metadata: authors: 0: author: Low, Patrick
1: author: Yeats, Alexander
docna: 0: docna: Nontariff measures and developing countries
            : has the Uruguay Round leveled the playing field?
docty: Policy Research Working Paper
subtopic: Trade Policy,International Trade and Trade Rules,Rules of Origin,Food Security,Natural Disasters,Trade and Multilateral Issues
teratopic: International Economics and Trade
abstracts: cdata!: In the policy environment prevailing
            before implementation of the Uruguay Round results, exports
            from developing countries face significant nontariff
            measures in industrial countries. Based on 1992 trade flows,
            the import coverage ratio of nontariff measures on this
            trade was more than 18 percent, compared with less than 11
            percent for trade among industrial countries. Trade
            liberalization measures agreed to in the Uruguay Round will
            dramatically reduce the incidence of nontariff measures on
            developing country exports: the coverage ratio will drop to
            less than 4 percent on nonoil exports. This change has the
            dual effect of increasing export market opportunities for
            developing countries and of substantially reducing - if not
            eradicating - the relatively negative bias against
            developing country exports. These impressive results from
            the Uruguay Round are attributed to
            "tariffication" in agriculture, the abolition of
            the Multi-Fibre Arrangement (MFA), and the elimination of
            voluntary export restraints (VERs) under the safeguards
            agreement. But all these aspects of liberalization will not
            happen instantaneously when the Uruguay Round results come
            into force. Agricultural tariffication will occur
            immediately, but the MFA will be phased out over ten years
            and VERs will be eliminated over four years. Considering the
            extent of the liberalization presaged by these policy
            changes, the authors speculate about likely sources of
            pressure for measures to mitigate the effects of removing
            nontariff measures. They conclude that the greatest risks
            will probably come from safeguards and antidumping. The new
            safeguards agreement permits the use of quantitative
            restrictions to stem the flow of injurious imports, and
            although the agreement tightens existing GATT rules in some
            respects, it loosens them in others. The antidumping
            instrument has been used with increasing frequency by an
            increasing number of countries in the past two decades or
            more. The efforts of several governments in the Uruguay
            Round to impose additional controls on antidumping met with
            little success, and antidumping continues to offer
            considerable scope for imposing protectionist trade measures.
repnme: repnme: Nontariff measures and developing countries
            : has the Uruguay Round leveled the playing field?
display_title: Nontariff measures and developing
            countries : has the Uruguay Round leveled the playing field
listing_relative_url: /research/1994/08/698103/nontariff-measures-developing-countries-uruguay-round-leveled-playing-field
topicv3: Agriculture and Food Security m1326205 435,Trade m1326924 698,Trade Policy and Integration m1327407 775,Trade Policy m1327640 776,Quantitative Restrictions m1504269 2564
publishtoextweb_dt: 2010-07-01T00:00:00Z
historic_topic: International Economics and Trade
origu: Development Economics and Chief Economist
no_of_pages: 30
model_extractions: > POLICY RESEARCH WORKING PAPER 1353

# Summary findings

In the policy environment prevailing before implementation of the Uruguay Round results, exports from developing countries face significant nontariff measures in industrial countrics.

Based on 1992 trade flows, the import covcrage ratio of nontariff measures on this trade was more than 18 percent, compared with less than 11 percent for trade among industrial countries.

Trade liberalization measures agreed to in the Uruguay Round will dramatically reduce the incidence of nontariff measures on developing country exports: the coverage ratio will drop to less than 4 percent on nonoil exports.

This change has the dual effect of increasing export market opportunities for developing counrr.-es and of substantially reducing - if nor eradicating - the relatively negative bias against developing country exports.

These impressive results from the Uruguay Round are attributable to -tariffication" in agriculture, the abolition of the Multi-Fibre Arrangement (MFA), and the elimination of voluntary export restraints (VERs) under the safeguards agreement But all these aspects of liberalization will not happen instantaneously when the Uruguay Round results come into force. Agricultural tariffication will occur immediately, but the MFA will be phased out over ten years and VERs will be eliminated over four years.

Considering rhe cxtent of the liberalization presaged by these policy changes, Low and Yeats speculate about likely souxres of pressure for measures to mitigate the effects of removing nontariff measures. They conclude that the greatest risks will probably come from safeguards and antidumping.

The new safeguards agreement permirs the use of quantirative restrictions ro stem the flow of injurious imports, and alrhough rhe agreemenr tightens exisring GATT rules in some respects, it loosens them in others.

The antidumping instrument has been used with increasing frequency by an increasing number of countries in the past two decades or more. The efforts of several governments in the Uruguay Round to impose additional controls on antidumping met with little success, and antidumping continues to offer considerable scope for imposing protectionist trade measures.

This paper-a productof the International Trade Division, International Economics Department-is part of a larger effort in the department to analyze and predict structural changes in trade and to quantify factors affecting developing countries' exports. Copies of the paper are available free from the World Bank, 1818 H Street NW, Washington, DC 20433. Please contact Jean Jacobson, room _R2-055,_ extension 33710 (25 pages). August 1994.

_Te Poliy Researc Working Paper Seies disseminates the fmndhgs of wAork in progress to encourage she exchange of idas about developnent isse. An obectiveof tbe siesistogetthefindisoutquicly, evenif tbe presentationsare kss thanfuily polished Tec papers carry the names of the ausdors and sbould be used and cited accordigly. The findings, interpretations, and conclusions are the authors' own and should not be attribzed to the World Ban, its Executive Board of Dlractors, or any of its member countrie_ Produced by the Policy Research Dissemination Center
**Nontariff Measurs** and Developing Counties: **Has** the Uruguay **Round Leveled** the Playing **Ied?**

by Patrick Low **and Alexnle** Yeats

**Economists,** Trade Divisio **The** World Bank- **Wasington,** D.C. 20433
Nontawiff Measures and Developing _Cowaticis:_ Has the Uruguay Round Leveled the Pla3diag U,1eld?

# Patridck Low and Alexander Yeats

# I. LU1rodul

It is often argued that OECD protectionism has an important restrictive effect on the exports and growth prospects of developing countries (see World Bank 199, 1993). It has also been asserted that GATT's muldtiateral trade negotiation (MTfN) process has not sewved developing countries as well as it has indusftri nations. The fact that the Kennedy and Tokyo Rounds achieved considerably _lower_ than average reductions in tariff barriers on products of major export interet to developing countries is cited as supporting evidence for this point (see UNCTAD 1968, 1982).' Relaed empirical studies also show that fth structure and types of OECI) tariffs often discriminate agains developing countries. Specifically, developed countries' import duties generally increase or HcscalatU with the level of a product's fabrication awl this is thoght to be an important constraint to processing of domesticaily produced commodities in developing countries (see UNCrAD 1968, BaLass 1968, Helleiner and Welwood 1978, or Yeats **1987)2** 'The Commonwealth Secreariat (1982, p, 29) noted -At the outset the Tokyo Declaration anonoiced an intention to provide a better balance as between developed and developing couimtres in the sharing of the advantages resulting from the expanion of international trade .... The result did not lIve up to thee ambition and **expectations.** Whie average tarffs on industria product were reduced by about one-third on an import weighted basis, the reduction for developing country products was only about one-quarter on base (protecton) levels which were already significanty higher. The minimal progres made in liberalizing agricutural trade, and the frct that quantiative restrictons under VERs and 0MAs were not considered, reduced the significanc of the Round Stil fturther for deveoping countries.*-

**2Dr** trpM of tariffs applied are important. Specifically, Yeat (1976) found that developed counties often single out products in which developing countres have a comparative advantage and apply specific (i.e., fixedcharge-per-unit) duties to these items. Becaus unit values of shipment from developing countries _are generally_ lower than those for similar tariff line level goods produced in industrial countries (due to production cost **&r** quality diffrentials) specific tariffs were found to have nominal equivalent for the developing countries' products that were: roughly doubie those for industrial countrie.
2 Apart from tariffs, developing countries generaly regard OECD nontariff measures (NTMs) as baving an even more negative impact on their exports. The UNCrAD Secreta (1993, p. 41) shows that nontariff measures inposed by industrial countries cover a nuch higher share of imports from developing countries than they do in respect of intra-OECD trade (see Table 1 for World Bank estimates). Almost one fift of all non-fuel imports from developing countries are subject to NTMs in industrial country markets, while the corresponding share for trade among industrial countries is about one-tenth.

