WORLD TRADE
ORGANIZATIONWT/TPR/M/50
13 January 1999
(99-0064)
Trade Policy Review Body
23-25 November 1998
TRADE POLICY REVIEW
URUGUAY
Minutes of Meeting
Chairperson:  H.E. Mr. Ali Said Mchumo (Tanzania)
Page
I. INTRODUCTORY REMARKS BY THE CHAIRPERSON      3
II. OPENING STATEMENT BY THE REPRESENTATIVE OF URUGUAY      4
III. STATEMENT BY THE FIRST DISCUSSANT      7
IV. STATEMENT BY THE SECOND DISCUSSANT     9
V. STATEMENTS BY MEMBERS OF THE TRADE POLICY REVIEW BODY    11
VI. REPLIES BY THE REPRESENTATIVE OF URUGUAY AND
ADDITIONAL COMMENTS    16
VII. CONCLUDING REMARKS BY THE CHAIRPERSON    22
ANNEX I    25
ANNEX II    36WT/TPR/M/50
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I. INTRODUCTORY REMARKS BY THE CHAIRPERSON
1. The second Trade Policy Review of Uruguay was held on 23 and 25 November 1998.  The
Chairperson welcomed the delegation of Uruguay, le d by Ms. Grazziella Bonfiglio, Director-General of
Trade of the Ministry of Economy and Finances, as we ll as H.E. Mr. Carlos Pérez del Castillo, and the
discussants, H.E. Mr. Alejandro de la Peña (Mexico)  and Mr. Martin Harvey (New Zealand).  As usual,
both discussants spoke in their personal capacities and not as representatives of their countries.  Inaccordance with the established procedures, the discussants had made available, in advance, an outline of
the main issues they intended to raise.
2. The Chairperson recalled the purpose of the Trade Policy Reviews and the main elements of the
procedures for the meeting.  The report by the Government of Uruguay was contained in document
WT/TPR/G/50 and that of the WTO Secretariat in document WT/TPR/S/50;  the main issues to be raised
by the discussants were contained in document WT/TPR/D/28.  Copies of advance written questions,
submitted by eight delegations Hong Kong, China;  Australia;  New Zealand;  Colombia;  the UnitedStates;  Canada;  Japan;  and the European Union, had been transmitted to the delegation of Uruguay
(Annex I).  Written responses by Uruguay are reproduced in Annex II.  The Chairman noted that if full
replies to all questions could not be provided during the meeting, supplementary written replies would be
provided later.WT/TPR/M/50
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II. OPENING STATEMENT BY THE REPRESENTATIVE OF URUGUAY
3. The representative of Uruguay noted that, since the first Trade Policy Review of Uruguay,
in 1992, several factors at the regional and international level had had an important impact on Uruguay's
trade policy, namely the finalization of the Urug uay Round and the creation of MERCOSUR through the
implementation of the Treaty of Asuncion and the Protocol of Ouro Preto.  At the domestic level
Uruguay had continued the process of trade liberalization and economic reform.  The structural reforms tothe social security system, the tax system, the State and education system had been among the most
important.  The State had reduced its participation in the economy by eliminating monopolies,
privatizating, outsourcing certain activities and increasing investment possibilities for the private sector.
4. In a stable macroeconomic context that was favourable to investment based on responsible fiscal
policy, inflation had gradually been reduced from 60% in 1992 to 15% in 1997; while GDP had grown
steadily during the last five years at a cumulative rate of 3.5% per annum.  As a result of the economic
policies applied in recent years, Uruguay had been able to deal with the recent world economic crisiswithout major consequences.  Uruguay had continued and deepened its economic reform process, despite
the unfavourable market access conditions for Uruguay's major exports.
5. Major structural reforms were carried out in recent years in the areas of the social security
system, education, and the State and non-financial public companies.  The goal for state-owned
companies was to boost their productivity and efficiency, in order to meet the challenges of the integratedmarket.  The reform of the social security system played an important role in the macroeconomic
programme, since it avoided the under-financing of the present regime.  Its main objectives were to check
the upward trend in costs, ease the tax burden on labour, and improve the administration of the retirement
and pension system.  The educational reform extended  compulsory schooling to three-year-olds; shifted
the focus of primary education and boosted the coverage of food programmes.  Reforms of the curriculumalso extended to secondary education.
6. Changes to the tax system have mainly taken place in two spheres:  reduction of tax burden on
production factors and elimination of agricultural taxation based on estimated income levels.
7. Reduction of State involvement in the economy, included the removal of monopolies in the
production of alcohol, electricity, insurance, and on housing mortgages.
8. The consolidation of economic reforms had resulte d in significant surpluses in the balance of
payments.  Capital inflows had financed the deficit in the current account and permitted the Central
Bank's net international reserves to rise;  these now covered about seven months of imports.  Faster
growth in imports of goods and services than in expo rts had led to negative results in the current account.
9. International trade was particularly important for the country since Uruguay was a small
economy.  This had become evident in the steady a nd continued growth in foreign trade flows.  The
economic openness coefficient showed an increase from 65% in 1992 to 90% in 1997.  The high importgrowth supported higher levels of consumption and investment;  imports grew at a cumulative rate of
about 12% during 1992-97.  Greater efficiency in the allocation of resources, together with the rise in
investment had led to an increase in exports, which, when quantified in the same way as imports, showed
a cumulative annual growth of 10.3%.
10. Uruguay's foreign trade in goods had increased si gnificantly in recent years, showing a rise of
72% in current U.S. dollars.  Exports had increased by 60% since 1992 to US$2.725 million;  imports had
grown by 82% to US$3.716 million during the same period.  Trade had continued to rise during the firstWT/TPR/M/50
Page 5
trimester of 1998.  The trade balance had posted increasingly negative balances since 1991, as a
consequence of higher growth in imports.
11. In 1997, some 50% of Uruguay's foreign trade in goods corresponded to transactions with the
Latin American Integration Association (LAIA) in particularly with MERCOSU R, which accounted for
45%.  The European Union's importance as a destination for Uruguayan exports had declined from 24%
to 19% during the period.  However, imports from the European Union had grown by 103% since 1992.Exports to the United Stated had also declined; while purchases from the United States had increased by
113% in current U.S. dollars between 1992 and 1997.  Trade in goods with Asia, excluding the Middle
East and including China, amounted to some 10% of Uruguay's exports and a similar percentage of its
imports; while 10% of trade in goods is carried out with other countries.
12. Uruguay's main exports were agricultural, with a reduced number of products accounting for a
substantial share of its external sales.  The main exports in 1997 were beef, wool, rice, hides and leather,
dairy products, and fish.
13. Regarding trade policy the representative noted th at in order to improve the internal allocation of
resources and foster the country’s integration into the world economy, Uruguay had maintained a policy
of opening up its economy, removing barriers and restrictions and rationalizing and reducing import
duties, through unilateral, bilateral, regional and multilateral measures.
14. The main trade policy instrument affecting imports was the tariff. In the Uruguay Round, the
country bound all its tariff lines at 35%, with some exceptions.  During the Uruguay Round, Uruguay
concluded negotiations initiated under Article XXVIII  with some trade partners; substituting its old
schedule of concessions with Schedule XXXI.
15. In 1991 the members of MERCOSUR began a tariff reduction programme, which was completed
in 1994 with the removal of most intraregional tari ffs.  In parallel, the MERCOSUR members defined a
common external tariff, which Uruguay adopted in 1995.  All tariffs on trade among the MERCOSUR
countries were eliminated in 1995, except for a small list of products from each country on which they
were to be removed in 1998 for Argentina and Brazil and in 1999 for Uruguay and Paraguay.  Periods
were allowed, in some cases extended to the year 2006, to make certain products converge with the
Common External Tariff (CET).  The Agreement on Tariffs reached by the MERCOSUR countries in
Ouro Preto in 1994 required Uruguay to reduce its average tariff and the levels and dispersion of effective
protection on goods produced in the economy.  Urug uay, together with the other MERCOSUR members,
had developed a wide schedule of negotiations with other countries and regions.
16. At the same time, Uruguay had continued its process of economic reform and liberalization
unilaterally, streamlining export and import procedures through the use of a single import document and a
single export document.  Regarding unfair trade practices Uruguay had recently introduced an anti-
dumping regulation, which was fully compatible with WTO rules.  In addition, the Government waspreparing a regulation to implement safeguards.  Uruguay had enacted an investment law establishing the
principle of non-discrimination and transparency, common application of benefits and a uniform
methodology, which had contributed to improve the investment climate.
17. Since the last Review in 1992, the thrust of Uruguay's economic and trade policy had moved
steadily along the following general lines: economic stability, trade liberalization in goods and services,economic openness, and deepening of the process of integration through MERCOSUR.WT/TPR/M/50
Page 6
18. Uruguay had been a promoter of the Urugua y Round of Trade Negotiations, which began
in 1986, signalling the country's commitment to the multilateral system.  Uruguay considered that the
Second WTO Ministerial Conference, held in May 1998, produced positive results since the Ministerial
Declaration had reaffirmed the commitment to respect the timetable for reviews, negotiations and other
tasks already agreed upon, and had established that the work programme of the General Council would
include the negotiations already covered in the Marrak esh mandate, to ensure that they would begin at the
stated time.  The forthcoming negotiations on agriculture, were a priority for Uruguay.  The core
objective of this reform process should consist of subjecting agricultural trade to the same rules and
disciplines as those applied to trade in other goods.
19. Issues such as trade and the environment and the recent initiatives in electronic commerce were
both interesting and important for the multilateral system and should continue to be examined in greater
depth. Nevertheless, discussion of these issues and their future negotiation should not be allowed to delay
the start of the negotiations that had already been planned and agreed upon.
20. The representative noted that the temporary 3 percentage point increase of the CET, to be phased
out in the year 2000, in general respected Uruguay's WTO binding commitments.  Nevertheless, in 1998
some applied tariff rates, affecting goods whose tr ade was minimal, exceeded Uruguay's bindings;  this
would be rectified in 1999.  She also clarified certain points regarding tariff bindings, reimbursement of
indirect taxes, minimum "export" prices, and the agency in charge of consumer defence.WT/TPR/M/50
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III. STATEMENT BY THE FIRST DISCUSSANT
21. The first discussant (H.E. Mr. A. de la Peña) mentioned the thorough reforms that had taken place
in Uruguay since it was first examined in 1992.  He recognized that since 1992 Uruguay had intensified
the rate of economic reform leading to greater trade liberalization, introducing reforms in social security,
education, the State apparatus, and the non-financial state enterprises.  These reforms had been
indispensable in creating greater credibility and certainty for Uruguay's economic programme inparticular since they had been carried out under difficult circumstances due to internal and external
factors.  In this framework he was pleased to note Uruguay's favourable economic trends;  the country's
economy had grown on average by 4.2% since 1992.  More importantly these rates of growth had enabled
the per capita GDP to increase constantly;  in 1997 per capita GDP had increased five-fold in comparison
to previous years.  However, despite the growth in GDP over the past five years, the rate of
unemployment had increased from 8.3% in 1992 to over 11% in 1997.  This reflected an increase in the
work force as well as structural changes in the economy.  However, it was also due to distortions in thelabour market, in particular the very high cost of labour.  In this respect he asked whether social security
reform included any complementary mechanism to pr ovide assistance and benefits to the increased
number of unemployed, in particular in the manufacturing industries, which had been the hardest hit.
22. The Uruguayan authorities were to be congratulated for their success in fighting inflation, which
had been reduced from 68.4% in 1992 to 15.2% in 1997, and was to be reduced to a single digit in 1998.The reduction of inflation had been based on the gradual de-indexation of the economy, the strengthening
of public finances and the increase of the real exchange rate.  As pointed out in the Secretariat report, an
improvement in public finances was not immediately apparent as Uruguay's fiscal surplus of 0.5% of
GDP in 1992 had turned to a deficit of about 2% of GDP.  He enquired about the authorities most recent
assessment in this respect, and about the effects of financing  the social reform.
