WORLD TRADE  
ORGANIZATION  WT/TPR/OV/11 
6 February 2006 
 
 (06-0479) 
Trade Policy Review Body  
  
  
OVERVIEW OF DEVELOPMENTS IN THE 
INTERNATIONAL TRADING ENVIRONMENT 
 
Annual Report by the Director-General 
 
1. INTRODUCTION 
 
1. Real global output is expected to grow by an  average of 4.3% in 2005-2006, well above its 
trend rate, albeit down from 5.1% in 2004.
1  At the same time, the volume of world trade in goods and 
services is expected to grow by an average of some 7% over the same period, down from 10.3% in 
2004.  World-wide inflows of foreign direct investme nt (FDI), after falling for three consecutive years 
from their peak of some US$1.4 trillion in 2001,  rebounded by 2% in 2004, to US$648 billion, and 
with favourable prospects for 2005 and 2006.2 
2. However, growth rates in output, trade, a nd FDI across regions vary widely.  Whereas 
advanced economies are expected to have grow n by 2.6% in 2005, other emerging markets and 
developing countries are expected at 6.4%.  Th e expansion has continued to be led by the 
United States and China, where expected growth rates of 3.6% and over 9%, respectively, have 
significantly exceeded expectations.3  With the important exception of Japan, growth projections in 
almost all other regions have been marked downwar d, with weakness in the euro area of particular 
concern.  Whereas advanced economies' imports and e xports are expected to have grown by 5.1% and 
4.6%, respectively, in 2005, in other emerging ma rkets and developing countries imports and exports 
are expected to have grown more than twice as much, at 12.9% and 10.1%, respectively.  The rebound 
in global FDI inflows in 2004 was led by devel oping countries, whose inflows surged by 40% to 
US$233 billion, while developed countries as a group e xperienced a 14% drop.  Asia led the upswing, 
attracting inflows 72% higher than in 2003, mainly due  to greenfield investments in China and India.  
The United States retained its position as the numb er one recipient of FDI, followed by the 
United Kingdom and China. 
3. The improvement in growth prospects in many of the world's poorest countries has been an 
especially welcome development over the past few year s.  Beyond the continued robust expansions in 
China and India, which account for over half of the world's poor, GDP growth in Highly Indebted Poor Countries (HIPCs) – while still slow – has also  risen to an average rate of 5% in 2001-05, 
despite the adverse effects of the global slowdown and – in many cases – falling commodity prices 
during this period.  Moreover, there is renewe d commitment in the international community to 
provide additional resources, reflected in the G-8 agreement at Gleneagles in July 2005 to raise 
official development assistance by US$50 billion and aid to Africa by US$25 billion, to the UN target of 0.7% of GNP by 2015;  and in proposal s to cancel HIPCs' multilateral debt.   
                                                     
 
1 International Monetary Fund, 2005, World Economic Outlook , September, Chapter 1. 
2 UNCTAD, 2005, World Investment Report , September. 
3 According to the GDP adjustme nt announced by the Chinese au thorities in December 2005, as a 
result of the First National Economic Census, China's GDP has been growing faster than originally estimated.  
Initial forecasts suggest that GDP grew by 9.8% in 2005.  Moreover, GDP in 2004 was 16.8% higher than the 
previous official estimate, which means that China's economy was the sixth largest in the world. WT/TPR/OV/11 
Page 2  
 
4. An element of downside risk to the global econo mic outlook is the rise in oil prices during the 
past year.  For example, a sustained increase of US $10 in the oil price is believed to reduce growth by 
one half of a percentage point in the first year of higher prices.
4  Higher oil prices could also 
contribute to inflationary pressures.  Some centr al banks, notably the United States Federal Reserve 
and, more recently, the European Central Bank, ha ve been tightening monetary policy by raising 
interest rates in order to contain such pressures.   Indeed, global headline inflation has picked up 
slightly, although it remains at moderate levels.  As  a consequence, the Bank of Japan has kept its rate 
on hold.  Nevertheless, long-term interest rat es, while volatile, continue to be unusually low 
worldwide; real interest rates re main well below historical averages, reflecting low and well-anchored 
inflationary expectations. 
5. An additional element of downside risk are th e global financial imbalances, especially those 
manifested in countries' current accounts, which ar e the counterparts of gaps between their domestic 
investment and national saving, including fiscal deficits.5  Imbalances have increased during the past 
year.  In particular, the U.S. current account deficit was some 6% of GDP in 2005, driven by both higher oil prices and continued strong domestic demand.   On the surplus side, the key counterparts to 
the U.S. current account deficit are Japan, Ch ina, the Middle East Oil exporters and the 
Commonwealth of Independent States.  Even so, cap ital inflows to the United States have remained 
strong, aided by robust private and official flows.  A reversal of such capital flows could be detrimental to the global economy.  An orderly re balancing of current accounts may require concerted 
action by deficit and surplus countries alike, with  those running large deficits increasing national 
saving, by inter alia  removing disincentives to save and reducing fiscal deficits, and those running 
large surpluses reducing their over-dependence on ex ternal demand (that is, exports) to generate 
growth and instead relying more on domestic demand (that is, quality investme nt and consumption).  
Whereas governments' ability to influence the private component of the gap between national saving and domestic investment is rather limited, as they  can only do so indirectly, the magnitude of the 
government component is the outcome of fiscal polic y, which is largely under governments' direct 
control and can therefore be changed more easily and effectively.  Such action would help fend off 
protectionist sentiment in countries with large curre nt account deficits directed at those with large 
surpluses. 
6. Greater exchange rate flexibility could also contribute to alleviati ng global imbalances.  
Notwithstanding the widening U.S. current account deficit, the U.S. dollar appreciated in trade 
weighted terms during the first half of 2005.  The bulk of this appreciation took place against 
industrial countries' currencies, particularly the euro .  In emerging markets, bilateral exchange rate 
movements against the U.S. dollar varied widely, w ith substantial trade weighted appreciations in 
Latin America and emerging economies in Asia, accomp anied by depreciations in central and eastern 
Europe – which move closely with the euro – a nd the ASEAN-4.  The 2.1% revaluation of the 
Chinese currency in July 2005, accompanied by the a doption of an unspecified reference basket of 
currencies, and a 0.3% daily fluctuation range agai nst the U.S. dollar, has so far had a moderate 
effect.
6 
 
                                                      
4 International Energy Agency, 2004, "Analysis of the Impact of High Oil Prices on the Global 
Economy," May, p. 13. 
5 Fiscal deficits have risen in both the euro area an d Japan since 2004 and are expected to decline only 
modestly over the medium term, with rising debt in Japan, Italy and Germany of particular concern (IMF. 2005, 
p. 16).  The fiscal deficit in the United States, althoug h still high, has decreased owing to a rebound in revenues. 
6 Subsequently, in September 2005, in a largely technical move, China slightly widened its currency's 
trading band against non-dollar currencies , such as the euro and the yen, to pl us or minus 3 per cent, a step in the 
direction of a floating exchange rate.   In the latest move towards a more flexible currency, the PBC launched 
over-the-counter trading for the yuan in January 2006.  WT/TPR/OV/11 
 Page 3 
 
 
7. In the face of global current account imbalances and growing fears of emerging market 
competition, protectionist sentiment does appear to be  on the rise.  In the United States, Members of 
Congress have renewed calls for across-the-board ta riffs of 27.5% on Chinese goods.  The lifting of 
quotas on textiles and clothing in accordance the WT O agreement has also triggered concerns in 
importing countries, resulting in safeguard actions in some countries, if not "voluntary" export 
restraints. 
8. From a multilateral perspective, a successful outcome to the Doha Round remains critical to 
securing global growth over the medium term and thus  contributing to poverty reduction.  At the sixth 
WTO ministerial meeting in Hong Kong, China in D ecember 2005  Ministers renewed their resolve to 
complete the Doha Work Programme and the current round of negotiations in 2006.  In this regard, it 
was agreed to continue the work that had been st arted, including in the areas of agriculture, non-
agricultural market access, ser vices, rules, TRIPS, environment and trade facilitation.   
9. With regard to developing and least-developed countries (LDCs), the provisions for special 
and differential (S&D) treatment were again rec ognized as being integral to the WTO Agreements 
and Ministers called for the current review of  outstanding Agreement specific proposals on S&D 
treatment to be completed, with recommendations for a decision to be made by the end of 2006.  
Ministers also reaffirmed their commitment to effe ctively and meaningfully integrate LDCs into the 
multilateral trading system;  in this context they  took a number of decisions in favour of LDCs, 
including for;  waivers of obligations under the GATT 1994;  market access to developed and developing-country markets, particularly that de veloped-country Members, and developing-country 
Members declaring themselves in position to do so , shall provide duty-free and quota-free market 
access for at least 97% of products originating from LD Cs by 2008 or no later than the start of the 
DDA implementation period;  LDC's commitments a nd concessions that should be consistent with 
their individual development, financial or trad e needs or their administrative and institutional 
capacities;  measures that deviate from LDC's TR IMs obligations that can be maintained on a 
temporary basis, provided they are notified to the Council for Trade in Goods.
7 
10. In the subsequent sections of this overview, recent developments are highlighted in these and 
several other key areas of interest to Members with developments in some areas viewed in the longer 
time-frame following the establishment of the WTO in 1995. 
2. Tariffs – Still Much Unfinished Business 
11. The further opening of markets to internationa l trade since the establishment of the WTO in 
1995 has fostered trade and economic growth worldwide.   Particularly important in this regard have 
been multilaterally negotiated reductions in tariff ra tes and the binding of such reductions during the 
Uruguay Round (UR).  For example, with the impl ementation of the UR, in developed countries, 
where applied and bound rates are much the same, the average applied MFN rate will be not higher 
than 3.8% for industrial products.  In the case  of agricultural products, the UR made existing 
protection more transparent through "tarifficati on" of  some non-tariff border measures and the 
binding of the resulting tariffs.  Nonetheless, tari ff protection for agricultural products remains much 
higher than for industrial products.   
12. Notwithstanding these positive developments, tariff s continue to be a major instrument of 
trade policy, especially in many developing countri es, where bindings are often far from complete.  
Even in developed Members, wher e the average tariff on industrial products is low, some products, 
notably textiles and clothing, are subject to relativ ely high rates (tariff "peaks").  Moreover, many 
Members' agricultural products are subject to cons iderably higher tariff rates than those applied to 
industrial products.  Such tariff peaks tend to be concealed by specific duties. Also, tariff quotas and 
escalation remain prominent features of developed and developing Members' tariffs.  It follows that 
                                                      
7 Annex F of WTO document WT/MIN(05)/DEC, 22 December 2005. WT/TPR/OV/11 
Page 4  
 
there is a great deal of scope for further tariff liber alization in the current ne gotiations.  Some progress 
has been made in this respect.  At the Ministeria l Meeting in Hong Kong, China, in December 2005, 
Ministers agreed to adopt a Swiss Formula for re ductions in non-agricultural tariffs, to reduce (or 
eliminate, if appropriate) tariff peaks, high tariffs  and tariff escalation, especially on products of 
export interest to developing countries, and to ta ke into account the special needs and interests of 
developing countries.  Developing and least-developed countries will be given flexibility, including 
through less than full reciprocity in reduction commitments. 
13. In the following discussion on tariffs, particular attention is focused on the so-called "Quad" 
group of major industrialized traders (namely the United States (U.S.), the European Communities 
(EC), Japan and Canada) as these Members' tariffs can  have serious repercussions for their trading 
partners, especially developing and least devel oped countries (LDCs).  This is also becoming 
increasingly true, albeit perhaps to a lesser extent, of tariffs applied by four major developing 
countries, notably Brazil, China
8, India, and South Africa. The use of tariffs by the Quad and these 
four developing countries can lead to welfare losses on a global scale as well as domestically, not 
least because they can hamper developi ng countries' exports, and hence growth. 
14. Some simple summary indicators capturing the leve l and structure of tariffs in the Quad are 
reported in Table 1 for 1998 and for the latest year available.9  They are also reported under full 
implementation of the UR (and the ITA);  the latter indicators are of interest because they provide a 
benchmark for the current WTO nego tiations on tariffs.  The same indicators for China, India, Brazil 
and South Africa are found in Table 2, insofar as da ta were available.  Tariff indicators for those  
Members whose Trade Policy Reviews were recently conducted, namely:  least developed countries  – 
Guinea, Sierra Leone;  Americas  – Bolivia, Ecuador, Paraguay, Trinidad and Tobago;  Asia and 
Pacific – Mongolia, the Philippines;  and Europe/Africa – Qatar, Romania, Egypt, Tunisia and 
Nigeria are found in Annex Table 1. 
Bound MFN tariffs 
15. Bindings are a key element of trade liberalization as they reduce the uncertainty concerning 
Members' trade regimes.  As a result of the UR, the percentage of tariff lines subject to  bindings 
increased significantly. In addition to achieving higher levels of bindings on in dustrial products,  all 
Members bound virtually all their tariff lines on agricultural items as a result of the WTO Agreement on Agriculture.   The Quad have bound close to 100% of all their tariff lines.  Overall bound averages 
range from 4.6% in the U.S. to 8.4% in Canada (s ee Table 1), with averages for agricultural products 
being 2 to 5 times higher than averages for indus trial goods.   As regard s industrial products, bound 
rates are among the highest for textiles and clothing, with post-UR averages ranging from 6.7% in 
Japan to 12.2% in Canada.
10  For the Quad, full implementation of the UR was achieved in 2004.11 
16. Whereas Brazil, China and South Africa also bound most, if not all, of their tariff lines, India 
has bound around three quarters.  For these four majo r developing countries, the average bound tariff 
for agricultural products is also higher than the average bound tariff for industrial goods.   Final 
average bound rates (once the U.R. commitments are fully implemented) range from nearly 10% in 
China to nearly 50% in India (Table 2).  For LD Cs the bound tariff structure can be very different 
                                                      
8 Since acceding to the WTO in 2001 , China has overtaken Canada and Japan to become the world's 
third largest trader. 
9 The methodology used to construct these tariff indicators is outlined in Daly, Michael, and 
Hiroaki Kuwahara, 1998, "The Impact of the Uruguay Round on Tariff and Non-Tariff Trade Barriers in the Quad", The World Economy  21(1), pp. 207-234.  
10 Other high bound averages exist for leather, rubber, footwear and travel goods, in Japan, Canada and 
the United States, with an average of, respectively, 17.2%, 8.7% and 7.7% and for fish and fishery products in the EC with an average bound rate of 12.1%. 
11 For Japan, tariff reduction commitments are yet to be met for one remaining industrial product, 
expected by April 2009.  WT/TPR/OV/11 
 Page 5 
 
 
from one country to another.  Whereas Sierra Leone has fully bound its tariff, Guinea has bound 40.8%.  Bound rates are, in general, high for LDCs , with averages being just  over 20% for Guinea and 
47.5% for Sierra Leone (Annex Table 1). 
Table 1 
Structure of MFN tariffs in the "Quad" 
(Per cent) 
 
 United Statesa European 
Communities Japanb Canada 
  1998 2005 1998 2005 FY98/99 FY04/05 1998 2005 
 Bound tariffc             
1 Bound tariff lines (% of all tariff lines) 100.0d 100.0d .. 100.0 98.9 98.9 .. 99.7 
2 Simple average bound rate 6.0 4.6 .. 6.5 8.4 6.4 .. 8.4 
 Agricultural products (HS01-24) 10.5 8.1 .. 16.7 25.3 16.8 .. 23.1 
 Industrial products (HS25-97) 5.1 4.0 .. 3.7 4.3 3.9 .. 5.8 
 WTO agricultural products 10.7 8.3 .. 16.6 27.2 18.4 .. 24.4 
 WTO non-agricultural products 5.1 4.0 .. 4.1 4.3 3.7 .. 5.7 
 Textiles and clothing 10.9 9.0 .. 8.0 8.5 6.7 .. 12.2 
3 Tariff quotas (% of all tariff lines) 1.9 1.9 .. 3.3 1.6 1.6 .. 2.2 
4 Duty free tariff lines (% of all tariff 
lines) 18.1 37.6 .. 26.8 34.0 40.9 .. 29.7 
5 Non- ad valorem  tariffs (% of all tariff 
lines) 14.2 10.8 .. 9.9 6.5 6.3 .. 5.1 
6 Non- ad valorem  tariffs with no AVEs 
(% of all tariff lines) 0.6 0.2 .. 2.7 1.8 1.5 .. 0.2 
7 Nuisance bound rates (% of all tariff 
lines)e 17.7 6.7 .. 6.8 4.0 1.0 .. 1.1 
 Applied tariff             
8 Simple average applied rate 5.9 4.9 7.6 6.5 6.9 6.3 7.8 6.6 
 Agricultural products (HS01-24) 10.3 9.5 18.7 16.6 18.1 16.1 23.5 21.2 
 Industrial products (HS25-97) 5.0 4.0 4.6 3.7 4.2 3.8 4.9 4.0 
 WTO agricultural products 10.6 9.7 19.0 16.5 19.3 17.7 24.7 22.3 
 WTO non-agricultural products 5.0 4.0 5.0 4.1 4.3 3.7 4.8 3.9 
 Textiles and clothing 10.9 9.0 9.2 8.0 8.2 6.7 11.7 8.9 
9 Domestic tariff "peaks" (% of all tariff 
lines)f 4.9 6.8 4.3  5.8 5.7 6.4 1.7 1.8 
10 International tariff "peaks" (% of all 
tariff lines)g 7.7 5.2 8.8  8.6 8.1 7.4 10.9 6.6 
11 Overall standard deviation of tariff 
rates 12.9 12.6 13.0  11.5 25.4 23.2 27.5 24.6 
12 Coefficient of variation of tariff rates 2.2 2.6 1.7  1.8 3.7 3.7 3.5 3.7 
13 Tariff quotas (% of all tariff lines) 1.9 1.9 3.3 3.3 1.6 1.6 2.2 2.2 
14 Duty free tariff lines (% of all tariff 
lines) 18.6 37.7 13.0 27.0 36.2 41.6 45.2 51.0 
15 Non- ad valorem  tariffs (% of all tariff 
lines) 14.0 10.6 10.0 9.9 6.9 6.6 4.0 3.9 
16 Non- ad valorem  tariffs with no AVEs 
(% of all tariff lines) 0.6 0.0 3.1 2.7 1.8 1.4 2.2 0.5 
17 Nuisance applied rates (% of all tariff 
lines)e 18.3 7.1 9.5 6.9 3.3 1.1 1.3 0.9 
.. Not available. 
a The United States levies ad valorem  duties on the f.o.b price, thereby excluding the costs of insurance and freight.  By contrast, most other WTO Members, 
including the EC, Japan and Canada, levy ad valorem  import duties on the c.i.f. price, which includes th ese costs.  Therefore, a ta riff levied on the f.o.b. 
price affords less protect ion than one levied at the same rate on the c.i.f. price. 
b Based on fiscal years (1 April to 31 March). 
c Calculations are only based on bound tariff lines.  For the Qu ad, the implementation of the UR was reached in 2004 (for Japan , one industrial product to be 
implemented in 2009 only).  
d Two lines, applying to crude petroleum, are not bound. e Nuisance rates are those greater than zer o, but less than or  equal to 2%. 
f Domestic tariff peaks are defined as th ose exceeding three times th e overall simple average ap plied rate (indicator 8). 
g International tariff peaks are defined as those exceeding 15% 
Note: All calculations exclude in-quota rates.  AVEs have been used where available;  where they are not available, the ad valorem  part of compound and 
alternate rates is used.  For the United States, the EC, Japan and Canada, 2004, 2002, 2003 and 2000 AVEs have been used, respe ctively. 
Source:  WTO Secretariat calculations, base d on data provided by the Members. WT/TPR/OV/11 
Page 6  
 
