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Accession.The process by which countries join the General Agreement on Tariffs and Trade, or GATT (see Section 111).1 The length of the accession process varies, depending on the conformity of the applicant country's trade practices with GATT norms.
Individual GATT members and the applicant country also usually negotiate a "price of admission " --tariff concessions or other obligations including the reduction of quotas and other trade-distorting policies --to compensate for benefits that have accrued over the years through multilateral GATT negotiations in which the applicant country did not participate. Accession to GATT does not automatically mean that the new member is bound by the various GATT Codes; members join these arrangements separately. The basic requirement for accession is that the applicant country's trade policies must provide nondiscriminatory and predictable treatment for all other GATT members; in return, the country becomes part of the organization that makes world trade rules, and also enjoys by right of international obligation the benefits of these rules for its exports. An outline of the GATT accession process is provided in Appendix B.
ACP (African, Caribbean, and Pacific) Countries. Refers to 69 countries --most of them former colonies of member states of the European Community (Sec. III) --receiving preferential tariff treatment as well as EC financial and technical assistance under the Lome Convention. See also entry under same heading in Section III.
Administrative Review. In unfair trade cases, a mechanism for parties to a case to appeal a ruling on subsidization, dumping, or injury to an administrative authority in the importing country.
Ad Referendum. Refers to delegations' acceptance of the outcome of a negotiation on a provisional basis, pending final approval by governmental authorities.
Ad Valorem Duty. See duty.
Ad Valorem Equivalent (A VE). A specific duty expressed in terms of a percentage of the value of the product in question. For example, a duty of $5 per ton on a product valued at $50 per ton has an A YE of 10 percent. When tariff negotiations are conducted on a percentage-reduction basis, AVEs must be calculated in order to permit proportional cuts in specific duties-
Agreement on Implementation of Article VI of the GA TT .See Antidumping Code.
Agreement on Implementation of Article VU of the GA TT .See Customs Valuation Code.
Agreement on Technical Barriers to Trade. See Standards Code.
Agreement on Interpretation and Application of Articles VI, XVI, and XXIII. See Subsidies Code.
1 Italicized phrases are cross-referenced to other handbook entries. Cross-references are to be found within the same section of the handbook unless stated otherwise.
Aide Memoire. In diplomatic parlance, refers to a written outline or summary of the main points of a proposed agreement.
Andean Trade Preferences Arrangement (ATPA). A non-reciprocal preferential arrangement established by the Andean Trade Preference Act of 1991, under which the United States grants duty-free treatment for a 10-year period to certain imports from Bolivia, Colombia, Ecuador, and Peru. The A TP A is intended to expand economic alternatives available to Andean countries that are engaged in combating drug production and trafficking. Eligible articles are the same as those under the Caribbean Basin Initiative, except rum.
Annecy Round. The second GATT Round of multilateral trade negotiations, held in
Annecy, France, from April through October, 1949. The Round dealt with institutional matters and the accession of new members, but did not make significant progress in reducing trade barriers.
Anticircumvention Duty. A term used by the European Community for penalty charges imposed on the output of Japanese screwdriver assemblies (Sec. 11) in Europe; subsequently found in violation of GATT rules by a dispute settlement panel. See circumvention.
Antidumping Code. Formally known as the Agreement on Anti-Dumping Practices. A code negotiated under the auspices of the GA n during the Kennedy Round and subsequently renegotiated in the Tokyo Round. The code interprets the provisions of GA n Article 6, specifying the procedures signatory countries must follow to verify dumping allegations, and providing the basis for the imposition, collection, and duration of antidumping duties. Parties to the Agreement include Argentina, Australia, Austria, Brazil, Canada, Czech Republic, Egypt, the European Community, Finland, Hong Kong, Hungary, India, Japan, Korea, Mexico, New Zealand, Norway, Pakistan, Romania, Singapore, Slovakia, Spain, Sweden, Switzerland, and the United States.
Antidumping Duty. A penalty charge on imports to protect domestic industry against disruptive pricing practices by foreign firms (see dumping). An antidumping duty is supposed to be set equal to the margin of dumping, defined as the difference between fair value and the actual sales price. GATT Article 6 permits members to levy antidumping duties, while the GATT Antidumping Code attempts to standardize and discipline importing governments' activities in this area. See also circumvention and injury test.
Appellations of Origin. (Also referred to as "geographic indications of origin.") The name of a country, region, or locality designating a product's origin --such as Champagne or Camembert --and having the same function as a trademark or brand name. International negotiations on protection of intellectual property rights seek to resolve differences among countries' eligibility requirements (or lack thereof) for use of appellations or origin.
Applied Tariff Rate. The tariff rate actually used to determine the amount of duty owed on a particular import transaction. Applied rates may differ from bound rates.
Arrangement on Guidelines for Officially Supported Export Credits. See Export Credits Arrangement.
Articles (of GATT). See Appendix A.
Article 22 Consultations or Article 23 Consultations. See consultations.
Assimilation. A term referring to national treatment in the protection of industrial property. See Paris Convention.
Assists. Inputs to production -- including blueprints, designs, tools and dies, and development engineering --provided by an importer to a foreign manufacturer for use in " producing merchandise for purchase by the importer. The value of assists may be subject to import duties on grounds that they would have been reflected in the sale price if they had been obtained commercial by the foreign manufacturer.
Auction Quotas. See import to auctioning.
Authors' Rights. A term used primarily in Latin American countries to refer to copyrights.
Automaticity. In GATT negotiations on dispute settlement procedures, refers to proposals to have reports of dispute panels automatically adopted by the GATT Council if no specific objections to adoption are raised --i.e., without requiring an affirmative decision by the disputing parties. Other proposals would give the country winning a GATT dispute an automatic right to withdraw concessions if, after a specified time, the defending party has neither complied with a panel's recommendations nor agreed to an acceptable timetable for compliance. GATT rules and procedures currently contain no time limits for implementation f panel reports, and implementation may be delayed indefinitely.
Auto Pact. (Formally known as the Automotive Products Trade Agreement.) A bilateral agreement signed in 1965 between the United States and Canada, providing duty-free treatment of most automotive products. The Auto Pact was augmented in 1988 by the US-Canada Free Trade Agreement, which required the phase out of remaining auto duties by 1998.
Balance of Concessions. See concessions and reciprocity. .
Balance of Payments Consultations. The GA TT permits countries to levy quantitative restrictions in times of acute deficits in their balance of payments. Countries invoking this provision take pan in balance of payments consultations with other GA TT members to justify the restrictions and specify plans to improve the payments deficit (see Committee on Balance-of-Payments Restrictions, Sec. III). Articles 12 and 18 require such restrictions to be temporary, but often they remain in place for years. (Article 18, providing more flexible and lenient conditions, may only be invoked by LDC members.) The 1979 GA TT Framework Agreement legitimized use of nonquantitative restrictions for balance-of-payments purposes (see import surcharge).
Base Price or Basic Price. See Common Agricultural Policy.
Berne Convention. Formally known as the Berne Convention for the International Protection of Copyrights. Signed in 1886 and revised in 1971, the Convention requires national treatment in the protection of intellectual property rights by signatory countries. The Berne Convention specifies rights of authors in more detail than the Universal Copyright Convention (UCC ), and its minimum term of protection is longer than under the UCC. See also Paris Convention. Not to be confused with the Berne Union (Sec. Ill).
Bilateral Investment Treaty (BIT). An agreement between two countries providing for nondiscriminatory treatment of direct investments. A BIT usually contains provisions for prompt and adequate compensation in the event of expropriation; guarantees on free transfers of investment earnings; freedom from performance requirements; and mechanisms for resolving disputes such as third-party arbitration. As of September 1993, the United States had signed 25 BITs --13 of which had entered into force --with another 20 under discussion with foreign countries.
Bilateral Restraint Agreement. See export restraints.
Binding. A formal commitment specifying maximum levels at which a GATT member's tariffs on a given product will be set. Tariff bindings provide a major element of stability to international trade by limiting large, unpredictable changes in tariff levels, since other GATT members may be entitled to compensation if a country raises a tariff above the bound rate. Many LDC members of GATT have bound few of their tariffs, however, and others --applying "ceiling bindings" at rates much higher than prevailing tariff levels -- retain considerable leeway to change tariffs at will.
BISD (Basic Instruments and Selected Documents). A series of documents, updated at irregular intervals in supplemental volumes, containing decisions, waivers, and reports adopted by the GATT Contracting Parties and subsidiary bodies. The BISD comprises the body of GATT "case law."
Blair House Accord. A bilateral agreement between the United States and the EC Commission, concluded in November 1992 at the Blair House in Washington in an effort to resolve longstanding US-EC differences on agricultural trade issues, which had been blocking conclusion of a comprehensive agreement in the GA TT Uruguay Round. Through the accord, an incipient trade war over oil seeds was averted when Brussels effectively froze subsidized soybean production at current levels, while Washington withdrew a threat to impose 200 percent tariffs on European wines. In addition, the accord stipulated that the final Uruguay Round text should require countries to reduce their tonnage of subsidized grain exports by 21 percent over six years.
