RESTRICTEDWORLD TRADE
ORGANIZATIONWT/TPR/S/50
12 October 1998
(98-3898)
Trade Policy Review Body
TRADE POLICY REVIEW
URUGUAY
Report by the Secretariat
This report, prepared for the second Trade Policy Review of Uruguay, has been
drawn up by the WTO Secretariat on its own responsibility.  The Secretariat has,
as required by the Agreement establishing the Trade Policy Review Mechanism
(Annex 3 of the Marrakesh Agreement Establishing the World Trade
Organization), sought clarification from the Government of Uruguay on its trade
policies and practices.
Document WT/TPR/G/50 contains the policy statement submitted by the
Government of Uruguay.
Note: This report is subject to restricted circulation and press embargo until the end of the meeting
of the Trade Policy Review Body on Uruguay.Uruguay WT/TPR/S/50
Page iii
CONTENTS
Page
SUMMARY OBSERVATIONS xiii
Introduction xiii
(1) The Economic Environment xiii(2) Trade Policy Developments xiii(3) Sectoral Development xiv(4) Trade Policies and Foreign Trading Partners xv
I. ECONOMIC ENVIRONMENT 1
(1) Major Features of the Economy 1(2) Recent Economic Developments 3
(i) Aggregate supply and demand 3
(ii) Public finances 6
(iii) Monetary policy 8
(iv) Exchange rate developments 9
(v) Balance of payments 10
(3) Developments in Trade 11
(i) Composition of merchandise trade 12
(ii) Direction of merchandise trade 12
(4) Outlook 16
II. TRADE POLICY REGIME:  FRAMEWORK AND OBJECTIVES 17
(1) Trade Policy 17
(i) Trade policy objectives 17
(ii) Institutional and legal framework 17
(iii) Trade policy formulation 18
(iv) Trade laws and regulations 18
(v) Trade relations 19
(2) Foreign Direct Investment 23WT/TPR/S/50 Trade Policies Review
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Page
III. TRADE POLICIES AND PRACTICES BY MEASURE 26
(1) Introduction 26
(2) Measures Directly Affecting Imports 26
(i) Registration, documentation, and rules of origin 26
(ii) Tariffs 29
(iii) Other levies and charges 38(iv) Customs valuation and rules of origin 40
(v) Import prohibitions, restriction and licensing 42
(vi) Import quotas 42
(vii) Import surveillance 43
(viii) Import cartels 43(ix) State-owned enterprises 43
(x) Anti-dumping and countervailing measures 44
(xi) Safeguard actions 46
(xii) Local-content schemes 46
(xiii) Measures implemented in exporting countries 46
(xiv) Balance-of-payments measures 46
(xv) Countertrade 47
(3) Measures Directly Affecting Exports 47
(i) Registration and documentation 47
(ii) Export taxes, charges and levies 47(iii) Minimum prices 47
(iv) Export prohibitions and other controls 48
(v) Export quotas 49
(vi) Export cartels 49
(vii) Voluntary restraints, surveillance and similar measures 49(viii) Export subsidies 49
(ix) Duty and tax concessions 49
(x) Export finance 51
(xi) Export insurance and guarantees 51
(xii) Export promotion and marketing assistance 52
(4) Measures Affecting Production and Trade 52
(i) Incentives 52
(ii) Pricing and marketing arrangements 53
(iii) Standards and other technical requirements 53
(iv) Trade-related investment measures (TRIMs) 58(v) Government procurement 58
(vi) Intellectual property protection 60
(vii) Competition rules 63Uruguay WT/TPR/S/50
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Page
IV. TRADE POLICIES BY SECTOR 64
(1) Introduction 64(2) Agriculture, Livestock, Fisheries and Forestry 66
(i) Agriculture, Livestock, Fisheries 66
(ii) Forestry 75
(3) Manufacturing 76
(i) Textiles and clothing 82
(ii) The automotive industry 83
(4) Services 84
(i) Banking, finance and insurance 86
(ii) Transport 93
(iii) Tourism 95
REFERENCES 97WT/TPR/S/50 Trade Policies Review