23. Uruguay had also managed to reduce the burden of the external debt on its economy to the
current level of around 30% of GDP.  However, since 1992 Uruguay had experienced a current account
deficit;  this was expected to reach 2% of GDP in 1998. Although the deficits seemed to be manageable
since capital inflow was expected through foreign direct investment, particularly in construction, tourism
and banks, it was risky to depend on foreign savings to support investment programmes and growth of theeconomy.  This risk was greater due to the drastic fluctuation of the world financial flows and the
insecurity and durability of capital flows;  particularly since Uruguay's main sources of foreign direct
investment were Argentina and Brazil.  He asked for the opinion of the Uruguayan authorities on the
effects of this situation for 1999 and the near future.  In particular he asked whether there were
reallocation priorities in terms of the economic policy in Uruguay due to the difficult world economic
situation.  More specifically whether inflation would no longer be fought through the increase of the real
value of the Uruguayan peso, since this had led to a loss of international competitivity and therefore adeterioration of the current account.
24. He refered to the trade liberalization measures that had been implemented since 1992 on a
unilateral, multilateral and regional basis, which ha d contributed to improving the multilateral trading
system.  During the Uruguay Round, Uruguay had consolidated all its tariffs lines at 35%, with some
exceptions below this level and only a few above this level;  some agricultural products. Also theintroduction of single import and export documents had made trading much smoother.  All these factors
had continuously increased the openness coefficient of the Uruguayan economy.
25. The main factor that had affected the economic and trade policies of Uruguay had been
MERCOSUR.  Brazil had become Uruguay's major trading partner both for exports and imports;WT/TPR/M/50
Page 8
accounting for some 25% of total imports.  This change in the course of Uruguay's trade flows was
logical;  however it also implied a greater dependence on fewer markets.  Although a greater flow of trade
between Brazil and other MERCOSUR partners was a welcomed trend, Uruguay needed to diversify its
trade structure to include more countries.  Over the last past five years Uruguay had also shown a greater
dependence in a short list of products:  exports of agricultural products had risen from 58% in 1992
to 62% in 1996, which had led to a deterioration in exports of manufacturing goods from 40.8% to 36.3%over the same period.  It was also important to note that Uruguay needed to diversify its exports,
eliminating structural obstacles, and to develop new products in services.
26. Regarding measures that affected production and trade, Uruguay was updating its legislation in
the area of intellectual property in order to bring it into line with the WTO Agreements.  He asked how
far this process had been taken;  according to the report of the Government the Bill had been submitted to
parliament.  Uruguay had no legislation fostering competition in the domestic market;  there were no state
agencies in charge of regulating the conditions for competition or any authority to defend competition.As the Secretariat report pointed out, it would seem necessary to establish a competition policy and a
mechanism aimed at regulating competition, given the dynamic process of liberalization of the economy,
which had fostered greater participation of the private sector in practically each industry.  He sought
comments on this matter.
27. Regarding the smaller share of the State in the economy he noted the elimination of monopolies
such as in the production of alcoholic beverages, generation of electricity, mortgage credits for housing
and a good portion of the insurance market.  However, there was still a heavy State participation in certain
activities such as basic telecommunications;  although competition in some aspects was permitted, there
was still as State monopoly in communications.  In the banking sector one State bank in 1997 held 40%
of all banking sector assets.  This situation had led to a lack of competition and modernization in thesesectors, which had given rise to high services costs and a considerable reduction in Uruguay's importance
as a traditional financial hub in the region.  He asked whether there were any plans to reform this
situation.WT/TPR/M/50
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IV. STATEMENT BY THE SECOND DISCUSSANT
28. The second discussant (Mr. Martin Harvey) found three things particularly striking in reviewing
the documents prepared for this trade policy review.  First, the reform efforts made by Uruguay to
integrate its economy into the international economy.   This had involved policies to improve the
competitiveness of the Uruguayan economy in areas of comparative advantage.  Second, the impact of
tariff policy - in particular tariff concessions - coupled with taxation policy on the allocation of resourcesin the economy.  Third, the future impact of MERCOSUR on Uruguay's economy, both on trade policy
and on the autonomy of its economic decision making.  In this regard, he believed that the evolution of
Uruguay's trade policy depended crucially on whether Uruguay had made the right choice in choosing this
deeper form of regional integration.
29. The extent of Uruguay's progress in reforming its border protection was reflected in the lowering
of its overall tariff levels by an average 10 percentage points since 1991.  This had generally left
Uruguay's WTO bindings way above applied rates.  There was an impression of balance between theaverage levels applying in the agricultural and industrial sectors, although in nominal terms there was a
modest amount of tariff escalation and the peaks in tariffs in some sectors still needed to be dealt with.
There might also be some questions raised about the distribution of the tariff burden as MFN duty rates
converged to the MERCOSUR Common External Tariff, es pecially the expected drop in the proportion of
tariffs in the 5-10% range.
30. Effective protection was higher than indicated by the nominal tariff.  There appeared to be
significant assistance to the export sector through the tariff concession policy;  raw materials, parts, and
other inputs for exported goods entered duty free (and free of other government charges) as did capital
goods for industries deemed to be in the "nationa l interest".  He sought information regarding the
rationale for such concessions, which could occur even when there was local production, and whetherthere was a danger of misallocation of resources into export industries due to concession decisions rather
than their merits vis-à-vis  domestically oriented industries.
31. The impact of tariff escalation also seemed to be exacerbated by various tax exemptions.  The
two-tier value-added tax appeared to be widely applied and the lower rate, as in many countries, was
applied to essential products as well as to other goods.  The exemption list, however, was significant andincluded fuel, which would have a noticeably beneficial  impact on certain industries.  He was interested
in the criteria used in deciding these exemptions.
32. A more significant impact appeared to come from the more discretionary exemptions applied in
the forestry and tourism sectors.  VAT was reimbursed on goods used to make agricultural machinery or
agricultural goods, as well as on agricultural goods or inputs for which domestic goods were exempt.  He
questioned the rationale behind this system.  As an indirect taxation system generally allowed the
remission of VAT paid on inputs, and was often im plemented so that a uniform and non-distortionary
impact was felt throughout the economy, he asked what had driven Uruguay to use such exemptions as a
principal leg of trade policy;  and how the exemption system had evolved with the growth of
MERCOSUR.
33. In addition to the remaining higher duties in sectors such as sugar, textiles and clothing, there was
also the minimum export price system, which appeared to be a minimum entry price system except that it
was equipped with an investigation system for determining price distortions, injury and causality.  He
sought information on how the system worked in pr actice;  and whether Uruguay considered it wasWT/TPR/M/50
Page 10
closest to a system of entry prices or trade remedies .  If the former, he asked whether Uruguay's possible
move towards traditional anti-dumping actions was due to inadequacies in this system.
34. He refered to specific policies by sector noting that according to the Secretariat report, the
opening up of the Uruguayan economy, especially si nce the early 1990s, had reduced the misallocation of
resources resulting from earlier policies of import substitution.  The impact on Uruguay's agro-industrial
exports was striking.  Uruguay appeared to have succeeded in ensuring that its sectors with comparativeadvantage were allowed to find their true place in the industrial mix.  Uruguay also seemed to have
eliminated most restrictions on exports and export taxes - in all but one area.  This was despite the levels
of tariff escalation that Uruguay faced in its main  export markets.  He asked how Uruguay saw the
evolution of polices in these strong sectors of the economy.
35. He was interested to know whether the interaction of taxation and tariff concessions policy in the
agro-industrial sector was at least partly in response to other countries' trade policies;  and how Uruguay
factored the external impediments to its exports into its policy responses.  The considerable success thatUruguay had achieved in improving sanitary conditions for its livestock exports was a case in point;  he
asked whether there were others.
36. He noted Uruguay's dairy policies, and the price support mechanism, which fixed a higher price
for a quota of fresh pasteurised milk for domestic consumption.  While neither the Government nor any
government institution appeared to have any role in the supply of out-of-quota milk - which reflectedworld prices – he questioned the impact of the quota on export competitiveness.  Given that the
mechanism dated back to 1935 when there was scarcity of milk and given the greater openness of the
Uruguayan economy, he wondered if the requirements of the domestic fresh milk market could not simply
be met through individual contracts between producers and processors at a price which would ensure the
year-round delivery of sufficient milk to meet local needs, without resorting to domestic quotas.
37. He noted the role of the taxation policy in directing resources in the Uruguayan economy.  The
Secretariat report noted that tariff protection was supplemented by additional instruments such as duty or
tax exemptions to promote industrial development, applied on a horizontal basis.
38. He refered to the discretion excised by the Executive under the Industrial Promotion Law for
projects deemed to be of "national interest", and sought clarification on how much this discretion wasused, the criteria that might apply with respect to th e "national interest", and the degree of export focus in
the Law.
39. In addition, he was interested to know the impact on exports of the national-content provisions
governing the remission of indirect taxes, paid in the production of exports and to what extent this benefit
was actually used by exporters.
40. National-content requirements were used in the automotive sector, where entitlements to import
built-up vehicles at concessional rates could be earned through the national content incorporated in
exported vehicles or parts.  He asked whether this would change when the common MERCOSUR auto
regime was put in place.WT/TPR/M/50
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V. STATEMENTS BY MEMBERS OF THE TRADE POLICY REVIEW BODY
41. In general, Members congratulated Uruguay for its efforts at trade and economic liberalization.
The benefits of the macroeconomic and structural reform were already being seen in Uruguay's economic
performance.  Members hoped that Uruguay would play an important role in future negotiations:  it had
continually demonstrated its commitment to the multilateral system, as embodied in the GATT and the
WTO.
42. The representative of the United States said that while almost half of Uruguay's trade was with its
MERCOSUR partners, the United States was Uruguay's third largest trading partner.  Uruguay had
traditionally been a market-oriented economy.  Since 1990, it had accelerated economic liberalization. It
had established a strong basis for continued economic growth by reducing deficit spending, downsizing
the Government and implementing structural reforms, a nd controlling inflation.  Many formerly restricted
activities had been transferred to the private sector;  the Government had also ended its insurance and
mortgage monopolies.  State-owned enterprises were preparing for more open competition to follow the
deregulation of markets expected under MERCOSUR. Social security reform was also being
implemented, lowering the structural government deficit in the long-run.  These changes had helped to
diversify Uruguay's economy away from its traditional reliance on agriculture:  today, over 60% of GDP
in Uruguay was based on services.  Partly as a result of liberal economic policies, per capita GDP stood at
US$6,000, placing Uruguay in the ranks of middle-income countries.
43. Uruguay was to be commended for its emphasis on liberalization and expansion of international
trade at the regional level, such as in the FTAA, and at the multilateral level in the WTO.  The United
States looked forward to Uruguay's responses to the questions raised on various elements regarding its
participation in the WTO, including tariffs, customs procedures and intellectual property rights.
Particular concerns included instances where applied tariffs exceeded WTO bindings, charges associatedwith importation exceeded services rendered, and excise taxes might be inconsistent with national
treatment obligations.
44. The representative of Hong Kong, China encouraged Uruguay to continue reducing the role of the
public sector in the economy, and to make government procurement procedures more transparent; noting
that Uruguay gave preferences to national products.  She referred to the lack of legislation or aninstitution in charge of promoting competition in the domestic market, which she considered instrumental
to achieving economic efficiency.  She noted Uruguay's interest in agricultural negotiations.  Hong Kong,
China had submitted advance questions and looked forward to Uruguay's responses.
45. The representative of Australia noted that despite the modest trade between Australia and
Uruguay their bilateral relationship was very close and cooperative;  agriculture was very important to
both economies.  Since the last Trade Policy Review in 1992, Uruguay had clearly and impressively
pushed forward with its domestic process of trade and economic reform.  The benefits were already beingseen in Uruguay's economic performance.  Australia urged Uruguay to continue with and expand its
reform agenda.  Australia looked forward to receiving responses to the submitted written questions.
46. The representative of New Zealand commended Uruguay, and its MERCOSUR partners on their
progress in developing a customs union:  these could be a significant stepping stone towards greater trade
liberalization and domestic economic efficiency, when applied in a non-trade-diversionary manner.
47. He noted that in 1997 MERCOSUR's CET had incr eased by 3% for all products;  this was a
disappointing move away from MERCOSUR's stated policy of liberalizing all trade.  He encouragedWT/TPR/M/50
Page 12
MERCOSUR countries to remove the increase and return to the original aim of reducing all tariffs by the
year 2001.  New Zealand welcomed Uruguay's commitment to further liberalization especially with
regard to market access in the agricultural sector.
48. The introduction of increased competition in certain parts of the telecommunications sector, and
encouraged Uruguay to continue towards greater liberalization of all basic telecommunications services.
