral trading system. 
126. The principles identified in 1947 and enshrined in GATT Article XXIV (for customs unions 
and free-trade areas, in trade in goods), and in GATS Article V (for agreements on trade in services) 
remain sound.  WTO provisions basically direct Memb ers that conclude RTAs to promote deep intra-
regional trade liberalization and facilitation (incl uding for sensitive sectors), while maintaining the 
significance of multilateral liberalization and rule making. 
127. These principles, however, are not always refl ected in today's regional landscape.  One 
example is with respect to scope, coverage, and de pth of liberalization, where the spectrum of RTAs 
varies widely.  A study by the Secretariat117 showed that, while RTAs have been effective in 
eliminating or substantially reducing tariffs on indu strial products, they have not done the same for 
agricultural goods.  Most often, agricultural trade, even on a preferential basi s, remains subject to 
                                                      
115 Traditional political arguments, such as regional se curity, increased bargaining power, and locking-
in of domestic reforms, are important motivating factor s for certain small or politically unstable countries.  
However, they seem less relevant when considering the economic and political fabric of many of the countries 
actively pursuing the RTA option today. 
116 Even the United States and the EU admit that the administration of several RTAs strains their 
resources to the limit. 
117 WTO document WT/REG/W/46:  "Coverage, Libera lization and Transitional Provisions in RTAs". WT/TPR/OV/9 
Page 45 
 
 
 barriers.
118  Another example is the increasingly broader regulatory framework of RTAs, which, while 
potentially useful in raising new trade issues on the international agenda, is, in effect, weakening the 
WTO regulatory function.  The latitude enjoyed by parties to RTAs to set up their own regulatory 
frameworks could lead to a global patchwork of di ffering trade regulations .  These may not only be 
difficult to harmonize at a later stage, but may also become effective trade barriers, ultimately adding 
to the costs of doing trade. 
128. That the WTO basic principles governing RTA formation have often been only partially 
applied suggests that RTAs are unlikely to melt au tomatically into multilateralism in the name of 
systemic rationality.  It also indicates that the WTO Membership is not adequately equipped to face 
the challenges that the proliferation of RTAs pos e for the functioning of the rules-based MTS.  
Clearly there is a need to beef up the principles on RTAs with mechanisms that are effective and 
operational. 
129. The decision by WTO Members, meeting at the Fourth Ministerial Conference in Doha, to 
launch negotiations aimed at clarifying and im proving the disciplines and procedures under the 
existing WTO provisions on RTAs, reflects these concerns.  It is premature to speculate on whether 
these negotiations will result in a redrafting of the WTO-RTA relationship or to a piecemeal re-
interpretation and clarification of existing rules.  However, the focus on transparency during the initial 
phase of the negotiations would seem to reflect a growing awareness of the need for closer 
surveillance and public scrutiny of RTAs, and to en courage greater adherence with the relevant WTO 
provisions. 
11. Disputes:  the caseload becomes heavier 
130. The dispute settlement mechanism (DSM), estab lished at the time of the WTO, was intended 
to ensure that Members abide by the WTO's rules an d disciplines.  It has been described as effective 
although measures have been suggested to improve  its effectiveness, especially for “small” 
countries.119 Many proposals to improve and clarify th e Dispute Settlement U nderstanding have been 
tabled in special sessions of the Dispute Settle ment Body as a part of the DDA negotiations. 
131. Since 1 January 1995, a total of 306 cases have been filed with the Dispute Settlement Body 
(up to 31 January 2004).  Of these, 125 ha ve resulted in panels covering 155 disputes.120  The majority 
of dispute settlement cases have involved industri alized countries:  60% (200) as complainant and 
61% (187) as respondent.  The developing countr y share has been some 40% (133 cases) as 
complainant, and 39% (119 cases) as respondent, duri ng this period.  Up until the end of 2003, the 
LDCs have not been participants in the system, e ither as complainants or as respondent.  However, in 
January 2004, Bangladesh requested consultations with India. 121  Among the industrialized countries, 
the largest users are the Quad:  the United Stat es (76 as complainant and 81 as respondent), the 
European Union and its member States (63 as complainant and 61 as respondent), Canada (24 as complainant and 12 as respondent) and Japan (11 as complainant and 13 as respondent).  A significant 
number of cases have been directly between the two largest traders, the United States and the EU (42, 
                                                     
