Note:  This report is subject to a press embargo until 9 November 2001, 8.00 GMT.RESTRICTEDWORLD TRADE
ORGANIZATIONWT/MIN(01)/2
22 October 2001
(01-5088)
MINISTERIAL CONFERENCE
Fourth SessionDoha, 9 -13 November 2001
OVERVIEW OF DEVELOPMENTS
IN THE INTERNATIONAL
TRADING ENVIRONMENT
Annual Report by the Director-General
This Annual Report for the period from October 2000 to September 2001 is submitted to the Trade
Policy Review Body (TPRB) in accordance with Section G of the Decision on the Trade PolicyReview Mechanism (TPRM), Annex 3 of the Marrakesh Agreement Establishing the WTO, which
states:
An annual overview of developments in th e international trading environment which
are having an impact on the multilateral tr ading system shall also be undertaken by
the TPRB.  The overview is to be assisted by an annual report by the Director-Generalsetting out major activities of the WTO and highlighting significant policy issues
affecting the trading system.WT/MIN(01)/2
Page iii
TABLE OF CONTENTS
Page
INTRODUCTION vii
I. WORLD TRADE DEVELOPMENTS 1
1. Overview 1
2. Trade growth in 2000 2
3. Trade of developing countries 6
4. Trade developments in major regional trade agreements (RTAs) 8
5. Developments in the first half of 2001 and outlook for the year as a whole 9
II. WTO ACTIVITIES 13
A. A CTIVITIES RELATED TO THE MULTILATERAL AGREEMENTS 13
1. Full schedule of regular meetings in the WTO 13
2. Action Plan for Least-Developed Countries 16
3. Trade-related capacity-building 19
4. Accessions 21
5. Outreach 22
6. Dispute settlement 24B. T
RADE POLICY TRENDS IN WTO M EMBERS 26
1. Overview 26
2. Market access for goods 28
3. Market access conditions for services 37
4. Intellectual property protection 39
5. Regional trade agreements 40
III. DEVELOPING COUNTRIES' PARTICIPATION IN WORLD TRADE AND IN WTO
ACTIVITIES 45
A. I NTRODUCTION 45
B. D EVELOPING COUNTRIES ' PARTICIPATION IN WORLD TRADE IN THE 1990 S 46
C. D EVELOPING COUNTRIES ' PARTICIPATION IN WTO ACTIVITIES 50
1. On-going negotiations in agriculture and services 51
2. Implementation 53
3. Dispute settlement 54
4. Trade-related capacity-building 54
D. C ONCLUSION 56WT/MIN(01)/2
Page iv
Page
IV. OPPORTUNITIES AND CHALLENGES OF WTO ACCESSION 57
1. Overview 57
2. Opportunities and challenges of WTO accession for acceding governments 60
3. Opportunities and challenges of accession for existing WTO Members 68
4. Conclusions 69
V. CONTROVERSIES ON HEALTH AND THE MULTILATERAL TRADING SYSTEM 71
A. O VERVIEW 71
B. A CCESS TO ESSENTIAL DRUGS IN LOW -INCOME COUNTRIES AND THE TRIPS
AGREEMENT 72
1. Public health in development 72
2. Pricing of essential drugs in developing countries 73
3. WTO action on access to essential drugs 78
4. Conclusions 78
C. H EALTH AND EDUCATION SERVICES UNDER GATS 79
1. Overview 79
2. Nature of the GATS Agreement 80
3. Commitments on health or education services 81
4. Conclusions 83
VI. REGIONAL TRADE ARRANGEMENTS AND THE WTO 85
1. Introduction 85
2. The regionalization of the world economy 86
3. The political economy of regional integration 87
4. Assessing the new regionalism 88
5. Conclusions 91
APPENDIX TABLES 93WT/MIN(01)/2
Page v
CHARTS
Page
I. WORLD TRADE DEVELOPMENTS
I.1 Growth in the volume of world merchandise trade and GDP, 1990-2000 1
I.2 Merchandise trade and GDP growth by region in 2000 3
I.3 Real GDP and trade growth of OECD countries, 1996-2001 10
II. WTO ACTIVITIESII.1 Initiations of anti-dumping and countervailing investigations, 1995-2000 33
II.2 Producer Subsidy Equivalents (PSE) for Canada, the United States, the European Union
and Japan, 1986-2000 35
II.3 Geographical distribution of RTAs, both in force and under negotiation, 2001 41
III. DEVELOPING COUNTRIES' PARTICIPATION IN WORLD TRADE AND IN WTO
ACTIVITIES
III.1 Composition of developing countries' merchandise exports, 1990-2000 49
III.2 Share of developing countries' commer cial services exports in world exports of
commercial services, 1990-2000 50
IV. OPPORTUNITIES AND CHALLENGES OF WTO ACCESSIONIV.1 Number of applications and accessions under Article XII, 1986-2000 57
IV.2 Share of WTO member and non-member countries in world trade, GNP and
population in 1999 58
TABLES
I. WORLD TRADE DEVELOPMENTS
I.1 World exports of merchandise and commercial services, 1990-2001 3
I.2 Growth in the value of world merchandise trade by region, 1900-2000 4I.3 Growth in the value of world trade in commercial services by region, 1990-2000 6
I.4 Trade and output growth of developing countries, 1990-2000 6
I.5 Merchandise exports of least-developed countries by selected country groups, 1990-2000 8
II. WTO ACTIVITIESII.1 Scope of bindings, average and bound tariff rates on industrial products for
selected WTO Members 29
II.2 TBT notifications of technical regulations and standards, 1995-2000 37II.3 Sectoral coverage of Schedules 38
III. DEVELOPING COUNTRIES' PARTICIPATION IN WORLD TRADE AND IN WTO
ACTIVITIES
III.1 Developing countries' share of exports and imports of goods and services in GDP
by selected country groups and regions, 1990-1999 45
III.2 Share of selected country groups and regions in world merchandise exports, 1990-2000 46III.3 Growth of merchandise exports by selected country groups and regions, 1990-2000 47III.4 Share of selected country groups and regions in world exports of
manufactures, 1990-2000 48WT/MIN(01)/2
Page vi
Page
IV. OPPORTUNITIES AND CHALLENGES OF WTO ACCESSION
IV.1 Average tariff bindings of newly acceded developing and transition economies 62
IV.2 Number of anti-dumping initiations, by affected countries, 1995-2000 66
V. CONTROVERSIES ON HEALTH AND THE MULTILATERAL TRADING SYSTEM
V.1 Tariff treatment of pharmaceutical products, in selected WTO Members 74
APPENDIX TABLES
II. WTO ACTIVITIES
AII.1 Respondents in dispute settlement pr oceedings initiated in the WTO, 1995-2001 95
AII.2 Bound tariffs on industrial products:  scope of bindings and simple averages 97
AII.3 Bound tariffs on industrial products:  simple averages by stage of processing and
by category 98
AII.4 Initiations of anti-dumping investigations by reporting WTO Member
and affected exporter, 2000 101
AII.5 Initiations of countervailing investigations by reporting WTO Member
and affected exporter, 2000 102WT/MIN(01)/2
Page vii
INTRODUCTION
1. The World Trade Organization
provides an agreed set of rules for the orderly
conduct of trade between its Members.  These
rules serve well.  The recent financial crisis
that originated in South-East Asia is a stark,telling example.  Sixty years ago a financial
crisis led inexorably to a great depression;
there were many causes for this, not the least
that in a knee-jerk reaction of economic
nationalism countries moved to close their
markets to protect domestic producers from
"cheap" imports.  Trade became part of theproblem.  In mid-1997 the difficulties of a
South-East Asian bank sparked a severe
regional downturn in  output, and world
markets trembled as confidence in the
financial order was drawn into question.  Thegood sense of governments and WTO rules
kept markets open;  excess production in the
crisis economies, where hard decisions were
taken, found a ready market in healthy
economies.  Trade became part of the solutionand was integral to a return of confidence and
to recovery.  Seldom have the gains from trade
been so evident.
2. Trade enhances consumer choice,
raises national incomes, and gives signals foran appropriate allocation of resources, thus
promoting employment, development, and
growth.  The multilateral trading system
embodied in the WTO safeguards these gains.
Chapter I  of this Report shows clearly the turn
to a global economic slowdown.  Trade has
slowed and confidence is weak.  A
continuation of the process of reform and
liberalization of trade policies, particularly by
initiating a broad agenda of negotiations at
the Fourth Ministerial Conference, would do
much to build confidence and to ensure thatthe system plays its full part in promoting
recovery and growth.
3. The raison d'être of the WTO is
to allow its Members to enhance and
efficiently reap the gains from trade.  It fulfilsits role by Members' adherence to the
fundamental principles, grounded in economic
sense, of non-discrimination, stability and
predictability, and transparency.  These
building blocks of the WTO serve to reducecosts and to promote certainty, thus
enormously facilitating trade, allowing a freer
flow of goods and services.  Chapter II  reports
on the recent activities of Members in their
ongoing work to maintain and strengthen the
WTO.  Part A of the Chapter reports inparticular on the continuing mandated
negotiations on agriculture and services,
which have now successfully entered their
second phase;  on issues and concerns related
to the implementation of WTO Agreements, an
area of considerable weight to the
Membership;  on the preparations for theFourth Ministerial Conference, for which the
political momentum on the adoption of a
broader negotiating agenda has been building
throughout the year;  and on other matters of
vital concern to the system, includingaccessions to the WTO, trade-related capacity
building, technical assistance, and the dispute
settlement mechanism, which ensures that
trade conflicts are settled in accordance with
the rule of law, not power, and on a timelybasis.
4. Part B of Chapter II provides
information on trade policy trends in WTO
Members.  Importantly, it notes that fears that
the failure of the Third Ministerial Conferencein Seattle to agree on an agenda for a new
round of multilateral trade negotiations could
lead to a resurgence of protectionism have
not, by and large, materialized;  the trend
towards more liberal trade policies has beenmaintained.  Nevertheless, significant barriers
to trade remain;  there continues to be ample
scope for a lowering of tariff protection,
subsidies are still an issue – especially in
agriculture – and the elimination of
restrictions in textiles and clothing has been
modest.  The rising trend in the use of tradedefence instruments, particularly anti-
dumping, slowed in 2000 but the number of
measures in force is still considerably higher
than in 1997 and more Members are using
them.  The section also notes that there hasbeen an acceleration in the pace of
autonomous liberalization in services, a sector
with an important bearing on economic
performance and development;  that, in view
of the WTO Agreement on Trade-RelatedAspects of Intellectual Property RightsWT/MIN(01)/2
Page viii
(TRIPS), many developing and transition
economies have taken steps to adopt new
intellectual property legislation, but that a
number of Members face difficulties on
implementation;  and that the trend towards
regional trade agreements continues apace.
5. Chapters III to VI deal with selected
topics.  Chapter III , on developing countries'
participation in world trade and WTO
activities, notes that the WTO has got a key
role to play in promoting development
prospects.  But further action is needed to
enhance the benefits developing countries canderive from the WTO.  This will certainly
require tackling persistent trade distortions,
including the tariff peaks and escalation, in
both developed and developing countries, that
affect a number of the products of main exportinterest to developing countries.  It is also
important that emphasis continues to be
placed on building capacity in developing
countries and on supporting reform to
mainstream trade policies into their overalldevelopment objectives.
6. Accessions to the WTO is the subject
of Chapter IV .  The Fourth Ministerial
Conference will complete the accession
procedures for China and Chinese Taipei, and28 other governments are in the process of
accession, a vivid reminder of the value
countries attach to a rules-based multilateral
trading system.  Each accession to the WTO
has a "win-win" quality for the system.  Theacceding Government operates a more
predictable and transparent trade regime,
opens its markets to its trading partners, and
often locks in reforms aimed at fostering
growth and development.  The new Member
gains similar rights and terms of access, and
commitments are enforced – on both sides – bydispute settlement.  Domestic reform and
integration into the world economy thus go
hand-in-hand to promote the growth prospects
of the acceding Government and of the
existing Members.
7. Two issues singled out by critics of the
WTO are considered in Chapter V :  access to
essential drugs in low-income countries and
the TRIPS Agreement;  and the potential
impact of the General Agreement on Tradein Services (GATS) on the quality and
availability of health and education services.
On the first issue, of prime importance to the
health of people and to achieving sustained
development, the Chapter is clear that the
TRIPS Agreement provides – and Membershave used – flexibility that can mitigate the
exclusive rights of patent holders.  The precise
nature and extent of the flexibility provisions
of the Agreement are under discussion and
may lead to action by Members to ensure that
the Agreement is implemented in a way that
contributes to access to drugs, especially forthe poorest.  On the second issue, critics
charge that GATS constrains the ability of
governments to protect public health and
education services and/or to apply necessary
quality standards.  It is also said that theongoing services negotiations have got free
trade in health and education services as their
objective.  This objective has not been
endorsed by Members.  Further, under GATS,
governments have complete discretion to makecommitments in covered services, including
health and education.  In fact, some
developing countries have taken such
commitments, in the hope of attracting
investment into these sectors and with a viewto improving the quality and availability of
these vital services.  The Chapter is clear that
negotiations will not affect Members' rights to
pursue the regulatory objectives they deem
appropriate within their jurisdiction.
8. Non-discrimination is the cornerstone
of the WTO.  It is a principle embodied in the
most-favoured-nation (MFN) provisions of the
GATT, GATS, the TRIPS Agreement, and is
fundamental to all WTO Agreements.  At the
same time, the WTO allows Members to
conclude customs unions and free-trade areas,which by definition establish an element of
preference in the trade between parties to the
agreement vis-à-vis the rest of the world.  Such
regional trade agreements (RTAs) have
become the most important exception to theMFN principle.  The Secretariat has identified
some 170 RTAs and estimates that their
number could grow to 250 by 2005;  about
43% of world trade is intra-RTA trade, and
this could rise to over 50% by 2005.WT/MIN(01)/2
Page ix
Chapter VI  examines some of the issues that
arise for the WTO as a result of RTAs.
9. The Chapter notes that the
proliferation of RTAs poses systemic risk.
This lies less in the potential for trade
diversion in each RTA than in the collectiveimpact of a large number of RTAs, each with
its own mini-trade regime, on the smooth
functioning of the rules-based multilateral
trading system.  This risk is smaller, and RTAs
and the WTO are more likely to be mutually
supportive, when the WTO is functioning welland is responding to the needs of
the Membership.  Options for the WTO to
respond effectively include continued
multilateral trade liberalization and a
strengthening of relevant WTO rules and
procedures.  The Chapter warns that, giventhe recent and prospective growth in the
number of RTAs, time may be short.  This adds
urgency to the importance of adopting a broad
agenda of negotiations at the Fourth
Ministerial Conference.WT/MIN(01)/2
Page 1
I. WORLD TRADE DEVELOPMENTS
1. Overview
1. The year 2000 was outstanding for global output and trade growth.  The expansion of
merchandise output and trade by 4% and 12%, respectively, was the strongest in more than a decade
(Chart I.1).  As trade growth continued to exceed ou tput growth, the ratio of world trade in goods and
services to world GDP rose to 29%.1  Since 1990 this ratio has increased 10 percentage points, more
than in the two preceeding decades combined.  Manufacturing production rose 6% in 2000, but the
increase in agricultural production was just 1% .  Mining output was up 3.5% boosted by a 4.5%
increase in oil and gas output.  As in preceding years, exports of manufactures increased in real terms
much faster than exports of agricultural or mining products.  And once again, the excess of trade
growth (14%) over output growth (6%) in manufactu res was far higher than in the other two sectors.2
02468101214
1990 91 92 93 94 95 96 97 98 99 2000Annual percentage changeChart I.1
Growth in the volume of world me rchandise trade and GDP, 1990-2000
Source : WTO Secretariat calculations.World GDP
Merchandise ex ports
Average GDP growth
(2.3% )Average export growth
(7%)
2. The contrast between the figures for 2000 and the available figures for the first half of 2001
could hardly be greater.  By the last quarter of 2000, it was evident that a marked deceleration in
output and trade growth was likely in 2001.  But the extent to which the slowdown in production,
investment and trade – associated in particular with developments in the information technology
sector – would  exceed earlier predictions became clear only as the first half of 2001 unfolded.  Thevalue of world merchandise trade in the first half of 2001 is now tentatively estimated to have been
just 2% above the corresponding period last year.  And worse, in the second quarter of 2001, the level
                                                     
1 Measures at constant 1987 prices and exchange rates.
2 A further indicator of the strength of  global integration last year is the estimated 18% increase in the
U.S. dollar value of inflows of foreign direct investment (FDI).  Although the most dynamic part of FDI flowswas again among the developed countries, both developing and transition economies reported record FDIinflows.  However, total private capital flows (net) to the developing countries and the transition economieswere close to zero as net FDI inflows were fully offset by other private capital outflows (International Monetary
Fund (IMF), World Economic Outlook , October 2001).WT/MIN(01)/2
Page 2
of world trade was below that of the corresponding quarter in 2000 – the first year-over-year decline
in world trade (on a quarterly basis) since 1998, during the Asian financial crisis.
All regions reported faster economic growth in 2000
3. Economic growth accelerated in all major regions in 2000. North America and developing
Asia, which had each recorded GDP growth above the global average in 1999, recorded only
moderate accelerations.  In contrast, economic activity picked up strongly in South America andRussia, after stagnating the previous year.  Africa's output growth is estimated to have strengthened in
2000, but – at 3% – remained well below the growth recorded in other developing regions.  While
Western Europe's economic growth increased to 3.4%, its strongest expansion in the last decade,
Japan’s recovery remained moderate and very fragile.
4. The forces behind the improved economic activity differed among the regions.  High growth
in the information technology sector was particularly beneficial for North America and Asia, while
the rise in world energy demand and the recovery of oil prices boosted the economies of the oilexporting countries.  In both Russia and Brazil a sharply lower real effective exchange rate and the
fading of contractionary forces linked to financial crises helped stimulate a strong recovery in
production.
In 2000 growth in trade volumes more than doubled
5. The stronger output growth in all regions stimulated – and in turn was stimulated by – the
12% increase in merchandise trade volumes  in 2000, nearly matching the best growth rates observed
over the last five decades.  In contrast to the two preceeding years, when world trade expansion
depended to a large extent on demand in North America, the pattern of regional import demand was
more evenly balanced in 2000, with all regions except Western Europe and Africa recording
double-digit import growth (Chart I.2).
6. Asia and the transition economies recorded both the highest export growth among the major
regions and the largest increases in imports, highlighting once again that dynamic exporters are
dynamic importers.  A noteworthy feature in Asia is Japan's strong merchandise import growth over
the last two years at a time when its economy was nearly stagnating, a development often linked to
decisions by Japanese manufacturing firms to relocate part of their production to other Asian
economies.  In Western Europe, exports and imports grew by nearly 10% – more than twice the rate
in the preceding year but less than  the growth of world trade.  The growth of imports into North
America again exceeded that of exports from North America, for the fourth consecutive year.
7. Data for Latin America (including Mexico) indicate a strong recovery of imports in 2000,
following the contraction in 1999.  While the re gion’s export growth accelerated to 9.5%, the
expansion was less strong than the world average for the first time since 1995.  It should be kept in
mind that regional totals for Latin America conceal the fact that in Mexico, the region's largest trader,trade growth was three to four times faster than in the rest of the region.
2. Trade growth in 2000
8. The value  of world merchandise exports was up 12.5% in 2000, triple that of 1999,
to US$6.2 trillion, due to the strong rise in export volumes and a small increase in export
prices measured in U.S. dollars (Table I.1).  World exports of commercial services rose by 6.0%in 2000 – close to the average for the past decade – reaching  US$1.4 trillion.  The faster growth of
merchandise trade relative to trade in commercial services continued a trend that has been evident
since the mid-1990s, driven in  part by the 60% increase in oil prices since 1995.WT/MIN(01)/2
Page 3
0510152025
Transition
EconomiesAsia of which
developing
AsiaNorth
America  Latin   
AmericaMiddle East Western
EuropeAfricaPer centChart I.2
Merchandise trade and GDP growth by region in 2000
Source : WTO Secretariat calculations.GDP Exports Imports
Table I.1
World exports of merchandise and commercial services, 1990-2001
(US$ billion and percentage)
Value Annual percentage change
2000 1990-2000 1999 20002001
First half
Merchandise 6,185 6.0 4.0 12.5 1.0
Commercial services 1,435 6.0 2.0 6.0 ..
.. Not available.
Source : WTO Secretariat.
9. The estimated small increase in U.S. dollar prices of merchandise exports last year arrested
the downward trend evident since 1995.  The overall figure, however, masks highly divergent  price
trends across products, countries and regions – trends that contributed to the large variations in trade
growth of countries and regions in 2000 (Table I.2).  Crude oil prices were up to US$28 per barrel,their highest level since 1985.  Both agricultural prices and those of internationally traded
manufactured goods continued the declines that began in the second half of the 1990s, to their lowest
level in ten years.  Factors behind the weakness in prices for manufactured goods include low
inflation rates, steady declines in the prices of electronic products throughout the 1990s (as their share
in world trade of manufactured goods was rising), and the strength of the U.S. dollar – in particularvis-à-vis European currencies, which led to a significant fall in the prices of European exports
expressed in U.S. dollars.
3
                                                     
3 The prices of manufactured goods excluding office and telecommunication products are estimated to
have stagnated in 2000.WT/MIN(01)/2
Page 4
Table I.2
Growth in the value of world merchandise trade by region, 1990-2000
(US$ billion and per cent)
Exports Imports
Value Annual percentage change Value Annual percentage change
20001990-
2000 1998 1999 2000 20001990-
2000 1998 1999 2000
World 6,186 6.0 -1.5 4.0 12.5 6,490 6.0 -1.0 4.0 13.0
North America 1,058 7.3 -0.7 4.9 12.5 1,504 8.9 4.6 11.2 17.4
Latin America 359 9.4 -1.3 6.6 20.1 388 11.9 5.0 -3.1 15.7
Mexico 166 15.1 6.4 16.1 22.0 183 15.4 14.0 13.5 22.9
Other Latin America 192 6.1 -6.1 -0.3 18.5 206 9.0 0.1 -13.3 10.0
Western Europe 2,441 4.1 3.6 0.3 3.0 2,567 4.2 5.7 1.3 5.3
European Union (15) 2,251 4.1 4.0 0.1 2.5 2,362 4.2 6.0 1.9 4.9
Excl. intra-EU trade 859 5.0 0.1 -1.5 7.1 966 5.3 5.2 3.5 13.2
Transition economies 271 7.4 -4.0 -0.2 26.1 242 7.8 -1.3 -12.5 13.0
Central/Eastern Europe 116 7.7 9.3 1.1 14.1 146 10.4 10.8 -1.1 12.5
Russian Federation 105 .. -15.2 1.1 39.0 46 .. -21.2 -31.7 11.6
Africa 145 3.4 -15.9 9.6 26.6 137 4.0 0.6 -2.7 6.7
South Africa 30 3.2 -9.0 1.3 12.3 30 5.0 -9.4 -8.7 11.2
Major fuels exporters (8)a70 3.9 -31.0 27.7 61.1 37 4.1 -0.9 -2.2 21.4
Other Africa 44 3.2 -4.3 0.4 1.1 71 3.1 6.3 -0.5 -1.3
Middle East 263 7.0 -21.2 28.1 46.3 171 5.6 -0.6 1.3 13.5
Asia 1649 8.4 -6.1 7.5 18.5 1,481 7.6 -17.8 10.3 23.5
Japan 479 5.2 -7.8 8.1 14.3 380 4.9 -17.2 11.0 21.9
China 249 14.9 0.4 6.3 27.7 225 15.5 -1.3 18.2 35.8
Asia (5)b441 11.3 -3.5 9.9 18.7 372 8.3 -30.9 15.1 27.5
.. Not available.
a Algeria, Angola, Republic of Congo, Equatorial Guinea, Gabon, Libyan Arab Yamahiriya, Nigeria and Sudan.
b Indonesia, the Republic of Korea, Malaysia, Philippines and Thailand.
Source : WTO Secretariat.
10. The product categories in world merchandise trade with the highest growth rates in 2000 were
fuels (up 50% to US$630 billion) and office and telecommunications equipment (up 20% toUS$940 billion). While the latter category recorded the highest growth among all major product
groups throughout the 1990s, fuel's 10% share in world trade in 2000 was little changed from its 1990
level.  World exports of agricultural products again recorded the weakest growth of all product
categories in 2000 (up 2% to US$560 billion);  consequently its share in world merchandise trade fell
to a record low of 9%.
11. Regional trade value developments in 2000 were strongly influenced by higher oil prices.  All
regions with a large share of fuels in their export basket – the Middle East, Africa, and the transitioneconomies – reported  export expansions in excess of one quarter, or more than twice the global
average export growth.  For at least 17 oil-exporting countries, merchandise exports were up by more
than one-half in 2000.
4  Export growth significantly exceeded import growth in both the Middle East,
where exports are estimated to have risen by nearly 50%, and in the transition economies, where –
largely due to the Russian Federation’s high export growth – exports expanded by about 26%.
                                                     
4 Saudi Arabia, Venezuela, Islamic Republic of Iran, Nigeria, Algeria, Kuwait, Iraq, Libyan Arab
Jamahiriya, Oman, Kazakhstan, Angola, Trinidad and Tobago, Yemen, Turkmenistan, Democratic Republic of
the Congo, Sudan and Equatorial Guinea.WT/MIN(01)/2
Page 5
12. Africa's 27% increase in merchandise exports in 2000 was four times the growth of its
imports, and more than double the growth rate for world exports.  However, that aggregate figure for
the continent as a whole hides exceptionally large differences among individual African countries .
While the major fuel exporters in Africa recorded sharp export and import growth, some 20 African
countries reported absolute declines in the level of exports and imports. Western Europe's export and
import growth in 2000 was the lowest of all regions, principally due to the depreciation of the euroagainst the U.S. dollar.  Expressed in euros, exports from the EU were up 17%, compared with a 2.5%
gain in U.S. dollar terms.  The marked difference between the stagnation of EU intra-trade and the 7%
rise of exports to all other countries is attributable largely to different price developments.
13. For the fifth consecutive year the expansion of North America's trade – exports and imports –
exceeded that of world trade.  Imports were particularly buoyant, rising faster than exports and
resulting in an excess of imports over exports in the order of US$450 billi on, equivalent to 7% of
world merchandise trade.  North America's trade deficit is entirely due to trade developments of theUnited States, with Canada recording a trade surplus in 2000.
14. Asia's import growth of nearly one quarter exceeded that of its exports, which in turn still
grew faster than world trade.  Consequently, Asia's share in world trade rose again and recovered (for
exports) to its previous peak level of 26.5% in 1996.  All major traders recorded double-digit export
and import growth and intra-trade of the region rose by one quarter.  Another noteworthydevelopment was the outstanding expansion of China's exports and imports and the recovery of
imports of the Asian countries most affected by financial  turbulences in 1997/98.  The latter's imports
rose sharply in 2000 and nearly matched the previous peak level in 1996.  As these countries' exports
have risen by one third between 1996 and 2000, thei r trade deficit of US$45 billion in 1996 turned
into a surplus of US$70 billion by 2000.
15. Commercial services trade developments by region and major product categories differed
markedly less than those for merchandise trade in 2000.  However, there were a number of similarities
with merchandise trade in regional developments (Table I.3).  Western Europe, which alone accounts
for almost 45% of world services trade, recorded a near stagnation of its exports and imports
measured in U.S. dollars, compared with a 14% increase in euros.  North America, Latin America,and the Middle East recorded strong expansions of their commercial services trade, with both exports
and imports up by more than 10%.  The fastest growth of imports of commercial services occurred in
the transition economies, where exports grew faster than the world average.
16. Among the major categories of commercial services, transportation showed the strongest
growth in 2000.  This is unusual and most likely reflects both the strong expansion in merchandisetrade and increased transportation costs due to the higher oil prices. The 5% increase in travel
expenditure in 2000 was below that sector’s average growth over the past decade.  Trade in “other
commercial services” (financial services, communicat ions, information services, royalties and licence
fees) grew at about the same 6% rate as total services trade, in contrast to most years when this sector
has been by far the most dynamic category of traded services.WT/MIN(01)/2
Page 6
Table I.3
Growth in the value of world trade in commercial services by region, 1990-2000
(US$ billion and per cent)
Exports Imports
Value Annual percentage change Value Annual percentage change
2000 1990-2000 1998 1999 2000 2000 1990-2000 1998 1999 2000
World 1,435 6 1 2 6 1,435 6 2 2 6
North America 312 8 2 5 10 241 7 8 4 13
United States 274 8 2 4 10 199 7 10 4 14
Latin America 61 7 8 0 12 72 8 4 -5 13
Mexico 14 7 6 -3 17 16 5 7 10 17
Other Latin America 47 8 8 0 11 55 8 4 -9 11
Western Europe 646 5 7 0 0 615 5 9 1 1
EU (15) 577 5 7 1 0 571 5 9 1 1
Transition economies 49 .. 1 -14 8 50 .. -2 -8 15
Africa 31 5 -1 10 1 39 4 0 -3 9
M i d d l e  E a s t 3 3 8 4 81 6 5 6 4 - 8 21 0
Asia 303 9 -13 4 12 365 7 -11 6 8
Japan 68 5 -9 -2 13 116 3 -9 3 1
C h i n a 3 0 1 8 - 3 1 01 5 3 6 2 4 - 5 1 71 6
Hong Kong, China 42 9 -6 2 13 26 9 1 8 3
Asia (5)a65 10 -22 0 5 85 11 -25 4 16
.. Not available.
a Indonesia, the Republic of Korea, Malaysia, Philippines and Thailand.
Source : WTO Secretariat.
3. Trade of developing countries
17. The developing countries made a major contribution to the vigorous expansion of world
output and trade in 2000 (Table I.4).  GDP growth in excess of 5% for the aggregate of developing
countries was the strongest in a decade. The estimated 15% increase in the volume of merchandiseexports from developing countries was three times faster than their GDP growth.  In U.S. dollar terms,
merchandise exports from developing countries rose 24%, twice the rate for world merchandise
exports, while imports were up 21%.
Table I.4
Trade and output growth of developing countries, 1990-2000(Annual percentage change)
Developing countries World
1999 2000 1990-2000 1990-2000
GDP 3.1 5.2 4.9 2.8
Merchandise export volume 7.0 15.0 9.0 7.0
Merchandise import volume 4.5 15.5 8.0 7.0
Merchandise export value 9.5 24.0 9.0 6.0
Merchandise import value 4.0 21.0 9.0 6.0
Source : WTO Secretariat.
18. As a result, the share of the developing countries in world trade and output  continued to
increase, as it had throughout the 1990s.  (Chapter III deals in more detail with trade developments in
developing countries.)  Indeed, the share of developing countries in world merchandise exports has
risen steadily since 1986 – with the exception of 19 98 during the Asian financial crisis – reaching a
50-year high of 30% last year.  Only a small part of the increase in the share of developing countriesWT/MIN(01)/2
Page 7
in world trade over the past decade is the result of increases in oil prices.  It is due rather to their
ability to expand their role in world exports of manufactured goods, the most dynamic part of world
trade.
19. Developing countries accounted for 27% of world exports of manufactures in 2000, a
remarkable increase from their 17% share in 1990.  The largest part of this increased share is
accounted for by China, Mexico, and East Asian exporters of office and telecommunicationsequipment;  such equipment also accounts for a very large share in total developing countries' exports
of manufactures.  For the decade as a whole, a number of smaller exporters – particularly in Asia –
also recorded export growth rates well above the global average.
20. The share of manufactures in the merchandise exports of developing countries rose markedly
in the 1990s and exceeded two thirds in 2000.  Exports of office and telecommunications equipment
alone accounted for a larger share of their exports than either agricultural products or mining
products.  As regards the latter two product categories, the developing countries’ shares in worldexports have shown limited gains over the past decade but still exceed - at 31% and 54% respectively
– their 27% share of world exports of manufacturers.
21. Developing countries merchandise exports and imports slowed markedly in the first half
of 2001.  Preliminary data suggest that developing countries' exports rose about 2% in U.S. dollar
terms in the first six months of 2001 and that over the same period their imports were up 4%.  Tradeof developing countries in Asia was most affected.  According to preliminary data their merchandise
exports and imports stagnated in U.S. dollar terms in the first six months, with trade in the second
quarter below that in the same period in 2000.  Lower volume growth and a decline in U.S. dollar
prices contributed to this outcome.  Latin America's trade was up by about 5% (both exports and
imports) but also on a downward trend.  Imports of  oil-exporting countries showed some strength
despite a marked deceleration of their export growth.
Least-developed countries
22. The 49 least-developed countries (LDCs) – as a group – shared in the dynamic output and
trade growth of the other developing countries.  In 2000, GDP growth of LDCs is estimated to have
exceeded 5%, and the U.S. dollar value of their merchandise exports rose by 28%, to a recordUS$34 billion;  this was the second consecutive year in which the growth in LDC merchandise
exports exceeded the growth in world merchandise exports.
5
23. However, the figures for the group as a whole conceal very divergent developments at the
individual country level (Table I.5).  For trade purposes, it is useful to distinguish at least four country
groups:
– oil-exporting LDCs, such as Angola, Equatorial Guinea, Sudan and Yemen;  they
benefited from higher oil prices and increased their exports by between 60% and
120% last year.  The four mentioned countries alone accounted for more than 40%
of LDC exports in 2000.
– LDCs that export mostly manufactured goods;  their merchandise exports rose by
nearly one quarter last year.  This group, which accounted for almost one third of
LDC exports in 2000, comprises Bangladesh, Cambodia, Lao People's DemocraticRepublic, Lesotho, Madagascar, Myanmar and Nepal.  As a group, these countries
have recorded high export growth throughout the 1990s, nearly matching or
                                                     
5 As a group, the LDCs were the world's 34th largest merchandise exporters.WT/MIN(01)/2
Page 8
exceeding that of China.  In many instances, exports from affiliates of multinational
companies contributed to the outstanding trade growth.
– the largest group;  consists of those LDCs whose exports are limited to a few
primary commodities;  their export performance is often determined by the cyclical
demand in commodity markets and the vagaries of weather.  Exports of these LDCs
are not only erratic but their longer term growth remained well below that of worldtrade.  Even in last year's buoyant economic environment, most of these countries
saw their exports decline.
– those LDCs that, due to armed conflicts and civil strife, experienced a severe
contraction of their trade in the 1990s to levels below that of 20 years ago.
Countries in this group – which now accounts for less than 5% of LDC merchandise
exports – are Afghanistan, Burundi, Democratic Republic of the Congo, Rwanda,
Sierra Leone and Somalia.
Table I.5
Merchandise exports of least-developed countries by selected country groups, 1990-2000(US$ billion and per cent)
Value Annual percentage change
2000 1990-2000 1998 1999 2000
Total LDC 34 7 -6 12 28
Oil exporters (4)a15 11 -30 50 63
Exporters of manufactures(7)b11 14 20 5 23
Commodity exporters (29) 8 1 -1 -6 -3
LDC with civil strife (6)c1 -7 -12 -8 -3
Memorandum Item:
World 6,185 6.0 -1.5 4.0 12.5
a Angola, Equatorial Guinea, Sudan and Yemen.
b Bangladesh, Cambodia, Lao People's Dem. Rep., Lesotho, Madagascar, Myanmar and Nepal.c Afghanistan, Burundi, Congo Dem. Rep., Rwanda, Sierra Leone and Somalia.
Source : WTO Secretariat.
24. Given the very sharp differences in the economic and political conditions, as well as in the
trade and output structure of these 49 countries, it is clear that aggregate figures for the LDCs as a
whole are, for many purposes, not very helpful.  Th is is evident, for example, from the fact that in
2000 aggregate merchandise exports from the LDCs were at a record level, while at the same time
more than one third of the LDCs saw their exports decline.
4. Trade developments in major regional trade agreements (RTAs)
25. Merchandise trade developments, in U.S. dollar terms of the largest regional trade agreements
showed great variation in 2000.6  Their combined intra-trade is estimated to have accounted for about
36% of world merchandise exports in 2000;  this a lower share than at any time during the 1990s and
is entirely due to the declining share of EU intra- trade.  While intra-trade of the EU, the largest and
most integrated RTA, rose less rapidly than its extra-regional trade, intra-trade of NAFTA expanded
substantially faster than its exports to other regions.  However, NAFTA imports from other regions
rose, at 18%, as fast as its intra-trade.  For both MERCOSUR and ASEAN intra-trade rose
                                                     
6 The RTAs with, in U.S. dollar terms, the largest intra-trade flows in 2000 are:  the EU
(US$1,396 billion), NAFTA (US$680 billion), ASEAN (US$96 billion), MERCOSUR (US$18 billion), CEFTA
(US$14 billion) and ANDEAN (US$5 billion).WT/MIN(01)/2
Page 9
significantly faster than their extra-regional trade:  for MERCOSUR, in 2000 the share of intra-trade,
slightly above one fifth, remained below its 1998 peak;  for ASEAN, intra-trade accounted for nearly
one quarter of total trade, a record on the import, but not on export, side.  Intra-regional trade of
CEFTA and ANDEAN accounted in each case for somewhat less than 10% of their total trade and
generally grew less rapidly than their extra-regional trade in 2000, although ANDEAN's extra-
regional imports grew less than its intra-trade.
26. Information on intra-regional trade in commercial services is generally not readily available
and therefore often not taken into account in the evaluation of RTAs.  However, it is of interest and
feasible to shed some light on intra-trade in commercial services for the EU and NAFTA.  In both
cases the share of intra-trade is significantly higher  for merchandise than for services trade.  For the
EU the share of intra-trade for commercial services was 55% in 1999 or eight percentage points less
than for merchandise trade;  this share has remained was roughly unchanged from the early 1990s.
For NAFTA, the share of intra-trade in commercial services decreased in the 1990s by about fivepercentage points and in 2000 was, at less than one quarter of total services trade, about half the rate
recorded for merchandise trade.
7  Preliminary data suggest that for both the EU and NAFTA intra-
trade in services grew less than their extra-regional services trade.
5. Developments in the first half of 2001 and outlook for the year as a whole
27. Following the strong growth of world trade in 2000, a marked deceleration in 2001 was
widely anticipated, with parts of the world economy already showing signs of weakening in the fourth
quarter of 2001 (Chart I.3).  For the information technology sector, warning signs had appeared even
earlier in the year – with sharp declines in share prices on major stock exchanges – but it was only in
the first half of 2001 that the full impact on investment and production in this sector became fully
apparent.  Adjustment to higher energy prices and the effects of tighter monetary policies in theindustrial countries for most of 2000 were other major factors behind the weaker economic growth in
early 2001.  While the slowing of the U.S. economy in 2001 has, for the most part, matched
expectations, short-term growth prospects in many other parts of the world economy became more
clouded in the first six months of the year.
28. Output growth in Western Europe slowed more than expected in the first half of 2001, while
Japan's economy hovered on the edge of a recession.  East Asian economies with a large share of
information technology products in their export baskets suffered from the very sharp decline in global
demand for these products.  In contrast, China’s economy, helped by strong domestic demand,
showed few effects of the weaker economies of it s neighbours.  Latin America's output growth was
revised downwards due to the financial crisis in Argentina and the energy crisis in Brazil.  Africaseems to be the only region in which GDP growth ma y be higher in 2001 than in 2000;  however,  it
was also the region with the lowest growth in 2000 and its growth continues to be well below the
average for developing countries.
29. An important factor behind the sharper-than -expected slowdown in world economic growth is
the steep fall in expenditure on information technology products.  This sector, which played a key role
in the outstanding economic growth in many regions during the second half of the 1990s, is now
undergoing severe contractionary pressures.  World-wide sales of personal computers in the secondquarter of 2001 were below their level in the corresponding period of 2000, and are expected to
remain below last year's level for the full year 2001 – the first ever such annual decline.  In June 2001,
the value of global shipments of semi-conductors – also a major item in world trade – was down 30%
compared with its level a year earlier.
8
                                                     