Table 2 
Structure of MFN tariffs in selected developing countries 
(Per cent) 
  China  Brazil   Indiaa South Africa 
   1997 2005 F.B.b 1997 2004 F.B.c FY97/98 FY05/06 F.B.d 1997 2002 F.B.e 
 Bound tarifff                 
1 Bound tariff lines (% of all tariff 
lines) n.a. 100.0 100.0 100.0 100.0 100.0 .. 74.0 74.0 96.3 96.2 96.3 
2 Simple average bound rate .. 10.0 9.9 .. 30.2 30.2 .. 48.5 48.5 .. .. 20.9 
 Agricultural products (HS01-
24) .. 14.7 14.6 .. 35.8 35.8 .. 115.4 115.4 .. .. 46.8 
 Industrial products (HS25-97) .. 9.1 9.1 .. 29.5 29.5 .. 35.7 35.7 .. .. 18.1 
 WTO agricultural products .. 15.3 15.2 .. 35.3 35.3 .. 114.5 114.5 .. .. 43.5 
 WTO non-agricultural products .. 9.1 9.0 .. 29.6 29.6 .. 34.2 34.2 .. .. 18.1 
 Textiles and clothing .. 11.5 11.5 .. 34.7 34.7 .. 29.6 29.6 .. .. 26.8 
3 Tariff quotas (%  of all tariff 
lines) .. 0.7 0.7 .. 0.0 0.0 .. .. .. .. .. 3.9 
4 Duty free tariff lines (% of all 
tariff lines) .. 7.7 7.7 .. 0.7 0.7 .. 2.3 2.3 .. .. 10.2 
5 Non- ad valorem  tariffs (% of all 
tariff lines) .. 0.0 0.0 .. 0.0 0.0 .. 5.3 5.3 .. .. 0.0 
6 Non- ad valorem  tariffs with no 
AVEs (% of all tariff lines) .. 0.0 0.0 .. 0.0 0.0 .. 5.3 5.3 .. .. 0.0 
7 Nuisance bound rates (% of all 
tariff lines)g .. 2.6 2.6 .. 0.0* 0.0* .. 0.0 0.0 .. .. 0.0 
 Applied tariff                 
8 Simple average applied rate 17.6 9.7 .. 14.7 10.4 .. 35.3 18.8 .. 15.0 11.4 .. 
 Agricultural products (HS01-
24) 24.3 14.6 .. 12.9 10.4 .. 33.8 42.8 .. 11.3 11.5 .. 
 Industrial products (HS25-97) 16.5 8.9 .. 14.9 10.4 .. 35.6 15.4 .. 15.4 11.4 .. 
 WTO agricultural products 23.7 15.3 .. 12.6 10.2 .. 35.2 41.7 .. 9.4 9.6 .. 
 WTO non-agricultural products 16.6 8.8 .. 14.9 10.5 .. 35.4 15.5 .. 15.7 11.6 .. 
 Textiles and clothing 27.0 11.5 .. 20.3 17.2 .. 43.7 15.0 .. 35.1 24.4 .. 
9 Domestic tariff "peaks" (% of 
all tariff lines)h 1.5 2.6 .. 0.5 0.6 .. 0.2 2.7 .. 4.0 3.9 .. 
10 International ta riff "peaks" (% 
of all tariff lines)i 44.2 15.6 .. 59.8 26.8 .. 90.5 18.3 .. 39.4 34.9 .. 
11 Overall standard deviation of 
tariff rates 13.0 7.55 .. 7.7 7.0 .. 14.5 16.4 .. 17.8 12.6 .. 
12 Coefficient of variation of tariff 
rates 0.7 0.8 .. 0.5 0.7 .. 0.4 0.9 .. 1.2 1.1 .. 
13 Tariff quotas (%  of all tariff 
lines) .. 0.7 .. 0.0 0.0 .. .. .. .. 4.2 3.8 .. 
14 Duty free tariff lines (% of all 
tariff lines) 2.1 8.6 .. 1.4 10.4 .. 1.4 2.5 .. 42.4 43.4 .. 
15 Non- ad valorem  tariffs (% of all 
tariff lines) 0.6 0.7 .. 0.0 0.0 .. 0.2 6.2 .. 25.6 25 .. 
16 Non- ad valorem  tariffs with no 
AVEs (% of all tariff lines) 0.6 0.7 .. 0.0 0.0 .. 0.2 6.2 .. 25.6 25.0 .. 
17 Nuisance applied rates (% of 
all tariff lines)g 1.2 2.6 .. 0.0 15.1 .. 0.0 0.0 .. 0.2 0.0* .. 
.. Not available. 
n.a. Not applicable. * Negligible.  F.B. Final bound. 
a Based on fiscal years (1 April to 31 March). 
b Based on 2005 tariff schedule. c Based on 2004 tariff schedule. d Based on 2001/02 tariff schedule.   
e Based on 2001 tariff schedule. 
f Calculations are only based on bound tariff lines.  Including fully bound and partially bound rates. g Nuisance rates are those greater than zero, but less than or equal to 2%. h Domestic tariff peaks are defined as th ose exceeding three  times the overall si mple average applied rate (indicator 8). 
i International tariff peaks are defined as those exceeding 15%. 
Note: Excluding in-quota rates.  Calculati ons exclude specific rates and include the ad valorem part for compound and alternate  rates. 
Source:  WTO Secretariat calculations, based on data provided by the Members. 
  WT/TPR/OV/11 
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Applied MFN tariffs 
17. Applied MFN tariffs in the Quad are generally at , or close to, bound rates.  The average for all 
products ranged from 4.9% in the United States to 6.6% in Canada;  the average for the Quad was 
6.1%.12  However, these low average applied tariff leve ls disguise the fact that WTO (that is, the 
WTO definition of) agricultural products and textiles and clothing, respectively, are subject to much 
higher average rates of 16.5% a nd 8.2% (Table 1).  These applied (as well as bound) MFN averages 
tend to underestimate the overall level of nominal tari ff protection.  In particular, they do not include 
certain specific duties for which ad valorem  equivalents (AVEs) are not available;  such duties tend to 
conceal tariff "peaks".  In the EC and Japan, fo r example,  AVEs were not available for around a 
quarter of tariff lines subject to non- ad valorem  duties. 
18. Since 1998 the overall average applied MF N tariff for the Quad  has declined by 
1.0 percentage point.  With the exception of the United States, the decrease is more pronounced in 
WTO agricultural products than for WTO non-agricu ltural products.  The average applied MFN tariff 
for WTO agricultural products fell by 2.4, percenta ge points, for both the EC and Canada, and by 
1.6 percentage points for Japan.13  In the United States averages decreased by 0.9 and 1 percentage 
points, respectively for WTO agricultural and non-agri cultural products.  Even though tariff averages 
have decreased, some product items have experienced an increase in their tariff rates.  This is the 
consequence of non- ad valorem  rates whose AVEs have risen from one period to another. 
19. Applied MFN tariffs tend to be higher in deve loping than developed countries;  the average 
applied MFN tariff rate for China (2005) was 9.7%, albeit roughly half the level in 1997 (Table 2).  
India's overall tariff average has also declined considerably; coming down to 18.8% in FY2005 
(1 April to 31 March) from 35.3% in FY1997.14   The average applied MFN tariff rates in Brazil 
(2004) and South Africa (2002), respectively, were 10.4% and 11.4%.  Whereas in China and India, 
imports of agricultural products face tariffs that are, on average, considerably higher than those 
applied to non-agricultural products, in Brazil and South Africa, agricultural products are subject to 
roughly the same or even lower tariffs than those applied to non-agricultural products.  China, Brazil 
and South Africa, unlike India, also levy relativel y higher tariffs on textiles, clothing and footwear. 
20. One possibly important reason for such high applied MFN tariff rates in several developing-
country Members is the fact that ta riffs are also a major source of tax revenue.  It follows that tariff 
reform can have important revenue  implications in such countries and reductions in average applied 
tariffs depend heavily on tax reforms aimed at  reducing reliance on border taxes for revenues.15  
However, the possible fall in the revenues resulting from across-the-board cuts in applied tariff rates 
can be mitigated by the elimination of exemp tions and other concessions in Members' tariffs; 
moreover, to the extent that broad cuts in applie d tariffs are reflected in lower domestic prices for 
imported products, the amount of revenue collected (fro m the tariff and internal indirect taxes) could 
rise insofar as demand for such products is suffici ently responsive.  A broad-based VAT would, in 
most cases, be a far less distorting source of ta x revenue than tariffs, provided the administrative 
obstacles to such a tax can be overcome.16 
                                                      
12 Average is based on the 2005 tariff schedule in the United States, the European Communities and 
Canada;  and FY2004-2005 tariff schedule in Japan.  
13 For WTO non-agricultural products, the decrease equals 0.9 percentage points for EC, 0.6 percentage 
points for both Japan and Canada. 
14 The simple average MFN rates do not include any ex emptions or concessions that are also offered  
on an MFN basis and will lower the effective tariff ra te.  A rough calculation including some of those 
exemptions provides an overall average of 17.3% for FY2005. 
15 WTO negotiations concerning cuts in tariffs involve bound MFN rates only;  such cuts would affect 
tariff revenues only insofar as they l ead to reductions in applied rates. 
16 Erbil, Can, "Trade Taxes are Expensive" (August 2004). WT/TPR/OV/11 
Page 8  
 
21. Applied MFN tariffs are often well below bou nd rates in developing countries, including 
India, Brazil and South Africa (but not China), thus providing considerable scope for applied tariffs to 
be raised and thereby imparting a degree of unpredictab ility to the tariff.  This gap is the result of two 
factors:  the negotiation of ceiling bindings and unila teral reductions in applie d tariffs.  For LDCs, the 
gap between applied and bound MFN rates is even more pronounced. 
22. The number of duty-free tariff lines has increased in  most countries.  As an average for the 
Quad, duty free tariffs have risen by 11 percentage points since 1998.
17   In Canada (2005), over half 
of total tariff lines bear a zero rate.  The Un ited States as well as the European Communities more 
than doubled their percentage of duty-free lines, respectively, from 18.6% and 13% in 1998 to 37.7% 
and 27.0% in 2005, whereas in Japan, zero rates in creased by 5.4 percentage points from FY1998 to 
FY2004 (Table 1).  Developing countries also show, in  general, an increase in their duty free rates.  
China's duty free lines increased from 2.1% in 1997 to  8.6% of the tariff and Brazil for the same 
period increased its zero rates from 1.4% to 10.4%.  South Africa has zero rates for over 40% of total lines in contrast to India, which has only 2.5% of tariff lines bearing duty free rates (Table 2).   In LDCs, duty-free rates are scarce. 
23. So-called "nuisance" tariffs (whose applied ra tes exceed zero, but are no more than 2%)
18 
involve as many as 7.1% of all tariff lines in the United States and 6.9% in the EC, but only 1.1% and 0.9%, respectively, in Japan and Canada.  In Brazil, they cover 15.1% of all tariff lines.  By contrast, 
in China, such tariffs cover only 2.6% of all tariff lines and are negligible in India and South Africa.  
Since 1998, the numbers of "nuisance" tariff rates ha ve declined for the United States, the EC and 
Japan and have increased for Canada, China and Braz il.  For Brazil, "nuisance" rates were virtually 
non-existent in 1997, but represented 15.1% of tota l lines in 2004.  Like duty-free rates, "nuisance" 
tariffs are not commonly used in LDCs (Annex Table 1). 
Tariff dispersion and "peaks" 
24. The efficiency losses associated with tariffs depend not just on average applied MFN levels, 
but also on the dispersion in rates across produc ts. For any given average tariff, the greater the 
dispersion in rates, the larger the distorting effects of tariffs.  Tariff peaks and the standard deviation 
are two indicators of the degree of dispersion.  Th e higher the standard deviation, the more tariffs 
differ from the average applied tariff and the great er the dispersion.  The United States and the 
European Community, with a standard deviation of, respectively, 12.6% and 11.5%,  seem to have a 
more uniform tariff than Japan and Canada whose st andard deviations are, respectively, 23.3% and 
24.6%.  Among these countries, applied MFN tariff ra tes that are three or more times the national 
average (domestic "peaks") continue in certain sector s.  These "peaks" cover from 1.8% of tariff lines 
in Canada to 5.8% in the EC, 6.4% in Japan and 6.8% in the United States.  By and large, tariff 
"peaks" are concentrated in agriculture and food products, partly due to "tariffication", as well as 
textiles and clothing, footwear and headgear, whic h tend to be labour intensive (Chart 1).  Even 
though tariff averages have decreased since 1998, do mestic tariff peaks have shown an upward trend 
for the United States, EC and Japan, emphasizing the continuing efforts by these Member to protect 
certain domestic products.  Many of these products are of major export interest to developing and 
least developed countries;  indeed, LDCs' exports ar e disproportionately affected by tariff "peaks" in 
the Quad.
19  Appropriately, the problem of tariff "peaks" features prominently in the DDA.   
                                                      
17 The increase is partly due to the implementation of ITAs. 
18 There is no agreed WTO definition of "nuisance" tariffs. 
19 The value of Quad imports subject  to international tariff "peaks" (that is, rates exceeding 15%) was 
nearly US$93 billion in 1999, roughly 60% of which origin ated in developing countries.  This represents about 
5% of  developing countries' total e xports to the Quad.  LDCs exports to the Quad subject to  "peaks" accounted 
for 15% to 30% of LDC's total exports to the United States, EC and Canada.  Up to US$22 billion of tariff 
revenue may be collected by Quad Members on those imports subject to such "peaks";  half of this amount is 
contributed by developing country exporters, and LDC exporters may pay up to US$200 million in tariff  WT/TPR/OV/11 
 Page 9 
 
 
25. In most developing (and least developed) count ries, domestic tariff "peaks" tend to be less 
pervasive, largely due to these countries' higher overa ll levels of tariff protection.  In China such 
"peaks" cover 2.6% of tariff lines.  In South Afri ca and India, the proportion is 3.9% and 2.7%, 
respectively, while they are negligible in Brazil (0.6%).  Although "peaks" in these countries do arise 
in agriculture and food products as well as textiles a nd clothing, they are less pronounced than in the 
Quad (Chart 2).  It is as well noticeable that standa rd deviations of developing countries tariffs tend to 
be lower than in the Quad, reflecting a less widely dispersed tariff structure. 
26. In general, a movement towards lower and more  uniform tariffs in developed and developing 
Members alike would tend to improve resource allocation and thereby raise economic welfare.20  High 
and disparate tariffs foster inefficiency by pe nalizing efficient activities, including exports; by 
promoting a high-cost economy, they impair the comp etitiveness of exporters.  Border taxes levied on 
imports are, in effect, shifted onto exports.  Reducing tariff dispersion will tend to reduce these 
adverse effects. 
27. It is estimated that if Quad Members were  to accord LDCs duty -free access to products 
subject to tariff "peaks", LDCs' exports to these ma jor markets would rise by between 30-60%, or by 
as much as US$2.5 billion;  the latter is equivale nt to an 11% increase in LDCs' total exports.21  Part 
of this increase in LDCs' exports would be at  the expense of other developing countries. 
Non- ad valorem  tariff rates 
28. Tariff "peaks" are often concealed by non- ad valorem  rates22, an important feature of the 
Quad Members' tariff schedules.23  This is particularly true for ag ricultural products, especially in the 
United States and the EC, where non- ad valorem  rates account for 10.6% and 9.9% of tariff lines, 
respectively.24  This is partly the consequence of the "t ariffication" of agricultural NTBs, which were 
often converted into specific or mixed25 and compound26 duties, rather than into ad valorem  tariffs, 
and often combined with quotas.  On average, over 90% of the top 100 tariff rates entail non- ad 
valorem  rates for the Quad.  Non- ad valorem  rates are also an important feature of the tariffs of India 
and especially South Africa, accounting, respectively, for 6.9% and 25% of tariff lines.  By contrast, 
the tariffs of China and Brazil appear to be relativel y transparent in this regard, with only 0.7% of all 
tariff lines subject to non- ad valorem  rates in China and none in Brazil.  In LDCs, non- ad valorem  
rates are very rare. 
                                                                                                                                                                     
revenue notwithstanding their tariff preferences (See Francis Ng and Mar celo Olarreaga, 2002, "Tariff Peaks 
and Preferences" in B. Hoekman, A. Mattoo and P. English (editors), Development, Trade and WTO  (The World 
Bank)).  This situation may well have changed somewhat owing to unilateral preferences accorded by the 
United States and the EC, respectively, under AGOA and EBA.  
20 Strictly speaking, a uniform, non-zero nominal tariff minimizes the net welfare cost of such 
protection only if import demand elasticities are unifo rm across commodities and cross-price effects are 
negligible.  Tariff uniformity may be desirable on admi nistrative simplicity and political grounds, however.  
Chile and Mongolia provide examples of Members with low and quasi-uniform tariffs. 
21 Hoekman, Bernard, Francis Ng and Marcelo Olarre aga, 2002 "Reducing Agriculture Tariffs Versus 
Domestic Support:  What's More Important to Developing Countries?", CEPR Discussion Paper No. 3576. 
22 The simple average of ad valorem  equivalents (AVEs) for specific duties is 2½ to 20 times the 
simple average of ad valorem  duties in the Quad. 
23 Norway and particularly Switzerland also rely heavily on specific duties; indeed, all Switzerland's 
duties are specific. 
24 To the extent that specific rates do conceal ta riff "peaks" and estimates of their AVEs are not 
available, as in the EC, Japan, Canada, China, India and South Africa, the indicators of both the levels of tariff 
protection and the dispersion in rates are underestimated.  
25 Mixed (or alternative) tariff rates ensure a minimum (or maximum) level of protection through a 
choice between an ad valorem  rate and a specific rate, e.g., 15% or US $5/kilo, whichever is greatest (or least).  
26 Compound tariff rates combine both an ad valorem  rate plus (in rare cases minus) a specific rate, 
e.g., 15% + $5/kilo. WT/TPR/OV/11 
Page 10  
 
0% 10% 20% 30% 40% 50% 60%Total212019181716151413121110987654321Chart 1
Simple average MFN tariff rates for the "Quad", by HS Section
HS Section
Calculations include AVEs where available;  where they are not available, the  ad valorem  part is used for 
alternate and compound rates.  Excluding in-quota rates.WTO Secretariat calculations, based on information provided by Members.Note:
Source : Canada 2005Japan 2004/05United States 2005
EC15 2005
01 Live animals and prods       
02 Vegetable products03 Fats and oils      04 Prepared food, etc.
05 Mineral products
06 Chemicals and prods07 Plastic and rubber
08 Hides and skins09 Wood and articles10 Pulp, paper, etc.
11 Textiles and articles
12 Footwear, headgear, etc.13 Articles of stones
14 Precious stones, etc.15 Base metals and prods16 Machinery, etc.
17 Transport equipment
18 Precision instruments19 Arms and ammunition
20 Miscellaneous manufs21 Works of art, etc.
  WT/TPR/OV/11 
 Page 11 
 
 
0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 55% 60% 65%Total212019181716151413121110987654321Chart 2
Simple average MFN tariff rates for selected developing countries, by HS section
HS Section
Calculations exclude specific duties and include the ad valorem  part for alternate and compound rates.  
Excluding in-quota rates.
WTO Secretariat calculations, based on information provided by the Members.Note:
Source : 01 Live animals and prods       
02 Vegetable products03 Fats and oils      
04 Prepared food, etc.
05 Mineral products06 Chemicals and prods07 Plastic and rubber
08 Hides and skins09 Wood and articles
10 Pulp, paper, etc.
11 Textiles and articles12 Footwear, headgear, etc.13 Articles of stones
14 Precious stones, etc.15 Base metals and prods
16 Machinery, etc.
17 Transport equipment18 Precision instruments19 Arms and ammunition
20 Miscellaneous manufs21 Works of art, etc.South Africa 2002Brazil 2004India 2005/06China 2005
 
29. It is interesting to see how AVEs influence the a pplied MFN tariff.  On average, 7.8% of total 
lines are subject to non-a d valorem  rates in the Quad.  For agricultural products, this figure is 32.9%, WT/TPR/OV/11 
Page 12  
 
ranging from 17.2% in Japan to 46.3% in the EC.  Excluding AVEs
27, the average MFN tariff of the 
Quad is 4.3%, 1.8 percentage points less than the average including AVEs, with a range from 3.9% in 
Canada to 4.5% in the EC.28  The use of AVEs is more striking when only considering agricultural 
products.  The average tariff on WTO agricultural products for the Quad is 16.4%;  excluding AVEs 
the average is 7.5%.29  The use of AVEs in agricultural products  does not have the same impact for all 
Quad countries.  Despite the fairly high percentage of non- ad valorem  rates in the United States, 
excluding or including AVEs changes the average tariff on WTO agricultural products by only 1.6 percentage points.  In Canada, the percentage of non-ad valorem rates is lower, but the difference in 
tariff averages is much more important,  with an  average for agricultural products including AVEs at 
22.3% and excluding AVEs at 4.3%.  The general aspects of non- ad valorem  rates, especially specific 
duties, are summarized in Box 1. 
Box 1:  Specific duties 
The use of specific (as well as alternate and compound) du ties are problematic for several reasons.  First, they 
are less transparent than ad valorem  tariffs, tending to conceal relatively high ad valorem  equivalents.  
Second, specific duties tend to distort domestic production patterns more than ad valorem  tariffs, providing 
disparate levels of assistance for similar goods by taxing imports of cheaper products more heavily;  this 
encourages domestic firms to produce cheaper goods that have higher protection from imports.  To the extent 
that developing countries are exporters of relatively ch eap products falling within the same national tariff line, 
such duties tend to impose a heavier burden on their exports;  specific duties thus tend to afford higher levels of tariff protection (in ad valorem  terms) against imports from developing countries than from industrialized 
countries. Third, specific duties may also be more regressive than ad valorem  duties because they impose a 
heavier burden on cheaper products with in the same tariff line.  Fourth, as AVEs are inversely related to 
import prices, specific duties progressively cushion domestic producers agains t competition from lower-
priced imports, thereby counteracting cuts in specific ra tes.  Consequently, they counteract the relative price 
effects of exchange rate changes on countries' trade bala nces.  Indeed, the use of specific duties can lead to an 
increase in real tariff protection as th e prices of traded goods decline (and to a fall in real protection as prices 
increase).  On the other hand, specific duties in domes tic currency are eroded by  inflation, which has the 
effect of autonomous trade liberaliza tion, and they are less prone to the problem of under-invoicing, which is 
a common issue in developing countries.  Members have agreed in the framework of current negotiations 
concerning non-agricultura l market access that duties on non-agricu ltural products sh all be "bound in ad  
valorem  terms". 
Source:  WTO Secretariat.  
Tariff quotas 
30. The UR negotiations on agriculture involved the establishment of tariff quotas to preserve 
market access ("current access") and enhance market access ("minimum access").30  As a result, tariff 
rate quotas as a proportion of all tariffs increased considerably in the United States, Japan and 
Canada; they were already significant in the EC pr ior to the UR.  Tariff quotas in the current applied 
tariff account for between 1.6% of tariff lines in Japa n to 3.3% in the EC.  By contrast, the tariffs of 
China and Brazil contain few, if any, tariff quotas.  "Out-of-quota" rates (and even "in-quota" rates) in 
the Quad, often entail potentially prohibitive tari ff "peaks" and most of them are based on non- ad 
valorem  tariffs with the average of out-of quota rat es being 4.2 to nearly 25 times higher than the 
                                                      
27 Averages excluding AVEs are only based on ad valorem  rates. 
28 Averages of ad valorem  rates and AVEs are respectively, 4.2% and 10.7% in the United States, 4.5% 
and 29.5% in the EC, 4.4% and 39.2% in Japan, and 3.9% and 81.8% in Canada. 
29 WTO agriculture averages of ad valorem  rates and AVEs, are respectively, 8.1% and 11.8% in the 
United States, 7.7% and 30.4% in the EC, 9.8% and 65.6% in Japan, and 4.3% and 85.1% in Canada. 
30 In 2004, 45 WTO Members have a total of 1,430 tariff quota commitments in their Schedules (see 
TN/AG/20).  For the Quad the number of tariff quota  commitments ranges from 20 for Japan, to 91 for the 
European Communities, representing around 12% (Canada), 15% (Japan) and 27% (U.S. and EC) of  tariff 
quotas applied in their current tariff schedules.   WT/TPR/OV/11 
 Page 13 
 
 
corresponding in-quota average.31 For the Quad, tariff quotas as a percentage of total tariff lines has 
remained unchanged since 1998.  WTO Members have considerable discretion in administering tariff 
quotas, which, despite the decreased in-quota tari ffs, may explain why in many cases tariff quotas 
have not been filled, hence reduci ng the benefits of "tariffication".32   
Tariff escalation 
31. A non-uniform tariff is often used to provide an "escalating" degree of tariff protection to 
encourage downstream processing.  This may be attempted by levying relatively low duties on raw 
materials with progressively higher tariffs applied to  more processed goods.  The outcome is that the 
level of effective (as opposed to nominal) prot ection increases as goods undergo further processing.33  
Indeed, what may be mild escalation in nominal ta riff terms can provide very high effective (net) 
assistance to downstream activities.  Tariff escalation (often reflecting tariff "peaks") is a feature of 
industrial-product tariffs in the Quad (Table 3).  Such escalation is present in the same sectors as those 
that are affected by "peaks", most notably textiles, clothing and leather, and food, beverages and tobacco.  Other groups of products that are subject  to escalation are non-metallic mineral products and 
base metals.  Among the Quad, Japan shows a less c onsistent escalation pattern.  For textile and 
leather products the average is highest in the first stage of processing and in many product groups the 
averages for semi-process ed goods are higher than for fully processed products.  Tariff escalation is 
also a feature of the tariffs of China, Brazil, South Africa and, to a lesser extent, India, especially in 
the case of textiles and leather, and wood and wood pr oducts (Table 4).  Not only is tariff escalation a 
potential impediment to the efficient allocation of  resources in the importing country, it also 
constitutes an obstacle to local processing of dom estically-produced primary products as well as of 
semi-finished goods in the exporting country.  Cons equently, it can impede the industrialization of 
developing countries and LDCs seeking to export produc ts with higher value-added, if not mitigated 
by GSP or other preferences.
34  Since 1998, no strong decline in escalation is apparent in the Quad.35 
                                                      