 
118 Broad duty-free product coverage in RTAs tends to be the exception rather than the rule, since the 
domestic forces that resist trade liberalization at the multila teral level are just as likely to resist it at the regional 
level. 
119 For example, Hoekman, B. and P. Mavroidis (1999), “WTO Dispute Settlement, Transparency and 
Surveillance", World Bank, November. 
120 In some cases, where disputes are similar or concern the same issue, the dispute brought by several 
Members has been consolidated under one panel.  For example, the recent US—Steel Safeguards case was 
established as one panel but includes eight compla ints (WT/DS248, WT/DS249, WT/DS251, WT/DS252, 
WT/DS253, WT/DS254, WT/DS258, and WT/DS259). 
121 There have been some cases where LDCs particip ated as third parties to the dispute. Among the 
LDCs are: Bangladesh, Benin, Chad, Madagascar, Malawi, Senegal, and Tanzania.   WT/TPR/OV/9 
Page 46  
 
 or 14%).  Among the developing countries, the largest users are Brazil with 34 cases (22 as complainant and 12 as respondent), India with 31 cases (15 as complainant and 16 as respondent), and Argentina with 24 (9 as complainant and 15 as res pondent).  The main areas of complaint are:  
GATT 1994 (222 requests of which 89 on national treatment, 80 on MFN treatment and 71 on 
quantitative restrictions)
 122, subsidies (53), agriculture (51) and anti-dumping (51). 
132. Up to the end of January 2004, a panel repor t had been circulated in 81 cases (and possibly 
later appealed);  26 of these cases were initiated by developing countries;  52 by industrialized 
countries;  and three by a combination of both.  Lo oking at the two largest traders, the EU initiated 
16 cases as sole complainant and pursued eight jointl y with others;  the United States initiated 12 as 
sole complainant and pursued seven jointly with ot hers.  In terms of respondents, there have been 
25 developing countries in cases where a report had been circulated.  The EU was respondent in 12 cases and the United States in 29 cases. 
133. Several reasons are given for the lack of par ticipation of LDCs in the dispute settlement 
mechanism.  These include:  lack  of sufficient knowledge and resources to collect information on 
other Members’ trade measures;  resource constraints in mounting a challenge in the DSB;  and also 
fear of  counter measures that may affect normally good relations with the trad ing partner concerned.  
While some of these measures are difficult to address, efforts can be made on other fronts.  On the issue of resource constraints, for example, the A dvisory Centre on WTO Law (ACWL) was formed in 
October 2001 to help developing and especially LD C Members to utilize more effectively the WTO’s 
dispute settlement mechanism.  The ACWL provides:   legal advice on WTO law;  support to parties 
in WTO dispute settlement;  and training in WTO la w.  The fees charged for its services are modest 
and vary with the size and standard of living of the user.  During its first year (July 2001 to July 2002), the Centre provided legal advice to six countries, and assistance in six WTO DSB proceedings.
123 
134. More than 40 proposals to improve and clar ify the Dispute Settlement Understanding have 
been tabled in special sessions of the Dispute Se ttlement Body in the context of the negotiations 
started under the DDA.   These proposals address almo st every stage of the process, including  the 
enhancement of third-party rights; improvement  of panel selection processes; treatment of 
confidential information; clarification of "seque ncing" between compliance procedures and retaliation 
authorization procedures; strengthened remedies; enhanced transparency; enhanced Member-control 
over the process, and enhancement of developing  country interests at various phases of the 
proceedings.  A number of these proposals are refl ected in the Chairman's text issued in May 2003.124  
Both the Chairman's text and other proposals put forward by Members will form the basis for future 
work.125 
135. A large number of cases that go through form al WTO dispute settlement procedures are 
resolved through bilateral consulta tions between the Members involve d.  In instances where the case 
goes beyond formal consultations a nd a panel, it appears that most of these go beyond the panel to the 
appeal stage.  In some cases, where Members ha ve been unable to agree on implementation of the 
recommendations and rulings by the DSB, the disputes have been decided through recourse to the dispute settlement procedures under Article 21.5  of the Dispute Settlement Understanding (DSU).  In 
general, Members have implemented the recommendati ons and rulings by panels  and by the Appellate 
                                                     