7 Using the average of exports and imports.
8 Semi-conductor Industry Association, Press Release August 2, 2001.WT/MIN(01)/2
Page 10
-10-505101520
Q1
96Q1
97Q1
98Q1
99Q1
00Q1
01-10-505101520
Q1
96Q1
97Q1
98Q1
99Q1
00Q1
01-10-505101520
Q1
96Q1
97Q1
98Q1
99Q1
00Q1
01Chart I.3
Real GDP and trade growth of OECD countries, 1996-2001
Source: WTO Secretariat calculations.OECD Countries United States
European Union JapanPercentage change on a year to year basis
-10-505101520
Q1
96Q1
97Q1
98Q1
99Q1
00Q1
01
GDP Imports of goods and services Exports of goods and services
30. Preliminary figures for the first half of 2001 indi cate that the deceleration of trade growth this
year will be much sharper than previously expected.  Factors behind the downward revision include
the unexpectedly strong slowdown in demand grow th in Western Europe, the stagnation of imports
into the United States in the first half of the year, and the repercussions on trade – especially that of
East Asia – of the dramatic downturn in product ion and investment in the information technology
industry world wide.
31. With inflation in all major regions at low levels, the appreciation of the U.S. dollar vis-à-vis
the currencies of the major traders in Western Europe and in Asia led to a fall in the prices of
internationally traded goods.  Falling U.S. dollar prices and a slowdown in volume growth, in turn,
caused a sharp deceleration in the growth in the U.S. dollar value of world trade.  According to
preliminary data the value of world trade increased only 1% in the first half of 2001 after an increase
of 12.5% for 2000;  it appears that in the second quarter of 2001 the value of world trade fell to a levelbelow that of a year ago.
32. Japan and those Asian developing countries that are major traders in office and
telecommunications equipment reported double-digit percentage declines in the value of their
merchandise exports and imports in the second quarter of 2001 (on a year-over-year basis).  China's
vigorous trade expansion became less pronounced in the first half of 2001;  with imports growing atWT/MIN(01)/2
Page 11
double-digit rates and exports up by 9%, its sizeable trade surplus decreased.  The relative strength of
China's trade developments in the first six months of 2001 can be attributed to its strong domestic
demand growth, the stability of its currency vis-à-vis the U.S. dollar and a relatively small share of
office and telecommunications products in its merchandise trade.
33. Growth in the value of North America's trade decelerated further in the first quarter of 2001,
and in the second quarter both exports and imports were below their year-earlier levels.  LatinAmerica's trade in the first half, in contrast, expa nded by about 5% despite the sharply slower growth
in Mexico's trade.  Western Europe's merchandise export and import values are estimated to have
increased by only 2.5% and 1.5%, respectively, during the first half, as trade growth faltered under the
combined effect of the depreciation of the euro and other European currencies vis-à-vis  the U.S. dollar
and lower volume growth.  Stimulated by Russi a’s strong 20% import expansion, the transition
economies turned in the best trade performance among major regions during the first half of 2001.
34. On the basis of the latest available data, world merchandise trade is expected to grow in
volume terms by only 2% in 2001, instead of the 7% projected earlier in the year.  Moreover, there is
great uncertainty about trade and growth developments in the fourth quarter of 2001, particularly in
light of the tragic events of 11 September 2001, and thus even the 2% trade growth projection must be
considered as tentative.  Trade expansion in Western Europe and the transition economies is expected
to be somewhat above 2% while that of North America is likely to be below the global average.Projections for Japan foresee a contraction in exports, coupled with moderate growth in imports.WT/MIN(01)/2
Page 13
II. WTO ACTIVITIES
A. ACTIVITIES RELATED TO THE MULTILATERAL AGREEMENTS
1. Full schedule of regular meetings in the WTO
1. WTO Members are engaged on a daily basis in regular meetings of the various Councils and
Committees, established under the multilateral agreements, and directed towards monitoring and
compliance.  These notably concern the receipt and examination of regular and periodic notificationsby Members of policy instruments covered by the WTO Agreements, regional trade agreements, and
balance-of-payments measures, as well as the periodic review of the Agreements themselves.
Members are also actively engaged in monitoring trade policy regimes in the Trade Policy Review
Body, and in the resolution of disputes in the Dispute Settlement Body.
2. WTO Members also participate in the various Committees established to consider issues such
as trade and development or trade and the environment.  In addition, there are working groups to
examine the relationship between trade and investment, the interaction between trade and competitionpolicy, and transparency in government procurement;  the work programme on electronic commerce
adopted by the General Council in 1998 is also continuing in the General Council and the relevant
subsidiary bodies.
3. Chapter III also deals with many of the topics in this section but with a particular focus on
developing countries.
Mandated negotiations on agriculture and services enter second phase
4. The mandated negotiations on agriculture, which started on schedule in early 2000, moved
into their second phase subsequent to the stock-taking exercise by a Special Session of the Committee
on Agriculture in March 2001.
1  These negotiations are to continue the reform process that has
brought the policy instruments used by many WTO Members to support domestic agriculturalproducers under strengthened and more operational multilateral rules.  In addition to their effects on
domestic consumers and producers, these support policies have spillover effects on world markets and
on the export opportunities of trade partners, many of which are developing countries.
5. The stock-taking exercise conducted in March 2001 concluded with a work programme for
the second phase.  The programme called for three Special Session meetings, in September andDecember 2001 and in March 2002, plus three informal Special Session meetings, in May and
July 2001 and in February 2002 (additional meetings may be scheduled by the Chair after
consultations with Members).
2  In the second phase, work in depth on all issues and options for policy
reform set out in Members' proposals is to be conducted, with further elaboration as appropriate.  The
initial list of issues to be addressed included:  tariff quota administration;  tariffs;  amber box;  exportsubsidies;  export credits;  state trading enterprises;  export restrictions;  food security;  food safety;
and rural development.  A review of progress of the negotiations is to take place at the March 2002
meeting.
6. The mandated negotiations on services also entered their second phase following a stock-
taking exercise by a Special Session of the GATS Council in March 2001.  The negotiations are to
address further rule-making and to "achieve a progressively higher level of liberalization" (GATS
Article XIX), building on the market-access commitments already contained in the Schedules.  The
services sector – the leading sector of economic activity in many WTO Members – was brought into
                                                     
1 Work is ongoing on the negotiations to be undertaken in the TRIPS Council under Article 23:4 of the
TRIPS Agreement concerning the establishment of a multilateral notification and registration system for wines.
2 WTO document G/AG/NG/7.WT/MIN(01)/2
Page 14
the multilateral rules for the first time in the Uruguay Round, and additional substantial agreements
were reached in 1997 on telecommunications and financial services.  To clarify misconceptions about
the GATS and the new services negotiations, the WTO Secretariat issued, on 19 March 2001, a
booklet entitled GATS — Fact and fiction.3  (See also Chapter V(B).)
7. The Services Council in March 2001 adopted guidelines and procedures for the continuing
negotiations in services, with negotiating sessions in July and October 2001.  Further meetings are tobe held in December 2001 and in March 2002, at which point the Council is to review progress in the
negotiations.  To guide the negotiations, Members restated some of the fundamental principles of the
GATS;  notably, the right to regulate and to introduce new regulations on the supply of services in
pursuit of national policy objectives; their right to specify which services they wish to open to foreign
suppliers and under which conditions; and the overarching principle of flexibility for developing and
least-developed countries.  Liberalization is to be advanced through bilateral, plurilateral or
multilateral negotiations.  The main method of negotiation is the request-offer approach.Multilaterally agreed criteria are to be developed to take account of, and give credit for, autonomous
liberalization undertaken by Members since previous negotiations.
Implementation-related issues and concerns
8. All WTO Members are bound to implement the commitments contained in the multilateral
agreements that concluded the Uruguay Round and to implement, if applicable, post-Uruguay Round
commitments on basic telecommunications, financial services or information technology products.
Certain Members have, however, identified implementation issues and concerns.
4  Following the
Decision of 3 May 2000 by the General Council to establish an Implementation Review Mechanism5,
and the work programme established in June at the first Special Session6, discussions were held in the
course of the year.  The General Council took  a Decision on 15 December 2000 (WT/L/384), which
identified positive steps on outstanding implementation-related issues and concerns on which
agreement had been reached.  Further positive steps were agreed by WTO Members in July 2001,
including agreement on some proposals and on the referral of some issues to subsidiary bodies;  the
latter are to report back to the General Council.
9. One category of implementation-related issues and concerns are the end of transition periods
for implementation in certain agreements.  These transitional periods to full implementation reflected
the concept of "special and differential treatment" for developing and least-developed countries, as
well as provisions for transition economies.  Most transition periods for developing countries and
transition economies expired on 31 December 1999, but certain transition periods are still in effect
(notably, in relation to the TRIPS Agreement).
10. The agreements concerned by the end of transitional periods to full implementation in 1999
are those on intellectual property protection, the elimination of trade-related investment measures,
methods of customs valuation, and on subsidies.  Members that identified difficulties in fully meeting
their commitments for customs valuation requested a nd, in most cases, obtained extensions in the
framework of the agreement, where provision for such extensions had been made.  A significant
development in July 2001 was the resolution of the matter of the extensions requested by eight WTO
Members to the transition periods in the TRIMs Agr eement, which had been the subject of intensive
consultations in the course of 2000 and 2001.  Argentina, Colombia, Malaysia, Mexico, Pakistan,
                                                     
3 Available at:  http://www.wto.org/english/tratop_e/serv_e/gats_factfiction_e.htm [13 July 2001].
4 Implementation-related issues and concerns are generally understood to be those detailed in
paragraphs 21 and 22 of the Draft Ministerial text of 19 October 1999 (Job(99)/5868/Rev.1), prepared for theThird Ministerial Meeting in Seattle, and in subsequent interventions on the issue.
5 WTO Press Releases 177/2000 and 184/2000.
6 WT/L/384.WT/MIN(01)/2
Page 15
the Philippines and Romania were granted an additional two years (from 1 January 2000 to
31 December 2001) with a possible further two years (1 January 2002 to 31 December 2003), subject
to certain criteria such as the submission of a phase-out plan for the TRIMs;  Thailand was granted a
waiver.
11. Other implementation-related issues and concerns that have been put forward include market
access conditions for exports of textiles and clothing products in the light of the integrationprogrammes under the Agreement on Textiles and Clothing, as well as on agricultural products.
Another issue concerns the capacity of developing countries to observe – given scant administrative
resources - the requirements of the relevant agreements when establishing technical standards or
setting sanitary and phytosanitary (SPS) measures, as well as participating in the development of
international standards.  On the latter, the Director-General was mandated to initiate discussions with
standards-setting bodies.
7  Those concerned with SPS measures participated in a WTO-organized
workshop on 13 March 2001 to provide information on their respective standard-setting processes,with a focus on maximizing developing country in volvement.  A further development, in July 2001,
was the agreement to review the operation of the SPS Agreement every four years.
Discussions on the adoption of a broader negotiating agenda continue
12. WTO Members have continued to discuss the initiation of a broader agenda of negotiations
than the mandated one, which could be agreed at the Fourth WTO Ministerial Conference in Doha,
should consensus be attained.  The agenda could include tariffs on non-agricultural products, andextending the framework of the multilateral rules to new areas.  Many Members are of the view that a
broader agenda will expand the scope for mutually beneficial trade-offs, which will, in turn, have a
positive impact on the outcome of mandated negotiations (agriculture, services), and on
implementation discussions.  For other Members, the resolution of these latter concerns is a necessary
step towards consideration of a broader agenda.
13. The political momentum on a broader negotiating agenda has been building throughout the
year.  For example:
– the annual Asia-Pacific Economic Cooperation (APEC) meeting, held in November
2000, ended with statement calling for a balanced and sufficiently broad based
agenda, a statement reconfirmed in June 2001;
– the closing statement of the conference of Trade Ministers and experts representing
53 African countries held in November 2000 in Libreville reaffirmed confidence in
the WTO system and the importance of the development dimension in future
multilateral negotiations;
– Andean Trade Ministers (Bolivia, Colombia, Ecuador, Peru and Venezuela) issued a
Declaration on 9 February 2001 in Lima supporting efforts to initiate a broader
agenda of negotiations at the Fourth WTO Ministerial Conference;
– the closing statement of the G-8 meeting in Genoa, issued on 22 July 2001, noted the
agreement reached by the leaders "to support the launch of an ambitious new Round
of global trade negotiations with a balanced agenda";
– a preparatory meeting in Zanzibar in late July 2001, representatives of the LDCs
stated in their Declaration they were not opposed to the adoption of a broader agendaof negotiations provided their concerns were fully taken into account, facilitating
their integration into the multilateral trading system and avoiding, as such, their
marginalization;
                                                     
7 WT/GC/42 and WT/GC/45.WT/MIN(01)/2
Page 16
– a preparatory meeting in Cairo at the end of July 2001, representatives of the regional
integration agreements, COMESA and S ADC, endorsed the position taken in the
Zanzibar Declaration regarding the importa nce of the development dimension in the
multilateral trading system;
– a meeting of Ministers from 18 Members, in Mexico in late August, from a broad
range of regions and viewpoints, reaffirmed support for strengthening the rules-based
multilateral trading system to the benefit of all;  and
– in Abuja in late-September 2001, African Trade Ministers adopted the Abuja
Declaration and a set of negotiating objectives, emphasizing the development
dimension in multilateral trade negotiations.
14. The initiation of a broader negotiating agenda is seen by many as beneficial to maintaining
the forward momentum of the multilateral trading sy stem in addressing significant issues affecting
trade and economic relations.  These include potential improvements in areas already covered by
existing multilateral trade rules, as well as bringing  new areas into the rules.  This forward momentum
is seen to be of key importance in maintaining the relevance of the multilateral trading system in the
changing context of the world economy.  Without such momentum, the WTO Members could turn to
alternative types of trading arrangements, notably regional trade agreements, to find solutions to
pressing difficulties.  Although the result may still be an improvement, the further fracturing of trade
relations could contribute to marginalization of lower-income countries as they are unlikely to be top
choices for partnerships.  This explains the significance of carefully examining the accelerating trend
to regional integration and its implications for the WTO system, which is the subject of Chapter IV.
15. Adoption of a broader negotiating agenda could also be of considerable benefit in sustaining
the sources of growth in the world economy, curren tly in a slow-down (Chapt er I).  Confidence of
investors and traders would be improved, and new export opportunities would be offered for all WTO
Members.  A WTO Secretariat study Market Access:  Unfinished Business , published on 27 April
2001, indicates that significant trade barriers remain, including in areas of interest to developing
countries, although world trade has been liberalized considerably as a result of the Uruguay Round.
2. Action Plan for Least-Developed Countries
16. The United Nations has classified 49 countries as least-developed countries (LDCs), based on
social and economic criteria, of which 30 are WTO Members and nine are in the process of
accession.8  The most obvious manifestation of the difficult situation of LDCs in the world trading
system is their almost continuously declining share in world merchandise exports.  This share hasfallen to some 0.5%, down from 0.7% in 1980;  by contrast, LDCs accounted for 10.5% of the world's
population.  The decline largely reflects the continued importance of primary commodities in LDC
exports, accounting for 80% or more of total merchandise exports in all but a handful of LDCs.
9
17. The situation of LDCs has complex roots.  The consensus on the forward agenda is for
mutually supportive, coherent policies, spanning domestic reform and supportive action by theinternational community.  Empirical evidence indica tes that LDCs seeking to improve their growth
                                                     
8 WTO Members are Angola, Bangladesh, Benin, Bu rkina Faso, Burundi, Central African Republic,
Chad, Democratic Republic of Congo, Djibouti, Gamb ia, Guinea-Bissau, Guinea, Haiti, Lesotho, Madagascar,
Malawi, Maldives, Mali, Mauritania, Mozambique, Myanmar, Niger, Rwanda, Senegal, Sierra Leone, SolomonIslands, Tanzania, Togo, Uganda, and Zambia.  LDCs in the process of accession to the WTO are Bhutan,Cambodia, Cape Verde, Laos, Nepal, Samoa, Sudan, Vanuatu, and Yemen.  Other LDCs are Afghanistan,Comoros, Equatorial Guinea, Eritrea, Ethiopia, Kiribati,  Liberia, Sao Tomé and Principe, Somalia, and Tuvalu.
9 WT/COMTD/W/65.  Exceptions include Bangladesh, Cambodia, Haiti, Laos, Madagascar, and
Myanmar.WT/MIN(01)/2
Page 17
prospects are well advised to, inter alia , open their trade regimes and implement appropriately
sequenced outward-oriented reforms that will permit trade diversification and expansion.10  I n
addition to the efforts to be made by countries and the communities within them, global actions are
also needed.
18. The WTO established a Plan of Action for LDCs at the First WTO Ministerial Meeting
in 1996, to remove market access barriers and support trade development through technical
assistance;  this Plan of Action has been continuously monitored and improved.  To a large extent,
market access is determined by the range of tariff and non-tariff barriers in foreign markets.
Strategies for improving market access for LDCs include reductions and eliminations of tariffs on amost-favoured-nation (MFN) basis, in which case all trading partners benefit, or on a preferential
basis and therefore targeted at LDCs specifically, notably through GSP or similar programmes.
However, LDCs' capacity to use the market access opportunities available to them – both existing and
enhanced – is also strongly affected by, and li nked to, domestic supply-side and policy constraints.
11
Addressing these constraints is the main motivation for the Integrated Framework.
19. Action by the WTO is part of a wider programme of action by international organizations.
The IMF and World Bank support Poverty Reduction Strategy Programmes (PRSP), combining debt
relief, macroeconomic stability, poverty reduction and better integration in the world economy.  In
this context, the initiative for Heavily Indebted Po or Countries (HIPC) makes available debt relief to
IDA-eligible countries.12  Most recently, the Third United Nations Conference on the Least
Developed Countries (UNLDC III) held in May 2001 concluded with a new Programme of Action.13
Market access improvements
20. In a study recently completed as part of the WTO's input into UNLDC-III, the Secretariat
provided factual information on market access conditions for products from LDCs in their 30 main
export markets.14  In these markets, the average trade weighted and unweighted applied tariff
applicable on LDC exports is 3.8% and 7.1% respectively.15  In developed-country markets, the trade
weighted average applied tariff is 2.2% and the unw eighted average is 2.5%;  in developing countries
these averages are 8.6% and 14.3%, respectively;  and, in transition economies, they are 1.3%and 3.1%, respectively.  About 75% of LDC exports, by  value, at the HS 6-digit level, is eligible for
duty-free treatment, either on an MFN basis (near ly 40%), or under GSP, GSTP or LDC specific
preference schemes.  Certain WTO Members offer preferences under regional arrangements or other
schemes (e.g. Africa Growth and Opportunity Act (AGOA)), that include both developing and least-
developed beneficiaries.
21. Since the WTO Singapore Ministerial Conference in 1996, there have been progressive
improvements in measures taken by trading partners to secure more open and predictable trading
conditions for LDCs.  At the High Level Meeting (HLM) held on 27-28 October 1997, several
Members announced new or additional preferential market access measures for LDCs that they had
taken, or proposed to take, and/or made
 statements drawing attention to existing liberal market access
                                                     
10 World Bank (2000), World Development Report 2000/2001:  Attacking Poverty  [Online].  Available
at:  http://www.worldbank.org [1 October 2000].  See also Winters, L.A. (2000), "Trade and Poverty:  Is there aConnection", in Trade, Income Disparity and Poverty , WTO, Geneva.
11 WT/COMTD/W/11 and Rev.1.
12 IMF, "Debt Initiative for the Heavily Indebted Poor Countries (HIPC)" [Online].  Available at:
http://www.imf.org/external/np/hipc.hipc.htm [15 September 2001].
13 "Programme of action for the least-developed countries" (UN Document A/CONF.191/111).
Available at:  http://www.unctad.org/conference/ [1 June 2001].
14 WT/LDC/SWG/IF/14 and Add.1.
15 Specific duties, other duties and charges and the impact of quotas especially in agriculture, textiles
and clothing, have not been examined in the tabulation of these averages.WT/MIN(01)/2
Page 18
for LDCs under GSP or GSTP regimes and other preferential arrangements.16  Based on the Director-
General's continuing efforts to improve market access opportunities for LDCs, 28 Members
announced measures they had taken or proposed to take in this regard at the General Council meeting
on 3 and 8 May 2000.17  To date, 12 Members have notified their market access improvements for
LDCs to the WTO, namely:  Canada, Egypt, European Communities, Japan, Republic of Korea,
Mauritius, New Zealand, Norway, Singapore, Switzerland, Turkey, and the United States.18
22. At the Third Ministerial Conference in Seattle in November 1999, the European Union and
Japan announced their intention to open their markets to essentially all products from LDCs.  This
undertaking was followed by the proposal by Canada, the European Union, Japan, and the
United States – the Quad Proposal – at the General Council in May 2000 to implement "both
tariff-free and quota-free treatment, consistent with domestic requirements and international
agreements, under their preferential schemes, for es sentially all products originating in LDCs", joined
by the Czech Republic, Iceland, Poland and Slovenia.19  This commitment was given effect by:
Canada adding, effective 1 September 2000, a further 570 tariff lines to the list of goods from LDCs
eligible for duty-free treatment, so that about 90% of all LDC imports (by tariff line) receive duty-free
treatment20;  the European Union adopting the "Everything but Arms (EBA)" Initiative in
February 2001, which provides for duty-free and quot a-free market access for all products from LDCs
from March 2001, with some exceptions (bananas, liberalized by 2006;  sugar and rice, liberalizedby 2009)
21;  Japan modifying its GSP scheme as a result of the "99% initiative on Industrial Tariffs"
to provide, from 1 April 2001, further product coverage for duty-free and quota-free treatment,
totalling about 99% of industrial products, including textiles and clothing;  and the United States
adopting the African Growth and Opportunity Act (AGOA) in 2000, for which 23 LDCs were
designated as beneficiaries in October 2000.22
23. Other WTO Members that have already notified duty- and quota-free access for imports from
LDCs are the Czech Republic;  Hong Kong, China;  Hungary; and the Slovak Republic.  A further
development is the decision by New Zealand to pr ovide 100% duty-free and quota-free market access
for all products from LDCs, effective 1 July 2001.23
                                                     
16 WT/COMTD/12 and WT/LDC/HL/M/1.  Members that elaborated on existing or proposed new
measures for market access in favour of LDCs at the HLM were:  Australia, Bulgaria, Canada, Chile, Egypt,European Communities, Hungary, India, Indonesia, Japan, Republic of Korea, Mauritius, Malaysia, Morocco,Norway, Singapore, Switzerland, Thailand, Turkey, and the United States.
17 WT/GC/M/55.  Argentina (on behalf of Mercosur), Canada, Chile, Czech Republic, European
Communities, Hungary, Iceland, Japan, Republic of Ko rea, Norway, New Zealand, Slovak Republic, Slovenia,
Switzerland and the United States were Members reported to have taken, or intending to take additional
measures to further improve access of LDCs to their markets. Hong Kong, China, offered duty-free treatment onan MFN basis to the imports of all countries.
18 WTO notifications of preferences have been  accorded by developed countries under the
1979 Enabling Clause (L/4903) and by developing countries under the 1999 Waiver on Preferential TariffTreatment for LDCs (WT/L/304).
19 WT/GC/M/55.
20 LDCs benefit from liberalized application of rules of origin requirements permitting cumulation from
LDCs, Canada and furthermore of up to half of the required minimum 40% content sourcing from developingcountries.
21 Council Regulation (EC) No. 416/2001.  In 2000, the European Union and the ACP States (one third
are LDCs) concluded the Cotonou Agreement to su cceed the Fourth Lomé Convention (WT/C/187/Rev.3).
22 Preferential treatment is granted on covered items from beneficiary countries meeting the eligibility
conditions (USTR Press Release 00-67).  Eligibility criteria include continuous progress toward establishing amarket-based economy, maintenance of the rule of law, th e elimination of barriers to U.S. trade and investment,
poverty-alleviation economic policies, protection of internationally recognized worker rights and, a system tocombat corruption.  There are also customs-related eligibility requirements that have to be met.
23 WT/COMTD/LDC/M/22.WT/MIN(01)/2
Page 19
Technical assistance under the Integrated Framework
24. Established at the High-Level Meeting, the Integrated Framework (IF) for the LDCs is a
partnership between six agencies – IMF, ITC, UNCTAD, UNDP, WB, and WTO – and LDCs to
provide them with assistance to integrate in the world economy.  In the light of disappointing
results in the first three years of existence of the IF, a review conducted in the course of 1999 and into
mid-2000 determined that three aspects were needed to improve its functioning: (a) mainstreamingthe IF into the existing development architecture; (b) resources;  and (c) enhanced management
and governance of the IF.  The Inter-Agency Working Group (IAWG) consequently decided on
6 July 2000 to:
– mainstream trade into national development priorities through development
frameworks, in the form of Poverty Reduction Strategy Papers (PRSPs) and the
United Nations Development Assistance Framework (UNDAF), with the World Bank
taking the lead
24;
– seek donor support for, and voluntary cont ributions to, an Integrated Framework
Trust Fund (IFTF), with a funding objective of US$20 million for 2001-03,administered by UNDP on behalf of the core agencies of the IF;  and
– invite representatives from LDCs and donor countries to serve, along with Heads of
the core agencies, in a Steering Committee, to which the IAWG would periodically
report.
25. The WTO Sub-Committee on Least-developed Countries adopted in February 2001 an
Integrated Framework Pilot Scheme.  The intention is to implement the IF first in a few selected
LDCs, which have demonstrated a clear choice and commitment to mainstream, or integrate, a tradeintegration chapter or agenda, as part of their development and poverty reduction strategies.  Once
positive results are attained in the pilot countries, this approach could be considered for extension to
other LDCs.  Three countries were selected:  Cambodia, Madagascar and Mauritania.  This revised IF
process incorporates an enhanced role for Trade Policy Reviews, in keeping with the more general
policy adopted in this respect for LDCs.
26. The Integrated Framework Steering Committee (IFSC) held its first meeting on 15 March
2001.  At the meeting, pledges were received totalling US$4.55 million for the IF Trust Fund.  Donors
immediately contributing were Canada, Denmark,  the European Union, the Netherlands, Norway,
Sweden, the United Kingdom, and UNDP.  Subsequently, the amount pledged to the Trust Fund has
risen to US$6.2 million, with additional contributi ons from Finland, Ireland, Japan, Switzerland, the
United States and the World Bank.  Most of the resources in the IF Trust Fund are to be directed
towards mainstreaming work.
3. Trade-related capacity-building
25
27. More than three quarters of the WTO's 142 Members have self-elected the status of
developing countries, of which 30 are LDCs.  The Agreement establishing the WTO recognizes theneed for efforts "to ensure that developing countries, and especially the least-developed among them,
secure a share in the growth in international trade commensurate with the needs of their economic
development".  Technical assistance and training activities aims at building the human and
institutional capacity of WTO Members and acceding countries to facilitate their full integration into
the multilateral trading system and the world economy.  One aspect is a better understanding of the
                                                     
24 The WTO hosted a seminar on "The Policy-Relevance of Mainstreaming Trade Into Country
Development Strategies – Perspective of LDCs", 29-30 January 2001.
25 Further detail is provided in Chapter III.C(4).WT/MIN(01)/2
Page 20
WTO Agreements to facilitate implementation of obligations, as well as effective participation in
WTO processes, including negotiations.  At the same time, emphasis is increasingly being placed on
enhancing the capacity of countries to realize the benefits of the market access opportunities that are
available to them as a result of being WTO Members.
28. These activities mainly consist of seminars, workshops, technical missions, courses on trade
policy and materials.  In recognition of the vital role of training, in June 2001, the Director-Generalreconstituted the Secretariat's Training Division as the WTO Training Institute, with extended
activities, including distance-learning services, cooperation with universities and training for trainers.
The WTO has also published a comprehensive Guide to Sources of Trade-Related Technical
Assistance , to provide a single reference source on technical assistance, available on the WTO web-
site.
26  To increase internal transparency, the Secretariat has been active in "shortening the distance"
between Geneva and capitals, by providing regular briefings, and establishing WTO Reference
Centres, supported by donations from WTO Members.27
29. LDCs continue to be a major focus of WTO technical assistance and cooperation activities.
These activities supplement other ones in which the WTO participates, notably the Joint Integrated
Technical Cooperation Programme (JITAP) for Selected Least Developed Countries and other
African Countries (WTO, UNCTAD and ITC Secretariats), and the Integrated Framework (IF) (WTO,
ITC, UNCTAD, World Bank, IMF, UNDP), covered above.  The Heads of the World IntellectualProperty Organization (WIPO) a nd WTO launched, on 14 June 2001, a new initiative to help LDCs
on intellectual property issues, including their obligation to comply with the WTO’s TRIPS
Agreement by 2006.
30. A new approach to help identify the capacity- building needs of LDCs is based on the Trade
Policy Review (TPR) process, which in itself is viewed as facilitating a better understanding of, and
integration into, the WTO.  Thus, more LDCs are being programmed for review – at least three each
year, including for 2001.  The review process for an LDC now includes, for its officials, a three-to-
four-day in-country seminar, on the WTO and, in particular, on the trade policy review exercise and
the role of trade in economic policy;  and the asso ciated Secretariat report for the Review includes a
section on technical-assistance needs and priorities, as identified in cooperation with the Memberconcerned, and with a view to feeding th is into the Integrated Framework process.
31. Another major focus is the preparation of developing country Members for the Fourth
Ministerial Conference in Doha.  In particular, on 10-11 May 2001 in Geneva, WTO delegations and
experts from international agencies, governments and the private sector discussed technical assistance
and capacity building in trade facilitation in a workshop organized by the WTO Secretariat;  inJune 2001 the WTO Secretariat helped to prepare a strategy for the Arab region, to raise awareness,
improve information flows, help delegations in Geneva, and prepare Members for a broader agenda of
negotiations that could potentially be adopted.  The WTO also held, through its Committee on Trade
and Development, on 14 February 2001, a seminar on “Trade, Technology and Development” aimed
at identifying opportunities and challenges faced by developing countries in relation to technology
access in the context of the WTO.  Also, the third Geneva Week, held on 10-14 September 2001,
brought together representatives of non-reside nt Members and Observers (i.e. those without
representation at the WTO in Geneva) and, for the first time, representatives of regional organizations
involved in trade.  The main objective of the Week was to brief on the state of work in the approach to
the Fourth Ministerial Conference and focus on the key issues for the representatives.
                                                     
26 http://www.wto.org/english/thewto_e/teccop_e/teccop_e.htm#guide.
27 The WTO Reference Centres are available to LDCs and small island developing countries on a
'supply-driven' basis, according to which the WTO is the source of the equipment, software and training, as wellas advising the local authorities on Internet access.  For other developing countries or entities, the WTO
provides training and its materials only.WT/MIN(01)/2
Page 21
32. Despite their vital nature, technical assistance and cooperation activities continue to be
sustained only by the generous extra-budgetar y voluntary donations of certain WTO Members.
Between 1995 and 2000, the demand for technical assistance increased fivefold.  The regular budget
for such activities has remained inadequate to resp ond to such needs, funding just 10% of activities
in 2000.28  These voluntary contributions by WTO Members, although vital, still fall short of WTO
needs.  For this reason, on 15 December 2000, the WTO General Council approved guidelinesgoverning the acceptance and use of voluntary contributions from private individuals and non-
governmental, non-profit organizations or  foundations (non-governmental donors).
29
33. Training has been another area of sustained activity.  The 16th Trade Policy Course was held
in early 2001 for 30 developing and transition economy officials, conducted in English.  The 17th
Trade Policy Course was held in mid-2001, with str ong representation of trade officials from Africa
and least-developed countries, in a three-month course conducted in French.  In addition, forty trade
officials participated in the 19th Special Course on Dispute Settleme nt Rules and Procedures organized
by the WTO Secretariat as part of its technical assistance programme.
4. Accessions
34. The accession of two new Members in 2001 to da te – Lithuania and Moldova – brought to 14
the number of Members that have acceded to the WTO since 1995, raising the organization's
membership to 142.30
35. Three new accession working parties were established in 2001:  Bahamas, the Federal
Republic of Yugoslavia, and Tadjikistan.  The other 27 accession working parties in process are those
for:  Algeria, Andorra, Armenia, Azerbaijan, Be larus, Bhutan, Bosnia-Herzegovina, Cambodia, Cape
Verde, China, Former Yugoslav Republic of Ma cedonia, Kazakhstan, Laos, Lebanon, Nepal, Russian
Federation, Samoa, Saudi Arabia, Seychelles, Sudan, Chinese Taipei, Tonga, Ukraine, Uzbekistan,Vanuatu, Viet Nam, and Yemen.  Arrangements were made in 2000 for participation of acceding
countries as observers in the mandated negotiations on agriculture, on services and on other elements
of the built-in-agenda.
36. The accession working party for China, which had entered the final stage of its work in 2000
following the conclusion of virtually all bilateral market-opening agreements, made further significant
progress in 2001 by agreeing the Draft Working Party Report and Draft Protocol.  A final meeting of
the working party took place in September 2001 to adopt these documents and forward them for
action to Ministers at the 4th Ministerial Conference in Doha, Qatar.  This step brings to a close a15-year process of accession.
37. The accession working party for Chinese Taipei, which had also entered its final phase
in 2000, is expected to conclude its work as well before the 4th Ministerial Conference in Doha,
Qatar.  The working party completed its mandate by agreeing the Draft Working Party Report and
Draft Protocol at a final meeting of the in September 2001 and forwarded them for action to Ministersmeeting in Doha, Qatar.
38. Each accession has the same 'win-win' quality for the multilateral trading system.  The
acceding Government operates a more transparent and predictable trade regime, by assuming WTO
                                                     
28 Donations have been disbursed by some 25 WTO Members since 1995, totalling over
CHF 31 million.  For major pledges in 2000, see WTO 2000 Press Releases 162, 164, 168, 186(Rev.1), 188,192, 196, 201 and 204.  For major pledges in 2001 to date, see WTO 2001 Press Releases 218, 225 and 234.
29 WT/L/386.
30 Ecuador and Bulgaria acceded in 1996;  Mongolia and Panama acceded in 1997;  the Kyrgyz
Republic acceded in 1998;  Latvia and Estonia acceded in  1999;  and Albania, Croatia, Georgia, Jordan and
Oman acceded in 2000.WT/MIN(01)/2
Page 22
obligations on goods, services, and intellectual property protection.  It opens its markets for goods and
services to its trading partners, and thus locks-in reforms and gains the benefit of more competitively-
priced imports.  In turn, the new WTO Member gains similar rights and terms of access on the
markets of other WTO Members – on a permanent basis.  These commitments are enforced – on both
sides – by dispute settlement.  Domestic reform and integration into the world economy thus go hand-
in-hand to strengthen growth and investment pr ospects of the acceding Government, and of WTO
Members.  Opportunities and challenges of accession are considered in greater depth in Chapter IV of
this Report.
5. Outreach
39. In addition to a very high level of activity directed at better integrating WTO Members from
developing and least-developed countries into the multilateral trading system, the Director-General,
his Deputies and the staff of the WTO Secretariat have also been active in building bridges outside the
WTO.  They maintain a comprehensive programme of participation in international meetings with thepublic and private sectors and non-governmental organizations (NGOs).  In part, this activity is
directed at enhancing the information flow on the WTO to parliamentarians, concerned citizens and
NGOs, but it is also aimed at better integrating external contributions to the WTO, within the
guidelines established by the WTO Members in July 1996.
 31
40. WTO policy with respect to NGOs, recognizes that NGOs are "a valuable resource, [which]
can contribute to the accuracy and richness of the public debate", but "there is currently a broadly held
view that it would not be possible for NGOs to be directly involved in the work of the WTO or its
meetings"32, mainly as a result of the intergovernmental character of the WTO and the prerogative of
Member Governments to channel to the WTO the results of consultations with domestic
constituencies.  NGOs may observe Ministerial Meetings, and registration has risen sharply – from108 NGOs at the first meeting in Singapore in 1996, to 128 in Geneva in 1998, 686 in Seattle in 1999,
and 647 in Doha in 2001.
33
41. On the occasion of the first meeting on international trade of the Inter-Parliamentary Union
held on 8 June 2001 in Geneva, the WTO Secretariat issued a Guide on WTO policy issues for
parliamentarians , available on the WTO web-site.34  The guide explains why governments created the
WTO Agreements, the important role individual governments play in the WTO and the freedom they
have to protect their people, their morals, food and environment while still drawing the benefits from
trade.
42. On 5 July 2001, the Director-General announced the appointment of a group of experts to
advise him on the challenges and opportunities confronting the WTO and the global trading system.The panel is to examine how the WTO should respond to the needs of its Members and their citizens
at a time when an increasingly integrated global economy has brought about profound economic and
political change.  The panel is also mandated to examine how the organization can ensure the fullest
possible participation of each Member as the WTO expands to near universal membership.  The
panelists have been asked to examine ways of creating a more effective partnership between the WTO
and civil society.
                                                     