New Zealand also encouraged Uruguay to reduce or eliminate non-tariff barriers to trade such as thosecaused by quarantine regulations, by making them as simple and transparent as possible.  New Zealand
had submitted questions on specific aspects of Uruguay's trade regime, and looked forward to Uruguay's
response to them.
49. The representative of Colombia refered to a study by ECLA, mentioned in the Secretariat report,
which noted that there had been more trade creation than diversion as a result of the process of integration
in MERCOSUR;  and to the restructuring of the Ur uguayan economy that had taken place as a result of
the process.  In this connection Colombia asked about Uruguay's loss of competitiveness vis-à-vis  third
partners; and the concentration of trade within MERCOSUR.
50. In the context of fiscal incentives which he believed were not necessarily bad for an economy, he
asked the Uruguayan delegation to comment on the assertions made in the Secretariat Report regarding
fiscal incentives, allocation of resources and fiscal revenue.
51. He commended Uruguay's implementation of its Uruguay Round commitments;  trusting that
Uruguay would rectify those tariff rates that had exceeded its WTO bindings.  He enquired about the
volume of trade in these goods.
52. With regard to services, Colombia asked for the definition of personal services, and sought
Uruguay's comments on the assertion that Uruguay's importance as a financial hub in the region had
declined, on the efficiency of the financial sector, and on the spread in interest rates.
53. The representative of Canada stated that Cana da's commercial relationship with Uruguay was
modest but growing;  while Canada had recorded a marginal negative trade balance with Uruguay in
goods, this had been compensated by the services sector.  In 1996, Canada and Uruguay had signed a
memorandum of understanding in environmental cooperation. Canada had recently concluded a trade and
investment cooperation arrangement with MERCOS UR and hoped for further opportunities to discuss
trade policy developments bilaterally with members of MERCOSUR, to fully implement a framework
agreement.  Canada looked forward to the future co llaboration with Uruguay in multilateral trade fora as
the WTO and the Cairns group.
54. The representative of Japan refered to trade flows between Uruguay and Japan and to certain
macroeconomic aspects of Uruguay's macroeconomy.  Uruguay's trade and economic policy was heavily
affected by MERCOSUR's common policy;  the share of trade between Uruguay and other MERCOSUR
increased since the establishment of MERCOSUR.  Japan considered that regional trade agreementsshould not raise barriers to trade with third countries:  he raised points including the conformity of
regional trade agreements signed between MERCO SUR and neighbouring countries with Article XXIV
of the GATT (e.g. the phase-out period of 18 years for a free-trade area between Chile and
MERCOSUR);  and the introduction of the CET in 1995 and negotiations under Article XXIV:6 of the
GATT.  He also emphasized that regional trade agreements including those that include developedcountries should be in conformity with Article XXIV of the GATT.WT/TPR/M/50
Page 13
55. He enquired about the timetable to eliminate a trade-related investment measure in the
automotive industry, notified by Uruguay to the WTO.  Japan encouraged Uruguay to submit answers to
questions posed by the United States in the TRIMs Committee.
56. Uruguay had no legislation to promote competition in the domestic market and there were no
government agencies monitoring competitive conditions.  Japan wished to know whether Uruguay
intended to introduce competition legislation in the near future;  and was interested in the expected impactof MERCOSUR's Competition Protocol on the legislation and on the operation of competition law in
Uruguay.
57. Japan welcomed Uruguay's commitments in six services areas including communications and
financial services.  Japan still expected Uruguay to further liberalize its services regimes including those
sectors in which no commitments had been made.
58. Japan's written questions covered some othe r points such as import procedures, customs
valuation, export subsidies, and intellectual property rights.  He looked forward to hearing Uruguay'sreplies.
59. The representative of the European Union noted that the Uruguayan economy had grown
since 1992, while inflation had been reduced, due to fi scal and monetary discipline.  Since 1991 Uruguay
had played an important role within MERCOSUR and as a result the Uruguayan economy had
restructured and modernized.  While MERCOSUR was in the process of convergence to a customs union,and negotiations were ongoing it was already a political and economic reality;  the European Union had
completed a framework agreement with MERCOSUR.
60. He congratulated Uruguay for the adoption of several measures, inter alia,  the reduction in
average applied tariffs, the revision of intellectual property legislation; the liberalization of services
sector; the absence of restrictions to foreign direct investment; and the facilitation of trade.  In this regardUruguay could provide information on its trade facilitation efforts to the Council on Trade in Goods
which was presently working on this topic.
61. Several trade measures adopted by Uruguay gave rise to concern:  the complex schedule of
convergence towards the CET;  the temporary 3 percentage point increase of the CET;  tariff escalation;
the Minimum Export Price system; and the different incentives regimes, some of which were tied tonational-content requirements and hence enforced tariff escalation.
62. Uruguay faced several challenges in the future: the creation of a favourable social and political
environment to continue the process of modernization;  the continuation of the modernization of the State;
the increase in competitiveness; and sectoral restructuring and employment creation.
63. The representative of Hungary noted that as a result of Uruguay's trade liberalization efforts the
applied, unweighted nominal tariff rate had fallen and the share of trade in goods and non-factor services
in GDP had increased.  He commended Uruguay for its efforts to reduce the role of state tradingenterprises in the economy, particularly the elimination of the production, marketing and trade monopoly
on alcohol and alcoholic beverages.   However, while there had been many positive macroeconomic and
economic policy developments in Uruguay there were also some concerning trends in the economy:
despite substantial GDP growth, unemployment had in creased slightly, the exchange rate policy had
resulted in a appreciation of the currency of close to 40%, and there was a persistent gap betweendomestic savings and investment, while both remained relatively modest.  As a result, the merchandiseWT/TPR/M/50
Page 14
trade balance had deteriorated and the current account showed average deficits of over 1.5% of GDP
financed mostly by foreign borrowing.  He noted that the decreasing competitiveness vis-à-vis  third
countries had been effectively offset by regiona l preferences granted within MERCOSUR, which had
contributed to the increased regional orientation of  exports.  He pointed out that MERCOSUR accounted
for over 50% of Uruguay's exports, and that the un fortunate economic developments in the world seemed
to affect the region, in particular Uruguay's largest markets.  He was interested in learning what measures,if any, the Government was considering to counter th e possible spillover effects, especially any steps to
avoid further deterioration of the trade balance.
64. Emphasising that Hungary's trade relations with Uruguay were free of friction, he asked for
clarification on some specific points concerning trade policy.  He refered to the temporary 3 percentage
point increase in the CET which raised applied rates for nine tariff lines beyond bound rates, he welcomed
the announcement made in the opening remarks that from 1 January 1999 this measure would be brought
into conformity with Uruguay's WTO commitments .  Tariff escalation existed for most industrial
products and was reinforced by this tariff increase, as well as the fairly complex regime of duty and tax
concessions and exemptions.  He pointed out that, according to the Secretariat report, this pattern of
protection was maintained as Uruguay was conv erging towards the MERCOSUR CET.  He was
interested in hearing how this corresponded to Uruguay's position, expressed in various WTO bodies, that
tariff escalation was a priority target for reduction, and what steps the Government intended to take in thisrespect.
65. According to the Secretariat report, the drawback regime and the reimbursement of indirect taxes
were tied to national content:  in both scheme s the higher the local content, the higher the
reimbursements.  He asked whether these schemes were in conformity with Uruguay's commitments
under the TRIMs Agreement;  and whether Uruguay had notified these measures as TRIMs, and underArticle 27 of the SCM Agreement.  He enquired about the Government's plans with regard to the notified
automotive TRIM, which, in accordance with Article 5: 2 of the TRIMs Agreement, had to be eliminated
by 1 January 2000.
66. Regarding charges on imports he noted that the Banco de la República Oriental del Uruguay
(BROU) charged a commission for services related to import procedures, on an ad valorem  basis and not
on the cost of services rendered.  Referring to Article VIII:1(a) of the GATT, he asked for clarification as
to the legal basis for the ad valorem  BROU charge.  The same question arose with regard to the fees
charged by Technological Laboratory of Uruguay (LATU).
67. He sought clarification regarding the validity of the minimum "export" prices after
30 September 1998 and the legal basis for this trade defence instrument under the WTO.  Since 1995 all
customs duties, surcharges, service and other charges had been combined into a unified customs charge
(TGA):  he requested a description of the various elements included in the TGA.
68. The representative of Chile noted that as many other Latin American countries Uruguay after
several decades of following an import substitution industrialisation strategy had started a the process of
opening its economy, based on the trade liberalization and restructuring of the public sector.  Since 1992,
this process had been intensified, in particular through the elimination of quantitative restrictions and
other trade barriers.  The creation of MERCOSUR had increased regional trade, particularly with Brazil.Nevertheless, trade flows with other countries for instance Chile had also increased.  He hoped that trade
flows between Chile and Uruguay would continue to  grow.  He commended Uruguay on the liberalization
of the services sector, and on the new investment law which put domestic and foreign investors on the
same footing.WT/TPR/M/50
Page 15
69. The representative of Costa Rica commended Uruguay for not granting subsidies to agriculture
in 1995-97 and for keeping overall support to this sector below " de minimis " levels;  nevertheless
agricultural exports increased.  Uruguay was interested in progressive liberalization of the agricultural
sector and therefore these were important measures.  He noted that Uruguay intended to participate in
future negotiations to eliminate discriminatory measures against agricultural products.
70. He sought information and clarification on specific issues including discriminatory treatment to
Uruguayan exports in the international market;  and Uruguay's need to diversify its commercial structure
to reduce dependence on MERCOSUR and the possibility of trade diversionary effects.
71. The representative of Brazil commended Uruguay on its economic performance and noted the
close trade relationship between the two countries.   Brazil had become the major destination for
Uruguay's exports;  its share had grown from 17.5% in 1992 to 38% in 1996.  Brazil was also the main
source of Uruguay's imports;  nevertheless since 1992 its share had fallen from 23.6% to 22.4%.
Since 1992, the EU's share of imports to Uruguay had risen from 16.4% to 19.4%, and the United States
share had also grown from 9.3% to 12.2%.  Given these figures comments related to trade diversion and
MERCOSUR could not be substantiated.
72. The representative of Thailand on behalf of ASEAN commended Uruguay for its contribution to
the multilateral system and noted Uruguay's achievements in deepening economic reform and opening its
economy.  Uruguay's trade policy was determined  by MERCOSUR, which ASEAN considered positive:
regionalism was a stepping stone for freer trade.  He believed that the temporary increase of the CET was
not significant since Uruguay was not applying it across the board.  ASEAN was pleased to learn that
intellectual property legislation was being reviewed.  He noted the absence of a competition policy, which
was deemed important for integration into the world economy.  Thailand shared Uruguay's view of the
need to reform agriculture.
73. The representative of Argentina commended Uruguay on its economic and trade reforms, which
had led to modernization and stability of its economy,  and growth in its trade flows.  This continuing
process of liberalization had been undertaken in an international context that was not favourable in terms
of access to international markets for Uruguay's main export products.  Trade relations between Uruguay
and Argentina had become stronger through particip ation in MERCOSUR.  Uruguay played a key role in
the process of integration, in which the four members were working to attain a definitive consolidation of
the custom union.  He thanked the delegation of Uruguay for clarifying questions raised by other
Members regarding MERCOSUR.WT/TPR/M/50
Page 16
VI. REPLIES BY THE REPRESENTATIVE OF URUGUAY AND ADDITIONAL
COMMENTS
(i) Economic environment
74. The representative of Uruguay said that priorities of economic policy had not changed in view of
the economic crisis, but that the pace of growth could slow down, therefore there was a need to increase
competitiveness.  In this context, it was also ment ioned that efforts to consolidate MERCOSUR's customs
union should be continued.  Fiscal discipline had been a basic element of Uruguay's economic policy so
that the overall deficit had been substantially reduced.  The recessive effects of the world economic crisis
would not have an impact on Uruguay because Uruguay was mainly a food exporter;  in this regard she
emphasized the importance of fiscal discipline.  Regarding unemployment she noted that there was
specific legislation in place to deal with the problem and that in the last trimester of 1997 unemployment
had been reduced.
75. In relation to export competitiveness, Uruguay granted incentives to the forestry tourism, and
manufacturing sectors, but the impact on fiscal revenue was very small.  The benefits derived from
granting these incentives, for instance on employment, were emphasized.  The current account deficit was
sustainable in the medium term and private savings had increased.
76. The stabilization programme undertaken by Uruguay was important because it had resulted in a
drop in the inflation rate to the one-digit level, while private investment and savings had increased.
