G e n e r a L a g r e e m e n t o n

particular sectors.

Consultations in the WTO committee

The understanding also tightens up rules for the consultations, in the WTO Balance-of-Payments

Committee, which countries invoking Articles XII or XVIII:B are required to undergo. Among the

changes made is a requirement that such consultations must begin within four months of restrictions being

imposed or increased (

Understanding para. 6

). The agreement retains a distinction, developed in GATT

practice, between full and simplified consultations. However, simplified consultations are now available as

the normal procedure only for least-developed countries. They may also be used, though not more than

twice in succession, for developing countries which are pursuing liberalization efforts already approved by

the Committee, or whose policies will be reviewed by the Trade Policy Review Body in the same year

(

Understanding para. 8

).

Other Uruguay Round agreements on GATT Articles

Several other “understandings” reached in the Uruguay Round interpret various provisions of the GATT,

                                                

12

These changes are recognized and endorsed in the Declaration on Trade Measures Taken for Balance-of-Payments

Purposes, adopted by the Contracting Parties on 28 November 1979 (GATT: BISD 26S/205-209).

13

 “Essential products” shall be understood to mean products which meet “basic consumption needs” or contribute to

efforts to improve the balance-of-payments situation, “such as capital goods or inputs needed for production”.

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INTRODUCTION TO GATT 1994 & 1947    9

without amounting to major agreements. These understandings, which concern Articles II:1(b) and XVII,

XXV (waivers) and XXVIII, make the application of these articles different, under GATT 1994, from what

it was under GATT 1947. The changes are in some cases largely technical, but are nevertheless significant.

Extra duties and charges

The 

understanding on

 

Article II:1(b)

14

 is particularly technical in nature. As already described, Article II

sets out the requirements and implications of the schedules in which each WTO member specifies the

precise tariff commitments (“bindings”) that it has accepted. Paragraph 1(b) of the article establishes the

basic requirement that “ordinary customs duties” shall not be higher than the levels specified in the

schedules.

In practice, however, imports are sometimes required to bear other duties or charges, before being cleared

through customs. These duties or charges were not in the past recorded in schedules, even though they

were not imposed on domestic products. Even when such charges had been bound against increase, the

fact that they were not listed meant that it was hard to know exactly what trade barriers imports would

face.

The new agreement provides that duties and charges other than customs duties that were imposed at the

border on imports and exports of each product as of 15 April 1994 should be included in each country’s

schedule, and should be bound at that level. The effect will be both to increase the transparency of each

country’s border protection and to reduce the likelihood of these duties and charges being increased in

future.

State trading enterprises

The 

understanding on Article XVII

15

 concerns the definition of state-trading enterprises, and

transparency of their activities.

The main aim of Article XVII is to ensure that government-owned enterprises, or enterprises that have

special privileges granted by the government, are not permitted by this privileged situation to escape the

GATT rules of non-discrimination (the MFN and national treatment rules).

The article does not cover purchases by governments for their own use: this is beyond its scope.

The point is that enterprises which, due to their relationship with the government, are able to influence

imports or exports, should not distort trade by favouring particular suppliers, restricting quantities

imported or exported, subsidizing exports, or fixing high prices. The understanding establishes, as a

working definition (

para. 1

) for the purpose of the Article XVII, that “state trading enterprises” are

governmental and non-governmental enterprises, including marketing boards, which through the exercise

of exclusive or special rights or privileges granted to them can influence through their purchases or sales the

level or direction of imports or exports. Such enterprises must be notified to the WTO.

Waivers

Waiver procedures under the GATT 1947 permitted decisions to allow individual contracting parties, in

exceptional circumstances, to be relieved of particular obligations imposed on them by the General

Agreement.

These procedures were set out in 

Article XXV:5

, and stated little more than the voting requirements for the

                                                

14

GATT 1994: Understanding on the Interpretation of Article II:1(b) of the General Agreement on Tariffs and

Trade 1994.

15

GATT 1994: Understanding on the Interpretation of Article XVII of the General Agreement on Tariffs and Trade

1994.

---

10  

 THE WORLD TRADE ORGANIZATION AGREEMENTS

approval of waivers. The possibility of waivers continues under the WTO, but the conditions are much

more carefully defined.

For waivers from obligations assumed under the GATT 1994, the new rules are partly in the WTO

agreement itself, and partly in a 

waiver understanding

, also negotiated in the Uruguay Round, that forms

part of the GATT 1994.

16

The final decision to grant a waiver rests with the WTO General Council, and the voting requirements are

in Article IX of the WTO Agreement (see booklet 1 in this series), along with important further provisions,

including for the first time the requirement that any waiver have a fixed termination date.

The understanding requires that requests to grant or extend a waiver shall describe the measures that the

member proposes to take, their policy objectives, and the reasons why these objectives cannot be pursued

by measures consistent with GATT obligations.

A second permanent element in the understanding recognizes that even if a waiver is granted, other

members may invoke the dispute settlement procedures if they believe that benefits due to them under the

GATT are being nullified or impaired. This right applies not only if the member given the waiver fails to

observe its conditions, but also if nullification or impairment is caused by a measure consistent with the

waiver.

The third element in the understanding is also important, although of less lasting significance: it provides

that any earlier GATT waiver still in effect at the time of entry into force of the WTO shall expire at the

latest within two years, unless extended under the new rules. The effect is that by the beginning of 1997 all

existing waivers will be governed by the new rules.