31 The average of in-quota and out-of quota rates is  respectively 9.0% and 48.9% in the United States, 
8.8% and 37.1% in the EC, 18.9% and 90.8% in Japan, 3.2% and 80.7% in Canada. 
32 Information regarding tariff rate quota (TRQ) "utili zation rates" and "administration" systems may be 
found in WTO documents TN/AG/S/2, TN/AG/S/5, TN/AG/S/6, TN/AG/S/9 and TN/AG/S/20. 
33 The effective rate of protection (ERP) measures the protection provided by the entire structure of 
tariffs, taking into account those levied on inputs as well as those on final products.  It is defined as ERP = (V D – 
VW)/V W, where V D is the value-added in the given sector at domestic prices, which includes tariffs, and V W is 
value added at world prices.   If the nominal tariff on the final product is t, the share of each imported input i in 
the total value of the final product is ai, and the nominal tariff on each imported input is ti, then the effective rate 
of protection can be written as:  ERP = ( t - Σaiti)/(1 - Σai).   Thus, if  t = 10%, ti  = 5% for all inputs and Σai = 
0.6, the ERP is nearly 20%.  For a full discussion of  this concept, see Corden, W.M., 1971, The Theory of 
Protection , London:  Oxford University Press. 
34 In principle, LDCs will not face any tariff escala tion once they are granted "duty-free and quota-free 
access" to the markets of developed coun tries, provided they can comply w ith associated preferential rules of 
origin. 
35 As a result of missing AVEs, it is difficult to comp are escalation across years.  For Japan, the first 
stage of processing for product group "food, beverages and tobacco" has an average of 23.7% in FY1998/99 and 
12.6% in FY2004/05.  The HS item 0171339227 belonging to this group has an AVE of 1,012% in FY98/99;  
for the same item, no AVE is provided in FY2004/05. WT/TPR/OV/11 
Page 14  
 
Table 3 
Tariff escalation in the "Quad" by 2-digit ISIC industry 
(Per cent) 
  United States EC15 Japan Canada 
    2005 2005 2004/05 2005 
Food, beverages and tobacco First st age of processing 2.9 14.7 12.6 9.5 
 Semi-processed 7.1 19.4 21.4 6.8 
 Fully processed 12.4 19.4 20.2 34.1 
Textiles and leather First stage of processing 2. 4 0.8 24.3 1.0 
 Semi-processed 8.5 6.2 6.5 6.1 
 Fully processed 9.5 9.4 11.4 12.7 
Wood and furniture First stage of processing 0.0 0.0 0.0 0.0 
 Semi-processed 2.1 3.1 4.3 2.1 
 Fully processed 2.2 2.1 2.1 5.2 
Paper, printing and publishing First stage of processing 0.0 0.0 0.0 0.0 
 Semi-processed 0.1 0.9 0.3 0.1 
 Fully processed 0.0 0.0 0.0 0.0 
Chemicals First stage of processing 1.8 1.5 2.4 1.5 
 Semi-processed 3.8 4.7 2.8 2.7 
 Fully processed 3.9 3.9 2.0 4.5 
Non-metallic mineral products First st age of processing 0.0 0.0 0.0 0.0 
 Semi-processed 2.1 2.9 1.5 0.6 
 Fully processed 5.5 4.1 1.1 3.8 
Basic metal First stage of processing 0.6 0.0 0.0 0.0 
 Semi-processed 1.2 1.3 0.8 0.6 
Fabricated metal products and machinery Semi-processed 2.5 1.6 1.5 1.3 
 Fully processed 2.2 2.5 0.3 2.6 
Other First stage of processing 1.6 1.2 0.2 1.2 
 Semi-processed 0.0 0.0 0.0 0.0 
 Fully processed 3.6 2.7 2.5 4.8 
Total industry First stage of processing 2.2 8.9 10.5 4.1 
 Semi-processed 4.3 4.7 4.7 3.5 
 Fully processed 5.4 7.0 7.2 8.8 
Overall escalation First stage of processing 3.7 8.5 7.5 4.9 
 Semi-processed 4.3 4.7 4.7 3.5 
 Fully processed 5.4 7.0 7.2 8.8 
Note: For countries with non- ad valorem  rates AVEs have been used as ava ilable. In case of unavailability, the ad valorem  part is used 
for compound and alternate rates.  Excluding in-quota rates. 
Source : WTO Secretariat calculations, based on data provided by the Members.  WT/TPR/OV/11 
 Page 15 
 
 
Table 4 
Tariff escalation in China, Brazil, India and South Africa, by 2-digit ISIC industry 
(Per cent) 
  China India Brazil South Africa 
    2005 2005/06 2004 2002 
Food, beverages and tobacco First st age of processing 12.7 38.1 8.1 10.8 
 Semi-processed 23.2 35.3 11.2 10.3 
 Fully processed 16.7 51.0 13.5 15.5 
Textiles and leather First stage of processing 11. 9 17.4 8.3 4.7 
 Semi-processed 9.0 15.0 15.6 22.0 
 Fully processed 14.6 15.1 19.1 32.3 
Wood and furniture First stage of processing 1.2 9.0 2.0 0.0 
 Semi-processed 4.0 15.0 7.3 6.2 
 Fully processed 6.4 15.0 14.7 15.6 
Paper, printing and publishing First stage of processing 0.0 7.1 3.6 0.0 
 Semi-processed 6.1 15.0 12.1 5.8 
 Fully processed 5.9 13.8 11.9 7.7 
Chemicals First stage of processing 6.1 15.5 6.8 3.5 
 Semi-processed 6.5 15.7 6.3 3.3 
 Fully processed 8.5 15.1 6.6 7.7 
Non-metallic mineral products First st age of processing 0.0 15.0 6.0 0.0 
 Semi-processed 10.4 15.0 7.3 4.9 
 Fully processed 13.2 14.9 11.1 7.1 
Basic metal First stage of processing 4.0 7.9 3.8 0.0 
 Semi-processed 4.9 17.9 9.5 3.1 
Fabricated metal products and 
machinery Semi-processed 6.9 15.0 13.7 2.4 
 Fully processed 9.3 15.5 13.0 5.2 
Other First stage of processing 13.8 27.8 8.6 2.5 
 Semi-processed 7.5 15.0 12.0 4.3 
 Fully processed 14.8 14.9 17.4 7.3 
Total industry First stage of processing 10.0 25.6 7.3 5.6 
 Semi-processed 7.3 16.3 8.5 12.9 
 Fully processed 11.1 18.9 12.5 11.2 
Overall escalation First stage of processing 9.6 27.3 6.8 4.8 
 Semi-processed 7.3 16.3 8.5 12.9 
 Fully processed 11.1 18.9 12.5 11.2 
Note: Calculations exclude specific rates and include the ad valorem  part for compound and alternate rates.  Excluding in-quota rates 
Source : WTO Secretariat calculations, based on data provided by the Members. 
Preferential tariffs for developing co untries and the erosion of preferences 
32. Under the GATT "Enabling Clause", non-reciprocal  preferential treatment may be offered to 
developing countries.  A number of countries offer such treatment under the Generalized System of 
Preferences.  The preferences are usually offered to a specific number of countries and for various ranges of products, although a number of countries have recently removed all tariffs on products 
entering from LDCs.
36  Others, such as the United States a nd the EC, have also passed legislation 
offering preferential treatment for specific count ries:  the United States under the African Growth 
Opportunities Act (AGOA), which offers preferentia l treatment for qualifying African countries;  and 
                                                      
36 Examples of such countries that have removed tariffs on imports from LDCs include New Zealand 
(1 July 2000), Norway (2002) and Australia (July 2003).   WT/TPR/OV/11 
Page 16  
 
the EC under the Everything but Arms (EBA) Agreement, which accords duty-free and quota-free entry to all products imported from LDCs, except ar ms and munitions and three agricultural products 
(bananas, rice and sugar), for which tariffs are due  to be removed by 2009.  GSP schemes usually 
exclude "sensitive products", such as agricultural prod ucts and textiles and clothing;  imports of these 
excluded products are normally subject to MFN duty. 
33. Analysis of preferences for developing and l east-developed countries shows that average GSP 
rates in the Quad are on average 1 to 2 percentage  points lower than MFN rates;  differentials are 
smaller for sensitive sectors such as textiles and clothing and agriculture (Table 5). 
34. With constant progress in overall trade liberalization, through inter alia  multilateral and 
regional negotiations, preference erosion has become an important issue in current WTO negotiations.  
Multilateral trade negotiations on gene ral tariff reductions are often sai d to be a two-edged sword for 
developing countries.  On the one hand, they produce benefits via improved access for developing 
country exports to world markets, but on the other hand,  they can be costly due to an erosion of their 
existing preference margins. 
Table 5 
MFN and developing country prefe rential tariffs in the "Quad" 
(Per cent) 
  MFN GSPa LDCb 
United States 2004 4.9 2.6 .. 
WTO agricultural products 9.7 6.2 .. 
Textiles and clothing 9.0 8.8 .. 
EC 2004c 6.5 4.5 1.7 
WTO agricultural products 16.5 14.5 9.0 
Textiles and clot hing 8.0 7.2 0.0 
Japan 2004/05 6.3 5.1 3.1 
WTO agricultural products 16.1 16.7 15.3 
Textiles and clot hing 6.7 5.0 0.0 
Canada 2005 6.6 5.3 2.5 
WTO agricultural products 22.3 20.0 15.3 
Textiles and clot hing 8.9 8.1 0.0 
.. Not available. 
a Generalized System of Preferences. 
b Least Developed Countries Preferences. 
c Data for EC's GSP and LDC are based on the 2001 tariff (and nome nclature), the latest availabl e on such preferential rates. 
Note: AVEs have been used as availa ble.  In case of unavailability, the ad valorem  part is used for compound and alternate rates. 
 Calculations exclude in-quota rates. 
Source:  WTO Secretariat calculations, base d on data provided by Members. 
35. It is difficult to calculate the magnitude of pr eference erosion, as arriving at an appropriate 
quantitative estimate of the full effects of MFN tariff reductions for developing countries receiving preferences is a rather complex task.  Different studies show that the erosion of tariff preferences will not have an equal impact on all de veloping or least- developed countries.
37  The impact depends on 
the composition of their exports and their dependence on, and the use of , preferential rates.  For some 
                                                      
37 See, for example, Low, P., R. Pi ermartini and J. Richtering, "Multilateral Solutions to the Erosion of 
Non-Reciprocal Preferences in NAMA", October 2005;  Alexandraki, Katerina (2005) "Preference erosion: 
cause for alarm?", IMF, Finance & Development , March; Paul Brenton and Takako Ikezuki  (2005) "The impact 
of agricultural trade preferences, w ith particular attention to the least-developed countries", World Bank, Global 
Agricultural Trade and Developing Countries;  See, also, Francois, J., B. Hoekman and M. Manchin. 
"Preference Erosion and Multilateral Trade Liberalization" , Centre for Economic Policy Research, July 2005.  
Available online at:  http//www.cepr.org/pubs/dps/DP5153.asp.   WT/TPR/OV/11 
 Page 17 
 
 
developing and least-developed countries, exports will ha rdly be affected by the erosion;  for others, 
there could be much at stake, even if the pref erential margin is very small.  But unless trade 
liberalization is put on hold, tariff erosion will be un avoidable.  To temporarily lessen the damage of 
tariff erosion, a better use of preferential schemes c ould be achieved by extending the coverage to all 
products and removing quotas or incr easing quota levels.   In agriculture, for example, the problem of 
tariff peaks on products of export interest to de veloping countries still exis ts and import quotas hinder 
exports further.    Moreover, from one year to the next, a product's preference or even a country's 
access to a preference may be removed.  By making preferential schemes more predictable, the motivation to invest in developing countries in order to take advantage of preferences might be strengthened.  Rules of origin also hamper the abi lity to take full advantage of preferential rates.  
Their lack of transparency and complexity can gene rate important administrative costs, decreasing the 
benefit of the preference considerably.
38  Rules of origin are often cons idered to be the main cause of 
low utilization rates39 of preferential schemes. 
36. For sub-Saharan African countries, the overall va lue of trade preferences granted by the EC, 
Japan and the United States is rather small.40  In 2002, the latest year for which data are available, the 
value of EC preferences to sub-Saharan African  countries, under the Cotonou Agreement and under 
the EBA/GSP, amounted to about 4% of the value of those countries' exports to the EC.  The value of U.S. preferences to the same countries, under AGOA a nd the GSP, amounted to 1.3% of the value of 
their exports to the United Stat es, whilst Japanese pref erences to sub-Saharan African exporters 
amounted to 0.1% of the value of their exports.  He nce, for a majority of beneficiaries, preferences 
appear to have had a limited impact on exports.  Consequently, for sub-Saharan countries, the erosion 
of tariff preferences is likely to have a limited effect .  However, it is important to point out, that the 
benefits of those preferences are concentrated in a small number of countries and sectors;  hence, for 
specific countries, and for certain products
41, the erosion of tariff preferences might have a significant 
negative impact. 
37. A crucial question for countries undergoing pr eference erosion is whether, during WTO 
negotiations, they should opt for slowing down the p ace of MFN tariff reductions to maintain greater 
tariff preferences for as long as possible.  The disadva ntage of preferences is that developing countries 
might tend to become dependent on the preferential access granted to certain products at the expense 
of other products where they do possess a comparativ e advantage.  In the long run, with preferential 
margins becoming smaller, or even abolished, those countries might see their exports dependent on 
preferential margins drastically reduced.  An exam ple of such dependence is the market distortion 
created by the ATC and its precursor, the MFA.  Under the MFA, which was negotiated in 1974, 
quotas were imposed on exports of textiles and cl othing from the most competitive developing 
countries.  A number of other countries took advantage of this constraint by developing a textiles and 
clothing industry.42  Since January 2005, with the terminati on of the ATC, quotas have been abolished 
for textiles and clothing. Countries that were gr anted preferential access under the ATC now need to 
compete without that preferential access.   
                                                      
38 WTO document WT/REG/W/45, 5 April 2002.  For example, Canada's textiles and clothing imports 
from LDCs increased considerably after it relaxed its rule s of origin in January 2003 (in addition to eliminating 
tariff rates) of such products. 
39 The utilization rate is defined as the ratio of im ports actually receiving preferential treatment in 
relation to imports eligible for preferential treatment. 
40 Paul Brenton and Takakao Ikezuki, 16 May 2005 "The value of trade preferences for Africa", Trade 
Note 21, the World Bank Group. 
41 Such as sugar and clothing. 
42 For example, with abundant cheap labour involved in the manufacture of low-priced clothing, 
Bangladesh's share of clothing in total exports rose from 0.2% in 1980 to 76.6% in 2004 (UNSD, Comtrade 
database). WT/TPR/OV/11 
Page 18  
 
3. Agriculture – Still the most distorted sector 
38. Agriculture plays a central role in many de veloping countries, accounting for just over one 
quarter of their GDP and about half of their employment;  by contrast, agriculture in OECD countries accounts for only around 2% of GDP and 7.3% (in 2001) of employment.  With nearly three quarters of the world's poor concentrated in rural areas, ma inly in developing countries, and depending heavily 
on agriculture for their livelihoods, trade liberalization in agriculture is crucial to the alleviation of 
poverty.  In agriculture, the conversion of quantitativ e restrictions and other non-tariff measures into 
tariffs ("tariffication") and the curtailment of su bsidies were among the major achievements of the 
UR;  tariffication of NTBs, in particular, paved th e way for future reductions in agricultural tariffs.
43  
Nonetheless, both tariffs and domestic support for ag riculture are still relatively high, especially in 
many OECD countries.  In the Quad, for exampl e, applied MFN tariffs on agricultural products 
average more than four times t hose on non-agricultural products, thus impinging on the opportunities 
of developing and other countries to benefit from tr ade in such products.  Total support to agriculture 
by OECD countries in 2004 exceeded US$1 billion per day, more than six times all development 
assistance.  Much of this support is linked to pr oduction; this encourages higher output resulting in 
surpluses, especially in several OE CD countries where such support is most generous.  Support linked 
to production in combination w ith export subsidies tends to lower world prices of agricultural 
products and leads to the displacement of devel oping countries' products, not just from subsidizing 
countries' markets, but also from their own and thir d markets, to the detriment of poor farmers in 
developing and least developed countries.  In ge neral, agriculture remains the most protected, 
subsidized, and thus distorted, sector of many Members' economies, with far-reaching social and 
economic repercussions, not just domestically, but  globally.  Estimates by the World Bank and IMF 
suggest that the benefits from dismantling all border measures and eliminating subsidies affecting 
agriculture would be very large for indus trialized and developing countries alike.44 
39. Under the Doha Ministerial Declaration, it was agreed that the agriculture negotiations would 
aim at achieving substantial reductions in trade-di storting domestic support, substantial improvements 
in market access and reductions, with a view to  phasing out, all forms of export subsidies.  In 
addition, the Declaration requires that special and differential treatment for developing countries be 
integral to all parts of the negotiations and be re flected in the results.  The General Council Decision 
of 1 August 2004 clarified that reductions in tari ffs, AMS and the total permitted level of trade-
distorting domestic support would be achieved by tiered formulas and that all forms of export 
subsidies would be phased out by eliminating direct  subsidies and export credits of 180 days or more 
and introducing rules on other export credits, food aid and exporting state trading enterprises.  It also 
set out how flexibility could be provided for all Members through sensitive products and for 
developing country Members through Special Pr oducts and a Special Safeguard Mechanism. 
40. Further progress was made in the Ministerial Conf erence in Hong Kong, China.  It was agreed 
that all forms of export subsidies would be elimin ated by 2013 along with further details concerning 
the rules on export credits, food aid and exporting state trading enterprises.  On domestic support, the 
position of Members on the bands for the tiered formul a for reductions in both overall trade-distorting 
support and AMS were agreed along with a number of other issues;  disciplines are to be developed to 
                                                      
43 The Uruguay Round Agreement of 1994 resulted in agricultural policies being subjected to 
multilateral rules and effective disciplines for the firs t time.  The Uruguay Round Agreement on Agriculture 
(URAA), replaced non-tariff import barr iers by bound tariffs, opened previ ously closed markets, curbed export 
subsidies; categorized domestic programmes on the basis of their potential to distort trade, and disciplined the 
most trade-distorting forms of support .  Agriculture was also affected by other agreements, notably SPS and 
TBT, whose aim was to forestall the use of su ch measures for purpos es of protection.   
44 Estimates of the benefits top US$350 billion for the world (World Bank, 2004, Global Economic 
Prospects , p. 105).  According to the IMF, the static glob al welfare gains from removing agricultural support 
tariffs and subsidies would be US$128 billion annually; the dynamic gains (from higher investment and faster 
productivity growth) may well be several times larger.  (IMF, 2002, World Economic Outlook , 
Washington, D.C, p. 85).   WT/TPR/OV/11 
 Page 19 
 
 
achieve effective cuts in trade-distorting domestic support consistent with the Framework adopted by 
the General Council on 1 August 2004.  On market access, progress was made on some elements of 
special and differential treatment.  Ministers agre e to intensifying work on outstanding issues to 
achieve the DDA objectives and resolved to establis h modalities no later than 30 April 2006 and to 
submit comprehensive draft Schedules no later than 31 July 2006. 
41. Agricultural support programmes are partly justified by those Members using them as being 
necessary to address non-trade concerns, such as income support for agricultural households, 
preservation of the environment and food security.  Wh ile the view that such non-trade concerns are 
legitimate domestic objectives is widely shared among WTO Members, some attach more importance 
to these concerns than others.  Much of the debate has, therefore, been about the magnitude of support 
to agriculture, as well as the effectiveness of the various measures aimed at achieving these multiple 
objectives. 
42. Clearly, domestic agricultural policies and intern ational trade are closely intertwined, with 
protective border measures often used alongside domestic support programm es.  In particular, a 
domestic support programme that holds the dom estic price above the world level requires 
accompanying import restrictions such as tariffs;  th e higher the domestic support price, the higher the 
accompanying tariff or its equivalent.  Further,  to the extent that domestic support programmes 
generate a surplus, export subsidies have b een used to help dispose of the surplus. 
43. Total support to agriculture by OECD countri es, as measured by the total support estimate 
(TSE)45, was US$378 billion in 200446, compared to US$349 in 2003 and US$306 billion in 1986-88.  
The EC (15), Japan and the United States collectivel y account for approximately four-fifths of such 
support (although as a percentage of the value of gross farm receipts, support is highest in 
Switzerland, Norway, Korea, Iceland and Japan, re spectively).  In 2002-2004, average annual total 
support was the equivalent of 1.2% of GDP in th e OECD area, compared to an annual average of 
2.3% in the peak 1986-88 period.  Agriculture's c ontribution to GDP in the OECD area is currently 
about 2%.  In Japan, Korea, Norway, and Switzerland, total support to agriculture is close to, or even 
exceeds, the sector's contribution to GDP.  
44. Nearly three quarters of total support is provide d to farmers.  Such support, as measured by 
the producer support estimate (PSE), represented 30% of  total farm receipts in 2004, the same level as 
in 2003, but down from 37% in 1986-88. In other words, close to one-third of OECD Members' current gross farm receipts result from transfers asso ciated with their agricultural policies.  In 2002-
04, the PSEs for Japan, the EC, Canada and th e United States were 58%, 34%, 22% and 18%, 
respectively.  In Iceland, Kor ea, Norway and Switzerland, PSEs we re even higher, ranging from 63% 
to 69%.  Thus, for every $100 earned by a farmer in these four countries, some two-thirds was the 
result of transfers associated w ith agricultural support measures.  Among OECD countries, support 
levels in 2002-04 were the lowest in New Zealand (2%) and Australia (4%).
47  Rice, sugar and milk 
remain the most supported commodities, with transfer s to producers close to, or exceeding, half of 
gross receipts.  The prices received by OECD fa rmers in 2002-04 were on average 29% above world 
prices (compared with 57% in the mid-1980s), thereby shielding farmers in many countries from world market signals.  At the same time, the pri ces paid by OECD consumers in 2002-04 were on 
                                                     
 
45 The total support estimate (TSE) is the value of all gross transfers from taxpayers and consumers 
arising from policy measures that support agriculture, regardless of their objectives and impact on farm 
production and income or consumption of farm products.  More details of the definition and calculation of the 
total support estimate and producer suppor t estimate are found in the Annex.   
46OECD, 2005, Agricultural Policies in OECD Countries: Monitoring and Evaluation 2005 , OECD, 
Paris. 
47 While government support in Australia and New Zealand is low, these countries have relatively strict 
SPS regulations, thought necessary to ensure that th eir reputation as reliable exporters of high quality 
agricultural products is not jeopardized by pests and dise ases, but which nonetheless tend to impede imports of 
such products.   WT/TPR/OV/11 
Page 20  
 
average 33% higher than world prices (compared to 59% in the mid-1980s).  Whereas domestic prices 
paid by consumers were, on average, the same as t hose at the border in Australia, they were 10% 
higher in the United States, 26% higher in the EC, and double or more in Japan, Korea, Norway and 
Switzerland.  Overall, consumers in OECD countries were  implicitly taxed at a rate of 21% as a result 
of market price support (MPS) policies. 
45. While the overall level of producer support in  OECD Members, as measured by the PSE, has 
not changed very much since the mid-1990s, there h as been a noticeable shift in the composition of 
support away from transfers paid by consumers in th e form of market price support (MPS) to direct 
payments.  The share of overall producer support fell from almost 78% in 1986-88 to roughly 60% in 2002-04 (Table 6).  Between the same periods, the combined share of MPS, output-linked support 
payments and payments based on input use dropp ed from 91% to 74%.  This drop is significant 
because these types of support measures are the mo st distorting forms of assistance as far as 
production and trade are concerned, contributing to over-production in the OECD area to the 
detriment of both those OECD Members where support is relatively low and of developing 
countries.
48  Such measures are also relatively ineffec tive in transferring income to farmers or in 
achieving environmental objectives.  By contrast, ther e is only a very modest use of policies targeted 
at specific objectives and beneficiaries. 
Table 6  
Composition of Producer Support Estimate by measure, 1986 to 2004 
(Percentage share in PSE) 
Measure United States European 
Communities (15) Japan Canada OECD 
 1986
-88 2002
-04 2004 1986
-88 2002
-04 2004 1986
-88 2002
-04 2004 1986
-88 2002
-04 2004 1986
-88 2002
-04 2004 
Market Price 
Support 38.7 35.3 34.8 86.9 54.8 53.8 89.6 90.1 90.6 52.4 47.8 46.5 77.6 61.3 59.9 
Payments 
based on 
output 8.0 10.1 14.9 4.9 3.5 3.5 3.1 3.2 3.1 15.7 4.4 5.2 5.0 4.4 5.2 
Payments 
based on area 
planted/animal numbers 31.1 6.2 3.0 2.6 28.2 29.2 0 0 0 15.5 10.6 12.6 6.5 15.6 16.8 
Payments 
based on historical 
entitlements 0 14.1 11.4 0 0.6 0.6 0 0.4 0.3 0 13.1 10.1 0.2 4.8 4.8 
Payments 
based on input 
use 17.9 17.6 15.5 4.9 8 8.1 4.2 3.3 3.2 14.4 5.1 5.9 8.4 8.9 8.6 
Payments 
based on input 
constraints 1.8 4.8 4.0 0.7 4.9 5.2 3.2 3.0 2.7 0 0.1 0.1 1.2 3.6 3.6 
Payments 
based on 
overall farm income 2.5 5.1 4.3 0 0 0 0 0 0 0 17.4 20.7 0.9 1.4 1.3 
Notes: Data for 2004 are provisional.  For the United States, Counter cyclical paymen ts accounted for 6.7 and 12.1% of total PS E during 
the period 2002-04, and 2004, respectively. 
Source: OECD, PSE/CSE database 2005.  
                                                      