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CHARTS
Page
I. ECONOMIC ENVIRONMENT
I.1 Sectoral distribution of GDP, 1992 and 1997 2
I.2 Trade in goods and non-factor services as shares of GDP, 1992-97 3
I.3 Growth in GDP and consumer price index, 1992-97 4
I.4 Selected indicators of macroeconomic development, 1992-97 5
I.5 REER index and trade in goods and non-factor services, 1990-97 10I.6 Product composition of merchandise trade, 1992 and 1996 13
I.7 Direction of merchandise trade, 1992 and 1996 14
I.8 Uruguay's trade with MERCOSUR by sector, 1992-97 15
III. TRADE POLICIES AND PRACTICES BY MEASUREIII.1 Distribution of applied MFN tariff rates, 1998, 2001 and 2006 32
III.2 Tariff escalation by 2-digit ISIC industry, 1998, 2001 and 2006 34
IV. TRADE POLICIES BY SECTORIV.1 Average tariffs by ISIC classification, 1998 65
IV.2 Growth rates for agriculture, livestock and fishing sectors, 1990-97 67
IV.3 Agricultural exports and imports, 1991-96 69
IV.4 Average tariff levels and bindings in agriculture, forestry and fishing,
1998, 2001 and 2006 71
IV.5 Growth in selected industries, 1992-97 78IV.6 Manufactured exports and imports, 1991-96 79
IV.7 Average tariff levels and bindings in manufacturing, 1998, 2001 and 2006 80
IV.8 Services GDP by sector, 1990 and 1997 85Uruguay WT/TPR/S/50
Page vii
TABLES
Page
I. ECONOMIC ENVIRONMENT
I.1 Basic economic and social indicators, 1992-97 1
I.2 Investment in fixed capital 6
I.3 Economic performance, 1992-97 8
I.4 Balance-of-payments, 1992-97 11
II. TRADE POLICY REGIME:  FRAMEWORK AND OBJECTICES
II.1 Uruguay's notifications under WTO Agreements 19III. TRADE POLICIES AND PRACTICES BY MEASUREIII.1 Annexes to the Uruguayan Applied Tariff 31
III.2 Average Tariff Levels 1998, 2001 and 2006 33
III.3 Tariff lines for which the 1998 applied rate is exceeding the bound rate 35
III.4 Goods and services exempt from the VAT 38
III.5 Structure of charges on imports of selected products, 1998 39
III.6 Goods on which IMEBA must be paid at export 48III.7 Government procurement 59
III.8 Laws, international conventions and agreements that regulate intellectual
property rights in Uruguay 61
IV. TRADE POLICIES BY SECTORIV.1 Output of selected primary products, for the agricultural season
ended 31 December 68
IV.2 Major crops area cultivated, production and productivity, 1992-1996 73
IV.3 Milk prices and quota, 1992-98 74IV.4 Industrial sector background, 1992-97 77
IV.5 Tariff escalation and tariff rates, 1998 and 2006 81
IV.6 Imports classified according to final use, 1992-1997 81
IV.7 Financial sector 87
IV.8 Interest rates in Uruguay by sector 89IV.9 Functions of the Department of Insurance and Reinsurance 90
IV.10 Insurance by type and amount insured 91
IV.11 Telecommunications in Uruguay 93
IV.12 Transport 94
IV.13 Tourism in Uruguay 96WT/TPR/S/50 Trade Policies Review
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APPENDIX TABLES
Page
I. ECONOMIC ENVIRONMENT
AI.1 Exports by groups of products, 1990-96 101
AI.2 Imports by groups of products, 1990-96 102
AI.3 Exports by destination, 1990-96 103
AI.4 Imports by origin, 1990-96 104
III. TRADE POLICIES AND PRACTICES BY MEASURE
AIII.1 Minimum export prices - woven fabrics 105
AIII.2 Minimum export pri ces – made up articles 108
IV. TRADE POLICIES BY SECTOR
AIV.1 Tariff escalation and tariff ranges, 1998 and 2006 112
AIV.2 Tariff rates for Uruguay, by ISIC category, 1998 and 2006 115Uruguay WT/TPR/S/50
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GLOSSARY
Administration of Stevedoring Services Administración de los Servicios de Estiba , ANSE
Advisory Committee Comisión Asesora