The purpose of this paper is to determine how far the Uruguay Round, when its results are fully implemented, will change the level, nature and incidence of OECD countries' NTMs on developing countries' exports. Preliminary information on what the Round accomplished suggests that a major change has occurred, yet little or no quantitative evidence has been produced thus far on the magnitude of the change. By utilizing a trade information system mainined by the World Bank and UNCTAD, this study atteLp5s to estimate how the Uruguay Round will alter the profile of NTM protection facing developing countries, both in total and for regional groups of exporters. After an overall assessment of the findings, the study goes on to anticipate how OECD countries may atempt to neutralize or "claw back" the trade liberalition implied by the loss of NTM protection.

# II. Nontariff Measures Facing Develooir Countries

Utilizing World Bank-UNCTAD records on OECD trade barriers, Table 1 shows the share of these countries' imports from: (i) all industrial counties, and (ii) all other countries that encounter NTMs. The data show that OECD nontariff measures affect a notably higher share of imports from 3Laird and Yeats (1990, Chapter 4) provide a detailed description of how this inventory of nontariff measures was construtd and what its limitaions are for research and polcy studies. In particular, tade coverage ratios are a rough approimation of the importance of NTMs, in dua they give no indication of the restrictiveness of the measures concerned. Low coverage ratios could be assocated with higbly rcstictive NTMs, and vi-versa. The Laird and Yeats book also provides extensive empircal information on the results of NTM mvetory studies for industi comntries. UNCTAD (1993, p. 37) tabulate the amnal share of developing counties' exports that encountered nonaiff measures over the last decade. The share of developing countries non-fuel exports covered by NTMs rose from 16.2 percent in 1981 to 18.3 percent in 1991.
3

# Table 1. 1992 Noutariff Measure (NTM) Coverage Ratios for OECD Imports from Developed and Developing Countries.

|____________________________|1992Impo|rts(Smillion)|NTM! Covc|rage Ratios|
|---|---|---|---|---|
|Product Group (SlTC)|Developing<br>Countries|Industrial<br>Countries|Developing<br>Countries|industrial<br>Countries|
|_ALL_NON-FUEL ITEMS (0 to 9- 3)|530,740|1,910,710|18.4|10.4|
|All Foods (0+1+22+4)<br>|77,083<br>|192,590<br>|18.3<br>|28.0<br>|
|Food_and_Live Anmbal (0)<br>|67,732<br>|154,280<br>|19.2<br>|29.8<br>|
|ailseeds and Nuts (22)|2.502|_5.856_|9.8|4.2|
|Aninmal-Vegetable<br>Oils (4)|2,829|_5,081_|7.8|8.3|
|Agricultural Materials (2-22-27-28)|20,076|_53.580_|_10.9_|_5.0_|
|Ores and Metals (27+28 +67+68)<br>|41,627<br>|117,073<br>|10.0<br>|13.7<br>|
|Ferrou Metals (67)|11,063<br>|_55.555_<br>|35.6<br>|38.3<br>|
|_Non-fmorros_<br>Metal (68)|15,116|37,859|0.0|0.0|
|Mineral Fuels (3)|164,420|86,205|16-5|21.5|
|Chemicals_(5)_|21,806|216,939|3.4|_5.9_|
|Other Manufactures (6_to_8-67-68)<br>|354,370<br>|1,290.212<br>|21.6<br>|912<br>|
|Leather (61)|3,741|5,013|_56.5_|29.6|
|Textile Yarn & Fabric (65)|18.375|_50,651_|52.1|9.0|
|Clothing (84)|75,293|47,615|64.3|7.0|
|Footwear (85)|15,844|12,163|34.0|16.8|
|ALL ITMS (0 to 9)|1695,160<br>_1_|_1,966,916_<br>|1<br>18.0|10.9|

Source: World Bank-UTNCTAD SMIART Dat-abas. Trade data from UN COMfTRADE Records.

Notes: (1). Trade and NTMd coverage ratios are for the following markets: Australi, Austria, Canada, EEC(12), Finland, Japan, New Zealand, Norway, Sweden, Switzerland and the United State.

(2).Tbe following tys of measures have been included in the computation of the NIl trade coverage index: surcharges, variable levies, quantitative restrictions (mncluding prohibitions, quotas, non-automatic licensing, 'voltuny' export restAnts and restaints under the MFA and similar xtie arrangements, and st monopolies), price control measures (inluding minimum, reference or basic import price systems, price survelce and voluntary export price restraints), additional custm formalities and er entry control measures, and local content requirements.
4 developing countries tha the do imports from oilier industrial countries. Approximately 18 percent of developing countries' non-oil exports encounter NTMs, while the corresponding share for OECD intratrade is about 10 percent. The statistics for several product groups reveal an even greater difference in developing-industrial country coverage ratios. Between 52 and 64 percent of developing countries' textiles and clothing exports face restrictions as compared to under 10 percent of OECD exports of these goodIS.4 Nontariff measure coverage ratios for developing countries' exports of leather and footwear are 17 to 27 points higher tha shipments of these products from industrial countries. Voluntary export restraints and special imprt authorization procedures largely account for these coverage differences. Table 1 shows that coverage ratios are not always higher for developing countries. In food items, for example, the coverage ratio for industria countries is 28 percent, compared to 1 8 percent for developing countries. This is largely explained by the fact that tropical products, like coffee, tea and cocoa, accounting for approximately 15 percent of developing countries' food exports, face relatively fe-w OECD nontariff measures. Most industrial country NTMs are applied to temperate zone food products (particularly grains and dairy products), which are mainly exported by other OECD countries.