Blockade. An interdiction of international shipments to or from a particular port or country by the military forces of another country .Any nation seeking to impose a blockade must proclaim its intention to do so in order for the action to be valid under international law. Moreover, the 1856 Declaration of Paris requires that a blockade must be effective and maintained by sufficient force in order to be internationally recognized. See also embargo.
Blocked Exchange. A restriction forbidding the unlicensed purchase of bills of exchange, currency, or negotiable instruments denominated in a foreign currency, in order to prevent depletion of foreign currency reserves. See exchange controls.
Border Tax Adjustments. The remission of taxes on exported goods, including sales taxes and value added taxes (Sec. 11), in order to ensure that national tax systems do not impede exports. The GA n permits such adjustments for indirect taxes --based on the economic assumption that such taxes are largely passed on to consumers --but not for direct taxes (e.g., income taxes assessed on producing firms). The United States makes little use of border tax adjustments since the federal government relies more heavily on income (or direct) taxes than do most other countries.
Bound Rates. Most favored-nation tariff rates resulting from GATT negotiations and thereafter incorporated as integral provisions of a country's tariff schedule. The bound rate may represent either a tariff reduction or a commitment not to raise an existing tariff rate (see binding).
Bounty or Grant. A form of subsidy. As used in US trade legislation, the term refers to an economic inducement by a foreign government to a manufacturer within its territory to encourage exports. Such inducements may include operating subsidies or forgiveness of debt; loans and loan guarantees at below-market rates; provision of goods, services, raw materials, or capital at below-market prices; or absorption of production or distribution costs.
Bovine Meat Arrangement. Formally known as the Arrangement Regarding Bovine Meat. An agreement negotiated in the Tokyo Round to promote expansion, liberalization, and stabilization of international trade in beef, veal, and live cattle, as well as to improve international cooperation regarding such trade. The arrangement is supervised by the International Meat Council (Sec. III). Signatories include Argentina, Australia, Austria, Brazil, Bulgaria, Canada, Colombia, Egypt, the European Community, Finland, Guatemala, Hungary, Japan, New Zealand, Nigeria, Norway, Poland, Romania, South Africa, Sweden, Switzerland, Tunisia, the United States, and Uruguay.
Boycott. A refusal to deal commercially or otherwise with a country, firm, or individual. A party to a "primary boycott" is one, which refrains from trading with the targeted country. A "secondary boycott" is one in which parties to a boycott attempt to induce other countries to adhere to the boycott, often as a condition of continued trade relations with them. See also embargo and sanctions.
Bretton Woods System. The general term for the international monetary and financial system established after World War II to foster full employment and price stability, while allowing individual countries to attain external balance without having to resort to trade restrictions. Takes its name from the July 1944 conference of 44 countries meeting in Bretton Woods, New Hampshire, to plan for postwar reconstruction and economic stability. The Conference laid the foundation for the International Monetary Fund and World Bank (Sec. 111). A third specialized agency envisaged at Bretton Woods --the International Trade Organization (Sec. III) --did not materialize, and the less powerful GATT took its place. See also World Economic Conferences of 1927 and 1933.
Brussels Tariff Nomenclature (BTN). See Harmonized System.
Buyback Arrangements. See Countertrade.
Buyer Credits. See export credits.
Cairns Group. See entry in Section III.
Call. A request by an importing country for consultations with an exporting country concerning products whose shipments during a specified period are at or near a limit specified in a textile agreement. See Multifiber arrangement (MF A).
Caribbean Basin Initiative (CBI). A non-reciprocal preferential arrangement established by the United States in 1984 to promote economic development in Caribbean countries; it was made a permanent program in 1990 under the Caribbean Basin Economic Recovery Act. Under the CBI, US duties are eliminated on all imports from beneficiary countries except textile and apparel products, canned tuna, footwear, certain leather goods, and certain watches and watch parts. Beneficiary countries are Antigua and Barbuda, the Bahamas, Barbados, Belize, British Virgin Islands, Costa Rica, Dominica, Dominican Republic, El Salvador, Grenada, Guatemala, Guyana, Haiti, Honduras, Jamaica, Montserrat, Netherlands Antilles, Nicaragua, Panama, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines, Suriname, and Trinidad and Tobago.
Caribbean-Canadian Common Market (CARIBCAN). A non-reciprocal preferential arrangement established by Canada in 1986 to extend tariff preferences to Commonwealth countries in the Caribbean region. Beneficiary countries are Antigua and Barbuda, Bahamas, Barbados, Belize, British Virgin Islands, Dominica, Grenada, Guyana, Jamaica, Montserrat, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines, and Trinidad and Tobago. Under CARIBCAN, Canadian duties are eliminated on all products imported from beneficiary countries except textiles, clothing, footwear, luggage and handbags, leather garments, lubricating oils, methanol and alcohol, and tobacco products. Product eligibility requires 60 percent local content.
Central and East European Countries (CEECs). Includes Albania, Bulgaria, the Czech Republic, Hungary, Poland, Romania, Slovakia, and the former Yugoslav republics. In some recent applications, this term has been used to also include some of .the Newly Independent States (NIS) of the former Soviet Union, e.g., Belarus, Moldova, Ukraine, and the Baltic republics.
Ceiling Binding. See binding.
Centre William Rappard. Formal name of the GATT headquarters building in Geneva.
Check Price System. A device used by a government agency to avoid charges of dumping in foreign markets by establishing floor prices for exporting firms.
Chicken War. A trade war that occurred in 1962-63 between the United States and the European Community. Prior to 1962, US chicken exports had entered many European countries at a bound tariff rate. Adoption of the Common Agricultural Policy imposed minimum import prices on all imported chicken, nullifying prior tariff concessions and causing an estimated $26 million in losses to US poultry farmers. When attempts to achieve a negotiated resolution failed, the United States imposed retaliatory duties on European trucks, brandy, and other products.
Circumvention. Measures taken by exporting companies to forestall or evade the payment of penalty charges in an importing country such as countervailing or antidumping duties. Examples include false labeling, transshipment, and screwdriver assemblies (Sec.ll). See also diversionary dumping and downstream dumping.
Civil Aircraft Agreement. Formally known as the Agreement on Trade in Civil Aircraft. The only sectoral agreement covering manufactures to result from the Tokyo Round negotiations. Under the agreement, signatory countries eliminated tariffs on civil (i.e., nonmilitary) aircraft, engines, and components; established rules covering governments' involvement in civil aircraft purchases; and applied the GA TT Standards Code and Subsidies Code to the aircraft sector. Code signatories are proscribed from pressuring airlines to buy from particular suppliers, and may not grant or deny landing rights in attempts to influence aircraft purchases. Signatories include Austria, Belgium, Canada, Denmark, Egypt, the European Community, France, Germany, Greece, Ireland, Italy, Japan, Luxembourg, Netherlands, Norway, Portugal, Romania, Spain, Sweden, Switzerland, the United Kingdom, and the United States.
Clearing Agreements. See Countertrade.
COCOM List. A list compiled by the Coordinating Committee for Multilateral Export Controls, or COCOM (Sec.III), designating strategic or sensitive products to be denied exportation to potentially hostile countries. The COCOM List encompasses the International Atomic Energy List; the International Munitions List; and the International List, which includes both military items and dual-use goods. A uniform control procedure, known as the International Import Certificate-Delivery Verification System, was established by COCOM member countries to prevent diversion of restricted products. See also Commodity Control List.
Code of Conduct. An international agreement establishing standards of behavior --by countries, corporations, or individuals --deemed desirable by the international community. Such codes are essentially normative statements of principle and, unlike " treaties or commercial agreements, have no binding force. Not to be confused with GAIT Codes.
Codex Alimentarius. See Codex Alimentarius Commission (Sec.III). The compilation of minimum grades and standards for raw and processed food products published by the Commission is known as the Codex Alimentarius. Upon adherence by a government, all "codex standards" become minimum standards by that country .See sanitary and phytosanitary standards.
Column 1 Rates. US tariff rates which have been established through international negotiation and approved by Congress. Column I rates are applied on a most favored- nation basis and are usually subject to binding in GA TT .
Column 2 Rates. US tariff rates assessed on imports from countries not receiving most- favored-nation treatment. Most Column 2 rates date from the Smoot-Hawley Act of 1930 (Sec. IV) and are substantially higher than Column 1 rates.
Commercial Counterfeiting. A deceptive trade practice involving trademark piracy, false labeling, or other fraudulent means of claiming manufacture by a reputable producer. See Counterfeit Code.
Commodity Agreement. A formal international arrangement among exporters and importers of a commodity. Such agreements have often been advocated by commodity exporting countries for the purpose of stabilizing price fluctuations, but few arrangements have been successful in doing so. The United States currently participates in commodity agreements covering coffee, wheat, jute, rubber, lead and zinc, tropical timber, copper, and cotton; of these, only the International Natural Rubber Agreement currently contains economic stabilization measures. See international commodity organization; see also buffer stocks and export quota agreement.