 
122 There is some double counting as some of the 89 cases brought under Article III of the GATT 1994 
are also brought under Article I. 
123 Further details are available from ACWL (2002),  "Advisory Centre on WTO Law:  Report on 
Operations, July 2001-July 2002" [Online].  Ava ilable at:  http://www.acwl.ch/ [10 June 2003]. 
124 See TN/DS/9 for the latest version of the Chairman's text. 
125 At its meeting of 24-25 July 2003, the General Council agreed to extend the timeframe for 
completion of these negotiations by one year, un til May 2004 (See WT/GC/M/81, paras. 71 to 75). WT/TPR/OV/9 
Page 47 
 
 
 Body in the "reasonable period of time" determined  under Article 21.3 of the DSU.  However, in a 
few cases, under the Compliance Review Procedur e of the DSU, compliance by Members has been 
contested, resulting in authorization by the DSB to suspend concessions and obligations (that is, 
retaliate) against the non-complying Member. There ha ve been a few such cases since the formation 
of the WTO: 
− EU ban on meat and meat products (com plaints by the United States and Canada) 
− EU banana regime (complaints by the United States and Ecuador) 
− Brazil export financing for aircraft (complaint by Canada) 
− United States Foreign Sales Corporations (FSCs) (complaint by the EU) 
− Canada export credits and loan guarantees fo r aircraft  (complaint by Brazil)  
136. With the exception of retaliation authorized for the United States and Ecuador against the EU, 
which the retaliating countries decided to lift becau se of a change in the EU’s import regime for 
bananas, these cases are still in force.   The EU recently issued a list of products worth US$4 billion in 
relation to the DSB's authorization to suspend concessi ons and obligations in the FSC dispute.  It has 
indicated, however, that it will wait until January  2004 to suspend concessi ons and obligations on 
these products.   
12. WTO Activities  
137. Some previous issues of this Report by the Dir ector-General have included a section on WTO 
Activities.  These are now presented in detail in  the WTO Annual Report (forthcoming for 2004). WT/TPR/OV/9 
Page 48  
 
