WORLD TRADE
ORGANIZATIONWT/BOP/R/66
19 November 2002
(02-6410)
COMMITTEE ON BALANCE-OF-PAYMENTS RESTRICTIONS
Work on Implementation Issues in Accordance with Paragraph 12(b) of the Doha Declaration
Report to the Trade Negotiations Committee
1. The Committee on Balance-of-Payments Restrictions met five times in 2002 to address
outstanding implementation issues under paragraph 12(b) of the Doha Ministerial Declaration – tiret 1
and part of tiret 3 of Job(01)/152/Rev.1.1  A copy of this report is being sent for information purposes
to the Chairman of the Committee on Trade and Development, where other aspects of tiret 3 are underdiscussion.
2. As a basis for its work, the Committee on Balance-of-Payments Restrictions took note of
earlier discussions that had been held on these two tirets of the Implementation work programme.
2
Also, at the Committee’s request the Secretariat produced a Note3 and the IMF provided input4 to
facilitate discussion on tiret 3.
3. With regard to the exercise as a whole, one view was that good faith efforts to resolve the
balance-of-payments implementation issues had been made at the Doha Ministerial Conference.  The
implications of the two remaining issues caused serious systemic concerns.  Another view was that all
proposals under paragraph 12(b) of the Doha Ministerial Declaration were matters for negotiation
within a given timeframe, as an integral part of the work programme.
4. By way of introduction to both tirets, one view was that the balance-of-payments provisions
of the WTO recognised the vulnerability of developing countries to balance-of-payments difficulties,as well as their need to safeguard their external position.  The provisions authorised the use of import
restrictions in a manner that took full account of the continued high level of demand for imports likely
to be generated by developing countries’ programmes of economic development.  In this regard, it
needed to be recognised, both in the Committee on Balance-of-Payments Restrictions and in any
dispute settlement proceedings on these provisions , that the circumstances in which Article XVIII:9
could be applied were fundamentally different from those in which Article XII:2 could be applied.  At
Doha, Ministers had re-affirmed that Article XVIII of the GATT 1994 was a special and differential
treatment provision for developing countries and that recourse to it should be less onerous than to
Article XII of the GATT 1994.  This re-affirmation needed now to be translated into practice in the WTO.
                                                     
1 Reports on these meetings are contained in WT/BOP/R/61, R/62, R/63,  and R/65.
2 WT/BOP/INF/9.
3 WT/BOP/W/21.
4 See Annex to WT/BOP/R/65.WT/BOP/R/66
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Tiret 1:  “Only the Committee on Balance-of-Pay ments shall have the authority to examine the
overall justification of  BOP measures”
5. One view  is that it should be confirmed that only matters arising from the application of trade
restrictions under Article XVIII:B, but not those arising from the overall justification for these
restrictions, could be referred to panels. This is what had been intended in the Understanding on theBalance-of-Payments provisions of the GATT 1994, where it is stated that:  “The provisions of
Articles XXII and XXIII of GATT 1994 as elaborated and applied by the Dispute Settlement
Understanding may be invoked with respect to any matters arising from the application of restrictive
import measures taken for balance-of-payments purposes”.
5 In light of this provision, the Dispute
Settlement Understanding (DSU) could not modify any of the rights accorded to developing-country
Members under Article XVIII:B, including their procedural rights.  A supporting interpretation had
been made by a Panel6 in the context of another dispute involving provisions containing  identical
language to that of footnote 1 of the Understanding (paragraph 12 of the Understanding on the
Interpretation of Article XXIV) where the same distinction between the “application” of a measure
and its “justification” had been made.  However, another Panel had ruled that the DSU could be
invoked with respect to any matters relating to balance-of-payments restrictions  It is therefore
necessary for the Membership to clarify the relationship between Article XVIII:B and the DSU.
6. Another view  is that this issue has already b een settled by WTO jurisprudence, and it was not
suitable for discussion under the Doha Implementation agenda.  At best, given its systemic
implications, it might be taken up for review under the DSU. The Appellate Body had found that
panels may review any matters relating to the use of balance-of-payments restrictions, and there
should not, and need not, be any conflict between the ‘judicial’ and ‘legislative’ branches of theWTO;  in considering the justification for balance-of-payments restrictions, panels should take into
account the deliberations and conclusions of the BOPs Committee.  As regards the findings of the
earlier Panel referred to in paragraph 5 above, it was noted that the Appellate Body had struck down
the deference approach adopted by this Panel so th at the Appellate Body’s conclusions in both this
case and the Article XVIII:B case were consistent.  The proposal contained in tiret 1 amounted to afundamental change in the rights and obligations of WTO Members, and if implemented would
undermine the DSU and have systemic implications for other WTO Agreements.
7. The Chairperson noted that there is no consensus of views. One view is that WTO Members
need to clarify the relationship between Article XVIII:B and the invocation of the DSU with a view to
confirming that only the Committee on Balance-of-Payments Restrictions shall have the authority to
examine the overall justification of balance-of-payments measures. The other view is that WTO
jurisprudence has settled the issue.
Tiret 3: “ a complete review of Article XVIII shall be undertaken with a view to ensure that it
subserves the original objective of facilitating  the progressive development of the economies in
developing countries and allows them to implement programmes and policies of economic
development designed to raise the general standard of living of their people”
8. Under this tiret, it was proposed by some Members that the Committee examine all issues
arising from the provisions of Article XVIII:B and the 1994 Understanding, read along with GATT
Article XV, including (i) criteria for assessing the ad equacy of reserves and the justification for trade
restrictions, and (ii) the scope and applicability of the proviso  and the Ad Note  to Article XVIII:11.