77. On Uruguay's export structure it had been noted th at exports were concentrated in a few markets.
Before the 1970s Argentina and Brazil were not important markets, they became important only after
Uruguay signed bilateral trade agreements with these two countries.  Intraregional trade with
MERCOSUR had increased as a result of the integratio n process, as was to be expected, but there had
also been growth in trade with the rest of the world.
78. While Uruguay had neither competition legisl ation nor an implemen ting authority, MERCOSUR
had a Competition Protocol:  Uruguay had already enacted regulations on some aspects of its new
investment law and would submit them to the Secretariat.
79. Regarding regional arrangements, while the current exercise was a trade policy review of
Uruguay, not of MERCOSUR, the num ber of questions related to the topic made it necessary to give
several clarifications.  MERCOSUR, was created in  1991 as a common market with free movement of
goods, services and factors of production, to promote the insertion of its members in the international
economy.  She explained the process of phasing out customs duties intra-MERCOSUR including the
schedules to phase out the different exceptions;  exceptions were agreed among the Members to facilitate
convergence to the CET.  In 1997 the CET was increased by 3 percentage points until 2000;  in
January 2001 the tariff rates would return to those agreed in 1994.  The schedules of convergence to the
CET had been complied with.  She also refered to the Protocol of Montevideo regarding trade in services.MERCOSUR held meetings with other countries and had signed trade agreements with Chile and Bolivia.
MERCOSUR was being reviewed by the Development Committee of the WTO.
80. In response to the question concerning incentives to the forestry and tourism sectors, the
representative said that, despite Uruguay's comparative advantage in these sectors, the incentives were
necessary.  It was a world tradition to grant incentives to  the forestry sector because the maturity of theinvestment was so long; this subsidy had been notified to the WTO.  It would had been difficult to
develop the industry without the incentives.  Regarding incentives to the tourism industry, by law thisWT/TPR/M/50
Page 17
sector was defined as a "priority sector";  in additi on the maturity of the investment was long, especially
since the incentives were granted for infrastructure.
81. With reference to the local-content issue, Uruguay did not have a provision regarding local
content.  Uruguay was not penalizing foreign content;  the provision was aimed at promoting valued
added.
82. The representative of the European Union enquired about the functioning of preferential rules of
origin within MERCOSUR and the possibility of double taxation.
83. In response the representative of Uruguay said that MERCOSUR was in the process of
convergence towards a customs union in the year 2001;  once the convergence to the CET had been
concluded and rules of origin of other bilateral agreements (i.e. ALADI) agreed upon, common rules of
origin would be adopted.
(ii) Trade policies and measures
84. The representative of Uruguay said that the tariff was Uruguay's main trade policy instrument; the
average tariff had decreased.  The TGA had no international effect, its purpose was to determine the
internal allocation of duty collection.  In 1995 the CET was adopted and thus any changes in the tariff had
to be agreed among the MERCOSUR members;  the tari ff had 11 levels.  As a result of the temporary
increase of 3 percentage points in the CET,  a reduced number of tariff lines were slightly above their
bound rate; as of 1 January 1999, Uruguay would correct this.  The trade volume of these goods wasinsignificant.
85. The BROU was a public entity and was involved in va rious trade-related activities as stipulated in
the law.  She noted that import administration proced ures had been streamlined.  Regarding the IMESI a
decree would be adopted shortly to provide equal treatment to domestically produced and imported
spirits.  There were no objections to the informa tion provided to the TPRD being given to the IDB.
86. On customs procedures and valuations she refered to the modernization of customs and
streamlining of customs procedures, through the a doption of the LUCIA system.  The only charges on
imports were for the processing of data.  Used in formatics, telecommunications equipment, and capital
goods were valued according to basic transaction value.  If there was no immediate sale the customs value
would be determined according to Decree 567/94.  In the case of used cars, valuation was based ontransaction value, which should approximate the valu e published in international catalogues.  There were
no limitations on registration in the importers registry of the BROU.
87. The import prohibition of ham on the bone was for sanitary reasons, since the swine fever virus
(Peste Porcina Clásica ) could not be eliminated from the bone.  Uruguay would need to check the
sanitary conditions of the country in situ , if the results of the evaluation were favourable.  The need for an
import prohibition on this good originating from the Member in question could be re-examined.
Reference was made to the prohibition of exports of exotic species, which was also based on sanitarygrounds, as well as the prohibition of imports of marine products originating in countries where there was
cholera.
88. Uruguay did not envisage joining the Govern ment Procurement Agreement.  The use of
international standards was common practice in Uruguay.  She explained in detail the procedures
established for recognition of zoo-sanitary certificates and for the import of plant products.WT/TPR/M/50
Page 18
89. On market access, it had been stated that Uruguay's agricultural exports faced high levels of
protection and distortion in most markets.  These measur es included subsidies;  high tariffs that resulted
from the tariffication process in the Uruguay Round;  tariff peaks;  lack of transparency in the
administration of tariff quotas;  exaggerated requirements to obtain sanitary and phytosanitary certificates;
and export subsidies.  Thus, Uruguay was interested in the new round of negotiations on agriculture.
90. Export taxes applied only to wet blue leather;  the elimination of this measure depended on the
harmonization of measures within MERCOSUR.  Subsidies affecting the automotive sector had been
notified to the WTO;  with reference to other questions regarding subsidies, these subsidies were
compatible with the WTO.
91. With respect to intellectual property, a draft law on patents was currently being discussed in the
Senate.  A new law on trademarks had been recently enacted.  The law introduced dispositions regarding
distinctive signs and was fully consistent with the TRIPS Agreement.  Regarding the speculative registry
of trade marks, this type of conduct was extremely rare.  Uruguay had implemented specific legislation tocancel pirate trade marks;  this had put an end to this  pirate registry and the need for a special anti-piracy
unit.  Within the framework of the reform of the public sector, this unit had been eliminated once the
problem ceased to exist;  the service had been absorbed by the National Patent Directory.  On copyrights,
the Executive had submitted to the Parliament a draft law on copyrights which, inter alia , protected
software, and provided for penal and civil sanctions for the protection of copyrights.  The judicial andadministrative authorities were making important efforts to ensure that copyrights were respected and to
eliminate software, CD and video piracy.  Efforts were also being made with regard to training judges.
The Supreme Court of Justice had organized courses and seminars for judges on protection of intellectual
property rights.
92. Regarding the application of Article 70.9 of the TRIPS Agreement, Law 16.671 incorporated the
TRIPS Agreement into Uruguayan law;  the Executive was in charge of its regulation.  There had been
applications for patents covered by paragraph 70.8 of the TRIPS Agreement.  With respect to
paragraph 70.9, the authorities were at present analysing the content and the scope of exclusive trade
rights.
93. The first discussant, referring to the IMESI, s ought further information regarding the proposed
decree, which would afford similar treatment to spirits and other goods irrespective of origin.  Regarding
country-specific rules of origin within MERCOSUR he asked whether these would be phased out
gradually as there was convergence to the CET or if they would be eliminated at the end of the
convergence process.
94. The representative of Uruguay stated that the present rules of origin were country-specific
because of the exception lists and existing bilateral agreements;  technical groups were currently working
on this matter.
95. The second discussant, sought clarification on the valuation method for certain used goods
(e.g. information technology, telecommunication equipment and capital goods) which he understood was
normally based on the transaction value;  however is was also stated the if there was no immediate prior
sale then Decree 567/94 established a basis for customs valuation and wondered how those two
statements interacted.  He was also interested on sanitary and phytosanitary measures, specifically on thequestion of equivalence and its determination;  and the extend to which Uruguay took into account the
certification and acceptances that countries might already have achieved elsewhere.  With regard to the
reimbursement of taxes, it was clear that exceptions were made when there was minimal transformation,
therefore this was not an issue of local-content requirements.WT/TPR/M/50
Page 19
96. Regarding customs valuation the representative of Uruguay said that Decree 567 defined the
requirements for valuation.  On equivalence, this was used in Uruguay but since this was a technical
matter the delegation was unable to provide further details on this subject.
97. With respect to the IMESI, the representative emphasized that a new regulation was to be
approved but few details were available:  the IMESI was based on fiduciary prices ( precios fictos ) and
coefficients and these would be recalculated under the new regulation.  The most important aspect of thenew regulation was that it would give equal treatment to domestic and foreign goods.
98. The representative of the European Union requested clarification on the functioning of the regime
for goods in transit, through Urug uay, to other MERCOSUR members.
99. The representative of Uruguay noted that MERCOSUR was not yet a custom union, but that after
January 2001 there would be no possibility of double taxation.
100. The representative of Japan sought further clarification on export subsidies:  he asked whether
certain measures outlined in the Secretariat report were not considered subsidies contingent on export
performance;  and whether Uruguay believed that thos e measures were consistent with WTO Agreements.
On the increase of the tariff by 3 percentage points, Japan understood that this was a temporary measure,
but noted that, according to Article XXIV:4 of the GATT, the purpose of a customs union was not to set
barriers to the trade of other contracting parties.  Hence, this increase, even though temporary, should not
have been made.  On investment, Japanese industries investing in Uruguay had complained about thecomplicated labour law which could create barriers to Foreign Direct Investment;  improvement was
expected.
101. The representative of Uruguay responded that there was no discriminatory treatment between
foreigners and Uruguayans under Uruguay's labour legislation.  With regard to the increase in the tariff,
this was a transitional increase;  there was a fixed time-frame to phase it out.  The increase, which wasintroduced because of MERCOSUR, had no impact on Uruguay's bindings.
102. Referring to the questions regarding subsidies the representative said that Uruguay's measures
were consistent with WTO provisions.  Reference had been made to the temporary admission regime,
under which imports of raw materials that were subsequently processed into exports were exonerated
from import duties;  the system was controlled in Uruguay by various agencies.  The drawback systemwas seldom used because of the existence of the temporary regime.  Both regimes were perfectly
consistent with the multilateral rule contained in the illustrative list.
103. The representative of Hungary sought further clarification on the BROU and the LATU import
charges, which were based on the c.i.f. value of imports;  he understood that the drawback and
reimbursement of indirect taxes would not be reimbursed unless there was a minimum national content of
20%.
104. The representative of Uruguay said that the BROU's commission rate corresponded to the
services rendered;  the BROU provided support and statistical services to customs.  On the drawback and
reimbursement of indirect taxes, there was no requirement for national content, there was only a provision
to promote value added.  The two systems were not used frequently in Uruguay.  The temporary
admission regime was used more frequently, since it allowed for tax-free admission of the imported good;
the drawback system would entail a payment of taxes at importation and reimbursement at the time ofexportation.WT/TPR/M/50
Page 20
105. The representative to the United States noted that Decree 567/94 did not provide a basis for
alternative valuation, that it only set forth the criteria for rejecting transaction value for used goods, one of
which was the absence of an immediate prior sale of the item.  This was not an appropriate criteria for
rejecting transaction value under the Customs Valuation Agreement.  He asked whether it was anticipated
that once the transition period was over this decree would be amended or replaced.  He expressed concern
with respect to the BROU's commission, since those that were based on ad-valorem  value could be
suspicious;  he noted also that the services were rendered to the importer as opposed to the government
authorities.
106. The representative of Uruguay stated that once the transitions period was over, Uruguay would
bring its legislation into compliance with the Custom s Valuation Agreement.  With regard to the BROU
the delegation had already made the relevant comments earlier.
(iii) Sectoral Issues
107. The representative of Uruguay refered to the price mechanism for dairy products.  For many years
Uruguay had maintained a support system for the production of milk to guarantee a specific price to
small-scale milk producers;  since Uruguay was an exporter of milk the dairy sector was influenced by
external factors.  He stated that this measure of support had been notified to the WTO and was in full
compliance with the relevant provisions of the overall measures of support.
108. On the Industrial Promotion Law and "national interest" he provided details of the criteria used to
determine whether an industry was of "national interest".  The BROU was a development bank, which
supplied credit to the different sectors of the economy in a transparent manner.
109. With reference to the Minimum Export Price system, since 1995 the number of products subject
to minimum export prices had been reduced;  there was commitment to eliminate this instrument.  This
would be substituted by the application of mechanisms for commercial defence and safeguardsestablished by the Uruguay Round.  The functioning of the regime was explained in detail, including the
determination of minimum export prices for clothing using an input-output matrix.