  
Annex 1: Measurement of tariff protection 
Overall tariff protection can vary considerably depending on the tariff rates  and weighting method  used.   
Tariff rates 
In computing tariff averages, a clear distinction should be made between the nominal , collected,  and effective  rates. 
The simplest and most straight forward nominal tariff rate to use is the applied  MFN rate.  The latter should be 
distinguished from the bound  MFN rate, which is usually the highest rate of duty permissible under a Member's 
schedule of commitments at the WTO; bound tariffs can be exceeded, but only in special circumstances .  Thus, average 
bound MFN rates tend to exceed applied MF N rates, especially in developing c ountries.  Not all tariffs are bound, 
however, so that in some instances bound rates do not exist.  
The collected  tariff rate is the amount of customs duties as a proportion of the value of imported products; it thus 
reflects the average transfer to the Government from domestic consumers of the products subject  to duty.  In contrast to 
the applied MFN rate, the collected rate includes preferential rates and exemptions and therefore tends to be lower than 
the applied MFN rate; the greater the use of preferences and exemptions, the greater the difference between the two 
rates.  The collected tariff rate does not necessarily bear any relation to the "marginal" tariff rate, however, which is the 
most appropriate indicator of the potenti al dead-weight (efficiency) losses caused by duties.  In particular, it ignores 
prohibitive tariffs that do not yield any revenues at all.  As a consequence, the collected tariff rate is not usually 
regarded as a reliable indicator of the level of tariff protection or of the poten tially distorting effects of the tariff 
structure on domestic resource allocation. 
In contrast to the nominal tariff rate, which concerns protection in relation to merchandise prices, the effective  tariff 
rate relates to the production activity's value-added, thereby taking into account the impact of tariffs on inputs used by 
domestic producers (allowing for industry-sp ecific tariff concessions).  Insofar as domestic indus try uses inputs that are 
subject to duty, the nominal tariff rate a pplied to imports of a particular product is  not an indicator of the effective rate 
of protection (ERP).  The extent to which value-added is protected is a more accurate indicator of the potential 
distortion in domestic resource allocati on.  A low level of nominal applied MF N protection may conceal high effective 
protection. 
 Weighting methods 
Average nominal tariffs can vary considerably depending on the weights used.  The main drawback of the simple 
(unweighted) arithmetic average of the tariff rates is that  it takes no account of the relative importance of various 
products.  Among the main alternatives to  simple averages are weighted averages  using the shares of imports or of 
domestic production.a  The use of actual impor t volumes assigns a small weight to the highly protected products, 
however, thus tending to underestimate the de gree of protection, with no weight at all being given to prohibitive tariffs.  
Furthermore, the use of variable impor t weights can result in spurious moveme nts in weighted averages over time as 
the weights themselves would tend to be inversely related to a Member's tariff rates. By contrast , although the use of 
actual domestic production weights over-repr esents highly protected products, it avoids the s purious movements often 
associated with variable import weights.  As none of th e viable weighting methods is free from drawbacks, with each 
method giving rise to some aggregation bias, only simple  averages for both bound and applied MFN tariffs are reported 
in Tables 1, 2 and 3.  
Both simple and import-share-weighted averages have been used in relation to GATT/WTO negotiations.  Import-
weighted averages have been used by the GATT/WTO as an  indicator of progress in achieving MFN tariff reductions.  
By contrast, commitments to reduce agricultural tariffs foll owing the "tariffication" exer cise agreed in the Uruguay 
Round were measured in terms of simple averages (pre sumably on simplicity grounds a nd because some tariffs may 
have been prohibitive).  As required by the GATT/WTO, ad justments in the EU tariff in order to compensate 
non-Member countries for the accession of Austria, Finland,  and Sweden were based on collected tariff averages for 
various groups of products. 
a The ideal weights to use in calculating import-weight ed or production weighted averages are obviously the 
values of imports or production in the absence of barriers .  Unfortunately, these values are unobservable.  For 
effective rates of protection, weig hts should be based on dom estic value-added rather  than domestic production 
weights. 
 
 
 WT/TPR/OV/9 
Page 49 
 
 
 
Annex 2 
Tariff escalation by 2-digit ISIC category 
Country/ 
Year Stage of 
processa Food, 
beverages
& tobacco Textiles & 
leather Wood & 
furniturePaper, 
printing & 
publishingChemicals Non-
metallic 
mineral 
products Base 
metal Fabricated 
metal 
products & 
machinery Other Total 
            
North America           
            
United 
States 1 3.1 2.9 0.1 0.0 1.9 0.0 0.4 n.a. 1.6 3.8 
2002 2 7.4 9.1 2.1 0.5 4.3 2.1 1.7 2.7 0.4 4.7 
 3 12.4 10.0 2.2 0.6 3.9 5.6 2.5 2.2 3.6 5.5 
            
Canada 1 10.2 1.1 0.0 0.0 1.5 0.0 0.0 n.a. 1.2 5.0 
2002 2 6.8 6.9 2.1 0.4 3.0 0.7 0.9 1.5 0.0 3.9 
 3 34.1 13.5 5.1 1.0 4.8 3.8 3.7 2.6 4.8 8.9 
            
Mexico 1 21.9 12.6 13.0 4.8 12.5 7.0 10.1 n.a. 13.6 15.1 
2001 2 27.1 17.8 18.6 13.3 11.3 17.7 12.9 13.8 13.0 13.2 
 3 34.3 31.5 21.9 14.9 13.5 18.3 15.6 15.4 21.7 18.5 
            
Latin America           
            
Argentina 1 10.2 11.4 5.0 6.6 9.4 9.0 5.2 n.a. 11.7 9.7 
2000 2 14.1 18.8 9.9 14.6 10.1 10.3 13.2 17.0 14.2 12.0 
 3 16.5 22.4 18.0 15.2 12.1 14.2 20.6 14.1 20.5 15.0 
             
