Home

WTO

Macro

Micro

Tariffs, MFN & Uruguay round

1. The economic effects of tariffs
   • Comparison with subsidy and quota
2. The MFN principle
   • Institutional framework of reciprocity should address the following
     • Uncertainty
     • Free rider problem
     • Trade diversion
     The 1st and 3rd are addressed by MFN clause. The 2nd is addressed by art. 24, and the possibility for political maneuver is addressed by art.19. In general reciprocity makes tariff concessions politically possible.
   • MFN exceptions
     1. Grandfather clause
     2. Generalized System of Preferences
     3. Antidumping and Countervailing duties (art.6)
     4. Quantitative restrictions (art.12 and 18 by virtue of art.14)
     5. National security (art.21)
     6. Retaliation (art.23, 19)
     7. Free trade areas (art.24)
3. Alternative bargaining strategies
   • Product-by-product negotiations
     Principal Supplier rule. Little free-riding but narrow coverage and lobbying.
   • Linear-cuts with exceptions
     Problems with agreeing on cutting formulae and abuse of exemption right.
   • Sector-by-sector negotiations
     Largely a failure, despite the Code on Trade in Civil Aircraft and Agreement on Agriculture.
   • Non-reciprocal concessions for LDC
4. The Uruguay round
   • Outstanding tariff issues before the Round.
     • High tariffs on certain products
     • Many tariffs are not bound
     • Specific tariffs discriminated against developing countries' products
     • CIF procedure discriminated against geographically disadvantaged countries
     • Tariff escalation in developed countries
   • Main results of the Round.
     • 40% reduction of industrial products tariffs,
     • Fall of average industrial products tariffs from 6.3 to 3.8% as a result of reduction of tariff escalation,
     • Increase of binded tariffs: from 78 to 99 in developed countries and from 21 to 73 in developing countries,
     • Agriculture quotas tariffication and reduction by 36% (min. 15) for 6 years in developed countries and by 24% for 10 years in developing countries,
     • Information Technology Agreement (1996).