110. Uruguay notified a measure applied in the automotive sector as a TRIMs.  This measure
promoted the import of automobiles through the reduction of the applied tariff when vehicles or parts
which complied with requirements specified in the regulation, were exported.  Within MERCOSUR themembers were negotiating a common regime for this sector.
111. Regarding the service sector, the contribution of the financial sector to GDP had not decreased,
neither had deposits from abroad.  On interest rates, levels varied according to the type of credit.
Uruguay underwent a financial crisis in 1965, at that time a law was enacted prohibiting the establishment
of financial institutions, except as a result of a merger of existing banks.  This prohibition was eliminated
in 1981 by a law which stipulated that the annual number of authorizations for new banks could not
exceed 10% of those already established the previous year.  The rationale was that a rapid expansion ofthe banking system could make the Central Bank's control more difficult.  In 1992, the elimination of this
measure was considered but was not implemented because of prudential reasons.
112. The insurance sector was open to foreign investors.  This market had shown dynamism after the
elimination of the monopoly;  there were no plans to eliminate the insurance monopoly related to
accidents at work or for procurement of public enterprises.  Insurance companies had to be constituted asan Uruguayan public company.WT/TPR/M/50
Page 21
113. There were no plans to privatize the telecommunications monopoly (ANTEL).  Nevertheless
value-added telecommunication services and cellular telephony were provided by private companies.  A
detailed list of private companies that provided th e various services was supplied.  Other companies were
applying for licences to provide data transmission services.
114. There were no restrictions for foreigners to provide or operate any port services;  however, the
company had to be established as an Uruguayan public company.  There were more than a 100 companiesproviding services at the Montevideo Port.  The Ports Law stipulated the requirements for a company to
operate at the ports;  there were no specific requirements for foreigners.  The National Administration of
Ports supervised ports.
115. A detailed definition of personal services was gi ven.  On professional services it was mentioned
that there were practically no restrictions for foreigners in this area.
116. The second discussant noted that Uruguay had not applied any anti-dumping measures.  He
enquired about the prognosis for the use of these trade remedies in the future, and requested the
Government's view on the use of these measures.
117. The representative of Uruguay said that since the enactment of anti-dumping legislation only two
requests for investigations had been made;  the investigations were still under way.  The Executive was
preparing a regulation in relation to the Safeguards Agreement.  In this regard there was already a
MERCOSUR common regulation, which had been adopted in 1996.  The future safeguard decree wouldbe published shortly;  one area still to be included was that of disciplines governing unfair practices in the
area of subsidies.  Uruguay believed that there were substantial differences between trade protection
instruments aimed at fighting measures such as anti-dumping or subsidies, on the one hand, and the
concession of safeguards, which was more closely related to allowing structural adjustments.
118. The representative of the European Union asked whether the minimum export prices had been
extended beyond 30 September 1998 and whether there was a common anti-dumping regime in
MERCOSUR.
119. The representative of Uruguay stated that, since 30 September 1998, temporary minimum export
prices had been established;  these could be extended for two additional months and covered mainly the
same items.  He noted that it was the intention of the authorities to replace this system with trade defencemeasures.  He added that in 1997 MERCOSUR ha d approved a normative framework for anti-dumping
and that the procedure was consistent with the WTO Agreement.  A technical working group in
MERCOSUR was preparing a normative framework for subsidies.WT/TPR/M/50
Page 22
VII. CONCLUDING REMARKS BY THE CHAIRPERSON
120. The second Trade Policy Review of Uruguay was conducted by the TPR Body on 23 and
25 November 1998.  These remarks, prepared on my own responsibility, are intended to summarize the
main points of the discussion;  they are not intended as a full report.  Further details of the discussion will
be fully reflected in the minutes.
121. The discussion developed under three main themes:  (i) economic environment;  (ii) trade policies
and measures;  and (iii) sectoral issues.
(i) Economic environment
122. Members congratulated Uruguay on the economic and structural reforms undertaken since 1992,
which have resulted in steady growth and a sharp decline in inflation.  The opening of the economy,
pursued both unilaterally and through regional and multilateral fora, had resulted in a better allocation of
resources and an increase in trade flows.  However, unemployment had increased and the current account
deficit had widened, with imports outpacing exports.  Some Members, in expressing concern about thedeficit, asked if the real appreciation of the peso had played a role, and enquired about the reliance on
external resources for financing the current account, especially in the context of today's financial crisis.
Members encouraged Uruguay to diversify both its e xport products and markets and asked about the role
of existing tax incentives in achieving this goal.
123. Members commended Uruguay for the reform of its public sector and for dismantling several
monopolies, but noted that state intervention remained important and that there was no competition
legislation.  Members welcomed Uruguay's new inve stment regulations which put domestic and foreign
investment on the same footing.
124. Members acknowledged MERCOSUR's importanc e in shaping Uruguay's trade and economic
policy.  Some concern was raised on the convergence to the Common External Tariff (CET);  thepossibility of trade diversion;  and the lack of a regional mechanism for managing the collection of import
duties.  Questions were also raised on the state of MERCOSUR's negotiations with the Andean
Community, and with the European Union.
125. In response, the representative of Uruguay stated that the effect of the current world financial
problems on Uruguay was likely to be modest.  Uruguay's ability to withstand external shocks resultedfrom its drive to improve competitiveness by reducing taxes and public charges, maintaining prudent
fiscal policies, and deepening integration within MERCOSUR.  Recently private savings and investment
had risen, while inflation had fallen sharply.  The current account deficit was sustainable, particularly
with the reduced foreign external debt to GDP ratio.  Unemployment had increased, but measures were in
place to address this and improvement was discernible.  Fiscal incentives were provided to the forestry,
tourism and manufacturing sectors, but any resulting reductions on direct tax revenues were largely offset
by increased revenues from expanded economic activity.
126. The representative gave details on libera lization within MERCOSUR.  MERCOSUR had
approved a number of common trade policy instrume nts, including safeguards and anti-dumping.  A
Common Customs Code and customs procedures were being prepared, and rules on consumer protection
and public procurement were under negotiation.  There were also negotiations on commitments to
liberalize trade in services.  Uruguay had no competition authority or statutes, but MERCOSURdiscussions in this area were ongoing.  On ince ntives under the new Investment Law, Uruguay had
introduced regulations that would be made available to the WTO Secretariat.WT/TPR/M/50
Page 23
127. Diversified trade flows, notably with Argentin a and Brazil, had reduced reliance on European
export markets.  Consistent with open regionalis m and complementary to multilateral liberalization,
Uruguay and its MERCOSUR partners had completed free trade agreements with Bolivia and Chile, and
were pursuing initiatives with the Andean Community, Canada, the Central American Common Market,
the European Union and under the FTAA.
(ii) Trade policies and measures
128. Members welcomed Uruguay's trade liberalization, including the lowering of applied tariffs
within MERCOSUR's framework.  However, the schedule of convergence to the CET was complex.
Several Members questioned the recent temporary increase in the CET by 3 percentage points, noting that
as a result tariff bindings have been exceeded in some instances.  Questions were also asked about the
provision of information to the Integrated Data Base (IDB);  import charges for services rendered;  and
the consistency of excise taxes with national treatment obligations.
129. Members congratulated Uruguay on streamlining customs procedures.  There were questions
about customs valuation procedures;  preferential rules of origin;  the use of international standards;  and
preferences for domestic products in government procurement and about Uruguay's possible accession to
the Government Procurement Agreement (GPA).
130. Uruguay was commended for eliminating export taxes in all but one area.  Several questions were
raised regarding export incentives and subsidies, and on existing barriers to Uruguay's exports.  Questionsarose about the status of pending legislation on intellectual property rights and on efforts to strengthen
their enforcement and train the judiciary in this area.
131. In reply, the representative noted that Uruguay had adopted MERCOSUR's Common External
Tariff (CET) on 1 January 1995, with rates between 0 and 20%.  The temporary increase of CET rates by
3 percentage points, would end on 31 December 2000.  Applied tariffs were within WTO bindings, exceptfor a few lines, which Uruguay intended to correct by 1 January 1999.  Uruguay agreed to the tariff
schedule being provided to the WTO's Integrated Data Base.  Other import charges were based on the
estimated cost of services rendered.  Uruguay was reviewing its regulations to ensure that excise duties
were applied in a non-discriminatory manner.
132. On customs valuation, the representative noted that transaction value was used whenever
possible.  Rules of origin were currently applied to MERCOSUR intraregional trade, but would be
eliminated when convergence to the CET was completed.  Uruguay did not now envisage joining the
Agreement on Government Procurement.  The use of international standards was common practice in
Uruguay.
133. The representative noted that Uruguay's agricultural exports faced a number of barriers, including
tariff peaks and non-tariff barriers;  access was also distorted by subsidies in a number of countries.
Export taxes in Uruguay were applied only on one product;  elimination depended on negotiations withinMERCOSUR.  On export subsidies, the concessions granted to the motor vehicles industry had been
notified to the WTO.  Uruguay applied a system of  temporary admission and import duty drawbacks in a
manner consistent with WTO obligations.  Uruguay had recently introduced new trademark legislation;
draft laws on copyrights and patents were in Pa rliament.  Uruguay was addressing the problem of
enforcement of intellectual property rights, particularly regarding trademark and copyright infringement.WT/TPR/M/50
Page 24
(iii) Sectoral issues
134. Members commended Uruguay on the performance of its agriculture sector, but posed questions
on the pricing mechanism for milk and its impact on exports.  Clarification was sought regarding the
criteria to grant incentives under the "national interest" provision of the Industrial Promotion Law.
Questions were also asked about the minimum "export" price system for textiles and clothing, and on the
automotive regime.  On services, Members welcomed Uruguay's liberalization and encouraged furtherprivate sector participation.  Questions were raised on specific service issues, including the contribution
of financial services to GDP and high spreads in inte rest rates;  promotion of competition, particularly in
basic telecommunications; commercial presence in port services;  and incentives granted to the tourism
sector.
135. The representative of Uruguay explained the pricing mechanism for milk, clarifying the
objectives and nature of the quota system and quality controls.  The national development bank (BROU)
granted credit in a transparent manner.  Details were provided on the criteria for "national interest" underthe Industrial Promotion Law, and on the operation of the system of minimum "export" prices.  Since
1995, this system had applied only to sugar and textiles and would in the future be replaced by the trade
defence and safeguard mechanisms established in the Uruguay Round.  Uruguay had notified one TRIM
in the automotive industry;  MERCOSUR partners were negotiating a common regime for the industry.
136. On financial services, the representative noted the sector's continued importance in terms of GDP,
the increased bank deposits by non-residents, and the availability to firms of credit at highly competitive
interest rates.  The provision that banks authorizations may not exceed 10% of the number of banks in the
preceding year was maintained for prudential reas ons.  The insurance sector was open to foreign
investment, but there were no plans to eliminate the state monopoly on insurance related to work
accidents and public procurement.  Neither were there plans to eliminate the state monopoly on basictelecommunications services (ANTEL), although private investment was possible in value added services.
There were no restrictions to private participation in port services, and locally established foreign firms
received national treatment.  Restrictions on foreign professionals were virtually non-existent.
Conclusions
137. In conclusion, it is my feeling that this Body welcomed Uruguay's wide-ranging structural reform
programme, including the significant steps taken in trade liberalization and the reform of the public
sector.  Delegations appreciated Uruguay's involvem ent in and commitment to the multilateral trading
system and were in no doubt that Uruguay would play, as in the past, an important and constructive role
in future negotiations.  Members encouraged Uruguay to continue to liberalize its economy thus
consolidating the basis for steady growth and diversification, including of export markets and products.  It
is also my sense that Members saw the importance for trade liberalization within MERCOSUR to
contribute to strengthening the multilateral trading system.WT/TPR/M/50
Page 25
ANNEX I
ADVANCE WRITTEN QUESTIONS
QUESTIONS BY AUSTRALIA
Australia welcomes the considerable progress that Uruguay has made in unilateral trade
liberalizations and economic reforms.  Unweighted average rates have fallen to 12.2% in 1998, despite
bound rates remaining at ceilings of 55% and 35% (for agricultural and manufactured goodsrespectively).  Uruguay is also in the final states of  implementing its commitment to eliminate most tariffs
with its MERCOSUR partners.  Beyond this, Australi a notes that Uruguay has indicated a continuing
commitment trade liberalization, and we would welcome details about any specific plans it has for further
liberalization on its trade both with respect to bound and applied tariffs, and non-tariff measures.