Brazil 1 10.2 10.7 5.0 6.6 9.7 10.7 5.2 n.a. 11.7 9.7 
2000 2 14.0 18.7 9.9 14.4 10.1 10.3 12.9 17.0 14.2 11.9 
 3 16.3 22.2 17.7 14.9 11.9 14.3 20.4 15.6 20.4 15.8 
            
Chile 1 6.0 6.0 6.0 6.0 6.0 6.0 6.0 n.a. 6.0 6.0 
2003 2 6.9 6.0 6.0 6.0 6.0 6.0 6.0 6.0 6.0 6.0 
 3 6.0 6.0 6.0 5.7 6.0 6.0 6.0 5.7 6.0 5.9 
            
Costa Rica 1 12.3 3.0 8.0 1.7 2.5 8.6 1.9 n.a. 8.4 7.4 
2000 2 12.7 8.5 8.2 3.8 2.2 3.1 3.0 1.0 3.0 4.3 
 3 19.7 13.0 12.3 8.9 6.3 8.2 4.2 4.2 9.8 8.2 
            
Dominican 
Rep. 1 13.5 1.9 3.0 3.0 2.9 17.6 3.0 n.a. 9.5 7.9 
2002 2 14.0 1.9 4.7 3.3 4.0 5.1 6.1 8.0 2.8 4.4 
 3 17.0 17.4 14.8 12.5 9.0 11.1 15.0 7.2 16.4 10.8 
            
Guatemala 1 9.8 2.0 0.0 0.0 2.6 11.0 0.0 n.a. 8.8 5.8 
2001 2 10.4 14.3 7.0 3.5 1.4 2.3 2.0 0.0 1.3 5.1 
 3 12.8 19.0 12.1 7.7 6.5 7.2 4.1 4.0 9.6 8.1 
            
Guyana 1 24.4 5.4 7.5 5.0 7.0 20.0 5.6 n.a. 28.9 16.2 
2002 2 16.7 5.1 9.7 4.9 5.8 5.9 5.6 5.0 5.0 6.1 
 3 25.5 17.4 14.1 11.4 11.3 10.8 14.0 10.2 15.5 13.8 
            
Honduras 1 10.3 2.0 0.0 0.0 1.8 9.0 0.0 n.a. 8.2 5.9 
2002 2 10.7 10.9 7.3 4.9 1.4 2.3 1.9 0.0 1.3 4.5 
 3 12.4 13.4 11.9 7.4 5.9 7.1 3.8 3.6 9.5 7.1 
            
Haiti 1 2.4 4.5 0.0 0.0 0. 0 12.0 0.0 n. a. 9.3 2.4 
2002 2 4.7 5.3 0.0 0.6 0.7 1.4 1.3 0.0 0.0 2.0 
 3 6.5 5.2 6.1 1.5 3.5 5.2 0.0 1.7 4.5 3.3 
            
Venezuela 1 14.6 11.0 5.0 6.3 8.2 9.0 2.8 n.a. 11.3 10.7 
2002 2 17.7 17.5 12.1 12.4 7.5 9.3 11.1 7.0 15.0 10.9 
 3 18.6 19.3 16.6 15.1 10.9 14.7 15.0 11.0 15.6 13.4 
            
Western Europe           
            
EU15 1 13.2 1.0 0.0 0.0 1.7 0.0 0.0 n.a. 1.2 8.1 
2002 2 19.1 6.7 3.0 2.1 4.5 2.9 1.9 1.9 1.8 4.9 
 3 18.7 9.8 2.1 1.5 3.8 4.0 2.4 2.5 3.0 7.0 
            
Annex 2 (cont'd) WT/TPR/OV/9 
Page 50  
 
 
Country/ 
Year Stage of 
processa Food, 
beverages
& tobacco Textiles & 
leather Wood & 
furniturePaper, 
printing & 
publishingChemicals Non-
metallic 
mineral 
products Base 
metal Fabricated 
metal 
products & 
machinery Other Total 
Switzerland 1 8.0 2.9 2.9 1.4 0.9 1.5 0.4 n.a. 2.0 4.4 
2000 2 27.7 5.7 2.4 6.2 0.9 2.9 1.8 0.8 3.7 4.0 
 3 36.8 6.3 2.3 4.1 2.3 2.7 2.4 1.1 2.0 8.5 
            