Commodity Control List. A listing of products subject to export controls administered by the US Department of Commerce. The list includes items on the multilateral COCOM List as well as those subject to unilateral US restrictions.
Common Agricultural Policy (CAP). The system of production targets and marketing mechanisms maintained by the European Community to manage farm trade within the EC and with the rest of the world. Article 39 of the Treaty of Rome established the CAP as a mechanism merging the individual member states' agricultural policies into a unified program to promote regional agricultural development, fair and rising standards of living for the farm population, stable agricultural markets, increased agricultural productivity, and methods of dealing with security of food supply. The main categories of CAP market-management and support mechanisms are:
The CAP was designed as a policy that relied extensively on trade measures to maintain and stabilize internal prices. Thus, two of the most prominent features of the CAP in terms of its effects on international trade are the variable levy, and export subsidies to promote exports of farm products that cannot be sold within the EC at target prices. The CAP mechanisms for managing the domestic market and regulating imports are based on a variety of price concepts, the main types of which are:
The CAP came into effect in 1961; at that time, the original EC member states were large net importers of most agricultural products. While variable levies under the CAP isolated EC producers and consumers from world market forces, it was not seriously disruptive to world trade for products in which the EC was a net importer. Since the 1970s, however, a combination of CAP price incentives and technological advances led to increased agricultural investment and domestic production increases at a time when European demand for farm products was stagnant or falling. The EC consequently went from a net importer to a major net exporter of grains, sugar, meat, and poultry, leading to escalating trade frictions with other countries. At the same time, the CAP has been beset with problems arising from monetary fluctuations, costly subsidies, overproduction, and high price support levels.
Common External Tariff. A uniform tariff schedule applied by members of a customs & union or common market to imports from nonmember countries.
Common Market. A group of countries formally committed to the unrestricted movement of goods, services, and factors of production traded among themselves. Features of a common market include elimination of tariffs and other barriers to internal trade, including harmonization of national standards that regulate the sale and distribution of goods; establishment of a common external tariff; and abolition of capital controls and restrictions on labor mobility among members. A common market may seek to harmonize macroeconomic policies or promote political unification, but this is not a necessary feature. See also customs union and economic union.
Compensation. Trade concessions granted by a GATT member to offset the disadvantage caused to other members whose exports are affected by its withdrawal or suspension of previously-agreed trade concessions or bindings. Compensation usually takes the form of reductions of tariffs on other products of commercial interest to the countries being compensated. See also consultations and dispute settlement.
Compensatory Tax. An import levy applied by the European Community to certain agricultural products when the import price is below a reference (or minimum target) price and reflects an export subsidy. Not the same as a variable levy.
Complementation Agreement. An agreement between a manufacturing firm and two or more governments to reduce or eliminate duties on specified items produced by the firm in one of the signatory countries. Complementation agreements are usually granted to induce a firm to establish manufacturing facilities in one of the signatory countries, by ensuring access to all of the signatories' markets for its output.
Compulsory Licensing. A term used in the context of intellectual property rights, primarily with regard to licensing of pharmaceutical patents. It refers to the legal authority to compel a holder of a patent to license production to a local firm as a condition of patent protection and sale in that country. Compulsory licenses may be granted by a government allowing local parties to use a patent, copyright, or trademark with or without the owner's consent, and are usually granted on grounds of national security or overriding national interests, or of non-working by the original owner. Proponents argue that compulsory licensing can lead to increased competition and reduced prices by encouraging production among a larger number of producers. Critics argue that such measures have the same trade-distorting effect as a local-content requirement or performance requirement.
Compound Tariff. A combination of a specific duty and an ad valorem tariff on the same imported item (e.g., $100 per unit plus 5 percent of the assessed value). Sometimes called a "mixed tariff."
Computed Value. (Not to be confused with constructed value.) An alternative method permitted by the Customs Valuation Code for establishing the value of imported merchandise for customs purposes when neither the transaction value nor the deductive value can be determined. The computed value is the sum of various production costs and charges associated with preparing goods for export, together with imputed profit and overhead.
Concession. An agreement to reduce import restrictions --such as through a tariff reduction or binding --granted in negotiations in return for equivalent concessions by trading partners. See reciprocity.
Conditional MFN. The granting of most favored-nation treatment subject to the recipient country's compliance with specific terms or conditions. Because all members of GA TT are expected to accord unconditional MFN treatment to other members, conditional MFN is normally applied only to countries that do not belong to GATT.
Confrontation and Justification. In negotiating parlance, refers to the process of defining country positions through multilateral cross-examination. Following confrontation, or questioning of a country's policy position or negotiating offers by other countries, the country being confronted is expected to respond with justification of its stand on the points raised.
Consensus. In GATT parlance, the outcome of a negotiated decision among contracting parties in which sufficiently generalized support for a position is achieved to permit action. A decision in GA TT is made by consensus if no party formally objects to the decision, and is almost always achieved by avoiding rather than utilizing voting. Because GATT is a contractual arrangement, members cannot normally be bound through voting procedures in "majority rule" fashion. As a result, virtually all GATT decisions are by consensus except decisions on amendments, waivers, and accessions. In any given case, a dissatisfied GATT member must decide whether the issue warrants expending negotiating capital in blocking a consensus. Consensus decisions in GATT are not necessarily optimal; one former negotiator referred to the GATT consensus process as a "balance of dissatisfaction." See also reverse consensus.
Constructed Value. See fair value; not to be confused with computed value.
Consular Fees and Formalities. Special charges and procedures --such as documents that must be approved by a designated official--.required by importing countries as a prerequisite for permission to import merchandise. Cumbersome consular formalities are especially widespread among developing countries and, because substantial fees are often charged for required authorizations, they can function as a significant nontariff barrier to trade. See also customs and administrative entry procedures.
Consultations. Any GATT member that believes its trade interests have been adversely affected by changes in the trade policy of another member, or by failure of another member to live up to its obligations, may request consultations with the offending country:
Consumer Subsidy Equivalent (CSE). The percentage by which consumer prices on an item are affected by direct or indirect government supports to producers.
Contingent Reciprocity. See selective reciprocity.
Contracting Party (CP). Formal term designating a signatory to the GATT (the term "member" of the GATT is often used informally). As signatories, contracting parties have accepted specific obligations and benefits of the General Agreement and have agreed to follow GATT rules in conducting their trade policy. Because of the most- favored-nation principle, all CPs receive the benefits of lower tariffs and trade barriers that have been negotiated in GATT, as well as recourse to GATT procedures for settling disputes with other members. CPs need not be independent, sovereign countries --Hong Kong and Macau are GATT members, for example --but must be autonomous in setting their trade policies. When written in capital letters, "CONTRACTING PARTIES" in GATT documents refers to the collective membership of the GATT , acting jointly rather than in their individual capacities. This entity is the only legally recognized body in GATT, as the Agreement itself makes no provision for a secretariat or for any subsidiary organs.
Conventional Duty. A tariff or customs duty arising out of an international agreement, as contrasted with an "autonomous duty" unilaterally levied by a government. '"
Convention on International Trade in Endangered Species of Flora and Fauna (CUES). A multilateral agreement signed in 1973 to suppress international trade in endangered species of wildlife and plants. Signatories committed themselves to interdict exports or imports of species listed in the agreement, with limited exceptions.
Convention on Settlement of Investment Disputes Between States and Nationals of Other States. A multilateral agreement, signed among World Bank member states in 1965, that established the International Center for Settlement of Investment Disputes (Sec. IIl). Signatories committed themselves to recognize decisions and arbitral awards in investment disputes referred to the Center as binding.
Copyright. The exclusive right of authors, composers, playwrights, artists, publishers, or distributors to publish and dispose of their work for a specified time. Copyright protection varies from country to country , and its enforcement is a major issue in international negotiations concerning intellectual property rights.
Counterfeit Code. A draft agreement, initiated in the closing stages of the Tokyo Round but never concluded, which would have addressed commercial counterfeiting problems in international trade. The initiative set the stage for subsequent work in the Uruguay Round on protecting intellectual property rights.
Counterpurchase Contracts. See Countertrade.
Countertrade. An international commercial agreement in which a buyer pays for purchases wholly or partly with something other than money. Countertrade transactions can take various forms:
Countervailing Charge. A charge in addition to normal import duties that may be imposed under the European Community's Common Agricultural Policy on imports of certain fishery products, fruits and vegetables, and wine, to match the difference between the reference price and the entry price (for fishery products and fruits and vegetables) or the free-at-frontier price plus customs duty (for wine).