48 Under the WTO Agreement on Agriculture, domestic  support measures are classified as "Amber 
Box"  (trade-distorting policies, such as price support, certain direct payments and input subsidies), "Blue Box" 
(trade distorting policies but with production-limiting conditions), "Green Box" (measures deemed to be non or 
at most minimally trade-distorting), with S&D for develo ping countries. Whereas in the United States and Japan 
"amber" box subsidies accounted for somewhat less than one quarter of total domestic support in 1998 (the 
latest year for which such data are available), such subs idies accounted for more than ha lf of total s upport in the 
EC and Canada.    WT/TPR/OV/11 
 Page 21 
 
 
46. In 2003-05, OECD Members introduced a number of policy changes unilaterally.  The United 
States implemented the 2002 Farm Act, providing new forms of payments to producers for the 
purpose of stabilizing farm incomes.  In  the EC , agreement was reached on the 2003 reform of the 
Common Agricultural Policy (CAP), involving a significant further step in the direction of decoupling support from production decisions, to be implemen ted from 2004 onwards.  At the same time, the 
Czech Republic, Hungary, Poland a nd Slovak Republic were among the ten new Members admitted 
to the EC in May 2004, so that their existing agri cultural polices are being replaced by the CAP, with 
EC payments being phased in gradually over a te n-year period.  Elsewhere in Europe, Switzerland 
adopted a new agricultural policy reform packag e that will be implemented over the period 2004-
2007, continuing the long-term shift away from the mo st trade-distorting measures.  Japan put in place 
in March 2005  a new "Basic Plan for Food, Agri culture, and Rural Areas", with a focus on multi-
commodity production, more efficient farms, land rete ntion in agriculture, and the environment, while 
Korea is realigning its policies towards achie ving better rice production management and rural 
development, both behind significant border protec tion.  Canada implemented its Agricultural Policy 
Framework, aimed at stabilizing farm incomes, and made emergency payments to compensate for 
losses related to BSE.  Emergency payments, relate d to drought, were also  provided in Australia. 
47. At the WTO, recent agricultural disputes settle ment panels concerned U.S. subsidies for 
cotton and EC subsidies for sugar.   The ruli ngs against these policies could have far-reaching 
consequences for those Members' domestic policies as well as for the current multilateral 
negotiations.  Other disputes and panel rulings involve state-trading enterprises, phytosanitary 
requirements and geographical indications.  
48. Government intervention in agriculture is al so extensive in many developing countries; 
whereas tariffs on agricultural products are often just  as high in developing as in OECD countries, if 
not higher, subsidies tend to be used rather less, owing to their budgetary cost.  As a result, overall 
support in these countries appears, by and large, to be  lower than in the OECD average.  For example, 
according to preliminary estimates of TSE/PSEs made by the OECD, support in Brazil is comparable 
to that in Australia and New Zealand, far below the OECD average.  Supp ort in China, India and 
South Africa, which involves mainly market-price support, is somewhat higher than in Australia, 
Brazil and New Zealand, but still well below the OECD  average.  The main components of support in 
China, India and South Africa is market pri ce support, although subsidies are also used.
49   
49. Farm support programmes have multiple domestic objectives, in cluding:  income support for 
agricultural households;  preservation of the enviro nment, notably traditional rural life and amenities; 
food security; and food safety.50  The last three of these objectives involve matters where markets 
alone may fail to achieve a socially desirable outco me due to the existence of "externalities" or 
"public goods".51  Accordingly, one can distinguish between two broad types of agricultural policies; 
those intended to redistribute income and those ai med more at addressing market failure.  In this 
regard, there would appear to be a serious mismat ch between these objectives and the policy measures 
designed to achieve them, thus casting doubt on the appropriateness and effectiveness of such 
                                                      
49 Subsidies for inputs such fertilizer, power and water are important in India, for example, as well as in 
some other developing countries.  
50 OECD, 2002, "Agricultural Policies in OECD Countries:  A Positive Reform Agenda", 
6 November 2002 (COM/AGR/TD/WP(2002)19/FINAL. 
51 An externality arises where a decision by one ag ent, whether a producer or consumer, has side-
effects that impinge on others.  For example, farm s may produce excessive pes ticide residues (negative 
externalities) as well as crops; they may also produ ce environmental as well as aesthetic benefits (positive 
externalities).  In these cases, the market determined output may be too much because of unpaid external costs 
or too little owing to uncompensated external benefits.  Public goods (or services), such as clean air or an 
attractive countryside, are those for wh ich the use by one agent does not diminish the amount available to 
others.  A public good may be a joint-output, and therefor e an externality, of private production.  As in the case 
of positive externalities, the market tend s to result in too little public goods. WT/TPR/OV/11 
Page 22  
 
measures.
52  More careful design and better targeting of agricultural policies would enable 
Governments to pursue their multiple objectives in a more cost-effective manner with minimal disruption to international markets for agricultu ral products.  The DDA presents Members with the 
opportunity to achieve such reforms multilaterally, thereby benefiting industrialized and developing 
countries alike.  According to the IMF, removal of agricultural support (tariffs and subsidies) as part 
of a comprehensive effort to lower trade ba rriers would raise global economic welfare by 
US$128 billion annually, the bulk of which appears to be  due to the removal of tariffs.  While nearly 
US$98 billion of this welfare gain would accrue to industrial countries through more efficient 
production and lower food prices for many consumers,  the benefits to developing countries would 
also be substantial, at some US$30 billion.  These benefits are particularly large for food-exporting 
regions, including sub-Saharan Africa, where many of the world's poorest live.  
50. Despite the large overall gains from liberalizati on of agriculture, some developing countries  
may gain very little by liberalization of commodity ma rkets.  For example, there is some evidence that 
the long-run benefits of liberalization in the cocoa market, where changes have been most 
pronounced, accrue largely to consum ers in developed countries rather than to the exporting countries 
(owing to loss of implicit or explicit export taxes)  and farmers in non-libera lizing countries – farmers 
in liberalized African markets are broadly neither better nor worse off.
53  Countries that are significant 
food importers may also be initially negatively affect ed by such liberalization.  Therefore, not only 
should trade liberalization be accompanied by comple mentary policies, it may, in the case of some 
countries, require support to redress unfavourable effects. 
51. While agriculture is of great immediate im portance to developing countries, pronounced 
declines in many commodity prices during the past d ecade have meant that, by and large, agricultural 
exporters face declining terms of  trade, which can reduce the beneficial impact of growth on 
economic welfare in an open economy.  If, as exp ected, this downward trend continues over the long 
term, developing countries will have to export increasing volumes of such products in exchange for 
the same value of manufactured goods and services.  Consequently, developing countries need to look 
beyond agriculture in the current negotiations .  Furthermore, for developing countries to benefit from 
lower protection of agriculture (and other sectors), th ey also need to overcome a wide range of supply 
constraints on their exports, including lack of finance and poor infrastructure; developed countries' barriers to market access may in some cases pale in comparison with such supply constraints in 
developing and especially least developed countries. 
                                                     
 
52 In particular, with regard to income redistributio n, existing policy measures are relatively inefficient 
instruments for delivering income support to rural households.  According to the OECD, the bulk of the support 
that does reach farmers goes to the larger farms,  many of whom already have higher incomes.  Direct income 
payments are much more efficient in  delivering income support, especia lly if they are de-coupled from 
agricultural activity; such payments can also be targeted more easily at those households felt to be most in need 
of assistance.  If the current production-based support measures were replaced by direct income payments, 
efficiency costs could be halved without reducing the in comes of farm households;  the savings would be even 
greater if support were targeted at lower income farm households through the income tax system or social 
security programmes.  The more a po licy measure pays to domestic farmers without affecting their production 
decisions, the greater the share of in come retained by farm households and the smaller the impact on production 
and trade.  (See OECD, 2002, "Farm household income issues in OECD Countries:  a synthesis report", AGR/CA/APM(2002)FINAL, Paris.) 
53 Whereas producer prices have tended to rise as a sh are of f.o.b. prices as intermediation costs and tax 
have declined, the downward shift in the aggregate supp ly curve in conjunction with inelastic demand results in 
lower world prices.  Farmers thus get a larger sh are of a lower price (see Christopher Gilberts and 
Panos Varangis, 2003, "Globalization and International Commodity Trade with Specific Reference to the West 
African Cocoa Producers" in R.E. Ba ldwin and L.A. Winters (Editors), Challenges to Globalization , NBER).  WT/TPR/OV/11 
 Page 23 
 
 
4. Contingency measures 
Anti-dumping 
52. During the period 1 January 1995 to 30 June  2005, WTO Members have reported initiating 
2,743 new (original)54 anti-dumping investigations55.  After peaking in 2001, the number of new anti-
dumping initiations reported by Members has fallen,  from 364 in 2001 to 311 and 233, respectively, 
in 2002 and 2003, and down to 213 in 2004, the last  year for which complete data are available. 
(Chart 3);  in the first half of 2005, 96 initiations have been reported.  In 2004, the initiations were 
mainly in the areas of chemicals, plastics and rubb er, and base metals;  in the first half of 2005, 
plastics and rubber became the most affected, follo wed equally by chemicals and base metals.  Since 
1995, base metals and chemicals have been the two most affected sectors, followed by plastics and 
rubber, machinery and electrical appliances, and te xtiles and articles thereof (Chart 4).  Since 1995, 
the largest numbers of initiations have been reporte d by India (412), the United States (358), and the 
EC (318).  In 2004, the most anti-dumping initiations  were reported by the EC (30), China (27), the 
United States (26), Turkey (25), and India (21);  in  the first half of 2005, South Africa (17) reported 
most initiations, followed by the EC (15), India (13)  and China (11).  Since 1995, the initiations have 
been mainly targeted at China (434) and the EC and member states56 (403).  In 2004, initiations were 
mainly targeted at China (49) follo wed by the Republic of Korea (24) and Chinese Taipei (21);  in the 
first half of 2005, China (22) was the main target followed by Chinese Taipei (9) and India (8). 
157225243256354
292364
312
232
212
119
92125170184232
166216221
151
050100150200250300350400
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004NumberChart 3
Anti-dumping:  initiations of investigations and measures taken, 1995 to 2004
Source :WTO Secretariat.Initiations
Measures taken
 
 
 
                                                      
54 These figures thus do not cover initiations of the various types of reviews of anti-dumping measures 
in force.   
55 These figures are derived from semi-annual reports of anti-dumping actions taken submitted by 
Members.  They are incomplete due to missing reports and/or missing information in reports submitted.   
56 Not counting the 10 new member states that acced ed to the European Union (EU) in May 2004. WT/TPR/OV/11 
Page 24  
 
 
Per cent
Base metals & articles thereo f
29.7
Chemicals & articles thereof 
20.1
Plastics, rubber & articles 
thereof
12.8Chart 4
Anti-dumping initiations by sector, 1995 to 2004
Source :  WTO Secretariat.Mineral products   2.4Textiles & articles thereof   6.7Articles of stone   3.3
Pulp of wood, paper, paperboard   4.5Other  6.4Machinery & mechanical/electrical appliances
8.3
Misc. manufactured articles  2.3
Note:     Other includes vegetable products (1.4%);  fats & oils (0.3%);  prepared foodstuffs, beverages, tobacco (1.5%);  raw 
               hides & skins (0.1%);  footwear & headgear, etc.  (0.8%);  precious stones etc. (0.04%);  transport equipment (0 .8%);  
               precision instruments (1.1%);  and works of art (0.4%).Live animals & products  1.8
Wood & articles of wood  1.7
 
 
53. On average, 63% of reported initiations result in measures being taken by Members.  The 
number of new measures reported peaked in 2000 (232 measures) before falling to 166 in the 
following year.  It rose to 216 and 221 measures in 2002 and 2003, respectively, before dropping to 
151 measures in 2004;  in the first half of 2005, 53 new measures have been reported.   In 2004, the 
Members who notified the largest number of measures were India (29), Turkey (16), China (14) and 
the United States (14); in the first half of 2005, th e United States (13) notified the largest number of 
measures, followed by China (10) and India (7).  Overall, since 1995, India (309), the United States 
(229), and the EC (200) have reported the largest  number of new anti-dumping measures applied.  
Those that have most frequently been targeted  by these new anti-dumping measures include:  China 
(317), the EC and member states57 (231) and the Republic of Korea (123).  As of the end of 2004, 
Members reported having a total of 1,340 anti-dumping measures in force, compared with the 1,388 
reported as of the end of 2003.    
Countervailing and safeguard measures 
54. Countervailing measures tend to be used less frequently by Members than anti-dumping 
measures.  During the period 1995-June 2005, 178 initiations of new (original)58 countervail 
investigations were reported by Member s (compared to 2,647 for anti-dumping).59  The number of 
reported initiations peaked in 1999 at 41.  In 20 04, only eight initiations were reported, down from 
15 in 2003;  between January and June 2005, two additional investiga tions had been initiated.  In 
contrast to anti-dumping investigations, around 35%  of which have been conducted by developed 
country Members, around 80% of countervail inv estigations have been  conducted by developed 
                                                      
57 Not counting the 10 new member states  that joined the EU in May 2004. 
58 These figures thus do not cover initiations of the various types of reviews of anti-dumping measures 
in force.   
59 These figures are derived from semi-annual reports of anti-dumping actions taken submitted by 
Members.  They are incomplete due to missing reports and/or missing information in reports submitted.    WT/TPR/OV/11 
 Page 25 
 
 
Members.  The main initiators overall since 1995 have been the Un ited States (70) and the EC (44)60; 
in 2004, Canada (four) and the United States (three) reported the largest numbers of initiations.  The 
sectors that have been most affected since 1995 include base metals (71 initiations), followed by 
prepared foods, beverages and spirits and tobacco (23), and plastics (19). 
55. On average, around 60% of original inves tigations (110) since 1995 have resulted in 
countervailing measures being applied by Members.  Overall, the United States (45) and the EC (22)61 
have reported the largest numbers of countervailing measures.  This was also the case for 2004, with 
both the EC and the United States reporting two measures;  Canada reported two measures during 
January-June 2005.  Since 1995 over ha lf (57) of the measures reported have affected base metals. 
56. The use of safeguards, although minor co mpared to anti-dumping and countervailing 
measures, continues to be active.62  In 2003, Members notified 16 safeguard initiations, a decline from 
34 initiations in 2002, but slightly higher than the 15 initiations notified in 2001.  The number of 
definitive safeguard measures notified increased to 19 in 2003, from 13 in 2002.  Members had 
notified 10 definitive safeguard measures in 2001.  In 2004, as of 1 November, Members had notified 
13 initiations and 6 definitive measures.  The main u sers since 1995 have been India (eight measures 
imposed) followed by the United States and Chile  (six each) and the Czech Republic and the 
Philippines (five each).  Most safeguard initiations o ccur with regard to chem ical products, foodstuffs 
and metals. 
5. Services 
Overview:  10 years of the GATS 
57. Services account for a growing share of Members' national income.  It is estimated that in 
OECD countries, services currently account fo r over 70% of employment and value added.63  I n  
developing and least-developed countries, that share is  smaller, but growing rapidly.  During the ten 
year period since 1995, exports and imports of commer cial services have grown on average by almost 
6% every year (the growth of trade in merchandise goods has been slightly higher, but also under 6%, 
during this period).  The share of trade in ser vices of developed and de veloping countries has 
remained relatively stable during this period with developed countries accounting for around three 
quarters of exports of commercial services, and with developing and l east developed economies 
accounting for around 22% and 0.4% respectively.64  The OECD estimates that trade in services 
compared to trade in goods is still relatively sm all if measured on a Balance-of-Payments basis 
(services trade for example accounts for only about 20% of total OECD trade), perhaps signifying the 
possibility for significant expansion in trade in services.65 
58. The delivery of efficient services, not just cr oss-border, but within national boundaries, is 
important because they are key inputs into other sectors and are a rising share of consumption.  
                                                      
60 Not counting the 10 new member states  that joined the EC in May 2004. 
61 Not counting the 10 new member states  that joined the EC in May 2004. 
62 The data on safeguards do not include safeguard actions taken with respect to agriculture or actions 
taken by Members under the transitional product-specific safeguards provided for in China's Protocol of 
Accession to the WTO. 
63 OECD (2005), Growth in Services:  Fostering Employment, Productivity and Innovation , Meeting of 
the OECD Council at Ministerial Level 2005, Online.   [Available at:  http://www.oecd.org/dataoecd/58/ 
52/34749412.pdf [7 May 2005]. 
64 International Trade Statistics Section, WTO. 
65 It should also be noted that most data concerning trade in services are derived from balance of 
payments statistics and therefore tend to underestimate the actual size of the trade flows that are covered by the GATS to a significant degree.  They ignore, in particular, transactions under Mode 3 (commercial presence), 
which is estimated to account for 50% of   services trade under the GATS, an d a possibly large share of  Mode 2 
(consumption abroad).   WT/TPR/OV/11 
Page 26  
 
Telecommunications, financial and transport servi ces, for example, are essential for the production 
and movement of goods, and also for maintaining e fficiency in other services (for example, tourism, 
and a range of IT-based services), which are increasingly becoming an important export of developing countries.  Recent research suggests that in light of  significant remaining barriers to trade in services, 
liberalization will result in significant gains.  For example, Francois, van Meijl and van Tongeren 
(2003) find that a reduction in such barriers could result in income gains ranging from US$23 billion, 
if 50% of border measures were liberalized, to over US$50 billion globally if all measures were 
liberalized.
66   
59. Given the importance of this sector, one of the major achievements of the Uruguay Round 
was the General Agreement on Trade in Services (GATS).  The GATS was also significant because 
not only did it include cross-border trade in services, but also three other modes  by which services are 
transacted, i.e. consumption of services abroad  (Mode 2), commercial presence (Mode 3) and 
presence of natural persons (Mode 4).67  This was an acknowledgement that the delivery of many 
kinds of services required the location of providers  close to consumers.  The GATS definition of 
services trade  therefore applies as well to transactions involving cross-border movements of 
consumers and suppliers (commercia l entities and natural persons).  Most services are included, with 
the notable exception of "services supplied in the ex ercise of governmental authority" and "measures 
affecting air traffic rights and services directly related to the exercise of these rights".68  The broad 
coverage of the GATS is balanced by flexib ility given to Members when scheduling their 
commitments.  Thus, although all Members are lega lly required to submit a schedule of commitments, 
they are free to select those sect ors in which they are ready to bind access conditions and to attach 
limitations to these commitments or to exclude one or more modes from coverage.  Members were  
free to list MFN exemptions for periods not exceed ing ten years in principle.  The GATS also 
contains various provisions to accommodate Memb ers' level of economic development and their 
economic and regulatory structures. 
60. The Uruguay Round did not end negotiations on servi ces.  In addition to negotiations on rules 
(domestic regulation, emergency safeguards, government procuremen t and subsidies), for which the 
GATS contains particular negotiating mandates, Memb ers agreed to continue negotiations to expand 
specific commitments in financial services, maritim e transport, movement of natural persons and 
telecommunications.  Further negotiations on financ ial services resulted in substantial improvements 
in scheduled commitments and in the number of Members that made commitments.  Similarly, the basic telecommunications services negotiations resu lted in a significant increase in the number of 
Members participating, especially developing countr ies, and eventually accounted for over 90% of the 
global telecommunications market.  Additional regulator y principles, set out in the "reference paper", 
were also agreed for optional scheduli ng as additional commitments to prevent, inter alia ,  abuse of 
market power, especially of dominant telecommunications services suppliers. 
61. Negotiations on maritime services have b een more difficult politically, although many 
Members continue to expand bilate ral agreements covering maritime transport, thereby contributing 
to some liberalization.  In addition, domestic un ilateral liberalization has led to significant reductions 
                                                     
 
66 Francois, Joseph, Hans van Meijl and Frank van Tongeren (2003), "Trade Liberalization and 
Developing Countries under the Doha Round", Centre for Economic Policy Research Discussion Paper Series, 
no. 4032, August. 
67 Notwithstanding the difficulties of measuring trade in services, it is estimated that approximately 
50% of trade in services is conducted through Mode 3, followed by 35% through Mode 1, and 10 to 15% 
through Mode 2;  Mode 4 accounts for around 1-2% of  trade in services (Data from the WTO Economic 
Research and Statistics Division.  Data on commercia l presence calculated from foreign affiliates trade in 
services (FATS) statistics on turnover, while data on cross border supply and consumption abroad is proxied by 
commercial services exports excludin g trade and travel exports, respectively from IMF balance of payment 
statistics).   
68 Article I(3) of the General Agreement on Trade in Services and the Annex on Air Transport Services, 
respectively.  WT/TPR/OV/11 
 Page 27 
 
 
in protectionism in the sector.  In the WTO, howev er, it was agreed to suspend the negotiations and to 
resume them in the current, Doha Devel opment Agenda, round of trade negotiations. 
62. Negotiations on the movement of natural pe rsons were extended due mainly to the 
dissatisfaction of developing countries at  the level of access provided under the  GATS schedules 
tabled at the end of the Uruguay Round.  Market access was mainly confined to business visitors and 
intra-corporate transferees (including managers an d technical staff) with specified time limits.  
Developing countries, however, would also like improved market access for other categories of 
service providers, given especially that they tend to  have a comparative advantage in relatively lower 
skilled and labour intensive services. 
63. Perhaps partly due to the fact that a lot of negotiating energy in the Uruguay Round was spent 
on devising the basic architecture of the  GATS and that trade disciplines were being extended to 
completely new areas (not only in terms of sector s and modes, but also of the administrations 
concerned), Members tended to bind the status quo, or even less, in a limited number of sectors.  
Liberalizing commitments, if any, were rare.  Give n an ongoing process of internal reform in many 
Members, in particular in basic infrastructural services, the gap between bound and actual access 
conditions has continued to widen over time.  A contrast is provided by new Members acceding to the 
WTO.  In general, the schedules submitted by these Members tend to include more sectors than those of current Members at similar, and sometimes far higher, levels of devel opment and involve more 
liberal commitments.  Table 7 lists commitments by types of Members. 
Table 7 
Specific commitments by types of Members, 2005 
Members Average number of sector commitments 
per Member Range 
(Lowest/highest number of scheduled 
sectors) 
Least developed Members 24 1 – 111 
Developing & transition Members 52 1 – 147 
 - Transition Members only 104 58 – 147 
Developed Members 105 87 – 115 
Accessions since 1995 103 37 – 147 
Note: Total number of sectors:  ~160;  total number of Members:  148.  
Source: WTO Secretariat. 
Current negotiations 
Progressive liberalization 
64. The built-in services agenda follows from Artic le XIX:1 of the GATS, which provides for 
successive rounds aimed at achieving progressively highe r levels of liberalization.  In addition, the 
Annex on Article II Exemptions (MFN exemptions) ca lls for all such exemptions to be subject to 
negotiation in any subsequent trade round.   The first round of such negotiations was due to start not 
later than five years from the date of entry into  force of the WTO Agreement (i.e. to start on 
1 January 2000).  The Guidelines and Procedures for the negotiations were a dopted by the Council for 
Trade in Services in March 2001.69  The Doha Declaration set target dates  for initial requests for 
specific commitments of 30 June 2002 and for  initial offers of 31 March 2003.  
65. The DDA's "July package" 2004 set a date of Ma y 2005 for the submission of revised offers.  
By end-October 2005, a total of 69 initial offers, representing 93 Member s, had been tabled.  Of these 
offers, 28 had been revised since May 2005 (represen ting 52 Members).  It appears that the emphasis 
has remained on the sectors and modes that already dominate existing schedules, and that there have 
                                                      