Table 2 provides another perspective on nontariff protecton facing developing countries by showing trade coverage ratios for different types of restrictions and by the product gro-ups to which they are applied. Within foods and feeds, variable import levies are the most commonly applied restrictions, accounting for 52 percent of all NTM-covered trade in the group, followed by quantitative restrictions _'Estimates_ of the restrictiv **e** ffect of NTMs in these sectors show the barrers are indeed formidable. The USlTC (1989) estimaed that the ad valorem equivalents ofexisting US NTMs on 54 broad categories of textile and clothing products ranged between15 to over 100percent. Laird and Yeats (1990) found that estimates for nominal equivalents of NTMs on grains, sugar, dairy, vegetable oils, poultry, pork oilseeds and nuts imported into fth EU and Japan ranged from 50 to 300 percent and more. See also Saxon and Anderson (1982) and OECD (1987).
_In_ Table 2. Analysb of **the** Types and Relative Importance of OECD Nontariff **Measures** on lmports from Developing Counties.

|||||Trade Cove|rage Rados_<br>'<br>|||
|---|---|---|---|---|---|---|---|
|Product Group (SITC)|1992 Imports from<br>Developing<br>Countries (Sbill.)|All<br>Nontariff<br>Measures2|Variable<br>Levies and<br>Surcharges|Quantitative<br>Restrictions|Volunta<br> <br> <br>Export<br>RestraimLs|Price<br>Control<br> <br>Measures|Other Entry<br>Control<br>Measures|
|ALL NON-FIJEL ITEMS (0 to 9 - 3)|530,740|18.4|1.9|2.2|12.4|1.5|2.3|
|All Foods (0+1+22+4)<br>|77,083<br>|18.3<br>|9.6|5.4|2.1|3.1|2.4|
|PFtl and Live Animals (0)<br>|67,732<br>|19.2<br>|10.6<br>|5.2<br>|2.4<br>|3.3|2.6|
|Oilseeds and Nuts (22)<br> <br>|2,502<br>|9.8<br>|0.5<br>|9.3|0.0|0.0|0.0|
|AnImal-Vegetable<br>Oils (4)|2,829|7.8|5.6|1.4|0.0|0.0|0.8|
|agricultural Materials (2-22-27-28)|20,076|10.9|0.1|1.A|0.1|0.0|10.0|
|Ores and Metals (27+28+67+68)<br>|41,627<br>|10.0<br>|0.1|0.5|5.5|_6.5_|0.0|
|Perrous Metals (67)<br>|11,063<br>|35.6<br>|0.0|1.0|20.2|23.6|0.0|
|Non-ferrous Metals (68)|15,116|0.0|0.0|0.0|0.0|0.0|0.0|
|Mineral Fuels (3)|164,420|16.5|2.4|14.1|0.0|0.0|0.0|
|Chemicals (5)|21,806|3.4|1.1|2.2|0.1|0.0|0.0|
|Other Manufactures (6 to 8-67-68)<br>|354,370<br>|21.6<br>|0.4|1.7|18.3|0.5|2.1|
|Leather (61)<br>|3,741<br>|_56.5_<br>|0.8|0.3|0.2|0.0|55.2|
|Textile Yam & Fabric (65)<br>|18,375<br>|52.1<br>|1.7<br>|6.2<br>|49.0<br>|0.0|0.0|
|Clothing (84)<br>|75,293<br>|64.3<br>|0.8|3.4|59.3|0.0|3.3|
|Footwear (85)|15,844|34.0|1.2|1.0|29.9|0.0|3.3|
|ALL ITEMS (O to 9)|695,160|18.0|2.0|5.0|9.5|1.2|1.8|

Source: World Bank-UNCTAD SMART Database. Trade statistics from UN COMTRADB records.

INTM groups are defined as follows. Variable levies and surcharges include all variable import levies (including variable components), product specific surcharges. minimum, reference, or basic import price regulations, price surveillance and 'voluntary" export price restraints. Quantitative restrictions include prohibidons, quotas (global or country specific), .te monopolies and non-automatic licensing requirements. 'Voluntary export restraints include measures under the MFA and similar textile quotas as well as other VERs _(_ quantity) that were negotiated outside the textile and clothing sectors. Other entry control measures include a variety of restrictions like local content regulations, Mrhe coverage shares for the individual types of NT.Ms may sum to more than the 'all NTM coverage ratio due to 'stacking' or the multiple applicadon of NTMs on a specific product. Imports are for those OECD countries listed in the notes to Table 1.
6 (30 percent of covered trade), and other price control measures (like minimum import prices -17 percent of the total).<sup>5</sup> Outside agriculture, 'voluntary' export restraints (VERs) are among the most conmnonly applied restrictions facing developing countries due to their extensive application on textile and clothing products. Although the United States abolished quantitative restrictions on footwear in the mid-1980s, almost onethird of exports of footwear to the OECD are covered by NTMs, generally in the forn of VERs (see Greenaway, 1985 for an analysis of the operation of VERs applied by the UK against Taiwan, China, and the Republic of Korea). Several entries in Table 2 also warrant clarification. The OECDI coverage ratio of almost 17 percent for energy imports (SITC 3) from developing countries reflects Japan's global quotas on coal and tariff quotas on petroleum oils. In addition, the United States imposed product specific import charges on some petroleum products in 1987 which had the intention of equalizing domestic and international prices. Special entry regulations in Fte EU (including eco-labelling requirements) are applied to almost all leather imports including highly processed leather account for the 56 percent NTM coverage ratio for leather (see Varangis et. al. 1993 for an analysis of the effects of eco-labelling requirements on trade).

# M. Accomplishments of the Uruguv Round

The foregoing discussion establishes two main points. First, in the pre-Uruguay Round policy environment, developing countries face significant NTMs in industrial country markets across a key range of sectors. Second, the incidence of these measures is considerably greater against developing country exports than against industrial country exports. The present section exariines briefly how this situation Due to the multiple application or mtacidngf of several NTMs on single tariff lines, tnade coverage ratios for the dififrent types of restrictions may sum to a larger toal than that shown for all nontariff measures as a group. Ms an illustrafion US imports of cane sugar (tariff line 17011100) face three different nontariff mcasures: tariff quotas; flexible import fees (variable levies); and global quotaS.
7 has changed as a result of commitments under the Uruguay Round, which should lead to a sharp reduction in the use of NTMs as an instrument of trade policy. The most relevant parts of the Uruguay Round results in this context are the agreements on agriculture, textiles and clothing, and safeguards.

Augriculture After more an four decades during which the agricultural sector was excluded from mainstream GATT rules,6 the Uruguay Round achieved a major breakthrough. The agreement requires that participating govermnents do not "maintain, resort to, or revert to any measures of the kind which have been .... converted into ordinary customs duties."<sup>7</sup> The measures to be so converted include virtually all nonitariff measures. Specific mention is made of quantitative import restrictions, variable import levies, minimum import prices, discretionary import licensing, and nontariff measures maintained through state trading enterprises, and voluntary export restraints.

Nontariff measures are to be converted into ad valorem or specific tariffs as soon as the agreement enters into force. The resultant tariffs are to be "bound"' and reduced gradually over a period of six years.' The agreement includes a special safeguard measure, which allows an additional duty to be imposed on a product if its price falls or the volume of imports increases by a specified amount. Since the special safeguard is a price-based measure, its application would not raise the NTM coverage ratio.

- The conversion of NTMs under the "tariffication" exercise is based on the ;tual difference between internal and external prices during the years 1986-88. The relevant calculations have been

Tor a detailed discussion of how agriculture and textiles were excluded from GATT rules, and how safeguards disciplines became weaker over the years, see Low (1993).

7Article 4.2 of the Agreement on Agriculture.

'A tariff binding is the legally set maximum rate at which a tariff may be set. Actual tariffs can be below the bound rate, but cannot go above it unless the rate is renegotiated with trading partners.

MThe penod is extended to ten years for developing countries, and the least-developed countries are not required to make any reductions, although they are also prohibited from maintining nontariff measures.
8 undertaken at the four-digit or six-digit level of the Harmonized System. Tariff equivalents for most processed products were not calculated from- direct price comparisons, but in terms of the aggregate of comnponent parts multiplied by their proportion in the product. Both the base year for the tariffication exercise and the manner in which the calculations are undertaken could lead to increases in the level of protection in the short-term, but any such increases would be dissipated by the tariff reduction commitmnts.'<sup>0</sup> 1 In addition, tariffied products are subject to minimum or current access requirement," which are to be guaranteed where necessary through tariff rate quotas. Reduction comdmitets have also been undertaken in respect of domestic support measures and export subsidies. A narrowly defined exception has been made to the general elimination of nontariff measures. Countries may designate certain agricdulturl products for 'special treatmnent" if they meet specified criteria, thereby exempting them from the tariffication requirement. Despite the right to maintain NTMs on designated products, minimum access requirements will also apply?" In order to qualify for special treatment, imports of designated products must comprise less than 3 percent of corresponding domestic consumption in the base period (1986-88). Second, designated products should not have benefitted from any export subsidies since the beginning of the base period. Third, measures restricting domestic production should be applied to the relevant prmimary agricultural product. The stringency of these condfitions means that relatively few products will qualify. The most obvious one that will is rice from Japan.