Countervailing Duty (CVD). A special duty levied on imports to enable domestic producers to compete on an equal footing with subsidized foreign producers. CVDs are levied in addition to normal tariffs, in an amount necessary to offset government subsidies in the exporting country .US trade law empowers the President to levy CVDs equal in amount to any "bounties or grants" extended by other governments to exporters, although the law does not specify what kinds of government practices should be considered actionable; see export subsidies. GATT Article 6 permits and regulates the use of CVDs; additionally, signatories to the GA 1T Subsidies Code are required to meet an injury test before levying CVDs on imports from another signatory nation. Because foreign subsidies usually reflect broader government policies and programs, countervailing duties are frequently the object of intense and sometimes acrimonious bilateral diplomacy. CVDs are not used as a remedy to dumping, which refers to pricing practices by foreign firms.
Countries in Transition (CITs). A group of countries classed by the International Monetary Fund as countries in transition to market economies. The CITs include Albania, Armenia, Azerbaijan, Belarus, Bosnia-Herzegovina, Bulgaria, Croatia, Czech Republic, Estonia, Georgia, Hungary, Kazakhstan, Kyrgyzstan, Latvia, Lithuania, Moldova, Mongolia, Poland, Romania, Russia, Slovakia, Slovenia, Tajikistan, Turkmenistan, Ukraine, and Uzbekistan. Prior to 1993, the IMP had used the term "former centrally planned economies" in referring to these countries. See former East Bloc countries.
Country of Origin. For purposes of customs administration, the country in which an imported product was manufactured, produced, or grown. When goods pass through more than one country in the manufacturing process, the country of origin does not change unless the product has been substantially transformed. In general, a product is considered to have originated in the country in which at least 50 percent of its final value was derived, although higher percentage thresholds are sometimes used. In the case of goods entering the United States under the Caribbean Basin Initiative or the Generalized System of Preferences, lower levels of local value-added may be allowed in establishing eligibility .See rules of origin.
Coverage. The extent of applicability of a trade action, agreement, or policy.
Cross-Retaliation. Retaliation in one sector of trade, such as agriculture, to counter unfair actions or violations of agreements affecting trade in another sector, such as services.
Currency Controls. See exchange controls.
Customs and Administrative Entry Procedures. Formalities applying to customs clearance of imported goods at national ports of entry, including health and sanitary certificates, certificates of origin disclosing the name and location of the manufacturer, and consular invoices. Such procedures can result in increased import costs that inhibit trade even when not intended to do so. See also consular formalities and documentation and Kyoto Convention.
Customs Classification. The determination of the appropriate category in which a traded product is classified for tariff purposes. Also refers to the coding system or "nomenclature" used by customs officials as a guide in determining which tariff rate applies to a particular item. See dutiable status.
Customs Harmonization. Intemational efforts to increase the uniformity of customs procedures such as valuation, nomenclature, and enforcement by participating countries. See Harmonized System.
Customs Territory. The geographical area within which a country1s customs authority is empowered to impose duties and controls upon foreign merchandise entering the territory .The customs territory does not necessarily encompass all the territory over which the nation asserts sovereignty. The customs territory of the United States, for example, does not include the Virgin Islands, American Samoa, or various foreign trade zones established within the United States. On the other hand, a country's customs territory may extend to other sovereign states. Monaco, for example, is part of the customs territory of France.
Customs Union. A group of countries that have agreed to eliminate barriers to trade among themselves while harmonizing their tariffs on imports from nonmember countries into a common external tariff. A customs union represents a level of economic cooperation intermediate between a free trade area and a more closely integrated common market. Unlike a common market, it does not provide for free movement of capital and labor among members.
Customs Valuation. The process of appraising the value of imported goods on which duties are to be assessed, according to the tariff schedule of the importing country.
Customs Valuation Code. Formally known as the Agreement on Implementation of Article VII of the GA TT. A GAIT Code establishing rules for the determination of value for customs purposes, designed to provide a fair, uniform, and neutral system of valuation, and to preclude use of arbitrary or fictitious values as a disguised form of protectionism. The cornerstone of the Code is the presumption that the actual sale price - -or transaction value --will be used whenever possible for valuation purposes; the deductive value or the computed value methods may be used in cases where the transaction value cannot be determined. Signatories include Argentina, Australia, Austria, Brazil, Canada, Cyprus, Czech Republic, the European Community, Finland, Hong Kong, Hungary, India, Japan, Korea, Lesotho, Malawi, Mexico, New Zealand, Norway, Poland, Romania, Slovakia, South Africa, Sweden, Switzerland, Turkey, the United Kingdom, the United States, and Zimbabwe.
Customs Value. A method of valuing imported goods which excludes shipping costs from the final price.
DAEs. See Dynamic Asian Economies.
Decoupling. A concept aimed at making government agricultural programs trade-neutral - by breaking the link between assistance to farmers and farmers' decisions to produce and sell agricultural products. Direct income supports are a form of decoupled assistance.
Deductive Value. An alternative method of valuing imported merchandise for customs purposes, permitted under the Customs Valuation Code if none of the methods for establishing transaction value is appropriate. Under the deductive value method, the customs value is determined by using the first sale price of the goods in the importing country, and deducting certain costs incurred after importation; it is not normally used on goods destined for further processing or manufacturing within the importing country (see super deductive). An alternative to the deductive value method is computed value.
De Facto Member of GATT. A former dependency of a GATT member that since attaining independence has applied the GATT on a de facto basis, pending final determination of its commercial policy. Based on its previous association with the GATT as a colony or protectorate of another member, a de facto member may become a .full Contracting Party --without engaging in lengthy accession negotiations --simply by notifying the Director-General of its intention to accede. In September 1993, there were 20 de facto members of GATT.
Deficiency Payments. Government payments to compensate producers --usually farmers --for all or part of the difference between domestic market price levels for a commodity and a higher, governmentally guaranteed price. See variable levy.
Degressivity. The characteristic of a trade restriction, which diminishes in severity over time. A degressive measure could take the form of an import quota with a "growth provision" to enlarge progressively the amount permitted to be imported, or a tariff the rate of which automatically declines according to a specified timetable.
Demarche. A formal diplomatic communication of a country's position on an issue, presented to an official representative of another country .
Derogation. In negotiating parlance, an exemption from part of an agreement demanded by a country as a condition for its acceptance of the remaining obligations or commitments.
Developed Countries. See industrial countries.
Developing Countries or Less-Developed Countries (LDCs). A broad range of 130 countries that are distinguished from the industrial countries by their lack of a high degree of industrialization, infrastructure and other capital investment, or of advanced living standards among their populations as a whole. The LDCs are sometimes collectively designated as the "South" because a large number of them are in the Southern Hemisphere. All of the countries of the Western Hemisphere (except Canada and the United States); Africa (except South Africa); and Asia and Oceania (except Japan, Australia, and New Zealand) are usually classed as LDCs, as are Cyprus, Malta, and Turkey in Europe. Current usage has not produced a consensus on whether the "industrial" or "developing" term applies to countries of Eastern Europe and the former Soviet republics, although the International Monetary Fund classes the latter as countries in transition.
The World Bank categorizes the developing countries and countries in transition (in ascending order of GNP per capita) as follows:
In addition, Israel, Hong Kong, and Singapore --which are usually included among the LDCs --are classed by the World Bank as "high-income countries" along with OECD members. On the other hand, Portugal and Greece --which are classed as industrial countries by the I1vIF --are placed by the World Bank in the "upper-middle-income" category.
Within GATT articles, numerous references are made to "developed contracting parties" and to "less-developed contracting parties," but few criteria are given for establishing which category a particular country belongs to;2 as in most GATT decisions, such a determination is achieved by consensus. See also industrial countries, newly-industrialized economies (NIEs), and least-developed countries (LLDCs), as well as graduation.
Development Subsidies. See Green Box.
Differential Exchange Rates. See multiple exchange rates.
Dillon Round. The fifth GAIT Round of multilateral trade negotiations, held in Geneva
from May 1959 through July 1962. The Round focused on revision of the GATT agreements and the addition of new countries. Tariff reductions, which were based on item-by-item negotiations, averaged roughly 10 percent on $4.9 billion of trade among the 45 participating countries. The Round was named for C. Douglas Dillon, then US Under Secretary of State, who led moves to launch the Round.
Direct Taxes. Taxes on all forms of income including wages, profits, interest, rents, and royalties, or on the ownership of real property. Under GATT Article 6 and the Subsidies Code, the rebate of direct taxes on exported products --but not of indirect taxes --can be considered an export subsidy and be penalized by a countervailing duty. The direct tax/indirect tax distinction in GATT creates a disadvantage for US firms, since other countries tend to rely on indirect taxes while the United States relies more on direct taxes for revenue purposes.
Disciplines. In GATT parlance, refers to members' substantive obligations undertaken by members to refrain from discriminatory trade practices. Generally refers to the key principles upon: which GATT rules are based, notably non-discrimination, national treatment, and transparency.
Discrimination. Inequality in trade treatment accorded by an importing country to one or more exporting countries. Some forms of discrimination may be sanctioned by GATT, such as preferential tariff rates for imports from LDCs or from partners in a free- trade area. Discrimination may also involve trade restrictions that apply to the exports of certain countries but not to similar goods from other countries (see selectivity and grey area measures). The opposite of discrimination is most1avored-nation (MFN) treatment.