69 WTO document S/L/93, 29 March 2001. WT/TPR/OV/11 
Page 28  
 
been relatively few changes to  "sensitive" servi ces, such as education, health and other social 
services, and Mode 4. 
Rule making agenda 
66. Several Articles of the GATS call for continued issue-specific negotiations beyond the 
timeframe of the Uruguay Round:  domestic regu lations (Article VI), emergency safeguards 
(Article X), government procurement (Article XIII ) and subsidies (Article XV).  The Negotiating 
Guidelines of March 2001, subsequently confirmed by the Doha Declaration, provided for these 
negotiations to be integrated into the wider framework of the services negotiations. 
67. Overall, there has been little progress in the  rule making areas to date.   
68. The negotiations on Domestic Regulations are mandated in Article VI(4) of the GATS and 
cover licensing requirements and procedures,  qualification requirements and procedures , and 
technical standards.
70  The mandate of the Working Party calls for the development of generally 
applicable disciplines for all services sectors as well  as disciplines, as appropriate, for individual 
sectors or groups of sectors.  The rationale of these negotiations is to protect the commitments inscribed in the schedules from being graduall y undermined through non-transparent and/or 
excessively burdensome regulatory requirements.  Th e negotiations are without prejudice to Members' 
rights to regulate for their own national policy objectives.   An initial step was taken in the form of the  
Guidelines for Mutual Recognition Agreements or Arrangements in the Accountancy Sector in 1997, 
followed by the Disciplines on Domestic Regulation in the Accountancy Sector in 1998.  The latter are expected to be integrated into the GATS, and to become binding at  the end of the current round of 
services negotiations.
71   
69. Negotiations on emergency safeguard measures,  government procurement and subsidies  have 
been on the negotiating agenda of the Work ing Party on GATS Rules since its inception  in March 
1995.72  Although emergency safeguard measures have attracted more attention over the years than 
the two other issues, Members do not appear very close to agreeing on  rules on this matter.  In fact, 
the positions appear to remain divergent on basic issu es, such as the desirability and feasibility of such 
a mechanism and the  form that measures may take under indi vidual modes of supply.  Discussions on 
government procurement have  recently  focused on a proposed scheduling mechanism that would 
allow for the assumption of access disciplines.  Members have not yet been able to agree, however, on 
whether the mandate contained in Article XIII cove rs negotiations on access issues.  On subsidies, 
discussions are still at an exploratory stage and have recently revolved around definitional issues and an information exchange. 
70. At the WTO Ministerial Conference in Hong Kong,  China, Members reaffirmed the need to 
continue and conclude the nego tiations on services following the objectives and principles stipulated 
in the GATS, the Doha Ministerial Declaration and other relevant provisions adopted by Members for 
the current negotiations.
73  Particular attention is drawn to th e economic situation of LDCs which are 
not expected to undertake new commitments.  Al so, the Declaration at Hong Kong, China reiterates 
the commitment to pay special attention to sectors and modes of supply of export interest to 
                                                      
70 The annual report 2005 of the Working Party on Domestic Regulations, which is tasked with these 
negotiations, is contained in WTO document S/WPDR/8, 23 September 2005.   
71 WTO document S/L/63, 15 December 1998. 
72 An overview of the Working Party's activities in  2005 is contained in WTO document S/WPGR/15, 
22 September 2005. 
73 Including the Guidelines and Procedures for the Negotiations on Trade in Services adopted by the 
Special Session of the Council for Trade in Services on 28 March 2001 and the Modalities for the Special 
Treatment of Least-Developed Country Members in th e Negotiations on Trade in Services adopted on 3 
September 2003, as well as Annex C of the Decision adopted by the General Council on 1 August 2004.  WT/TPR/OV/11 
 Page 29 
 
 
developing countries.74  Overall, it is fair to conclude that, as in other areas of the negotiations, much 
remains to be done in order to en able commercially significant results. 
6. Regional (and bilateral) trade agreements  –Building blocks or stumbling blocks? 
71. The number of regional trade agreements (RTAs)  and the world share of trade under them has 
been steadily increasing over the last ten years;  2005 is no exception to this trend with 29 RTAs 
notified to the WTO in the course of the year.75  Several RTAs are awaiting entry into force, others 
are currently being negotiated and many more are be ing proposed.  This suggests that RTA activities 
are likely to further intensify in the near futu re, particularly in the absence of a significant 
breakthrough in the multilateral process. 
72. Developments in 2005 confirm some major trends  in RTA activity.  First, for many countries, 
the conclusion of RTAs has become a vital part of their commercial policy.  Second, RTAs are 
becoming increasingly multifaceted, in many cases est ablishing regulatory trade regimes that go 
beyond multilaterally agreed trade regulations.  Thir d, agreements between de veloped and developing 
countries are on the increase, and so are RTAs am ong developing countries; this points to a 
decreasing reliance by some developing countries on non-reciprocal systems of preferences and to 
new trade alliances being forged among key developi ng countries.  Fourth, RTA dynamics show a 
general pattern of expans ion and consolidation;  not only do cross-regional RTAs account for a large 
proportion of the total increase in RTAs, but continen t-wide trading agreements are in the making. 
73. RTA activities in Europe revolve around two main hubs, the European Communities (EC) 
and the European Free Trad e Association (EFTA).  After years of expansion, the EC has lately been 
focusing on consolidating its extensive intra-Eur opean RTA network.  The EC enlargement by ten 
new members in May 2004 ushered in this process wh ich is set to continue in the coming years as 
more countries are added to the list of candidates for EC accession.76  In South Eastern Europe, as part 
of the Stabilization and Association process, the EC  has been negotiating bilateral agreements with 
the countries of the region;77 in parallel, a network of bilate ral FTAs among nine parties to the 
Stability Pact is now virtually in place.78  Further afield, the EC has been focusing on advancing and 
finalizing ongoing negotiations.79  These include FTAs with countries in North Africa and the Middle 
East as part of the Barcelona Process;80 with the Gulf Co-operation Council (GCC); with 
MERCOSUR; and the Economic Part nership Agreements (EPAs) with the African, Caribbean and 
Pacific (ACP) group of countries.81  Prospective RTAs may include an EC-ASEAN FTA, following 
                                                      
74 WTO document, WT/MIN(05)/DEC, 22 December 2005. 
75 A total of 34 RTA notifications were r eceived by the WTO in 2004, made under GATT 
Article XXIV, GATS Article V and the Enabling Clause (including acce ssions to existing RTAs);  for a 
complete list of RTAs notified to the GATT/ WTO see <http://www.wto.org/english/tratop_e/ 
region_e/region_e.htm> 
76 Adding to the current membership process with Bulgaria and Romania, negotiations were opened 
with Croatia and Turkey on 3 October 2005. 
77 The EFTA States and Turkey are pursuing similar negotiations. 
78 The Stability Pact process involves Albania, Bo snia and Herzegovina, Bulgaria, Croatia, FYROM, 
Romania, and Serbia and Montenegro.  The FTA network has been extended to Moldova and UNMIK (Kosovo).  In 2005, 13 such agreements were notified to the WTO. 
79 The FTA with Chile entered into force in March 2005. 
80 One of the aims of the Barcelona Process is th e establishment of a Euro -Mediterranean Free Trade 
Area by 2010.  Partners to this process are Algeria, Egypt, Israel, Jordan, Lebanon, Morocco, Palestinian 
Authority, Syria, Tunisia and Turkey.  As with the other networks of intra-European RTA negotiations, the 
EFTA States and Turkey are pursuing RTA negotiations with these same countries. 
81 EPAs are reciprocal FTAs supposed to replace th e existing non-reciprocal systems of preferences 
under the Cotonou Agreement between the EC and the 77 ACP countries.  EPA negotiations have been opened with Central Africa (CEMAC), West Africa (ECOWAS), Eastern and Southern Africa (ESA), the Southern 
African Development Community (SADC), the Caribbean Forum of ACP States (CARIFORUM), and with the 
Pacific ACP States. WT/TPR/OV/11 
Page 30  
 
the decision in April to set up a "vision" group to assess its feasibility.  The EFTA States concluded 
FTAs with Korea and Tunisia and launched negoti ations with Thailand in 2005.  Other ongoing 
EFTA negotiations relate to FTAs with Canada and the South African Customs Union (SACU). 
74. In the Western Hemisphere, the patchwork of RTAs is becoming increasingly complex.  In 
North America, the United States' active pursuit of RTAs over the last few years is beginning to bear 
fruit;  the FTA with Australia entered into forc e in January 2005 and negotiations have been 
concluded with Bahrain, Morocco, the Dominican Republic-Central American Free Trade Agreement 
(DR-CAFTA)
82 and Oman.  RTAs under negotiation in clude the United Arab Emirates (UAE), 
Thailand, Panama, SACU, and the Andean countries.83  Among those being considered are RTAs with 
Qatar, Kuwait, Korea and Egypt.  Canada showed a renewed interest in RTAs in 2005 by giving 
consideration to possible FTAs with Korea, CA RICOM, the Andean Countries and the Dominican 
Republic;  these would add to its ongoing negotiati ons with Singapore, the EFTA States and the 
Central America Four.84  An FTA with Korea is being considered also by Mexico, whose FTA with 
Japan entered into force in April. 
75. In South America, MERCOSUR members have b een working towards the objective of a fully 
fledged customs union.85  MERCOSUR has opened membership ne gotiations with Venezuela and it 
has concluded framework agreements with three members of the Andean Community,86 India, SACU, 
Egypt, Morocco and the GCC, all of which aim to wards the gradual establishment of FTAs; partial 
scope agreements providing for limited trade concessi ons have been conclude d with Egypt, India, 
Morocco and SACU.  MERCOSUR's FTA negotiations w ith the EC have resumed, preliminary talks 
have been held with Canada and a feasibility study of an FTA with Korea is under way.  As for Chile, 
in 2005, it concluded negotiations with Brunei, New Zealand and Singapore for the Trans-Pacific 
Strategic Economic Partnership (SEP- 4), and it launched negotiations fo r an FTA with China, and for 
a partial scope agreement with India; parallel to these initiatives, Chile is conducting a feasibility 
study of an FTA with Japan and Thailand. 
76. The pursuit of RTAs among Asia-Pacific countri es further intensified in 2005.  Singapore 
signed FTAs with India, Jordan, Korea and SEP-4;   it concluded FTA negot iations with Panama, 
launched negotiations with Kuwait,  Qatar, Pakistan, Peru and Sri Lanka, and is considering 
negotiations with SACU, UAE, Bahrain and Egypt.87  Japan, Korea and Thailand are all seeking 
RTAs.  Japan signed an FTA with Malaysia and is negotiating with Korea, I ndonesia, Philippines and 
Thailand;  it is also considering the launching of negotiations with Au stralia and Chile.  Korea, having 
concluded an FTA with Chile, si gned FTAs with EFTA and Singapore in 2005, is negotiating with 
ASEAN, Canada and Japan, and is studying the f easibility of FTAs with China, India, MERCOSUR, 
Mexico and the United States.  Thailand has si gned FTAs with New Zealand and Australia, is 
negotiating with EFTA, Japan, Peru and the United States, and is considering FTAs with Chile and 
Pakistan.  China's pursuit of RTAs has also gained momentum, adding to the ongoing FTA negotiations with ASEAN,
88 negotiations with the GCC countries,  Chile, Australia, New Zealand and 
                                                      
82 DR-CAFTA parties are Costa Rica, El Salvad or, Guatemala, Honduras, Nicaragua and the 
Dominican Republic on one side and the United States on the other. 
83 Negotiations with Peru have been concluded and those with Colombia and Ecuador are ongoing.  
Bolivia is not yet party to these negotiations. 
84 El Salvador, Guatemala, Honduras and Nicaragua. 
85 MERCOSUR has been focusing, among others, on the elimination of the exceptions to the common 
external tariff, the entry into  force of the Protocol of Montevideo on Trade in Services, and the entry into force 
of the Protocol of Olivos for the Settlement of Disputes. 
86 These are Colombia, Ecuador and Venezuela.  Free- trade with Bolivia and Pe ru is regulated under 
the agreements concluded between MERCOSU R and Bolivia and Peru, respectively. 
87 Singapore has ongoing negotiations with Canada and Mexico. 
88 The Framework Agreement on Comprehensiv e Economic Cooperation between ASEAN and the 
People's Republic of China, including its Earl y Harvest programme, was notified to the WTO in 
December 2004.  WT/TPR/OV/11 
 Page 31 
 
 
Pakistan.  FTA feasibility studies are also being unde rtaken with Iceland, India and Korea.  At the 
broader regional level, China has raised the sugges tion of an East Asian Community.  Australia and 
New Zealand are both negotiating FTAs with ASE AN and Malaysia.  Australia has also launched 
FTA negotiations with the UAE and a fe asibility study for an FTA with Japan. 
77. Although limited to those regions showing greatest  RTA activities, this brief overview of 
RTA dynamics maps the lines of an international trading environment characterized by the 
coexistence of trade conducted under MFN condi tions and an increasing number of layers of 
preferential trading regimes under RTAs. 
78. The process of freer trade through RTAs ma y exert leverage for openness and competitive 
liberalization in international trade relations, thus furthering the multilateral process.  But a 
proliferation of non-MFN trading networks, subject  to different regulatory regimes, could also 
jeopardize two mainstays of the multilateral trading system, i.e. transparency and predictability in 
trade relations, and ultimately alter global trade patterns through, among others, trade and investment 
diversion. 
79. The lack of an effective WTO mechanism to  monitor RTA developments exacerbates the 
systemic challenges that RTAs may pose to the multilateral trading system.  DDA negotiations on 
RTAs, in the Negotiating Group on Rules, aim at  addressing these challenges, by clarifying and 
improving the relevant disciplines and procedures under existing WTO provisions.89  Since early 
2004, meaningful progress has been achieved towa rds setting up a WTO process that would enhance 
the transparency of RTAs, with the view to resolving the impasse of the Committee on Regional 
Trade Agreements (CRTA)90, and to allowing Members to exercise better surveillance of RTA 
dynamics.  Also, in 2005 work has progressed on some  "systemic" issues, with the aim of making the 
conditions governing WTO Members' participati on in RTAs more cohe rent and unambiguous.  
Particular attention has been devoted to the ques tion of intra-RTA trade liberalization and neutrality 
of RTAs towards third parties; the focus of this  discussion suggests increasing concerns by many 
Members of the possible negative effects of RT As on third parties trade and on the multilateral 
trading system as a whole.  In December, Ministers,  considering that "[t]rans parency of RTAs is ... of 
systemic interest as are disciplines that ensure the complementarity of RTAs with the WTO", called 
for an intensification of negotiations with a view  both to a provisional decision on RTA transparency 
by 30 April 2006 and appropriate outcomes by end-2006 on WTO disciplines governing RTAs. 
7. Dispute settlement 
80. The number of cases brought before the dispute settlement mechanism, set up in 1995, has 
been considerable.  Between 1 January 1995 and 1 Oct ober 2005, 333 cases had been filed with the 
Dispute Settlement Body (DSB), of which 135 have resulted in the establishment of panels covering 
166 disputes.  This, in turn, led to the actual co mposition of 112 panels c overing 142 disputes.  (It 
should be noted that some disputes are resolved af ter the establishment of panels by the DSB, but 
before their actual composition.)  Nearly two thirds of the cases91 brought to the DSB involved 
                                                      
89 Contained in GATT Article XXIV, for agreements co vering trade in goods, and in GATS Article V, 
for agreements in the area of trade in services.  Th e 1979 Decision of the GATT Council on Differential and 
More Favourable Treatment (Enabling Clause) governs the conclusion of preferential arrangements among 
developing countries (trade in goods only). 
90 Notified RTAs in force totalled 180 in June 200 5.  WTO Members are allowed to participate in 
regional initiatives, albeit subject to certain criteria and procedures.  The CRTA, the body entrusted with verifying the compliance of RTAs with the relevant WTO provisions, has continued in 2005 the examination of 
an increasingly long backlog of RTAs.  However, the CRTA made no further progress on its mandate of 
consistency assessment, due to long-standing institu tional, political and legal difficulties.  Since the 
establishment of the WTO, Members ha ve been unable to reach consensus on the format, and substance of the 
reports on any of the examinations entrusted to the CRTA.  
91 Based on 314 cases (as at 17 September 2004). WT/TPR/OV/11 
Page 32  
 
industrialized countries, 218 as complainants and 201 as respondents.  Developing countries were 
involved in 126 cases as complainants and 127 cases as respondents.  The main areas of complaint 
have been:  GATT 1994 (245 requests)
92, subsidies (61), agriculture (53) and anti-dumping (60). 
81. With one exception, LDCs have not used th e dispute settlement mech anism, although some 
have participated as third parties in disputes.93  Bangladesh was the first LDC to request consultations 
under the mechanism in January 2004.94  Assistance is provided to LDCs that do wish to use the 
mechanism, notably through the Advisory Centre on WTO Law (ACWL).95  The ACWL was formed 
in October 2001 as an independent, inter-governm ental organization to help developing, and 
especially LDC, Members make more effective use of the WTO’s dispute settlement mechanism.  All 
countries designated by the United Nations as least-developed that are Members of the WTO are 
entitled to ACWL services, regardless of whether they are members of the Centre.  The ACWL 
charges modest fees for its services.  As at 1 Apr il 2005, the Centre had 37  members (10 developed 
country members, who make monetary contributio ns, but are not entitled to its services, and 27 
developing country members entitled to the services of  the ACWL).  Since July 2001, the Centre has 
provided legal advice to LDCs on a number of issues , including:  the implications of paragraph 6 of 
the Doha Ministerial Declaration on the TRIPS Agr eement and Public Health;  the WTO-consistency 
of certain subsidies;  the viability of initiating a dispute under Article VI of the GATT 1994;  and the 
viability of resorting to Article XVIII of the GATT 1994.  
82. The main developed-Member users of the WT O dispute settlement m echanism are the United 
States, the EC, Canada and Japan.  Up to 1 October 2005, the United States brought 80 complaints and was respondent in 89;  the EC and its member  States brought 70 complain ts and were respondent 
in 53;  Canada was involved in 26 cases as co mplainant and 13 as respondent;  and Japan was 
complainant in 12 cases and respondent in 14.  A significant number of cases (56 or 17%) have 
occurred between the two largest users, the Un ited States and the EC.  Among the developing 
countries, the main users are Brazil (22 cases as co mplainant and 13 as respondent), India (16 cases as 
complainant and 17 as respondent), and Argentina (9  and 15 cases, respectively, as complainant and 
respondent). 
83. Panel reports have been circulated (up to 1 October 2005) in 104 (out of the 135 panels 
established and 112 panels actually composed) cases,  of which 69 were appealed.  Of these 104 cases, 
38 were initiated by developing countries, 63 by industrialized countries and three by a combination of both.  With regard to the two largest trader s, the EC has initiated 34 panel proceedings and the 
United States has initiated 35 panel proceedings.  Th e United States and the EC were also the main 
respondents in cases for which panels were request ed, 48 and 26 cases, respectively.  Developing 
countries were respondents in 40 cases for wh ich panel proceedings were initiated. 
84. Of the cases that do go to WTO dispute se ttlement, a large number tend to be resolved 
bilaterally at the consultations stage.  For tho se cases that go beyond consulta tions to panels, around 
two thirds are subsequently appealed.  In cases where Members have failed to agree through 
consultation on implementation of the DSB’s recommendations and rulings, recourse to the 
compliance procedures under Article 21.5 of the Di spute Settlement Understanding (DSU) has been 
sought in about one sixth of the cases.  Members have, in general, implemented the recommendations 
and rulings made by panels and by the Appella te Body in the "reasonable period of time" as 
                                                     
 
92 There is some double counting as some of the cases alleging violations of Article III of the 
GATT 1994 also involved alleged violations of Article I.  
93 Least developed countries that have participated in disputes as third parties include Bangladesh, 
Benin, Chad, Madagascar, Malawi, Senegal and Tanzania. 
94 Bangladesh requested consultations with India on  28 January 2004 regarding the latter's imposition 
of anti-dumping duties on imports of lead acid batteries from Bangladesh (WTO document, WT/DS306/1, 2 February 2004);  in February 2004, the EC requested to join these consultations (WTO document 
WT/DS306/2, 16 February 2004). 
95 Information available at:  h ttp://www.acwl.ch/e/index_e.espx.  WT/TPR/OV/11 
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determined either by mutual agreement or thro ugh arbitration under Article 21.3 of the DSU.  
However, in a few cases, where compliance by Members has been successfully challenged, the 
complaining parties have sought and received aut horization by the DSB to suspend concessions and 
obligations against the non-complying Member.  Although the number of such cases remains small, 
the value of trade affected by th ese suspensions has been significant.  Since the previous issue of the 
Overview of Developments in the International Trading Environment96, there has been one additional 
case of such authorization involving the U.S. "B yrd Amendment".  To date, the cases that have 
resulted in DSB authorization of retaliation are: 
- EC ban on meat and meat products (com plaints by the United States and Canada) 
- EC banana regime (complaints by the United States and Ecuador) 
- Brazil export financing for aircraft (complaint by Canada) 
- United States Foreign Sales Corporations (FSCs) (complaint by the EC) 
- Canada export credits and loan guarantees for aircraft (complaint by Brazil) 
- United States 1916 Anti-Dumping Act (complaint by the EC) 
- United States Offset Act (Byrd Amendment) (complaints by Brazil, Canada, Chile, 
 EC, India, Korea, Japan and Mexico) 
85. With respect to the EC banana regime, the United States withdrew its retaliation after a 
settlement in 2001 involving the US, Ecuador and the EC under which the EC agreed to go to a tariff-
only regime in 2006.  In its decision of 14 November 2001, the Ministerial Conference agreed to waive until 31 December 2007, Article 1(1) of GATT 1994 to permit the EC to provide certain 
preferential tariffs for products from ACP countries.   The Annex to this decision sets forth certain 
procedures to be followed in the case of bananas, including resort to arbitration, following rebinding 
of the EC tariff on bananas to implement the EC's proposed tariff-only regime.  The arbitration will 
determine whether the proposed rebinding would at  least maintain market access for MFN banana 
suppliers to the EC market.  In this context requ ests for arbitration were made by Brazil, Colombia, 
Costa Rica, Ecuador, Guatemala, Hondur as, Nicaragua, Panama and Venezuela.
97  The arbitrator was 
appointed on 2 May 2005.98  The arbitrator issued its first award under the arbitration on 
4 August 2005 and a second arbitr ation award on 27 October 2005. 
86. In the case of the United States 1916 Anti-Dumpi ng Act, an arbitration decision concerning 
the appropriate level of retaliation was circulat ed on 24 February 2004, although the EC never 
requested authorization to suspend concessions an d obligations pursuant to the decision and the 
United States repealed the law in late 2004.99  In the case of the FSC dispute, the EC suspended 
concessions and obligations on 1 March 2004 on a number of products imported from the United 
States.  Such countermeasures consisted of an a dditional customs duty of 5% to be enforced on 
1 March 2004, followed by an automatic, monthly increase by 1% up to a ceiling of 17% to be reached on 1 March 2005, if the United States had failed to comply with the ruling by then.
100  
However, following the passage in October 2004 of a new corporate tax law repealing the FSC/ETI, 
the EC suspended these sanctions on 1 January 2005.  At the same time, however, the EC expressed 
concern over certain transition provisions in the newly passed legislation and initiated compliance 
proceedings at the WTO challenging these provi sions and initiated an Article 21.5 compliance 
                                                      