Aeronautic Code Código Aeronáutico
Agreement on International Land Transport Convenio de Transporte Internacional  Terrestre
Agricultural Income Tax Impuesto a las rentas agropecuarias , IRA
Agricultural Protection Services Servicio de Protección Agrícola
Application Commission Comisión de Aplicación
Chamber of Deputies Cámara de Representantes
Commerce Code Código de Comercio
Committee on Animal Health of MERCOSUR Comité de Sanidad Animal del MERCOSUR
Common Market Group Grupo de Mercado Común , GMC
Control, Transit and Guarantees Office Oficina de Control, Tránsito y Garantías
Council of the Common Market Consejo del Mercado Común , CCM
Credit Fund for the Forestry Sector Fondo de Crédito Forestal
Denomination of Origin Denominación de Origen Reconocida , DOR
Directorate of Free Zones Dirección de Zonas Francas
Economic Complementarity Agreements Acuerdos de Complementación Económica
Economic Complementarity Agreements with
ArgentinaConvenio Argentino-Uruguayo de Cooperación
Económica , CAUCE
Economic Complementarity Agreements with
BrazilProtocolo de Expansión Comercial con Brasil,
PEC
Executive Power Poder Ejecutivo
Final Adjustment Regime Régimen de Adecuación
Financial Intermediation Law Ley de Intermediación Financiera
General Association of Authors of Uruguay Asociación General de Autores del Uruguay ,
AGADUWT/TPR/S/50 Trade Policies Review
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General Directorate of Agricultural Services Dirección General de Servicios Agrícolas
General Directory of Agricultural Services of the
MGADDirección General de Servicios Agrícolas del
Ministerio de Ganadería, Agricultura y Pesca
General Directorate of Foreign Trade Dirección General de Comercio Exterior , COEX
Horizontal Property Law Ley de Propiedad Horizontal
Import Procedure Procedimiento de ImportaciónInsurance and Re-insurance Superintendency Superintendencia de Seguros y Reaseguros
Inter-ministerial Committee on MERCOSUR Comisión Interministerial del MERCOSUR
Latin American Integration Association Asociación Latinoamericana de Integración ,
ALADI
Law declaring the regime aplicable to transport
and international trade insuranceLey declaratoria del régimen aplicable a los
seguros del transporte y comercio internacional
Law of Financial Intermediation Ley de Intermediación Financiera
Law on Accidents and Sickness related to Work Ley de Accidentes de Trabajo y Enfermedades
Profesionales
Law on Accounting Ley de Rendición de Cuentas 1985, Art. 91
Law Reforming the Social Security System Ley de Reforma de la Seguridad  Social
Material and Arms Service Servicio de Material y Armamento
MERCOSUR Council Consejo del MERCOSUR
MERCOSUR Customs Code Código Aduanero de MERCOSUR
MERCOSUR Trade Commission Comisión de Comercio  del MERCOSUR, CCM
MERCOSUR's Sanitary and Phytosanitary
AgreementAcuerdo Sanitario y Fitosanitario del
MERCOSUR , ACSAFIM
Ministry of Livestock, Agriculture and Fisheries Ministerio de Ganadería, Agricultura y Pesca,
MGAP
Ministry of National Defense Ministerio de Defensa Nacional
Ministry of Transport and Public Works) Ministerio de Transporte y Obras Públicas
Montevideo Protocol on Trade in Services within
the MERCOSURProtocolo de Montevideo sobre el Comercio de
Servicios en el MERCOSURUruguay WT/TPR/S/50
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National Administration for Fuel, Alcohol and
Portland CementAdministración Nacional de Combustibles,
Alcohol y Portland, ANCAP
National Administration of Factories and
Electrical TransmissionsAdministración Nacional de Usinas y
Transmisiones Eléctricas , UTE
National Customs Office Dirección Nacional de Aduanas