9. One view is that Article XVIII:B, especially paragraphs 9 and 11, recognises the vulnerability
of developing countries to balance-of-payments difficulties and the need to accord special and
                                                     
5 Footnote 1 of the Understanding on the Balance-of-Payments Provisions of the GATT 1994.
6 Source:  WT/DS34/R.WT/BOP/R/66
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differential treatment to their application of trade restrictions for balance-of-payments purposes, in
particular:  their need to maintain a high level of monetary reserves; their need to take measures that
will restore balance-of-payments equilibrium on a sound and lasting basis;  their need to ensure an
economic employment of productive resources in carrying out their domestic policies; and, most
importantly, their need to phase-out the restrictions gradually, and not to withdraw or modify themprecipitately if doing so would lead as a direct consequence to a deterioration in their balance-of-
payments position or disrupt their development policy.
10. In this regard, some Members had concerns over several aspects of recent consultations in the
Committee on Balance-of-Payments Restrictions and of dispute settlement in this area, in particular:
• The role played by the IMF in the consultation process and the nature of its input, in light of the
mandate contained in GATT Article XV.  The IMF should not supplant the role of the BOPsCommittee.  The IMF’s input should be analytical, not prescriptive, particularly not in
commenting on domestic policies that had only an indirect effect on the balance-of-payments orin setting timetables for the removal of trade restrictions;
• the way in which the adequacy of monetary reserves was measured when assessing a developing
country Member’s need to maintain trade restrictions for balance-of-payments purposes;
• the limited time accorded to developing countries to phase-out their restrictions;  and
• the inadequate weight given to the special circumstances of developing countries, particularly
their greater need for reserves to implement their programmes of economic development,including the financing of infrastructure with foreign capital, and the impact on their domestic
industry of removing trade restrictions within a short time frame. 
11. Attention needed also to be paid to two other factors: lifting the overseas market access
barriers facing developing countries with balance-of-payments difficulties, since these limited their
ability to expand exports and increased the proportion of the adjustment burden that had to be borne
by import contraction;  and instability in financial markets which these countries faced.  The increase
in international capital flows and the integration of  trade, investment and financial markets meant that
more variables had to be taken into account by these countries in assessing the adequacy of their
reserves.  All of this argued in favour of the Committee on Balance-of-Payments Restrictions and
dispute panels taking a more holistic view of the foreign exchange needs of developing countries that
were related to their economic development.  Conventional criteria for measuring the legitimacy of
measures to safeguard the balance-of-payments of developing countries under Article XVIII:B,including the basis for assessing the adequacy of monetary reserves, were no longer appropriate.
12. Another view was that the provisions of Article XVIII:B operate effectively.  The WTO relied
heavily on the expertise and advice of the IMF.  IMF input to the Committee on Balance-of-Payments
Restrictions had evolved over time and increasin gly included a broad range of balance-of-payments
criteria, not only trade developments but also capital account developments and domestic policies thathad an impact on the balance-of-payments.   Nonetheless, Article XV clearly set out a division of
labour between the IMF and the BOPs Committee, and this needed to be scrupulously respected.
Also, it might be useful in the context of the current exercise to clarify the criteria to be used in the
assessment of the balance-of-payments situation of consulting countries.
13. The Chairperson noted that there is no consensus of views.  One view is that WTO Members
need to ensure that Article XVIII:B subserves the original objective of facilitating the progressive
development of the economies in developing countries and allows them to implement programmes
and policies of economic development designed to raise the general standard of living of their people.WT/BOP/R/66
Page 4
Another view is that the provisions of Article XVIII:B operate effectively and there is no need for
review.
14. The Chairperson noted also that, notwithstanding the fact that it has not been possible to reach
a consensus on tiret 3 in the Committee on Balance-of-Payments Restrictions, consultations suggest
that further consideration could usefully be given to responding to the concerns raised under tiret 3along the following lines:
• As agreed in Doha, the Committee recalls that Article XVIII of GATT 1994 is a special and
differential treatment provision for developing countries and that recourse to Article XVIII:B
should be less onerous than to Article XII, noting that the criteria under Article XVIII:9 and
Article XII:2 differ.
• The analytical input provided to the Committee on Balance-of-Payments Restrictions by the IMF
under the mandate contained in GATT Article XV and GATS Article XII is of great value to the
Committee’s deliberations.  Matters of a prescriptive nature are the responsibility of theCommittee.
• The Committee on Balance-of-Payments Restrictions shall draw up its conclusions under GATT
Article XII, GATT Article XVIII:B and GATS Article XII on a case-by-case basis, taking fullaccount of the merits and development needs in each case. Relevant factors for assessing the
adequacy of reserves include a country’s monetary and exchange arrangements, and the size,nature and variability of its balance-of-payments and external position.  Financial risks associated
with a country’s external debt position and the volatility of its capital flows should receive
particular attention, especially for economies with significant but not fully certain access to
international capital markets.
• The Committee on Balance-of-Payments Restrictions shall pay special attention to the factors
referred to in the Proviso  and the Ad Note  to Article XVIII:11 when drawing up its conclusions.
Attention shall be paid  to the need of develo ping countries for reserves to implement their
economic development programs, (including the financing of infrastructure with foreign capital).
Attention shall also be paid to the time accorded to developing-country Members to phase-out
their restrictions.
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