As a developing country which is reliant on export of agricultural goods, Uruguay's economic
reforms have made a substantial contribution to improving the competitiveness of producers and
processed food industries.  Has Uruguay been able to  gain sufficient access to international markets to
maximize the benefits of this improved competitiveness in world markets?  What implications do barriers
to Uruguay's exports and international market distortions have for Uruguay's approach to the next round
of WTO agriculture negotiations?
We understand that Uruguay has deferred on a number of occasions proposals to eliminate taxation
rebates on export items.  Could Uruguay explain the reasons for these deferrals and Uruguay's futureintentions regarding the rebate?
As a signatory to GATS, Uruguay had made solid progress on the liberalization of its services trade
in a range of areas.  Australia would welcome an indication of what plans Uruguay may have to
incorporate  professional services in its comprehensive liberalization privatization of the ports?
We note that Uruguay has a commitment to the privatization of Maritime Services.  We also note
that Uruguay will shortly be privatising one port.  Australia would welcome further information on what
plans, if any, the Government of Uruguay has for the further privatization of the ports?
With respect to the provision of port services:
(a) Is a foreign operator required to meet specific criteria, for example, in relation to licensing,
employment and investment?
(b) Do these requirements differ for national operators providing the same services ?
Could Uruguay comment on the relationship be tween its regional and multilateral trading
arrangements, with particular emphasis on MERCOSUR, the FTAA and possible EU-MERCOSUR
negotiations.  How will Uruguay ensure that regional and bilateral initiatives support the process of
multilateral trade liberalization, and strengthen the multilateral trading system?
Will the world financial crisis have an effect on the elimination of tariff protection on imports of
sensitive items which are now excluded from MERCOSUR's Common External Tariff but which wereoriginally scheduled to be eliminated by the end of 1999?WT/TPR/M/50
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QUESTIONS BY CANADA
Secretariat Report (WT/TPR/S/50)
Intellectual Property Protection
Chapter III, Section (4), sub-s ection (vi), para 157 notes Uruguay's issuance of a resolution,
pursuant to the ratification of the TRIPs Agreement, to be able to fulfil the obligation contained in
Article 70.8 of the agreement.  Footnote221, which accompanies this reference, pertains specifically to
Article 70.8 (a).  As Article 70.9 refers back to Article 70.8 (a), why is there no mention of Uruguay's
application of Article 70.9?
How has Uruguay applied Article 70.9?
Telecommunications
Chapter IV, Section (4), sub-section (c), para. 92 and 93, state that although basic telecom services
are operated by a state monopoly ( ANTEL), certain services may be provided by local and foreign
companies.  These services include mobile cellular telephony, internet, and other value-added services.
There is no independent regulatory body overseeing the practices of this industry and no registry is kept
of foreign companies operating in this sector.  May we know the number and origin of the foreign
companies providing these services?
QUESTIONS BY COLOMBIA
Please comment on the statement in the Secretariat report that "Uruguay's loss of competitiveness
vis-à-vis third partners has resulted in an increase  and concentration of trade with MERCOSUR partners"
(Chapter I, para. 27).
Please comment on the statement in the Secretariat report that fiscal incentives "are a major feature
of Uruguay's economic policy.  Apart from any possible effect on resource allocation and productivity,such incentives have a negative effect on the Government's fiscal position, thereby reducing national
savings, widening the savings investment gap and exacerbating the current account deficit" (Chapter I,
para. 14).
What is the trade volume of the nine products for which the applied rate exceeds the bound rate
(Table III.3).
The personal services subsector is the second biggest subsector within the services sector, after the
financial subsector.  What type of services does the personal services subsector comprise?
Please comment on the statement in the Secretariat report that "the decline in the financial
subsector's contribution to GDP may signal a decline in Uruguay's traditional role as a financial centre for
the region" (Chapter IV, para. 67).
Please comment on the statement in the Secretariat report that "both public and private banking are
inefficient" and that "these inefficiencies are reflected in high interest rates and wide spreads betweenborrowing and lending rates".WT/TPR/M/50
Page 27
QUESTIONS BY THE EUROPEAN UNION
The EU understands that convergence towards the CET will in certain cases imply the application
of tariff rates beyond the levels previously bound by Uruguay.  Could Uruguay specify when it has or will
notify new bindings for the products concerned and explain when and on the basis of which modalities it
intends to negotiate appropriate compensation for affected WTO Members?
Could Uruguay specify where the list of products subject to the additional "temporary" increase is
to be found and indicate when it is envisaged that this increase could be removed?
Is the adoption of competition rules, including the setting up of an independent agency, envisaged
in Uruguay?  Is such adoption foreseen by the MERCOSUR Competition Protocol"?
Could Uruguay envisage joining the Information Technology Agreement (ITA)?  If so, when?  If
not, what is the reason of such reluctance?
Could Uruguay envisage joining the Government Procurement Agreement (GPA)?  If so, when?
Will the "ad hoc group" in charge of designing a go vernment procurement regime for MERCOSUR try to
ensure the compatibility of this regime with the GPA?
Uruguay has not to date given any contribution to  the WTO Integrated Database (IDB) although the
first contribution was due in December 1997.  When will Uruguay fulfill its obligations in this respect?  It
should be noted that most – if not all – the tariff and import data which would be necessary for such a
contribution have already been provided to the WTO Secretariat for the purpose of this TPR.  CouldUruguay authorise the WTO Secretariat to use these data to format an IDB contribution?
Does Uruguay envisage modifying the commission charged by the BROU for services rendered
related to import procedures with a view to ensuring that the amounts paid are genuinely based on
services rendered rather than the c.i.f. value of imports?
What is Uruguay's experience in the operation of its transit regime in conformity with the Customs
convention on the International Transport of Goods?  Is the regime suffering from a high level of fraud?
If so, what are the measures implemented to fight such fraud?
The levels of customs duties actually applied by Uruguay are very difficult to assess because of the
complex schedule of convergence and numerous lists of exceptions described on pages 29 to 33 of the
report of the WTO Secretariat.  Could Uruguay s upply a matrix showing year after year from 1995 to
2006 the rates (CET, CET + 3% or national exception rates) applicable to each of the categories of
products corresponding to the various Annexes listed in Table III.1 on page 31 of the report?  Could
Uruguay also specify if the Uruguayan Applied Tariff and its seven annexes are available in electronic
format and, if so, where such computer files can be obtained?
It is unclear from the report how the circulati on of third country goods within the MERCOSUR is
organised once such goods have been customs cleared  in one of the member countries and how double
taxation is avoided.  Could Uruguay provide explanations in this respect?
Are the so-called "MERCOSUR (preferential) rule s of origin" applicable to all goods traded
between member countries including those already subject to the CET in all four countries?  Will suchWT/TPR/M/50
Page 28
rules be maintained after the adoption of the CET for all products has been completed in all four countries
or will it be replaced by a regime of free circulation?
The EU (Spain) would like to know why Urug uay does not authorize imports of bone-in ham.
We consider this prohibition unjustified scientifically, as producers-exporters comply with the
required curing periods to guarantee food safety.
QUESTIONS BY HONG KONG, CHINA
Secretariat Report (WT/TPR/S/50)
Registration, documentation, and rules of origin
It is reported that only commercial firms, industrial firms or individuals listed in the Registry of
Importers at BROU may legally import products from Uruguay.  We would like to know if there are any
limitations or conditions for registration (pp. 26-27, paras. 5-11).
Tariffs and additional duties
We note that the simple average tariff rate would increase from 10.4% in 2001 to 11.1% in 2006.
We are interested to know whether Uruguay has planned to bring down its tariff rate (p. 32, para. 28 and
Chart III.1).
We note that the "minimum export price" system has been put in place to offset "abnormally" low
world prices and it covers a number of tariff lines including textiles and clothing.  In the light of WTO
rules and in view of the many similarities, we woul d like to know why the system could not be replaced
by Uruguay's anti-dumping regime which has already been institutionalized.  We are also interested to
know if there is any plan to enhance the transparency  of the system, including the release of information
on the frequency of its use, the items affected and their origin, and how the authority devises the specific
factors for use in multiplying the export prices (pp. 36-37, paras. 40-46;  pp.82-83, paras. 54-58).
Competition rules
We note that Uruguay does not have a legislation to promote competition in its domestic market,
nor are there any government agencies whose responsibilities include the monitoring of competitive
conditions.  While Hong Kong, China believes that competition law is not essential to every economy, we
consider that effective implementation of competition policy is instrumental to achieving economic
efficiency.  We are therefore interested to know if Uruguay has any competition policy, and whether theUruguayan Government has any plan to promote competition in its market (p. 63, paras. 169-170).
Financial services
It is stated in Uruguay's schedule of specific commitments that commercial presence for banks is
subject to a quantitative limit that in any one year, the number of authorizations for new banks to operate
may not exceed 10% of the number in the immediately preceding year.  We would like to know the policy
objective behind this restriction.  Will the government consider relaxing this limitation?
We note that the State Insurance Bank (BSE) ho lds a monopoly in the provision of insurance for
state-owned enterprises, as well as for accidents and work-related sickness insurance.  We would like to
know whether there is any plan to remove this monopoly (p. 90, para. 85).WT/TPR/M/50
Page 29
Uruguay has scheduled in its specific commitments that only institutions established as
Uruguayan public limited companies can act as insurance companies providing motor-vehicle, marine
aviation and other transport insurance services and fr eight insurance.  However, the Secretariat report
seems to indicate that the relevant law may apply to other insurance services as well.  We should be
grateful if Uruguay could clarify the exact  coverage of the law (p. 91, para. 89).
Telecommunications
We note that basic telecommunication services are monopolized by the state-owned National
Telecommunications Administration (ANTEL).  In 1991, Parliament approved a package allowing the
Government to dismantle several public monopolies, including ANTEL.  However, the privatization of
ANTEL met with strong opposition.  A referendum was held in 1992 and the electorate rejected the
project.  We would like to know whether Uruguay ha s any plans to privatize ANTEL in the future (p. 92,
paras. 92-95).
Transport
It is stated that port services were privatized in 1992.  We would like to know the general criteria
for obtaining permits to supply port services and the extent to which foreign investors' participation is
allowed (p. 94, para. 101).
QUESTIONS BY JAPAN
Regional agreements
It is reported that full implementation of th e CET of MERCOSUR is to be achieved by 2006.  Is
this not conformity with paragraph 3. of the "Understa nding of the Interpretation of Article XXIV of the
GATT 1994", which provides the "reasonable length of time" referred to in paragraph 5(c) of
Article XXIV should exceed 10 years only in exceptional cases (para. 21, p. 21 of the Secretariat Report).
Regional trade agreements signed between MERCOSUR and neighbouring countries includes
some provisions which seem to be not conformity with Article CCIV of the GATT.  For example, free
trade agreement between MERCOSUR and Chile phase out the internal tariff within 18 years in spite of
paragraph 3 of the "Understanding of the Interpretation of Article XXIV of the GATT 1994".  The
negotiations for the establishment of the Free-Trade Area of the Americas (FTAA) are also reported in
paragraph 30, page 23 of the Secretariat Report.
Could Uruguay confirm that the FTAA is established conformity with the WTO Agreements
i.e. the duties and other restrictive regulations of commerce are eliminated on substantially all the trade
within ten years? (paras. 27-30, pp. 22-23 of the Secretariat Report).
Registration, documentation, and rules of origin
It is reported that the BROU charges a commission for the services rendered related to the import
procedures and that this is not based on the cost of the service but the rate varies according to the c.i.f.
value of imports.  Article VIII:1(a) of the GATT 1994 stipulates "[a]ll fees and charges of whatevercharacter imposed by contracting parties on or in connection with importation or exportation shall be
limited in amount to the approximate cost of services rendered".  Please explain Uruguay's view on theWT/TPR/M/50
Page 30
conformity of the above measure with this Article.  Does Uruguay have intention to revise this scheme to
meet the GATT provision? (para. 11, p. 27)
Tariffs
Uruguay agreed with its MERCOSUR part ners on a CET in December 1994, and, on
1 January 1995, the CET entered into effect on imports from non-member countries at rates up to 20%.
Although negotiation on Article XXIV:6 of the GATT has not been in place, in some products, appliedtariff level is above the bound tariff level of Uruguay (para. 19, p. 29).
(a) Has negotation on Article XXIV:6 been initiated with any third country?