1t1lndustria countries will reduce tariffs by 36 percen over six years and developing countries will do so by 24 peren over ten years. "Minimum access opportunities are to be provided when imports of a product sub~ject to tariffication are less than _5_ percet of domesti **c** onsumptioi **n** the base pediod (1986-88). The minimunam access opportunfity is equal to 3 percent of base period consumptioi **n** the _first year,_ rising to _5_ percet in six years. In the case where imports of tariffied products exceeded _5_ percent of consumptioi **n** the base period, countries must miaintain the acces opportunity that existed in fth base period. '<sup>2</sup> Tke miniTmum access requirement on designaed product' will bring their level of penetration from a minirmum of 4 percent up to 8 percent by the end of thec six-year ipmetinperiod. This requirement could lead to an increase in the NTM coverage ratio.
9

# Txie, and Cloth

Discriminatory quantitative restrictions have been prevalent in the textiles and clothing sector for over thirty yars, starting with the Short-Tern Arrangement Regarding International Trade in Textiles in 1961 (Low, 1993). This was followed in 1962 by the Long-Tenn Arvangement until 1974, when the first Multi-Fiber Arrangement (MFA) came into being. The current arrangunent, MFAIV, runs until December 31, 1994. These arrangements have covered a growing nurnber of products over the years, and have become increasingly restrictive.

From the beginning, quantitative restrictions under the MFA have been administered by exporting countries. Many developing countries considered the elimination of the MFA a priority in the Uruguay Round, bearing in mind that textiles and clothing is a key industry in the early stages of industrialization, and the fact that, with the exception of Japan, the quantitative restrictions only affect developing country exports to the industrial countries, and not trade among the industrial countries.

The Agreement on Textiles and Clothing in the Uruguay Round provides for the elimination of MAFA-type arrangements, or in other words, of all NTMs in the sector, over a ten-year period. The phase-out of NTMs is gradual, involving the progressive elimination of quantitative restraints by product category, combined with continuing quota expansion. Restrictions must be removed from products accounting for not less than 16 percent in volume tenns (1990) of the items covered by the MFA as soon as the agreement enters into force. There are then three additional phases that take effect at the beginning of the fourth and eighth years and end of the tenth year, in which an additional 17 percent, 18 percent and 49 percent respectively of 1990 import volumes must be fully integrated into the mainstream trading system.

The agreement also establishes a "transitional safeguard" mechanism that allows NTMs to be used in certain circumstances. These safeguards can be applied if increased import volumes cause or threaten serious damage to the domestic industry, and they can be maintained fbr a maxiimum of three years. The
10 safeguard is invoked on a country by country basis, but can only be applied on products which have not yet been integrated into mainstream GATT/WTO rules (i.e. products on which MFA-type quotas may still be applied). A second restriction on the use of the special safeguard is that it cannot be invoked on an eligible (non-integrated) product if that product is already subject to an MFA quota in the market concerned.

Before they are removed, quotas must be expanded by not less than the amount of quota growth during the twelve month period prior to entry into force of the agreement, plus 16 percent, 25 percent and 27 percent in each of the three periods of the phase-out. Quota expansion during the phase-out period could increase NTM coverage ratios in this sector.

Unlike agriculture, where the removal of most NTMs will occur immediately the agreement enters into force, the process in the textiles and clothing sector will be much more gradual. Indeed, 49 percent of all quota restrictions by volume existing in 1990 could still be in place until the last day of the ten year phase-out period. Use of the transitional safeguard could also raise the coverage of NTMs above the levels yielded by the three period phase-out schedule. Moreover, since the MFA and its phase-out program are built on a series of bilateral arrangements, and countries face quite different levels of restrictions, it is difficult to make any straightforward judgements about NTM coverage ratios in this sector, except to say that they will all be zero after ten years.

Over the years, the GAIT's safeguard provisions have been used less and less. This was partly because governments preferred to seek bila:eral accommodation when addressing import competition considered unacceptably damagmg to domestic industry. The GAlT's safeguard rules permit the use either of import duties or quanitatve restrictions, but require a nondiscriminatory application of measures and payment of compensation through additional trade liberalization.
Voluntary export restraints, and similar bilateral arrangements involving exporters in tflu administration of restrictions, became an increasingly commnon approach to rhe protection of domestic industries. For their part, exporters wished to avoid the inferior outcome of import restrictions, where they would exercise less control and stand a slimmTer chance of enjoying any of the rents deriving from the restrictions. Importers preferred a less transparent protective arrangement, and one where neither explicit compensation nor the constraint of the nondiscrimirnation rule would apply.

Another reason why safeguard measures became less _frequent may_ have been the growing popularity of antidumping and countervailing duty actions. While safeguard actions arc a tac-it admission of the inability of a domestic industry to compete, antidumping and countervailing duties are instruments whose justification is the counteraction of unfair behavior on the part of foreign producers or govmern.

The Uruguay Round Agreerinent on Safeguards seeks to provide more flexible arrangements, but under tighter rules. There is a relaxation of the nondiscrimination rule in exceptional circumstances, and no compensation or retaliation is foreseen during the first thre years that a measure is applied. On the other hand, safeguards can only be applied for a limited period (four years, renewable for a further four), and cannot be renewed during tie same amnount of time for which they were originally applied. In addition, safeguards must be progressively liberalized, and arc subject to surveillance and review.

The most signficant feature of the safeguards agreement in the present context, however, is the commitmnent to etlminate all voluntary export restraint (VERs). All VERs, with the exception of one,'1<sup>3</sup> are to be removed within a period of four years. T-his commitment implies a significant reduction in nontariff measures. However, it is imnpossible to say to what extent governments will take advantage of their rights under the safeguards agreement to apply quantitative restrictions rather tha price-based Lrhe exception of a single measure from the general phase-our commitment was designe to accommodate the wish of the EU to continue to restrict Japanese auto imports. According to the agreement, however, thec single exception permitted to each party rnms only until December 31, 1999.
12 measures when they take safeguard action. The fact that VERs are ruled out, combined with relaxation of the nondiscrimination, compensation, and retaliation rules, may encourage the use of safeguards in general, and quantitative restrictions in particular.

# IV. Global Trade Implications: The Round and NTMs

Given the global importance of NTMs (Table 1 indicates that $125 billion of OECD imports from developing countries face these measures), this section seeks to quantify the extent to which the Uruguay Round results will influence the level and structure of nontariff protection. Using published details on the agreement (GATT 1994), Table 3 provides an indication for all developing countries and regional eountry groups (i.e., developing countries in South Asia, Latin American and the Caribbean, Sub-Saharan Africa, etc.). The top quarter of the table shows the 1992 values of OECD imports from each region - - in total and for four product groups: all non-oil goods; ores, minerals and metals; chemicals; and all other manufaures. Directly below these import values, the pre-Uruguay Round NTM coverage ratios are shown for each product and regional group.