Eastern Europe           
            
Bulgaria 1 11.9 3.4 0.0 0.0 4.5 0.7 0.0 n.a. 2.3 8.1 
2003 2 22.7 12.8 5.0 9.0 7.4 9.7 4.8 5.0 0.6 8.8 
 3 27.3 19.8 13.7 9.4 9.1 13.4 11.0 6.7 7.7 13.5 
            
Czech 
Republic 1 1.7 0.2 0.8 0.0 1.9 0.3 0.3 n.a. 0.4 1.3 
2001 2 17.6 4.6 2.7 7.6 3.8 8.2 3.8 2.8 8.7 4.9 
 3 16.2 8.5 5.6 6.4 4.1 6.5 5.8 4.0 4.6 7.4 
            
Slovak 
Republic 1 1.7 0.3 0.6 0.0 1.9 0.3 0.3 n.a. 0.4 1.3 
2001 2 14.4 4.6 2.7 7.1 3.7 8.3 3.8 2.8 8.7 4.7 
 3 16.1 8.5 5.6 5.8 4.0 6.5 5.8 4.0 4.6 7.4 
            
Slovenia 1 4.9 2.1 1.0 0.4 3.9 1.0 0.1 n.a. 5.9 3.9 
2001 2 16.2 9.6 4.6 8.7 7.8 5.4 6.9 6.2 10.0 8.3 
 3 19.8 16.4 14.2 13.6 9.0 9.9 12.2 9.9 13.6 13.1 
            
Middle 
East            
            
Bahrain 1 4.7 9.5 6.3 5.0 6.4 8.3 5.0 n.a. 8.9 6.1 
2000 2 2.8 10.0 5.2 5.2 5.4 5.1 5.0 5.0 5.0 6.2 
 3 11.3 8.7 8.8 7.3 7.0 7.1 5.8 9.3 8.1 9.0 
            
East Asia            
            
Brunei 
Darussalam 1 0.0 0.3 12.0 0.0 0.0 0.8 0.0 n.a. 1.5 0.4 
2000 2 0.0 0.1 19.4 0.0 0.1 0.0 0.0 0.0 0.0 0.4 
 3 0.0 1.5 3.7 0.0 2.9 0.9 0.0 8.8 2.9 5.2 
            
China 1 15.3 13.0 0.0 0.0 7.1 2.3 2.8 n.a. 14.5 11.3 
2002 2 28.1 15.1 5.7 8.4 7.2 10.7 5.3 6.8 8.9 9.7 
 3 21.5 20.4 11.8 11.5 10.7 15.1 13.1 11.2 17.1 14 
            
Hong Kong, 
China 1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 n.a. 0.0 0.0 
2002 2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 
 3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 
            
Indonesia 1 3.8 5.5 1.3 2.6 4.0 3.0 2.9 n.a. 7.5 4.1 
2002 2 4.7 8.3 1.7 4.8 5.2 3.9 7.3 5.0 5.0 6.1 
 3 12.9 12.2 9.5 4.4 7.1 6.4 9.5 6.6 10.4 8.6 
            
Japan 1 23.6 10.2 0.0 0.0 2.4 0.4 0.4 n.a. 0.2 14.5 
2002/03 2 20.3 6.8 4.3 0.5 2.8 1.5 1.1 1.8 0.1 4.9 
 3 22.6 12.0 2.0 0.3 2.0 1.1 0.5 0.3 2.8 7.8 
            
Korea, Rep. 
Of 1 54.7 5.5 3.5 1.8 6.7 5.0 1.7 n.a. 6.1 28.3 
2000 2 99.3 8.8 5.9 7.8 8.0 7.5 6.0 8.0 8.0 10.9 
 3 36.2 11.4 6.4 5.4 7.6 7.9 8.0 6.4 7.8 10.7 
            
Malaysia 1 1.2 0.3 15.0 0.0 7.6 3.3 0.3 n.a. 0.0 2.9 
2001 2 5.3 13.3 2.2 6.5 7.2 22.0 9.3 1.0 7.5 7.7 
 3 4.4 17.0 13.4 15.0 7.5 19.9 9.6 16.8 11.4 13.6 
            