31 WTO document WT/L/162.
32 Ibid.
33 The procedures regarding the attendance of NGOs are:  (i) NGOs are allowed to attend only the
Plenary Sessions of the Conference (without the right to speak);  (ii) applications from NGOs are to beregistered and are to be accepted on the basis of Article  V, paragraph 2 of the WTO Agreement, i.e. such NGOs
"concerned with matters related to those of the WTO";  and (iii) a deadline is to be established for theregistration of NGOs that wish to attend the Conference.   For the procedures on IGOs and NGOs for Seattle, see
WT/GC/M/40/Add.3.
34 http://www.wto.org/english/thewto_e/teccop_e/teccop_e.htm#guide.WT/MIN(01)/2
Page 23
43. The WTO was the venue of a "Symposium on Issues Confronting the World Trading System"
on 6 and 7 July 2001.  Representatives from governments, non-governmental organizations, the media
and members of the academic community participated.  Special work-sessions focused on trade in
agriculture, food safety and sanitary and phytosanitary standards, intellectual property rights (the
TRIPS Agreement), development and environment issues and trade in services (the GATS).  A fifth
working session addressed the relationship between the WTO and civil society.  The symposium wascovered by the International Institute for Sustainable Development (IISD), which issued a full report
on its web-site.
35
44. Transparency is also an important dimension of outreach.  Regular press briefings are held, a
publications service and the WTO web-site (h ttp://www.wto.org) are maintained, information
products are developed, and responses are given to the many requests for information on the WTO
received each day.  In particular, the WTO web-site has been receiving an average of 350,000 visitors
each month at last count, up from an average of 200,000 in 2000.
45. The Secretariat hosts regular briefings fo r NGOs on the work of  WTO committees and
working groups and provides the Membership each month with a list of documents, position papers
and newsletters submitted by NGOs.  These doc uments are made available upon request from
Member states.  A special section of the WTO web site, including a recently opened chat room for
interactive discussion, is devoted to NGOs.  Finally , a special electronic NGO bulletin is available to
organizations that wish to receive information on the current status of activities at the WTO.  This
facility is an integral part of the efforts to reach out to individuals and organizations located all over
the world.
46. In addition to obtaining information on the WTO, the web-site gives open access (without
charge) to all publicly available WTO documents in the three official languages of English, French
and Spanish.36  This facility was re-designed and launched on 1 February 2001, as part of ongoing
efforts to make the Organization more accessible and to make its work more transparent for the public
at large.
47. In 2000 and 2001, WTO Members have been confer ring on improvements that could be made
to accelerate public availability of documents of particular interest to citizens, such as minutes of
meetings of WTO bodies and panel reports.37  According to the current policy, established in 1996, a
presumption of public circulation status applies to notifications by Members, unless a restricted status
is requested, and documents related to the regular activities of the WTO are circulated to the publicafter six months or when the activity has been completed.
38
48. Outreach also concerns relations with other international intergovernmental organizations
(IGOs).39  A formal policy on such relations was established in 1995 for the IMF and the World Bank,
                                                     
35 http://www.iisd.ca/sd/wto-issues/.
36 An important exception are the Trade Policy Reviews of Members (WT/TPR/- series), protected by
copyright and distributed to the public in book form and on CD-ROM by the publisher.
37 Paragraph 7 of WT/L/160/Rev.1 provided that:  "In the light of the experience gained from the
operation of these procedures and changes in any othe r relevant procedures under the WTO, the General
Council will review, and if necessary modify, the procedures two years after their adoption."
38 WT/L/160/Rev.1.
39 Article V, paragraph 1 of the Marrakesh Agreement Establishing the World Trade Organization
provides that the General Council shall make appropriate arrangements for effective cooperation with otherintergovernmental organizations that have responsibilities related to those of the WTO.  Annex 3 to the GeneralCouncil’s rules of procedure provides further guidance on relations with other intergovernmental organizations,specifically in respect to observer status.  Paragraph 4 of that Annex suggests that the main factors to be
considered in granting observer status to other intergovernmental organizations are: the nature of work of the
organization concerned, the nature of its membersh ip, the number of WTO Members in the organization,WT/MIN(01)/2
Page 24
as provided for in their respective agreements with the WTO, and observer status in the General
Council also applies to the United Nations, UNC TAD, FAO, WIPO and the OECD.  WTO Members
have been conferring for some time on other IGOs to be granted observer status in the General
Council and other WTO bodies.  Arrangements were made for IGOs to observe Ministerial Meetings,
on the same basis as NGOs:  this opportunity was taken by 42 IGOs at the first meeting in Singapore
in 1996, by 40 in Geneva in 1998, and by 50 in Seattle in 1999.
6. Dispute settlement40
A heavy case-load for the system
49. By mid-2001, 234 complaints, involving 180 distinct matters, had been filed under the WTO's
Dispute Settlement Understandin g (DSU) since the entry into force of the WTO on 1 January 1995.
The complaints concern allegations of inconsistency with WTO obligations and span, among other
measures, the use of trade defence instruments (anti-dumping, countervailing and safeguard
measures), intellectual property protection, trade-related investment measures, domestic taxes onproducts, product regulations, and subsidies.  The measures at issue in some complaints have been
recently introduced, while others are part of legislation or regimes that have been in place for decades.
50. Of 234 complaints, developed countries filed two-thirds and developing countries the
remainder.
41  The United States and the European Union (or its Member States) are the WTO
Members most frequently complained against (Table AII.1).
51. The largest single category of complaints concerns trade defence instruments, accounting for
close to one quarter of complaints filed.  The United States is concerned as a respondent in 19 of these
54 complaints and developing countries figure as a respondent in most of the others. This high level
of complaints is an indication of the frequency of use of trade defence instruments among WTO
Members.  The use of such measures is subject to the rules set down in the concerned WTOAgreements.  Complaints lodged in the WTO have mainly contained contentions of deficient
procedural practices, incorrect definitions of key aspects (e.g. domestic industry), faulty injury
determinations, erroneous findings, and incorrect application of duties.
Satisfactory adjustment is generally the outcome, but some cases reach the stage of retaliation
52. Roughly three quarters of complaints do not proceed beyond consultations to the panel stage,
indicating that a satisfactory adjustment of the matter obtains at an early stage of the WTO
procedures, just as was the case under GATT 1947.
42  When complaints proceed to the panel stage,
the issued report contains findings that were, in most cases, the subject of appeal to the Appellate
Body.
                                                                                                                                                                    
reciprocity with respect to access to proceedings, documen ts and other aspects of observership, and whether the
organization has been associated in the past with the work of the CONTRACTING PARTIES to GATT 1947.
40 WTO (ongoing), "Overview of the State-of-play of WTO Disputes" [Online].  Available at:
http://www.wto.org [15 September 2001].
41 To overcome human and financial resource constraints that limit the participation of developing
countries in the dispute settlement procedures, legal assistance is made available by the Technical Cooperation
Division of the WTO Secretariat.  The Advisory Centre on WTO Law (http://www.itd.org), which provides
training and legal advice in WTO matters to its developing country Members and all least-developed countries,became operational in July 2001.
42 Although Article 3:6 of the DSU requires that "mutually agreed solutions to matters formally raised
under the consultation and dispute settlement provisions of the covered agreements shall be notified",notifications of outcomes have not been made in a numb er of complaints that have not proceeded to the panel
stage.WT/MIN(01)/2
Page 25
53. When complaints have completed the panel and Appellate Body report process, the record on
prompt compliance with the recommendations or ru lings of the Dispute Se ttlement Body (DSB) is
good.  Certain cases, however, where action to implement was required of the respondent WTO
Member, have led to further, often lengthy, proceedings.  One category concerns the determination by
arbitration (under Article 21.3 of the DSU) of a "reasonable period of time" in which to implement
findings;  the guideline is 15 months.  Another category concerns disagreements between thecomplainant and the respondent on the consistency of the action taken to comply with the
recommendations and rulings;  a number of reques ts for review under Article 21.5 of the DSU have
been filed with the DSB.
43  In such instances, the matter is refe rred to the original panel, which issues
a finding.44
54. Article 22 of the DSU makes retaliation the last resort in the WTO system of dispute
settlement, within a carefully circumscribed framework for the exercise of this instrument.  In the
event a Member fails to implement the DSB's ru lings and recommendations within a reasonable
period of time, negotiations to agree mutually satisfactory compensation is the preferred remedy
available to the complainant.  Failing such agreem ent, the complainant may th en request authorization
from the DSB for the suspension of concessions or other obligations (Article 22.2), which is granted
unless the DSB decides by consensus to reject the request (Article 22.6).  Such suspension is,
however, subject to rules to ensure that its level is not excessive, and arbitration is available to thisend (Articles 22.6 and 22.7).
45  Finally, the suspension is conceived as a temporary measure, in place
only for as long as implementation is outstanding or a mutually satisfactory solution is not found
(Article 22.8).
55. Only one case of mutually satisfactory compensation has been notified to the DSB, by India
and Turkey, in the matter of Turkey's quotas on textiles and clothing products.46  The DSB has
authorized five instances of retaliation47:
                                                     
43 "EC – Regime for the Importation, Sale and Distribution of Bananas" (WT/DS27), recourse by the
EC and recourse by Ecuador;  "Australia – Measures Affecting the Importation of Salmon" (WT/DS18),recourse by Canada;  "Australia – Subsidies Provided to Producers and Exporters if Automotive Leather"
(WT/DS126), recourse by the United States;  "Brazil – Export Financing Programme for Aircraft" (WT/DS46),
recourse by Canada;  "Canada – Measures Affecting the Export of Civil Aircraft" (WT/DS70), recourse byBrazil;  "United States – Anti-dumping Duty on Dynamic Random Access Memory Semiconductors (DRAMS)of one megabit or above from Korea" (WT/DS99), recourse by Korea;  "United States – Import Prohibition ofCertain Shrimp and Shrimp Products" (WT/DS58), recourse by Malaysia;  "Mexico Anti-dumping Investigationof High-Fructose Corn Syrup (HFCS) from the United States" (WT/DS132), recourse by the United States;
Canada - Measures Affecting the Importation of Milk and the Exportation of Dairy Products, (WT/DS103,
WT/DS113), recourse by the United States and by New Zealand;  "United States - Tax Treatment for "ForeignSales Corporations" (WT/DS108), recourse by the European Communities.
44 The clarification of the relationship between Articles 21.5 and 22 of the DSU ("sequencing") is still
outstanding in spite of the priority given to a solution by the General Council in 1999.  On 10 October 2000,eleven WTO Members presented a proposal to amend the articles (WT/GC/W/410).  The Appellate Body, in a
ruling issued in "United States – Import Measures on Certain Products from the European Communities",
complaint by the European Communities (WT/DS165), deferred to WTO Members the resolution of thesequencing issue (paras. 92 and 93 of WT/DS165/AB/R).
45 So far there has been arbitration under Article 22.6 in the following cases:  "EC-Measures
Concerning Meat and Meat Products (Hormones)" (W T/DS26/ARB);  "EC-Measures Concerning Meat and
Meat Products (Hormones)" (WT/DS48/ARB);  "EC-Regime for the Importation, Sale and Distribution of
Bananas" (WT/DS27/ARB);  "EC-Regime for the Importation, Sale and Distribution of Bananas"(WT/DS27/ARB/ECU);  and "Brazil-Export Financing Programme for Aircraft" (WT/DS46/ARB).
46 "Turkey – Restrictions on Imports of Textile and Clothing Products", complaint by India
(WT/DS34).
47 A matter in which the EC has stated that it may request authorization to suspend concessions or other
obligations under Article 22:2 is its complaint on "United States – Tax Treatment for "Foreign SalesWT/MIN(01)/2
Page 26
− in the matter of the EC's ban on hormone-treated beef, Canada and the United States have
both retaliated by raising duties on imports from the EC48;
− in the matter of the EC's regime for bananas, retaliation was requested by and authorized for
the United States and Ecuador, and has been carried out by the United States, but suspendedas of 1 July 2001
49;  and
− in the matter of Brazil's financing for exports of aircraft, retaliation was requested by and
authorized for Canada.50
In this context, a significant and welcome development in the long-running dispute on the EC's
bananas regime was the adoption of a new regime on 1 July 2001, which led the United States tosuspend its sanctions, with a view to their definitive lifting;  a similar result would obtain for
Ecuador's authorized retaliation.
51
56. The use of retaliation in disputes did not increase in 2001, indicating that WTO Members
continue to be careful in their use of this instrument .  But it is also true that no instances of the lifting
of sanctions in place has yet occurred, although there are hopeful developments in one case.Respondents and complainants involved in a case should continue to make every effort to find a
satisfactory resolution to the dispute or, pending full implementation, mutually agree to compensation,
which tends to create trade, rather than resort to retaliation, which is potentially damaging to both
parties and the system.
B. T
RADE POLICY TRENDS IN WTO  MEMBERS
1. Overview
57. Although the path of world trade growth has b een uneven in the past few years (contraction
in 1998, rebound in 1999 and 2000, followed by a slow down in 2001), the fact that trade continued to
expand faster than output is indicative of the increasing openness of national economies.  Part of this
development is due to the gradual but continued trend towards more liberal trade policies around the
world.  Fears that the failure of the Third Ministerial Meeting in Seattle to agree on an agenda for a
                                                                                                                                                                    
Corporations" (WT/DS108).  The parties notified the WTO of an agreement on the follow-up to the panel and
Appellate Body reports adopted by the DSB (WT/DS108/12).  Pursuant to this agreement, the United States andthe EC jointly requested the Article 22.6 DSU arbitrator to suspend the arbitration proceeding.  However, the
EC considered that the revised law enacted by the Un ited States, the FSC Replacement Act, replicates the
violations of the WTO Agreement found in the original dispute, which led to the examination of that new law by
the original panel.  This compliance panel, on 20 August 2001, found the U.S. law not in full conformity withthe WTO Agreement.
48 In "European Communities – Measures Affecting Meat and Meat Products" (WT/DS26 and 48), the
United States was authorized to suspend tariff concessions on products of a value of US$116.8 million, andCanada was authorized to suspend tariff concessions on products of a value of Can$11.3 million.
49 In "European Communities – Regime for the Importation, Sale and Distribution of Bananas"
(WT/DS27), the DSB authorized the United States to su spend tariff concessions on products of a value of
US$191.2 million, and Ecuador was authorized to suspend TRIPS obligations of the value of US$201.6 million.
50 In "Brazil - Export Financing Programme for Aircraft" (WT/DS46), the DSB authorized Canada to
suspend tariff concessions on products of a value of Can$344.2 million per year.
51 Council Regulation (EC) No. 216/2001 of 29 January 2001 amending Regulation (EEC) No. 404/93
on the common organisation of the market in bananas.  On 22 June 2001, the EC notified an "Understanding onBananas between the EC and the US" of 11 April 2001, and an "Understanding on Bananas between the EC andEcuador" of 30 April 2001 (WT/DS27/58).  On 5 July 2001, the EC and Tanzania and Jamaica, on behalf of theACP countries, made a request for a GATT Article XIII waiver concerning the transitional regime for the ECautonomous tariff rate quotas on its imports of bananas, to be examined simultaneously with the request for a
GATT Article I waiver for the ACP-EU Partnership Agreement.WT/MIN(01)/2
Page 27
new trade round would lead to a resurgence of protectionism have not, by and large, materialized.
This is a tribute to the good sense of governments in conducting their trade policies.  But credit also
goes to the strength of the multilateral rules under the WTO, as well as commitments made under
regional trade arrangements, which have made it more difficult to take protectionist measures.
58. National trade policies have continued, by and large, to be outward-oriented, through the
implementation of multilateral and regional commitments, and new liberalizing initiatives, bothmultilateral, regional and autonomous.  Since the establishment of the WTO in 1995, Members have
been implementing staged reductions in bound tariffs, in domestic levels of support and export
subsidy levels for agricultural products, and lifting non-tariff barriers.  Specific measures, targeted on
improving market access for least-developed countries in particular, have also been implemented
(section A(2) above).  At the same time, with a view to improving the transparency, stability and
openness of their trading environments, a number of WTO Members have been changing the
procedural aspects of their trade policy regimes, particularly with respect to licensing and customsvaluation.  These efforts have resulted, without doubt, in more open markets, on the whole.
59. Nevertheless, significant barriers to trade remain.  The unfinished business of market access is
the subject of the recently-published WTO Secretariat's study Market Access:  Unfinished Business .
52
Possibly contrary to common belief, the results of the study demonstrates that trade in industrial
products continues to be subject to significant tariff protection in developed and developing countries,with ample scope for further liberalization.
53  For tariffs on industrial products, the study indicates that
bindings cover 100% of tariff lines for most developed countries.  As a result of Uruguay Round-
related tariff reductions, on top of seven rounds of tariff negotiations held under GATT 1947,
developed countries' average bound and applied tariff rates on industrial products have fallen to low
levels (7% and 5%, respectively), on a most-favoured-nation (MFN) basis.  However, these lowaverage levels mask the much higher rates applied to imports in 'sensitive' sectors, such as textiles and
clothing, footwear, travel goods, transport equipment or electric machinery.  Tariff escalation – to
protect upstream industries in relation to primary production of metals, minerals, fibres, fish and
agricultural produce – is also an enduring feature of most tariff regimes, and may affect primarily the
market access interests of developing countries.
60. Developing countries have also raised their share of bound tariffs (to three quarters of the
total), but a significant proportion of their industrial product tariff lines remain unbound or are bound
well above the level of applied tariffs through ceiling bindings.  The average bound rate for
developing countries as a whole remains well above that of developed countries, although this gap is
much lower for applied tariffs.  Peaks and tariff escalation are also features of developing countries'tariff regimes, generally in the same category of products as developed countries.
61. In agriculture, one of the main achievements of the Uruguay Round was the tariffication of all
non-tariff measures and the binding of 100% of all tariffs on agricultural products by all WTO
Members, improving predictability and security of access.  However, resulting tariffs, even after
implementation of staged reduction commitments, are high and continue to offer significant protection
to the products concerned.  The quantification and binding of disparate measures of domestic support
was also a significant achievement, although overall levels of total support to farming also remainhigh.  Export subsidies, although also bound and reduced in a staged manner, remain in place.  This
'unfinished business' explains the emphasis currently being placed on the mandated negotiations on
agriculture.
                                                     
52 WTO (2001), Market Access:  Unfinished Business , Special Study 6, WTO Secretariat, Geneva.
53 The tariffs reported in the study are drawn from a sample of 42 WTO Members including all
developed countries and a group of developing-country Members that account for 90% of all developing
countries' trade.WT/MIN(01)/2
Page 28
62. The notification of products to be integrated under the third stage of the WTO's Agreement on
Textiles and Clothing (ATC) suggests that a significant number of quantitative restrictions maintained
under the ATC may not be removed until the end of 2004.  Use of anti-dumping and countervailing
procedures by established developed country users is increasing, joined by a larger number of
developing countries each year.  While regional trade agreements are increasingly attractive to WTO
Members, they also raise questions regarding trade diversion, the effect of tariff preferences, andcomplex rules of origin.
63. The services agenda is also full.  This sector, critical for businesses and consumers, was first
brought into the multilateral rules in the Uruguay Round.  Part of its unfinished business was
addressed by the agreements on basic telecommunications and financial services reached in 1997.  As
in the industrial products area, levels of commitments may not reflect actual practice in the services
area.  Certain WTO Members may be interested in extending the scope of their commitments in order
to provide a strong signal of interest in domestic services liberalization.  This 'unfinished business'explains the emphasis currently being placed on the mandated negotiations on services.
64. This section looks in greater detail at recent trends in trade policies to take stock of progress,
and unfinished business, in the multilateral trading system.
2. Market access for goods
Unfinished business on tariffs
65. The increase in the level of bindings was a major result of the Uruguay Round.  In addition to
higher levels of bindings on industrial products, all Members bound 100% of their tariff lines on
agricultural items as a result of the WTO Agreement on Agriculture.  Bindings reduce uncertainty and
improve transparency in trading regimes.  Bindin gs may also have laid the ground for improvements
in access to developed countries' markets, as these Members chose to liberalize tariffs throughreductions in bound rates.
66. Most developed countries have bound close to 100% of their industrial tariff lines
(Table II.1).  A very substantial increase in the share of bound industrial product tariff lines - from
21% to 73% - was effected by developing countries as a whole, although there are considerable
differences between such Members.  In Latin America, Members bound 100% of lines at ceilinglevels, and in Central and Eastern Europe, bindings are close to 100%.  The variation in level of
bindings among Members in Asia is significant.  Apart from a few, notably Gabon and South Africa,
the scope of bindings of WTO Members from Africa is generally low.
67. Uruguay Round commitments will result in relatively low simple average bound rates for
industrial products, although wide differences exist across Members and products.  The average forthe Quad – Canada, the European Union, Japan and the United States – is under 5%, for developed
countries as a group it is about 7%, and for developing countries and transition economies the average
is around 26%.
54  Japan has the highest share duty-free bound lines – just under one half – closely
followed by Norway (Table AII.2).  Few deve loping countries have bound any lines at zero.
                                                     
54 Taking into account the effects of recent WTO commitments on information technology and
pharmaceutical products, the average bound rate of the Quad and other developed countries is further reduced
by about one percentage point, and by a few decimals in developing countries.WT/MIN(01)/2
Page 29
Table II.1
Scope of bindings, average and bound tariff rates on industrial products for  selected WTO Membersa
Average applied rate Import Markets Share of bound lines
(%)Average boundb,c
rate (%) Level
(%)Year
North America
Canada 99.6 5.2 4.4 2000
United States 100.0 3.9 4.1 2000
Latin America
Argentina 100.0 31.0 13.4 2000
Chile 100.0 25.0 9.0 2000
Colombia 100.0 35.5 11.2 2000
Costa Rica 100.0 44.6 4.7 2000
Mexico 100.0 34.8 15.6 2000
Peru 100.0 30.0 13.0 1998
Western Europe
European Union 100.0 4.1 4.5 2000
Iceland 93.2 9.7 2.5 1998
Norway 100.0 3.4 3.3 1998
Switzerland 98.9 1.8d2.3 2000
Turkey 36.3 42.6 8.0 1999
Central and Eastern Europe
Czech Republic 100.0 4.3 4.8 1998
Hungary 95.4 7.4 7.4 2001
Slovak Republic 100.0 4.3 4.4 2000
Asia
Australia 95.9 14.2 4.7 2001
Hong Kong, China 23.5 0.0 0.0 2001
Japan 99.2 3.5 3.9 2000
Korea, Republic of 90.4 11.7 7.5 2000
Macau, China 9.9 0.0 0.0 1997
Philippines 58.6 26.1 6.7 2001
Singapore 65.5 4.6 0.0 2000
Africa
Cameroon 0.1 17.6 17.6 1999
Chad 0.4 17.6 17.6 1999
Gabon 100.0 15.5 17.6 1999
a The data need to be interpreted with caution:  neither the year nor nomenclature is the same for all Members listed.  For boun d
duties, most of the Members were using  Harmonized System 1988 or 1992, or still CCCN nomenclature.  For applied duties,
HS 1996 is used for the majority of the Members.
b Post Uruguay Round bound rate:  the Member may have scheduled a longer implementation period for a certain number of tariff
lines. One example is textiles and clothing products where several Members have until 2004 to implement the tariff reduction.
c Taking into account commitments on information technology and pharmaceutical products, post Uruguay Round bound rates for
some countries will actually be slightly lower.  For example, 3.3% for the United States, 2.9% for Japan, 9.5% for the Republicof Korea, and 22.8% for the Philippines.
d All Swiss tariffs are specific:  ad valorem  equivalents not available for all lines.
Source:   WTO (2001), Market Access: Unfinished Business , Special Study 6.  Figures on applied rates have been updated
for the latest available year on the Consolidated Tariff Schedules (CTS) database.
68. Levels of bound rates for categories of industrial products vary significantly (Table AII.3).
For both developed and developing countries, bound rates are highest in the category of textiles and
clothing:  Quad countries show a post-Uruguay R ound average of 9% and developed countries as a
whole are at 12%;  developing and transition economies average 29%.  Similar levels of rates are toWT/MIN(01)/2
Page 30
be found for leather, rubber, footwear and leather products (9% for the Quad, 10% for developed
countries, 27% for developing countries).55  Above-average bound rates are generally also found in
the categories of fish and fish products, and transport equipment.
69. Among the Quad, tariffs well above the average continue to protect a number of industries
from imports.  In the European Union and Japan, peaks are concentrated in agriculture and food
products, although peaks are also prevalent in footwear .  In the United States and Canada, most tariff
peaks are in manufactures, particularly textiles and clothing, footwear, glass and related products, and
electrical parts.56  Many of these products are of significant export interest to developing countries.
70. In addition to peaks, tariff escalation is a feature of industrial-product bound tariffs in many
WTO Members.  Tariffs structured according to the degree of processing (as well as peaks) affect
resource allocation, as well as transparency, and provides scope for rent-seeking.  In developed
countries, such escalation is present in the same sectors that are affected by peaks, including in
textiles and clothing, leather and footwear products.  Despite significant efforts made by developingcountries to achieve more uniform tariff regimes, peaks and escalation are in evidence, in many cases
on the same categories of products as on those in developed countries (Table AII.2).
57
71. Levels of bound rates for agricultural products are more difficult to analyse due to the
presence of specific duties on certain products, which must be converted to ad valorem  equivalents
for comparative purposes;  the prevalence of tariff quotas is also a complicating factor.  The level ofprotection implied by specific duties depends on world commodity prices, domestic prices, and thus
varies continuously;  for tariff quotas, important issues concern administrative arrangements and their
implementation.  Keeping these difficulties in mind, the evidence suggests that for most WTO
Members, the average bound rate for agricultural products is invariably higher than for industrial
products;  for developed countries, estimates indicate that the simple average of bound rates foragricultural products is around four times that on industrial products, and for developing countries, the
average is two to three times higher than that for industrial products.
58  Peaks in more sensitive
agricultural product categories are frequent, as is escalation by degree of processing.
72. Applied tariffs are generally at, or close to, bound rates for developed countries, whereas
developing countries often apply tariffs at rates significantly below bound levels.  This latter gap isthe result of a combination of two factors:  use of ceiling bindings in Schedules and/or autonomous
liberalization initiatives to reduce applied tariffs si nce the WTO came into existence.  Such initiatives,
often remarked in Trade Policy Reviews (TPRs), frequently indicate significant progress in
liberalization (e.g. Cameroon and Uganda in Africa, a nd India and Pakistan in Asia).  Liberalization in
Central Europe has also continued at a sustained pace, resulting in generally low applied MFN tariffs.There would seem to have been a pause in the process of tariff reduction in South East Asia and Latin
America in connection with the 1997-98 financial crisis.  In absolute terms, however, applied tariffs in
these regions are already among the lowest among developing-country Members (9% on average in
the ASEAN-6, 13% in South America), and no major policy reversals were observed during the
financial crisis.
                                                     
55 This category of products is defined, in WTO (2001), op. cit ., Table 4, page 6, as the aggregation
of HS Chapters 40 and 41 (except 4101-03), 4201, 4203-05, Chapter 43 (except 4301), Chapter 64(except 6405-06), 9605.
56 B. Hoekman, F. Ng, M. Olarreaga (2000), Tariff Peaks in the Quad and Developing Countries'
Exports , World Bank.
57 B. Hoekman, F. Ng, M. Olerreaga (2000), ibid.
58 IMF and World Bank (2001), "Market access for developing countries", p. 18.WT/MIN(01)/2
Page 31
73. The gaps between applied and bound rates on industrial products differ among regions, noting
however the different scope of bindings.59  Average bound rates are three times higher than applied
rates in Latin America, and two-and-a-half times higher in South East Asia.60  In these cases, bindings
contribute less to the stability of applied tariffs, since countries could, if they wish, raise their applied
tariffs up to the level of their bindings.  Trade Po licy Reviews indicate that such increases generally
have not occurred, although certain countries in Asia fine-tuned tariffs in the course of the 1997-98financial crisis.
74. It has to be underlined that the scope of application of MFN tariffs by WTO Members is
reduced by preferences granted to partners in regional trade agreements, non-reciprocal preferences,or other preferences granted to countries in transition and developing countries under the Generalized
System of Preferences (GSP), or supplementary pr eferences for the least-developed countries.  One
recent development in this respect is the extension of preferences granted to the least-developed
countries since the Action Plan was launched in 1996 (section A(2) above).  The increase  in the
number of regional trade agreements in recent years looks set to further erode the scope of applicationof MFN tariffs (Chapter V).
Slow pace of elimination of restrictions on textile and clothing
75. Under the WTO Agreement on Textiles and Clothing (ATC), Canada, the European Union
and the United States continue to maintain quantitative restrictions on certain of their imports of
textiles and clothing from developing and transition economies.  These restrictions were carried over
from the Multifibre Arrangement, and are to be e liminated by end-2004.  The first two phases of the
ATC product integration programme, to bring the sector fully into GATT rules, required the
integration of no less than 16% of the total volume of 1990 imports in 1995 and no less than 17%in 1998, respectively.  Market access was also required to be improved in the first and second stages
of integration, by increases in the quota growth-rates of at least 16% and 25%, respectively, and
applied annually.  The product integration percentages and the increases in the growth rates have been
met, but the elimination of the restrictions has been modest, with a significant exception (Norway).
Canada removed restrictions on one product in the first phase and on two categories in the secondphase, the EU on 12 categories in the second phase (none in the first phase), and the United States on
all or part of 24 product categories in the second stage (none in the first stage).  Norway has removed
all its quotas under a phased plan.
61
76. The third stage of integration under the ATC will take place on 1 January 2002, and is to
involve no less than 18% of the total volume 1990 imports.  At least 12 months in advance of each
implementation stage, Members were required to notify the Textiles Monitoring Body (TMB) of theirrespective integration programmes.  The EU's integration programme will result in the elimination of
restrictions on 11 EU categories of products, affecting nine WTO Members and leading to the
elimination of 37 specific restrictions.  In public  statements, the EU has raised the possibility of
removing additional quotas of particular interest to an exporter in exchange for better access to its
                                                     
59 It is difficult to include agricultural tariffs in this analysis because of the above-noted specific-duty
and tariff-quota aspects of those tariffs.
60 WTO (2001), op. cit . Table II.4, p. 17.
61 Details are contained in notifications to the Textiles Monitoring Body.  They are as follows: Canada's
integration programme contained one product subject to restrictions (work gloves) in the first phase ofintegration and two categories of products under the second stage (tailored collar shirts and textiles handbags).
Canada removed quotas on certain clothing products in six additional product categories, although not
integrating these products.  In the second stage, the EU's integration programme contained products in12 restricted categories, affecting five Members to varying extents.  Norway gradually removed all its
restrictions:  14 quotas in 1996, 32 in 1997, 5 in 1998 and 3 in 2001.  The United States' second stage ofintegration programme contained all or part of 24 product categories, with specific limits affecting three of these
categories or combined categories and six Members, an d the other product categories in group or aggregate
limits.WT/MIN(01)/2
Page 32
domestic textiles and clothing market.  For its part, the United States, is going to integrate products
from 38 U.S. categories for which the United States maintains restrictions, affecting 20 WTO
Members and resulting in the elimination of 43 specific limits or sub-limits.  Canada will integrate
three categories and two sub-categories for which it maintains restrictions;  as a result 27 specific
restraints will be lifted.  In addition, restrictions affecting 17 other Canadian categories or sub-
categories will be partially eliminated.62  In addition, in the third stage of integration all growth rates
on the remaining restrictions will be increased by 27%, to be applied annually.
77. As a result of the implementation of the third stage of integration of textiles and clothing
under the ATC, some additional liberalization is to ta ke place beyond that in the previous two stages.
However, this still leaves the bulk of trade affected by quotas, to be liberalized only on
31 December 2004, at the end of transitional period to full implementation.  It is worth noting, in this
respect, that Canada, the EU and the United States have already largely liberalized textiles and
clothing trade with neighbouring countri es under regional trade agreements.63
78. Restrictions on textiles and clothing products maintained by some other WTO Members
outside the ATC but with reference to GATT provisions are also gradually being eliminated.  Those
maintained by India were removed on 1 April 2001, as scheduled.64  Pakistan is in the process of
phasing-out restrictions on textiles and clothing products maintained under the balance-of-payments
provisions of GATT65;  it notified the Committee on Balance-of-Payments Restrictions that it had
liberalized certain fabrics and apparel products in early 2001.66  Turkey, for the implementation of the
results of a dispute-settlement proceeding with I ndia, agreed to a phase-out plan of restrictions
affecting textiles and clothing imports from that country;  subsequently the two Members notified a
mutually satisfactory agreement to the DSB, which includes compensation.67
Rising trend in the use of trade defence instruments slows in 2000
79. Under the WTO Agreements, Members have the right to apply contingency trade measures
(anti-dumping, countervailing or safeguard), subject to specified rules.  However, to preserve the
market access gains from reducing traditional measures of protection, care should be taken not to
abuse such contingency measures to impose new barriers to trade.  Moreover, even when in
compliance with WTO disciplines on the use of such measures, it is possible that the initiation ofprocedures (sometimes in a combined manner, both anti-dumping and countervailing procedures) may
have a chilling effect on trade;  in particular, responding to procedures imposes costs on traders and
exporters that may discourage trade, in particular in sensitive products.  Finally, the use of the
procedures themselves can be the source of disputes, as a significant percentage of all complaints filed
in the WTO since 1995 concern the use of trade defence instruments (section A(6) above).
80. During the period 1995-2000, records maintained by the WTO indicate nearly
1,500 initiations of anti-dumping investigations world-wide.  More than half of these investigations
were initiated by developing or transition countries, demonstrating their growing use of anti-dumpingprocedures;  developing and transition countries accounted for one third of total initiations of
                                                     
62 G/TMB/N/370/Corr.3.
63 For example, quantitative restrictions maintained by the EU on textiles and clothing imports from EU
membership candidates were eliminated on 1 January 1998, while tariffs had been eliminated one year before.Rules of origin have been harmonized between the EU and the associated countries (WTO (1997), Trade Policy
Review – European Union , and WTO (2000),  Trade Policy Review – European Union ).
64 India – Quantitative Restrictions on Imports of  Agricultural, Textile and Industrial Products ,
complaint by the United States (WT/DS90/1).
65 WT/BOP/R/51.
66 WT/BOP/N/53/Add.2 of 10 January 2001 and WT/BOP/N/57 of 15 February 2001.
67 Turkey – Restrictions on Imports of Textiles and Clothing Products , complaint by India
(WT/DS34/14).WT/MIN(01)/2
Page 33
investigations in the previous five-year period.  At the same time, exporters in developing and
transition countries are the main targets of anti-dumping investigations – of both developing countries
and developed countries – accounting for nearly three quarters of initiations.
81. A slowdown in the number of initiations occurred in 2000 after the surge of 1999 – 272 anti-
dumping investigations initiated compared with 356 in 1999 (Chart II.1 and Table AII.4).  The
leading four users are:  the United States (47 initiations), Argentina (45), India (41), and the European
Union (31).  In 2000, the WTO Members whose exporters were most often the subject of initiated
anti-dumping investigations were:  the European Union and its Member States together (41);  the
Republic of Korea (19);  Indonesia (13);  and the United States (12).  Chinese exporters were alsooften targeted (42 initiations).  Since 1995, the European Union and its Member States have been the
most affected by initiations (264), followed by the Republic of Korea (117), the United States (89),
Japan (67), Indonesia (61) and India (56).  Among non-members of the WTO, China (202) andChinese Taipei (75) have been the most affected.
10 7162541
17156224243254356
272
050100150200250300350400
1995 1996 1997 1998 1999 2000Source:  WTO Secretariat.Chart II.1
Initiations of anti-dumping and co untervailing investigations, 1995-2000
Number
Countervailing
Anti-dumping
82. On average, about one-half of initiated anti-dumping investigations are terminated without
measures being imposed, and the rest end with a definitive anti-dumping measure in the form of a
duty or, much less frequently, a price undertaking by the exporter.  The number of anti-dumpingmeasures in force rose from 880 at the end of 1997 to 1,120 at end-1999;  in 2000 the number
declined to 1,088.  In 2000, the United States had the most measures in place, followed by the
European Union, South Africa, India, and Canada.  Counted together, the EU and its Member States
were the WTO Members most affected by anti-dum ping measures in place, although exporters from
China are affected by a similar number of measures.
83. Sectors where anti-dumping measures are more frequent include chemical products and
base metals, notably steel.  Requests for anti-dumping investigations by the steel industry have
been relatively frequent in recent years, notably in the United States (almost two-thirds of the
125 anti-dumping investigations initiated between 1998 and 2000 involved steel products), inWT/MIN(01)/2
Page 34
relation to chronic excess-supply in world markets.68  As steel prices are falling again, new calls for
anti-dumping investigations are re-emerging from both sides of the Atlantic.
84. The use of countervailing procedures – both in terms of the number of user WTO Members,
initiations, and measures in force – remains much lower than for anti-dumping.  While the number of
initiations also reached a peak in 1999, a slow down occurred in 2000, wi th 17 initiations compared
with 41 in 1999 (Table AII.5).  The United States has the largest number of measures in force (21),followed by the European Union (14), while the European Union and its Member States are the most
affected by measures (20).
Subsidies are still an issue, in particular in agriculture
85. Although there is no global accounting available on the use of subsidies, a number of factors,
ranging from fiscal consolidation in major economies to private sector-oriented structural reforms in
developing countries, have contributed to limit the use of subsidies in the manufacturing and services
sectors.
69  The disciplines on trade-distorting subsidies contained in the WTO Agreement on
Agriculture have also capped support to this sector, which nevertheless remains among the leading
recipients of support in a number of WTO Members.
86. Total support to agriculture by OECD countries  is estimated by the OECD to have decreased
in 2000, from US$356 billion to US$327 billion.  The decline was due to higher world prices (and
hence a reduction of the gap between domestic and world prices) and exchange rate movements,"rather than major agricultural policy changes".
70  Producer support granted in the OECD area also
declined from US$274 billion in 1999 to US$246 billion in 2000, i.e. from 37% to 34% of total farm
receipts:  the largest share of this producer support is accounted for by the European Union (36%),
followed by Japan (24%) and the United States (20%).  Chart II.2 presents producer subsidy
equivalents for these four countries.  It should be noted that OECD figures do not segregate less frommore trade-distorting measures of producer support, notably the measures in the 18 "green box"categories of Annex 2 of the Agreement on Agriculture.
71
87. In relation to the peak 1986-88 period, when the Uruguay Round was underway, the OECD
notes that the overall level of support to producers in 2000 was some 7 percentage points below the
peak (Chart II.2).  This is an improvement ov er 1999, when the OECD found support to have risen to
the 1986-88 level for the first time.  On the whole, the OECD finds that:
The overall reduction in market protection in the OECD area may
partly reflect the process of achieving WTO commitments.
However, the current levels of protection are still an important factorin encouraging production, distorting trade and depressing world
prices of agricultural commodities.  Moreover, such protection
continues to be regressive as it mainly benefits large firms and
impacts most strongly on low-income consumers for whom food
constitutes a larger share of their total household expenditure.
72
                                                     