The lower half of the table shows estimated post-Uruguay Round NTM trade coverage indices under two alternative assumptions concerning trade values. The first assumption allows for no change - in the value of OECD imports from developing countries this clearly overestimates the importance of remaining NTMs since there will be an import response in the cases where NTMs are removed. In order to quantify the effects of the Round, NTM-ridden trade in agriculture, tectiles and clothing, along with VERs on all other products, is subtracted from the total trade (in all sectors) covered by NTMs and the remainder is then expressed as a ratio to the total value of OECD imports. The second estimate - see - the lower quarter of the table attempts to project the expansion of non-OECD trade that should
**w**

Table 3. **Estlnated** Impact of the Uruguay Round on Regional Groups of Low and Mfddle Income Countries' NTM Coverage Ratlos.

|Product Group (SITC)|East<br>Asia|Eastern<br>Europe|Latin<br>America|Middle East<br>and Nornh<br>Africa|Middle<br>Income<br>Europe|South<br>Asia|Sub-Saharan<br>Africa|All<br>LMIC<br>Countries|
|---|---|---|---|---|---|---|---|---|
||||199|2 Value of OECD|<br>Imports ($milli|on)|||
|ALL GOODS|197,262.4|67,123.3|118,140.1|38,364.7|36,008.8|32,772.1|28,905.3|519,576.6|
|All Non-Oil Goods|181,651.1|50,174.1|98,297.6|12,877.4|35,2f J.0|23,586.4|14,359.7|416,206.3|
|Ores and Metals|7,028.9|9,512.6|13,189.4|940.7|1,905.6|1,171.9|2,426.7|36,175.9|
|Chemicals|4,825.9|4,813.6|4,492.0|672.0|1,106.3|247.0|282.2|16,439.0|
|Other Manufactures|144,765.1|29,238.8|48,716.7|7,573.8|26,518.7|17,173.0|3831.3|277817.4|
||||<br>Ike-Urug|<br>uay Round NTM T|<br>rade Coverage|<br>Ratio(%)|,|,|
|ALL GOODS|18.5|25.6|11.7|9.1|31.1|36.7|16.2|18.0|
|All Non-Oil Goods|19.5|19.8|11.2|7.8|32.3|37.8|15.5|18.4|
|Ores and Metals|9.4|19.3|9.6|19.6|12.2|1.5|6.1|10.0|
|Chemicals|3.3|4.8|3.5|7.0|1.1|1.8|0.2|3.4|
|Other Manufactures|21.9|19.1|10.4|3.4|41.7|48.9|10.5|21.6|
|||Estimated P|ost-Uruguay Rou|nd NTM Trade Co|verage Ratio_(|!)- Constant|Trade Values||
|ALL GOODS|3.6|14.0|3.9|6.!|2.1|5.5|9.5|_5.5_|
|All Non-Oil Goods|3.5|4.1|1.6|3.6|0.7|_5.8_|_5.1_|3.8|
|Ores and Metals|9.4|19.3|9.6|19.6|12.2|1.5|6.1|10.0|
|Chemicals|3.3|4.8|3.5|7.0|1.1|1.8|0.2|3.4|
|Other Manufactures|3.9|2.7|_<br>2.7|2.2|0.8|7.2<br>||<br>4.5<br>||<br>4.5|
|||EFtimated P|ast-Uruguay Rou|nd NTM Trade Co|verage Ratios(|<br>%)- Increased|<br> <br>Trade Values||
|ALL GOODS|2.6|11.8|3.4|5.8|1.1|3.5|8.5|4.2|
|All Non-Oil Goods|2.5|1.8|1,2|3.4|0.3|3.6|4.3|2.8|
|Ores and Metals|_9A._|19.3|9.6|19.6|12.2|1.5|6.1|10.0|
|Chemicals|3.3|4.8|3.5|7.0|1.1|1.8|0.2|3.4|
|Odher Manufactures|2.8|2.1|2.3|2.1|054.0||4.0|3.0|

Note: The trade values and NTM coverage ratios shown in this table are for the OECD countries listed in the notes to Table 1.

Source: World Bank-UNCTAD SMART Database.
14 occur for each regional country group as a result of the removal of nontariff measures (see World Bank, 1992 for published details concerning these estinates). Total exports from developing countries are assumed to equal pre-Uruguay Round trade plus the expanded trade that should result from the NTM liberalization. The NTM coverage ratios are then recomputed using the procedures oudined in foomote 13, but with this new larger trade base.'<sup>4</sup> Figure 1 provides a graphical illustration of the projected magnitude of change in pre and post-Uruguay Round NTM coverage ratios for all non-oil exports of developing countries.

Both Table 3 and Figure 1 indicate that the Uruguay Round dramatically changed the share of developing countries' exports that faced OECD nontariff restrictions. Overall, the developing countries' NTM coverage ratios decline by approximately three-quarters, but for South Asia the ratio falls from 37 percent to about one-tent its pre-Uruguay Round level. The main reason for this 33 percentage point decline is the high share of textile and clothing products in South Asia's exports which are subject to MFA restrictions. A similar decline (from 31 to 1 percent) for middle income Europe is attributable both to textiles and clothing and temperate zone agricultural products.

Figure 1 indicates that Eastern Europe and Sub-Saharan Africa will be the regions least affected by the Uruguay Round achievements on nontariff measures. The Eastern European results are largely "The projections incorporate two distinct elements i.e., trade creation (TCi,) and trade diversion TIDi). The former represents the substitution of imports for domestic production as trade barriers are lowered. SMART estimates this term using,

# (2) TCii = [fru*e%*dwj - [(1 + t,*( - _(efi/e)],_

where M, is the value of iports of product i from couny j, e is the price eLasticity of import demand, tj is the tariff on the product, and e,, is the supply elasticity. The projections were run using an assumed infinitely elastic supply term. Trade diversion was estmated from,

# (3) TDjj = TCbi/[ii,

where the term in parentheses is the share of imports from non-prefece receiving countries in domestic consumption of the product.
n Table **4.** Estimated Impact of the Uruguay Round on **NTM** Coverage Ratios for Indlitdual Developing Countries.