Singapore 1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 n.a. 0.0 0.0 
2000 2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 
 3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 
Annex 2 (cont'd) WT/TPR/OV/9 
Page 51 
 
 
 
Country/ 
Year Stage of 
processa Food, 
beverages
& tobacco Textiles & 
leather Wood & 
furniturePaper, 
printing & 
publishingChemicals Non-
metallic 
mineral 
products Base 
metal Fabricated 
metal 
products & 
machinery Other Total 
            
Thailand 1 17.4 3.8 1.0 1.0 9.1 2.8 1.0 n.a. 10.2 10.0 
2003 2 24.6 15.6 10.3 11.8 5.1 14.7 7.3 12.8 17.5 9.5 
 3 29.3 28.5 20.6 20.6 14.9 18.6 20.0 12.7 16.6 18.1 
South Asia            
            
Bangladesh 1 20.3 16.2 3.8 0.0 12.2 15.0 5.7 n.a. 25.1 15.0 
2000 2 24.8 26.4 16.0 25.5 16.4 29.7 19.2 27.5 25.0 20.7 
 3 29.5 36.5 30.1 28.1 24.2 25.2 27.8 18.6 32.2 24.1 
India 1 36.3 25.9 12.5 7.1 25.8 33.0 23.8 n.a. 35.0 28.6 
2001/02 2 36.6 28.4 31.1 34.7 33.6 34.1 33.0 19.0 35.0 32.3 
 3 48.2 34.2 34.8 29.4 33.5 34.1 35.0 29.1 33.4 33.0 
            
Maldives 1 16.3 19.3 15.0 25.0 21.3 25.0 21.3 n.a. 25.0 19.6 
2002 2 14.5 17.5 15.0 11.4 14.8 19.5 21.2 25.0 10.0 16.8 
 3 18.9 24.7 20.6 19.8 23.8 24.2 24 23.9 21.4 23.2 
            
            
Pakistan 1 12.6 10.4 8.8 6.1 13.6 10.0 14.7 n.a. 14.3 12.1 
2001 2 19.2 23.6 19.1 24.1 14.0 23.8 15.4 20.0 25.0 17.5 
 3 29.8 29.2 28.4 23.5 21.1 25.6 24.6 21.2 21.8 23.6 
            
Oceania            
            
Australia 1 0.3 0.1 2.5 0.0 1.7 0.0 0.3 n.a. 0.0 0.7 
2001/02 2 0.4 9.9 3.9 3.9 1.7 1.9 3.0 2.0 4.2 4.1 
 3 2.2 14.5 4.0 3.4 3.5 4.0 6.5 3.4 2.8 5.1 
            
New 
Zealand 1 0.4 2.4 0.0 0.0 0.9 0.0 0.0 n.a. 1.2 0.8 
2002 2 2.6 2.8 3.1 5.2 1.2 0.5 2.3 0.0 4.9 2.2 
 3 3.0 14.8 4.9 4.1 3.5 3.7 4.3 3.8 3.8 5.6 
            
Africa            
            
Burundi 1 35.5 14.6 14.0 10.0 10.3 34.0 10.0 n.a. 40.0 22.6 
2003 2 35.3 33.3 12.0 10.7 10.7 10.3 16.6 10.0 10.0 18.4 
 3 36.0 37.7 35.7 25.8 25.7 27.9 19.2 19.3 0.0 26.1 
            
Gabon 1 23.2 11.6 25.0 10.0 9.8 22.5 10.0 n.a. 24.7 16.6 
2000 2 22.8 18.0 29.7 10.9 10.4 21.6 14.4 10.0 7.5 14.6 
 3 25.6 28.0 27.3 18.2 16.8 22.8 12.7 15.9 27.9 20.2 
            
Ghanab 1 16.7 15.0 17.5 12.2 10.2 16.0 15.6 n.a. 21.3 14.9 
2000 2 18.8 16.6 19.6 19.3 10.9 11.3 11.0 10.0 20.0 13.1 
 3 23.8 30.0 24.5 16.9 22.7 14.6 18.2 7.6 18.2 15.5 
            