68 During the 1997-98 financial crisis in some emerging markets, calls for anti-dumping actions were
heard in the main importing (and producing) countries, in  particular the United States, raising fears of a new
wave of anti-dumping actions; however, world demand and prices rebounded quickly, preventing a new "steelwar".
69 All WTO Members are required to notify their subsidy programmes to trading partners.  For
notifications on subsidies under Article XVI:1 of GATT 1994 and Article 25 of the Subsidies Agreement, see
document series WT/G/SCM/N/;  and for notifications on agricultural support measures under the Agreement onAgriculture, see document series WT/G/AG/N.  Comparison s are however difficult to make regarding the actual
amounts of subsidy involved.
70 OECD (2001), Agricultural Policies in OECD Countries – Monitoring and Evaluation , Paris, p. 5.
71 G/AG/NG/2.
72 OECD (2001), Agricultural Policies in OECD Countries – Monitoring and Evaluation , Paris, p. 16.WT/MIN(01)/2
Page 35
01020304050607080
Canada United States European Union JapanChart II.2
Producer Subsidy Equivalents (PSE) for Canada, the United States, the 
European Union and Japan, 1986-2000
Source : OECD (2001 ), Agricultural Policies in OECD Countries - Monitorin g and Evaluation, Paris: OECD Secretariat.Per cent
1986-88
1998
1999
2000
88. Under the WTO Agreement on Agriculture, Members are committed to limit and reduce the
volume and value of export subsidies;  the use of new export subsidies is prohibited.73  T h e s e
commitments primarily constrain developed countries, and notably the European Union, which
accounts for about 90% of export subsidies granted by OECD countries.  Acco rding to the OECD, the
total value of export subsidies on agricultural products decreased in 2000, mainly due to a fall in the
value of subsidies granted by the European Union (this in turn being the outcome of the lower gap
between domestic and international prices).  Still, the post Uruguay Round levels of export subsidies
that will continue to be allowed at the end of the implementation period amount to close to
US$13 billion, permitting significant use of these subsidies, if Members so wish.74  This underlines
the importance of meaningful progress in the currently engaged negotiations, under Article 20 of the
Agreement on Agriculture, to continue the reform process.
89. Subsidies are used in sectors other than agriculture.  Although their use is by no means
confined to the two largest WTO Member economies – the United States and the European Union –
their impact on conditions of competition in world markets tends to be significant.  Statistics producedby the European Commission, which monitors state aid in the European Union, show a clear
downward trend since 1996.
75  No similar overall assessment is available for the United States
concerning trends in aid provided at the federal, state and local government levels, but there is no
                                                     
73 Commitments include the reduction of subsidized exports by 21% over 6 years (14% over 10 years
for developing countries) and the reduction of the value of export subsidies by 36% (24% over 10 years for
developing countries).
74 70% to the European Union.  See WTO (2001), Market Access: Unfinished Business , Geneva,
Table III.10, p. 61.
75 European Commission (2001), Eighth Survey on State Aid, Brussels, p. 9. State aid to the
manufacturing sector in the Community has been reduced by a third between 1995 and 1998, the latest year for
which statistics are available.WT/MIN(01)/2
Page 36
reason to believe a trend to rising levels.76  Subsidies tend to be narrowly targeted on specific sectors,
certain types of business (e.g. small and medium-sized enterprises), disadvantaged regions or certain
objectives (e.g. technological development, environmental protection).  Subsidy practices on both
sides of the Atlantic have proved to be a persistent source of disputes in the WTO.
Product regulations and standards are a growing issue for market access
90. Products placed on the markets of WTO Members, whether domestic or imported, must
comply with the relevant regulations, where they exist, to meet, inter alia , health, safety and
environmental objectives.  Such regulations may include sanitary and phytosanitary (SPS) measures,
which are taken to protect human, animal or plant health, or other product regulations and standards,
such as labelling and packaging requirements, to meet public policy objectives.  Generally, the entry
of imported products is permitted subject to conformity assessment procedures conducted on the
territory of the destination market.  However, sometimes the measures involve outright bans, notably
in the context of the implementation of multilateral environmental agreements such as the MontrealProtocol, the Basel Convention or CITES.
91. The WTO Agreements on Technical Barriers to Trade (TBT), and on Sanitary and
Phytosanitary Measures (SPS) recognize and encourage the activities at the international level
designed to reduce barriers to trade resulting from products and products-related regulation, in
particular, the development of international standards, guidelines, and recommendations.  Suchactivities at the international level reduce the potential barriers to exports.  As part of implementation-
related issues and concerns with respect to WTO Agreements, developing countries have pointed to
their inadequate levels of participation in standard-setting bodies, an issue on which initiative was
taken by the Director-General (section A(1)).
92. A new development, encouraged by the TBT Agreement, is the conclusion of mutual
recognition agreements (MRAs), on the results of conformity assessment procedures, between trading
partners having established confidence in each other's testing entities and procedures.  The trend to
conclude such MRAs is confined, to date, to developed countries.
77  The SPS Agreement encourages
the acceptance, by an importing country, of health protection measures that may differ from those of
the importing country but that provide an equivalent level of safety.  The SPS Committee hasidentified actions that could assist developing countries that are seeking to have their measures
recognized as equivalent.
93. The prevalence of SPS measures appears to have grown in recent years.  Developed countries
are significant users of such measures, mainly for food safety reasons;  developing countries are also
using them with greater frequency.  In 2000, the United States notified the highest number of SPSmeasures (162) to the WTO followed by the European Union and its Member States, and New
Zealand.  The significance of TBT measures also appears to have grown, rising from 365 notified
measures in 1995 to 611 measures in 2000 (after a peak of 672 measures in 1999), in part due to the
expanded use of such measures by developing countries (Table II.2).
                                                     
76 According to WTO(2001), Trade Policy Review – United States , for 1999, estimated U.S. outlays in
support of commerce and business amounted to US$28 billion and credit programmes slightly exceeded
US$2 billion.  By comparison, tax expenditures were US$6.8 billion in the international business sector,US$2.4 billion for space and technology companies, US$3.2 billion in the energy sector, and US$1.7 billion fornatural resources and the environment;  the largest single business tax expenditure (accelerated depreciation ofassets) was estimated at US$32 billion in lost revenue that year.
77 For example, the European Union has concluded MRAs for the results of conformity assessment
with Australia, Canada, Japan, New Zealand, Switzerland, and the United States.WT/MIN(01)/2
Page 37
Table II.2
TBT notifications of technical regulations and standards, 1995-2000
1995 1996 1997 1998 1999 2000
Argentina 0 1 0 1 16 37
A u s t r a l i a 2 01 82 61 23 51 0
Brazil 1 9 35 43 17 12
Canada 29 20 30 115 24 26
Czech Republic 12 14 1 6 28 52
European Uniona123 123 437 276 185 156
J a p a n 5 04 13 52 83 05 6
Korea, Rep. of 13 9 14 8 22 27
M a l a y s i a 11 91 22 89 8 3
Mexico 29 27 29 35 34 28
Switzerland 4 12 21 7 22 9
T h a i l a n d 71 32 23 42 2 9
United States 33 40 33 35 49 32
Total 365 460 795 648 672 611
a The European Union and its Member States.  For details of Member States' notifications, see WT/TPR/S/72, p. 62, Table III.6.
Source : WTO Secretariat.
94. SPS and TBT measures are an integral part of the instruments at the disposal of WTO
Members to meet public policy goals:  an objective of the relevant WTO Agreements is to ensure that
such measures do not create unnecessary obstacles to international trade.  Complaints of such barriers
to trade being created are on the rise:  by mid-2001, there were 21 complaints invoking provisions of
the SPS or TBT Agreements.78
3. Market access conditions for services
95. The services sector plays a dominant role in the economies of most WTO Members, both in
providing consumer benefits directly, such as through health and education, and as a support to
business activities through, for example, finance, communications, and transportation.  Services is the
main sector of activity in high-income countries (both in terms of GDP and employment) and itsimportance is growing in lower-income countries.  Th e importance of the services sector in the world
economy greatly exceeds its share in world trade, the latter being estimated at one fifth in 2000, in
part because these statistics only count cross-border transactions and not services provided through
affiliates.
79
96. Efficiency in the production and trade of services has an important bearing on economic
performance and development.  Services like transportation and distribution, banking and finance are
of critical importance in developing countries (and no less in developed countries), both for theemergence of a competitive manufacturing sector, and, more broadly, for social development and
poverty reduction.  In many of the poorest countries, economic and social development is hampered
by the lack of adequate basic infrastructure such as roads, power supply, telecommunications, and
public transport.  Open services trade regimes may therefore entail major benefits by helping poor
countries to obtain infrastructural services at internationally competitive prices.  For those reasons,similar basic policy prescriptions as in the goods sector apply, such as ensuring that policies
encourage rather than impede competition, and that economic operators have some certainty regarding
                                                     
78 Allegations of inconsistency with provisions of the TBT Agreement and/or the SPS Agreement were
made in the following complaints:  shelf-life (DS5);  salmon (DS18);  hormones (DS26, DS48);  shrimp (DS58,DS61);  butter (DS72); agricultural products (DS76);  textiles and apparel products (DS85);  quantitativerestrictions (DS96);  poultry (DS100);  footwear (DS121);  rice (DS134);  asbestos (DS135);  wood of conifers(DS137);  cattle, swine and grain (DS144); textiles and apparel products (DS 151);  swine (DS 203),  sardines
(DS231);  matches (DS232);  pharmaceutical products (DS233).
79 WT/S/C/W/27.WT/MIN(01)/2
Page 38
the stability of the policy framework.  In addition to domestic benefits from a greater variety and
competitive pricing of services, trading partners gain the opportunity for trade-related development,
based on services trade.
97. A key development in the multilateral trading system was therefore the WTO GATS
Agreement, which established a framework of commitments by Members to bind, reduce or eliminate
impediments to the supply of services by foreign providers;  this was followed up by the agreements
on basic telecommunications and financial services in 1997 (Fourth and Fifth Protocols of the GATS,
respectively). Just as is the case of the policies affecting market access for goods, Members display a
wide variety of approaches to service-sector liberalization (Table II.3). Within the sectoral
commitments, all modes of delivery are generally provided for, although a number of Members
maintain restrictions on commercial presence, and the scope of access for delivery by mode 4 –
movement of natural persons – is severely limited (essentially to business travellers and intra-
corporate transferees).
Table II.3
Sectoral coverage of Schedules
Sectors
committedNumber of
MembersWTO Members
≤20 44 Angola, Bahrain, Barbados, Benin, Botswana, Burkina Faso, Cameroon, Central African Republic,
Chad, Congo, Congo (Republic), Costa Rica, Cyprus, Fiji, Gabon, Guinea, Guinea-Bissau, Guyana,
Haiti, Honduras, Madagascar, Malawi, Maldives, Mali, Malta, Mauritania, Mauritius, Mozambique,
Myanmar, Namibia, Niger, Paraguay, Rwanda, St. Kitts & Nevis, St. Lucia, St. Vincent & theGrenadines, Solomon Islands, Sri Lanka, Suriname, Swaziland, Tanzania, Togo, Uganda, Zambia
21-40 23 Bangladesh, Bolivia, Brunei Darussalam, Burundi, Côte d'Ivoire, Djibouti, Dominica, El Salvador,
Ghana, Grenada, Guatemala, Kenya, Macau, Mongolia, Nigeria, Papua New Guinea, Peru, Qatar,
Senegal, Sierra Leone, Tunisia, Uruguay, Zimbabwe
41-60 10 Antigua & Barbuda, Belize, Cuba, India, Morocco, Netherlands Antilles, Nicaragua, Pakistan,
Trinidad & Tobago, United Arab Emirates
61-80 12 Brazil, Ecuador, Egypt, Hong Kong (China), Israel, Jamaica, Kuwait, Liechtenstein, Poland,
Romania, Singapore, Venezuela
81-100 12 Argentina, Chile, Czech Republic, Dominican Republic, Indonesia, Lesotho, New Zealand, Panama,
Slovak Republic, Slovenia, South Africa, Turkey
101-120 7 Australia, Bulgaria, Gambia, Canada, Philippines, Switzerland, Thailand
≥121 24 EC (15), Iceland, Japan, Columbia, Korea (Rep. of), Malaysia, Mexico, Norway, Hungary,
United States
Source : WTO document T/S/C/W/94, 9 February 1999.
98. Although GATS commitments are of relatively recent vintage, a number of Members have
pursued, or are still pursuing, privatization and deregulation of services activities, accelerating the
pace of autonomous liberalization in the services sector, and leading to policies in place that are
generally more liberal – in some instances, much more so – than those specified in Schedules.  Since
the mid-1990's, a wave of restructuring, rationalization and privatization of key services has been
undertaken in many developing countries, particularly in the areas of telecommunications, finance andtransportation.  Among the underlying factors were the rapid rate of technological change (in
telecommunications, for example), financial crises and the need to redress ailing banking sectors, the
restructuring of public sectors, supply bottlenecks (public transport, energy) as well as fiscal
considerations.  Foreign participation has often been encouraged to provide capital, transfer of
technology and entrepreneurial methods.  Faced with the rapid globalization of markets and
technologies and changing consumer demands, service reforms have also been undertaken by
developed countries, in particular in "network  industries" (telecommunications, power and gas
supply).  Domestic reforms have generally resulted in more open markets for both domestic and
foreign suppliers.  Chapter V deals in part with some issues related to GATS and the provision of
health and education services.
99. The Trade Policy Reviews conducted since the establishment of the WTO in 1995 provide
numerous examples of domestic reforms undertaken in both developed and developing countries afterWT/MIN(01)/2
Page 39
the end of the Uruguay Round, and which have not been bound in GATS Schedules of Commitments.
For example, the recent financial crisis in South-East Asia (1997-98) provided for extensive opening
to foreign participation in banking (Indonesia, Republic of Korea, Thailand), other financial services
(Republic of Korea), telecommunications (Republic of Korea, Thailand), and distribution services
(Indonesia).  Wide-ranging liberalization of service sectors had the objective to increase economic
efficiency and resilience in key services as well as to attract foreign expertise.  The lowering offoreign ownership thresholds in Indonesia, Republic of Korea and Thailand allowed foreign banks to
take effective control of ailing domestic institutions and facilitate restructuring.  In addition, the lifting
of branch restrictions (Indonesia) aimed at creating a level playing field throughout the country, as
foreign institutions had initially been confined to selected urban centers.  In Brazil, the structural
reform agenda in services covers the privatization of state-owned banks, the national telephone
company and the leasing of port, airports and highways.  In South Africa, the main telephone
company was sold to a private consortium and th e authorities are considering the implication of
privatizations in the air transport sector.  Many countries in Africa have taken similar steps (Gabon,
Kenya, Uganda), seeking foreign strategic partners for major banks or telecommunications
companies.  Reforms are undertaken on an autonomous basis, often under IMF and World Bank-supported programs.
4. Intellectual property protection
100. The WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS)
establishes a framework of rules on minimum levels of protection for intellectual property rights
(IPRs) and the means to ensure their enforcement.  These rules concern the protection of patents (for
inventions), trademarks, geographical indications (i dentifying the origin of a product) industrial
designs of integrated circuits, undisclosed information, as well as the protection of copyright (for
literary and artistic works such as novels, poems, plays, films, musical works, paintings, photographs,sculptures, and architectural designs, and the rights of performers, producers of sound recordings and
broadcasting organization).  Protecting intellectual property rights such as patents and copyright
preserves the incentive for creativity and inventivene ss, while in the area of distinctive signs, such as
trademarks and geographical indications, its main purpose is to protect the consumer and prevent
unfair competition between producers.  In the area of patents, another benefit is to foster disclosure of
inventions, which encourages further innovation.
101. When the WTO Agreements took effect on 1 January 1995, developed countries had one year
to ensure that their laws and practices conformed with the TRIPS Agreement, developing-country
Members and (under certain conditions) transition economies had an additional four years (plus five
years to provide patents for areas of technology not subject to such protection previously, although
exclusive marketing rights were required as of 1995), and LDCs had an additional 10 years.  Thus, as
of 1 January 2000, developing-country Members were required to have implemented the TRIPSAgreement by introducing new legislation or modifying existing legislation;  the WTO has received
notifications to this effect and the TRIPS Counc il has been engaged in reviewing implementation
efforts by such Members.
80
102. Trade Policy Reviews conducted in the course of 2000 and 2001 confirm the steps taken by
many developing and transition countries to adopt entirely new intellectual property legislation, orupdate existing legislation.
81  In Latin America, Brazil enacted revised copyright, patent and
                                                     
80 IP/C/19.
81 Based mainly on the information contained in Trade Policy Review documents (WT/TPR/G/, S, M)
circulated between January 2000 and July 2001 for the reviews of Kenya (WT/TPR/S,G,M64), Peru(WT/TPR/S,G,M69), Poland (WT/TPR/S,G,M71), Republic of Korea (WT/TPR/S,G,M73), Bahrain(WT/TPR/S,G,M74), Brazil (WT/TPR/S,G,M75), Ghana (WT/TPR/S,G,M81), Macau, China(WT/TPR/S,G,M82), Brunei Darussalam (WT/TPR/S,G,M84), Organization of Eastern Caribbean States
(OECS) (WT/TPR/S,G,M85), Gabon ((WT/TPR/S, G,M86), and Cameroon (WT/TPR/S,G,M87).WT/MIN(01)/2
Page 40
trademark legislation, while Costa Rica adopted regulations to give effect to TRIPS obligations.  In
the Caribbean, the degree to which the Members of the Organization of Eastern Caribbean States
(OECS) have amended or introduced domestic legislation to reflect the TRIPS Agreement varies
considerably, but no country has completed the process.  Dominica updated or introduced domestic
legislation regarding trademarks, industrial designs, geographical indications, patents, and protection
of layout-designs of integrated circuits, between 1998 and 2000.  No new or amended legislation withrespect to the protection of intellectual property rights has been passed in Antigua and Barbuda,
Grenada, and St. Vincent and the Grenadines since the inception of the WTO.  In Antigua and
Barbuda, however, draft legislation is being prepared with respect to copyright and related rights,
layout designs, trademarks and geographical indications.
103. In Asia, new legislation was adopted by Macau, China, and measures have been taken to
better enforce rights.  Brunei Darussalam introduced legislative changes in 2000 for the protection of
copyright, trademarks, patents, layout designs of integrated circuits, and industrial designs.  TheRepublic of Korea launched in April 1998 the "Intellectual Property Great Leap Forward Policy" to
raise competitiveness through strengthened inventive activities and enhanced protection of IPRs,
enacting legislation on IPRs, notably patents in 1999, trademarks and designs in 1998, and enhancing
enforcement by raising the ceiling on fines by 150%.  In Africa, Ghana and Kenya were proceeding to
update their intellectual property laws, and the members of the Organisation Africaine de la PropriétéIntellectuelle (OAPI) revised the 1977 Bangui Agreement to attain consistency with TRIPS
provisions.  In Europe, the Czech Republic and Poland revised their legislation to meet TRIPS
requirements and to harmonize with legislation of the European Union.
104. Although the Reviews confirm significant progress being made on implementation, they also
indicate that certain Members face more difficulties than others on implementation.  These difficultiesinclude delays in completing legislative procedures in some areas of IPR legislation or in ratifications
of regional agreements, or with respect to measures required to be taken to better enforce IPRs.  The
latter includes the border measures to be taken by customs authorities, which requires training, as well
as the training of police and of magistrates on judici al tribunals.  The use of the 'flexibility' provisions
of the TRIPS Agreement by developing countries and their scope has recently been at issue withrespect to access to essential medicines, and is dealt with in more depth in Chapter V.
5. Regional trade agreements
105. Virtually all WTO Members are partners in at least one regional trade agreement (RTA), and
many are partners in two or more.
82  A major development in 2001 is the formal launch of
negotiations on a Free-Trade Agreement of the Americas (FTAA), linking partners in North and
South America (except Cuba).  Other cross-regional trade integration initiatives are also making
progress, notably the negotiations on free-trade agreements between the European Union, on the one
hand, and Chile and MERCOSUR, respectively, on the other hand.  Another major development is the
rising number of RTAs planned or under negotiation in Asia, the region with the smallest number of
RTAs currently in force, including by Japan, still among the few WTO Members not party to one or
more RTAs.
106. Although RTAs may take the form of free-trade areas (FTAs), customs unions (CUs), or
agreements leading to the formation of one or the other, free-trade areas are generally more prevalent
                                                     
82 Regional trade  agreements are distinct from regional integration  agreements insofar as the former
provide for partners to grant each other preferential ta riff treatment on a reciprocal basis, while the latter
promote open trade and cooperation.  The Asia-Pacific Economic Cooperation (APEC), established in 1989, isan example of "open" regionalism.  APEC Members are:  Australia;  Brunei Darussalam;  Canada;  Chile;China;  Chinese Taipei;  Hong Kong, China;  Indonesia;  Japan;  Republic of Korea;  Malaysia;  Mexico;  NewZealand;  Papua New Guinea;  Peru;  Philippines;  Russian Federation;  Singapore;  Thailand;  United States;
and Viet Nam (http://www.apecsec.org.sg/).WT/MIN(01)/2
Page 41
than customs unions.  FTAs account for almost 90% of all RTAs.83  Another fact of note is the
prevalence of RTAs in Europe and neighbouring regions, accounting for about half of all RTAs, the
result of the long-standing use of RTAs as an instrument to forge closer ties with neighbours on the
part of the European Communities (Chart II.3).
020406080100120
Americas Asia Pacific Eastern Europe &
Central AsiaEuro-
MediterraneanSub-Saharan Cross-RegionalChart II.3
Geographical distribution of RTAs , both in force and under ne gotiation, 2001
Number of RTAs
Source: WT/REG/W/41.FTAs under negotiation
CUs under negotiation
FTAs in force
CUs in force
107. In the Americas, the FTAA planned for 2005 would link 34 countries in the Americas.  In
effect, the FTAA is to link pre-existing sub-regional groupings, including the NAFTA (which is in its
last stage of implementation), customs unions such as MERCOSUR, CARICOM in the Caribbean,
and CACM in Central America, as well as the dense network of bilateral free-trade agreements (many
of partial scope) concluded under the Latin American Integration Association (Chile and Mexicobeing among the most active countries in this regard).  Parties to NAFTA – the United States, Canada
and Mexico – have also pursued an active agenda of negotiations on bilateral FTAs with countries in
other regions of the world.
108. In Europe, the liberalization provisions of most of the FTAs between the European Union
(EU) and candidates to accession have been implemented, and further liberalization has been agreed
for agricultural products.  In turn, the candidates to accession are linked among themselves by FTAssuch as the CEFTA (Central European Free Trade Agreement) and BAFTA (Baltic Free Trade Area),
which are broadly framed and modelled on the RTAs negotiated with the EU.  Meanwhile, the EU is
negotiating and concluding second-generation bilateral FTAs, based on a reciprocal exchange of
preferences, with partners in the Mediterranean and North Africa, with the objective of a Euro-Med
free-trade area by 2010.  A similar process is envisaged for African, Caribbean and Pacific (ACP)countries, as part of the transitional provisions of the ACP-EU partnership agreement concluded in
February 2000.  The EU is also looking to forge closer ties with emerging markets in Latin America;
                                                     
83 WT/REG/W/41.WT/MIN(01)/2
Page 42
its FTA with Mexico entered into force in mid-2000 and negotiations on FTAs with MERCOSUR and
Chile have taken place in the past few months.
109. In Africa, the regional integration process continues to intensify, with initiatives in western
and eastern Africa involving in some cases the same countries with different objectives and rules.84  In
western Africa, countries are working at the completion of the West African Economic and Monetary
Union (WAEMU) and Central African Economic and Monetary Community (CEMAC).85  C e r t a i n
Members of the Economic Community of West African States (ECOWAS) agreed to establish a
common external tariff by the end of 2001, but progress has been uneven.86  Ambitious plans to
achieve a free-trade area among 20 countries in eastern and southern Africa under the COMESA,
supported by closer monetary cooperation, are under way.87  Members of the SADC are working
towards achieving a free-trade area by 2004.88
110. In Asia, Japan, like the Republic of Korea, has shifted its long-standing policy of multilateral-
only trade liberalization to initiate negotiations on an FTA with Singapore, and has formed a studygroup to consider the feasibility of FTAs with the Republic of Korea and Mexico.  Singapore hopes to
conclude FTAs with Australia, Canada, and Mexi co;  an FTA with New Zealand was concluded in
November 2000.  Singapore, already a member of ASEAN, considers such FTAs as a useful means to
forge links with trading partners.  Similar considerations are motivating Thailand in its search for
bilateral FTAs with Croatia, the Czech Republic, and the Republic of Korea.  The Members ofASEAN moved towards their objective of achieving a free-trade area by 2005, although most tariffs
will already be cut to between zero and 5% by 2002.  The Republic of Korea is negotiating an FTA
with Chile, and is considering the feasibility of FTAs with Japan and Thailand.
111. In the rest of the world, regional initiatives have been burgeoning, from the Middle-East (in
the context of the Gulf Cooperation Council and th e Arab League) to Eastern Europe (customs union
between several former Soviet Union countries) and South Asia (recent free-trade agreement between
India and Sri Lanka), involving both WTO Members and non-members.
112. While it was argued that regional integration co uld strengthen after Seattle, in response to
disappointment with the multilateral trading system, most of the initiatives described above were
designed or launched before the Third WTO Ministerial Conference.  In addition, not all regionalprocesses are moving forward without difficulties.  The process established under APEC to meet the
goal set at Bogor in 1994 of "free and open trad e and investment in the Asia-Pacific by 2010 for
developed member economies and 2020 for developing ones", through autonomous MFN tariff
reductions has not advanced significantly in recent years.
89  MERCOSUR has encountered obstacles
following the decision by Argentina, on an emerge ncy basis, to suspend certain regional commitments
and impose a surcharge on imports in the autumn of 2000.  Finally, plans to complete customs unions
                                                     
84 Concerns have been voiced by multilateral and regional aid agencies over the number of internally
inconsistent initiatives, particularly in eastern and southern Africa. COMESA, SACU, SADC and the EAC have
overlapping memberships, conflicting obligations, differen t strategies and objectives, and conflicting rules and
administrative procedures (one example is the existence of multiple rules of origin, leading to possible
discretion at customs and costly duplication of administrative efforts).
85 WAEMU is composed of Benin, Burkina Faso, Guinea-Bissau, Côte d'Ivoire, Mali, Niger, Senegal
and Togo;  and CEMAC comprises Cameroon, the Central African Republic, the Congo, Gabon, EquatorialGuinea, and Chad.
86 The countries concerned are Benin, Burkina Faso, Ghana, Mali, Niger, Nigeria, and Togo.
87 COMESA Members are Angola, Burundi, Comoro s, Djibouti, Egypt, Eritrea, Ethiopia, Kenya,
Madagascar, Malawi, Mauritius, Namibia, Rwanda, Seychelles, Sudan, Swaziland, Uganda, Zambia, andZimbabwe.
88 SADC is composed of Angola, Botswana, the Congo, Lesotho, Malawi, Mauritius, Mozambique,
Namibia, Seychelles, South Africa, Swaziland, Tanzania, Zambia, and Zimbabwe.
89 For information on APEC developments, see http://www.apecsec.org.sg/.WT/MIN(01)/2
Page 43
or FTAs in Africa have at times proved difficult to complete or been slowed by significant delays or
even defections by parties.
113. Still, the evidence regarding the stock of completed RTAs, and the large number of RTAs
planned or under negotiation, is testimony to the basic attraction of such agreements to virtually all
WTO Members.  RTAs can offer intermediate steps to the broader process of integration into the
world economy and, in some cases, achieve faster and deeper liberalization than is possible at themultilateral level.  Some countries argue that liber alization at the regional level is sometimes a
prerequisite to achieving multilateral consensus.  Other countries view trade agreements as part of a
wider integration projects, aimed at stimulating economic, social and political links in their regions;
this is notably the case for small or landlocked African states, which typically seek integration of
infrastructures and monetary unions.  In this context, the exchange of trade preferences is but an
initial aspect of much broader and deeper integration agenda.
114. RTAs have their limits.  Experience has also shown that 100% product coverage of free-trade
provisions is the exception as opposed to the rule, as the domestic forces that resist trade liberalization
at the multilateral level are just as likely to resist it at the regional level, perhaps even more so given
proximity.  And FTA partners do not generally exempt each other from using trade defence
instruments, which are a frequent source of dispute in the WTO, but also regionally.  For third parties,
RTAs imply trade diversion as a result of tariff preferences, reinforced by preferential rules of origin.These and other issues related to RTAs are explored in greater detail in Chapter IV of this report.WT/MIN(01)/2
Page 45
III. DEVELOPING COUNTRIES' PARTICIPATION IN WORLD TRADE AND IN WTO
ACTIVITIES
A. INTRODUCTION
1. The participation of developing countries in the multilateral trading system has changed
considerably in recent years.  The WTO's membership has increased steadily to 142, over 75% of
which are developing-country Members.  Also, the WTO Agreement, negotiated in the UruguayRound, resulted in a major expansion of the rules-based multilateral trading system.  Certain sectors
that had been characterized by pervasive distortions, such as agriculture and textiles and clothing,
were brought under strengthened multilateral discipli nes.  Rule-making in the areas of services and
intellectual property was introduced and there was a tightening of disciplines on contingent trade
remedies, the use of subsidies, standards, and customs valuation.  The dispute-settlement mechanism
was strengthened, a trade-policy review mechanism was permanently established, and the World
Trade Organization was created.
2. This institutional shift coincided with, and was to  some extent driven by, a change in the trade
policies and practices of developing countries.  A number of these rejected inward-looking,
interventionist, import-substitution models of development in favour of trade reform and
liberalization, on the grounds that this enhanced their growth and development prospects.  In
particular, the justification for intervention based on the argument that countries at a different stage ofdevelopment required different policies was seen as both conceptually and empirically
unsubstantiated.  During the 1990s, the openness of all developing countries to trade (as measured by
the share of trade in GDP) has increased considerably (Table III.1).
Table III.1
Developing countries' share of exports and imports of goods and services in GDP by selected country groups and regions, 1990-19 99
(Per cent, based on constant 1995 dollar values)
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Developing countriesa43.1 45.4 47.8 49.9 52.7 56.3 57.6 60.4 59.2 59.9
Latin America 24.4 25.6 27.5 28.9 30.8 33.1 35.2 37.9 40.3 40.9
Africa 64.4 63.0 63.5 64.1 63.5 65.9 65.1 66.6 65.8 66.8
Middle East 67.6 72.1 70.3 68.9 60.3 52.7 53.9 48.9 46.2 46.0
Asiaa53.6 57.7 61.0 63.5 67.7 72.1 72.2 75.4 71.6 71.8
China 35.1 38.8 40.9 42.8 45.2 45.7 44.4 49.0 46.3 48.9
Other Asiaa59.7 64.0 68.4 71.5 77.0 83.2 84.2 87.3 84.4 83.5
a Due to missing data, Singapore and Chinese Taipei are not included.
Source: World Bank, World Development Indicators.
3. Developing countries' interest in the multilateral trading system rests on a number of different
factors.  First, the need to address and discipline interventionist and trade distorting policies – whetherin developing or developed countries.  Second, the fact that multilateral rules and negotiations can
reinforce autonomous reform efforts by helping to guard against policy reversal and slippages.  Third,
the possibility that multilateral processes and rules can help create coalitions among the beneficiaries
of trade liberalization, generating the momentum needed to address politically sensitive areas.
Fourth, the security afforded by multilateral rules, which are of special interest to developing – andespecially smaller, low-income and least-developed – countries, since larger developed countries can
also bring to bear their size and economic weight in trade relations.
4. Developing countries thus have a significant stake in the smooth functioning of the
multilateral trading system, providing predictable and secure access to export markets.  The use of
trade policy instruments is regulated and certain legitimate trade policy actions, such as trade defenceWT/MIN(01)/2
Page 46
measures, are subject to enforceable multilateral rules and disciplines.  The WTO provides developing
countries the opportunity to assert themselves in dispute settlement and in the crafting of new trade
rules.  In addition, WTO Membership includes the provision of technical assistance by the WTO and
other relevant agencies to help build capacity and improve the wider institutional infrastructure in
developing countries.
5. Developing countries have a lot to gain from further wide-ranging trade liberalization. In
manufacturing, despite generally low average tariff levels, products exported by developing countries
are affected by tariff peaks and tariff escalation in both developed and developing countries.  In
agriculture, the continuation of the reform process remains a key area for the growth prospects of
many developing countries.  Also, all developing countries can gain considerably from further
liberalization of services in both developed and other developing countries, in particular in regard to
the temporary movement of natural persons in areas such as construction, distribution and software
services.  Dynamic gains can also be expected from further liberalization in developing countries ofkey infrastructure services, such as telecommunications, transport, and financial services.
B. D
EVELOPING COUNTRIES ' PARTICIPATION IN WORLD TRADE IN THE 1990 S
Total merchandise exports
6. In the past decade, considerable progress has been made in integrating developing countries
into international trade, although this has not neces sarily been even across all developing countries.
The share of developing countries in world merchandise exports has increased steadily, largely on
account of strong growth in merchandise exports in six East-Asian traders1 and China, and to a lesser
extent Latin America.  In 2000, developing countries' share in total merchandise exports amounted to
more than 30%;  as a group, developing countries' merchandise exports grew at an average rate of 9%
in the period 1990-2000 (Tables III.2 and III.3).
Table III.2
Share of selected country groups and regions in world merchandise exports, 1990-2000(Per cent)
1990 1994 1998 1999 2000Percentage point change
1990-00
Worldab100.0 100.0 100.0 100.0 100.0
Developed countriesb72.8 70.6 69.3 68.1 64.8 -8.0
Developing countries 24.1 26.4 26.7 28.0 30.8 6.7
 Latin America 4.3 4.6 5.3 5.4 5.8 1.5
 Africa 3.1 2.3 2.0 2.1 2.3 -0.7
 Middle East 4.0 3.0 2.6 3.3 4.2 0.2
 Asia 11.9 15.7 15.8 16.4 17.7 5.8
China 1.8 2.9 3.5 3.5 4.0 2.2
Six East-Asian tradersc7.9 10.2 9.5 9.9 10.5 2.6
Other Asia 2.2 2.6 2.8 3.0 3.1 0.9
a Includes transition economies.
b Includes EU intra-trade.c Chinese Taipei; Hong Kong, China; the Republic of Korea; Malaysia; Singapore;  and Thailand.  Significant re-exports are
excluded.
Source: WTO Secretariat.
                                                     
1 This group is composed of Chinese Taipei;  Hong Kong, China;  the Republic of Korea;  Malaysia;
Singapore;  and Thailand.  Significant re-exports are excluded.WT/MIN(01)/2
Page 47
Table III.3
Growth of merchandise exports by selected country groups and regions, 1990-2000
(Annual percentage change)
1990 1994 1998 1999 2000 1990-2000
Worldab13.0 13.2 -1.5 4.0 12.3 6.1
Developed countriesb14.8 12.4 0.8 2.3 6.8 5.0
Developing countries 13.4 15.1 -6.8 9.2 23.6 8.8
 Latin America 9.5 16.4 -1.3 6.6 20.1 9.4
 Africa 20.8 3.1 -15.9 9.6 26.6 3.4
 Middle East 24.6 2.1 -21.2 28.1 46.3 7.0
 Asia 10.3 19.6 -4.7 7.7 20.9 10.5
China 18.2 31.9 0.4 6.3 27.7 14.9
Six East-Asian tradersc7.9 18.4 -7.4 7.9 19.1 9.3
Other Asia 12.9 12.6 -1.2 8.7 18.5 10.2
a Includes transition economies.
b Includes EU intra-trade.c Chinese Taipei; Hong Kong, China; the Republic of Korea; Singapore;  and Thailand.  Significant re-exports are excluded.
Source : WTO Secretariat.
7. The performance of developing countries' merchandise export growth has been uneven across
regions.  China and the six East-Asian traders accounted for the bulk of developing country exports
in 2000, with a share of nearly 47%, up fr om 40% in 1990 but down from 50% in 1994.
Latin American and Caribbean countries saw their share remaining approximately constant with 18%
in 1990, 17% in 1994 and 19% in 2000.  Conversely, African countries have experienced strong
fluctuations in merchandise export growth;  their share of 13% of developing countries' merchandise
exports in 1990 had declined to some 8% by 2000.  The reasons for the latter are complex and include
strong dependence on primary commodities, but also domestic constraints, such as structural
problems, weak institutional frameworks and civil unrest.
Agricultural trade
8. Agriculture remains of great importance to many developing-country economies, as is
apparent from its contribution to GDP in these countries.  Agriculture as a share of GDP, although
down during the 1990s, remains high for many developing countries, in particular low-income
countries (29% in 1990, 26% in 1999) compared, for instance, to EU countries (mostly between 1%
and 4% in 1999).  Net food-importing developing countries point to the role agriculture plays in theirtotal imports and to the difficulties that result from falling levels of food aid in the 1990s.
9. There was a significant increase in exports of agricultural products by developing countries in
the 1990s.  In that period, developing countries' share of world agricultural exports increased from
28% to 31%, with their exports growing at some 4% a year on average.  For about one third of all
developing-country Members, agricultural exports still account for 50% or more of total merchandiseexports.
10. In agriculture, trade-distorting measures remain significant, in both developed and developing
countries, and tariffs are much higher than those applied to manufactured goods.  Developing
countries find it hard to enter protected markets and to compete with subsidized production from
certain developed countries.  Also, in some instances, practices in administering lower-duty tariff-ratequotas are seen as possible constraints to market access.WT/MIN(01)/2
Page 48
Trade in manufactures
11. Since 1990, developing countries have steadily increased their share of world exports of
manufactures, from 17% to some 27% in 2000 (Table III.4).  However, as with total merchandise
exports, growth in exports of manufactures from developing countries has been uneven across
regions.  China and the six East-Asians traders accounted for about 63% and 62% in 1990 and 2000,
respectively, of developing countries' exports of manufactures.  The share accounted for by Asiaexcluding China and the six East-Asian traders increased from 9% in 1990 to about 11% at the end of
the decade.  In 2000, Latin America accounted for 17%, Africa for 3%, and Asian developing
countries for 72% of all developing countries exports in manufactures, compared with 13%, 5%, and
72% respectively, in 1990.
Table III.4
Share of selected country groups and regions in world exports of manufactures, 1990-2000
Per cent
1990 1994 1998 1999 2000
Worldab100.0 100.0 100.0 100.0 100.0
Developed countriesb80.4 75.2 72.8 72.0 69.4
Developing countries 17.5 22.6 24.0 25.0 27.4
 Latin America 2.3 3.0 4.1 4.3 4.7
 Africa 0.9 0.8 0.8 0.7 0.8
 Middle East 0.8 0.9 1.0 1.0 1.2
 Asia 12.6 17.1 17.3 18.2 19.9
China 1.9 3.3 4.0 4.1 4.7
Six East-Asian tradersc9.1 11.7 10.7 11.4 12.2
Other Asia 1.6 2.2 2.6 2.8 2.9
a Includes transition economies.
b Includes EU intra-trade.c Chinese Taipei; Hong Kong, China; the Republic of Korea; Malaysia; Singapore;  and Thailand.  Significant re-exports are
excluded.
Source : WTO Secretariat.
Export structure of developing countries
12. The increase in the share of developing country merchandise exports accounted for by
manufactures reflects a significant shift, away from primary products, in the export structure of
developing countries as a whole (Chart III.1).  From 1990 to 2000, average annual growth of more
than 10% for developing country exports in manufactures to developed country markets by far
outperformed export growth to those markets in primary products, which rose at an average annualgrowth rate of about 3%.
13. Regional differences are very marked with regard to the diversification of exports.  The share
of merchandise exports from China and the six East-Asian traders accounted for by manufactures rose
from 75% in 1990 to 85% in 2000;  in Latin America a significant increase from 38% to more than
60% occurred, and the share of manufactures in African merchandise exports rose from 20% to about25% over the same period.  In many of these latter countries, around 75% of exports are still
concentrated in traditional primary commodities and their manufactures share therefore remains
significantly below the world average share of manufactures in total merchandise exports, of over
75%.WT/MIN(01)/2
Page 49
01020304050607080
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000Source:     WTO Secretariat.Chart III.1                                
Composition of developing countri es' merchandise exports, 1990-2000
Per cent
Manufactures Agricultural products Mining products
Exports of commercial services
14. Based on balance-of-payments data, the total value of world exports of commercial services is
estimated at US$1,415 billion in 2000.2  Trade in commercial services has expanded quickly over the
past years, with 12.4% growth in 2000.  Developi ng countries' share in world exports of commercial
services rose to about 25% in 2000, up from some  20% in 1990 (Chart III.2).  In 2000, Latin America
was estimated to account for approximately 4.3%, Africa for 2%, the Middle East for 2.3%, and
developing Asia for 15.1%.
15. Trade in services is increasingly important for the diversification of developing-country
economies and as a source of foreign exchange and export earnings.  Individual developing countries
feature among those countries most specialized in services, as measured by the importance of services
exports as a share of total exports.  For instance, for the small-island developing countries of the
Organization of Eastern Caribbean States (OECS) , tourism receipts accounted for 55% of total
exports of goods and services, and for about three times the value of their total exports of
merchandise.3
                                                     