Dispute Panel. See panel of experts.
Dispute Settlement. The process of negotiation, consultation, conciliation or mediation, and resolution of trade-policy conflicts between GATT Contracting Parties, usually through a negotiated compromise between opposing claims. GATT Articles 22 and 23 establish the basis for procedures a Contracting Party may follow --sometimes including referral to an impartial panel of experts or working party of countries not involved in the dispute --to obtain redress if it believes its benefits under GATT have been impaired. See consultations.
Diversionary Dumping. Sales by a firm at less than fair value in a foreign country, where the product is further processed and exported to a third country .See also downstream dumping.
Domestic Content Requirement. A requirement that foreign firms selling a particular product must use goods produced within the importing country as a specified minimum percentage of their inputs. Similar measures relating to inward direct investments are referred to as local-content requirements.
Domestic Subsidy. Government aid to a domestic manufacturer, grower, or producer to " maintain or increase production. Common incentives include direct payments, tax relief, and low-interest loans. As distinguished from an export subsidy, a domestic subsidy is not explicitly or solely directed at exports, although it may nonetheless have a significant trade impact GATT Article 16 establishes substantive obligations or disciplines only regarding the use of export subsidies, not domestic subsidies. The GATT Subsidies Code recognized that domestic subsidies are widely used for the promotion of social and economic policy objectives, but requires signatories applying them to "seek to avoid" creating adverse affects on the trade interests of other signatories.
Double-Column Tariff. A tariff schedule listing two duty rates for some or all commodities. In any given case, the applicable rate depends on the exporting country's trade relationship with the importing country.
Downstream Dumping. Sales at below cost in a firm's home country to a "downstream producer," which further processes the product and exports it Similar transactions involving a downstream producer located in another country are referred to as diversionary dumping.
Draft Final Act (DFA). See Dunkel Draft.
Drawback. Also known as duty drawback. The partial or total reimbursement of import duties by a government when the imported goods are re-exported or used in the manufacture of exported goods. Drawback can also refer to the refund of a domestic tax upon exportation of an article, which has been subjected to it. Drawbacks may be, considered export subsidies. See also duty remission.
Dual Pricing. The selling of identical products in different countries for different prices. When not based on factors such as differences in shipping costs or exchange rates, dual pricing is often presumed to reflect export subsidies or dumping practices. See also price discrimination (Sec. II).
Dumping. The sale of a product in a foreign market at less than fair value, presumably in order to capture or hold market share, or for other economic motives (see price discrimination, predation, and shakeout in Section II). Different forms of dumping can be categorized as:
Dumping is widely considered to be an unfair trade practice because it can disrupt markets and injure producers of competitive products in the importing country. When dumping occurs, adversely affected firms in the importing country may seek redress through imposition of an antidumping duly. See also diversionary dumping and downstream dumping.
Dumping Margin. In a dumping investigation, the percentage by which the price charged in the importing country's market falls below a product's fair value.
Dunkel Draft or Dunkel Text. Efforts to conclude the Uruguay Round in 1991 culminated in December of that year with the tabling of a "Draft Final Act" (DFA) by GATT Director-General Arthur Dunkel, embodying all of the rule-making agreements under negotiation in the Round. In some portions of the DFA --commonly referred to as the Dunkel Draft or Dunkel Text --the texts had been fully negotiated among participating countries; in others where this was not possible, Dunkel put forward his own proposed solutions after extensive consultations with delegations.
Dutiable Status. A determination made by an importing country's customs authorities whether a particular article is subject to duty and, if so, at what rate. The dutiable status is determined by "classifying" the merchandise --i.e., determining into which category of the tariff schedules the product falls. See customs classification.
Duties Collected. A criterion for evaluating the comparability or reciprocity of concessions in a tariff negotiation. Refers to the amount of duties collected for a particular product at a specified duty rate over a given time period.
Duty. A tax imposed on imports or exports. Duties can be "ad valorem" (applied as a percentage of value), "specific" (applied on a quantitative basis, such as dollars per ton), or "compound" (a combination of both). See also tariff
Duty Drawback. See drawback.
Duty Remission. A system allowing a firm to import goods into a country for processing and, when exported to a third country, to receive a repayment of duties paid at the time of the original importation. Unlike drawbacks , duty remissions do not require that the exported products contain elements of the imported product. Duty remissions may be considered export subsidies.
Duty Suspension. A temporary , unilateral reduction in tariffs. Duties are sometimes suspended to ease shortages of needed imports, or "to lower the cost of products not available domestically.
Dynamic Asian Economies (DAEs). In recent OECD discussions and publications, this term has been used to refer to Hong Kong, South Korea, Malaysia, Singapore, Taiwan, and Thailand. As such, the term is broader than and may eventually supersede NIEs.
East- West Trade. In the parlance of the 1970s and 1980s, trade between the former East Bloc countries ("the East") and industrial and developing countries outside the East Bloc ("the West").
Eco-labeling. Government or privately-sponsored labels or markings (also known as eco-seals or green seals) signifying that products or packaging are "environment- friendly," allowing consumers to discriminate among products in terms of their environmental impact Labels signifying "dolphin safe" tuna are an example. See also eco-packaging.
Eco-packaging. Refers to national regulations and programs to encourage recycling or reuse of product packaging and containers, together with associated labeling designed to promote use of "environment-friendly" packaging. Discussions in the GA TT Group on Environmental Measures and International Trade (Sec. III) have addressed application of eco-packaging and labeling requirements in ways that do not discriminate against foreign products.
Economic Summit. Although the term can be used more generally, its most prominent use is in referring to the annual meetings of leaders of the seven leading industrial countries (see Group of Seven, Sec. III).
Economic Union. The highest level of economic integration between sovereign countries, in which members proceed beyond the requirements of a common market to unify their fiscal, monetary, and socioeconomic policies. Belgium and Luxembourg, for example, have been joined in an economic union since 1921.
Embargo. A prohibition upon exports or imports, either with respect to specific products, or to specific countries. An embargo is usually applied for political reasons, although it may also be intended for economic or regulatory (e.g., environmental or sanitary) purposes. The term also applies to an official edict prohibiting entry or departure from the nation's ports of vessels flying the flag of a particular country. In cases where ports are closed only to commercial vessels of the targeted nation, a "civil embargo" exists; when ports are closed to military or public vessels as well, the condition is a "hostile embargo." Both an embargo and a blockade are particular forms of a broader category of economic countermeasures known as sanctions.
Enabling Clause. Pan of the 1979 Framework Agreement providing a legal basis in GATT for industrial countries to grant tariff preferences to LDCs. The enabling clause amounted to a permanent waiver of the GA TT most favored-nation provision for the Generalized System of Preferences (GSP ). LDCs sought agreement on the enabling clause as a key objective in the Tokyo Round, but were obliged to accept inclusion of language in the agreement that also recognized the graduation principle.
Enterprise for the Americas Initiative. A program launched in 1990 as a vehicle for defining a new US economic relationship with Latin America, including eventual free trade within the Western Hemisphere. The three pillars of the EAI are trade, debt, and investment. See Framework Agreement (2).
Enterprise Zones. See export processing zone.
Entities. In the context of the GA TT Government Procurement Code, refers to government departments or ministries and their subsidiary agencies, as well as state-owned monopolies or other state trading enterprises.
Environmental Dumping. Refers to an unfair trade practice whereby an exporter achieves a cost advantage over its rivals in foreign markets through inadequate environmental protection in its home country .A similar concept, referring to inadequate labor regulations, is referred to as social dumping. Both have been suggested as topics for future multilateral negotiations following the Uruguay Round.
Environmental Trade Measures. Trade measures applied by importing or exporting countries in conjunction with environmental policies. In 1987, parties to the Montreal Protocol enacted a series of restrictions to curtail trade in products employing ozone- damaging chemicals. Within GA TT , international discussions on such measures are conducted in the Group on Environmental Measures and International Trade (Sec. III). See also Green Round.
Escape Clause. A provision in a bilateral or multilateral commercial agreement permitting a signatory temporarily to suspend concessions it has granted when imports threaten harm to its domestic workers or firms producing competing goods or services (see safeguards). Also used in reference to procedures in the United States for applying for import relief.
Exceptions. Products specifically exempted from an international agreement to liberalize trade through multi-product duty reductions or other commitments. Exceptions are usually made by importing countries to protect workers and firms engaged in production of sensitive products.
Exchange Controls. The rationing of foreign currencies and other instruments for settling international financial obligations by a country facing balance of payments difficulties. Exchange controls require importers to apply for prior government authorization to obtain the foreign currency needed to bring in designated amounts and types of goods. Since such measures can easily be manipulated by governments to restrict imports, they are often viewed as nontariff barriers to trade.
Exhaustion. Refers to the doctrine that protection of intellectual property rights (IPR) is "exhausted" or confined to the country in which protection is granted. The exhaustion principle specifically implies that IPR holders may not seek to curb parallel imports from other countries. In Uruguay Round IPR negotiations, some LDCs have demanded international extension of the exhaustion principle in order to ensure access to industrial- country markets for goods they produce under license.