(b) Please provide expected timetable for the negotiations on Article XXIV:6 of the GATT and
for the modification of the Schedule.
Uruguay and other MERCOSUR countries have raised the CET by 3% at the end of 1997.
Although this is a temporary measure to be eliminated next year, is not this measure against the spirit of
Article XXIV:4 of the GATT which provides that the purpose of a customs union or a free-trade areashould not be "to raise barriers to the trade of other contracting parties with such territories"? (para. 21,
p. 30)
Customs valuation
It is reported that specific regulations exist to determine the value of used capital goods,
informatics and telecommunications goods, vehicles, and motors, other components and parts ofautomotive vehicles.  Please explain how the value of these goods is determined (para. 56, p. 41).
Import prohibitions
Certain import prohibitions for phyto-and zoo-sanitary reasons are reported in para. 61, p. 42 of the
Secretariat Report.  Please explain on tariff line basis which products fall to "other products of the sea"
prohibited by Law No. 13.833 (29 December 1969)  and Decree No. 521/93 (para. 61, p. 42).
Export taxes, charges and levies
Please explain on tariff line basis which agricultural goods are subject to export taxes and/or fees
(para. 92, p. 47).
Export subsidies
The following measures seem to be export subsidies which are prohibited in Article 3.1(a) of the
Agreement on Subsidies and Countervailing Measures.  Please explain Uruguay's view on this point.
(a) Enterprises which export vehicles wholly or partly constructed in Uruguay, or motor parts of
national origin may benefit form a customs concession, applicable to the importation of motor vehicles
assembled in the place of origin destined for the domestic market (para. 101, p. 49).
(b) Industries whose output is exclusively destined for export are allowed to import inputs under
the temporary admission regime that allows importation without payment of tariffs (para. 103, p. 49).WT/TPR/M/50
Page 31
The following measures seem to be subsidies which are prohibited in article 3.1(b) of the SCM
Agreement.  Please explain Uruguay's view on this point.
(a) There is a special regime under which exports are exempt form the VAT, as well as a
mechanism that allows the exporter to recover the tax levied on its inputs, so that the cost
incidence of this tax on the product to be exported is neutralized (para. 105, p. 50).
(b) In order to neutralize the incidence of indirect taxes, these are reimbursed on exports, but the
regime only applies to exports for which the c.i.f. value of inputs exceeds 80% of the f.o.b.
value of the export itself (para. 106, p. 50).
(c) The Uruguayan drawback scheme allows the partial or total reimbursement of duties and
charges paid for imported goods used in adding value assembling or preparation of
merchandise to be exported.  This regime applies to all exports, except those whose inputs
have a c.i.f. value exceeding 80% of the f.o.b. value of the export itself (para. 107, p. 50).
TRIMs
Uruguay maintains a trade-related investment measure in the automotive industry which was
notified to the WTO in 1995 (para. 142, p. 58 of the Secretariat Report).
(1) Have there been any change in the measure since the notification in 1995?  If any, please
provide the detail of the change of the measure including when the change was made.  Please
also explain how the changed measure conforms to the TRIMs Agreement.
(2) Please explain the timetable and process to eliminate the above TRIM by 1 January 2000.
IPR
It is reported that the Trade Mark Act was modified in 1992 to establish a summary anti-piracy
proceeding.  Please explain further on the "summa ry anti-piracy proceeding" (para. 162, p. 62).
It is also reported that the application of the pr ocedure, and of the special elimination standards, by
a special anti-piracy unit within the Patent and Trade Mark Office appears to have been successful.
Please explain the competence and the activities of the "special anti-piracy unit".
Competition Policy
It is reported that Uruguay has no legislation to promote competition in the domestic market and
that there are no government agencies whose responsibilities include the monitoring of competitiveconditions (para. 169, p. 63).
(1) Does Uruguay intend to introduce legislation on competition in the near future?  If so, please
explain the timetable.
(2) What impacts of the MERCOSUR Competition Protocol does Uruguay expect on the
legislation and operation of competition law in the country?WT/TPR/M/50
Page 32
Tourism
It is reported that the tourism sector is eligible  for incentives, including tax and duty exemptions,
provided under the Industrial Promotion Law of 1974.  Please explain the requirements for services
providers to be able to benefit from these incentives (para. 111, p. 95).
QUESTIONS BY NEW ZEALAND
Secretariat Report (WT/TPR/S/50)Trade Policy Regime;  Framework and Objectives
Trade Policy
We note that Uruguay's convergence to MERCOSUR's CET tariffs may lead to increasing trade
diversion.  Do Uruguay and its MERCOSUR partners ha ve any measures in mind to combat this effect?
(Chapter II(1), p. 22, para. 25)
We note that as MERCOSUR's negotiations with the Andean Community to sign a free trade
agreement had not yet been concluded, previous  bilateral agreements by MERCOSUR members under
LAIA were extended until September 1998.  That date has now passed.  Could Uruguay offer an update
on MERCOSUR/Andean Community free trade agreement negotiations? (Chapter II(1), p. 23, para. 29)
Could Uruguay also provide details on the stage of negotiations between MERCOSUR and the EU
in the context of the three stages set out in the Report by the Secretariat? (Chapter II(1), p. 23, para. 29)
Foreign Direct Investment
We note that Uruguay has in place a system of investment incentive, for which enterprises must
apply through the Application Commission, which advises the Executive on whether to qualify the
enterprise for the incentives.  What measures does Uruguay have in place in this decision-making
procedure? (Chapter II(2), p. 24, para. 38)
Trade Policies and Practices by Measure
Measures Directly Affecting Imports
Registration, documentation and rules of origin
On what basis is prior authorisation for entry of products of the sea into Uruguay granted or
withheld? (Chapter III(2), p. 28, para. 12)
We welcome the proposed reforms to modernise and further simplify Uruguayan customs
procedures.  When does Uruguay hope to complete this process of reform? (Chapter III(2), p. 29,
para. 15)
Tariffs
We note that Uruguay adopted a temporary 3 pe rcentage points increase of the MERCOSUR CET
in December 1997 which is scheduled to be eliminated by 31 December 2000.  We also note that Uruguay
is applying exceptions to this increase.  Will Uruguay continue to apply those exceptions to the increaseWT/TPR/M/50
Page 33
in CET, and is there an intention to eliminate the tem porary increase earlier than that date if the economic
situation allows it? (Chapter III(2), p. 30, para. 21)
We note that at present there is no mechanism for managing the collection of the MERCOSUR
CET, which could entail double imposition of duties although this is not common in practice.  When does
MERCOSUR intend to implement a management  mechanism for the collection of the CET?
(Chapter III(2), p. 30, para. 22)
Measures Affecting Production and Trade
Pricing and marketing arrangements
We note that Uruguay still enforces a price support mechanism for milk producers through
controlled pricing and marketing arrangements.  Does Uruguay have any provisions in place for the
review of these arrangements? (Chapter III(4), p. 53, para. 123, Chapter IV(2), p. 68, para. 11)
Standards and other technical requirements
We note that Uruguay usually accepts international standards/specifications except when they are
not compatible with national technology and/or national risk factors.  Could Uruguay provide information
on when international standards have not been accepted? (Chapter III(4), p. 54, paras. 125-127)
Could Uruguay detail the procedures required for acceptance of a certificate issued by the sanitary
authorities in the country of origin stating that specific sanitary and phytosanitary requirements are met?
(Chapter III(4), p. 56, para. 137)
Trade Policies by Sector
Services
We note that basic telecommunications services are still a state monopoly in Uruguay, although
there is competition in some sectors.  Does Uruguay plan to introduce competition throughout the
telecommunications sector? (Chapter IV(4), p. 92, para. 92)
QUESTIONS BY THE UNITED STATES
Tariffs
As a result of the increase of three percentage points in applied tariffs in MERCOSUR in late 1997,
we understand that nine products now have tariff rates which are above their bound rates.  Could Uruguay
confirm whether these products still have tariffs above the bounds rates?  If so , when will Uruguay makethese tariffs consistent with its WTO commitments?
The Report indicates that 117 tariff lines comprising sugar, textiles and clothing are still under the
Minimum Export Price (MEP) system.  How does the MEP system work?  What other products are
included in this system?WT/TPR/M/50
Page 34
Customs Procedures/Valuation
Generally, when would the national Customs Office require an investigation to determine the value
of imported goods?  We note that there is an inspection charge assessed by the National Customs Office.
Is there a charge for verifying the documentation of goods which are not actually inspected?  What is the
amount, or rate, of the inspection charge for the actual inspection of merchandise imports?  Is this, like
the examination carried out by the Banco de la República oriental de Uruguay (BROU), based on the c.i.f.value of the goods or on the basis of the value of the service rendered?
The Banco de la República Oriental del Urugua y (BROU), a private bank, charges a commission
for services rendered to imports.  This charge is not based on the cost of the service, but rather on the c.i.f.
value of the import.  Could Uruguay explain how these private bank charges are administered?  Who are
the beneficiaries of this revenue and how is it reported?  It appears that these charges are only applied to
particular products such as wheat.  What criteria are used to determine products that face these charges?
What other products are subjected to this charge?  Although the BROU is a private bank, this charge doesnot appear to be in conformity with Article VIII of the GATT.  When does Uruguay plan to bring this
practice into conformity?
Labour Issues
We understand that there is an advisory Socio-Economic Consultative Forum that can make
recommendations on labour and other social issues to the Common Market Group (GMG), the executive
body of MERCOSUR.  As we understand the process, each country establishes its own recommendations
to the CMG.
We would be interested in learning of Uruguay's experiences with the Socio-Economic consultative
Forum and whether, in Uruguay's opinion, these experiences could be helpful as the WTO begins to
address similar issues.  For example, have concerns been raised through the Forum regarding the need to
coordinate labour policies or harmonize labour standards?  Has the Forum been used as a vehicle for
raising and/or addressing concerns over the labour implications of the FTAA of MERCOSUR's
negotiations with the Andean Community?
Intellectual Property Rights
What is the status of the pending legislation covering patents and copyrights?  Will the proposed
legislation be TRIPS-consistent for both patents and copyrights?  What are the prospects for passage
before the Congresses recesses for the year?  What strategies does the GOU have for passage of TRIPS-
consistent copyright legislation?
What is the status of Uruguay's efforts to end speculative registrations of trademarks?  Will the
provisions in the draft law on trademarks that allow for a transitory period of two years for
implementation of the low be consistent with Uruguay's TRIPS obligations?
We would appreciate receiving information about Uruguayan efforts to strengthen enforcement of
intellectual property rights, including to protect against software, video, and CD piracy.
What efforts is Uruguay taking to provide training for the judiciary in intellectual property law
litigation to ensure effective enforcement of the statutes?WT/TPR/M/50
Page 35
Taxation
The report notes under the Industrial Promotion Law of 1974, the Government can consider fiscal
incentives for industries considered of "national intere st".  The law allows for total or partial exemption of
all taxes, exemption of up to 60% of the employers' social security contributions, exemption of on income
generated bay the enterprise, and exemption of taxes and surcharges, customs duties, and port charges on
imported merchandise required for the initiation of a new activity or enlargement of an existing one.
How does the Executive determine which industries are of "national interest"?  Which industries
have received benefits from this provision and on what basis are exemptions conferred?
The report states that small and medium-size enterprises can obtain preferential lines of credit,
financed with grants, through the BROU.  In addition, other banks - the Banco Pan de Azúcar and Banco
La Caja Obrera - also provide subsidized credit to these enterprises.
What criteria are used in determining the recipients of the preferential lines of credit?  What
industry sectors have benefitted from the credit lines?
The report indicates that Uruguay levies an excise tax, the specific Internal Tax (IMESI), at the
wholesale level on certain domestic goods and equivalent imported goods.  In addition, the IMESI levied
on non-alcoholic beverages varies according to national content.  In addition, our industry is concerned
that the formula used to calculate the IMESI discriminates against imported spirits because each product
category is assigned a notional fixed price per liter, which does not accurately reflect real market value.In addition, a September 1996 decree placed additional burdens on imported distilled spirits by requiring
that 100% of the value added tax be prepaid, in addition to prepayment of 60 percent of the excise tax.
This tax scheme appears to afford protection to domestic production inconsistent with GATT
Article III.  Does the Government of Uruguay have plans to bring these taxes into conformity with GATT
Article III?
How does Uruguay justify the fixed price system for determining the excise tax?