2 These figures underestimate the true share of commer cial services in total world trade.  For instance,
conventional balance-of-payments statistics fail to cover trade in services embodied in goods or production and
sales of foreign affiliates.
3 WT/TPR/S/85.WT/MIN(01)/2
Page 50
1015202530
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000Source: WTO Secretariat.Chart III.2                   
Share of developing countries' commercia l services exports in world exports of
commercial services, 1990-2000
Per cent
South-South trade
16. Developing countries are trading more, in particular with each other.  Total merchandise
exports from developing countries to other developing countries in the 1990s grew much faster (anaverage 10% rate) than exports from developing to developed countries, which grew at an average
rate of 6.5% a year.  Merchandise exports from developing countries to other developing countries as
a share of total developing-country exports increased from 28% in 1990 to about 36% in 2000.
Increases in exports to other developing countries were particularly pronounced for Asia (in particular
due to intra-Asian trade), Africa, and the Middle East.
17. Manufactures proved to be by far the most dynamic component of intra-developing country
trade with an increased share in total intra-developing country merchandise exports of more than 63%
in 2000, compared to 54% ten years earlier.  A large part of this increase can be ascribed to a nearly
sevenfold increase in intra-developing country e xports of office and telecommunications equipment.
18. Agricultural trade among developing countries has grown rapidly in recent years.  In 1999,
about 40% of the agricultural exports of developing countries was sold in the markets of other
developing countries, up from 30% in 1990.  Nonethel ess, agriculture's share in total intra-developing
country merchandise exports declined from 16% in 1990 to about 12% in 2000, due to the significant
rise in trade in manufactures.
C. D
EVELOPING COUNTRIES ' PARTICIPATION IN WTO ACTIVITIES
19. Participation of developing countries in the multilateral trading system has changed
dramatically.   Among the original 23 signatories of GATT 1947, only 11 were developing countries4.
Currently, over 70% of the WTO's Members are developing countries.  Participation of developing
                                                     
4 Brazil, Chile, Cuba, China, India, Lebanon, Myanmar, Pakistan, Sri Lanka, Syria, and Zimbabwe.WT/MIN(01)/2
Page 51
countries in trade negotiations has also increased steadily:  for example, 25 developing countries took
part in the Kennedy Round, 68 in the Tokyo Round, and 76 in the Uruguay Round.  In the current
WTO negotiations on agriculture and services, most developing countries are playing an active role.
20. The Uruguay Round was a major step forward in the integration of developing countries into
the multilateral trading system, as fully-fledged commitments were taken on for the first time,
covering trade in goods and services, as well as on intellectual property rights.  Previously in theGATT, developing countries' effo rts had concentrated more on expanding their rights to remain
exempt from the rules rather than participating ac tively in negotiations. However, with more and more
developing countries becoming important exporters, increasingly in manufactured goods, and with
many developing countries undertaking trade liberalization reforms in the 1980s, developing countries
have been participating more actively in the trade ne gotiations to assert their trading interests and are
actively shaping the trade agenda of the WTO.
21. In this section, the current situation of developing countries' participation in the WTO is
described by examining their involvement in four key WTO areas:  the ongoing negotiations in
agriculture and services, implementation of the WTO Agreements, dispute settlement, and trade-
related capacity-building.
1. On-going negotiations in agriculture and services
Agriculture
22. The concerns of developing countries, including special and differential treatment, are an
integral feature of the current negotiations on agriculture.  Developing countries are participating very
actively in the negotiations, including by submitting or co-sponsoring negotiating proposals.  Almost
two thirds of developing-country Members, and about 90% of WTO Members have submitted
negotiating proposals to date.
23. In general, negotiating proposals by developing countries reflect a diverse range of interests.
For example, the Cairns Group, which counts 15 developing countries among its 18 members, favours
much greater liberalization in agricultural trade.  On domestic support, many developing countries call
for Green-Box exemptions that are more responsive to the specific needs and special situations of
developing countries, especially with respect to food security, rural development and povertyalleviation.  One approach proposed by India a nd the Group of Like-Minded (G-13) countries (a
number of African, Asian and Latin American/C aribbean countries) is to create a "Food
Security/Development Box" to enab le developing countries greater scope to protect and enhance,
through domestic support and other measures, their food production capacity, particularly in key
staples.  Also, a number of developing countries have proposed various forms of additional flexibilityin the area of domestic support, including an increase in the de minimis  level of trade-distorting – but
for developing countries exempt – subsidies.
24. With regard to export competition, virtually all developing-country proposals call for the
elimination of export subsidies or all forms of export subsidization, although a number of developing
countries, including ASEAN and the African Group, supplement this by proposing to continue special
and differential provisions under which developing countries are able to use certain marketing and
transportation subsidies in order to assist them in the development of their exports. There are alsocalls for improved measures in favour of least-developed and net food-importing developing
countries.  Enhanced disciplines on export restrictions and export taxes feature in a number of
proposals, for instance by the Cairns Group and Korea,  in the context of food security.
25. On agricultural market access, a wide range of developing-country Members calls
for substantial further reductions in tariffs.  Many proposals refer to the need to eliminate tariff peaksWT/MIN(01)/2
Page 52
and tariff escalation, particularly with regard to products of export interest to developing countries.
In several proposals the need to simplify tariff regimes, particularly by way of eliminating complex
non-ad valorem  tariff schemes, is highlighted. Proposals by a number of developing-country
groupings (ASEAN, Group of Like-Minded (G-13) countries) call for substantial liberalization of
trade in products of interest to developing countries, including full liberalization for processed tropical
products.  There is also the proposal to improve and bind non-reciprocal preferential tariffs.  Somesmaller developing countries, such as the CA RICOM countries, Mauritius, and Swaziland, have
expressed concern about import barriers in developed countries falling too fast;  these countries
usually depend on a few basic commodities, and preferential treatment (such as duty-free trade) in
these is essential for them to preserve the value of their access to richer markets.
26. Other issues of particular concern to developing countries are the administration of tariff
quotas, including commercially meaningful access opportunities for small suppliers or newcomers
from developing countries;  and the special agricultural safeguard mechanism, with a number ofdeveloping countries proposing to make it available to all developing countries for all agricultural
products.  A considerable number of developing countries also point to the need for enhanced
technical assistance, with some, including the CA RICOM countries, Senegal, and Jordan, referring to
the establishment of special agricultural technical assistance funds.
Services
27. Services have become a crucial component for developing countries' trade both as exports and
as inputs into production processes and infrastructure development.  Barriers in services trade vary
from sector to sector and between modes of delivery.  Liberalization of the temporary movement of
natural persons (mode 4), in which the least commitments have been made to date,  is of particular
export interest to developing countries.  Many developing-country Members have undertaken toliberalize key infrastructure services, such as telecommunications, transport, and financial services,
autonomously, as inefficiencies in these sectors add to the export costs of goods and services and
reduce their ability to compete internationally.
28. The mandated negotiations will take liberalization of services further, by extending market
access commitments over a broader range of services and by removing limitations from existingcommitments.  The Negotiating Guidelines and Procedures, which were adopted by the Council for
Trade in Service in March 2001, stress the need for flexibility for developing countries to liberalize at
a pace consistent with their development situations and emphasize the liberalization of sectors and
modes of supply that are of export interest to them.
29. Developing countries have so far indicated a similar level of activity and interest as their
developed counterparts.  A group of developing countries, which includes the Dominican Republic,
El Salvador, and Honduras, has proposed the addition to the GATS of an Annex on Tourism.
Attention is drawn to the heavy dependence of the tourism sector on other services, such as air
transport and computer reservation services, where trade regimes tend to be much less liberal than in
the tourism sector itself.  Apart from tourism, the sector focus has been mainly on infrastructural
services, such as finance, communication, and transport.  Chile, for instance, made a proposal on the
latter two areas, Colombia one on financial services.  Other proposals include professional services(Chile, Colombia), construction (Chile), and distribution (Mercosur, Chile).  Venezuela has submitted
a specific and detailed proposal on energy services.  Also, India submitted a very substantive and
detailed proposal on the liberalization of the movement of natural persons.  Mode 4 was also
emphasized in a Colombian proposal and in a comprehensive proposal by the CARICOM countries.
The latter also elaborated on dealing with small service providers as a proxy for the treatment of smalldeveloping economies.  The Andean Community countries made a proposal on classification of
services for the purpose of the negotiations.WT/MIN(01)/2
Page 53
2. Implementation
30. The WTO Agreements expanded the depth and breadth of multilateral rules and obligations
for both developed and developing countries.  Thus, with the entry into force of the WTO and the
acceptance by all WTO Members of all the results of the Uruguay Round as a single undertaking,
developing countries saw a sharp increase in their obligations.  Several agreements specify transition
time periods for developing and least-developed countries, which allow for delayed implementation ofobligations but not for differences as to the nature of the obligations themselves.  Many developing
countries have implemented their obligations as foreseen, but others have had difficulty in doing so.
31. During the preparatory process for the Third WTO Ministerial Conference in Seattle, a
number of developing countries put forward a wide  range of proposals dealing with their perceived
problems in the implementation of WTO Agreements.  Overall, there were more than 100 proposals
touching on most of the WTO Agreements.  Following the Seattle Ministerial Conference, the
General Council decided on 3 May 2000 to set up an Implementation Review Mechanism and meet inSpecial Sessions to address all outstanding implementation issues and concerns with a view to
completing the process no later than the Fourth Ministerial Conference.  Intensive consultations were
held in the second part of 2000 leading to the adoption of a Decision on some of the proposals in
December 2000.
32. The expiry of transition periods for some agreements at the end of 1999 gave additional
impetus to the debate on increased obligations of developing countries under the multilateral trading
system and the lack of resources in many of these countries to implement these obligations.  In the
case of TRIMs and Customs Valuation, several developing countries saw the need to request an
extension.  In the case of TRIMs, all developing countries that so requested were given additional
time to phase out their TRIMs.
5  In the area of Customs Valuation, 22 Members have requested an
extension of the transition period6, of which 19 have already been granted with three decisions still
outstanding.7
33. Implementation of the WTO Agreements by developing countries has turned out to be a
particularly difficult and sensitive issue.  In 2001, further wide consultations were held on the
remaining proposals.  In a bid to move the process forward, Uruguay and six other Members(Argentina, Morocco, New Zealand, Norway, Switzer land, and Thailand) submitted a paper in June,
which was favourably received by most delegations.  Following consultations on the basis of this
paper, the Chairman of the General Council and the Director-General circulated another paper
identifying some elements on which they saw the po ssibility for early agreement.  In late July, an
agreement was reached on some proposals and on the referral of some issues to subsidiary bodies fortheir consideration.  It was decided that all subsidiary bodies, also on earlier referrals, were to report
back to the General Council by 30 September 2001.
34. Some of the concerns expressed in the proposals relate to what a number of developing
countries see as inadequate implementation by developed countries of provisions requiring them to
undertake positive actions in favour or developing countries.  Dissatisfaction has also been expressed
with the best-endeavours or non-operational nature of many special and differential treatment
provisions in WTO Agreements.  Another series of concerns relates to alleged abuses of certainprovisions of the Agreements (particularly anti-dum ping), and to the lack of expected market-opening
                                                     
5 Argentina, Colombia, Malaysia, Mexico, Pakistan, the Philippines, Romania, and Thailand.
6 Bahrain, Bolivia, Burundi, Cameroon, Côte d'Ivoire, Dominican Republic, El Salvador, Egypt,
Guatemala, Haiti, Jamaica, Kuwait, Mauritania, Maldives, Myanmar, Paraguay, Rwanda, Senegal, Sri Lanka,Tanzania, Tunisia, and UAE.
7 Several developing countries have never requested a delay period, but have not yet notified their
Customs Valuation legislation.WT/MIN(01)/2
Page 54
in an area of significant export interest to many developing countries, namely, textiles and clothing.
Finally, in many of these proposals, developing countries seek to modify provisions in the existing
agreements to rebalance the obligations, i.e. make them more responsive to their concerns.
35. Despite the considerable amount of time and resources devoted to implementation large gaps
have remained among Members both on substance and on further process with regard to many of the
outstanding implementation issues.  However, most, if not all WTO Members agree that
implementation has been assigned high priority by a large number of delegations (not only developingcountries), and that addressing it would be a key to a successful Ministerial Conference in Doha.
3. Dispute settlement
36. Averaged out over the period from 1995 to June 2001, developing countries account for
approximately 31% of the complaints so far under the WTO.  About 43% of these complaints were
directed at other developing countries.  Of a total of 75 developing-country complaints, 16 were
successful and four unsuccessful;  the rest were brought to a mutually agreed or otherwise satisfactory
solution, are inactive or still pending.  To date, a developing country has only once lost a case it
initiated against an industrialized country.  Developed countries are responsible for about 69% of allcomplaints, of which 38% were against developing countries.  Taken together, developing countries
were the target in 39% of all complaints.  Overall, about 50 developing country Members have been
involved in a case at the consultation or panel stage.
37. The growing use by developing countries of the WTO dispute settlement mechanism may
reflect their widening range of trade interests and greater diversity of export products and trading
partners.  A continuously increasing number of complaints levelled by developing countries against
other developing countries gives an indication of their growing stake in each other's markets.  By thesame token, developing countries more frequently become subject to complaints.  The fact that
only 13% of all cases were brought against developing countries in the last 15 years of the GATT
(1980-94) as against 39% under the WTO from 1995 to the present seems to suggest that the increase
in developing countries' obligations after the conclusion of the Uruguay Round goes hand in hand
with an increase in WTO litigation in which they are involved.
38. Another indication of developing countries' interests in each other's markets can be found in
the growing number of anti-dumping procedures init iated against other developing countries.  About
53% of all 252 new anti-dumping investigations in 2000 were initiated by developing countries.  This
compares with 53% in 1995 and 11% in 1990, when the numbers of new initiations were also smaller,
totalling 156 and 167.  In 2000, 70% were directed against other developing countries, as opposed to66% in 1995 and 28% in 1990.  Main product groups targeted among developing countries comprise
steel and chemical products and, more recently also consumer goods.
4. Trade-related capacity-building
39. Technical assistance and training activities are conducted by the WTO and other relevant
organizations in order to help build the human and institutional capacity in developing countriesneeded to participate effectively in the multilateral trading system and in world trade. During 2000, a
total of 398 technical assistance activities were organized by the WTO.  This compares with
382 activities in 1999, representing an increase of 4.2%. These activities were held in 121 countries,
of which 99 were WTO Members, 16 were in the process of accession, and six had expressed interest
in acceding to the WTO.  Out of the 99 Member countries where technical assistance activities wereheld, 18 were least-developed (LDCs).  Anothe r nine LDCs not Members of the WTO were also
beneficiaries.  The Integrated Framework has been established for LDCs (Chapter II.A(2)).
40. In addition to ongoing technical cooperation activities, a practice was instituted of holding
regional events for the purpose of sensitizing high-level capitals-based officials on WTO matters.  AWT/MIN(01)/2
Page 55
major meeting involving African Trade Ministers was held in November 2000 in Libreville, Gabon,
and a regional event for Trade Ministers and senior trade officials of the Caribbean took place in
June 2001.
41. Under the WTO Reference Centre programme, the WTO provides Centres in beneficiary
countries with computer equipment, software, a WTO print and CD-Rom library, a "help desk"
service, an equipment replacement plan, and hands-on training.  For LDCs, the Centres are providedfree of charge, and free Internet connection for LDCs Reference Centre users are envisaged in the
future;  for developing countries, the charges are minimal.  So far, more than 100 Reference Centres
have been established covering close to 100 countries or regional/sub-regional organizations.
Moreover, one official depository library is to be designated by each WTO Member to receive all
WTO publications in print and CD-ROM formats free of charge.
42. Technical assistance was also provided to several developing countries in the preparation of
their Trade Policy Reviews.  At the end of the year 2000, over 50 developing-country Members and11 LDC Members of the WTO had been reviewed through the Trade Policy Review Mechanism at
least once.  The review exercise also serves to take stock of the problems and constraints these
countries are facing and to identify the technical assistance requirements needed to remedy those
problems.  While the reviews of most developing and least-developed countries are less frequent than
for developed countries, the number of requests has been increasing.
Initiatives for non-residents an d capacity-constrained missions
43. Ensuring the effective participation of all developing countries has been a priority area of
action.  Thirty-six Members and acceding Observers have no missions in Geneva.  Initiatives in
favour of "non-residents" include regular briefing notes giving an overview of work in progress,
briefings by senior Secretariat staff, and the holding of "Geneva Week" for senior officials from non-residents' capitals and European missions.  "Gen eva week" gives non-residents the opportunity to be
briefed by Secretariat staff, to receive training in  the use of information technology, to interact with
Geneva-based delegations, and to participate directly in the WTO's work.  The Secretariat also works
closely with other service providers, such as th e Agency for International Trade Information and
Cooperation (AITIC), and the Commonw ealth Secretariat, in meeting the needs of non-residents.  The
Secretariat has stepped up cooperation with regional organizations comprising non-residents, through
regional workshops and conferences and the creation of reference centres.
44. A number of developing countries with missions in Geneva also face constraints in
participating fully in the work of the WTO, owin g principally to the limited number of staff in the
Missions.  Since June 2000, a number of new initiatives have been developed, including internships tobring additional staff from capitals to Geneva-based Missions;  orientation courses for new staff of
developing country Missions in Geneva by the WTO Training Institute;  and the dissemination of the
briefing notes supplied to non-residents also to small, capacity-constrained Missions.  The new
Documents On-line system has also greatly facilitated access to information.  As with non-residents,
the WTO Secretariat works closely with other service providers and the secretariats of regional
organizations to meet the needs of developing c ountries with small, capacity-constrained Missions.
Inter-Secretariat Cooperation
45. The WTO continues to develop and strengthen links with regional and other institutions,
bodies, and organizations to cooperate in the organization of technical assistance activities.  In this
regard, the WTO Secretariat signed a number of Memoranda of Understanding with the Secretariats
of other bodies (e.g. the Inter-American Development Bank, the Caribbean Community, the Central
African Economic and Monetary Community, the Economic and Social Commission for Asia and thePacific, the Economic and Social Commission for Western Asia, the Islamic Development Bank, theWT/MIN(01)/2
Page 56
Economic Commission for Africa, the Joint Vienna Institute, and the Common Market for Eastern
and Southern Africa, among others) to formalize such ties.
Training
46. In 2000, the WTO organized three twelve-week Trade Policy Courses at the WTO premises
in Geneva.  Eighty-two officials from 70 countries/customs territories participated in the courses.
Twenty-four fellowships were granted for each course.  Eleven auditors were self-financed, includingone from a regional secretariat.  At mid-point of the present cycle of six courses, which started in
January 2000, 47% of the total number of eligible countries/customs territories had been represented
by at least one participant.  In order to ensure that the network created during the courses between
participants and WTO staff remains active and productive, former participants to the trade policy
courses posted in Geneva (presently 86) reactivated the Association of Former Participants to
GATT/WTO Trade Policy Courses.
47. On 5 June 2001, the Director-General of the WTO decided to reconstitute the Secretariat's
Training Division as the WTO Training Institute.  The Division's activities have consequently been
extended beyond traditional trade policy courses to include also:  training for trainers, a diversified
range of short-term trade policy courses, distance-learning services, and cooperation with universities
and other institutions of learning.
D. C
ONCLUSION
48. The WTO and multilateral trade rules have a key role to play in enhancing development
prospects, and developing countries have a key interest in a unified system of common rules.  It is
necessary to build on the achievements of the Uruguay Round to enhance the benefits developing
countries can derive from the WTO.  This requir es action by both developed and developing countries
to tackle persisting trade distortions.  Further wide-ranging multilateral trade liberalization is key inview of developing countries' export interests and potential.  But developing countries find it equally
important that further trade liberalization is accompanied by appropriate action that takes into account
developing countries' limited capacities and needs for parallel reform in order to mainstream trade
policies into their overall development objectives.WT/MIN(01)/2
Page 57
IV. OPPORTUNITIES AND CHALLENGES OF WTO ACCESSION
1. Overview
1. The WTO is moving towards universal membership.  Presently it has 142 Members, and
30 governments are in the process of accession.  Accessions are governed by Article XII of the
Marrakesh Agreement Establishing the World Trade Organization (WTO Agreement), which states,
inter alia , that "any State or separate customs territory possessing full autonomy in the conduct of its
external commercial relations… may accede to this Agreement on terms to be agreed between it and
the WTO".
2. Since the start of the Uruguay Round, a total of 44 governments have applied to accede to the
WTO (or, previously, to the GATT), of which 14 have completed the process:  Albania, Bulgaria,
Croatia, Ecuador, Estonia, Georgia, Jordan, the Kyrgyz Republic, Latvia, Lithuania, Mongolia,
Moldova, Oman, and Panama.  More than half of the 44 applications started as applications to accede
to GATT 1947, and were converted in December 1994 into applications to the WTO (Chart IV.1).The longest-running process is that of China, which requested a resumption of its contracting-party
status to the GATT in 1986, and is expected to finalize its accession to the WTO in 2001.  A majority
of the 44 applications occurred between 1993 and 1996, but four governments applied in 1999, one
in 2000, and three have applied in 2001.
0123456789
1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000Chart IV.1
Number of applications and accessions under Article XII, 1986-2000
Applications
Accessions
Source: WTO Secretariat.
3. The 142 Members of the WTO represent almost three quarters of the world's 191 independent
states.1  They also account for 90% of world trade2, more than 80% of world GNP, and two thirds of
                                                     
1 Separate customs territories possessing full autonomy in the conduct of their external commercial
relations and of the other matters provided for in the WTO Agreements may also accede.  Hong Kong, Chinaand Macau, China are WTO Members in this category.
2 Including flows between Member States of the European Union.WT/MIN(01)/2
Page 58
the world's population (Chart IV.2).  Significant traders in the process of accession to the WTO,
include China, Chinese Taipei, the Russian Federation, and Saudi Arabia;  in terms of population and
market size, China and the Russian Federation are the largest among applicants for accession.  About
two in three States outside the WTO have applied for accession and others are observers;  few States
do not have official links with the WTO.
0%10%20%30%40%50%60%70%80%90%100%
Trade (Imports) GNP PopulationChart IV.2
Share of WTO member and non-member countries in world trade, GNP and 
population in 1999
World Develo pment Indicators 2001, WTO International Trade Statistics 2000. Source:Members Applicants Other countries
4. The process of acceding to the WTO is the same for all applicants (Box IV.1).  Following
acceptance of the request by the General Council, a working party is established to steer the process
to, eventually, a successful conclusion for the applicant and the WTO Members:  a draft Protocol of
Accession and a Working Party Report.  These constitute the basis for a final Decision by the GeneralCouncil or by the Ministerial Conference.  Such d ecisions require a two thirds majority of the WTO
Members;  in practice, such decisions are taken by consensus.
5. The length of the process of accession, from the initial establishment of a working party to the
adoption of the Protocol of Accession and relate d Decision, varies greatly due to the fact that
accession is obtained through a process of negotiation.  The Kyrgyz Republic completed the processin approximately three years, Bulgaria's accessi on process spanned 14 years, and, as of 2001, China
had been negotiating for over 15 years.  The speed of the accession process depends mainly on the
efforts made by each applicant to achieve consistency of its domestic regime with the WTO
Agreements and conclude bilateral market-opening agreements.  WTO Members have been exhorted,
in the context of UNLDC-III, to give particular attention to the burdens the accession process imposeson LDCs, with a view expediting the process to the extent possible.
6. There are two important differences between the process of accession to the WTO and that
which obtained previously under GATT 1947.  The first, and most obvious, is the increased scope and
coverage of the WTO Agreement, covering not only goods but also services and trade-related aspects
of intellectual property rights.  This increased scope and coverage could require a moreWT/MIN(01)/2
Page 59
comprehensive agenda of trade reform on the part of the acceding government than under
GATT 1947, just as it has for original Members of the WTO.  The second, and less obvious, is that a
number of developing countries became contracting parties to GATT 1947 by assuming their own
membership in the GATT, which had previously been exercised on their behalf by the colonial
power.3  This route obviated the need for a working party process, which meant that the governments
which took this route to membership did not have  their regimes scrutinized.  About 1 in 4 original
Members of the WTO fall into this category.
Box IV.1:  Steps to acceding to the WTO
All accessions begin with a letter from the requesting government addressed to the Director-General.  The
item is then placed on the agenda of the WTO General Council for action, which generally establishes a"working party" composed of representatives of Me mbers, to examine the application.  The applicant
generally obtains observer status in the WTO to become familiar with its activities.
The applicant submits a Memorandum on its Foreign Trade Regime in one of the WTO's three official
languages (English, French or Spanish), describing in detail the regime (including copies of relevantlegislation) and providing data.  Questions may then be submitted by Members, to which the applicant isinvited to respond, to establish a basis for dialogue on the regime and its conformity with WTO obligations,with a view to ensuring a good match.  Technical assistance may be requested from the Secretariat or may beprovided by individual Members.
When the examination of the foreign trade regime is  sufficiently advanced, Members of the working party
may initiate bilateral market access negotiations on goods and services and on the other terms to be agreed.At their successful conclusion, the results of the negotia tions are reflected in the Schedules appended to the
draft Protocol of Accession.  The market-opening commitments of acceding WTO Members, althoughnegotiated on a bilateral basis with individual WTO Members at their request, apply to all other WTOMembers through the application of the Most-Favoured-Nation clause.
The working party concludes its activity by submitting a report to the WTO General Council, a Draft
Protocol of Accession, and a draft Decision.  Such a decision on accession is, in practice, approved by
consensus.  The accession takes effect 30 days after domestic ratification by the applicant.
Source: WT/ACC/1, 4, 5, 8 and 9.  For a comprehensive overview of the accession process in practice, see
WT/ACC/7/Rev.1.
7. When entering the accession process, most applicants are already engaged in far-reaching
reform programmes aimed at removing domestic impediments to growth and better integrating theireconomies in the world economy.  In this context, WTO accession provides a framework for reforms
in covered areas, strengthens competition by opening the domestic market, and improves governance
by requiring administrations to operate transparent and predictable trade policy regimes in areas of
discretionary authority (e.g. customs valuation).  In other words, the process of WTO accession
ensures that the reform of the trade policy regime is a coherent part of a broader programme ofreform.  Reform is, however, typically accompanied by an adjustment process that can be painful to
segments of the population.  The challenge for acceding governments is to promote the reform
process by ensuring that adjustment occurs in a timely and sustainable fashion and that it is not
undermined by social costs.
8. For WTO Members, each accession is viewed on its own merits and no one Member expects
to reap the same benefits as another.  In general, however, the main economic benefits are due to the
                                                     
3 Under the 'succession' provision of Article XXVI:5(c), a State or separate customs territory could
become a contracting party by sending the Director-Gener al a letter certifying that it had attained "full autonomy
in the conduct of its external commercial relations and of other matters provided for in the [GeneralAgreement]".  The provision was invoked mainly by States established in the 1950s and 1960s following the
dissolution of the British, Belgian, Dutch, and French colonial dominions.WT/MIN(01)/2
Page 60
export opportunities derived from more open markets for goods and services, as well as improved
protection of intellectual property rights.  These wi ll differ between candidates;  access to China's
huge domestic market is likely to affect the export opportunities of many more WTO Members than
access to Cambodia's market, an LDC, although accession will be just as important to domestic
reform in both cases.  More generally, expanding the membership of the WTO fosters global growth
through three main channels: a positive effect on investment, a positive effect on productivity, and apositive impact on policy and governance.
9. The political benefits of accession are just as significant as the economic ones.  Experience
has shown that the conduct of trade relations through mutual respect for the rules contained in a strong
multilateral framework, as well interdependence through economic integration, can serve to foster
peaceful relations between countries.
2. Opportunities and challenges of WTO accession for acceding governments
10. The opportunities of WTO membership for acceding governments fall into two main
categories:  those related to the new Member’s own trade regime, and those resulting from the new
Member’s rights in relation to its trading partners.  The relative importance of each of these effects –
domestic reform and access to markets – will differ for each acceding government.  However, in all
cases, consumers of the new WTO Member stand to benefit, directly through lower prices and a
greater choice of products, and indirectly through the strengthened growth prospects of theireconomy.  Enterprises are beneficiaries of the new market access opportunities.
11. Acceding governments also face challenges.  The process of accession to the WTO is a
demanding one, which can take a number of years depending on the effort made on both sides.  The
different stages require highly-skilled professionals both in the capital and in Geneva.  Aside from the
exigencies of the process itself, accession is politically challenging for the acceding government, sincedomestic constituencies are unlikely to be united in all cases on the benefits to be derived.  All levels
of government should be involved from the start in a coordinated and informed process, from the
executive branch that leads the negotiating process, to the legislative branch that must consider and
enact reforms and eventually ratify the Protocol of Accession.
12. The first stage is fact-finding, consisting of the preparation of a complete and detailed
description of the government's trade-related policies and institutions (the "Memorandum on the
Foreign Trade Regime"), which elicits questions from WTO Members, requiring detailed and precise
responses, typically leading to further fact-finding, questions, and answers.  The aim is to determine
the extent to which the acceding government is in a position to comply with the requirements of the
WTO Agreements.  The Secretariat provides technical assistance, on request to the accedinggovernment, for this purpose (within the limits of available resources);  other programmes of
assistance are also available (e.g. UNCTAD, World Customs Organisation, and WIPO).  Once the
fact-finding stage is sufficiently advanced, the process of bilateral market access negotiations is
initiated with "interested" WTO Members, a subset of the 142 WTO Members, which have identified
themselves as negotiating partners.  Many WTO Members are interested by negotiations with larger
potential Members, because they have commercial interests to advance, but fewer with the smaller
ones.  Negotiations on agricultural products are generally on a plurilateral basis.
13. Article XII of the Marrakesh Agreement provides that accession occurs on the terms agreed
between the WTO and the applicant, which makes each accession negotiation unique.  Members
recognize that accession often requires far-reaching and sometimes difficult legislative and executive
action to be taken by the acceding government, in the context of its own specific domestic situation.
At the same time, the goal of accession is to secure a fit with WTO obligations, thereby preserving theintegrity of the system.  Achieving the appropriate balance in the accession negotiations between theWT/MIN(01)/2
Page 61
specific needs of the acceding government and the integrity of the system is the main challenge for
incumbent Members.
14. WTO Members are well-placed to ask an applicant to liberalize, based on the principle that
liberalization benefits both their exports and the economy that liberalizes.  On the other hand,
governments in applicant countries tend to cons ider liberalization in the light of the domestic
adjustment required, carefully weighing the social and political risks involved.  They are also likely toexamine closely the costs associated with implementing obligations.  Questions of parity of
commitments with existing WTO Members also tend to be present, notably with respect to
"developing country status" and market access commitments.
4  Depending on the circumstances,
finding an appropriate balance can take time.
15. Certain Members have emphasized that the benefits of accession for the new Member can
only be realized once the process is completed, meaning that particular urgency should be applied to
the accessions of least-developed countries.  Proposals for facilitating the accession of LDCs include afast-track accession procedure, allowing transitional periods to full implementation, or additional
technical assistance.
5  Other Members have emphasized that full compliance is needed upon accession
and that the transitional periods that were available to original Members have expired, for the most
part.
Domestic trade reform
16. In order to accede, applicants often need to adopt or modify existing legislation and
implementing regulations in areas covered by the WTO Agreements.  Frequently, the result is new
legislation and institutions that facilitate the functioning of markets, as well as a set of norms that
contribute to transparency and thus promote the rule of law.  Applicants also agree, in the context of
bilateral market access negotiations with existing Members, to open up their economies to foreigncompetition by reducing barriers to trade in goods and services through scheduled commitments.
17. Implementation of the WTO Agreements typically requires, in addition to legislation, the
administrative capacity to give effect to their provisions, in turn requiring training and financing.
6  For
example, the Agreement on Article VII of GATT 1994, which pertains to customs valuation, may
require customs officers to be trained in order to appropriately implement the Agreement.Implementing internationally agreed sanitary and phytosanitary measures, or participating in their
elaboration, is also a costly and challenging process.   Financial resources are needed to establish and
equip government bodies mandated to set standards or to operate conformity assessment procedures.
The implementation of the TRIPS Agreement may al so require the setting up or strengthening of
judicial systems and other enforcement agencies.
18. There are certain similarities in the scheduled commitments of acceding governments to date,
although each government accedes "on terms to be agreed between it and the WTO", according to
Article XII of the WTO Agreement.  Like all other WTO Members, new Members are required to
bind all agricultural product tariff lines.  In  addition, new Members have bound all their non-
agricultural product tariff lines – a step accomplished by a number of WTO Members, but not the
                                                     
4 WT/ACC/7/Rev.3.
5 See for example the Communication from the European Communities presented to the WTO's
General Council as part of preparations for the 1999 Ministerial Conference (WT/GC/W/153), and more
recently the Programme of Action for the Least Developed Countries adopted by UNLDC-III.
6 Costs involved are estimated at an entire year's development budget in many of the least-developed
countries, according to Finger, J.M. and P. Schuler (1999), "Implementation of Uruguay Round commitments,the development challenge", World Bank Policy Research Working Paper, No. 2215.  Similarly, ProfessorMaskus estimates that it can cost a poor country roughl y US$1.5 - 2 million to build a bare-bones infrastructure
to implement the WTO's TRIPS Agreement ( The Economist , 23 June 2001).WT/MIN(01)/2
Page 62
majority.  Furthermore, the levels at which tariffs are bound (Table IV.1) compare favourably
with those of existing WTO Members at similar levels of development.  On average, recently
acceding economies have bound their tariffs on agricultural and non-agricultural products at an
average 22% and 13%, respectively.  Newly acceding governments have also signed on to zero-for-
zero liberalization initiatives such as the Information Technology Agreement (ITA).
Table IV.1
Average tariff bindings of newly acceded developing and transition economies
Simple average bound tariffa
Agricultural products Non-agricultural products
Transition economies
Albania 10.6 6.0
Bulgaria 34.9 12.6
Croatia 10.4 5.0
Estonia 17.7 6.6
Georgia 12.1 5.8
Kyrgyz Republic 11.7 6.7
Latvia 33.6 9.3
Lithuania 15.6 8.2
Moldova 12.4 5.7
Mongolia 18.4 20.0
Developing economies
Ecuador 25.8 20.1
Jordan 25.0 15.0
Oman 30.5 11.0
Panama 26.1 11.5
a Estimates do not take specific tariffs into account.
Source : WTO Secretariat estimates;  WT/ACC/7, Protocols of Accession.
19. New Members of the WTO have also taken a comprehensive approach to GATS sectoral
commitments.  They have made commitments in professional services (mostly accounting, legal,
taxation, architecture, engineering), business services (in some cases with important exclusions), and
construction services.  Coverage is most comprehensive in construction, distribution, and financial
services.  Thirteen new Members have undertaken commitments in environment, tourism, andtransport services, twelve in health and education services, eleven in recreational services, and six in
audio-visual services.  The limitations on market access and national treatment for the four modes of
supply, as well as MFN exemptions, are howev er similar to those of original Members.
7
20. These accession commitments underline the important role played by the WTO in facilitating,
consolidating and locking in reforms.  Although governments are not prevented from reducing trade
barriers and putting into place the same market-oriented reforms on their own, the WTO enhances the
benefits to be derived in two essential respects.  First, it facilitates the introduction of the reforms byreinforcing the credibility of the government's po licy choices.  An external commitment can help a
reform-minded government contain domestic opposition to needed economic reform.  Second, it turns
the policy reforms into intergovernmental commitments of a legal nature, enforceable by other WTO
Members through the dispute settlement process, and thereby prevents backsliding.  These two
aspects confer credibility and stability on the government's policy choices, which are important fortraders, but even more important for domestic and foreign investors with their long planning horizons.
21. Liberalization and associated reforms can be challenging and costly in terms of domestic
adjustment, both in economic and political terms.  The reduction of tariffs and other obstacles to trade
will induce a reallocation of resources, both workers and capital, from import-competing sectors to
                                                     
