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July 2017


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    Post  Seck on Sat 02 Feb 2013, 21:25

    Economic policies back to top

    The main aim of this section of the Working Party Report, and the following part dealing with the framework for making and enforcing policies affecting trade in goods and services, is to provide Members with an understanding of the context within which the applicant’s WTO obligations on specific trade policy measures will operate. Certain information requested is relevant to specific WTO provisions. Discussion in the Working Parties has focussed on the following subjects: monetary and fiscal policies; foreign exchange and payments, including balance of payments measures; investment regime; State ownership and privatization; pricing policies and competition policy.

    Monetary and fiscal policies

    Experience indicates that information submitted by applicants on monetary policy and fiscal policy should include the objectives pursued, the responsible agencies and the policy instruments used. Summaries of fiscal policies should indicate if any tax reforms have been undertaken and any changes planned. Applicants should also indicate whether they have achieved their objectives in this area and give an account of the present situation.

    The aspects of taxation covered by the rules of GATT 1994 are the subject of the sections on the application of internal taxes to imports and exports. There are no provisions in GATS on taxation.

    Discussion of this item in Working Parties has usually been brief and there are no Protocol commitments in this section of their Reports.

    Foreign exchange and payments

    Applicants need to describe how their exchange rate is determined, whether their currency is convertible, whether foreign exchange is freely available for trade and payments purposes, whether any regulations exist relating to the retention of foreign currencies, or repatriation or surrender requirements. Applicants should also describe their balance of payments situation.

    While foreign exchange questions are within the jurisdiction of the IMF and trade policy questions within the competence of the WTO,128 foreign exchange questions and trade policy questions are interrelated. Of most direct relevance to the WTO is whether foreign exchange is freely available in payment for current account transactions, as exporters need to know how they will be paid. The WTO therefore recognizes this interrelationship. The GATT 1994 provides that Members must not, by exchange action, frustrate the intent of its provisions and that they must either be members of the Fund or enter into a special exchange agreement with the WTO.129 GATS provides that Members must allow international transfers and payments for current transactions relating to specific commitments entered into under that agreement.130

    Working Parties have been careful to respect the competence of the IMF. While Members have demonstrated an interest in obtaining adequate information on all matters dealt with in this section, they have laid stress on issues of direct relevance to international trade. They have, for instance, focussed on knowing whether applicants are members of the IMF and whether they have accepted Article VIII of its Articles of Agreement which provides that “no member shall, without the approval of the Fund, impose restrictions on the making of payments and transfers for current international transactions”. They have been particularly concerned that foreign exchange controls may be used to regulate the level and composition of trade in goods and services.

    All Working Party Reports but one have been able to note, that the acceding government concerned is a member of the IMF and has accepted its Article VIII obligations. The great majority of WTO Members do not pursue the matter further. In the case of the one applicant that was not a member of IMF, members noted that it would have to enter into “a Special Exchange Agreement as provided for in Article XV:6 of the GATT 1994 incorporating obligations consistent with Fund Article VIII”, which it duly did.131

    In one case an acceder responded to concerns that elements of its foreign exchange system provided scope for practices that distorted trade flows by stating that in the context of accession to the WTO, it was prepared to comply with the provisions of Article XV of the GATT 1994 regarding its foreign exchange restrictions.132 Similar concerns were raised in two other cases. The two acceding countries accepted a Protocol commitment that, in accordance with these obligations, and unless otherwise provided for in the IMF’s Articles of Agreement, they would implement its obligations with respect to foreign exchange matters in accordance with the provisions of the WTO Agreement and related declarations and decisions of the WTO that concerned the IMF. They further committed that they would not resort to any laws, regulations or other measures, including any requirements with respect to contractual terms, that would restrict the availability to any individual or enterprise of foreign exchange for current international transactions within its customs territory to an amount related to the foreign exchange inflows attributable to that individual or enterprise.133 One of these acceders stated, in addition, that it “would provide information on exchange measures as required under Article VIII, Section 5 of the IMF’s Articles of Agreement, and such other information on its exchange measures as was deemed necessary in the context of the transitional review mechanism.”134 The other committed not only to implement its obligations with respect to foreign exchange matters in accordance with the provisions of the WTO Agreement and related declarations and decisions of the WTO that concerned the IMF but also with the relevant provisions of the IMF’s Articles of Agreement itself.135