Madagascar
b 1 24.7 7.0 5.0 5.0 7.0 25.0 5.0 n.a. 22.2 15.2 
2000 2 18.3 22.2 14.7 9.5 5.8 8.4 8.4 15.0 7.0 11.9 
 3 23.8 28.6 20.3 22.5 17.7 18.5 25.5 13.8 24.7 19.0 
            
Mauritania 1 15.9 2.8 0.0 0.0 2.4 18.6 5.5 n.a. 11.6 8.6 
2001 2 10.9 12.6 9.3 6.9 4.7 9.7 8.3 8.0 5.0 8.0 
 3 14.4 18.2 17.5 11.7 11.5 14.8 12.9 9.0 18.2 12.3 
            
Mauritius 1 11.1 6.8 0.0 0.0 1.7 0.0 0.0 n.a. 16.0 6.7 
2001 2 18.9 0.0 1.8 0.0 4.2 5.9 12.3 0.0 7.5 5.5 
 3 29.2 64.8 53.8 43.4 32.5 29.5 37.7 17.7 33.9 30.4 
            
Morocco 1 43.2 10.2 30.0 21.5 16.9 29.8 20.7 n.a. 32.2 29.2 
2002 2 47.9 37.3 35.0 45.2 28.5 31.8 24.5 23.2 45.0 32.5 
 3 61.8 46.4 47.3 41.9 30.8 38.2 41.0 20.9 34.1 34.3 
            
Mozambiqu
e 1 22.7 3.8 2.5 7.5 3.3 7.5 2.5 n.a. 15.7 12.0 
2000 2 17.7 21.6 7.5 10.3 3.8 7.3 5.6 7.5 23.1 9.5 
 3 23.8 27.5 21.1 18.3 15.1 11.5 22.5 10.7 26.0 16.6 
Annex 2 (cont'd) WT/TPR/OV/9 
Page 52  
 
 
Country/ 
Year Stage of 
processa Food, 
beverages
& tobacco Textiles & 
leather Wood & 
furniturePaper, 
printing & 
publishingChemicals Non-
metallic 
mineral 
products Base 
metal Fabricated 
metal 
products & 
machinery Other Total 
            
Nigerb 1 15.8 9.1 7.5 7.5 8.9 10.5 7.5 n.a. 10.6 11.7 
2002 2 17.1 18.4 11.9 10.3 8.7 19.4 12.0 22.5 11.2 12.5 
 3 19.3 21.7 20.0 16.6 14.8 19.0 19.8 13.3 20.5 16.3 
            
Senegalb 1 16.1 9.1 7.5 7.5 8.9 10.5 7.5 n.a. 10.4 11.8 
2002 2 16.9 19.0 12.5 10.1 8.7 19.4 12.1 22.5 11.3 12.6 
 3 19.4 21.8 20.0 16.6 14.7 19.0 19.4 13.3 19.8 16.2 
            
South 
Africa 1 10.7 5.0 0.0 0.0 3.7 0.0 0.0 n.a. 2.5 5.5 
2002 2 10.3 22.1 6.2 5.9 3.5 4.9 3.2 1.7 4.3 12.9 
 3 15.4 32.4 15.5 7.7 7.9 7.1 2.9 5.2 7.3 11.5 
Zambia 1 20.0 14.6 22.5 5.0 6.3 15.8 2.8 n.a. 18.8 14.2 
2002 2 19.1 14.0 22.8 9.9 6.0 13.1 7.1 21.0 12.5 8.8 
 3 20.7 24.1 23.1 18.1 15.5 14.3 20.3 12.8 19.8 16.5 
            
n.a. Not applicable. 
a 1 = First stage of processing;  2 = Semi-processed;  3 = Fully processed. 
b Including import taxes and (in the case of Senegal and Niger) othe r duties and charges. 
Note: For countries with non- ad valorem  rates AVEs have been used as ava ilable.  In case of unavailability, the ad valorem  part is used 
for compound and alternate rates.  Averages differ from those in last year's publicati on due to changes in concordance between 
HS and ISIC. 
Source : WTO Secretariat calculations, based on data provided by the Members. 
 
__________ 
 
 