||||||Nonta|riff Measure Trad|e Coverage R|atios (%)||
|---|---|---|---|---|---|---|---|---|---|
||1992|OECD Imports ($|million)||Pro-Uruguay Ro|und||Post-Uruguay R|ound|
|Develoin Ct|All|||||||||
|pg ounry<br>|<br>Goods|All Non-oil<br>Goods|OUter<br>Manufactures|All<br>Goods|All Non-oil<br>Goods|Other<br>Manufactures|All<br>Goods|All Non-oil<br>Goods|Other<br>Manufactures|
|Argentina<br>Banladesh|6,603.7<br>20599|6,238.1<br>|1,178.9<br>|21.5<br>|21.8<br>|19.2<br>|3.7<br>|3.3|11.4|
|g<br>Bil|,.<br>|2,056.4<br>|1,862.4<br>|58.3<br>|_58.6_<br>|74.1<br>|10.5|10.4|13.3|
|raz<br>Chile|24,361.3<br>70127|24,059.9<br>|10,297.5<br>|12.6<br>|11.1<br>|12.9<br>|3.7<br>|1.8|4.5|
|<br>Chi|,.<br>|7,008.1<br>|719.9<br>|7.7<br>|7.7<br>|2.3<br>|0.6<br>|0.5|1.2|
|na<br>Dominican Reublic|70,347.0<br>27109|67,255,3<br>21|59,169.0<br>|18.2<br>|19.1<br>|23.5<br>|3.3<br>|2.8|2.2|
|p<br>Et|,.<br>|,70.9<br>|_2,155.3_<br>|35.7<br>|35.7<br>|39.8<br>|0.2|0.2|0.1|
|gyp<br>Haiti|3,853.4<br>1452|1,447.3<br>1452|1,003.9<br>|23.2<br>|31.8<br>|_66.5_<br>|9.3<br>|0.6<br>|1.2|
|<br>Hon Kon|.<br>263676|.<br>263656|122.5<br>|13.2<br>|13.2<br>|15.3<br>|0.4<br>|0.4|0.0|
|g g<br>Idi|,.<br>|,.<br>|25,147.6<br>|34.3<br>|34.3<br>|35.3<br>|1.8|1.8|1.8|
|na<br>lamaica|13,532.3<br>12866|13,162.2<br>|10,551.1<br>|29.4<br>|30.6<br>|40.9<br>|_5.1_<br>|5.4|7.1|
|<br>Jordan|,.<br>1477|1,286.5<br>|779.B<br>|35.4<br>|35.4<br>|85.5<br>|2.3<br>|2.3|0.4|
|<br>Reublic of Korea|.<br>429812|147.7<br>423089|91.0<br>|2.3<br>|2.3<br>|0.6<br>|1.1<br>|1.1<br>|0.5|
|p<br>Malasia|,.<br>238621|,.<br>|39,357.9<br>|24.0<br>|24.1<br>|25.8<br>|10.9|10.8|12.3|
|y<br>Mexico|,.<br>433005|21,536.9<br>|16,021.3<br>|6.5<br>|7.5<br>|13.1<br>|0.7<br>|0.7|0.9|
|<br>Morocco|,.<br>47778|35,767.5<br>47003|29,149.9<br>|8.0<br>|5.5<br>|4.7<br>|4.7<br>|1.4<br>|1.3|
|<br>Pakistan|,.<br>39786|,.<br>39676|2,705.4<br>|30.2<br>|30.5<br>|46.4<br>|3.0<br>|2.8<br>|6.6|
|<br>Philiines|,.<br>94957|,.<br>|3,511.7<br>|_50.4_<br>|50.4<br>|59.6<br>|6.9|6.8|8.2|
|pp<br>Seneal|,.<br>3624|9,420.5<br>|6,546.4<br>|20.4<br>|20.7<br>|33.1<br>|1.2<br>|1.2|1.8|
|g<br>Sri Lanka|.<br>20665|356.8<br>|21.2<br>|25.2<br>|25.2<br>|9.0<br>|0.9<br>|0.9|7.2|
|<br>Taiwan China|,.<br>553347|2,058.8<br>|1,709.7<br>|50.5<br>|50.7<br>|67.8<br>|0.9<br>|0.8|0.5|
|,<br>Thailand|,.<br>225437|55,311.4<br>|50,621.6<br>|12.0<br>|12.0<br>|13.1<br>|3.1<br>|3.1|3.4|
|<br>Tunisia|,.<br>33767|22,451.6<br>30099|15,010.9<br>|25.3<br>|25.5<br>|21.4<br>|2.2<br>|2.2<br>|2.9|
|<br>Uruua|,.<br> <br>|,.<br>|2,586.2<br>|25.7<br>|28.3<br>|31.1<br>|4.6|2.0|3.0|
|gy|789.7<br>||789.7|294.3|48.3|48.3|53.8|8.9|8.9|12.2|

Note: The 1992 OECD Import a;-d trade coverage ratios are for those countries listed in Table 1. See Table I for an indication of the products included in the outer manufactures group.

Source: World Bank-UNCTAD SMART Database.
Figure 1: The Trade Coverage of OECD Nontariff Measures on Regional Groups of Developing Countries Non-Oil Exports Before and After the Uruguay Round <!-- Start of picture text --> 50 - 0<br>Share of exports Key: 2<br>10<br>-<br>covered by NTMs The width of each bar is proportional<br>to the share of regional group in U<br>total developing countires' exports<br>40 _ = U)<br>-<br>The whole bar indicates the pre-Uruguay . ,<br>Round NTM coverage ratio. The shaded<br>area indicates the estimated ratio after<br>the Round is implemented.<br>30<br>0<br>z<br>East Asia Eastern Europe 2<br>20 _ 20~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~0 m (~U<br>Latin America<br>10<br>0 L .<br><!-- End of picture text -->

# **Regional Developing Country Group**
17 accounted for by the relatively high share at' chemicals and energy products in total exports - these products face quotas and special product-specific charges. Eco-labelling requirements are largely responsible for the relatively high share (about 6 percent) of sub-Saharan Africa's non-oil exports that face post-Uruguay Round NTMs. The cost of compliance with these requirements may be relatively low. However, Varangis et. a]. (1993, p.20) suggest that their adoption could have potentially negative mimplications for African tropical trinter exports.

Table 4 provides a less aggregated view of the Uruguay Round's achievement by showing how the pre- and post-Uruguay Round NTM trade coverage ratios should change for selected developing countries. These projections are made under the constant trade value assumiption and, as a result, overstate the imnportance of nontariff measures that will remain after the Round."1 Even so, the imnpact on some countries is dramatic. The NTM coverage ratio for all Sri Lankan exports, for example, - declines from over 50 percent to under 1 percent an even greater reduction occurs within "other manuifactures' (see Table 1 for a list of products included in this group). A dec-line of 40 perentage points or more is. also projected for Bangladesh and Pakidstan. The declines for all of these countries are accounted for by the preponderance of textiles and clothing products in their total exports. V. Policy Substitution T'he impending elimination of the bulk of NTMs faced by developing countries in industria country markets is a remarkable achievement, notwithstanding the fact that the phase-out will take up to ten years and that agricultural tariffication might in some cases lead to short-tern increases in protection 15Analysis of our underlying trade and trade barrer information indicate that several two-digit SITC chemical products like mineral tars and crude compounds (SfTC _52),_ manufactured fertilizers (SITC _56),_ or plastic materias (SitC _58)_ will have trade coverage ratios ranging from _5_ to 10 percent due to the imposition of quotas and restrivctv licensing regulations. Tariff quotas will apply to over 10 percent of wood manufactures, wlbile nonautomatic licensing regulations will be applied to between _5_ and 12 percent of medicinal product imporbs (SLTC 54) and manufactred fertilizers (SITC _56)._ Tariff quotas and specia product specific charges (lie retaliatoy duties) wHil remain on a few products, but their coverage ratios will not exceed 2 percet Special entry regulations, like eco-labeung requirements, wll continue to be appled to a fay high of some crude material products classified in SITC 2 as well as true, wood and leather manufacur.
18 levels. The benefits of these changes for developing countries come not only in the form of prospective increases in export sales, but also greater predictability of market access. Another significant benefit may be greater price stability in international markets (Box 1). Perhaps it is the gradual pace at which the reforms will be introduced that makes them politically palatable in industrial countries. But considering that the NTM problem remained intractable for so long, it is not unreasonable to speculate about the likelihood of renewed demands from industrial country producers for new measures to insulate them from imnport competition. In what policy areas might such pressures emerge? The two most likely candidates are safeguards and antidluniping measures.