96 WTO document WT/TPR/OV/10, 15 November 2004. 
97 WTO documents WT/L/607, 1 April 2005;  and WT/L/607/Add.12, 2 May 2005. 
98 WTO document WT/L/607/Add.12, 2 May 2005. 
99 WTO document WT/DS136/ARB, 24 February 2004.  On 10 November 2004, the United States 
notified the Secretariat that on 8 October 2004, the U.S. House of Representatives had approved the Miscellaneous Trade and Technical Corrections Act of 2004 (H.R. 1047).  H.R. 1047, which includes a 
provision to repeal the 1916 Act.  (WT/DS136/14/Add.32, 11 November 2004) It was signed into law by the 
President on 3 December 2004. 
100 European Commission Press Release IP/04/282, "US Foreign Sales Corporations (FSC):  EC starts 
countermeasures on U.S. produ cts", Brussels 1 March 2004, [Online].  Available at:  
http://Europe.eu.int/rapid /pressReleasesAction.do?reference=IP/ 04/282&format=HT..., [1 June 2004]. WT/TPR/OV/11 
Page 34  
 
procedure in early 2005.  The compliance panel agr eed with the EU that the United States had not 
fully complied with its WTO obligations in a report circulated to Members on 30 September 2005. 
87. In the case of the United States Offset Act (Byrd Amendment), on 26 January 2004, the 
United States referred the case to arbitration for determ ination of the proper level of retaliation.  The 
Arbitrator ruled that the suspension of concessi ons should be based on the annual disbursements 
under the Act (for the most recent year for which da ta were available) accruing from imports from the 
country authorized to suspend concessions.
101  In November 2004, the DSB authorized suspension of 
concessions.  On 29 April 2005, the delegations of the EC and Canada notified the DSB that they 
were suspending, as of 1 May 2005, the applica tion of concessions and re lated obligations under 
GATT 1994 on imports of certain products originating in  the United States pursuan t to the Arbitrator's 
decision.  On 18 August 2005, Japan informed th e DSB of its intent to impose sanctions as of 
1 September 2005. 
8. Trade-related aspects of intellectual property rights 
Overview of developments 
88. The Agreement on Trade-Related Aspects of Inte llectual Property Rights (TRIPS), along with 
the GATT and the GATS, was one of the key aspects of the Uruguay Round Agreements.  It aims to 
ensure minimum standards of protection for intellectual property rights across all WTO Members, while providing scope for Members to fine-tune this in the light of their own needs. 
89. The TRIPS Agreement recognized that some Members would require longer than others to 
enact the relevant legislation.  The Agreement therefore provides for longer transition periods for 
developing and least-developed countries than for de veloped country Members.  Under Article 65, the 
transition periods provided are one year following the date of entry into force of the WTO Agreement 
for all Members;  in addition, developing count ries are entitled to delay implementation by another 
four years, or in cases of product patent protection to areas of technology not so protectable upon entry into force of the WTO Agreement, for an  additional five years (2005).  Least-developed 
countries have until 2006 with the possibility of an extension.  In respect of pharmaceutical products, 
the transition period for LDCs has been extended to 2016 as a result of a Ministerial decision during 
the Doha Ministerial Meeting in 2001. 
90. Over the last ten years, as Members have  proceeded with implementing their TRIPS 
obligations, some significant decisions have been taken by the WTO, notably the decision taken under 
the Doha Declaration on the TRIPS Agreemen t and Public Health and the Decision of 
30 August 2003 on paragraph 6 of this Declaration. 
The Doha Declaration on the TRIPS Agreement and Public Health 
91. The Doha Declaration on the TRIPS Agreement and Public Health emerged from a discussion 
initiated by the African group in April 2001 on access to medicines.  Although the TRIPS Agreement 
permits Members to take various kinds of measur es to limit intellectual property rights, for example 
for public health reasons, the question was raised as to whether this flexibility was sufficient.  There 
were also different interpretations about the nature  and scope of the flexibility provided in the TRIPS 
Agreement, in particular with respect to compulso ry licensing and parallel imports.  Further, there was 
concern about whether Members felt comfortable to use such flexibility to the full without challenge 
from other Members. 
                                                     
 
101 For example, in the case of Brazil, the amount authorized would result from the following equation:  
the amount of disbursements under the Act for the most recent year for which data are available relating to anti-
dumping or countervailing duties paid on imports from Br azil at that time as published by the United State 
authorities multiplied by 0.72 (WT/DS217/ARB/BRA, 31 August 2004).  WT/TPR/OV/11 
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92. The Declaration reaffirms the right of Members to take measures to protect public health and 
to use the flexibility in the TRIPS Agreement to do so.  While maintaining commitments in the TRIPS 
Agreement, the Declaration also clarifies a number of aspects of the flexibility, such as making clear 
that Members are free to determine the grounds fo r granting compulsory licences and that Members 
are free to determine what constitutes a national emer gency, which could include public health crises, 
such as HIV/AIDS and other epidemics. 
93. The Declaration also contains an agreement by  Ministers to extend the transition period for 
implementation of the TRIPS Agreement by LDCs until the beginning of 2016 for the protection of patents and rights in undisclosed information with  respect to pharmaceutical products.  The TRIPS 
Council took action under Article 66.1 of the TRIPS Ag reement to give effect to this extension in 
June 2002.  It also recommended a waiver for LD Cs for the same period from obligations under the 
"exclusive marketing rights" provisi ons of Article 70.9.  The waiver was subsequently adopted by the 
General Council in July 2002. 
94. Another issue that arose was the ability of Members with limited capacity to manufacture 
pharmaceuticals to make effective use of compulso ry licensing.  Under Article 31(f) of the TRIPS 
Agreement, compulsory licences have normally to be given "predominantly for the supply of the 
domestic market" of the Member issuing the licence.  Thus, concern was raised as to whether sources of supply of generic medicine would be availa ble to Members who might want to import under a 
compulsory licence, given this requirement in th e Agreement and given also that some important 
suppliers of generic medicines would have to  change their legislation by 2005 to protect 
pharmaceutical product patents.  This problem was recognized in paragraph 6 of the Declaration. 
95. The Decision on this paragraph adopted by  the General Council on 30 August 2003 grants 
three waivers from the obligations set out in Ar ticle 31(f) and 31(h) of the TRIPS Agreement.  
Essentially these waivers:  permit, subject to certain  conditions, the grant of a compulsory licence for 
production for export of pharmaceutical products needed to address public health problems by 
Members that do not have sufficient capacity to  manufacture them;  waive the obligation on the 
importing Member to provide ade quate remuneration to the right s holder where remuneration in 
accordance with Article 31(h) is being paid in the exporting Member for the same products;  and 
waive the obligation on any developing or least-devel oped country that is party to a regional trade 
agreement (of which at least half the membership is composed of countries on the UN list of least-
developed countries), a move intende d to facilitate the local producti on of pharmaceutical products in 
these Members. 
96. At its meeting of 6 December 2005, the TRI PS Council decided to approve a proposal to 
amend the TRIPS Agreement to refl ect the waiver of 30 August 2003.
102  The amendment, which was 
adopted by the Genera l Council on 6 December 2005103, transforms the waiver into a permanent 
amendment of the TRIPS Agreement through a new Article 31 bis and an Annex to the Agreement 
setting out the terms of use and procedural matters.   The decision will be formally built into the 
TRIPS Agreement when two-thirds of the WTO's Me mbers have accepted the change.  They have set 
themselves until 1 December 2007 to do so.  The wa iver will remain in force until the amendment 
enters into force.   
Current issues 
97. In addition to the debate on pu blic health and access to medicin es, there are a number of other 
issues that are currently being debated in the TRIPS Council.  These are:  the relationship between the 
TRIPS Agreement and the Convention on Biological Diversity (CBD) and certain related matters as 
                                                      
102 WTO document IP/C/41, 6 December 2005. 
103 WTO document WT/L/641, 8 December 2005;  s ee also WTO Press Release 426 of 6 December 
2005.  Available at:  http://www.wto.org/english/news_e/pres05_e/pr426_e.htm, [19 January 2006]. WT/TPR/OV/11 
Page 36  
 
well as the protection of geographical indications ;  in addition, incentives for the transfer of 
technology to least developed c ountries under Article 66.2 of the TRIPS Agreement are discussed in 
the TRIPS Council. 
The Relationship between the TRIPS Agreement and the Convention on Biological Diversity and the 
Protection of Traditional Knowledge and Folklore 
98. The first of these issues, the relationship be tween the TRIPS Agreement and the Convention 
on Biological Diversity (CBD) was first discussed  in the WTO in the Committee on Trade and 
Environment in 1995 and from 1999 in the TRIPS Co uncil under the review of Article 27.3(b).  The 
Doha Ministerial Declaration instructed the TRIPS Council "to examine, inter alia , the relationship 
between the TRIPS Agreement and the Convention on Biological Diversity, the protection of 
traditional knowledge and folklore...".
104  Since then a set of three issues (the relationship between the 
TRIPS Agreement and the CBD, protection of traditio nal knowledge and folklore and a review of the 
provisions of Article 27.3(b)) have been under discussi on in the TRIPS Council.  In addition, this set 
of issues also figures among the outstanding implem entation issues to which solutions are being 
sought in the WTO by developing countries  
99. The main issue currently under discussion in th e TRIPS Council is the relationship between 
the TRIPS Agreement and the CBD.  In the TRIPS Council, three positions appear to have emerged 
with regard to compatability of the TRIPS Agreemen t with the CBD:  that there is a conflict between 
the two agreements105;  that there is no conflict and both agreements can be implemented in a 
mutually supportive manner at the national level106;  and that, while there is no inherent conflict, there 
is a case for international action to ensure that th ey are implemented in a mutually supportive manner. 
100. Some of those Members that believe that ther e is a conflict between the two agreements are 
concerned that the TRIPS Agreement, by allowing th e patenting of certain genetic material, provides 
for the appropriation of genetic resources without  respecting the sovereign rights of countries over 
their genetic resources (as required under the CBD).  They have therefore suggested that the TRIPS 
Agreement be amended so that lif e forms and parts thereof become non-patentable.  Many developing 
countries have expressed a concern that the TRIP S Agreement allows the granting of patents for 
inventions that use genetic material without en suring the respect of the CBD provisions on prior 
informed consent and benefit sharing.  They have  proposed that patent applicants be required to 
disclose information regarding the source and origin  of any genetic material or related traditional 
knowledge used in their inventions and evidence of  prior informed consent and of arrangements for 
fair and equitable sharing of benefits.107  In their view, such a disclosure requirement would be an 
important complement to national access and benef it-sharing regimes, especially in making more 
effective their enforcement in respect of uses of genetic material and related traditional knowledge 
outside their country of origin. 
101. Those who believe that there is no inherent c onflict between the two agreements argue that 
the TRIPS Agreement and the CBD have different objectives and deal with different subject-matter 
and that the granting of patent rights over inve ntions using genetic material does not prevent 
compliance with the CBD, but rather could facilitate  it.  For example, the information disclosure 
requirements of patent regimes c ould facilitate the licensing and tran sfer of technology and in the 
sharing of benefits and conservation of biological di versity through voluntary contracts.  In their view, 
genetic material in its natural state cannot be pate nted as it does not meet the criteria for patentability 
laid down in the TRIPS Agreement.  They pr opose that the objectives of the CBD could be 
                                                      
104 Paragraph 19 of the Doha Ministerial Declaration, WTO document WTO/MIN(01)/DEC/1, 
20 November 2001. 
105 For example, WTO documents IP/C/W/356, 24 June 2002;  and IP/C/W/404, 26 June 2003. 
106 See for example WTO documents IP/C/W/257, 13 June 2001;  and IP/C/W/443, 18 March 2005. 
107 WTO documents IP/C/W/356, 24 June 2002;  and IP/C/W/434, 26 November 2004.  WT/TPR/OV/11 
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implemented through appr opriate national systems, including access and benefit-sharing regimes and 
the use of voluntary contracts based on such natio nal law.  According to proponents of this view, 
therefore, no change is required to the TRIPS Agreem ent.  They argue that disclosure of origin is 
unlikely to result in prior informed consent and be nefit sharing since disclosure does not constitute a 
mechanism to transfer the benefits resulting from expl oitation of the patent.  Moreover, such a system 
would not address benefit sharing for those inventio ns that were commercialized outside the patent 
system.108  They are concerned that instead such a syst em would likely add uncertainty to the current 
patent system and add additional administra tive burdens especially on developing-country 
Members.109 
102. Some other Members have referred to proposals th ey have tabled in WIPO for the disclosure 
of source or origin, and not of evidence of prior in formed consent or benef it-sharing arrangements.  
One proposal is that the Patent Co-operation Tr eaty of WIPO be amended to allow a disclosure 
requirement.  Another is that a mandatory disclos ure requirement be introduced at the national, 
regional and international level on all patent applicants that would be legally binding, but not linked to 
patent validity. 
103. The discussion on the protection of traditional knowle dge and folklore is linked closely to that 
of the relationship between the CBD and the TRIPS Agreement.  In the Council for TRIPS, recent 
discussions on this issue have focused mainly on the disclosure inter alia  of the traditional knowledge 
used in the invention as part of the procedure of applying for a patent.110  The issue is also being 
discussed in other fora including the World Intellectual Property Organization (WIPO), the Convention on Biological Diversity and the Food and Agriculture Organization (FAO). 
104. At the Ministerial meeting in Hong Kong, China,  held in December 2005, Ministers requested 
the Director General to intensify his consulta tions with Members on outstanding implementation 
issues including issues related to the relationship between the TRIPS Agreement and the Convention 
on Biological Diversity. 
Geographical indications 
105. Geographical indications (GIs) are covered by  Articles 22-24 of the TRIPS Agreement.  
Broadly speaking, a GI is a place name identif ying a product that has certain characteristics or 
reputation because it comes from that place.  Article 22 provides for a standard level of protection for 
all such GIs, to prevent their u se in a way that would mislead the public or be an act of unfair 
competition.  Under Article 23, a higher level of pr otection is provided for GIs for wines and spirits.  
For example, they are to be protected even if there is no risk of the public being misled, e.g. even if 
the true origin of the good is being indicated.  Certain exceptions are permitted, for example, when a 
name has become generic. 
106. In regard to the TRIPS Agreement, there are cu rrently two issues relating to GIs that are being 
debated:  the negotiation of a multilateral register  of GIs for wines and spirits, as mandated in the 
Doha Declaration and in fulfilment of Article 23. 4 of the TRIPS Agreement;  and issues relating to 
extending the protection granted under Article 23 to GIs for products other than wines and spirits.  
Work on the multilateral register began in July 1 997 and negotiations on this  matter have been under 
way since 2001.  Members continue to be far apart notably on two major issues.  One is the question 
of what should be the legal effect of the registra tion of a GI in the multilateral system.  Under one 
proposal, such a registration would mean that domestic authorities in each WTO Member would have to presume (rebuttably) that the GI is protected  and would be prevented from refusing protection on 
                                                     
 
108 WTO document IP/C/W/434, 26 November 2004. 
109 WTO document IP/C/W/443, 18 March 2005. 
110 For example, submission by Bolivia, Brazil, Cuba, Dominican Republic, Ecuador, India, Peru, 
Thailand and Venezuela (WTO document IP/C/W/403, 24 June 2003). WT/TPR/OV/11 
Page 38  
 
certain grounds, unless that Member has entered a reser vation in the register in regard to that GI.  
Under another proposal, the effect of the registration of a GI in the database would be that provision 
would be made for the domestic authorities of each Me mber participating in the system to consult the 
database of such registrations when making national decisions regarding regist ration and protection of 
trademarks and GIs in accordance with their domesti c law.  The other key point of difference relates 
to whether the legal effects of a registration woul d apply in all WTO Members, as envisaged in the 
former proposal, or only in those Members opting to  participate in the system, as envisaged in the 
latter proposal.  There is also a compromise proposal  which would envisage limited legal effects, only 
applicable in those Members opting to participate in the system.   
107. The second issue of providing higher protection for GIs for products other than wine and 
spirits has been the subject of consultations in th e context of the process being held under the auspices 
of the Director-General in regard to outstanding implementation issues.  At the Ministerial meeting in Hong Kong, China held in December 2005, Minister s requested the Director General to intensify 
consultative work on outstanding implementation issu es, including on issues related to the extension 
of the protection of geographical indications provi ded for in Article 23 of the TRIPS Agreement to 
products other than wines and spirits. 
Technology Transfer 
108. The transfer of technology is a goal enshrined in the TRIPS Agreement.  Article 7 of the 
Agreement states that the "the protection and en forcement of intellectual property rights should 
contribute to the promotion of technological innov ation and to the transfer and dissemination of 
technology, to the mutual advantage of producer s and users of technological knowledge and in a 
manner conducive to social and economic welfare and to  a balance of rights and obligations".  Article 
66.2 of the Agreement states that "Developed countr y Members shall provide incentives to enterprises 
and institutions in their territories for the purpose of promoting and encourag ing technology transfer 
to least developed country Members in order to enable them to create a sound and viable 
technological base".  Technology transfer has also been a demand of developing and least-developed 
countries in the TRIPS Council.  In the Doha Declar ation, Ministers agreed that a working group, 
under the auspices of the General Council, would be set up to examine "the relationship between trade 
and transfer of technology and of any possible r ecommendations on steps that might be taken within 
the mandate of the WTO to increase flows of technology to developing countries".
111   
109. In the Council on TRIPS, following the D oha Declaration, a decision was taken in 
February 2003 agreeing to inter alia  monitor actions taken or pla nned by developed countries under 
Article 66.2 of the TRIPS Agreement.112  Under the Decision, developed country Members are 
required to submit annual reports of their activities (full reports every third year and updates in the 
intervening years), which are to be reviewed by the Council at the end of each year. 
110. Technology transfer has long been an important aspect of intellectual property rights.  Those 
who support strong IPRs argue that they provide an incentive for technology transfer, for example, 
through licensing.  The security provided by IPR protection allows the IPR holder to negotiate 
contracts for technology licensing and eventual transf er.  The disclosure requirements of IPRs also 
enable information that may otherwise be secret to  be released into the public domain.  While the 
theoretical economic literature on the impact of in tellectual property rights on technology transfer and 
innovation tends to be rather ambiguous, the em pirical literature finds, with a number of 
                                                      
111 In the WTO Working Group on Trade and Technology Transfer, discussions have focused thus far 
on inter alia the channels of technology transfer, the re lationship between technology transfer and the home and 
host country environments, as well as the identification of issues relating to the transfer of technology in the 
WTO Agreements. 
112 WTO document IP/C/28, 20 February 2003.  WT/TPR/OV/11 
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qualifications, that the relationship may be more positive.113  Moreover, one would expect that in 
sectors such as pharmaceuticals and software, firms w ould be quite concerned about the risk of illegal 
copying and would therefore tend to invest less in countries with weak IPRs.  Recent industrial and 
company surveys have found that this is indeed the case.114  On the other hand, stronger IPRs may 
also strengthen the bargaining power of the firm holding the proprietary technology, and therefore 
significantly increase the cost s of technology transfer. 
111. Nevertheless, there is evidence to suggest that other factors, including, not in any particular 
order, the trade and investment climate, efficien t governance, market size and growth, proximity to 
suppliers and demanders and infrastructure, are e qually, if not perhaps more, important than IPR 
protection in facilitating technology transfer and its successful diffusion.115  For example, despite IPR 
protection and enforcement being rather weak, multinati onal firms chose to invest in large, developing 
countries such as Brazil, China and India, presumably for other reasons, including the size of the local market.
116  The transfer of technology and the quality of  the technology transferred will also depend 
greatly on the level of technological capability in the country.  Countries tend  to acquire technology 
more readily if domestic firms are engaged in research and development and there exists a sound base 
of technical skills and human capital.117  This would seem to suggest that technology transfer and 
diffusion would take longest in the poorest economies.118 
9. Standards, technical regulations and sanitary and phytosanitary measures 
112. With the gradual reduction in tariff and non-tariff barriers (such as licensing and quotas) to 
imported products, increasing intern ational attention is being give n to other non-tariff barriers, 
                                                      