7 WT/ACC/7/Rev.2, Annex 4.WT/MIN(01)/2
Page 63
outward-oriented sectors.8  A quick and smooth reallocation of resources from the shrinking to the
expanding industries will tend to minimize adjustment costs.  These costs comprise mainly training
and the cost of temporarily idle resources.  Trade theory also suggests that liberalization and the
ensuing reallocation of resources could induce changes in the distribution of income.  Overall, some
firms and workers will gain while others experience a temporary or permanent loss in income
following accession;  an inter-regional reallocation of income may also occur as a result of shiftinglocation of production.  The challenge for the government is to ensure that the benefits of accession
are shared by facilitating adjustment and providing assistance to the losers.
22. An overlooked but important aspect of the adjustment that is required to establish a
competitive presence on the home and export markets, is the need to adjust domestic production of
agricultural products and other products to meet product regulations and standards, and conformity
assessment procedures.  Adjusting domestic production to meet regulations and standards may require
a complete renewal of fixed assets and technologies, which requires large investments.
Access to markets of trading partners
23. The new Member of the WTO gains access to trading partners' markets on the terms and
conditions established by the WTO Agreements, Protocols of Accession, and individual schedules of
commitments.  These terms and conditions constitu te the mutually enforceable obligations of all
Members.  Only Members that invoke the "non-application clause" (Article XIII of the WTOAgreement), before the Decision of the General Council or Ministerial Conference, need not apply the
WTO Agreements to the new Member.
24. This treatment is an improvement over non-member status in two essential respects.  The first
is that the WTO Members are required to observe a certain standard of treatment in relation to other
Members that is not required for non-members – indeed, the WTO Agreement is silent on the matterof relations with non-members.  For example, in their mutual relations for merchandise trade, WTO
Members observe the most-favoured-nation (MFN) principle, which provides for the no-less-
favourable standard, with exceptions for regional trade agreements.  Furthermore, they cannot impose
quantitative restrictions except in limited circumstances, and must follow certain rules in the use of
trade remedies.  The second improvement is predictability of treatment.  While imports from a non-member will typically (but not always) enjoy MFN treatment in WTO Members, the terms of this
treatment may be determined by the granting govern ment, which can modify, terminate or subject it to
yearly renewal.  Thus, upon accession, the trade policy actions of other WTO Members in relation to
that new Member are subject – for the first time – to enforceable multilateral rules and disciplines;
these provide for a high standard of treatment that cannot be withdrawn.
25. More generally, joining the WTO brings the go vernment into the rules-based world trading
system.  All Members, but especially the smalle r and economically less powerful Members, benefit
from a system based on rules rather than the exercise of economic and political power alone.  Access
to the WTO's dispute settlement procedures is an important source of benefits for governments at risk
of conflict with other, more powerful partners.  Similarly, membership guarantees an opportunity to
participate in multilateral trade negotiations and ru le-making processes, including the opportunity for
smaller and economically weaker governments to negotiate with larger governments on a more equalfooting than is possible in bilateral or regional frameworks.
                                                     
8 One obstacle to tariff reduction commitments on the part of developing countries, notably LDCs, is
their adverse revenue implications.  Many developing countries rely on trade taxes to fund public expenditure toan important extent, as domestic personal tax collectio n systems are absent. Evidence has shown, however, that
such implications can be counter-balanced by reform of internal taxation, which would over time offset revenue
losses from reductions in border taxes.  (Ebrill, L., J. Stotsky, R. Gropp (1999), "Revenue Implications of Trade
Liberalization", IMF Occasional Paper No. 180.)WT/MIN(01)/2
Page 64
Least-developed countries
26. Of the 49 LDCs, 30 are WTO Members and nine have applied for membership.  The criteria
used by the United Nations for LDC designation include:  a low GDP per capita (currently the
threshold is US$800 per year);  a low level of human resources;  and a low level of economic
diversification.9  Many LDCs are remote islands or landlocked States with a highly concentrated
export structure in which one or two products – often subject to large fluctuations – account for morethan half of total exports.  For LDC island economies, the main export is often travel services, while
other LDCs typically rely on exports of primary products (e.g. minerals for Mauritania and Zambia, or
oil in the case of Sudan).
27. With respect to conditions of market access, virtually all LDCs that are Members of the WTO
benefit from preferential access to major developed country markets under GSP or other preferential
agreements and arrangements, although such access falls short, in most cases, of tariff-free and quota-
free access.  Non-members may also typically be granted such access, but WTO membershipestablishes a sounder basis for its continuation.
28. Given these characteristics, it is clear that an expectation of rapid returns in export
performance from WTO membership is unrealistic;  accession cannot remedy remoteness or
landlocked status, and LDCs already obtain the best standard of market access treatment available in
major markets.  WTO accession may not appear, therefore, to be a top priority to most LDCs.  Thisview, however, ignores the impact of accession in laying the basis for economic development by
modifying government policies that inhibit growth.  Accession can be used to facilitate economic
reforms in the short run, and in the longer run, it is a key condition for the diversification of these
countries' exports and for their integration into world markets for trade and investment.  Experience
indicates that the goal of acceding and the interaction with multilateral agencies and large countries,contributes to the momentum in favour of economic reforms.
29. In the medium term, accession can contribute importantly to the diversification and the
expansion of exports through several mechanisms.  First, import liberalization will reduce import
protection's implicit tax on exports and induce some reallocation of resources towards industries
where the country has a comparative advantage.  The second benefit of membership is to make LDCsmore attractive to foreign investors.  Third, membership will allow LDCs to defend their interests not
only in future trade negotiations, either individually or in a coalition, but also in current disputes and
discussions.
30. The accession process is also an exercise in transparency, which is crucial to informed policy-
making and improving governance.  Moreover, the WTO and other multilateral agencies providetechnical assistance to help LDCs with policy formulation and implementation.  Training and the
formation of human capital can contribute to the development of an institutional infrastructure whose
usefulness extends beyond the government’s trade regime.  The WTO, as well as other
intergovernmental organizations, has a key role to play in capacity-building.
31. Anticipated benefits for LDCs explain the importance attached by the international
community to their integration into the multilate ral trading system through accession.  At the same
time, it has been recognized that LDCs face particular difficulties in assuming the burdens of theaccession process due to limited human and financial resources;  these also affect participation of
LDCs in the WTO once they are Members.  Action directed at "facilitating the accession process on
the basis of terms that take into account their stage of development and the basic principles of special
and differential treatment" was therefore agreed at the Third UN Conference on Least-developed
                                                     
9 http://www.unctad.org/conference/ [25 July 2001].WT/MIN(01)/2
Page 65
Countries (UNLDC-III).10  This pledge is part of Commitment 5 of the agreed action programme on
behalf of LDCs, which concerns enhancing the role of trade in development.
Transition economies
32. Most of the transition economies that are in the process of accession are States created from
the dissolution of the former USSR.11  Their defining characteristic is the decision to shift from
central planning to a more market-oriented economic system.  Ten transition economies have alreadyacceded under Article XII, accounting for 70% of all accessions to the WTO.  Those currently in the
process of acceding generally have a lower level of economic development and are relatively less
advanced in their process of transition.
33. After a decade of transition, a comparison with developing countries suggests that the States
created from the former USSR (with the exception of the Baltic States) exhibit certain defining
characteristics, even though transition economies are difficult to distinguish from other countries with
the same level of GDP per capita.  While some positiv e legacies from central planning persist, such as
a relatively well educated labour force, inherited structural distortions are still present in lower income
transition economies.
12  T h e  s i z e  o f  t h e  g o v e r n m e n t  s e c t o r  i s  g e n e r a l l y  l a r g e r  t h a n  i n  m a r k e t
economies, and efficiency in the delivery of public services is low.  The financial system tends to be
underdeveloped by international standards.  Also, a larger share of the workforce is in industry,
economic activities are more energy intensive, infrastructure is often inadequate, and plant andequipment tends to be obsolete.
34. As with other applicants, transition economies stand to benefit from the impact of accession
to the WTO on their own policies.  Accession can be used to facilitate reform and to improve
institutional quality, an important consideration, given that recent empirical studies point to the
prominent role of structural reforms in explaining differences in performance across transitioneconomies.
13  Specific components of the reform programmes do not emerge as of greater importance
than others, suggesting that a broad programme of po licy reforms is preferable to a narrowly focussed
reform programme.  A binding commitment to pur sue an open and transparent trade policy, for
example, is only one element, albeit an important one, of policies aimed at attracting foreign
investment.  Accordingly, WTO accession by itself will not establish the basis for development intransition economies, but it can be an important building block in reform programmes.
35. Among transition economies of the former USSR, which had extensive trade ties previous to
the start of the transition, efforts to re-integrate as market economies under regional trade agreements
have not encountered great success.  Instead, joining the WTO has proved to be a more solid anchor
to trade policy reform, the pre-condition for trade to flourish, as can be seen from the accessions ofthe transition economies to date.  Those accessions that remain to be completed, and notably the
                                                     
10 A/CONF.191/11.
11 The three exceptions are the Federal Republic of  Yugoslavia, the Former Yugoslav Republic of
Macedonia, and Bosnia Herzegovina.  Four East-Asian countries are sometimes listed as transition economies:
Cambodia and the Lao PDR, which are also LDCs (see above), as well as China (see below) and Viet Nam.
12 See IMF (2000), World Economic Outlook , Focus on Transition Economies, October, and Gros, D.
and M. Suhrcke (2000), "Ten years after:  what is special about transition countries?", EBRD Working PaperNo. 56.
13 See Berg, A., E. Borensztein, R. Sahay, and J. Zettelmeyer (1999), "The evolution of output in
transition economies: explaining the differences", IMF Working Paper 99/73; and Havrylyshyn, O. T., J. Wolf,J. Beregaut, M. Castello-Branco, R. van Rooden, and V. Mercer-Blackman (1999), "Growth experience in
transition countries, 1990-1998", IMF Occasional Paper No. 184.WT/MIN(01)/2
Page 66
Russian Federation, will add significant scope to the emerging regional market, and prevent
backsliding.14
36. With respect to conditions of market access, transition economies benefit, as others do, from
the permanent and unconditional MFN status that accession brings with it (barring invocation of non-
application).  Of particular tangible benefit is the improvement to be anticipated in the application of
trade defence measures (anti-dumping, countervailing and safeguard measures), both with respect toprocedural guarantees and the duration and type of measure imposed.  WTO-non member transition
economies have been the target of numerous anti-dumping actions (Table IV.2), and are subject, as
"non-market economies", to different, arguably less favourable criteria to assess margins of
dumping
15, or fewer constraints on the type of anti-dumping measure that can be imposed.16
Alternatively, transition economies may be subject, again as "non-market economies", to specificsafeguard regimes providing for surveillance or quotas.
17
Table IV.2
Number of anti-dumping initiations, by affected countries, 1995-2000
1995 1996 1997 1998 1999 2000 Total
Non-members 36 66 66 67 101 75 411
A l g e r i a 0 0 0 01 01
B e l a r u s 0 0 0 03 25
B o s n i a  H e r z e g o v i n a 1000 0 0 1
China, P.R. 20 43 33 28 41 37 202
Chinese Taipei 4 9 16 10 22 14 75
I r a n 0120 2 2 7
Kazakstan 3 1 2 4 0 3 13
L i b y a 0 0 0 00 11
Macedonia 1 0 1 1 1 0 4
Russia 2 7 7 12 17 9 54
Saudi Arabia 0 1 0 3 2 1 7
Ukraine 2 3 4 9 9 5 32
Uzbekistan 2 0 0 0 0 0 2
Viet Nam 0 0 1 0 1 1 3
Yugoslavia 1 1 0 0 2 0 4
Members 120 158 177 183 255 179 1,072
Total 192 290 309 317 457 329 1,894
Source : WTO Secretariat.
                                                     
14 The Kyrgyz Republic for instance will welcome the accession of the Russian Federation and other
larger Central Asian countries.  In 1998 and 1999, first Kazakhstan and then Uzbekistan imposed significantimpediments to Kyrgyz exports, including very high tariffs, quotas, and other trade restrictions.  If all threecountries had been members of the WTO, tariff bindings would have limited the tariff increases, quotas would
not have been allowed, and any disputes would have been resolved through the dispute settlement mechanism.
15 For example, Article 2(7) of the European Union's Council Regulation 384/96 provides for normal
value to be computed from constructed value in a third-country market economy.
16 For example, under U.S. legislation, agreements with WTO Members with respect to suspended anti-
dumping investigations must involve only price undertakings;  agreements with respect to countervailing
measure investigations may involve also quantitative restrictions.  Agreements with WTO non-members
regarding both anti-dumping and countervailing measure investigations may involve price, quantityundertakings or both.
17 For example, the European Union's Council Regulation 519/94 provides for safeguard measures in
the form of surveillance or quotas on imports from Annex I countries (Albania, Armenia, Azerbaijan, Belarus,China, Georgia, Kazakhstan, Democratic Republic of  Korea, Kyrgyz Republic, Moldova, Mongolia, Russian
Federation, Tajikistan, Turkmenistan, Ukraine, Uzbekistan, and Viet Nam).WT/MIN(01)/2
Page 67
China
37. Since 1979, China has been progressively reform ing its economic system, with the objective
of establishing and improving the socialist market economy.  The initial objective was to improve the
functioning of central planning rather than to replace it;  China currently is considered as an
intermediate reformer.18
38. China has been reaping the benefits of its reform programme for some time already.  Its GDP
grew by 10.7% on average over the last decade (1990-99).  By 1999, China's GDP had reached a level
slightly below US$1 trillion, making it the world's seventh-largest economy;  with a population of
some 1.3 billion, however, per capita income remains around US$800.  During the 1990s, China has
also become a major trader, with exports growing at 15% annually on average, more than double the
rate of world exports.  China is now the world's fifth-largest exporter and sixth-largest importer of
goods and services (counting the European Union as a single trading entity).
39. The authorities are counting on WTO accession to give renewed impetus to domestic reforms
that are expected to double GDP by 2010 (Box IV.2).  Accession is also expected to signal to external
observers and domestic constituencies China's intention to prevent backsliding and to continue to
open its economy.  A number of reforms have been introduced recently to prepare the economy for
accession and ensure WTO-conformity of China's laws and regulations, including:  the shift from a
fixed to a managed float exchange rate regime;  the partial lifting of ceilings on deposit and loaninterest rates;  the elimination of investor requir ements with respect to foreign exchange balancing,
local content, export performance, and technology transfer;  tariff reductions, the elimination of
certain quotas, and the introduction of WTO customs valuation practices;  and new legislation to
improve enforcement of intellectual property protection rules on counterfeiting.  Of particular benefit
has been the impetus to reform state-owned enterprises, which still account for some 40% of GDP(and take two thirds of loans), in anticipation of enhanced competition from lower-priced imports
after accession.  The authorities have also engaged in a large-scale training programme to improve
knowledge of the WTO among public officials and the community.
40. Other reforms are to be introduced upon accession.  Although the exact nature of China's final
accession package has yet to be fully analysed, details of the bilateral market-opening agreementsnegotiated with major WTO Members indicate the nature of the reforms China is to undertake.
19
Transparency and the rule of law should improve as China is to publish all trade-relevant laws, rules,regulations, and administrative guidance;  judicial review is also to be made available.  With respect
to trade in goods, China is to reduce both its agricu ltural and non-agricultural tariffs, and eliminate a
broad array of impediments to trade in various areas, including licensing and quotas.  A unified fiscalregime is to apply to enterprises inside and outside Special Economic Zones.  State-owned enterprises
are to make purchases and sales based on commercial considerations alone.  The four major state-
owned banks are to face competition from foreign institutions in the corporate loan market two years
after accession and within five years in the consumer market, and foreign insurance service providers
are to gain access progressively to China's market.  Additional telecommunications licences are to be
granted for mobile telephony services provided in the context of joint ventures.  The opening of the
                                                     
18 Reform progress as measured by the EBRD's transition indicator, which ranges from 1 to 4+, is 2.1,
which is far below the EU accession countries' aver age (3.3) and just below the average level for the
Commonwealth of Independent States (2.3).  See IMF (2000), World Economic Outlook , Focus on Transition
Economies, October.
19 The bilateral agreement finalized between China and the United States in 1999 is available at:
http://www.uschina.org/ [1 August 2001].  A summary of the bilateral agreement concluded between China andthe European Union in May 2000 is available at:  h ttp://europa.eu.int/comm/trade/ bilateral/china/high.htm
[1 August 2001].WT/MIN(01)/2
Page 68
financial and telecommunication sectors will in particular have important spillovers on downstream
sectors.  The TRIPS Agreement is to be implemented upon accession, without a transitional period.
Box IV.2:  Measuring the impact of WTO accession on China's growth
Several quantitative assessments of the economic effects of China's accession have been made.  These
assessments are subject to considerab le uncertainties for two main reasons.  The first is the uncertainty on
the scope of the reforms that China will eventually enact as the final terms of accession are not known withprecision.  The second reason is that many of the important changes China will make to its trade regime
upon accession cannot be taken into account in such assessments due to their nature:  the effects of tariff
reductions or quota elimination can be quantified, but other important changes, such as increasedtransparency or greater reliance on the rule of law, are impossible to quantify.
Estimates of the impact of tariff reductions on China's GDP range between 0.6% and 4%.  In USITC
(1999), detailed qualitative assessments of the effect of changes in non-tariff measures affecting trade areprovided.   More generally, macroeconomic projections in IMF (2000) s uggest that following a limited
initial adverse impact, accession should increase China's real GDP growth by 0.1 percentage point in the
second year following accession, by 0.6% in the third and fourth years, and by 0.8% in the fifth year.Estimates suggest that China's external current account, which at present shows a large surplus, couldweaken in the first years following accession as imports  are expected to increase faster than exports.  The
elimination, under the WTO's Agreement on Textiles and Clothing of all quotas on textiles and clothing
could reverse the trend.  The deterioration of the current account should in principle be financed by an
increase in foreign investment.
The short-run adjustment costs for China have also been estimated.  There are reasons to believe that
labour market pressures and income distribution problems will increase in the years following accession.A study by Ming-tai Fan and Yu-xin Zheng (2000) estimates that accession will require an additional
13 million workers in rural areas and 1.25 million workers in urban areas (together around 2% of the
workforce) to find new jobs in other sectors over the next five years.
Source: IMF (2000), World Economic Outlook , October, Focus on Transition Economies;
USITC (1999), Assessment of the economic effects on th e United States, of China's Accession
to the WTO ;  Shoukang Li and Fan Zhai (1999), "China's WTO accession and implications for
national and provincial economies", unpublished, People's Republic of China DevelopmentResearch Center of the State Council;  and Ming-tai Fan and Yu-xin Zheng (2000), "China's
Trade Liberalization …" paper presented to the XIII International Conference on Input-Output
Techniques, University of Macerata, Italy, 21-25 August.
41. WTO accession will also play an important role in stabilizing and securing China's access to
its export markets.  In addition to securing MFN treatment on a permanent basis, China will derive
benefits from the phasing out of "non-market economy" status with respect to the application of anti-dumping and safeguard measures.  In addition, the European Union has agreed to eliminate
surveillance and quotas within five years of accession.  The United States negotiated a 'China-specific'
safeguard mechanism that may be invoked for up to 12 years, and will phase out "non-market"
economy status on all dumping investigations within 15 years.
3. Opportunities and challenges of accession for existing WTO Members
42. Certain benefits of integrating new Members into the WTO are available to all existing WTO
Members, large or small.  Integration demonstrates both the continuing relevance and viability of the
multilateral trading system, and advances the goal of an organization with a truly global reach.
Integrating new Members into a rules-based system for the conduct of trade relations enhances the
prospect of peaceful coexistence.  Economically, accession leads to enhanced trade opportunities and,in the medium term, fosters growth prospects of the new Member with important spillover effects on
existing WTO Members, particularly when a large economy is involved.WT/MIN(01)/2
Page 69
43. The trade benefits that each existing WTO Member derives from any particular government's
accession depends on the interaction of their economy with that of the acceding government, and
therefore varies significantly across the membership.  Although there are no hard-and-fast rules on
this matter, trade flows between any two countries tend to be associated with proximity, with the
relative size of their economies, and with differences between them in sources of comparative
advantage (e.g. labour, skills, knowledge, capital).  Small countries tend to have relatively high trade-to-output ratios, while much lower levels prevail among larger countries due to scope for large-scale
local production of goods and services.
44. In general, new Members that are relatively well endowed with unskilled labour will offer
more trade opportunities to incumbents relatively well endowed with capital and skilled labour than to
those with a comparative advantage in unskilled labour products.  Existing WTO Members might see
candidates with endowments similar to their own pr imarily as competitors on third-country markets.
Or existing Members with labour-intensive sunset industries are likely to fear for domesticemployment from the competitive export industries of a new Member with abundant labour, which
helps to explain the phase-out time schedules in bilateral market access agreements for restrictive
measures maintained by existing Members.
45. A more attractive environment for national inve stors is also to be anticipated from WTO
membership.  As noted above, the stability conferred by accession is a key aspect of decisions tolocate a plant or establish a commercial presence to supply services.  In addition, qualitative aspects
of the investment regime are likely to improve through the application of transparency to laws and
regulations;  with respect to China, for in stance, the foreign business community anticipates
significant benefits through a unification of applicable laws and regulations, their publication, and the
possibility of judicial review of administrative decisions.  Other improvements are the lifting ofcertain restrictions on foreign investment or, although not mandated by WTO obligations, a more
attractive fiscal regime.  These types of changes build confidence in the new Member's business
environment and are an inducement to increased foreign investment.
46. From this perspective, the accession of China to the WTO will have significant effects on
most WTO Members, reinforcing the already eviden t trend to integration through trade with major
trading partners.  Currently, the main sources of China's imports (goods) are Japan, the European
Union, Chinese Taipei, the Republic of Korea, and the United States, while the United States,
Hong Kong, China, Japan, and the European Union, are also the main destinations of China's exports.
These economies are likely to experience important positive effects following China's accession both
due to the observance by China of the WTO Agreements and to the trade reforms China is to make.At the same time, China's exports are likely to increase as a result of fewer special restrictions on
them and, in the medium-term, of more efficient export industries.  By contrast, the accession of
LDCs is unlikely to offer significant new market access opportunities to WTO Members, although
effects will be important for LDCs themselves.
47. Another dimension of accessions is their influence on existing processes within the WTO,
such as negotiations and decision-making.  In such processes, each WTO Member can be counted
upon to articulate and pursue its own interests.  This  situation is unlikely to change as a result of the
accession of China or any other new Member.  Where there is uncertainty is on the manner in which
the accession of such an economically large and politically important new Member will affect
consensus-based outcomes.
4. Conclusions
48. Thirty governments are currently in the process of accession to the WTO.  The first challenge
for WTO Members is to complete these accession processes.  Much depends on the applicants’
efforts, but WTO Members also have a role to play in facilitating governments’ accession.  ForWT/MIN(01)/2
Page 70
applicants, the accession process is beneficial in itself due to the examination of trade and trade-
related policies, knowledge of the rules and procedures of the multilateral trading system, and the
reforms facilitated by an “external anchor” for commitments.  The supportive nature of accession to
domestic reform is likely to be very much more important to citizens and enterprises than the effects
of improved access to foreign markets.
49. WTO membership will not automatically and immediately stimulate economic growth in a
new Member government.  Most applicants are currently in the process of introducing deep economic
reforms aimed at promoting market mechanisms and at stimulating growth and development.  By
facilitating reforms, accession can significantly contribute to an economy's integration into the world
trading system.  But trade liberalization will better foster growth if other policies are sound.  One of
the main lessons of experience with economic reform is that inter-linkages between policies cannot be
overlooked.  Another lesson of this experience is that management of the costs of adjustment is
important to maintaining the political support necessary to see the reform/accession process throughand should not be underestimated.
50. Finally, the completion of the accession process is just the start of WTO membership,
opening the door to an Organization whose daily activities are multiple and complex.  Effective
participation is a major challenge for most new Members, requiring knowledge of the rules and
procedures of the multilateral trading system.  The WTO's Secretariat plays an important role infacilitating such participation through information dissemination, technical assistance, and training.
But existing WTO Members also have their part to play in ensuring that new members, and in
particular the LDCs, fulfil their ambition to fully participate in the world trading system.WT/MIN(01)/2
Page 71
V. CONTROVERSIES ON HEALTH AND THE MULTILATERAL TRADING SYSTEM
A. OVERVIEW
1. Critics of the WTO have singled out two issues in particular in 2001:  access to essential
drugs in low-income countries and the WTO Agreement on Trade-Related Aspects of Intellectual
Property Rights (TRIPS);  and the potential impact of the WTO's General Agreement on Trade in
Services (GATS) on the quality and availability of health and education services.  On the first issue,critics charge that by requiring developing countries to enforce pharmaceutical patents, the TRIPS
Agreement enables pharmaceutical companies to charge  exorbitant prices for essential drugs, which,
particularly in the dire circumstances of the HIV/AIDS epidemic, appears reprehensible.  At the same
time, patents are widely acknowledged as providing the incentive for investment in research and
development (R&D) to bring new and more effective pharmaceutical products to market;  although
there is no cure for HIV/AIDS at present, there is hope that research efforts currently under way will
yield results.
2. This issue has emerged in the wider context of a campaign to provide better access to
essential drugs for the treatment of health and related problems in needy populations.  The
Accelerating Access Initiative was launched by UNICEF, UNFPA, WHO, the World Bank, and the
UNAIDS Secretariat in May 2000, on the basis of offers by five pharmaceutical manufacturers to
supply anti-retroviral drugs at reduced prices for use in developing countries;  other manufacturershave since responded to the Access initiative.  Most recently, in June 2001, a Special Session of the
General Assembly on HIV/AIDS was held by the UN for the purpose of proposing a global trust fund
to receive new donations to finance action against HIV/AIDS, malaria, and tuberculosis in developing
countries, as a supplement to resources committed by the affected countries themselves.
1
3. The WTO has also taken action.  A joint WHO/WTO workshop of experts was held in
May 2001 in Høsbjør, Norway, on the issue of differential pricing and financing of access to essential
drugs.  WTO Members have taken up the issue of "Intellectual Property and Access to Medicines" in
special sessions of the TRIPS Council.  These discussions have enabled the Members to discern more
clearly the relationship between the TRIPS Agreement and the public policy objective of affordable
access to patent-protected essential drugs, and to identify an agenda of points requiring furtherdiscussion;  this includes clarification of the Agreement's flexibility provisions so as to minimize the
potential for disputes.
4. On the second issue – the quality and availability of health and education services under
GATS commitments – critics have charged that the GATS unduly constrains the ability of
governments to protect public services and/or to operate necessary quality standards.  Further, it isalleged that the objective of the ongoing WTO negotiations on services is free trade in these areas.
Although this objective has manifestly not been endorsed by Members, the underlying issue of
providing for competition in health and education services, including through foreign service
providers, does merit attention.  Under the GATS, governments have complete discretion to make
commitments in covered service sectors, including health and education.  A number of developing
countries have in fact scheduled such commitments in the hope of attracting much-needed investment
into these sectors, with a view to improving the quality and availability of vital services.
                                                     
1 http://www.un.org/ga/aids/ungassfactsheets/html/fsfund_en.htm.WT/MIN(01)/2
Page 72
B. ACCESS TO ESSENTIAL DRUGS IN LOW -INCOME COUNTRIES AND THE TRIPS A GREEMENT
1. Public health in development
5. The WHO, UNAIDS and several other UN agencies identify four components of an "access
framework", each of which is necessary to ensure access to essential drugs in developing countries:
rational selection;  affordable prices;  sustainable and adequate financing;  and reliable health care and
supply systems.  The first and last of these components engage primarily the public health authoritiesof developing countries;  the international community and the pharmaceutical manufacturers have a
role in the other two.
6. In meeting the public policy objective of delivering health care, governments face numerous
domestic challenges, including:
– situating public health in an array of urgent needs, such as nutrition, education,
infrastructure, employment or national defence;
– establishing structures to deliver health care efficiently to the needy;  and– supporting families of affected persons.
7. Externally, governments face two challenges:  dealing with the suppliers of essential drugs for
the purpose of securing adequate supplies on the domestic market; and securing the necessary
assistance from the international community, constituted by IGOs, governments, NGOs, and private
citizens acting on their own, to supplement domestic resource commitments.
8. These challenges are not new;  they have been a constant feature of the development
landscape.  What is new, or what has crystallized awareness of the need for "doing business
differently"
2, is the combination of (a) the squeeze in the international purchasing power of incomes
of certain developing countries, mainly in Africa, in the course of the past two decades, as a result of
numerous factors, including declining terms of tr ade, (b) the explosive growth in demand for care
related to the treatment of HIV/AIDS as the epid emic has developed, again mainly in Africa, and
(c) the "negative synergy" between poverty and HIV/AIDS, creating and deepening poverty, making
it harder to escape from deprivation.3
9. Moreover, HIV/AIDS has no known cure.  In conjunction with the treatment of infected
persons – the care agenda - a major effort is needed on prevention.  While certain countries haveachieved a sustained and dramatic decline in infection rates, others have had less success and still
experience rising rates of infection.  On the whole, it is estimated that in 2000 some 36 million people
are living with HIV, the virus that causes AIDS, of which 90% are in developing countries and 75%
in sub-Saharan Africa.
4  Within this group, it is estimated that very few – between 10,000 to
25,000 people – receive anti-retroviral treatment therapies, which are routinely used in developedcountries to prolong the lives of HIV-infected people.
5
10. Funding programmes for the prevention, care, treatment and mitigation of the impact of
HIV/AIDS – of which drugs are but one essential component – is a major challenge, especially for the
                                                     
2 Report from the Executive Director of UNAIDS, UN Document E/2001/82, p. 4 [Online].  Available
at:  http://www.unaids.org/ [30 July 2001].
3 See Introduction by Dr. Peter Piot, Executive Director of UNAIDS, in a joint publication of WHO,
UNICEF, UNAIDS, World Bank, UNESCO, UNFPA (2000), Health a key to prosperity:  Success stories in
developing Countries , WHO, Geneva.
4 UN Document E/2001/82 [Online].  Available at:  http://www.unaids.org/ [30 July 2001].
5 WHO, UNICEF, UNAIDS Secretariat, and MSF (May 2001), "Sources and prices of selected drugs
and diagnostics for people living with HIV/AIDS" [O nline].  Available at: ht tp://www.unaids.org/acc_access/
access_drugs/index.html [1 July 2001].WT/MIN(01)/2
Page 73
governments of the most affected countries.  UNAIDS estimates an annual need of US$3-4 billion for
HIV/AIDS programmes, compared with current annual expenditures of US$0.3-0.4 billion.6  A part of
the solution is to raise the level of domestic resources committed to HIV/AIDS;  the African Heads of
State or Government pledged, at the Abuja Special Summit in April 2001, to set a target of allocating
at least 15% of their annual national budgets for the improvement of the health sector to help address
the HIV/AIDS epidemic.  The level of commitment engaged to support this effort by the internationalcommunity also must rise.  Dr. Brundtland, Dire ctor-General of the World Health Organization
(WHO), has stated:
The OECD estimates that total Official Development Assistance for
health – for all purposes, for all countries, from all sources, loans and
grants – is currently about US$3.5 billion a year.  We now suspect
that this estimate might be a little low.  But just to treat one million
people with AIDS in Africa, with the prices now on offer, wouldrequire that the US$3.5 billion be increased, almost immediately, by
one third.
7
In June 2001, the UN set a new target to be reached by 2005, through a series of incremental steps, forannual expenditure on the epidemic of betwee n US$7 and US10 billion, fr om donor countries and
national budgets.
8
2. Pricing of essential drugs in developing countries
11. For a number of reasons, including location of research facilities and personnel, economies of
scale in production, and patent regimes, the bulk of world production of drugs is located in six
countries:  the United States, Japan, France, Germany, Italy, and the United Kingdom.9  M a j o r
developing-country producers of drugs in clude Argentina, Brazil, and India.
12. There are two basic sources of supply onto the domestic market:  domestic production and
imports.  Drugs can be categorized according to whether they are produced and sold under patent or
outside of patent  A product could be produced and sold out of patent if the patent has expired, if no
patent has been taken out, if the country does not provide for patent protection in this area or,
eventually, as a result of a compulsory licence.  Given the location of the world's productive capacityfor drugs, the major part of domestic demand for essential drugs is met in most countries, developed
and developing, by imports.  A pre-condition is approval for placement on the market by the national
authorities responsible for human health.
13. In this context, the causes of high prices of AIDS drugs on developing-country markets are
multiple.  The WHO, UNICEF, the UNAIDS Secretar iat, and MSF stated jointly in May 2001 that:
                                                     
6 UNAIDS (2001), "Mobilizing Billions to Fight AIDS in Africa: The Way Forward",  Presentation to
Conference of African Ministers of Finance, Algiers, Algeria, 8 to 10 May 2001 [Online].  Available at:
http://www.unaids.org [17 June 2001].
7 "Opening remarks", WHO/WTO workshop on differential pricing and financing of essential drugs,
Høsbjør, 2001.
8 United Nations, "Declaration of commitment on HIV/AIDS", special session of the 26th General
Assembly convened in accordance with resolution 55/13 to review the problem of HIV/AIDS in all its aspects,
from 25 to 27 June 2001, New York.
9 OECD Document DAFFE/CLP(2000)29.  According to calculations by UNIDO, 46 of the 133 non-
OECD countries, or about one third, imported 100% of their demand for medicines in 1989.  This count goes upto about two thirds when all nations importing more than 50% of consumed medicines are counted.  Thirty-onedeveloping countries (less than one quarter) supplied three fourths or more of their consumption domestically.See United Nations Industrial Development Organization (UNIDO), International Yearbook of Industrial
Statistics, 1992,  Vienna.WT/MIN(01)/2
Page 74
The high price of many AIDS drugs – especially antiretroviral drugs
– is one of the main barriers to their availability in developing
countries.   Factors related to affordability may include: patents;
limited volume; limited competition;  import duties and tariffs;  local
taxes; and mark-ups for wholesaling, distribution, and dispensing.10
By the time a drug reaches the consumer, its price will have been successively raised from the ex-
factory level by the combined effects of charges of middlemen and of taxes.  These factors, which
affect pricing of essential drugs in any country, are considered more burdensome in developing
countries, where drug costs weigh more heavily in national health expenditures.
14. However, it should be borne in mind that the pricing of pharmaceutical products is but one
among the key issues that affect access to essential drugs.  Reducing drug prices will make them more
affordable to the population.  On the other hand, without an efficient structure for delivery, an
abundant supply of cheap essential drugs might not save many more lives;  administering treatmenttherapies for AIDS requires, for example, trained doctors and nurses, and careful monitoring of
patients' doses within a working infrastructure for health delivery.
Tariffs and taxes
15. Recent Trade Policy Reviews indicate that duty-free treatment is granted to imports of
pharmaceutical products by a number of developing countries, but not all (Table V.1).  Mostdeveloping countries apply moderate to low tariffs.  By contrast, a group of WTO Members (Canada,
the Czech Republic, the European Union, Japan, Norway, the Slovak Republic, Switzerland, and the
United States) agreed to eliminate tariffs on pharmaceutical products during the Uruguay Round and
to bind the duty-free treatment in their Schedules (the 'zero-for-zero' agreement).
11  Since that time,
two rounds of discussions have been held to broaden the scope of duty-free treatment.12
Table V.1
Tariff treatment of pharmaceutical products, in selected WTO Members
Tariff treatment
(Per cent)WTO Members
0 Brunei Darussalam; Canada; European Union; Japan; Madagascar;
Mozambique; Malaysia; Norway; Papua New Guinea; Singapore;
Turkey; Uganda; United States
Greater than 0 but less than or equal to 5% Australia; Cameroon; Gabon; Iceland; Indonesia; Kenya; Saint Kitts and
Nevis; Malawi; Mauritius; Philippines
Greater than 5% but less than or equal to 10% Antigua and Barbuda; Bangladesh; Bahrain; Chile; Colombia;
Dominican Republic; Ghana; Grenada; Israel; Republic of Korea; SaintLucia; Mauritania; Poland; Romania; United Republic of Tanzania;Thailand; Saint Vincent and the Grenadines
Greater than 10% but less than or equal to 20% Argentina; Brazil; Egypt; Mexico; Pakistan; Peru
Greater than 20% but less than or equal to 30% n.a.
Greater than 30% India
n.a. Not applicable.
Note:  Simple average of tariffs (including surcharges) applied on products in Chapter 30 of the Harmonized System.  The covera ge of
pharmaceutical products used for the zero-for-zero agreement is broader.
Source: WTO Secretariat, Trade Policy Review Division, Tariff Data Base System.
                                                     
10 WHO, UNICEF, UNAIDS Secretariat, and MSF (May 2001), "Sources and prices of selected drugs
and diagnostics for people living with HIV/AIDS" [Online].  Available at:  http://www.unaids.org/acc_access/access_drugs/index.html [1 July 2001].
11 WTO Documents L/7430, Add.1, Add.2, Add.3, Add.4.  Legal effect has been given to the
commitments on pharmaceutical products in the schedules of concessions of participating WTO Members.
12 WTO Documents G/MA/W/10 and G/MA/W18.WT/MIN(01)/2
Page 75
16. In addition to import duties, domestic taxes (e.g. VAT or sales tax) are often applied on drugs,
as on other products, even if they are deemed essential (although many countries apply a reduced
VAT or sales tax rate).  There is, of course, noth ing in the WTO to prevent Members from eliminating
domestic taxes on drugs provided they do so also for imported drugs.
Patent regimes
17. Regarding the sale price of patented medicines, a pharmaceutical company will seek to set a
price that reflects to some degree any market power resulting from the exercise of patent rights.
Market power is enhanced where the price elasticity of demand for drugs is low in the absence of
substitute therapies.  Competitors accordingly ha ve a considerable incentive to bring therapeutic
substitutes rapidly to market.  This suggests that the exercise of market power will be higher in the
very early stages of the launch of a new treatment, and be dissipated over time as competing drugs
emerge.  In any event, the pricing by market forces of products under patent is unlikely to reflect the
marginal cost of production.  Fixed costs including R&D and profit are borne disproportionately bythe most successful products.
13
18. These considerations on pricing of products under patent protection are not surprising.  A
patent is intended to provide a positive incentive to  R&D efforts by granting to the owner the right to
prevent others from using the invention without the owner's agreement for a period of time, a
minimum of 20 years under the TRIPS Agreement.  (In practice, the effective life of a patent iscurtailed by the lead-time required to bring a drug to market, which can be eight to 12 years;  most
OECD countries provide an extension of up to five years to pharmaceutical patents to compensate in
part for the loss of effective patent term).
14  This incentive is widely thought to contribute to the
availability of new and more effective pharmaceutical products.  Patent protection is also considered
to help make information on the innovation public, establishing a stock of knowledge on which other
innovators can build, or duplicate once the patent has expired.15
19. In the TRIPS Agreement, compulsory licensing is one exception to the owner's right to
prevent others from using the invention, provided certain conditions are met.16  The applicant for a
compulsory licence must have first attempted, unsucce ssfully, to obtain a voluntary licence from the
right holder on reasonable commercial terms (Article 31(b)), except for "national emergencies","other circumstances of extreme urgency", "public non-commercial use" (or "government use"), or
anti-competitive practices.  If a compulsory licence is issued, among other conditions, production
must predominately be for the domestic market (Article 31(f)) and 'adequate' remuneration must be
paid to the patent holder (Article 31(h)).
                                                     