It was noted in Section U[ that the new safeguards agreemnent may result in more frequent use of these measures, and that the option of applying quantitative limiitations rather than tariffs may be preferred. In particular, a relaxation of' the compensation requiremnents, combined with the possibility of a discriminatory application of safeguards, could encourage their use. In addition, there appears to be some risk that measures closely resembling voluntary export restraints (VERs) may have been legitimized under certain conditions in thie new agreemnent. Article I11 of the agreement provides for the elimnination of VE-Rs and similar measures, but a footnote to the article states that an import quota "applied as a safeguard measure in conformity with the relevant provisions of GATT 1994 and this Agreement may, by mutual agreement, be administered by the exporting Member.' A country wishing to make use of this provision must carry out an investigation and make a determination of serious injury or threat thereof. These procedural requirements may temper the use of safeguards, but not elimninate the risk of VERs re-emerging under a quasi-official guise.
19

# Box 1: Nontariff Measures and Price Instabiblty

> ;Iitial andyses of the Uruguay Round's accomplishments relating to NTMs tend to focus on whe associated trade gains. 7Tis orientation understates the importance of what was achieved. Developing :.countaie, fior cxample, have long beet concerned with the effects of price and earings instability for their 7 major exports and ilis recognized-that industrial countries' nontariff nwasures are an important source of tbzs iiistabffty. For.: exle, qimtas and other quantitative restrictions (Ike VERs) make the import encrvetonpletely inelastic at the point where they become operative. As such, any shift in export supply .wilesul ina greater pe cange than that which would occur under normal (not perfectly :inelasic) demanddconditions. Similarly, European countries' variable import levies-which are widely ; applied to aicultr imports.-.are designed to shield domestic producers from instability in agricultural .:prices.:and ein,but in-doing so bave a destabilizing influence on international markets.

Variableklevies may have both an upward and downward destabilizing influence on the products to:which the are applied. -Whworld prices ris variable levies fail and may become negative (i.e., they become subsidies. on: imort) if the world price rises above the EC's threshold price. In this case, EC : 'import demand is higher than under a nominul. tariff. The -excess demand in an inflationary period conitributes to.a further mcrease in:world prices. In periods when world prices are falling, however, the .ariale ievies rise tereb stricnganyincrease in demand. Thus, through their _peNrSe effect_ on: import demand variable levies desbilize world prices. Although the EC and many- EFTA countries rely.Z. .hiavily on these easures iable-levies are also used by the United States and Japan.

Aside from levies, othrutypesofnontiff msu are also recognized to have a destabilizing impact on intenational tradc niid prices.: For example, -in an analysis of international commodity markets the OECD (1982) compiled thiebllowing maitrixi which showedbow inteh ntional price stability woud be

* ~ ~ ......... ~ .... .~~~~~~~~~~~~~ .Variac -. ; ~ -of PrceIntabilit Compared: tof InstbliyUndeir:~~ ~~ .. . . . ... ~ ~ F-ree trade .~~~~~~~~~~~ ance: -Price: : *.f nim;po:.tin Cn-t--MExportin. Import.n CuntrY J. Specif Tariff -- _Sa_ Samne r * Ad Valorem TariffSmle Fixed Quota Generally Larger Generally Larger Proportional Quota Gene. Larger : --- - :- -: -::ral Gen e r:l Lag.-e * Imptrq,-ort Prohibition Gnrly LagrGeneal Larger._--! P*e Fixing ,~~~~~~~~~~~~~~~~~~. .., . .. .. .. .... .. .. .. .. , ... **.** . .... Variable Levy ! "','.' La'e .malle S. a. ffeed by differt NTMs relative to what would: occur8 in a ae s nThimortan of t aboveclassification is highlighted by the:fact'that Laird and Yeats (1990,Qp .105) show that more than 70 percent~ of EC(l0) imports.of meat, cereals, dairy products, sugar and honey. live aimals, and beverages *iresubjectto.variable import levies or minimu imiport prices. Levies are also applied to over 80 percet of Japan's uigatrand honey imporis vwhile:fiied quotas'ar- applied extsively to Japan's meat, dairy fish :.aui ocrl:impQrts. Whilc attempts to yexactmagnitudqes would beusel,: is ev indic :*.:< that the Urnguay.Round's "tarifflcation' of NTMswill mnake an-imporzant contribution to die reduction of > jlobal price and trade instabilityfor gricultul:raprodu.cts.
20 The situation with respect to antidumping is potentially more troublesome still. Antidumping measures have boen the subject of growing attention in trade policy discussions, as their use has intensified over the last decade and more. Many analysts emphasize what they regard as a protectionist bent in the formulation and application of antidumping laws and regulations (see, for example, Boltuck and Litan 1991, Finger 1993, Messerlin 1989, and Tharakan 1991). The most basic problem with dumping is that it is defined merely as price discrimination between the domestic and export sales of a firm. This makes dumping a ubiquitous practice, as profit maximizg firms can be expected to chargc different prices in segmented markets.6 Instead of using antidumping as a mechanism to deal with welfare-reducing pricing strategies, as would be the case were the practice to be defined in terms of predatory pricing behavior, antidumping has become yet another instrument in the arsenal of possible measures for insulating domestic producers from import competition. As Finger and Murray (1993) show, the ease with which the claim of a positive dumping margin can be supported tends to make the injury test the only feature of the procedures that may lead to an unsuccessful antidumping petition. Several of the authors mentioned above have identified procedures and defnitions used in antidumping investigations that bias the findings in antidumping cases in favor of petitioners.' Attempts by some countries in the Uruguay Round to impose additional discipline on the use of antidumping measures met with limited success. While providing more detailed procedual guidelines and exerting additional controls in certain areas, the agreement does not provide guarantees against the use of antidumping measures that can severely curtail imports over an extended period of time. A general "The existence of tariffs against imports in the maket of the exporting firm will be sufficient to allow the firm to charge more on domestic ta export sales, and thus run the risk of facing an accusation of unfair tradig through dumping.

r'For example, some of the techniques leading to an upward bias in dumping margin calculations include: i) identifying a dunmped sale by comparing an average number for domestic sales vith individual observations on export sales; ii) excluding sales below cost in calculating a domestic price for comparison with eport prices; iii) resortng to ' best information available' without sufficient critical assessment of available data; and iv) constucing costs with arbitry assumptions about profits and adminisaive selling costs.
21 difficulty with rules on such manors as dumping is that no matter how detailed the rules become, there will nearly always remain scope for interpreting them in ways tat produce the desired trade restricting outcome. Restraint, therefore, will reside primarily in the behavior of the administering authorities, not in the constraints of the law. Any hope that precedents might be established to tilt decisions more in favor of respondents in antidumping cases seems remote in the face of dispute settlement provisions that prohibit panes from choosing between competing "pennissible" interpretations of the agreement.

Table **_5_** records the number of antidumping cases initiated by signatories to the GATT Antidumping Code fiom 1985-92. The Table shows the predominance of the EU, United States, Canada, and Australia as users of antidumping measures, although Mexico has been catching up in recent years. Few developing countries use antidumping mechanisms, but an increasing number are introducing or reviving dormant antidumping legislation."8 In contrast to the situation in respect of pre-Uruguay Round NTMs, it is the industral countries rather than developing countries that are affected by the bulk of the measures taken. However, if anidumping actions are used by industrial countries as a substitute for the NTMs phased out in the Uruguay Round, then developing countries will find themselves on the receiving end of an increasing proportion of a growing total number of antiduniping actions.