113 There are several studies on this subject, fo r example, Yang, G. and K.E. Maskus (2001), 
"Intellectual Property Rights and Licensing:  An Econometric Investigations", Weltwirtschaftliches Archiv , Vol. 
137, no. 1, pp. 58.79.  Mo re recently, the question of whether stronger  intellectual property rights result in 
increased technology transfer is examin ed in Branstetter, L.E., R. Fisman and C.F. Foley, 2004, "Do Stronger 
Intellectual Property Rights Increase International Techno logy Transfer?  Empirical Evidence from U.S. Firm 
Level Panel Data", World Bank Policy Research Working Paper no. WPS3305 , May. 
114 See for example Levin, R. C., A. Klevorick, R. Nelson and S.G. Winter (1987), "Appropriating the 
Returns from Industrial Research and Development", Brookings Papers on Economic Activity , no. 3 which 
found in a survey of American co mpanies that executives tend to pla ce greater emphasis on IPRs in the 
pharmaceutical and chemical industries, as an incentive to innovate;  simi larly Mansfield (1986), "Patents and 
Innovation:  An Empirical Study", Management Science , 32, pp. 173-181 found that the share of innovative 
activity that would not take place in the absence of patent protection ra nged from 65% and 30% in 
pharmaceuticals and chemicals respectively, to 1% for so me kinds of machinery and zero for office equipment, 
motor vehicles, rubber and textiles.  The results are replicated for Germany and Japan in a later survey 
(Mansfield, E. 1995, "Intellectual Property Protection, Direct Investment and Technology Transfer:  Germany, 
Japan and the United States", International Finance Corporation Discussion Paper no. 27).   Evidence that 
licensing between multinational headquarters and their affilia tes based in other countries increases as IPRs in the 
country the affiliate is base d in are strengthened is presented in Br anstetter, L.G., Raymond Fisman and C. F. 
Foley (2004),"Do Stronger Intellectual Property Rights Increase International Techno logy Transfer?  Empirical 
Evidence from U.S. Firm -Level Panel Data", World Bank Policy Research Working Paper no. WPS3305 , May. 
115 Maskus, Keith E. (2003), "Encouraging International Technology Transfer", UNCTAD/ICTSD 
Capacity Building Project on Intellectual Property Rights and Sustainable Development , December. 
116 Lall, S. and M. Albaladejo (2002), "Indicators of the Relative Importance of IPRs in Developing 
Countries", Queen Elizabeth House Working Paper Series, no. 85 , April. 
117 Hoekman, B. M., K. E. Maskus and K. Saggi (2004), "Transfer of Technology to Developing 
Countries:  Unilateral and Multilateral Policy Options", World Bank Research Working Paper no. 3332 , June;  
and Maskus, K. E. (2003), "Encouraging International Technology Transfer", UNCTAD/ICTSD Capacity 
Building Project on Intellectual Proper ty Rights and Sust ainable Development , December.  Lall and Albaladejo 
(2002), suggest on the basis of availa ble econometric cross section data th at there is an inverted U-shaped 
relationship between IPRs and income, with the intensity  of IPRs first falling with rising incomes and then 
rising as countries develop sufficient technology capacity to become innovators. 
118 Maskus, Keith, E. (2003), "Encouraging International Technology Transfer", UNCTAD/ICTSD 
Capacity Building Project on Intellectual Property Rights and Sustainable Development , December. WT/TPR/OV/11 
Page 40  
 
including technical regulations a nd sanitary and phytosanitary measures.
119  Indeed, there is concern 
among some WTO Members that such measures could be used as disguised forms of protectionism and could vitiate benefits otherwi se derived from tariff reductions.   
113. Product standards are used in order to, inter alia , guarantee product quality, safeguard health, 
or protect the environment.  Under WTO rules, measures to achieve these objectives are allowed 
provided they are implemented in a non-discriminatory manner and do not cause unnecessary 
obstacles to international trade.  The main discip lines for these types of measures are contained in the 
Agreements on Technical Barriers to Trade (TBT) a nd Sanitary and Phytosanitary (SPS) Measures.  
The SPS Agreement, which covers measures intended to safeguard human, animal or plant life and 
health, has specific disciplines requiring such measur es to be based on scientific principles.  This 
might mean, for example, that imports of certain goods are permitted subject to presentation of  
appropriate health certificates or upon completion of inspection procedures at the border.   
114. Both the SPS and TBT Agreements promote the us e of international standards.  The use of 
common standards may facilitate production and trad e;  for instance, a technical regulation (TBT 
measure) based on international standards may provide information regarding characteristics of a 
product and thereby enable the producer to ensu re its compatibility with other systems.  An 
international standard may also provide a public g ood, for instance, by establishing emission levels 
and thereby contributing to cleaner air.  While  the SPS Agreement indicates which international 
standards are relevant for human, animal and pl ant health, the TBT Agreement is not as explicit.
120    
115. Considering the importance given by both th e SPS and TBT Agreements to international 
standards, and the explicit encouragement in both agreements for Members to participate in the 
standard-setting process, several de veloping country Members continue to express concerns in respect 
of difficulties they have encountered in this regard .  Over the last few year s, several international 
standard-setting bodies have undertaken various acti ons to enhance the participation of developing 
country Members in their work.   For instance, th e ISO General Assembly adopted, in 2004, an ISO 
Strategic Plan for the period 2005-2010, which aims, inter alia , at enhancing developing country 
involvement in its technical activities.  The IEC has also reported, over the last two years, on the 
increased use of its "Affiliate Country Programme", wh ich is aimed at facilitating the participation of 
developing countries in the elaboration of interna tional electrotechnical standards.  The Food and 
Agriculture Organization (FAO) and the World Health Organization (WHO) have also been 
supporting the participation of developing countries in The Codex Alimentarius Commission through 
the  FAO/WHO Codex Trust Fund since end-February 2004.121 
116. Trade Policy Reviews show that while there is an overall trend towards adopting international 
standards, several Members have standards with no international equivalents.  For example, among 
developed countries, 92% of Japan's standards were based on international standards in 2004 
(compared with 90% in 2002), while about two-thir ds of standards issued by the EC's standards 
setting organizations CEN and CEN ELEC (compared with 40% of standards set by CEN and 80% set 
by CENELEC in 2001) were harmonize d with international standards;  data for the United States were 
not available.  Among developing countries, 56% of national industrial standards were aligned with 
international standards in Senegal in 2002, 54% in the Philippines in 2001, 35% in Mongolia in 
                                                      
119 UNCTAD document TB/B/COM.1/EM.27/2 (23 June 2005), provides evidence of the increasing 
use of technical measures.   
120 The SPS Agreement mentions the following international standards-setting organizations:  the 
Codex Alimentarius Commission (Codex, for food safety), the World Organisation for Animal Health (former 
International Office of Epizootics (OIE)), and the rele vant international and regional organizations operating 
within the framework of the International Plant Protection Convention (IPPC) .  
121 http://www.fao.org/newsroom/en/news/2004/46967/index.html and CODEX document, ALINORM 
04/27/10F, May 2004.    WT/TPR/OV/11 
 Page 41 
 
 
2004.122  Most of the transition economies in Eur ope reviewed are moving towards basing their 
standards on EU standards.123  
117.  Since the entry into force of the WTO Agreements, the number of technical regulations and 
conformity assessment procedures notified by develo ping Members has increased.  Slightly over half 
of all TBT notifications have been  made by developing Members.  The number of such notifications 
amounted to 6,098 between 1 January 1995 and 31 December 2004.124  In 2004, 638 notifications 
were submitted by Members, down from 794 in 2003;   the European Communities, along with its 
Member States, notified the largest number of regulations (80125), followed by Israel (44) and 
Thailand (44).  By the end of 2004, Members had notified 4,163 SPS measures to the WTO126;  the 
number of annual notifications in 2004 was 617.  Developed countries are significant users of such 
measures, mainly for food safety reasons;  develo ping countries are also using them with greater 
frequency.  The United States notified the largest number of SPS measures (173), followed by Canada 
(42), New Zealand (39), China (37), the Republic of  Korea (27) and the European Communities (23). 
118. Both SPS and TBT Committees continue to consider  various specific trade concerns that arise 
between Members.  Since 1995, about 200 such con cerns have been discussed  in the SPS committee, 
and 130 in the TBT committee.  There have been 30 alleged violations of th e SPS Agreements, and 17 
where TBT provisions have been invoked.127  Eleven dispute resolution panels have been established 
to examine complaints relating to the SPS Agreem ent, and in six of these cases the Appellate Body 
has also given a ruling;  in the TBT area there has only been one case involving an Appellate Body 
ruling.128   
119. While most countries acknowledge that standard s are necessary, developing country Members 
in particular are concerned that multiple testing requirements associated w ith similar standards in 
different markets as well as the rising complexity of conformity assessment requirements make these costs very high.
129  According to UNCTAD’s Trade Analysis and Information System (TRAINS), the 
number of tariff lines affected by technical  measures varies widely between countries.130  This may, to 
some degree, explain increased attention in the TBT Committee to matters relating to conformity 
assessment procedures, i.e. how to check that Memb ers are actually complying with the requirements 
set out in technical regulations.  For instance,  in March 2005, the TBT Committee held a special 
workshop on Supplier's Declaration of Conformity  (SDoC), which is one approach available to 
                                                      
122 WTO document G/TBT/W/166, 26 June 2001 and WT/TPR/S/137, 18 August 2004, and 
WT/TPR/S/119, 30 June 2003.  
123 For example, as of July 2003, among the 17,571 standards in force in Bulgaria, 9,995 were 
Bulgarian national standards, 6,469 European standards, and 1,107 ISO and/or IEC standards;  52% of EU 
standards were implemented as Bulgarian standards. (WTO document WT/TPR/S/121, 15 September 2003) 
124 WTO document G/TBT/15, 4 March 2005. 
125 Notifications by the European Commi ssion and the 15 Member States.   
126 These do not include corrigenda, addenda and revisions.  WTO document G/SPS/GEN/510/Rev.1, 
23 February 2005. 
127 WTO documents G/SPS/36, and G/TBT/15, 11 July 2005 and 4 March 2005. 
128 On SPS:  two panels were established to examine the United States' and Canada's complaints 
regarding the EC ban on meat treated with growth-promoting hormones;  two panels to examine complaints against Australia's restrictions on imports of fresh, chilled or frozen salmon and salmonids;  one to examine 
Japan's requirement that each variety of certain fruits be tested with regard to the efficacy of fumigation 
treatment;  one regarding Japan's restrictions on apples due  to fire blight (G/SPS/36).   On TBT:  one Panel on 
EC – Trade Description of Sardines (G/TBT/15). 
129 See, for example, "The Cost of Compliance w ith SPS Standards for Moroccan Exports:  A Case 
Study, Agriculture and Rural Development Discussion Paper, the World Bank, Aloui and Kenny (2004).   
130 For example, in Australia, Brazil, China and the United States, more than 25% of tariff lines are 
covered by technical measures, while less then 3% of tariff lines are covered by such measures in Japan, South Africa, the European Communities, and Hong Kong, China.   It should be noted that the TRAINS covers only 
government-imposed requirements and the latest available data vary significantly between countries.  (WTO 
(2005), World Trade Report ])   WT/TPR/OV/11 
Page 42  
 
facilitate the acceptance of conformity assessment re sults.  Moreover, the Committee intends to hold, 
in early 2006, a workshop addressing various appro aches to conformity assessment.  The results of 
this workshop as well as the ongoing wo rk programme on conformity assessment
131 should feed into 
the Fourth Triennial Review of the TBT Agreem ent to be adopted at the end of 2006.     
120. The lack of recognition of conformity assessment may also be a barrier to trade.  Both the 
SPS and TBT Agreements encourage the negotiation of mutual recognition agreements (MRAs).  
Such agreements, for instance on the acceptance of the results of conformity assessment procedures, 
increase confidence in testing entities and procedures between trading partners.  However, while there 
is a growing trend to conclude such MRAs, presently  this is largely confined to agreements between 
developed countries.132   
121. A number of developing countries have received technical assistance on TBT;  assistance 
includes seminars, workshops, awaren ess programmes by the ITC and WTO133,  as well as by APEC, 
UNDP, UNIDO, and ISO.134  In addition to initiatives by vari ous governments and standard-setting 
institutions, mainly of developed countries, in order to provide TBT-rela ted assistance, developed 
countries have also assisted several developing count ries, including Uganda, Malawi, and Zambia  in, 
for example, setting national standards by financin g technical assistance programmes implemented by 
the Joint Technical Assistance Program (JITAP) and the Integrated Framework.135  The TBT 
Committee has, in following up on recommendations  from the Third Triennial Review of the 
Agreement, adopted a voluntary me chanism for the notification of sp ecific technical assistance needs 
and responses.136      
122. Since 2002, the SPS Standards and Trade Development Facility (STDF) has been established 
by the Food and Agriculture Organization, the World Organization for Animal Health, the World 
Bank, the World Health Organization and the WTO with a view to assisting developing countries 
enhance their expertise and capacity to analyze and to implement international SPS standards, 
improving their human, animal and plant health situati on, and thus their ability to gain and maintain 
market access. The STDF inter alia  provides financial grants for developing countries that seek to 
comply with international SPS standards with a view to gaining or maintaining market access;  it also 
provides a forum for dialogue on SPS technical assist ance issues among its five partner organizations 
and interested donors.137   Since 2002, France, the Netherlands, Denmark, the United Kingdom and 
Canada have given funds to the STDF.   
123. Foreign direct investment can facilitate recipi ent developing countries' efforts to harmonize 
their standards with those of their export destina tions.  Products and produc tion facilities established 
by export-oriented foreign direct investors are more likely to meet standards of export markets;  the 
recipient country's domestic industries that provide  inputs (e.g. parts and services) to such production 
                                                      
131 WTO document G/TBT/13, 11 November 2003. 
132 For example, the European Communities has concluded MRAs on conformity assessment 
procedures with Australia/New Zealand, Canada, Israel, Ja pan, Switzerland and the Unit ed States;  Norway with 
Australia, Canada, New Zealand, and Switzerland;  Cana da with the EC and Switzerland;  Australia and New 
Zealand (jointly through 1996 Trans Tasman Mutual Recognition Agreement) with the EC, Norway/Iceland/Liechtenstein, and Singa pore;  Switzerland and Liechtenstein with the EC;  Japan with the EC.  
the United States participates in a number of mutual recognition agreem ents in which foreign conformity 
assessments of U.S. regulations are accepted on a bilatera l product-specific basis.   (WTO Trade Policy Review, 
various reports , and OECD (2004)). 
133 A summary of WTO's technical assistance programmes is provided in WTO document 
G/SPS/GEN/510/Rev.1, 23 February 2005. 
134 WTO document G/TBT/W186 and W186/Add.1, 14 October 2002 and 13 March 2003.   
135 WTO document WT/TPR/S/93, 21 November 2001.  Some countries, including Uganda, have left 
the membership of the ISO apparently owing to financial difficulties in keeping membership.   
136 WTO document G/TBT/16, 8 November 2005. 
137 See the STDF homepage at http://www.standardsfacility.org.  WT/TPR/OV/11 
 Page 43 
 
 
would also need to meet those standards.  Sin ce the existence of multiple standards for similar 
products would entail high cost for producers, and since the use of international standards have 
become more prevalent in many countries, harm onization of domestic standards with those of 
international standards would be beneficial fo r developing countries with a view to reducing 
compliance cost for their domestic producers and exporters. 
10. Trade facilitation 
The economic benefits of trade facilitation 
124. With tariff and non-tariff barriers to trade havi ng fallen owing to successive rounds of trade 
negotiations, other impediments to the cross-border m ovement of goods have become more evident.  
These impediments include regulation, administrati on and enforcement of international trade and 
related policies. While such impediments have si milar economic effects to import tariffs and export 
taxes, they tend to be far less transparent or pred ictable than such tax measures.  Trade facilitation 
involves reducing the cost of transactions associat ed with these (and other) impediments to trade.138  It 
includes the elimination of unnecessary administrative  barriers through the modernization of import 
and export procedures, standards and other transaction costs. 
125. Faster and more efficient processing of imports  and exports can bring both commercial gains 
to private business and secure revenue due to govern ments insofar as imports (and exports) are taxed.  
The economic impact of compliance costs and charges is similar to a tariff, although the government 
may not collect any revenue.  In addition, restricted  entry or delays in releasing goods at borders 
usually increase uncertainty in doing business.  Delays  in importing intermediate goods may retard the 
production of end goods or products further dow n the domestic production chain.  Poor port 
management or costly trade insurance also inhib its imports and exports, thereby squeezing importers' 
and exporters' profit margins, increasing end-user prices,  or leading to irregular supplies.  Against this 
background, the gains from trade f acilitation include an increasing trade volume, a higher level of 
competition, a better business environment (thereby al so encouraging FDI), and a higher participation 
of small and medium-sized enterprises in internationa l trade.  Developing countries in particular may 
gain from better integration into regional or global production networks.  Furthermore, improved 
clearance of goods may help translate increased production capacities into higher export volumes.  Finally, efficient border procedures ensure proper collection of border tax revenues.  
126. The benefits to business of trade facilitation result in particular from reductions in the 
following cost components:  compliance costs (p roducing and transmitting required documents);  
service charges (banking, insurance, cargo handli ng, transport, etc.);  time costs (processing and 
procedural time);  business opportunities (lost business or business not considered);  personal 
opportunity cost (e.g. time lost waiting in lin es),  and costs related to unpredictability and 
corruption.
139  In the case of some goods, such as perish able products, the effi ciency of clearance 
procedures has added urgency.  
                                                      
138 While there is no standard or "agreed" definiti on of trade facilitation, more narrow concepts refer 
only to reforming customs procedures and technical regulations relating to the flow of goods across borders.  
Broader definitions of trade facilitation also include issues  such as transport infrastr ucture and ports logistics, 
technical regulations, and delays in payments  Krista Lucenti (2003):  "Is There a Case for Further Multilateral 
Rules on Trade Facilitation?" in State Secretariat of  Economic Affairs and Evenett, S. (eds):  The Singapore 
Issues and the World Trading System:  The Road to Cancun and Beyond , Berne. 
139 Tom Butterfly (2003):  "Trade Facilitation in a Global Trade Environment", in:  United Nations 
Economic Commission for Europe:  Trade Facilitation – Th e Challenges for Growth and Development , Geneva. WT/TPR/OV/11 
Page 44  
 
127. The economic benefits through improved trad e facilitation are potentially very large.
140  
Francois, van Meijl and van Tongere n (2003) find trade facilitation to be an important source of 
welfare gain, including over US$95 billion in th e OECD countries and over US$150 billion across the 
world;  this is reportedly, around a third of the total welfare gains from trade liberalization in goods 
and services.141  The biggest gains from trade facilitation w ould be enjoyed by those countries that are 
highly trade-oriented, such as in south-east Asia .  Research by the World Bank focused on APEC 
countries shows large improvements in internati onal trade flows as a result of a reduction of 
regulatory barriers between APEC members and the use of efficiency enhancing tools such as e-business.
142  According to these calculations, which are based on data for the year 2000, total intra-
APEC trade is expected to increase by about US$254 billion (an increase of around 21% in intra-
APEC trade in manufactures), with more than ha lf (US$139 billion) coming from improvements in 
port efficiency and the customs environment, and around US$115 billion from improvements "behind 
the border" (including the regulatory environment).  In a follow-up paper, which takes a more global 
perspective and covers 75 countries, gains fro m trade facilitation are estimated to be US$377 
billion.143  While all regions gain in im ports and exports, developing c ountries gain more in terms of 
exports than imports, in large part throu gh increased exports to the OECD markets. 
128. Trade facilitation issues have been addressed in  numerous international fora, including the 
World Customs Organization (WCO) and UNCTAD, both of which also provide technical assistance with regard to trade facilitation.  The WCO maintains a customs reform and modernization 
programme to provide training for customs office rs to implement required changes in customs 
procedures and evaluate their impact on trade facilitation and customs compliance.  The WCO's 1999 
Revised Kyoto Convention remains a crucial refe rence on the simplification and harmonization of 
customs procedures.  UNCTAD maintains an automa ted system for customs data and management 
used by a large number of developing countries, a nd provides technical assistance to improve customs 
clearance and data management.  The United Nati ons Centre for Trade Facilitation and Electronic 
Business (UN/CEFACT) has developed a series of recommendations, some of which reflect best 
standards and practices in trade procedures and standards.
144  The recommendations also include 
guidelines for designing trade documents. 
129. Regional agreements also often include effort s to harmonize customs procedures, rules and 
measures.  For example, the Canada-U.S. Shared Border Accord commits both governments to align, 
to the maximum extent possible, the customs clear ance processes along their shared border.  This 
agreement marked the creation of the Free and Secure Trade (FAST) programme, which seeks to 
harmonize clearance procedures at the border for driver s, carriers, and importers, and offers expedited 
                                                      
140 Studies on documentation costs in international trade date back as early as to  the early 1970s.  Based 
on a business survey, the United States' National Council on International Trade Development found that such 
costs represented 7.5% of the value of total U.S. exports and imports. 
141 Even under the assumption of constant returns to  scale and 50% liberalization of border measures, 
they estimate total gains to the world of US$63 billio n (US$41 billion from liberalization in the OECD countries 
and US$22 billion from liberalization in the developing countries) (Francois, J., H. van Meijl, and F. van 
Tongeren, 2003, "Economic Benefits of the Doha Round fo r the Netherlands":  Report submitted to the Ministry 
of Economic Affairs, Directorate General for Foreign Economic Relations). 
142 John S. Wilson, C. L. Mann and T. Otsuki (200 3), "Trade facilitation and Economic Development:  
Measuring the Impact",  World Bank Policy Research Working Paper, no. 2988 , March.  The paper also 
discusses previous research on the impact of trad e facilitation, including by UNCTAD, APEC and the OECD. 
143 John S. Wilson, C. L. Mann and T. Otsuki (200 4), "Assessing the Benefit of Trade Facilitation:  A 
Global Perspective",  World Bank Policy Research Working Paper, no. 3224 , February. 
144 United Nations Economic Commission for Europe (undated):  List of UNECE-UN/CEFACT 
Recommendations on Trade Facilitation .  WT/TPR/OV/11 
 Page 45 
 
 
clearance.145  A similar programme has been elaborated  under the U.S./Mexico Border Partnership 
Plan. 
130. In APEC, trade facilitation has been a key obj ective since the inception of the regional forum 
in 1989.  The 1994 Bogor Declaration emphasized th at trade facilitation was needed to complement 
trade liberalization in order that businesses and cons umers could enjoy the benefits of trade.  The 
1996 Osaka Action Agenda agreed to align nationa l norms with international standards and to 
recognize each others' national standards.146  The Shanghai Trade Facilitation Action Plan, launched 
in 2001, set the objective of achieving a 5% reducti on of transaction costs across the APEC region by 
2006, building on voluntary undertakings.  In the co ntext of this Action Plan, various methodologies 
have been developed to help economies to benchm ark their current situation and to track their 
progress, in quantifiable financial terms, toward the transaction cost reduction goal.147  The Santiago 
Initiative for Expanded Trade in APEC, adopted at  the APEC Summit in Chile in 2004, has trade 
facilitation as one of its two main components.148 
131. The modernization of customs procedures has b een a key objective of many governments in 
recent years.  Introducing information technology  can greatly contribute to the promotion of 
transparency, efficiency, and simplification of cu stoms procedures.  For example, in an increasing 
number of countries, including developing country Members, the necessary fo rms can be downloaded 
from the Internet and submitted electronically.  Other steps taken by governments include the introduction of single export forms
149 and the establishment of one-stop offices or single windows, 
which allows traders to lodge information with  a single institution to fulfil all trade-related 
requirements150. 
132. In addition to the necessity of streamlining customs procedures, numerous governments have 
recognized the strategic importance of increasing the e fficiency of the maritime port system.  Nigeria, 
for example, has adopted a new port policy that aims to attract private investment in port and auxiliary 
services, while the Government restri cts itself to regulatory functions.151 
The negotiations in the WTO 
133. Trade facilitation is a relatively new topic on th e multilateral negotiating table.  It was added 
to the WTO agenda as one of the "new" issu es in December 1996 at the Singapore Ministerial 
meeting.  As was the case for the other "Singapor e issues", the 2001 Ministerial Declaration at Doha 
stated that a decision regarding negotiations on trade facilitation was to be taken after the Fifth 
Ministerial Conference in 2003 "by explicit consensus" .  In the period up to the Conference, the WTO 
                                                      
145 WTO, (forthcoming), Trade Policy Review - United States 2006 .  Additional information on the 
FAST programme is available a t:  http://www.cbp.gov/linkhandler/cgov/import/commercial_enforcement/ 
ctpat/fast/fast.ctt/F ASTBrochure.doc 
146 WTO, 2000, Trade Policy Review - Singapore 2000 ;  and WTO, 2002, Trade Policy Review—
Japan, 2002 . 
147 Asia-Pacific Economic Cooperation (2004):  Trade Facilitation and Trade Liberalization:  From 
Shanghai to Bogor . 
148 Asia-Pacific Economic Cooperation (2005):  Outcomes and Outlook 2004/05 . 
149 WTO, 2003: Trade Policy Review - Chile  2003;  WTO, 2002:  Trade Policy Review - Dominican 
Republic 2002.  
150 WTO, 2003: Trade Policy Review - Niger 2003;  WTO, 2004:  Trade Policy Review - Republic of 
Korea 2004.  
151 WTO, 2005, Trade Policy Review - Nigeria 2005.  The example of Nigeria also shows the links 
between customs efficiency and port efficiency as the la rge number of agencies responsible for cargo clearance 
often leads to congestion at seaports.  The Government has now taken steps to redu ce the number of agencies 
involved in cargo clearance. WT/TPR/OV/11 
Page 46  
 