13 In the United States, the fixed costs of R&D are estimated at 21% of total sales, and 30% of interest
forgone in the 12 or more years of the drug development and approval process (Danzon, P.M. (2000), "Making
Sense of Drug Prices", Regulation , Volume, 23, No. 1, pp. 56-63).
14 OECD Document DAFFE/CLP(2000)29.
15 Many countries allow third parties to use a patent ed invention for research purposes where the aim is
to understand more fully the invention as a basis for advancing science and technology.  In addition, a WTO
dispute-settlement panel on "Canada — Patent Protec tion for Pharmaceutical Pr oducts" (WT/DS114) decided
on the WTO-consistency of a provision of Canadian law that permits the use by generic producers of patentedproducts, without authorization and prior to the expiry of the patent term, for the purposes of seeking regulatoryapproval from public health authorities for the marketing of their generic version as soon as the patent expires.
16 The term "compulsory licensing" does not appear in the TRIPS Agreement.  Instead, the phrase
"other use without authorization of the right holder" appears in the title of Article 31.  Compulsory licensing is
only part of this since "other use" includes use by governments for their own purposes.WT/MIN(01)/2
Page 76
20. Compulsory licensing, or its threat, may lower prices of pharmaceutical products.17  T h e
scope for parallel trade is another aspect influencing the pricing of pharmaceutical products on the
domestic market.  As noted, pharmaceutical manufacturers have an incentive to price their product
according to local market conditions, determined by supply and demand, including availability of
alternative therapies.  Thus, patent owners typically prefer national exhaustion regimes that support
domestic distribution and licensing arrangements by allowing them to take action against parallelimports.
21. Proponents of international exhaustion regimes hold that parallel trade will tend to lower
prices of pharmaceutical products by encouraging arbitrage through trade and limiting the scope for
price differentiation.  Evidence on this point is not available for developing countries.  For developed
countries, the OECD has noted that "the effect of parallel trade in lowering prices in high-price
countries is muted" and its primary effect is that it increases the profitability of pharmaceutical
wholesalers and retailers.
18
22. Another factor known to reduce prices of pharmaceutical products is the availability of
generic bio-equivalent drugs.19  The term "generic" is often used to refer to drugs that are not
produced under patent – "generic from a patent point of view".20  Availability of generics at lower
prices typically sharply reduces the market share of manufacturers of the patented product;  thus their
interest in delaying such an eventuality by seeking extended terms of patent protection or exercisingother delay tactics.
21  On the other hand, certain countries have adopted policies to facilitate the
approval process for generic drugs, bringing them to market more quickly, by permitting generic
companies to conduct development work and product testing prior to a patent's expiration.  This has
been found to be consistent with the TRIPS Agreement by a recent WTO panel.
23. Governments often regulate the prices of pharmaceutical products to make drugs affordable to
the local population and control public expenditures on drugs.22  An alternative is for government or
private insurers or managed care providers to negotiate equivalent results with health care providers
and suppliers of equipment and drugs.  Managed care providers, for example, leverage their market
power on the consumption side of the market by reac hing agreements with health care providers and
manufacturers.  State or private insurers may limit reimbursement of prescriptions or treatments inorder to ensure shared responsibility by patient s and health care providers in keeping costs down.
24. Leveraging market power on the consumption si de of the market has been followed by the
WHO since 1989 in its test kit bulk-procurement scheme, in collaboration with other UN agencies.
                                                     
17 The OECD has recently explored the issue of compulsory licensing in the context of introducing
competition into pharmaceutical production as an a lternative to price controls, noting its advantages, in
particular curbing x-inefficiencies, which refer to the tendency of monopolies to relax their vigilance on costs,reinforced in the presence of price controls (OECD Document DAFFE/CLP(2000)29, p. 48).
18 OECD document DAFFE/CLP(2000)29, p. 53.
19 There is extensive evidence from countries with patent protection that average pharmaceutical prices
fall sharply when generic entry occurs following the expiration of the patents (Scherer, F. M. (2000): "ThePharmaceutical Industry", in Culyer, A.J. and J.P. Newhouse, eds. Handbook of Health Economics, Vol. 1,
Elsevier Science B.V., pp. 1298-1322.).  Estimates for the United States indicate that generics cost 50% less
than brand-name equivalents and can capture up to 50% of the market (by volume) within a year of the patent
expiring (OECD Document DAFFE/CLP(2000)29).
20 "Generic" as a product can also be defined as a product that does not have a trademark.  For example,
"paracetamol" is a chemical ingredient that is found in many brand-name painkillers and is often sold as a(generic) medicine in its own right.  This is "generic from a trademark point of view".
21 "Delay, delay, delay",  Wall Street Journal , 17 July 2001.
22 OECD document DAFFE/CLP(2000)29, p. 78.WT/MIN(01)/2
Page 77
The WHO negotiates bulk purchase prices directly with the manufacturers, a process that enables it to
offer test-kits at approximately half the cost of those purchased on the open market.23
25. A counterfeit drug is in a different category altogether.  Counterfeit drugs appear under fake
labelling and packaging, which often makes them indistinguishable (except to the expert) from the
brand-name version.  However, counterfeit drugs can be very dangerous.  Consequently, a major
campaign has been under way for some time by the WHO and other organizations to combatcounterfeit products.
24
26. These issues – compulsory licensing, scope for parallel trade, availability of generics – are of
current significance to developing-country and transition-economy WTO Members, because certain
transitional periods for implementation of the TRIPS Agreement ended on 1 January 2000, and those
for LDCs will expire in 2006 (with a further extension perhaps possible).25  Implementation of the
TRIPS Agreement has thus led many developing countries and transition economies to introduce new
legislation or modify existing legislation.  Such legislation typically includes most compulsorylicensing provisions and some have specified the nature of the exhaustion regime so as to provide for
the possibility of parallel trade.
27. It should be noted that most developing country Members of the WTO already had patent
protection for pharmaceutical products prior to the entry into force of the WTO.  In these countries,
implementation may have required modification of terms and conditions.  For example, the15 members of the Organisation Africaine de Propriété Intellectuelle granted patent coverage to
pharmaceutical products under the Bangui Accord (1977) for a term of ten years, which has been
extended to 20 years under the revised Bangui Accord (1999) in the light of relevant TRIPS
provisions.
28. Developing countries that had not previously provided protection to pharmaceutical products
are required to do so by 2005 at the latest.  Such governments also had to provide as of
1 January 1995 a means of filing applications for patents on such products, as well as, subject to
various conditions, patent-like protection through excl usive marketing rights if such products get onto
the market prior to the decision being taken on the grant or not of the patent.
26  For such countries,
implementation of the TRIPS Agreement's provisions on pharmaceutical products is bound tomaterially alter the competitive conditions on the domestic market for new pharmaceutical products.
29. It should be noted that the WHO Model List of Essential Drugs (11
th revision, 1999) mainly
contains drugs for which patents have expired ev erywhere, and which are available as generics.
However, because HIV is a relatively new infection, many of the drugs developed specifically to treat
HIV/AIDS are still under patent protection in some countries, as are some important drugs for othercommunicable diseases.
                                                     
23 WHO, UNICEF, UNAIDS Secretariat, and MSF (May 2001), "Sources and prices of selected drugs
and diagnostics for people living with HIV/AIDS" [On line].  Available at http://www.unaids.org/acc_access/
access_drugs/index.html [1 July 2001].
24 Press Release WHO/84, 28 November 1997, and Press Release WHA/012, of 17 May 2000.
25 When the WTO Agreements took effect on 1 January 1995, developed countries had one year to
ensure that their laws and practices conformed with the TRIPS Agreement, developing countries and (undercertain conditions) transition economies had, in general, an additional four years, and least-developed an
additional ten years.
26 Thirteen WTO Members (Argentina, Brazil, Cu ba, Egypt, India, Kuwait, Morocco, Pakistan,
Paraguay, Tunisia, Turkey, United Arab Emirates, and Uruguay) have notified "mailbox" systems to the TRIPSCouncil, thus indicating that they did not grant patent protection to pharmaceutical products.  Some of them,such as Argentina, Brazil, Morocco, Paraguay, Turkey, and Uruguay, are not using the full transition period,having introduced such protection alread y or indicated that they will do so shortly.  It cannot be excluded that
there are a few other WTO Members who should have notified but have not done so.WT/MIN(01)/2
Page 78
30. Anti-competitive practices by distributors of imports can occur in developing (and other)
countries for pharmaceutical and other products, particularly when the domestic markets are small.
Domestic distribution may also be subject to anti-competitive practices.  However, many developing-
country governments lack the means to combat such practices effectively, either through lack of
competition law or inadequate resources for its effective enforcement.
3. WTO action on access to essential drugs
Differential pricing by pharmaceutical companies
31. The issue of differential pricing was considered at a joint WHO/WTO Secretariat workshop
of experts held in May 2001, in Høsbjør, Norway.  "Differential pricing" is generally understood to
mean charging lower prices to lower-income c lients – pricing in relation to income levels.
32. Differential pricing has occurred for some time with respect to vaccines and contraceptives.
So far, with respect to HIV/AIDS-related drugs,  several of the major pharmaceutical manufacturers
have offered donations of individual drugs or significant reductions on the price of some expensivepatented drugs for use exclusively in developing countries.  Sources and prices of drugs and
diagnostics for people living with HIV/AIDS are contained in a report published bi-annually by the
WHO, UNICEF, the UNAIDS Secretariat, and Medecins Sans Frontières (MSF).
27
33. The WHO/WTO Secretariat workshop concluded that differential pricing was feasible,
provided certain conditions were met.  One concerned segmenting markets to prevent reduced-priceddrugs from making their way to markets where higher prices prevail.  This is important not only for
manufacturers but also for the poor-country recipients, since otherwise a differentially priced product
would not reach the people for which it is intended.
TRIPS Council discussions
34. At the initiative of the African Group, the TRIPS Council initiated a discussion on
"Intellectual Property and Access to Medicines" in June 2001.  Members are discussing the precise
nature of the scope and nature of the flexibility provisions in the TRIPS Agreement with a view to
providing greater legal certainty and avoiding disput es.  A wide range of provisions and issues have
been raised with the discussion focusing on Articles 7 and 8 of the TRIPS Agreement (objectives and
principles), the TRIPS provisions relating to compulsory licensing, and the TRIPS provisions onparallel imports.  Various texts for language to be adopted by Ministers have also been tabled by
Members and discussed.
4. Conclusions
35. The pricing of pharmaceutical products is among the key issues that affect access to essential
drugs;  other vital elements include an efficient structure for delivery and resource commitments, bothdomestic and external.
28  In 2001, governments pledged to augment domestic resource commitments
and the UN has engaged action to mobilize external sources of funds.
                                                     
27 WHO, UNICEF, UNAIDS Secretariat, and MSF (May 2001), "Sources and prices of selected drugs
and diagnostics for people living with HIV/AIDS" [On line].  Available at:  http://www.unaids.org/acc_access/
access_drugs/index.html [1 July 2001].
28 Summarizing recent developments in the pricing/ care nexus, UNAIDS has stated:  "With the United
Nations as facilitator and partner, the advocacy of civil society, the initiatives of a number of major researchand development pharmaceutical companies, and generic competition have combined to reduce significantlythe prices of HIV drugs, beginning to bring them within reach of a greater number of people living with
HIV in developing countries.  One unintended conseque nce of the focus on antiretrovirals has been the wayWT/MIN(01)/2
Page 79
36. With respect to the factors that influence th e prices of essential drugs, the importance of
tariffs and domestic taxes, and anti-competitive practices by manufacturers and distributors need to be
noted, in addition to the influence of intellectual property rights regimes.  On the latter, patents are
widely thought to provide the incentive for inve stment in R&D to bring to market new and more
effective pharmaceutical products.  At the same time, the TRIPS Agreement provides – and Members
have used – flexibility with respect to compulsory licensing and parallel trade, which can mitigate theexclusive rights of patent owners.
37. The precise nature and extent of the flexibility provisions of the TRIPS Agreement have been
under discussion among the WTO Members.  The discussions on the issue of "Intellectual Property
and Access to Medicines" may lead to action being taken by the Members (to clarify provisions) of
the TRIPS Agreement so as to ensure the Agreemen t is implemented in a way that not only promotes
the development of new drugs but also contributes to access to existing drugs, especially for the
poorest.
C. H
EALTH AND EDUCATION SERVICES UNDER GATS
1. Overview
38. The liberalization of services is important to countries mainly because it is difficult to prosper
with an inefficient and expensive services infrastructure.  Producers and exporters of textiles, bananas
or any other product will be more competitive with access to efficient banking, insurance,accountancy, telecommunications, and transport systems.  Consumers are likely to have better, more
competitively priced products – goods and services – available to them. The list of services of direct
importance to consumers is long, ranging from leisure (e.g. restaurant, hotel, and other tourism
services), to transport, telecommunications, financial services (e.g. banking, insurance, share trading),
health, and education services.
39. The GATS is a powerful framework to liberalize services mainly because of the binding
nature of commitments, which sends a clear signal to domestic and foreign service providers on the
policy of government.  This is not the only route to services liberalization.  Indeed, many governments
have done so on an autonomous basis over the past  two decades, acting on their own to enhance the
conditions of market participation, using various policy instruments (e.g. facilitating new entry and/orprivatization).  Collective action to liberalize services outside the GATS has occurred as well, mainly
in the European Union.
40. Telecommunication services is the most visible sector in which liberalization has proceeded
in the past decade.  Most European countries have now dismantled the long-standing state-run
monopolies in the sector to allow new entrants to offer services, including through new technologies(e.g. wireless).  The aim has been to reduce prices and expand the scope of services available, to
advance the penetration of affordable information and communication technologies among enterprises
and consumers, and to boost innovation and employment in the sector and related areas.  Many
Members anchored these new conditions of market participation in the telecommunications sector in
the form of binding commitments in the GATS Agreement.
41. The situation of health and education services is different.  With few exceptions, their
provision is viewed as a core governmental responsibility.  Although social policy concepts –including equity and universal access – do not necessarily imply that governments also act as
producers, public facilities have traditionally been, and continue to be, the main suppliers of health
                                                                                                                                                                    
in which it has overshadowed care intervention." (UN Document E/2001/82, p. 5 [Online].  Available at:
http://www.unaids.org/ [30 July 2001].)WT/MIN(01)/2
Page 80
and education services in most countries.  This does not mean that efficiency considerations are
irrelevant;  value for money is an important objective.
42. According to a WTO Secretariat study on education services29, OECD countries as a whole
spent 5.9% of their collective GDP on education in 1994, of which 80% was devoted to direct public
expenditure on educational institutions.  For most OECD countries, education represents between
10% and 15% of total government outlays.30  A WTO Secretariat study on health services indicates
that in most OECD economies, health care spending  accounted for more than 8% of GDP in the later
1990s (1.5% to 5.5% in the early 1960s), compared with some 5% in developing countries.31  The
WHO notes that "differing degrees of efficiency with which health systems organize and finance
themselves, and react to the needs of their populations, explain much of the widening gap in death
rates between the rich and poor, in countries and between countries, around the world".32
43. Prompted by budgetary constraints and/or s upply bottlenecks in certain areas, including
specialized professionals, governments have increasingly come to recognize the need for a moreproductive use of resources.  Relevant initiatives in this context include organizational changes
expected to yield economies of scale and scope, the introduction of monetary incentives in previously
tightly regulated areas (commercialization of hospital functions) or reforms in public insurance and
subsidy schemes to encourage more prudent resource use.  While many of these initiatives may lead
to greater market orientation, various countries have also introduced administrative controls and othercommand-and-control measures to deter new entrants, curtail "excessive" demand for pharmaceuticals
or hospital beds, or influence geographic patterns of supply.
44. Attributing a predominant role to government in  the provision of health or education services
does not mean that the private sector – domestic or foreign – should be excluded.  In fact, public and
private sectors co-exist in most countries.  In addition, many students go abroad to access education
services that are not available domestically.  Travel abroad to obtain medical treatment also occurs.
Distance learning (through the Internet) is also on the rise, as is the provision of certain medical
consultancy services (telehealth).  Thus, the responsibility of the public authorities to provide health
or education services does not preclude other channels to supply the domestic market, including
private provision or trade.
2. Nature of the GATS Agreement
45. The GATS Agreement has two parts:  the framework agreement containing the rules, and the
national schedules of commitments in which each Member specifies the degree of access it is
prepared to guarantee for foreign service suppliers in designated sectors.  The GATS covers all
services with two exceptions, i.e. services provided  in the exercise of governmental authority and, in
the air transport sector, air traffic rights and all services directly related to the exercise of traffic rights.
46. Services provided in the exercise of governmental authority are defined as any service that is
supplied neither on a commercial basis nor in competition with one or more service suppliers.  Many
public services are therefore manifestly excluded from GATS coverage – national defence being the
                                                     
29 WT/S/C/W/49 [Online].  Available at: http://www.wto.org/english/tratop_e/serv_e/sanaly_e.htm
[13 July 2001].
30 OECD (1997), Education at a Glance Indicators, pp. 67-69.
31 WT/S/C/W/50 [Online].  Available at:  http://www.wto.org/english/tratop_e/serv_e/sanaly_e.htm
[13 July 2001].  It is worth noting that health care spending – which includes the inputs provided by othersectors – is significantly higher than the health sector's genuine contribution to GDP.  Estimates on a grossvalue-added basis indicate a share of health services in GDP, in 1994, of 5.6% in the United States (privatemarket and non-market services), 3.6% in France, 2.4% in Germany, and 2.1% in Canada (market services only)(OECD (1997), Services Statistics on Value Added and Employment , Paris).
32 WHO (2000), The World Health Report 2000 , Overview, p. 2.WT/MIN(01)/2
Page 81
most obvious example.  In other instances, where public and private provision of services already co-
exists, as is the case for certain forms of health or education services in many countries, the relevance
of the carve-out for governmental services is less clear.  No jurisprudence yet exists on the issue.
47. The basic principles that apply to all covered services include most-favoured-nation (MFN)
treatment, which amounts to placing all WTO Members on an equivalent footing, i.e. not treating one
better than another.33  Other policy constraints associated with GATS coverage are minimal:
monopoly suppliers, whether public or private, can be maintained, established or re-established (if no
commitments have been made);  and, limitations of any other kind can be imposed on foreign service
suppliers.  There is nothing in the Agreement to require that covered services should be privatized or
liberalized.  It is thus hard to discern in what manner basic GATS obligations would limit public
policy options to meet national objective for health and education services.
48. Governments are free to decide whether to schedule a sector and thus make commitments on
market access and national treatment for the four modes of supply:  cross-border, consumptionabroad, commercial presence, movement of natural person s.  As a result, there is wide variation in the
number of sectors covered by Schedules.  In gene ral, higher-income countries made more wide-
ranging commitments in terms of covered service activities than developing countries or LDCs.  Over
90% of Members undertook some form of commitment on tourism services, compared with less than
40% for health and education services.  Participation of Members in the post Uruguay Roundnegotiations on financial services and telecommunications was also less than comprehensive among
developing countries.
49. If a specific commitment on a sector is made, it can be circumscribed to exclude sub-sectors.
Thus, for example, a Member may make a commitment on education services, but restrict the scope of
that commitment to adult education only;  similarly health services may be covered only for medicaland dental services and not for hospital or other health services.  Furthermore, Members can schedule
limitations on the scope of market access and national treatment with respect to modes of supply.  For
example, a Member may decide that consumption abroad of health services is allowed – which
amounts to a commitment not to limit the travel abroad  of citizens seeking health services – but limit
the scope for refund from public funds.
50. Making a commitment to provide access to foreign service suppliers does not imply giving up
the right to regulate, for obvious reasons of consumer safety.  A commitment on medical doctors does
not exempt foreign service providers from meeting national standards;  qualifications obtained abroad
may however be recognized as equivalent.  Part of the agenda of the GATS is ensuring that
qualification requirements and procedures, technical standards, and licensing requirements do notconstitute unnecessary barriers to trade in services.  The negotiations under Article VI:4 are confined
to the use of measures  in specified areas (qualification and licensing requirements, technical
standards, etc.), and will not affect Members' rights to pursue the regulatory objectives  they deem
appropriate within their jurisdiction.
3. Commitments on health or education services
51. The GATS does not compel governments to make specific commitments on defined service
activities such as health or education, but it does provide the opportunity to those wanting to do so.
Such a "positive" approach to specific commitments – voluntary, rather than mandatory – ensures that
the GATS can be reconciled with the very significant differences in attitudes and domestic constraints
to service sector liberalization among Members.
                                                     
33 Exemptions to MFN are permitted in principle for ten-years and were listed by many Members.
Other exceptions pertain to regional trade arrangements and mutual recognition agreements for standards and/or
certification.WT/MIN(01)/2
Page 82
52. Less than 50 of the WTO's Members have made commitments on education or health.34  The
main reason for this is the lack of interest in negotiating access for services already provided on the
domestic market for free or at subsidized rates by the government.  Nevertheless, in virtually all
Members, the public provision of services like education or health co-exists with private-sector
provision, suggesting they are not perfect substitutes.  Private service providers may offer different
types of services or ones that are not considered part of the universal service obligation (althoughgovernments remain free, even in fully liberalized sectors, to require such (non-discriminatory)
obligations from private-sector providers).
53. The opportunities for trade in education or health services is also attracting increasing
attention.  Exporters of these services are interested in expanding client bases, either by encouraging
travel to the home location, by locating abroad or by delivering services through new Internet-based
technologies.  Importers are interested in expanding the scope for affordable quality services available
to citizens, either by consumption abroad, by using external resources domestically, through foreigndirect investment, location domestically, or through the Internet.  Again, not all importers and
exporters of health or education services share these attitudes, helping to explain the different level of
commitments in the GATS.
54. Governments that make commitments on education services may do so to meet several social
policy objectives.  The crucial role of education in fostering economic growth, personal, and socialdevelopment, as well as in reducing inequality, is well recognized.  Countries seek to ensure that their
populations are well equipped to contribute to, and participate in, the process of social and economic
development.  Education enables them to face the challenges of technological change and global
commercial integration.  Through its capacity to provide skills and enable effective participation in
the work force, education is crucial to economic adjustment.
55. Motivations involved in making commitments on medical and hospital services may include
boosting private-sector provision, which enhances  consumer choice and can have pro-competitive
effects on public-sector provision.  Such commitments are for example contained in the European
Union's services Schedule, ratified by the Parliaments of all EU States, and effective since
1 January 1995.
35  For hospital services not provided by public utilities, the EU guarantees foreign
investors unimpeded market access and national treatment in Denmark, Germany, Greece, Ireland,
and the United Kingdom.
56. Another motivation for making a specific commitm ent on health care services may be a desire
to augment the performance of the health care system, especially if public provision is weak.
Burundi, the Gambia, Lesotho, Malawi, Sierra Leone, and Zambia are the LDCs that have madespecific commitments, and each of these has low levels of life expectancy at birth, expenditure per
capita, and health system attainment and performance.
36  Some of the countries that have recently
acceded to the WTO also made extensive commitments – Albania, Estonia, Georgia, Jordan, the
Kyrgyz Republic, and Latvia.
57. It should be noted that although attracting foreign direct investment to the health sector may
be facilitated by the GATS Agreement, commitments are unlikely to be the sole consideration in
location decisions.  These depend on a host of other aspects of the business environment, such asdomestic factor costs, taxation, security, and regulatory conditions.
                                                     
34 Adlung R, and A. Carzaniga (2001), "Trade in Health Services under GATS – Past and Future",
Bulletin of the World Health Organization , Volume 79, No. 4, 2001, 278-380.
35 GATT document GATS/SC/31, 14 April 1994.
36 WHO (2000), The World Health Report 2000 , Annex Tables 1 and 2.WT/MIN(01)/2
Page 83
4. Conclusions
58. The ongoing WTO services negotiations are expected to promote further market liberalization
or to translate liberalization already undertaken into binding commitments.  To date, no proposal has
been made on health services, and just two proposals have been made on education services.37  Even
if a request for inclusion of these services is made, there is no need for other Members to agree.  To
clarify misconceptions about the GATS and the new services negotiations, the WTO Secretariatissued in March 2001 a booklet entitled GATS — Fact and Fiction .
38
59. In its proposal for negotiations on higher education services, dated 26 June 2001, and
available on the WTO web-site, New Zealand notes:
In addition to generating revenue for private and state sector
education institutions, and Members’ economies, trade in education
services provides benefits to participating economies at the
individual, institutional and societal level, through academicexchange, increased cross-cultural linkages and technology transfer.
Increased access for Members to education where it has previously
been limited is a vital component in the development of human
capital.
60. In its proposal for negotiations on higher education services, dated 18 December 2000, and
available on the WTO web-site, the United States recognizes that:
…education to a large extent is a government function, but that most
countries permit private education to co-exist with public education.
The proposal therefore envisions that private education and training
will continue to supplement, not displace public education systems.… It seeks to supplement public education systems, affording
opportunities for suppliers to make their services available to
students in other countries.
It may be that a number of Members will heed this call and decide to schedule commitments for
education services to supplement domestic resource commitments with foreign capital and expertise.
39
Other Members may be reluctant.  But under the GATS "positive" list approach those who wish to
schedule commitments have the option to do so.
                                                     
37 New Zealand (S/CSS/W/93) and the United States (S/CSS/W/23).
38 Available at:  http://www.wto.org/english/tratop_e/serv_e/gats_factfiction_e.htm [13 July 2001].
39 For example, Cornell University has established a branch of its medical school in Qatar;
Johns Hopkins Medical School helps train doctors in Singapore to be researchers;  and the University of
Chicago offers an executive master's degree in business administration in Spain and Singapore ( International
Herald Tribune , 10 April 2001).WT/MIN(01)/2
Page 85
VI. REGIONAL TRADE ARRANGEMENTS AND THE WTO
1. Introduction
1. The cornerstone of the WTO is non-discrimination, a principle embodied in the most-
favoured-nation (MFN) provisions of Article I of GATT 1994, Article II of GATS and Article 4 of the
TRIPS Agreement, and fundamental to all the multilateral trade agreements annexed to the WTO
Agreement.  At the same time, the WTO – as did the GATT from its inception – allows Members to
conclude customs unions and free-trade areas, which by definition establish an element of preferencein the trade between the parties to the agreement vis- à-vis the rest of the world.  Such regional trade
arrangements (RTAs) have become by far the most important exception to the MFN principle.
2. The provisions contained in GATT Article XX IV (on customs unions and free-trade areas),
which have their origins in the Havana Charter, were not conceived to address the surge in
regionalism that has occurred in recent years.  Indeed, in the late 1940s, reflecting the dismalexperience with discriminatory trading arrangements in the inter-war period, the presumption was that
the exception to the MFN contained in Article XXIV would remain an exception, and a positive one.
1
Article XXIV offered the possibility to contracting parties to further the market access they had boundin the GATT through deeper trade liberalization among themselves.
3. The current trading landscape reveals a very different reality from the one foreseen nearly
six decades ago when Article XXIV was drafted. Far from being the exception, RTAs (now primarily
free-trade areas) are today almost the norm in international trade relations.
2  Most WTO Members are
party to at least one and often several agreements, and a number of Members that had not previously
considered RTAs as a policy option are either actively negotiating or considering such agreements
(Chapter II, section B(5)).  As a result, intra-RTA trade could soon account for more than half of
world trade.  In addition, as the number of RTAs multiplies, networks of overlapping agreements may
generate intricate webs of discriminatory treatment, which are likely to lead to complex andincoherent regulatory structures for the conduct of a growing share of world trade.
3
4. The purpose of this chapter is twofold: first, to alert Members to the rapid and ongoing
changes in trade regimes triggered by the spread of RTAs at a time when the outlook for multilateral
trade liberalization is uncertain, and when the shortcomings and inadequacies in WTO rules and
procedures for RTAs have not been corrected; and second, to make the case for an earlycomprehensive review of the treatment of RTAs under the WTO.
                                                     
1 See D. Irwin (1993) "Multilateral and bilateral trade policies in the world trading system:  an
historical perspective", in J. de Melo and A. Panagariya (eds) New Dimensions in Regional Integration ,
Cambridge University Press;  and WTO (1995) Regionalism and the World Trading System , for  historical
perspectives on Article XXIV.
2 It should be noted that the initial draft Charter of the International Trade Organization (ITO) only
provided for customs unions, and that the inclusion of free-trade areas (FTAs) in article 44 of the HavanaCharter (subsequently included as Article XXIV in the GATT) was the result of a last-minute political
compromise made possible by the United States agreeing to accept FTAs.
3 Some experts believe this proliferation of RTAs should be welcomed (see, for example, L. Summers
(1991) "Regionalism and the World Trading System" in Policy Implications of Trade and Currency Zones ,
Federal Reserve Bank, Kansas City).  Others are less sanguine and emphasize the importance of multilateraltrade liberalization, warning against the discriminatio n and fragmentation of the global economy that can
accompany the spread of RTAs (see, for example, J. Bhagwati and A. Krueger (1995) "The Dangerous Drift to
Preferential Trade Agreements", AEI Press, Washington, D.C.).WT/MIN(01)/2
Page 86
2. The regionalization of the world economy
5. As detailed in Chapter II(B)(5), there has been a massive proliferation of RTAs in recent
years, with an average of one RTA per month being notified to the WTO.  A recent study by the WTO
Secretariat identified a total of 170 RTAs currently in force (including some that have not, or not yet,
been notified to the WTO), and this number may well grow to about 250 by 2005.4
6. Some recent moves to conclude new RTAs appear to stem partly from defensive motives,
such as fear of being left out of a movement th at is gathering pace, or of finding one's trade
discriminated against in a growing number of markets.
7. On the basis of the 113 RTAs notified to WTO and deemed to be in force as of July 2000, it is
estimated that some 43% of world trade is intra-RTA trade.  This share would rise to 51% if all 68 or
so RTAs currently under discussion and scheduled to be in force by 2005 were already in place. Intra-
trade in the European Union (EU), a mature custom s union, is somewhat over 60% of its total trade,
marginally down from ten years previously.  Other regions, starting from a lower level of intra-RTA
trade, are catching up.  For example, the share for Latin America, excluding Mexico (which has a
head start because of the NAFTA), is projected to increase from 18% to 64% by 2005, if the FTAA is
implemented on schedule.  In Asia, the current share of  intra-RTA trade is expected to increase from
the current  5% to 15% by 2005.
8. At the same time, it is important to recall that only a part of intra-RTA trade flows involve
preferential treatment – the essence of an RTA – since (i) many tariffs are MFN-bound at zero (among
the Quad countries, for example, the share of imports entering under bound MFN zero rates ranges
from about 25% for Japan to somewhat over 40% for the EU);  (ii) most RTAs exclude certain
sectors, for example, agriculture;  and (iii) in some instances importers forgo free-trade treatment
because the MFN duty is less than the cost of comp lying with rules of origin and other requirements.
There have been important instances of regional disintegration , in particular the collapse of the
Council of Mutual Economic Assistance (CMEA) a nd the splitting-up of the former Soviet Union,
Yugoslavia, and the Czechoslovakia into 15, five and two countries, respectively.  This was followed
by strong moves on the part of many of their count ries to find new partners of integration.  Indeed,
over 20% of the RTAs notified to the WTO involve at least one of these countries.
9. Half of all RTAs under negotiation involve only two parties, i.e. they are bilateral RTAs.
Others are agreements in which one (or more) of the parties is an RTA itself.5  The most noteworthy
development anticipated in the next five years is the emergence of  RTAs in which each party is itself
a distinct RTA.  At present, there are no agreements of this kind in force, but several are currently
under negotiation and this tendency looks set to intensify in the near future.6
10. Regional trade agreements also differ considerably in scope. In their simplest form, they
provide for the exchange of preferences on a limited range of products between two or more
developing countries.  At the other extreme, they may go well beyond traditional tariff elimination for
goods, to include services and rules on various trade-related topics, such as foreign investment,
intellectual property rights, standards, competition policy, government procurement and, in some
instances, environment and labour issues. In these and other ways, many of the new RTAs areparalleling or anticipating the evolution of the GATT/WTO system.
                                                     
4 See document WT/REG/W/41.
5 Examples include the RTAs signed between the EC and individual EFTA members, as well as those
signed by CMEA and the CACM with third parties.
6 For example, the EC-Gulf Cooperation Council (GCC), EC-MERCOSUR, MERCOSUR-Southern
African Customs Union (SACU) and CER-ASEAN.WT/MIN(01)/2
Page 87
11. The resulting multitude of special trade regimes is creating several related problems.  One
concerns the extent to which the nature of these special regimes is consistent with the basic messageof deeper liberalization underlying GATT Article XXIV.  Another concerns the coherence between
the provisions in these special regimes. A third is the diminishing adequacy of the WTO's rules and
procedures for RTAs – originally designed for a GATT concerned primarily with tariffs – as RTA
agendas expand beyond the mutual elimination of tariffs among the partners.
3. The political economy of regional integration
12. Countries conclude or expand RTAs for a mix of political and economic reasons. As a general
rule the economic motivations behind an RTA – for example, to benefit from economies of scale in
producing for a larger market, to expose domestic producers to a limited amount of foreign
competition (perhaps preparing them for wider-s cale competition), and to increase the country’s
attractiveness to foreign investors  – are less compelling than the political motivations.  A recentWorld Bank report, for example, noted that regional integration “… meets political needs, such as
security or enhanced bargaining power, and it satisfies influential lobbies. Indeed, the purpose of
regional integration is often political, and the economic consequences, good or bad, are side effects of
the political payoff".
7
13. Four possible political benefits are identified.  One is intra-regional and extra-regional
security.  A case in point is the European Coal and Steel Community, established in 1951 for the
purpose of preventing future conflicts by putting critical natural resources for the defence industry
under common control. Security considerations have figured also in other RTAs, including
MERCOSUR, ASEAN, and the Gulf Cooperation C ouncil.  Second, cooperation on trade can pave
the way for cooperation in other areas, including shared natural resources (water, fishing,
hydroelectric power), transboundary pollution problems,  and infrastructure for trade (railways, roads,
ports, telecommunications).
14. Regional trade agreements may also serve as an anchor for domestic economic (and political)
reforms that otherwise would be politically difficult to carry out, a case in point being the ongoing
restructuring of Central European countries in preparation for their accession to the European Union.
A fourth political benefit is the enhanced bargaining power, in commercial relations and other aspects
of international affairs, that can flow from a larger economic area and a common voice.  Thisadvantage can be particularly important for medium/small developing countries.
15. The economic success of an RTA is often gauged by the growth of trade between the
participants.  However, a trade criterion, while seemingly a reasonable way of evaluating the success
of a trade agreement, does not reveal much about the economic benefits that flow from increased
regional trade.  The problem is that the trade between the parties expands for both good and badreasons.  When efficient producers inside the RTA expand their market shares at the expense of
inefficient partner-country producers, the participating countries gain.  But if inefficient firms
producing at above-world-market prices gain market share at the expense of third country firms –
because of their preferential access to partners' markets – both the participating countries and third-
country suppliers lose. Thus the net economic impact can go either way, depending for the most parton the balance between trade creation and trade diversion – something that is difficult to estimate
ex post , let alone ex ante .
                                                     
7 World Bank (2000) Trade Blocs , Oxford University Press.WT/MIN(01)/2
Page 88
16. While RTAs are ex ante  inherently ambiguous with regard to their economic  benefits, they
can always be designed to benefit economically both the members and the world at large.8  If trade
diversion is a problem, it can be mitigated by reducing trade barriers on imports from third countries,
either unilaterally by members of the RTA or in multilateral trade negotiations.  More generally, the
balance between trade creation and trade diversion often depends on the details of the agreement,
including provisions on external trade barriers, rules of origin, and sectoral coverage.  By choosing
these parameters carefully, the risk of trade divers ion can be mitigated, if not eliminated altogether.
Clearly there is a role to be played here by WTO rules and procedures for RTAs.
4. Assessing the new regionalism
17. The composition of new RTAs – and especially of those currently being negotiated – reveals
a relative decline in the importance of such factors as geographical proximity, cultural similarities,
and similar levels of economic development.  RTAs connecting developed and developing countriesfrom different continents are increasingly common, with the predominant format being a free-trade
area rather than a customs union.  This is symptomatic of a regionalism driven less by traditional
objectives of economic integration and more by feelings that complex trade policy issues can better be
managed amongst a more limited circle of "friends".
18. With regard to scope and coverage, the broader agendas of the current generation of RTAs
reflect, among other developments, decreasing tariff levels in OECD countries for most non-
agricultural goods, the globalization of markets, and the growing importance of cross-border issues in
such areas as services, foreign direct investment, and corporate strategies (for example, mergers and
acquisitions), together with insufficient regulatory provisions for non-tariff issues at both the regional
and multilateral levels.
19. The web of overlapping RTAs, as well as the intercontinental dimension of many new
agreements, constitutes not only a departure from the traditional concept of regionalism amongneighbouring countries, but also a conceptual sh ift away from multilateralism towards trading
strategies based on numerous selective preferential agreements comprising no more than two or three
parties.  This could be viewed as a consolidation of trading patterns and a welcome development for
further trade liberalization across the globe.  Alternatively, the idiosyncrasy of the agreements, and the
growing preference for bilateral RTAs also suggests a shift to regionalism à la carte , based on the
selective choice of trading partners and sectors to be liberalized in a preferential – that is,
discriminatory – way, leading to greater complexity in world trade relations.
Implications for the WTO
20. As RTAs increase in importance, the world trading system looks more and more multi-tier
rather than multilateral.  The bedrock of the syst em remains the WTO, as the repository of global
rules and the forum for trade negotiations and dispute resolution.  But spreading from this, ranging all
the way to the bilateral level, is a variety of less- than-global trade initiative s, varying in composition
and scope, engaged in preferential trade liberalization and policy negotiations in parallel to the
WTO’s efforts in an MFN framework.
21. It should be noted that, in line with the th inking of the GATT's founders, well-structured
regional trading initiatives can contribute to the development of the multilateral trading system.
However, in an increasingly multi-tiered system, there is a growing risk of inconsistencies in the rules
                                                     