# VI. Conclusions

The Uruguay Round will bring about a dramatic reduction in the use of NTMs in the areas of trade where these measures have predominated in the past. The effect will be most noticeable in the agriculture and textiles and clothing sectors, but the phasing out of VERs will also have a significant "Countries not listed as users in Table 5 that have recenty introduced or re-actvated antidumping legislation include Argentina, Bolivia, Chile, China, Colombia, Egypt, Indonesia, Israel, Jamaica, Malaysia, Morocco, Peru, the Philippines, South Afica, Thailand, Trinidad and Tobago, and Venezuela.
22

# Table 5: Initation of Antidm ug Invetlgtions, 1985-fl

|Country_or_petitioner<br>_No. of cases_|Country or respondent|No. of case|
|---|---|---|
|European Union<br>242|European Union or Member|209|
||States||
|Japan<br>3<br> <br>|Japan<br>|_105_<br>|
|United Stares<br>300|United States<br>|100<br>|
|Korea<br>9|Republic of Korea|78|
||China|69|
||China. Taiwan|68|
|Brazil<br>13|Brazil|_54_|
||Yugoslavia (former)|31|
|Canada<br>129|Canada|25|
|Poland<br>24|Poland|24|
||Czech Republic & Slovakia|23|
||Romania|23|
||Hong_Kong_|22|
|Mexico<br>84|Mexico|22|
||Turkey|22|
||<br>Thailand|_19_|
||Singapore<br>|I8<br>|
||Argentina|17|
|India<br>_5_|India<br>|17<br>|
||USSR (fonner)|16|
|Sweden<br>11|Sweden<br>|_15_<br>|
||Venezuela|14|
||Hungary|12|
||Malaysia|12|
|Austria<br>4|Austria|11|
||Indonesia|9|
||Israel|B|
||Norway|6|
||South Africa|6|
||Colombia|5|
||Philippines|_5_|
||<br>Saudi Arabia|_5_|
||Bulgaria|4|
|Finland<br>13|Finland|4|
|New Zealand<br>29|New Zealand|4|
||Bangladesh<br>|3<br>|
||Egypt<br>|3<br>|
||Chile|3|
|Australia<br>282|Austalia|2|
||Kazakhstan|2|
||Russian Federation|2|
||Trinidad and Tobago<br>|2|
||Ukraine|2|
||_l Others_|47|
|TOTAL<br>1148|TOTAL|1141|

Source: GATT (1993) International Trade and the Trading System: Report by the Director General 1992-1993 (Geneva: GATI).
23 impact. Although NTMs in the agricultural sector will be almost entirely eliminated as soon as the rsults of the Uruguay Round enter into force, many textilea and clothing restrictions could take as long as ten years to eliminaze, and VERs will be phased out over a period of four years. The implications of the drastic reduction in NTMs foreseen in the Uruguay Round are more far-reaching for developing countries than industrial countries in terms of their export interests, because of the more extensive application of NTMs to developing country trade. In this sense, the Uruguay Round will contribute to a more olevel playing field." The success of the Uruguay Round in reducing the use of NTMs is likely to generate pressures for new measures. A major challenge, therefore, especially in the industrial countries, will be to resist demands for policy substitution. The greatest risk of this occurring comes in the areas of safeguards and antidumping measures. Certain modifications in the safeguards provisions make the remedy more user-friendly, especially in terms of relaxing the compensation requirements and pernitting a disciminatory application of safeguards under certain circumstances. On the other hand, the safeguards agreeent requires that proper investigations and deterninations are made prior to the adoption of safeguard measures. Moreover, the agreement ought to induce greater multilateral accountability. Another advantage of the new arrangements is that safeguard measures must be if limited duration. Trends in the use of antiduniping measures over the last decade or so, together with the failure of the Uruguay Round to impose stronger limitations upon the use of these measures, suggest significant potential for the antidumping instrumen **t** o become the cuting edge of discriminatory protection in the post-Uruguay Round trading system. How willing will governments be to resist such a trend?
24 Balassa, Bela (1968). 'The Structur of Protecion in Industrial Countries and its Effects on **t** he Exports of' Processed Goods from Developing Countries," in UNCTAD, The Kennedy Roust: Estimatd Effects on Tariff Barriers, _(TDI6IRev._ 1), (New York: United Nations).

Boltuck, Richard and Robert E. Litan (eds) (1991). Down in the **_Dumps:_** Amnsrton of the Unfair Trade Laws, (Washingon D.C.: The Brookings Institution).

Conumonweakh Secretariat (1982). Protectionism: Threat to International Order, (London: Commonwealth Secetariat).

Finger, **_3._** Mdicael (ed) (1993). Antddunping: How it Works and Who Gets Hurt, (-Ann Arbor: The University of Michigan Press).

Finger, J. Mfichael and Tracy Murray (1993). "Antidumping and Countervailing Duty Enforcement in the UniteDd States"- in Finger (edl), **Antidumping:** How it Works and Who Gets Emit.

GATT (1993). An Analysis of the Proposed Uruguay Roiund Agreement, with Particular Emphasis on Aspects of Interest to Developing Countries, (MTN.TNC/W/122)(MTN.GNGlW/30), (Geneva: GATT, 29 November).

GATT (1994). Final Act Embodlying the Results of the Uruguay Round of Mtlultilatera T)rade Negotiations, (Marrakesh: GATT, 30 March).

Greenaway, David (1985). "Non-Leather Footwear from Taiwan and Korea," in David Greenaway and Brian Hindley (eds.), What Britain Pays for Vohmntary Export Restraints, Thames Essay No. 43 (London: Trade Policy Research Centre) Helleiner, Gverry and Douglas Welwood (1978). Raw Material Processing in Developing Countries and Reductions in the Canadian Tariff, (Ottawa: Economic Council of Canada).

Laird, Sam and Alexander Yeats (1990). Quantitative Methods for Trade Barrier Analysis, (London: Macmillan Press).

Low, Patrickc (1993). Trading Free: Thbe GATT and U.S. Trade Policy, (New York. The Twentieth Centry Fund Nress).

Messerlin, Patrick (1989). "The EC Antidumping Regultions: A First Economic Appraisal _(1980-85),_ Weltwirschaftliches Archiv Band 1US, (Heft 3).

OECD (1987). Nationad Polices and Agricultural Trade: Study on the European Eotomic Community, (Pads: OECD).

Saxon, Eric and Kym AndersM (1982). "Japanese Agidculnal Protection in a Historical Perspective," Pacfic Economic Papers No. 92, (Canberra: Austraian National University, July).
25 Tharakan, P.K.M. (ed) (1991). Policy Implications of AntiduDping Measures, (Amsterdam: North Holland).

UNCrAD (1968). The Kennedy Round: Estimated Effects on Tariff Barriers, (New York: United Nations.

(1982). Assessment of the Results orthe Muitilateral Trade Negotiations, (New York: United Nations).

Trade and Development Report, 1993 (New York: United Nations).

Varangis, Panayotis, Carlos A. Prio Braga and Kenji Takeuchi (1993). *Tropical Timber Trade Policies: What Impact Will Eco-Labelling Have?," World Bank Policy Research **Working** Paper No. 1156, (Washington: World Bank. July).

World Bank (1992). Global Economic Prospects and the Developing Countries 1992, (Washington: World Bank, April).

World Bank (1993). Global Economic Prospects and the Developing Countries 1993, (Washington: World Bank, April).

USITC (1989). The Economic Effects of Significant U.S. Import Restaints, Phase **1:** Manufactuing," (Washington: USIC Publication Number 222).

Yeats, Alexander (1976), _"An_ Analysis of the Incidence of Specific Tariffs on Developing Countries' Exports," Western. Economic Journal (Economic Inquiry), (March).

Yeats, Alexander (1987). "The Escalaton of Trade Barriers," in J. Michael Finger and Andrzej Olechowski (eds.), The Uruguay Roun: A Hbadbook for the Mutilaterl Trade Negoiations, (Washington: World Bank).
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