Exonerated Cargo. Otherwise dutiable merchandise permitted duty-free entry into certain countries in furtherance of a particular government policy. The exonerations are, in effect, licenses to import specified quantities of the desired articles --usually raw materials or unfurnished goods not available locally but deemed essential to local industry. Imports in excess of the quantities authorized in the exoneration may be prohibited or may be permitted only at high rates of duty.
Export Controls. Regulations or restrictions applied to exports by the government of the exporting country to limit foreign access to sensitive technologies, or to protect domestic producers and consumers from temporary shortages of certain materials. See: COCOM List and export restrictions; see also Export Administration Acts of 1969 and 1977 (Sec. IV).
Export Credits. Deferred payment arrangements provided by exporters for goods or services sold internationally. Official export credits are deferred payment arrangements financed or underwritten by an exporter's government, and can have the same effect as an outright export subsidy. Export credits are generally divided into short term (less than two years), medium term (two to five years), and long-term (over five years) credits. They may take the form of "supplier credits" extended by the exporter, or "buyer credits," in which the exporter's bank or other financial institution lends to the buyer. Export credit agencies may give official support to both supplier and buyer credits; such support may be limited to "pure cover" --insurance or guarantees given to exporters or lending institutions --or it may take the form of "financing support," including direct credits, refinancing, and interest subsidies. All major industrialized countries are signatories to the OECD Export Credits Arrangement. See Group on Export Credits and Credit Guarantees (Sec.I/l).
Export Credits Arrangement. Formal title is the Arrangement on Guidelines for Officially Supported Export Credits. An international understanding negotiated under the auspices of the OECD, providing the institutional framework for an orderly export credit market. Its purpose is to prevent an "export credit race" in which exporting countries compete for sales to third-country markets on the basis of their financing terms rather than on the basis of providing competitively priced goods. The Arrangement deals, with actions and policies of official export credit and insurance agencies, covering only the conditions or terms of insurance or guarantees. It limits trade finance subsidies, setting standards for minimum interest rates, maximum repayment periods, and down payments. The Arrangement took effect in April 1978, and includes all OECD member countries except Turkey. It replaced a less elaborate understanding that had been in effect among a more limited number of countries since 1976. See also Berne Union (Sec. III).
Export Duty. A tax imposed on exports. Although export duties are sometimes a convenient source of revenue, in some circumstances they can discourage exports and place producers at a competitive disadvantage in world markets. The United States is constitutionally proscribed from imposing export duties; resource-exporting countries such as Canada, Australia, and many LDCs tend to favor them. See also export restrictions.
Export Enhancement Program (EEP). A system of agricultural export subsidies maintained by the United States. The EEP, which is linked to stock disposal policies, is partial and discretionary in nature. Payments are not automatically accorded to all exports of a given commodity nor to all commodities, and payment rates may vary widely from sale to sale. Congress restored $1 billion in EEP export subsidies in mid- 1992 as a result of failure to conclude a Uruguay Round agreement covering foreign agricultural trade practices.
Export Guarantees. Assurances by an exporter's government that financing provided by a private lender will be repaid with official funds if a buyer defaults.
Export Performance Requirements. See performance requirements.
Export Processing Zone. A special form of free trade zone in which certain exemptions from duties and regulations are granted as an inducement to export-oriented manufacturing. Usually a manufacturer within the zone may import equipment and raw materials free of duty for goods that are ultimately exported as finished products. Other inducements may include abatement of taxes on profits derived from export sales or relaxation of minimum wage regulations. Also known as "special economic zones," "enterprise zones," and "industrial free zones."
Export Quota. A specific restriction or ceiling imposed by an exporting country on the value or volume of certain exports. Some international commodity agreements explicitly indicate when producers should apply such restrictions. Export quotas are also often applied in orderly marketing agreements and voluntary restraint agreements.
Export Quota Agreement. An arrangement arising under an international commodity agreement whereby each participating exporting country is allocated a portion of the global market for the commodity. The purpose of the arrangement is to maintain price stability and ensure producer incomes.
Export Restraints. Also referred to as bilateral restraint agreements. Quantitative restrictions applied by exporting countries to curtail shipments of sensitive products to a specified foreign market for a fixed time period, usually pursuant to a formal or informal agreement with the importing country (see voluntary restraint agreements and orderly marketing agreements.) Their economic effects --unlike those of "traditional" trade restrictions such as tariffs or import quotas --include significant benefits to established foreign producers. VRAs and OMAs have no explicit sanction under GA TI' (see grey area measures).
Export Restrictions. While usage varies, this term is often used to denote quantitative limits or charges on exports purely for domestic purposes, such as protecting producers and consumers from temporary shortages of certain materials, promoting processing of raw materials within the producing country, or bolstering export prices by limiting supplies in world markets. They are thus distinguished from export restraints, which are designed primarily to forestall frictions with the exporting country's major trading partners. US efforts in the Tokyo Round to have GATT rules and disciplines extended to export restrictions were largely unsuccessful. See also export controls and supply access.
Export Subsidy. Any form of government payment or other benefit provided to domestic producers of goods destined for sale in foreign markets. Examples include preferential government financing, income tax holidays, and rebates of direct taxes on exported products. Reflecting the belief among the founders of GA TT that export subsidies can distort normal trading patterns, GATI' Article 16 proscribes export subsidies on non-primary products that result in lower prices in foreign markets than prices charged for the "like product" in the domestic market. The Tokyo Round yielded an agreement that extended Article 16 by banning all export subsidies by industrial countries on manufactured and semi-manufactured goods (see Subsidies Code). See also domestic subsidy and countervailing duty.
Fair Trade. See entry in Section II.
Fair Value. The benchmark against which selling prices of imported merchandise are compared in a dumping investigation. In US practice, fair value is generally expressed as the weighted average of the exporter's home market prices or prices to third countries during the period of investigation. In some cases it is the "constructed value" --a derived figure used if there are few home-market or third-country sales of the product in question, or if the number of such sales made at prices above the cost of production is so few that they provide an inadequate basis for comparison. See also dumping margin.
Financing Support. See export credits.
Floor prices. See buffer stocks.
FOGS. See Functioning of the GATT System.
Former Centrally Planned Economies. See countries in transition.
Former East Bloc Countries. Countries that comprised the now-defunct East Bloc (i.e., those "dominated by international communism," in the language of the US Trade Act of 1974), many but not all of which have now abandoned central planning and moved to establish market economies. Includes the East European countries (CEECs), the former Soviet republics (NIS), China, Mongolia, North Korea, Vietnam, Laos, Cambodia, and Cuba. In the parlance of the 1960s, these countries comprised the "Second World," between the industrialized "First World" countries and the underdeveloped "Third World." Usage in the 1990s is still evolving; see countries in transition.
Formula Approach. A tariff negotiating procedure in which a general formula for calculating tariff reductions on all products is agreed by the participants, with limited exceptions allowed for sensitive items. The most straightforward formula approach is a linear reduction, although more complicated formulas have been used. Negotiations based on a formula approach tend to achieve tariff cuts across a broader range of products than item-by-item negotiations, but are vulnerable to becoming bogged down by demands for exceptions. See also harmonization.
Forum Shopping. Refers to the ability of countries to take advantage of differing procedures for dispute settlement under GATT and various GATT Codes by pursuing a trade complaint in a venue in which it believes it can exploit procedural or tactical advantages.
Four Dragons or Four Tigers. See newly-industrializing economies (NIEs).
Framework Agreement (I). A package of agreements negotiated during the Tokyo Round, dealing with (a) differential and more favorable treatment for LDCs; (b) trade restrictions applied for balance-of-payments purposes; (c) safeguard actions for "infant industry" development purposes; and (d) the process of dispute settlement in GAIT. The agreement took its name from the paragraph in the Tokyo Declaration calling for "improvements in the international framework for the conduct of world trade." The four texts making up the Framework Agreement were adopted by the GATT Contracting Parties in November 1979. See also enabling clause and graduation.
Framework Agreement (2). Also known as a Trade and Investment Framework Agreement, or TIF A. A bilateral agreement establishing a mechanism for consultations on trade and investment policy in conjunction with the Enterprise for the Americas Initiative (EA/). The EAI framework agreements set up intergovernmental councils to discuss and negotiate the removal of trade and investment barriers; the councils also serve as fora to prepare for subsequent stages of trade liberalization, including the possible negotiation of free trade agreements (FTAs). Since the EAI was launched, the United States has concluded framework agreements with Bolivia, Colombia, the Dominican Republic, Ecuador, El Salvador, Chile, Costa Rica, Guatemala, Honduras, Nicaragua, Panama, Peru, and Venezuela, as well as with MERCOSUR and CARICOM (Sec. III). The United States has signed similar framework agreements with Australia and New Zealand.
Framework Initiative. (Also known as the New Economic Partnership). An initiative launched by the United States in May 1993 to address bilateral trade problems with Japan.