    GATT 1994 permits the imposition of quantitative restrictions to deal with balance of payments difficulties, Article XII regulating its use by developed countries and Article XVIII:B its use by developing countries. WTO Members maintaining such measures must consult with the WTO. While not modifying these rights and obligations, the Uruguay Round Understanding on this subject confirmed Members’ commitment to give preference to price-based measures. Only one acceding country actually maintained balance of payments measures at the time of its accession, these taking the form of an import surcharge. Its Protocol commitment on the subject contained a timetable for its reduction and elimination and arrangements for consultations with the WTO.136 In a limited number of other cases Working Parties have judged it necessary to obtain a commitment from applicants on balance of payments measures they might take in the future. Four accepted the commitments along the following lines: “If balance-of-payment measures were ever necessary in the future, [X] would impose them in a manner consistent with the relevant WTO provisions, including Article XII of the GATT 1994 and the Understanding on Balance-of-Payments Provisions of the GATT 1994”.137 They were therefore treated as developed countries. One LDC accepted the same commitment, modified to refer to Article XVIII.138 Curiously, the other LDC to have acceded accepted a commitment to impose any balance of payments measures in a manner consistent with both Article XII and Article XVIII.139 In another case the relevant GATT 1994 provision was not cited but the new Member undertook a commitment to “give preference to those measures referred to in the Understanding on the Balance of Payments Provisions of GATT 1994 as price-based measures to address the situation and [to] maintain any measures only so long as necessary. In the circumstance that [it] must resort to measures that were not price-based, [it] would transform these measures into price-based measures within 6 months after implementing the initial measures. Moreover, any measures taken for balance-of-payment reasons would not be used to provide import protection for specific sectors, industries or products”.140

    Investment regime

    Investment policies are closely related to trade policies and applicants are requested to provide a summary of their investment policies. They should provide details of: the objectives of the policies; the legislative framework; the government entities responsible for implementation; incentives granted to domestic and foreign investors; bans and restrictions on such investment (e.g. sectors closed to foreign investment, limitations on percentage of ownership); conditions imposed on investment (e.g. technology transfer, domestic purchasing and trade-balancing requirements); approval procedures; access to sources of capital, land and national resources, visas and residence permits, etc; right of foreign investors to initiate legal proceedings and to repatriate profits. In particular, any differences between the treatment of domestic and foreign investment should be indicated. Any international investment agreements should be listed.

    A number of provisions of GATT 1994 relate specifically to investment policies. The Agreement on Trade-Related Investment Measures (TRIMs), which confirms that domestic purchasing and trade-balancing requirements are contrary to the GATT rules on national treatment and quantitative restrictions, is the subject of a separate section below under the heading Trade in Goods. The provisions of the Agreement on Subsidies and Countervailing Measures (SCM Agreement) relate, inter alia, to subsidies providing investment incentives. The GATS deals with investment in that its definition of trade, unlike that of the GATT, includes the supply of a service by a supplier of one Member through commercial presence in the territory of another Member, which often requires investment. While the 1996 Ministerial Conference launched work in the WTO on the interaction between trade and investment, many Members opposed the initiation of negotiations on the subject in the WTO and it was effectively dropped from the agenda at the 2003 Ministerial Conference.141

    Policies covered by the TRIMs Agreement, the SCM Agreement and the GATS are normally dealt with under the headings devoted to these subjects with only a few exceptions. Three acceding countries were permitted to confirm that their new legislation would conform to WTO obligations before it was completed.142 In one case, the acceding country confirmed that “the terms and conditions of technology transfer, production processes or other proprietary knowledge, particularly in the context of an investment, would only require agreement between the parties to the investment”.143 In another case, an acceding country undertook commitments relating to the rights of foreign investors that had established joint ventures under its legislation on investment and enterprises and to the transparency of amendments or deletions to the list of prohibited or conditional investme

      Current date/time is Fri 28 Jul 2017, 10:46