8 See M. Kemp and H. Wan (1976) "Elementary proposition concerning the formation of Customs
Unions", Journal of International Economics , Vol. 6, February, pp. 95-98.WT/MIN(01)/2
Page 89
and procedures adopted by RTAs on the same and different tiers.  Such inconsistencies would not
only produce current regulatory confusion, but would also greatly complicate future efforts to developa consistent set of multilateral rules and procedures  governing countries’ trade-related policies.  The
result could be "regulatory gridlock", distortion of regional markets and severe implementation
problems, especially where there are overlapping RTAs.  Under the best of circumstances – defined to
include, in particular, effective and unambiguous WTO rules covering all dimensions of RTAs –
dealing with this risk would be a formidable challe nge.  In fact, in the current circumstances, the
ineffectiveness or absence of WTO rules practically  invites RTAs to develop inconsistent rules and
procedures.
WTO rules and regional trade agreements
22. For the most part, tariffs and other forms of protection against foreign competition exist not
because governments are ignorant of the efficiency arguments for free trade, but rather because otherconsiderations have entered the political balance sheet.  Governments are well aware – from intense
lobbying by inefficient import-competing industries, trade unions, and other special interest groups –
that trade liberalization, be it multilateral, regional or unilateral, creates losers as well as winners, at
least in the short term. Just as with multilateral liberalization, some compromises with free trade are
thus politically inevitable for RTAs.
910
23. This political need for flexibility is recognized in the WTO provisions on RTAs.  GATT
Article XXIV states that tariffs must be "eliminated" and cover “substantially all the trade” between
the participating countries (the fact that the rule does not specify "all trade" often is used to defend the
exclusion of certain “sensitive” sectors from the agreement, most frequently agriculture).  Another
key  provision is that the tariffs and other regulations of commerce in a customs union's harmonized
tariff schedule "shall not on the whole be higher or more restrictive than ... prior to the formation of
such union."  A similar provision applies for free-trade areas with respect to the trade regimes ofindividual members.  There is also flexibility with regard to the length of the transition period:  while
an RTA should be fully implemented within ten years, there exists the possibility of additional time
on an exceptional basis.  Provisions of GATS Article V, which deal with economic integration
agreements in the area of trade in services, largely mirror GATT Article XXIV provisions.
24. There have been problems and controversies in these three areas – sectoral coverage, post-
RTA trade barriers, and the length of the transition period for full RTA implementation
11 – but at least
there are WTO rules that attempt to strike a balance between political needs and the need to protect
the interests both of third countries and of the trading system.  This is in contrast to an important
fourth dimension of RTAs – rules of origin – which Members have refused to subject to multilateral
rules.  Preferential rules of origin (PROs), which are used in RTAs, are unregulated, except by the
                                                     
9 As noted by Mayer (1998), in his insightful political analysis of the NAFTA, the issue was not
whether trade should be liberalized between the parties or  not:  “The issue was how far and how fast they would
go and what rules they would establish to govern commerce in the region.  In the end, the most interestingfeatures of the agreement have to do with deviations from free trade: some sectors exempted, long phase-outs of
protections in others, high rules of origin, and a host of other carefully tailored provisions that make up the bulk
of the several-thousand-page agreement.”  F. Mayer, (1998) "Interpreting NAFTA", (p. 146), ColumbiaUniversity Press, New York.
10 See G. Grossman and E. Helpman (1995), "The Politics of Free Trade Agreements", American
Economic Review  84(4), pp. 833-850, for a formal political-economy analysis.
11 See Chapter I of  WTO (1995), Regionalism and the World Trading System , and document
WT/REG/W/37 for a detailed discussion.WT/MIN(01)/2
Page 90
transparency provisions included in Annex II of the WTO Agreement on Rules of Origin.12  The result
is that Members have unlimited freedom in designing rules of origin for free-trade areas and customsunions.
25. PROs define whether a good is “made” in a member of a RTA and hence entitled to
preferential entry into the markets of the participating countries. Rules of origin are complex and
controversial because, in an integrating global economy where different stages of processing
frequently take place at different locations, there is no objective way of defining “where” a product ismade. This lack of an objective definition does not, however, mean that “all PROs are equal.”  There
are two important criteria for judging PROs: the degree to which they are transparent and simple to
understand/administer, and their degree of restrictiveness (e.g. percentage of local content required).
26. The inherent ambiguity of deciding the country of origin of a good or service, combined with
the absence of any meaningful WTO rules for PROs, opens the door wide for protectionist interests toplay an often important role in drafting origin rules.  PROs are easily designed to induce producers to
source inputs within the RTA, thereby reducing their competitiveness and increasing trade diversion
in intermediate products, or to forgo duty-free entry to partners' markets.
The Committee on Regional Trade Agreements (CRTA)
27. Problems in dealing with RTAs is not a new development.  During the GATT years,
divergences on the interpretation of Article XXIV conditions used to determine the GATT-conformity
of RTAs hindered the review process, with the result that only one examined RTA, the Czech-Slovak
customs union, was ever found fully in conformity with the GATT provisions.
13  In his 1991 report to
the GATT Council, the Chairman of the CUSFTA Working Party observed:
One might ... question what point was there in establishing a working party if
no one expected it to reach consensus findings ... or to recommend to the participants
how to meet certain benchmarks.  ...  As further agreements came along, there mightbe a risk that they would be treated increasingly superficially and that contracting
parties would lose – if they had not alr eady done so – the ability to distinguish
between agreements of greater or lesser GATT consistency....
14
28. Ten years later, not only has there been no progre ss in dealing with the problems noted in the
quotation, but the situation has worsened, as both the number of RTAs among Members and thenumber of trade-related topics covered by the agreements have multiplied.  This despite the fact that
the CRTA was established in 1996 (i) to oversee, under a single framework, all regional trade
agreements, and (ii) to consider the implications of such agreements and regional initiatives for the
multilateral trading system and the relationship between them – the so-called "systemic issues".
29. The CRTA’s main failure has been its inability to resolve the problem of  reaching consensus
on the terms of such assessments.  It has not issued a report on any of the more than 100 RTAs
notified to the WTO.  This impasse is due to various political and practical difficulties.  First,
Members oppose any conclusive judgement on the consistency of RTAs because of the possible
consequences for dispute settlement processes.  Second, there is long-standing controversy about the
                                                     
12 That Agreement deals primarily with so-called non-preferential rules of origin used in connection
with anti-dumping actions, safeguard actions, and so forth.
13 The adoption of the WTO Understanding on the Interpretation of Article XXIV, as part of the Final
Act of the Uruguay Round, clarified some of the disputed issues but did little to resolve the more seriousproblems.
14 GATT document C/M/253, p. 25.WT/MIN(01)/2
Page 91
interpretation of the WTO rules against which RTAs are assessed. Given the high political stakes
involved, and the fact that the flexibility enshrined in these rules allows for divergent interpretations,
it is no surprise that any ambiguity in wording is transformed into a major issue of conflicting
opinions.
30. Other practical difficulties hindering the examination process include the great diversity of
RTAs; linkages drawn by the Members among the Committee’s assessments of different RTAs; and
the reluctance of the parties to many agreements to provide information requested by other Membersin order to make an informed judgement of the RTA’s WTO-conformity.  Not surprisingly, in these
circumstances, the debate on systemic issues has also become completely empty – another major
failure of the CRTA – focusing instead on repetitive discussions of divergent interpretations of the
legal requirements contained in GATT Article XXIV and GATS Article V.
31. Clearly, a variety of inter-linked issues lies behind the regionalism debate.  Some arise from
the interpretation of the wording of the requirements in GATT Article XXIV and GATS Article V, on
which there is no agreement. Others are more institutional in nature and arise from either the absence
of WTO rules (especially on PROs), or from troublesome discrepancies between the WTO’s rules and
those contained in the numerous RTAs, for example in such areas as anti-dumping, subsidies, and
standards.
32. In summary, against the background of these and other unresolved problem areas affecting
the functioning and adequacy of the WTO’s rules and procedures for RTAs, it is not surprising that
work in the CRTA – which should be, in the presen t circumstances, one of the WTO’s most important
and active committees – has come to a standstill.
15
5. Conclusions
33. The broad conclusions from the preceding, rather sombre analysis, may be briefly
summarized as follows:
− RTAs are proliferating .  In itself, this is not necessarily a threatening development.  What is
worrying is this trend in conjunction with the WTO’s inability thus far to fully recover from
the set-back at Seattle, the chronic ineffectiveness/inadequacy of the WTO’s procedures andpractices for RTAs, and the increasing extent to which RTAs are taking the form of à la carte
approaches to trade liberalization and negotiation.
− The proliferation of RTAs poses systemic risk.  The risk posed by the current spread of
RTAs lies less in the potential for trade di version in each individual RTA than in the
collective  impact  of a large  number of RTAs , each with its own special mini-trade regime, on
the functioning of the rules-based multilateral trading system.
16
− There is less risk if the WTO is functioning well.  RTAs and the WTO are more likely to be
mutually supportive when the WTO is functioning well, when it is seen to be moving forward
on trade liberalization and rulemaking, and responding to the needs of its Membership. In
contrast, when WTO Members are having difficulty agreeing on how to move forward
multilaterally, as has been the case for the past few years, incentives to follow the regionalroute become stronger and the importance countries attach to ensuring compatibility between
                                                     
15 See WTO (1995) for details on the other problem areas.
16 See OECD (2001) "Regional Integration:  Observed Trade and Other Economic Effects", Working
Party of the Trade Committee, TD/TC/WP(2001)19/Rev.1, for an extensive up-to-date summary of theempirical evidence on the trade effects of RTAs.  The empirical evidence also suggests that the impact on
economic growth is quite small.WT/MIN(01)/2
Page 92
regional and multilateral trade liberalization and rules becomes weaker.  The prolonged
paralysis of the CRTA is a sign of this problem.
− Middle/lower income developing countries would be the biggest losers.   Should the world
turn its back – partly or completely – on multilateralism in favour of regionalism, the biggest
losers in term of national welfare would be the middle/lower income developing countries,
which constitute well over half of the WTO Membership.  Because of their relatively small
domestic markets, such countries are often at a disadvantage when other countries, especially
important trading partners, are seeking partners for an RTA.  If they get over this hurdle and
are invited to join, the other partners – with their greater economic and political bargainingpower, and their vastly greater negotiating resources and capabilities – are certain to dominate
the process of drafting the agreement (exceptions, safeguard provisions, rules of origin, and
so forth).
− Options exist for the WTO to  respond effectively to  the new regionalism.  Two actions are
needed to ensure the “inherent complementarity” of regional and multilateral approaches to
trade liberalization:
- Continued multilateral trade liberalization.  While past experience indicates that
regional trade initiatives can increase the incentives for pursuing multilateral
liberalization, it is unclear to what extent that factor is at work in the present situation.
- WTO Members need to overcome their resistance to dealing with the serious
problems and shortcomings affecting the WTO's rules and procedures for RTAs, and
to carry out a thorough review, reform, and extension of those rules and procedures.
At Seattle, some Members pushed unsuccessfully to include just such a review on theWTO’s agenda.  Clearly, moving forward will require a political initiative and a
sustained political commitment.  Experien ce suggests that, without a radical change
in its mandate, the CRTA would not be the best venue/forum for pursuing review and
reform.
− An earlier warning.  The WTO’s 1995 study of the relationship between regionalism and
multilateralism reached two broad conclusions regarding the postwar experience:  first, that
experience indicated the relationship between the two had been “at least satisfactory, if not
broadly positive”, but that this probably had more to do with circumstances and good luck
than with GATT’s problematic rules and procedures for RTAs; and second, that governments
should consider reforms designed to put the relationship between regionalism and
multilateralism on a more solid foundation.  In the six years since that study appeared – aperiod when the role of RTAs in the life of the WTO has expanded greatly – a large majority
of WTO Members has consistently refused to accept the critical need for a major review of
the functioning and adequacy of existing rules and procedures for RTAs.  Time may be
running out.Note:  This report is subject to a press embargo until 9 November 2001, 8.00 GMT.APPENDIX TABLESWT/MIN(01)/2
Page 95
Table AII.1
Respondents in dispute settlement proceedings initiated in the WTO, 1995-2001
Respondents Dispute settlement casesTotal
cases
United States gasoline (DS2, DS4);  automobiles (DS6); underwear (DS24); wool coats (DS32);  wool shirts (DS33);
Helms Burton Act (DS38);  hormones retaliation (DS39);  anti-dumping (tomatoes) (DS49);  shrimp (DS58,
DS61);  anti-dumping (urea) (DS63);  safeguard (brooms) (DS78);  textiles (DS85);  government
procurement (DS88, DS95);  anti-dumping ( CTVs) (DS89);  countervail (salmon) (DS97);  anti-dumping(DRAMS) (DS99);  poultry (DS100);  foreign sales corporations (tax treatment) (DS108);  tariff rate quota
(groundnuts) (DS111);  harbour tax (DS118);  Anti-Dumping Act 1916 (DS136);  countervail (lead and
steel) (DS138);  cattle and swine (DS144);  textiles (DS151);  sections 301-310 (DS152);  copyrights(DS160);  Anti-Dumping Act 1916 (II) (DS162);  import measures (bananas retaliation) (DS165);
safeguard (wheat gluten) (DS166);  countervail (cattle) (DS167);  Omnibus Act (Cuban rum trademarks)
(DS176);  safeguard (lamb) (New Zealand) (DS177); safeguard (lamb) (Australia) (DS178); , anti-dumping(steel) (DS179);  anti-dumping (steel) (DS184);  Section 337 (DS186);  safeguard (cotton yarn) (DS192)
countervail (export restraints) (DS194);  Section 306 (retaliation) (DS200);  safeguard (line pipe) (DS202);
anti-dumping and countervailing measures (steel plate) (DS206);  countervailing measures (DS212);countervail (carbon steel) (DS213);  safeguard (wire rod and line pipe) (DS214);  2000 Offset Act
(Australia, Brazil, Chile, the EC, India, Indonesia, Japan, Korea and Thailand) (DS217); countervail
(carbon steel) (DS218); Section 129(c)(1) (DS221);  Patents Code (DS 224);  anti-dumping (seamless
pipe) (DS225);  2000 Offset Act (Canada and Mexico) (DS234)53
European
Communities or
its Member Statesscallops (DS7, DS12, DS14);  grains (DS9, DS13, DS17, DS25);  bananas (DS16, DS27);  hormones
(DS26, DS48);  patenta (DS37);  computers (DS62, DS67, DS68)b;  poultry (DS69);  butter (DS72);
telephone directories (DS80)c;  copyright (grant of rights) (DS82)d;  intellectual property (enforcement)
(DS83)e;  intellectual property (enforcement) (DS86)f;  subsidies (processed cheese) (DS104);  bananas
(DS105);  intellectual property (DS124, DS125)g;  subsidies (income tax measures) (DS127, DS128,
DS129, DS130, DS131)h;  import duties (rice) (DS134);  asbestos (DS135);  wood conifers (DS137);  anti-
dumping (cotton fabrics) (DS140);  anti-dumping (bed-linen) (DS141);  patent protection (pharmaceuticals)
(DS153);  special & differential treatment (coffee) (DS154);  bananas II (DS158);  subsidies (FMS forAirbus) (DS172, DS173)
i;  trademark protection (DS174);  soluble coffee (DS209);  customs duties for rice
(DS210)j; anti-dumping (pipe fittings) (DS219);  corn gluten feed (DS223);  sardines (DS231)46
Japan alcoholic beverages (DS8, DS10, DS11);  telecommunications (DS15);  sound recordings (DS28, DS42);
film (DS44);  distribution (DS45);  pork (DS66);  aircraft (DS70, DS71);  procurement  (DS73);  agricultural
products (DS76);  tariff quotas (leather) (DS147)14
Argentina textiles (DS56);  textiles (DS77);  safeguard measures (footwear) (DS121);  subsidies (footwear) (DS123);
countervailing duties (wheat gluten) (DS145);  bovine hides (DS155);  anti-dumping (drill bits) (DS157);import measures (footwear) (DS164);  patent protection (DS171);  anti-dumping (card-board and ceramic
floor tiles) (DS189);  safeguards (cotton fabrics) (DS190); patent protection (DS196);  pharmaceutical
products (DS233)13
India patent (DS50);  patent (DS79);  quantitative restrictions  (DS90, DS91, DS92, DS93, DS94, DS96);  export
commodities (DS120);  auto (DS146) ;  import restrictions (DS149);  customs duties (DS150);  motor
vehicles (DS175)13
Brazil countervail (coconut) (Philippines) (DS22); countervail (coconut) (Sri Lanka) (DS30);  aircraft (DS46);
automobiles (DS51, DS52, DS65, DS81);  import payment terms (DS116);  import licensing (DS183);
minimum import prices (DS197);  patent protection (DS199);  anti-dumping (jute bags) (DS229)12
Canada periodicals (DS31);  aircraft (DS70, DS71);  subsidies (milk and cheese) (DS103);  dairy exports (DS113);
patent protection (pharmaceuticals) (DS114);  film distribution (DS117);  auto industry (DS139, DS142);
patent protection (DS170);  export credits and loan guarantees (DS222)13
Republic of
Koreainspection of agricultural products (DS3, DS41);  shelf-life (DS5);  bottled water (DS20);  telecom (DS40);
alcoholic beverages (DS75, DS84);  safeguard measure (dairy) (DS98);  beef imports (DS161, DS169);
government procurement (DS163)11
Chile alcoholic beverages (DS87);  alcoholic beverages (DS109, DS110);  swordfish (DS193);  price band system
and safeguard measures (DS207);  price band system and safeguard measures (DS 220);  safeguard (mixed
edible oils) (DS226);  safeguard (sugar) (DS230)8
Mexico customs valuation (DS53);  anti-dumping (corn syrup) (DS101);  anti-dumping (corn syrup) (DS132);  live
swine (DS203);  telecommunications services (DS204);  anti-dumping (electric transformers) (DS 216);
matches (DS232)7
Australia salmon (DS18);  salmon (DS21);  leather (DS57);  subsidies (auto leather) (DS106, DS126);  anti-dumping
measures (paper sheets) (DS119)6
Turkey textiles (DS29, DS34, DS47);  film tax (DS43); anti-dumping (steel and iron pipe fittings) (DS208) 5
Table AII.1 (cont'd)WT/MIN(01)/2
Page 96
Respondents Dispute settlement casesTotal
cases
Indonesia automobiles (DS54, DS55, DS59, DS64) 4
Philippines pork and poultry (DS74, DS102);  motor vehicles (DS195);  p olypropylene resins (DS215) 4
Guatemala anti-dumping (cement) (DS60);  anti-dumping (cement) (DS156) 2
Ecuador anti-dumping (cement) (DS182);  anti-dumping (cement) (DS191) 2
Egypt import prohibition (DS205); anti-dumping (steel rebar) (DS211) 2
Hungary export subsidies (DS35);  safeguard measure (steel) (DS159) 2
Nicaragua imports from Honduras and Colombia (I) (DS188);  imports from Honduras and Colombia (II) (DS201) 2
Pakistan patent (DS36);  hides, skins and leather (DS107) 2
Peru countervail (buses) (DS112);  cigarettes (DS227) 2
Slovak Republic dairy products (DS133);  import duty (wheat) (DS143) 2
Trinidad andTobago anti-dumping (pasta) (DS185);  anti-dumping (pasta) (DS187) 2
Colombia safeguard (polyester) (DS181) 1
Czech Republic import duty (wheat) (DS148) 1
Malaysia polyethylene and polypropylene (DS1) 1
Poland automobiles (DS19) 1
Romania minimum import prices (DS198) 1
South Africa anti-dumping (pharmaceuticals) (DS168) 1
Thailand anti-dumping (metal products) (DS122) 1
Venezuela anti-dumping (OCTG) (DS23) 1
a Portugal. f Sweden.
b EC, UK, Ireland. g EC, Greece.
c Belgium. h Belgium, France, Greece, Ireland, Netherlands.d Ireland. i EC, France.
e Denmark. j Belgium.
Note: The references in parenthesis, e.g. DS1, refer to the WTO document series for each case.  Adopted panel and Appellate Body  reports
are available on the web-site of the WTO.  This listing includes all requests for consultations on new dispute settlement cases ;  it does
not include so-called "implementation panels" under Article 21.5 of the DSU.
Source : WTO Secretariat.WT/MIN(01)/2
Page 97
Table AII.2
Bound tariffs on industrial productsa: scope of bindings and simple averages
Import MarketsTotal number of
tariff linesShare of bound
tariff linesbShare of bound
duty-free tariff
linesShare of
unbound duty-
free tariff
linesShare of non-ad
valorem tariff
linesSimple average
bound tariff
North America
Canada 6,261 99.6 34.5 0.1 0.3 5.2
United States 7,872 100.0 39.4 0.0 4.2 3.9
Latin America
Argentina 10,530 100.0 0.0 0.0 N.A 31.0
Brazil 10,860 100.0 0.5 0.0 0.0 30.0
Chile 5,055 100.0 0.0 0.0 0.1 25.0
Colombia 6,145 100.0 0.0 0.0 0.2 35.5
Costa Rica 1,546 100.0 0.0 0.0 N.A 44.6
El Salvador 4,922 100.0 0.0 0.0 0.0 36.9
Jamaica 3,097 100.0 0.0 0.0 0.0 50.0
Mexico 11,255 100.0 0.0 0.0 0.0 34.8
Peru 4,545 100.0 0.0 0.0 N.A 30.0
Venezuela 5,974 100.0 0.0 0.0 0.0 33.9
Western Europe
European Union 7,635 100.0 26.9 0.0 0.5 4.1
Iceland 5,689 93.2 41.6 2.9 0.0 9.7
Norway 5,326 100.0 46.5 0.0 2.6 3.4
Switzerland 6,217 98.9 17.2 0.0 82.8 1.8
Turkey 15,479 36.3 1.4 0.8 0.1 42.6
Central and Eastern Europe
Czech Republic 4,354 100.0 14.0 0.0 0.0 4.3
Hungary 5,896 95.4 10.4 0.2 0.1 7.4
Poland 4,354 95.8 2.2 0.0 0.0 10.4
Romania 4,602 100.0 5.8 0.0 0.0 30.8
Slovak Republic 4,354 100.0 14.0 0.0 0.0 4.3
Asia
Australia 5,520 95.9 17.7 0.2 0.8 14.2
Hong Kong, China 5,110 23.5 23.5 76.5 0.0 0.0
India 4,354 61.6 0.0 0.4 1.1 58.7
Indonesia 7,735 93.2 0.0 1.2 0.0 38.9
Japan 7,339 99.2 47.4 0.4 3.5 3.5
Korea, Republic of 8,882 90.4 11.6 0.0 0.2 11.7
Macau, China 5,337 9.9 9.9 90.1 0.0 0.0
Malaysia 10,832 61.8 1.6 2.8 3.2 17.2
New Zealand 5,894 100.0 39.4 0.0 2.5 12.7
Philippines 5,387 58.6 0.0 0.0 4.1 26.1
Singapore 4,963 65.5 15.2 33.8 0.2 4.6
Sri Lanka 5,933 8.0 0.1 1.4 22.4 28.1
Thailand 5,244 67.9 0.0 1.2 19.7 27.5
Africa
Cameroon 4,721 0.1 0.0 0.0 0.0 17.6
Chad 4,721 0.4 0.0 0.0 0.0 17.8
Gabon 4,721 100.0 0.0 0.0 0.0 15.5
Senegal 2,818 32.3 0.9 0.0 N.A 13.8
South Africa 11,677 98.1 7.7 0.3 1.3 17.7
Tunisia 5,087 46.3 0.0 1.0 0.0 34.0
Zimbabwe 1,929 8.8 3.0 44.7 N.A 11.3
a Excluding petroleum.
b All shares are expressed as a percentage of the total number of industrial tariff lines (column 1).
Source: WTO (2001), Market Access: Unfinished Business , Special Study 6.WT/MIN(01)/2
Page 98
Table AII.3
Bound tariffs on industrial products:  simple averages by stage of processing and by category
Import
marketsStage of
processWood,
pulp,
paper
and
furnitureTextiles
and
clothingLeather,
rubber,
footwear
and
travel
goodsMetalsChemicals and
photographic
suppliesTransport
equipmentNon-electric
machineryElectric
machineryMineral
products
and
precious
stones and
precious
metalsManufactured
articles not
elsewhere
specifiedFish and
fish
products
North America
Canada Raw materials 0.2 2.5 0.3 0.1 2.7 0.6
Semi-
manufactures0.9 11.1 5.7 1.7 4.7 1.0 0.3
Finished
products1.9 14.5 10.3 5.2 3.9 6.8 3.6 5.2 4.4 4.2 4.6
United
StatesRaw materials 0.0 2.8 0.0 0.8 0.6 0.7
Semi-
manufactures0.7 9.1 2.3 1.1 4.1 1.3 1.7
Finished
products0.7 9.1 11.7 2.9 2.3 2.7 1.2 2.1 5.3 3.0 4.0
Latin America
Brazil Raw materials 20.2 35.0 34.3 35.0 34.3 35.0
Semi-
manufactures25.8 34.8 34.4 33.3 21.6 29.4 25.6
Finished
products31.1 34.9 35.0 33.4 26.2 33.6 32.6 31.9 34.8 33.5 34.5
Chile Raw materials 25.0 25.0 25.0 25.0 24.8 25.0
Semi-
manufactures25.0 25.0 25.0 25.0 25.0 25.0 25.0
Finished
products25.0 25.0 25.0 25.0 25.0 24.9 25.0 25.0 25.0 25.0 25.0
Colombia Raw materials 35.0 35.3 34.6 35.0 35.1 35.0
Semi-
manufactures35.0 35.0 35.0 35.0 35.0 35.0 35.0
Finished
products35.0 38.8 35.5 35.0 35.0 35.8 35.0 35.0 35.1 35.0 63.8
El Salvador Raw materials 36.4 40.0 40.0 26.3 39.1 42.4
Semi-
manufactures30.0 37.1 38.5 32.8 38.0 32.6 48.3
Finished
products39.7 40.0 42.4 39.9 36.7 35.8 32.6 34.6 39.2 38.2 55.2
Jamaica Raw materials 50.0 50.0 50.0 50.0 50.0 50.0
Semi-
manufactures50.0 50.0 50.0 50.0 50.0 50.0 50.0
Finished
products50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 52.4
Mexico Raw materials 30.1 34.2 34.8 34.1 33.7 35.0
Semi-
manufactures34.1 35.1 34.7 34.4 35.1 33.6 33.0
Finished
products34.6 35.0 34.9 35.0 35.4 35.8 35.0 34.1 35.0 34.6 36.0
Venezuela Raw materials 31.8 34.7 34.9 35.0 33.8 33.4
Semi-
manufactures32.8 35.0 33.9 32.8 34.0 33.8 34.8
Finished
products34.6 34.9 34.6 34.4 34.3 33.6 33.2 33.9 34.6 33.4 33.5
Western Europe
European
UnionRaw materials 0.0 2.6 0.1 0.0 0.4 11.2
Semi-
manufactures1.0 6.6 2.4 1.2 5.2 2.4 13.3
Finished
products0.5 9.7 7.0 2.8 3.4 4.7 1.8 3.3 3.7 2.7 14.1
Iceland Raw materials 1.9 1.1 0.3 1.6 2.3 1.5
Semi-
manufactures6.1 3.4 8.4 2.1 1.2 5.5 0.0
Finished
products18.1 18.2 19.1 15.3 6.5 17.1 7.0 19.4 20.9 21.9 10.4
Norway Raw materials 0.0 0.1 0.0 0.0 0.2 0.0
Semi-
manufactures0.2 7.8 0.3 3.0 0.0 0.0
Finished
products0.6 9.5 4.4 2.5 2.9 3.3 2.7 2.7 1.3 2.2 30.9
Switzerland Raw
materials1.2 1.6 0.1 0.0 1.7 0.3
Semi-
manufactures2.9 3.9 0.8 1.1 1.5 1.5 0.2
Finished
products1.7 5.5 3.2 1.3 1.2 2.2 0.6 0.7 1.4 1.3 1.1
Table AII.3 (cont'd)WT/MIN(01)/2
Page 99
Import
marketsStage of
processWood,
pulp,
paper
and
furnitureTextiles
and
clothingLeather,
rubber,
footwear
and
travel
goodsMetalsChemicals and
photographic
suppliesTransport
equipmentNon-electric
machineryElectric
machineryMineral
products
and
precious
stones and
precious
metalsManufactured
articles not
elsewhere
specifiedFish and
fish
products
Turkey Raw materials 15.7 27.3 18.1 6.0 26.3 21.2
Semi-
manufactures39.2 74.2 87.6 24.5 27.0 35.8 25.0
Finished
products52.8 89.8 87.3 47.9 35.6 25.8 23.7 26.6 49.7 43.3 58.8
Eastern Europe
Czech
RepublicRaw materials 2.3 3.3 0.6 0.1 0.4 0.2
Semi-
manufactures6.2 4.8 2.2 3.7 4.1 3.6 0.0
Finished
products6.0 7.8 5.7 4.6 3.8 6.2 3.8 4.2 5.8 3.6 0.0
Hungary Raw materials 1.6 3.1 4.6 1.4 3.2 13.9
Semi-
manufactures5.4 7.1 6.9 3.9 5.0 4.6 22.9
Finished
products6.6 9.6 7.2 8.0 7.2 15.9 8.4 9.5 6.6 7.8 23.6
Poland Raw materials 3.1 5.7 7.4 2.5 2.8 14.3
Semi-
manufactures9.0 10.1 11.2 10.2 8.6 6.3 10.8
Finished
products8.8 16.7 13.6 10.5 9.1 16.1 8.9 9.7 10.5 11.6 27.9
Romania Raw materials 34.0 33.4 35.0 35.0 30.4 27.1
Semi-
manufactures30.5 32.5 30.3 32.5 31.2 35.0 28.3
Finished
products31.3 33.1 29.7 30.0 28.7 32.1 29.5 27.3 32.0 29.3 31.8
Slovak
RepublicRaw materials 2.3 3.3 0.6 0.1 0.4 0.2
Semi-
manufactures6.2 4.8 2.2 3.7 4.1 3.6 0.0
Finished
products6.0 7.8 5.7 4.6 3.8 6.2 3.8 4.2 5.8 3.6 0.0
Asia/Pacific
Australia Raw materials 0.3 1.5 4.2 0.6 2.4 0.4
Semi-
manufactures7.0 22.9 11.5 0.8 9.8 6.0 0.0
Finished
products8.9 35.7 22.0 11.8 7.6 15.1 9.1 13.3 11.1 7.0 3.2
Hong Kong,
ChinaRaw materials 0.0 0.0 0.0 0.0 0.0 0.0
Semi-
manufactures0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Finished
products0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
India Raw materials 25.1 39.1 37.0 29.0 38.5 60.5
Semi-
manufactures40.4 86.5 33.7 47.1 39.4 40.6 60.0
Finished
products81.1 93.8 96.3 82.1 61.1 53.9 36.2 44.8 58.0 72.4 106.6
Indonesia Raw materials 38.3 40.0 39.0 40.0 39.5 40.0
Semi-
manufactures39.8 40.0 40.0 35.1 37.5 37.1 40.0
Finished
products39.9 39.8 39.8 38.7 37.2 58.5 36.6 38.7 40.0 36.9 40.0
Japan Raw materials 0.1 2.6 0.1 0.0 0.2 5.2
Semi-
manufactures1.9 5.9 10.4 1.0 2.9 0.5 10.4
Finished
products0.6 8.3 20.7 0.9 1.0 0.0 0.0 0.2 1.8 1.1 7.9
Korea,
Republic ofRaw materials 2.1 8.1 9.4 1.2 5.6 17.8
Semi-
manufactures7.1 14.0 11.1 4.5 6.0 8.6 20.0
Finished
products3.6 24.5 19.8 13.2 8.2 24.6 11.1 16.1 14.9 11.4 22.5
Macau, China Raw materials 0.0 0.0 0.0 0.0 0.0 0.0
Semi-
manufactures0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Finished
products0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Table AII.3 (cont'd)WT/MIN(01)/2
Page 100
Import
marketsStage of
processWood,
pulp,
paper
and
furnitureTextiles
and
clothingLeather,
rubber,
footwear
and
travel
goodsMetalsChemicals and
photographic
suppliesTransport
equipmentNon-electric
machineryElectric
machineryMineral
products
and
precious
stones and
precious
metalsManufactured
articles not
elsewhere
specifiedFish and
fish
products
Malaysia Raw materials 19.7 5.2 10.2 5.8 5.4 9.8
Semi-
manufactures19.7 19.6 21.1 12.0 14.7 13.3 20.4
Finished
products20.5 23.5 24.4 19.5 16.8 29.8 10.9 14.1 21.4 12.6 22.9
New Zealand Raw materials 0.0 0.0 5.9 0.0 2.1 1.1
Semi-
manufactures4.6 9.2 14.8 9.4 4.1 1.6 0.0
Finished
products5.6 34.4 23.1 15.2 11.4 17.0 15.1 16.1 13.1 11.7 6.6
Philippines Raw materials 13.7 14.4 20.6 10.6 17.8 24.9
Semi-
manufactures32.5 25.7 27.1 18.8 20.8 30.3 50.0
Finished
products37.2 31.2 40.3 33.6 28.4 26.1 22.0 26.2 35.6 29.5 41.9
Sri Lanka Raw materials 13.1 22.6 29.6 5.0 18.9 50.1
Semi-
manufactures31.9 40.2 43.8 9.1 11.3 11.9 50.0
Finished
products41.9 56.7 47.8 31.4 28.4 18.3 12.8 20.4 39.0 27.1 45.8
Singapore Raw materials 4.2 6.8 6.3 0.0 0.3 10.0
Semi-
manufactures4.2 5.1 1.2 4.1 5.2 2.2 10.0
Finished
products1.8 9.6 3.0 2.1 4.6 4.4 4.3 4.9 1.4 1.2 8.8
Thailand Raw materials 8.3 29.3 28.6 28.8 17.4 8.8
Semi-
manufactures22.3 27.6 34.7 21.4 29.7 27.9 6.9
Finished
products24.8 30.4 35.8 31.9 28.1 38.5 23.4 30.5 33.0 29.5 27.0
Africa
Cameroon Raw materials 24.1 12.6 10.0 10.0 12.6 24.3
Semi-
manufactures20.6 18.8 17.8 13.2 10.3 17.5 20.0
Finished
products21.9 27.7 25.9 20.9 15.6 14.9 12.2 16.8 23.7 22.9 27.6
Chad Raw materials 24.1 11.6 10.0 10.0 12.6 24.3
Semi-
manufactures20.6 18.6 17.8 13.2 10.3 17.5 20.0
Finished
products21.9 27.7 25.9 20.9 15.6 20.2 12.2 16.8 23.7 22.9 27.6
Gabon Raw materials 15.0 15.0 15.0 15.0 15.0 15.0
Semi-
manufactures15.0 15.0 15.0 15.0 15.1 16.6 15.0
Finished
products16.5 15.1 15.0 15.6 15.2 15.0 15.2 15.0 16.8 18.5 15.0
South Africa Raw materials 1.2 12.5 12.7 0.0 4.3 22.7
Semi-
manufactures6.7 23.9 16.3 10.8 13.0 6.7 25.0
Finished
products15.5 36.6 27.0 20.0 16.7 23.3 12.0 17.4 16.8 14.8 21.4
Tunisia Raw materials 18.2 55.5 25.2 17.0 20.4 39.4
Semi-
manufactures36.2 55.2 35.4 22.6 24.9 26.9 43.0
Finished
products36.9 57.3 39.1 32.0 30.7 25.5 25.2 29.1 35.3 32.5 47.0
Source: WTO (2001), Market Access: Unfinished Business , Special Study 6, p. 36.WT/MIN(01)/2
Page 101
Table AII.4
Initiations of anti-dumping investigations by reporting WTO Member and affected exporter, 2000
Reporting WTO Member Affected exporter
Name Number Name Number
Argentina 45 Argentina 2
Australia 15 Australia 4
Brazil 11 Austria 3
Canada 21 Belarus 2
Chile 5 Brazil 9
Colombia 3 Bulgaria 1
Egypt 1 Canada 1
European Union 31 Chile 6
India 41 China, P.R. 42
Indonesia 3 Chinese Taipei 14
Israel 1 Croatia 1
Korea, Rep. of 2 Czech Republic 3
Mexico 7 Egypt 1
New Zealand 10 Estonia 1
Peru 1 European Union 9
Philippines 2 France 1
South Africa 21 Germany 4
Trinidad and Tobago 1 Greece 1
Turkey 2 Hong Kong, China 1
United States 47 India 10
Uruguay 1 Indonesia 13
Venezuela 1 Iran 3
Israel 1
Total 272 Italy 5
Japan 9
Kazakstan 3
Korea, Rep. of 19
Latvia 2
Libya 1
Lithuania 1
Malaysia 7
Mexico 1
Moldova 2
Netherlands 2
Norway 1
Peru 1
Philippines 1
Poland 5
Portugal 1
Romania 4
Russia 10
Saudi Arabia 3
Slovak Republic 1
South Africa 6
Spain 6
Thailand 10
Turkey 7
Ukraine 6
United Arab Emirates 2
United Kingdom 8
United States 12
Venezuela 2
Viet Nam 1
Total 272
Source : WTO Secretariat.WT/MIN(01)/2
Page 102
Table AII.5
Initiations of countervailing investigations by reporting WTO Member and affected exporter, 2000
Reporting WTO Member Affected exporter
Name Number Name Number
Canada 4 Argentina 3
Peru 1 Brazil 1
South Africa 5 India 6
United States 7 Indonesia 1
Israel 1
Total 17 Korea, Rep. of 1
Pakistan 1
South Africa 1
Thailand 1
United States 1
Total 17
Source: WTO Secretariat.
__________