National Development Corporation Corporación Nacional  para el Desarrollo , CND
National Directorate of Civil Aviation and
InfrastructureDirección Nacional de Aviación Civil e
Infrastructura
National Directorate of Commerce and Consumer
Defense of the Ministry of Economy and FinanceDirección Nacional de Comercio y Defensa del
Consumidor del Ministerio de Economía y
Finanzas
National Directorate of Handcrafts, Small and
Medium EnterprisesDirección Nacional de Artesanias, Pequeña y
Mediana Empresa , DINAPYME
National Directorate of Industrial Property Dirección Nacional de la Propiedad Industrial
National Fisheries Institute Instituto Nacional de Pesca , INAPE
National Institute of Grape Growing Instituto Nacional de Vitivinicultura
National Meat Institute Instituto Nacional de la Carne, INAC
National Milk Producers Cooperative Cooperativa Nacional de Productores de Leche ,
CONAPROLE
National Ports Administration Administración Nacional de Puertos , ANP
National Seeds Institute Instituto Nacional de Semillas
National Telecommunications Administration Administración Nacional de
Telecomunicaciones , ANTEL
Office of Planing and Budget Oficina de Planeamiento y Presupuesto , OPP
Office to Control Transit and Guarantees Oficina de Control de Tránsito y Garantías
Phytosanitary Accreditation for Imports Acreditación Fitosanitaria de Importación ,
AFIDI
Plant National Protection System Sistema Nacional de Protección Vegetal
Policy Transport Comision Comisión de Política de TransporteWT/TPR/S/50 Trade Policies Review
Page xii
Regime of Final Adjustment to the Customs
UnionRégimen de Adecuación Final a la Unión
Aduanera
Regime of Phytosanitary Certification and
VerificationRégimen de Certificación y Verificación
Fitosanitaria , RVD
Simplified Import Declaration Declaración Simplificada de Importación , DSI
Single Customs Tax on Imports impuesto aduanero único a las importaciones ,
IMADUNI
Single Export Document Documento Único de Exportación , DUE
Single Import Document Documento Único de Importación , DUI
Specific Internal Tax Impuesto Específico Interno , IMESI
State Insurance Bank Banco de Seguros del Estado , BSE
State Railroad Administration Administración de Ferrocarriles del Estado ,
AFE
State Sanitary Services Obras Sanitarias del Estado , OSE
Superintendency of Financial Intermediary
InstitutionsSuperintendencia de Institutiones de
Intermediación Financiera, SIIF
Tax Laws which specifically affect insurance
companiesLeyes fiscales que afectan especificamente a las
Compañías de Seguros
Tax on transactions involving agricultural goods Impuesto a la enajenación de bienes
agropecuarios , IMEBA
Technological Laboratory of Uruguay Laboratorio Tecnológico del Uruguay , LATU
Unified Customs Charge Tasa Global Arancelaria, TGA
Uruguayan Institute of Technical Standards Instituto Uruguayo de Normas Técnicas , UNIT
Uruguayan National Fisheries Institute Instituto Nacional de Pesca, INAPEUruguay WT/TPR/S/50
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SUMMARY OBSERVATIONS
INTRODUCTION
1. Since the previous Trade Policy
Review in 1992, Uruguay has deepened its
trade policy reforms through multilateral,regional, and bilateral trade negotiations as
well as through autonomous measures.
Today, Uruguay's trade policy is determined
to a great extent by common policies decided
at the regional level in MERCOSUR, althoughautonomy remains in a few areas where
common policies have not been agreed.
Uruguay also maintains some special regimes,
which provide fiscal incentives and duty
exemptions, conferring some flexibility on thecountry's trade and related policies.