Free List. A list of goods that have been designated as free from tariffs or licensing requirements by an importing country.
Free-Riders. In the context of the Uruguay Round discussions of a proposed Multilateral Trade Organization, refers to provisions to ensure that participating countries will not have the option of "free-riding" --i.e., of signing only some of the Uruguay Round agreements while avoiding the obligations of others --but instead would require countries to accept or reject the results of the Round as a "single undertaking." See non-application.
Free Trade vs. Fair Trade. See entries under respective headings in Section II.
Free Trade Agreement. An agreement between two or more countries establishing a free trade area (FTA).
Free Trade Area (FTA). A group of two or more countries that agree to remove barriers affecting substantially all trade with each other, while each maintains its own schedule of tariffs and other regulations on imports from non-member countries. Because some goods --such as farm products --may not be traded in significant quantities between partners in an FTA, coverage of " substantially all " of their trade does not necessarily mean trade barriers are eliminated in all sectors. Indeed, agriculture is exempted from coverage in many FTAs.
Free Trade Zone. (Not to be confused with a free trade area or FTA.) A designated area within a country in which goods can be imported, stored, or processed without being subject to customs duties and taxes. Also known as a "foreign trade zone," a "free port," or a "bonded warehouse." See also transit lone and export processing lone."
Functioning of the GATT System (FOGS). Designation for a negotiating group in the Uruguay Round that dealt with measures to strengthen the GATT process, particularly by improving surveillance of members' trade policies; encouraging greater involvement of trade ministers in the GATT; and strengthening GATT's relationship with other international organizations such as the IMF. See Trade Policy Review Mechanism.
Further Processing Method. See superdeductive .
GATT Codes. Agreements negotiated under GATT auspices to remove or lessen the trade-distorting effects of nontariff measures by prescribing signatories' rights and obligations concerning use of such measures as well as countermeasures that may be applied in response. Only the signatories of a GATT Code are bound by its terms. During the Tokyo Round, codes were negotiated governing subsidies and countervailing duties; standards and technical barriers to trade; import licensing procedures; customs valuation; and government purchasing policies. In addition, the existing GA TT antidumping code was revised.
GATT Panel. See Panel of Experts.
GATT Round. A cycle of multilateral trade negotiations conducted under the auspices of the GATT. Each Round has constituted a series of interrelated bargaining sessions among the participating countries to achieve mutually beneficial agreements reducing, tariffs and other trade barriers. The agreements reached at the conclusion of each Round become new GATT commitments and thus amount to an important step in the progressive liberalization of the world trading system. Eight Rounds have been initiated under GATT auspices since 1947:
Since 1956, all GATT Rounds have taken place at GATT headquarters in Geneva, although the more recent Rounds have been named after the city or country in which the ministerial declaration launching the negotiations was signed.
GATT Standing Committee. A permanent body of GATT members dealing with a specific area of trade policy. Includes the Committee on Trade in Industrial Products and the Agriculture Committee (both currently subsumed by the Uruguay Round negotiations under Track 1); the Committee on Tariff Concessions; the Committee on Balance of Payments Restrictions; the Committee on Trade and Development; the Textile Surveillance Board; and various the GATT Code Committees (see entries in Sec. III).
General Tariff. A tariff that applies to countries that do not enjoy either preferential or most-favored-nation tariff treatment. Where the general tariff rate differs from the r..1FN rate, the general tariff is usually the higher rate. See Column 1 rate and Column 2 rate.
Generalized System of Preferences (GSP). A system of tariff preferences applied by industrial countries to selected manufactured and semi-manufactured goods from developing countries, in order to facilitate LDC exports and economic development. GSP was originally propounded by UNCTAD (Sec. III), and was sanctioned by GATT in 1971 despite contravening the most-favored-nation principle of equal treatment for all GATT members. The United States began according GSP treatment to most LDCs in 1976 --the last of the major industrial countries to do so. GSP was given permanent standing in GATT by the 1979 Framework Agreement. GSP tariff treatment is not subject to either binding or reciprocity, and thus represents an autonomous, unilateral grant by the preference-giving country .In accordance with the graduation principle, GSP treatment is also intended to be temporary, with individual LDCs expected to relinquish benefits as they develop.
Geneva Rounds. The first and fourth GATT Round of multilateral trade negotiations, held in Geneva, Switzerland. The "First Round" involved the actual drafting of the GATT itself as well as tariff negotiations among the original contracting parties; the Preparatory Committee met in October and November of 1946, drafting of the General Agreement took place between 20 January and 28 February, 1947, and tariff negotiations lasted from April to October, 1947.3 The "Fourth Round" took place from January to May, 1956.
Geographic Indications. See appellations of origin.
Global Quotas. Explicit limits set by a country on the overall value or quantity of goods, which may be imported from or exported to all countries during a given period.
Government Procurement. Government policies and procedures for purchasing goods and services. Procurement policies can be construed as nontariff barriers if they discriminate in favor of domestic suppliers when imported goods are price-competitive and are of comparable quality.
Government Procurement Code. A GATT Code negotiated during the Tokyo Round, prohibiting signatories from discriminating against or among the products of other signatories in certain types of government procurement covered by the Code --i.e., purchases valued at more than 150,000 special drawing rights, or SDRs (Sec. 11) by specified government entities listed in the Agreement. Exceptions include contracts for most services, construction, procurement related to national security, and purchases by political subdivisions. The Code seeks to increase transparency in signatories' regulations and practices regarding government procurement, and to ensure that they do not discriminate against foreign suppliers or products. It contains detailed rules on the way in which tenders should be invited and awarded. Signatories include Austria, Canada, the European Community, Finland, Hong Kong, Israel, Japan, Norway, Singapore, Sweden, Switzerland, the United Kingdom, and the United States.
Graduation. The principle that an individual developing country --as it advances economically and becomes more developed, such as through industrialization, increased production and export earnings, and rising living standards --should assume greater responsibilities and obligations within GATT. As enunciated by the GATT enabling clause, graduation specifically implies that donor countries will remove or "graduate" the more advanced developing countries from eligibility for preferential treatment under the Generalized System of Preferences (GSP). The United States has graduated Hong Kong, Taiwan, Singapore, and South Korea from the US asp program accordingly.
Grandfather Clause. A provision in the GATT and other trade agreements permitting signatories to retain domestic legislation that was in effect before the agreement was signed, even though it may be inconsistent with certain provisions of the agreement. Only charter members of GATT may take advantage of its grandfather clause; they are, however, expected to bring their legislation into conformity with GATT provisions as soon as possible.
Green Box. A term used in the context of GA TT negotiations on agriculture and on export subsidies to refer to a category of official support measures that are deemed to be permissible, and hence are not subject to countervailing duties by an importing country. Measures often proposed for inclusion in a Green Box include development subsidies and privatization subsidies.
Green Room Consultations. Informal meetings of heads of delegations to the GATT Uruguay Round negotiations. Such meetings, usually convened to resolve procedural problems, take their name from a conference room adjacent to the Director-General's office at GATT Headquarters in Geneva.
Green Round. A term referring to a proposed new GATT Round of multilateral negotiations that would address environmental trade measures.
Grey Area Measures. Import relief measures taken outside the scope of GATT rules by countries seeking to protect domestic industries from injury arising from factors other than foreign unfair trade practices. The main forms are voluntary restraint agreements (VRAs) and orderly marketing arrangements (OMAs). Negotiations on safeguards in the Uruguay Round have aimed at bringing grey area measures within the scope of GATT rules and disciplines.
Group on Negotiations of Goods (GNG) and Group on Negotiations of Services (GNS). See negotiating group. The establishment of separate GNG and GNS groups was agreed at the outset of the Uruguay Round to maintain the formal appearance -- insisted upon by developing countries --that negotiations in the areas of goods and services were not linked.
Guide Price. See Common Agricultural Policy.
Harmonization. Cutting tariffs in a way that results in greater uniformity in rates applied to most items within each country's tariff schedule. Most harmonization negotiations have employed a formula approach for achieving relatively large cuts in high "tariff peaks" and smaller cuts in lower tariffs. This approach contrasts with linear reduction formulas, which call for equal percentage cuts in all tariffs.
Harmonized System (HS). A system of tariff nomenclature for customs classification negotiated within the Customs Cooperation Council (Sec.III). Participating countries classify goods for customs purposes on the HS basis up to a level of product specificity denoted by six-digit codes. Countries are free to introduce national distinctions --for tariff or statistical purposes --for more detailed product breakdowns beyond the six-digit level. The United States adopted the Harmonized System in the Trade Act of 1988 (Sec. IV). The Harmonized System superseded the Brussels Tariff Nomenclature (BTN) classification system.
Havana Charter. A multinational agreement concluded at Havana in 1948, which called for establishment of an International Trade Organization (ITO) to govern world trade. The ITO never came into force, primarily because of opposition in the US Congress, leaving the "provisional" GATT as the sole institution providing a foundation for the multilateral trading system. See entry under International Trade Organization in Section III.
High-Technology Trade. See high technology (Sec. 11).