Goods Council, which has been studying trade facilitation since 1997
152, was instructed to "review 
and, as appropriate, clarify and improve relevant asp ects of Articles V (freedom of transit), VIII (fees 
and formalities connected with importation and expor tation), and X (publication and administration of 
trade regulations) of the GATT and identify the trad e facilitation needs and priorities of Members, in 
particular, developing and least developed countries". 
134. The launch of negotiations on trade facilitati on in July 2004 marked a new phase in 
multilateral efforts to expedite the movement of goods and cut disruptive red tape.  Elevating the 
WTO's contribution to those endeavours from analys ing related obstacles to working towards their 
elimination, the decision to embark on the exercise  reflected the growing r ecognition of the role of 
trade facilitation in fostering development and thus  in the Doha Round.  It underlined the global 
awareness of the potential gains from this undertak ing and its link to econom ic growth.  No longer 
considered as the "plumbing" of trade policy, trad e facilitation has come to be seen as an important 
economic issue and a core element of a country's trade strategy.  
135. A number of steps have already been undertaken to advance this process, leading to concrete 
suggestions on how to enhance the underlying re gulatory framework concerning trade.  Various 
proposals were made by Members, particularly w ith respect to improvements of GATT Articles V, 
VIII and X153, in line with the agreed scope of the negotiations154.  The focus on those three Articles 
implies a concentration of work on transparency a nd simplification issues, with efforts also being 
made to enhance predictability.  Substantiv e areas covered range from transit issues over 
import/export-related fees and formalities to the publi cation and administration of trade regulations, 
with the overall objective to speed up the move ment, release and clearance of goods.  Measures 
proposed to this end include enhanced publica tion and information requirements, consultation 
mechanisms, strengthened appeal and due process pr ocedures and a number of initiatives to expedite 
clearance processes.  All of these measures aim at  lowering costs, enhanc ing trading opportunities 
(especially for small and medium-sized enterpri ses) and allowing for more efficient resource 
allocation. 
136. Technical assistance and capacity building as well as special and differential treatment are 
part and parcel of any proposed measure, with th ought also being given to cost implications and 
related needs.  The mandate calls for an innovative  approach that links the implementation capacities 
of developing and least-developed countries to th e extent and timing of their entering into new 
commitments in this area.155 
137. While the end result of this process remains to  be seen, the initial phase of the negotiations 
has already led to an encouraging convergence of views and their translation into concrete ideas, 
paving the way for a substantially upgraded treatment  of trade facilitation at the multilateral level.  
The high level of support and large degree of shared objectives in this regard will further add to the 
WTO's positive contribution to the in ternational trading environment. 
                                                      
152 This was in response to the instruction by Minist ers at the Ministerial Conference in Singapore held 
in 1996, to commence exploratory and analytical work on the simplification of trade procedures in order to 
assess the scope for WTO rules in this area. 
153 WTO documents TN/TF/W/6 to TN/TF/W/75. 
154 Annex D of the July Decision of the General Council of 1 August 2004 (WTO document 
WT/L/579).  
155 This approach was endorsed by the Consultative Board established to consider how the WTO could 
be reinforced and equipped to meet  the institutional challenges it faces. (P eter Sutherland and others (eds.) 
(2005):  The Future of the WTO – Addressing Institutional Challenges in the New Millennium , Geneva).  WT/TPR/OV/11 
 Page 47 
 
 
Annex Table 1 
Structure of MFN tariffs in least developed countries reviewed in 2005 
(Per cent) 
 
  Guinea Sierra Leone 
   1998 2005 U.R.a 2004 U.R.b 
 Bound tariffc        
1. Bound tariff lines (% of all tariff lines) 40.8d 40.8d 40.8d 100.0 100.0 
2. Simple average bound rate 21.1 21.1 21.1 47.5 47.5 
 Agricultural products (HS01-24) 38.6 38.6 38.6 41.8 41.8 
 Industrial products (HS25-97) 12.9 12.9 12.9 48.5 48.5 
 WTO agricultural products 39.4 39.4 39.4 40.6 40.6 
 WTO non-agricultural products 11.5 11.5 11.5 48.7 48.7 
 Textiles and clothing 16.9 16.9 16.9 50.0 50.0 
3. Tariff quotas (% of all tariff lines) 0.0 0.0 0.0 0.0 0.0 
4. Duty free tariff lines (% of all tariff 
lines) 1.2 1.2 1.2 0.0 0.0 
5. Non- ad valorem  tariffs (% of all tariff 
lines) 0.0 0.0 0.0 0.0 0.0 
6. Non- ad valorem  tariffs with no AVEs 
(% of all tariff lines) 0.0 0.0 0.0 0.0 0.0 
7. Nuisance bound rates (% of all tariff 
lines)e 0.0 0.0 0.0 0.0 0.0 
 Applied tariff        
8. Simple average applied rate 16.6 14.9 .. 14.7 .. 
 Agricultural products (HS01-24) 17.6 18.5 .. 18.6 .. 
 Industrial products (HS25-97) 16.4 14.3 .. 14 .. 
 WTO agricultural products 17.6 17.8 .. 17.9 .. 
 WTO non-agricultural products 16.4 14.5 .. 14.1 .. 
 Textiles and clothing 16.4 20.0 .. 23.3 .. 
9. Domestic tariff "peaks" (% of all tariff 
lines)f 0.0 0.0 .. 0.7 .. 
10. International tari ff "peaks" (% of all 
tariff lines)g 88.6 41.3 .. 47.6 .. 
11. Overall standard deviation of tariff rates 2.6 7.1 .. 10.7 .. 
12. Coefficient of variation of tariff rates 0.2 0.5 .. 0.7 .. 
13. Tariff quotas (% of all tariff lines) 0.0 0.0 .. 0.0 .. 
14. Duty free tariff lines (% of all tariff 
lines) 0.0 0.0 .. 0.0 .. 
15. Non- ad valorem  tariffs (% of all tariff 
lines) 0.0 0.0 .. 0.0 .. 
16. Non- ad valorem  tariffs with no AVEs 
(% of all tariff lines) 0.0 0.0 .. 0.0 .. 
17. Nuisance applied rates (% of all tariff 
lines)e 0.0 0.0 .. 0.4 .. 
.. Not available. 
a Based on 2005 tariff schedule. 
b Based on 2004 tariff schedule. 
c Calculations are only based on bound tariff lines. d Including partially bound rates (representing 0.7% of total lines). 
e Nuisance rates are those greater than zero, but less than or equal to 2%. 
f Domestic tariff peaks are defined as those exceeding three ti mes the overall simple average applied rate (indicator 8). 
g International tariff peaks are defined as those exceeding 15%. 
Note: MFN tariff calculations are based on e ffectively applied rates (including taxes). 
Source:  WTO Secretariat calculations, based on data provided by the Members. WT/TPR/OV/11 
Page 48  
 
Annex Table 1 (cont'd) 
Structure of MFN tariffs in se lected countries reviewed in 2005 
(Per cent)  
 
 Bolivia Ecuador Paraguay Trinidad & 
Tobago 
   1998 2005 F.B.a 2005 F.B.b 1997 2004c F.B.a 2004 F.B.b 
 Bound tariff               
1. Bound tariff lines (% of all tariff lines)d 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 
2. Simple average bound rate 40.0 40.0 40.0 .. 21.0 32.7 32.7 32.7 57.6 57.6 
 Agricultural products (HS01-24) 40.0 40.0 40.0 .. 26.5 33.3 33.3 33.3 85.1 85.1 
 Industrial products (HS25-97) 40.0 40.0 40.0 .. 20.1 32.6 32.6 32.6 51.3 51.3 
 WTO agricultural products 40.0 40.0 40.0 .. 25.4 33.2 33.2 33.2 89.9 89.9 
 WTO non-agricultural products 40.0 40.0 40.0 .. 20.3 32.6 32.6 32.6 50.8 50.8 
 Textiles and clothing 40.0 40.0 40.0 .. 28.4 33.7 33.7 33.7 56.9 56.9 
3. Tariff quotas (% of all tariff lines) 0.0 0.0 0.0 .. 0.4 0.0 0.0 0.0 0.0 0.0 
4. Duty free tariff lines (% of all tariff lines) 0.0 0.0 0.0 .. 0.0 0.0 0.0 0.0 1.8 1.8 
5. Non- ad valorem  tariffs (% of all tariff lines) 0.0 0.0 0.0 .. 0.0 0.0 0.0 0.0 0.0 0.0 
6. Non- ad valorem  tariffs with no AVEs (% of all 
tariff lines) 0.0 0.0 0.0 .. 0.0 0.0 0.0 0.0 0.0 0.0 
7. Nuisance bound rates (% of all tariff lines)e 0.0 0.0 0.0 .. 0.0 0.0 0.0 0.0 0.0 0.0 
 Applied tariff               
8. Simple average applied rate 9.7 8.2 .. 11.4 .. 9.6 8.9 .. 9.1 .. 
 Agricultural products (HS01-24) 10 9.9 .. 16.7 .. 10.7 10.1 .. 20.5 .. 
 Industrial products (HS25-97) 9.6 7.9 .. 10.6 .. 9.5 8.7 .. 6.9 .. 
 WTO agricultural products 10 9.8 .. 15.7 .. 10.4 9.9 .. 17.9 .. 
 WTO non-agricultural products 9.6 7.9 .. 10.8 .. 9.6 8.8 .. 7.6 .. 
 Textiles and clothing 10 10.0 .. 18.1 .. 17.9 17.4 .. 9.0 .. 
9. Domestic tariff "peaks" (% of all tariff lines)f 0.0 0.0 .. 0.7 .. 0.0 0.1 .. 8.4 .. 
10. International tariff "peaks"  (% of all tariff lines)g 0.0 0.0 .. 24.5 .. 26.2 22.7 .. 28.2 .. 
11. Overall standard deviation of tariff rates 1.3 3.0 .. 7.0 .. 6.8 6.8 .. 11.8 .. 
12. Coefficient of variation of tariff rates 0.1 0.4 .. 0.6 .. 0.7 0.8 .. 1.3 .. 
13. Tariff quotas (% of all tariff lines) 0.0 0.0 .. 0.5 .. 0.0 0.0 .. 0.0 .. 
14. Duty free tariff lines (% of all tariff lines) 0.0 5.8 .. 3.2 .. 6.1 14.0 .. 45.4 .. 
15. Non- ad valorem  tariffs (% of all tariff lines) 0.0 0.0 .. 0.0 .. 0.0 0.0 .. 0.4 .. 
16. Non- ad valorem  tariffs with no AVEs (% of all 
tariff lines) 0.0 0.0 .. 0.0 .. 0.0 0.0 .. 0.4 .. 
17. Nuisance applied rates (% of all tariff lines)e 0.0 * 0.0 .. 0.0  16.4 21.3 .. 0.0 .. 
.. Not available. 
* Negligible.  F.B. Final bound. 
a Based on 1998 tariff schedule. 
b Based on 1995 tariff schedule. 
c As at July. d Calculations are only based on bound tariff lines .  Including fully bound and partially bound rates. 
e Nuisance rates are those greater than zero, but less than or equal to 2%. 
f Domestic tariff peaks are defined as those exceeding three ti mes the overall simple average applied rate (indicator 8). 
g International tariff peaks are defined as those exceeding 15%. 
Note: Excluding in-quota rates.  Calculati ons exclude specific rates and include the ad valorem part for compound and alternate  rates. 
 Final bound calculations are only based on bound tariff lines. 
Source: WTO Secretariat calculations, based on data provided by the Members.  WT/TPR/OV/11 
 Page 49 
 
 
Annex Table 1 (cont'd) 
Structure of MFN tariffs in se lected countries reviewed in 2005 
(Per cent) 
  Mongolia Philippi nes Qatar Romania 
   2000 2004 F.Ba 1999 2004 F.B.b 2004 F.B.c 1999 2005 F.B.d 
 Bound tariff                
1. Bound tariff lines (% of all tariff lines)e 100.0 100.0 100.0 .. .. 64.8 .. 100.0 100.0 100.0 100.0 
2. Simple average bound rate 18.4 18.4 17.6 .. .. 25.7 .. 16.0 40.0 37.7 37.7 
 Agricultural products (HS01-24) 19.0 19.0 19.0 .. .. 36.5 .. 25.2 117.7 107.1 107.1 
 Industrial products (HS25-97) 18.3 18.3 17.4 .. .. 23.3 .. 14.5 17.5 17.0 17.0 
 WTO agricultural products 19.0 18.9 18.9 .. .. 34.8 .. 25.7 134.2 121.5 121.5 
 WTO non-agricultural products 18.3 18.4 15.2 .. .. 23.4 .. 14.5 16.2 16.0 16.0 
 Textiles and clothing 21.5 21.8 21.7 .. .. 28 .. 16.4 24.0 23.9 23.9 
3. Tariff quotas (% of all tariff lines) 0.0 0.0 0.0 .. .. .. .. 0.0 2.0 2.1 2.1 
4. Duty free tariff lines (% of all tariff lines) 0.6 0.5 1.6 .. .. 2.3 .. 0.9 4.4 7.3 7.3 
5. Non- ad valorem  tariffs (% of all tariff lines) 0.0 0.0 0.0 .. .. 0.0 .. 0.0 0.0 0.0 0.0 
6. Non- ad valorem  tariffs with no AVEs (% of 
all tariff lines) 0.0 0.0 0.0 .. .. 0.0 .. 0.0 0.0 0.0 0.0 
7. Nuisance bound rates (% of all tariff lines)f 0.0 0.0 0.0 .. .. 0.0 .. 0.0 0.0 0.0 0.0 
 Applied tariff                
8. Simple average applied rate 5.0 5.0 .. 9.7 7.4 .. 5.2 .. 19.8 17.5 .. 
 Agricultural products (HS01-24) 5.1 5.1 .. 14.8 10.6 .. 6.8 .. 32.3 26.3 .. 
 Industrial products (HS25-97) 4.9 5.0 .. 8.9 6.9 .. 4.9 .. 16.2 14.9 .. 
 WTO agricultural products 5.1 5.1 .. 14.1 10.3 .. 7.1 .. 34.0 28.0 .. 
 WTO non-agricultural products 4.9 5.0 .. 9.1 7.0 .. 4.9 .. 16.2 14.8 .. 
 Textiles and clothing 5.0 5.0 .. 18.5 11.3 .. 5.0 .. 24.0 22.2 .. 
9. Domestic tariff "peaks" (% of all tariff lines)g 0.0 0.0 .. 1.9 5.1 .. 0.5 .. 2.9 2.4 .. 
10. International tariff "p eaks" (% of all tariff 
lines)h 0.0 0.0 .. 23.1 7.5 .. 0.5 .. 51.9 46.9 .. 
11. Overall standard deviation of tariff rates 0.5 0.5 .. 9.6 7.9 .. 7.0 .. 17.9 13.7 .. 
12. Coefficient of variation of tariff rates 0.1 0.1 .. 1.0 1.1 .. 1.3 .. 0.9 0.8 .. 
13. Tariff quotas (% of all tariff lines) 0.0 0.0 .. 1.3 0.6 .. 0.0 .. 2.0 2.1 .. 
14. Duty free tariff lines (% of all tariff lines) 0.9 0.9 .. 0.3 3.7 .. 5.8 .. 5.5 10.8 .. 
15. Non- ad valorem  tariffs (% of all tariff lines) 0.0 0.0 .. 0.0 0.0 .. 0.7i .. 0.0 0.0 .. 
16. Non- ad valorem  tariffs with no AVEs (% of 
all tariff lines) 0.0 0.0 .. 0.0 0.0 .. 0.7 .. 0.0 0.0 .. 
17. Nuisance applied rates (% of all tariff lines)f 0.0 0.0 .. 0.0 21.5 .. 0.0 .. 0.0 0.4 .. 
.. Not available. 
F.B. Final bound. 
a Based on 2004 tariff schedule. 
b Based on 1999 tariff schedule. c Based on 1996 tariff schedule. 
d Based on 2005 tariff schedule. 
e Calculations are only based on bound tariff lines .  Including fully bound and partially bound rates. 
f Nuisance rates are those greater than zero, but less than or equal to 2%. 
g Domestic tariff peaks are defined as those exceeding three ti mes the overall simple average applied rate (indicator 8). 
h International tariff peaks are defined as those exceeding 15%. i Including prohibited tariff lines, representing 0.3%. 
Note: Excluding in-quota rates.  Calculati ons exclude specific rates and include the ad valorem  part for compound and alternate rates. 
 Final bound calculations are only based on bound tariff lines. 
Source:  WTO Secretariat calculations, based on data provided by the Members. WT/TPR/OV/11 
Page 50  
 
Annex Table 1 (cont'd) 
Structure of MFN tariffs in se lected countries reviewed in 2005 
(Per cent)  
  Egypt Tunisia Nigeria 
   1998 2005 F.B.a 1994 2005 F.B.a 1997/98 2003 F.B.b 
 Bound tariffc             
1. Bound tariff lines (% of all tariff lines) 98.7 98.7 98.7 .. 60.7 60.7 19.2 19.2 19.2 
2. Simple average bound rate .. .. 38.6 .. 65.6 65.6 .. 118.4 118.4 
 Agricultural products (HS01-24) .. .. 93.4 .. 119.1 119.1 .. 149.7 149.7 
 Industrial products (HS25-97) .. .. 29.6 .. 40.1 40.1 .. 69.8 69.8 
 WTO agricultural products .. .. 96.2 .. 117.3 117.3 .. 150 150 
 WTO non-agricultural products .. .. 29.6 .. 39.3 39.3 .. 49.2 49.2 
 Textiles and clothing .. .. 31.3 .. 57.7 57.7 .. 60 60 
3. Tariff quotas (% of all tariff lines) .. .. 0 .. 2.6 2.6 .. 0.0 0.0 
4. Duty free tariff lines (% of all tariff lines) .. .. 0 .. 0.0 0.0 .. 0.0 0.0 
5. Non- ad valorem  tariffs (% of all tariff lines) .. .. 0.2 .. 0.0 0.0 .. 0.0 0.0 
6. Non- ad valorem  tariffs with no AVEs (% of all tariff lines) .. .. 0.2 .. 0.0 0.0 .. 0.0 0.0 
7. Nuisance bound rates (% of all tariff lines)d .. .. 2.6 .. 0.0 0.0 .. 0.0 0.0 
 Applied tariff             
8. Simple average applied rate 26.8 20.0 .. 30.7 31.7 .. 24.4 28.6 .. 
 Agricultural products (HS01-24) 63.4 64.1 .. 36.6 65.7 .. 32.8 50.8 .. 
 Industrial products (HS25-97) 20.9 12.8 .. 29.8 21.8 .. 23 25.0 .. 
 WTO agricultural products 64.9 66.4 .. 35.0 66.8 .. 32.8 50.2 .. 
 WTO non-agricultural products 20.9 12.8 .. 30.1 22.6 .. 23.1 25.3 .. 
 Textiles and clothing 36.7 24.4 .. 39.1 31.1 .. 42.9 42.7 .. 
9. Domestic tariff "peaks" (% of all tariff lines)e 0.5 0.4 .. 0.0 5.5 .. 0.5 5.0 .. 
10. International tariff "peaks"  (% of all tariff lines)f 52.7 26.6 .. 90.4 64.7 .. 51.6 56.5 .. 
11. Overall standard deviation (SD) of tariff rates 127.4 148.3 .. 11.8 30.4 .. 18.0 22.3 .. 
12. Coefficient of variation (CV) of tariff rates 4.8 7.4 .. 0.4 1.0 .. 0.7 0.8 .. 
13. Tariff quotas (% of all tariff lines) 0.0 0.0 .. .. 1.6 .. 0.0 0.0 .. 
14. Duty free tariff lines (% of all tariff lines) 0.2 5.3 .. 1.2 15.0 .. 0.0 0.0 .. 
15. Non- ad valorem  tariffs (% of all tariff lines) 0.2 0.2 .. 0.0 0.0 .. 0.0 0.0 .. 
16. Non- ad valorem  tariffs with no AVEs (% of all tariff lines) 0.2 0.2 .. 0.0 0.0 .. 0.0 0.0 .. 
17. Nuisance applied rates (% of all tariff lines)d 0.9 23.7 .. 0.0 0.0 .. 0.0 0.0 .. 
.. Not available. 
F.B. Final bound. 
a Based on 2005 tariff schedule. 
b Based on 2003 tariff schedule. 
c Calculations are only based on bound tariff lines. 
d Nuisance rates are those greater than zero, but less than or equal to 2%. 
e Domestic tariff peaks are defined as those exceeding three ti mes the overall simple average applied rate (indicator 8). 
f International tariff peaks are defined as those exceeding 15%. 
Note: Excluding in-quota rates.  Calculati ons exclude specific rates and include the ad valorem  part for compound and alternate rates. 
Source:  WTO Secretariat calculations, based on data provided by the Members.   WT/TPR/OV/11 
 Page 51 
 
 
Annex:  Definition and Calculation of TSEs and PSEs156 
 
Total transfers associated w ith agricultural policies (Total Support Estimate (TSE)) is  "an indicator of 
the annual monetary value of all gross transfer s from taxpayers and cons umers arising from policy 
measures which support agriculture, net of the assoc iated budgetary receipts, regardless of their 
objectives and impacts on farm production and income , or consumption of farm products".  The TSE 
equals the sum of the following:    (1) transfers from consumers of agricultu ral commodities and taxpayers to agricultural 
 producers (PSE);  
 (2) transfers from taxpayers to general servi ces provided to agriculture (including R&D;  
 agricultural schools;  inspection services;  infrastructure;  marketing and promotion;  
 and public stockholding);  and  (3)  transfers from taxpayers to consumers of agricultural commodities.   
 The first component of the TSE is the Producer Supp ort Estimate (PSE), which is "an indicator of the 
annual monetary value of gross transfers from cons umers and taxpayers to agricultural producers, 
measured at the farm-gate level, arising from po licy measures that support agriculture, regardless of 
their nature, objectives or impacts on farm productio n or income".  The PSE is calculated as the sum 
of the following: 
(i) market price support (MPS), which indicat es the gross transfers from consumers and 
taxpayers to agricultural producers arising from policy measures that create a gap 
between domestic market prices and border prices of a specific agricultural 
commodity, measured at the farm-gate level; 
(ii) payments based on output; (iii) payments based on area planted or animal numbers; (iv) payments based on historical entitlements;   
(v) payments based on input use; 
(vi) payments based on input constraints; (vii) payments based on over all farming income;  and 
(viii) miscellaneous payments. 
 When calculating TSEs and PSEs for a given country, the OECD points out that "the only component 
that has to be calculated for each commodity is th e part of market price support", as "all the other TSE 
and PSE components are recorded, explicitly or implicitly, as budgetary expenditure", or being 
estimated in the budget.      
Source:  OECD (2005), "Producer and Consumer  Support Estimates:  OECD Database 1986-2004 
User's Guide", available at:  http://www.oecd.org/dataoecd/56/31/35010085.pdf   [13 January 2006] 
 
__________ 
 
 
                                                     
 
156 The methodology used by the OECD to calculate assistance for agriculture is different from the 
WTO's Aggregate Measure of Support (AMS).