Uruguay's rapprochement to its MERCOSUR
partners has promoted significant
restructuring and modernization of the
economy, as well as increasing trade within
the region, especially with Brazil.
(1) T
HE ECONOMIC ENVIRONMENT
2. The Uruguayan economy has grown at
an average of 4.2% since 1992.  This has
translated into a substantial increase in per
capita GDP.  There has also been a
substantial reduction of inflation from anannual rate of 68.4% in 1992 to 15.2% in
1997.  This performance has been achieved
through the strengthening of public finances,
the progressive de-indexation of the economy,
monetary discipline and a reduction in the rateof currency depreciation.  These macro-
economic measures were supported by a series
of structural reforms, including trade
liberalization, changes in the social security
system and the reform of the state.  The aim isto attain single-digit inflation in 1998 and
GDP growth of some 3%.
3. International trade has become
increasingly important for Uruguay.  This has
been a result of the opening up of the economy
on a unilateral basis, in the context of
MERCOSUR and through the implementationof WTO commitments.  Trade facilitationinitiatives, such as the privatization of port
services and the simplification of both import
and export procedures, have resulted in cost
reductions and an increase in efficiency.
Since 1992, both imports and export have
increased, especially within MERCOSUR, butimports growing more rapidly than exports,
partly due to the policy of permitting a real
appreciation of the Uruguayan peso (Ur$) as
an anti-inflationary measure.  Despite
Uruguay's growing surplus in services trade,with increasing revenues from tourism and
international freight, this has resulted in a
rising current account deficit.
(2) T
RADE POLICY DEVELOPMENTS
4. As a result of the Uruguay Round
negotiations, Uruguay bound all tariff lines in
Chapter 1 to 97 of the Harmonized System,
mainly at ceiling rates of 55% for agricultural
goods and 35% for manufactured goods.
These bound rates are substantially in excess
of the unweighted average applied rate of
12.2% in 1998 (compared to 21.5% at the timeof the previous review).
5. MERCOSUR's Common External
Tariff (CET) came into effect for Uruguay on
1 January 1995.  Since then, Uruguay's
applied tariff structure has largely beendetermined by the programme of convergence
towards the CET.  The CET ranges from 0% –
20%, with an additional temporary
3 percentage points increase recently agreed
among MERCOSUR members.  This increasedoes not, however, apply across the board;
Uruguay thus was able to avoid increasing
rates on inputs and basic goods.  In a few
cases, (nine tariff lines) applied rates were
raised beyond bound rates; goods affectedinclude prunes, articles of plastic, and
hydraulic windscreens and accumulators for
aircraft.
6. A pattern of protection similar to that
under the import substitution strategy still
prevails, although it is less pronounced than in
the past.  On average, the tariff structureprovides for low nominal protection for inputs,WT/TPR/S/50 Trade Policies Review
Page xiv
providing higher effective protection for final
goods than is obvious from nominal rates.
Thus, escalation has become more pronounced
with the temporary increase mentioned.  Tariff
peaks and escalation are expected to be
maintained, albeit at lower levels, as Uruguayconverges toward the CET;  full adoption of
the CET will also lead to increased protection
for some items.
7. The effects of tariff escalation are
reinforced by fiscal incentives; including taxand duty exemptions for selective activities,
duty-free temporary admission and duty
drawback for goods used in export production,
and free trade zones.  Apart from increasing
the potential effective protection and anyconsequent effects on resource allocation and
productivity, such incentives have a negative
effect on the Government's fiscal position.
Moreover, reimbursement of indirect taxes
and drawback for exports are tied to national
content.
8. Reference prices were eliminated in
1994; but "minimum expor t prices" are still
applied on a few items, namely textiles and
clothing, and sugar.  In the past, these systems
were used as contingency trade measures.
However, hand-in-hand with a reduction in thecoverage of goods affected by "minimum
export prices", Uruguay has started to use
anti-dumping procedures;  as yet, no final
measures have been applied.
9. There is no explicit legislation to
regulate competition conditions in the
Uruguayan market, and no competition
authority;  however, a competition policy and
regulatory apparatus appears to be needed as
the process of liberalization continues and therole of the private sector increases.