Horizontal Reduction. Negotiated cuts in tariff rates by the same percentage for all parties to an agreement. Also known as equal-percentage of linear reduction.
Impairment. See nullification or impairment. Import Deposits. See prior deposits.
Import Licensing. Procedures requiring the submission of an application or other documentation (other than those normally required for customs purposes) to an administrative body for approval as a prior condition for importation into the customs territory of a country. See also prior deposits.
Import Licensing Code. Formally known as the Agreement on Import Licensing Procedures. A GAIT Code negotiated during the Tokyo Round to simplify and harmonize import licensing procedures of signatory governments, and to ensure that they do not in themselves restrict imports. Signatories are required to submit details of their licensing procedures and laws for examination by the Committee on Import Licensing. Signatories include Argentina, Australia, Austria, Canada, Chile, Czech Republic, Egypt, the European Community, Finland, Hong Kong, Hungary, India, Japan, Mexico, New Zealand, Nigeria, Norway, Pakistan, Philippines, Poland, Romania, Singapore, Slovakia, South Africa, Sweden, Switzerland, the United Kingdom, and the United States.
Import Quota. A means of restricting or controlling imports by specifying the quantity or value of a commodity, which may be imported during a specified period. Such restrictions may take the form of "global" or "basket quotas" --limiting total imports from all sources, without differentiating among originating countries --or of country-specific, "allocated quotas" in which producing countries may be assigned a portion of the total quantity permitted to be imported. Some global quotas contain sub-quotas designating individual limits for various supplier countries. Import quotas result in protection that tends to be more predictable than with a tariff, and can thus be "fine- tuned" by governments. As with a tariff, domestic producers protected by a quota are able to charge higher prices, and there are some efficiency losses --but these are not offset by the additional government revenue that a tariff provides, so that a greater deadweight loss (Sec.ll) results. See also quantitative restrictions and tariff quota.
Import Quota Auctioning. The process of allocating the right to import a product subject to quantitative restrictions by auctioning the quota among potential importers. Through the auction proceeds, the importing government can extract some of the revenue it might otherwise obtain by levying a tariff on the goods in question.
Import Relief. Governmental action to temporarily restrict imports in order to prevent or remedy injury to domestic workers or firms producing goods competitive with those being restricted. See safeguards.
Import Restrictions. Measures to limit or control the volume of imports by means of tariffs or nontariff barriers --including import quotas, exchange controls, import licensing, requirements for prior deposits, levies of import surcharges, or prohibitions of various categories of imports.
Import Sensitivity. The vulnerability of a domestic industry to injury from foreign competition. See also sensitive products .
Import Surcharge. A temporary tax on imports over and above established tariffs, usually enacted in times of economic crisis. The United States, for example, imposed a 10 percent import surcharge when the dollar-gold linkage was severed in 1971. The Tokyo Round Framework Agreement legitimized use of surcharges for balance-of- payments purposes, provided they do not provide special protection for particular products and do not discriminate among individual exporting countries.
Import Surge. A substantial and usually unforeseen increase in imports above recent trends for a particular product or class of goods, presenting serious adjustment costs (Sec . II) for domestic workers and firms producing such goods. When an import surge is due to economic or commercial factors other than unfair trade practices, governments may resort to safeguards to provide temporary import relief to the domestic industry.
Indirect Tax. A tax levied on expenditures --such as a sales tax, excise tax, or value- added tax --rather than a direct tax on individual or corporate earnings. GA TT rules permit countries to rebate indirect taxes on goods destined for export, but not direct taxes.
Industrial Countries or Industrialized Countries. (Also known as developed countries) A term used to distinguish the more industrialized nations from developing countries (LDCs) as well as the newly-industrializing economies (NIEs) and countries in transition. The International Monetary Fund categorizes as industrial countries the United States, Canada, Japan, Australia, New Zealand, and the member states of the EC and EFT A --i.e., all OECD member states except Turkey. South Africa in the past has been categorized as an industrial country, but its status is unclear at present. The industrial countries are sometimes collectively designated as the "North" because most of them are in the Northern Hemisphere.
Industrial Property. Encompasses most forms of intellectual property with the exception of copyrights --e.g., patents, trademarks, and trade secrets (Sec. II). See intellectual property rights.
Initial Negotiating Right (INR). A right held by a GA TT member to be compensated by another member if a given bound tariff rate is raised by the latter. INRs stem from past negotiating concessions and allow the holder to seek compensation for an impairment of tariff concessions whether or not the country holds status as a principal supplier of the product in question.
Injury. In the GATT context, refers to economic damage sustained by workers or firms in an industry as a consequence of foreign competition or unfair trade practices. Under GATT rules and various GATT Codes as well as under US law, mechanisms are established for determining whether injury has occurred or is threatened, as a prerequisite for taking countermeasures (see injury test). Different gradations of injury are referred to in US law and international discussions; the two most prominent are:
Injury Test. An administrative determination establishing that injury to a domestic industry has occurred as a result of an import surge or foreign unfair trade practices. Such a test is a prerequisite for imposition of safeguards, countervailing duties, or antidumping duties. By requiring an industry seeking trade relief to establish that it has been injured by foreign competition --a significant burden-of-proof threshold --the injury test is intended to prevent abuse of unfair-trade laws for protectionist purposes.
Intellectual Property Rights (IPRs). The right to possess and use intellectual property, conferred by means of patents, trademarks, and copyrights. Even though IPR laws are enacted and enforced on a strictly national basis, once a patent or copyright has been granted in one country and disclosure of an invention or creative work has been made, information technology makes it available throughout the world. As a result, cross- country differences in patent and copyright laws can result in inadequate IPR protection. In the Uruguay Round, negotiations on trade-related intellectual property rights (referred to as TRIPs) seek to balance goals of facilitating technology diffusion with the objective of promoting innovation through more effective IPR protection.
International Atomic Energy List. See COCOM List.
International Commodity Organization. An organization of nations engaged in international trade involving a particular commodity. Principal motives for such an organization, such as price collaboration among producers, may be similar to those of a producer cartel (Sec. II); the organization may also establish buffer stocks to prevent wide swings in the market price of the commodity. Some international commodity organizations, established to implement a commodity agreement, include both producing and consuming nations. The principal international commodity organizations (descriptive details of which may be found in Section III) include:
See also International Rice Commission; International Tea Committee; International Tin Council; International Wool Secretariat; and Organization of Petroleum Exporting Countries (Sec. III).
International Convention on the Simplification and Harmonization of Customs Procedures. See Kyoto Convention.
International Dairy Arrangement. A Tokyo Round agreement covering trade in dairy products, consisting of three protocols establishing minimum prices for milk powder , milk fats (including butter), and certain cheeses. The arrangement is overseen by the International Dairy Products Council (Sec. III). Signatories include Argentina, Australia, Botswana, Bulgaria, Egypt, the European Community, Finland, Hungary, Japan, New Zealand, Norway, Poland, Romania, South Africa, Sweden, Switzerland, and Uruguay.
International Import Certificate-Delivery Verification System. See COCOM List.
International Munitions List. See COCOM List.
Intervention Price. See Common Agricultural Policy.
Investment Performance Requirements. See Performance Requirements.
Item-by-Item Negotiations. A method of tariff negotiations in which the expected trade effects of each proposed tariff cut are evaluated separately. At the end of the negotiations, participants are expected to have achieved approximate balance in the total effect of tariff cuts offered and received. The first five GATT Rounds used the item-by-item approach, but by the rnid-1960s it had become too cumbersome for multilateral negotiations with increasing numbers of participating countries. See formula approach.
J-List. A list originally established under the US Tariff Act of 1930, indicating products that are exempted from requirements that imported goods be marked to show country of origin. Items on the list are difficult or impossible to mark. See marks of origin.
Judicial Review. In unfair trade cases, a mechanism for parties to a case to appeal a finding of subsidization, dumping, or injury to a court of law in the importing country.
Kennedy Round. The sixth GAIT Round of multilateral trade negotiations, held in Geneva from June 1963 to June 1967 with 48 countries participating. Tariff reductions -- based for the first time on a formula approach --covered $40 billion in trade and led to an average tariff reduction among the participating countries of about 35 percent. The Kennedy Round was the first GATT negotiation in which the member states of the European Community participated as a single entity. Moreover, developing countries for the first time played an important part in the negotiations, which resulted in the addition of Part Four to the GATT. The Round was named for President John F. Kennedy, who first sounded the call for the negotiations.
Kyoto Convention. Formal name is the International Convention on the Simplification and Harmonization of Customs Procedures. An international agreement sponsored in 1973 by the Customs Cooperation Council (Sec. Ill) to harmonize the methods and procedures of national customs authorities. The convention consists of a set of principles, which apply to all signatories, together with 30 individual annexes dealing with various aspects of customs and administrative entry procedures, rules of origin, transshipment, duty drawback, and free trade zones. A signatory may accept or reject any of the annexes, but must adopt at least one of them and must endeavor to implement all of the annexes as soon as feasible.