Legislation on intellectual property is being
updated to achieve full consistency with the
WTO Agreements.  Uruguay has until the year
2000 to bring such legislation into conformity
with the TRIPS Agreement.(3) S
ECTORAL DEVELOPMENT
10. Since 1992, the contribution of the
manufacturing sector to GDP has declined, as
some industries have found it difficult to
compete in the wider market of MERCOSUR.
Primary goods, mainly beef, wool and dairyproducts, continue to be the major
merchandise exports.  However, tourism has
become the largest single component of
exports of goods and services, exceeding the
share of traditional exports of agro-industrialproducts.
11. Exports of agro-industrial products
have been liberalized; export restrictions on
live cattle, sheep and horses, as well as on raw
hides, have been abolished; minimum exportprices except for sugar, have been eliminated;
and today only exports of raw hides are
subject to taxes.  In addition to these policies,
Uruguayan agriculture has striven to enhance
productivity and improve quality in order to
create new market niches and gain access to
new markets:  the improvement in animalhealth conditions has opened new markets to
Uruguayan beef.  To promote diversification,
a production subsidy for forestry plantations is
granted;  this has increased production of
wood.
12. Uruguay's manufacturing production
and exports are largely based on the
processing of natural resources.  The
automotive and the clothing and textiles
industries are subject to special regimes.  Theexisting automotive regime, notified to the
WTO as a subsidy and a TRIM, will be
replaced by a common MERCOSUR
automotive regime when negotiations are
finalized.  Textiles and clothing are the onlyitems, other than sugar, still affected by
minimum export prices.  Besides diminishing
the transparency of the trade regime, this
policy has isolated the sector from competition
from abroad, and even export items seem to
have become less competitive in recent years.Uruguay WT/TPR/S/50
Page xv
13. Under public sector reforms, private
participation has increased in the services
sector, either as a substitute for, or in
competition with, state-owned firms, while the
State has adopted more of a regulatory role.
State intervention in telecommunications andbanking remains important: popular
opposition through a referendum has
prevented the privatization of the
telecommunications state monopoly, but
competition has been allowed in certain areassuch as cellular telephony.  The banking
sector is open to foreign investment, but one
state-owned bank retains a dominant position.
A lack of modernization has reduced the
competitiveness of the Uruguayan bankingsector, reflected in high interest rates and
wide spreads between borrowing and lending
rates.
14. Uruguay welcomes foreign
investment, which is especially strong in the
banking and tourism sectors.  A new
investment law puts domestic and nationalinvestment on the same footing, allowing equal
access to all sectors and to available
incentives.  Thus, there are no special benefits
for foreign investors.  This new law aims at
increasing national as well as foreigninvestment.  In addition, under a new
framework agreement, the MERCOSUR
countries have begun negotiations to liberalize
trade in services.  Sector-specific commitments
negotiated in the Uruguay Round and insubsequent sectoral negotiations cover
business services, communication services,
financial services, tourism and travel related
services, recreational, cultural and sporting
services and transport services.
(4) T
RADE POLICIES AND FOREIGN
TRADING PARTNERS
15. Since 1992, there has been a
significant shift in the direction of Uruguay's
trade towards the region.  This results mainly
from liberalization under MERCOSUR, butalso, to a degree, from the real appreciation of
the Uruguayan peso, which has led to a loss of
competitiveness, particularly in relation with
third markets.  The opening of the economy to
regional competition has already meant somedifficult adjustments, especially in the
import-competing manufacturing sector, and
this process will continue as integration is
deepened.
16. Increasingly Uruguay's economic
performance is being linked to that of Brazil
and Argentina.  Any slowdown in these twocountries is likely to have spillover effects in
Uruguay.  For this reason, Uruguay needs to
continue its efforts to diversify its trading
structure, in particular by eliminating
structural impediments to growth in existingsectors with export potential to new markets as
well as by developing new products and
services.