We understand that Uruguay requires pre-payment of certain internal taxes.  If this requirement the
same for domestically produced distilled spirits?
Regional Integration
What is the status of the MERCOSUR's effort at regional integration?  What do you see as the
primary objective of these negotiations?WT/TPR/M/50
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ANNEX II
RESPONSE TO QUESTIONS
I. ECONOMIC ENVIRONMENT
Macroeconomic situation:  world financial crisis;  tax policy;  unemployment;  current account and
capital flows
MEXICO
I understand that Uruguay's main sources of foreign di rect investment are Argentina and Brazil.  In light
of the foreseeable economic development in the region, what consequences do the Uruguayan authorities
think this will have on its economy in 1999 and beyond?
It would be interesting to know if Uruguay's priorities in economic policy have changed as a result of the
difficult world economic situation.  More specifically, will inflation continue to be curbed by increasing
the real value of the Uruguayan peso in view of the fact that this appreciation has resulted in weaker
international competitiveness and consequent worsening of external accounts?  We would like to know if
the reform of the social security system, the aim of which seems to be to increase productivity and
efficiency, includes any kind of supplementary support mechanism to the increasing number of
unemployed persons, in particular in the manufacturing sector, which has been the sector most affected.
HUNGARY
Bearing in mind that today MERCOSUR accounts for over 50% of Uruguay's exports and that the
unfortunate economic developments in the world seem  to affect the region and, in particular, Uruguay's
largest markets, we would be most interested to hear what measures, if any, the Government is
considering to counter the possible spillover effects, especially what steps they foresee to avoid a further
deterioration of the trade balance.
MEXICO
We would like to know if the reform of the social security system, apparently aimed at raising productivity
and efficiency, includes any type of supplementa ry arrangements to aid the growing number of
unemployed, particularly in the manufacturing sector, which has been hardest hit.
We would like to know the authorities' latest estimates as well as its opinion on the effect the reform of the
social security system, begun in 1996, has had on public finances.
Answer
Generally speaking, the world economic situation has not changed Uruguay's priorities in terms
of economic policy.  However, we cannot ignore the impact of crises in other parts of the world and the
possible slow-down of the economy as a result.  C onsequently, the Uruguayan Government intends to
take up the challenge of introducing measures to improve competitiveness, mainly by easing the tax and
public sector burdens with a view to achieving greater openness.
In particular, Uruguay will continue the efforts that it is jointly carrying out with its four customs
union partners in order to strengthen the consolidation and deepening of the customs union.WT/TPR/M/50
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A progressive fiscal tightening has been the main aspect of the stabilization policy, bringing
together two basic structural reform processes (social security and State reforms) which will ensure
sustained improvement of public finances in the long term.  The overall deficit of the public sector has
fallen steadily from 2.8 % of GDP in 1994 to 1.4% in 1997.  Apart from the fiscal cost of the above-
mentioned reform, the public sector attained balanced management in 1997.  This trend was further
consolidated in 1998, with the global deficit estimated at under 1%, representing a surplus, reformsexcluded.
In Uruguay's opinion, MERCOSUR's line on trade has been towards open trade.  From a national
point of view, Uruguay does not expect the likely recessionary effects of the world crisis to have any
significant impact on its external trade, as its impor ts are mainly in the food sector.  Furthermore, the
Government's fiscal policy, which has been consolidated over the last few years, is a fundamental
instrument used to counter the possible effects of a worsening trade balance.
Unemployment is currently being tackled through specific provisions contained in legislation in
force.  As to the increase in unemployment referred to by the Secretariat, it should be pointed out that
although economic growth in a context of macroeconomic stability is a necessary condition, it is not
sufficient to create jobs because the changes in pr oduction, the technological revolution, restructuring and
social changes have altered the direct relationship between growth and job creation.  However, in the last
quarter of 1997 these two factors converged, resulting in the creation of 60,000 more jobs than the yearbefore;  an increase of 5%.
Export competitiveness:  exchange rates;  diversification;  incentives (tax system)
NEW ZEALAND
Why has Uruguay applied tax incentives, for example, in forestry and tourism?
Could Uruguay explain the concept of national content in the reimbursement of indirect taxes?
COLOMBIA
Please comment on the statement in the Secretariat report that fiscal incentives "are a major feature of
Uruguay's economic policy.  Apart from any possible effect on resource allocation and productivity, such
incentives have a negative effect on the Government's fiscal position, thereby reducing national savings,
widening the savings investment gap and exacerbating th e current account deficit" (Chapter I, para. 14).
Please comment on the statement in the Secretariat report that "Uruguay's loss of competitiveness vis-à-
vis third partners has resulted in an increase and concentration of trade with MERCOSUR partners"
(Chapter I, para. 27).
Answer
Uruguay offers fiscal incentives in forestry, tourism and manufacturing which have had very little
direct negative effect on revenue.  It must be borne  in  m ind tha t su ch i nv estm ent in t he  econ om y  also
generates direct and indirect revenue.  Consequently, the following aspects are of the utmost importance:(a) the impact of increased forestry activity on other areas such as manufacturing and services;  (b) the
significant effect of services derived from tourist investment on employment levels;  (c) the importantWT/TPR/M/50
Page 38
role played by investment in the manufacturing sector in the current restructuring of the sector, within the
broader framework of openness to trade.
With respect to the external sector, the balan ce-of-payments current account has posted a deficit
of between 1.2% and 1.6% in the last triennium.  This is a sustainable level in the medium term bearing in
mind that the country's external debt has been on  a downward trend over the same period, at 14.3% of
GDP, which affirms that the Government has held its position.
Considering the imbalances of the public and external sectors and looking at residual net saving
of the private sector, it will be noticed that the savings-investment gap in this sector is narrowing.
In 1994 the excess of savings over investment of the private sector stood at 0.1 per cent, increasing to
0.6% in 1997.  Public sector transfers to social security funds, which in 1997 stood at 0.8%, are
considered as private sector savings.
In recent years the stabilization programmes have played a central role in economic policy,
achieving significant improvements in this area.  This year, annual inflation is expected to run at between8 and 9%, and at 5% for 1999.  At the same time, there has been a marked increase in private investment,
as evidenced by an annual cumulative growth average of  10% over the last three years.  This trend, along
with the private sector surplus of saving over invest ment, attest to the considerable growth in private
saving resulting from economic growth and the stabilization process.
In relation to the structure of exports, a time-study shows that at the beginning of the 1970s,
Uruguayan exports were concentrated in a few areas only, namely, beef, leather and skins and wool
exported mainly to the European Economic Community which then absorbed 65% of total Uruguayan
exports.
Although it may seem strange, viewed from the present perspective, Argentina and Brazil were,
until the 1970s, relatively small buyers of Uruguayan products, together accounting for less than 10% oftotal exports.  The changes which took place on the international scene in the early 1970s prompted
Uruguay to seek ways of diversifying its market s and products.  Thus, between 1975 and 1976, it signed
bilateral agreements with Argentina and Brazil with th e result that those markets, except in a few specific
circumstances, are now the main buyers of Uruguayan products.
In 1993, for example, exports to those two countries represented 41.5% of total Uruguayan
exports.  Intraregional trade, through MERCOSUR, has grown steadily and may be considered as a
natural consequence of the integration process.  Nevertheless, growth with the rest of the world also grew
in a context of trade openness.
Domestic competition:  role of the State;  competition legislation
HONG KONG, CHINA
We note that Uruguay does not have a legislation to promote competition in its domestic market, nor are
there any government agencies whose responsibilities include the monitoring of competitive conditions.While Hong Kong, China believes that competition law is not essential to every economy, we consider
that effective implementation of competition policy is  instrumental to achieving economic efficiency.  We
are therefore interested to know if Uruguay has any competition policy, and whether the Uruguayan
Government has any plan to promote competition in its market.WT/TPR/M/50
Page 39
JAPAN
Competition Policy (paragraph 169, page 63)
It is reported that Uruguay has no legislation to promote competition in the domestic market and that
there are no government agencies whose responsib ilities include the monitoring of competitive
conditions.
(1) Does Uruguay intend to introduce legislation on competition in the near future?  If so,
pleased explain the timetable.
(2) What impacts of the MERCOSUR Competi tion Protocol does Uruguay expect on the
legislation and operation of competition law in the country?
EUROPEAN UNION
Is the adoption of competition rules, including the setting up of an independent agency, envisaged in
Uruguay?  Is such adoption foreseen by the "MERCOSUR Competition Protocol"?
Answer
Uruguay does not have an agency responsible for monitoring competitive conditions nor is any
related national legislation being envisaged at the moment.
Although MERCOSUR has a Competition Protocol which was approved in 1996 and duly
notified to the WTO Committee on Regional Trade Arrangements, the negotiating groups have begun
discussions of the regulatory aspects of this text, including issues relating to the implementing authority.
Investment regime:  investment legislation and regime
NEW ZEALAND
We note that Uruguay has in place a system of investment incentives, for which enterprises must apply
through the Application Commission, which advises the Executive on whether to qualify the enterprise for
the incentives.  What measures does Uruguay have in place in this decision-making procedure?
Answer
In that respect, Uruguay has regulated certain aspects relating to the recently approved Investment
Law.
The Secretariat will be provided with copies of the Regulatory Decrees of the said Law
(Decrees 59/998 and 92/998).WT/TPR/M/50
Page 40
Regional and trade agreements:  multilateral and regional arrangements;  convergence to CET and
trade diversion;  circulation of third  country goods;  management of duty collection;
MERCOSUR/Andean;  MERCOSUR/EU;  MERCOSUR/FTAA
AUSTRALIA
Will the world financial crisis have an effect on the elimination of tariff protection on imports of sensitive
items which are now excluded from MERCOSUR's Co mmon External Tariff but which were originally
scheduled to be eliminated by the end of 1999?
NEW ZEALAND
How is MERCOSUR's tariff revenue distributed?
UNITED STATES
We understand that there is an advisory Socio-Economic Consultative Forum that can make
recommendations on labour and other social issues to the Common Market Group (CMG), the executive
body of MERCOSUR.  As we understand the process, each country establishes its own recommendationto the CMG.
We would be interested in learning of Uruguay's experiences with the Socio-Economic Consultative
Forum and whether, in Uruguay's opinion, these experiences could be helpful as the WTO begins to
address similar issues.  For example, have concerns been raised through the Forum regarding the need
to coordinate labour policies or harmonize labour standards?  Has the Forum been used as a vehicle forraising and/or addressing concerns over the labour implications of the FTAA or MERCOSUR's
negotiations with the Andean Community?
UNITED STATES
What is the status of MERCOSUR's effort at regi onal integration?  What do you see as the primary
objective of these negotiations?
NEW ZEALAND
We note that Uruguay's convergence to MERCOS UR's CET tariffs may lead to increasing trade
diversion.  Do Uruguay and its MERCOSUR partners have any measures in mind to combat this effect?
We note that at present there is no mechanism for managing the collection of the MERCOSUR CET,
which could entail double imposition of duties although this is not common in practice.  When doesMERCOSUR intend to implemen t a management mechanism for the collection of the CET?
We note that as MERCOSUR's negotiations with the Andean Community to sign a free trade agreement
had not yet been concluded, previous bilateral ag reements by MERCOSUR members under LAIA were
extended until September 1998.  That date has now passed.  Could Uruguay offer an update on
MERCOSUR/Andean Community free trade agreement negotiations?
Could Uruguay also provide details on the stage of  negotiations between MERCOSUR and the EU in the
context of the three stages set out in the Report by the Secretariat?WT/TPR/M/50
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AUSTRALIA
Could Uruguay comment on the relationship between it s regional and multilateral trading arrangements,
with particular emphasis on MERCOSUR, the FT AA and possible EU-MERCOSUR negotiations.  How
will Uruguay ensure that regional and bilateral initiatives support the process of multilateral trade
liberalization, and strengthen the multilateral trading system?
EUROPEAN UNION
It is unclear from the Report how the circulati on of third country goods within the MERCOSUR is
organized once such goods have been customs cleared in one of the member countries and how double
taxation is avoided.  Could Uruguay provide explanations in this respect?
COSTA RICA
What measures has Uruguay adopted to downplay the negative effect of regional blocs, as this could
result in trade diversion, in the face of growing in tegration within MERCOSUR, whose member countries
account for 44% of Uruguay's imports?
JAPAN
Regional Agreements
(1) It is reported that full implementation of the CET of MERCOSUR is to be achieved by 2006.  Is
this not conformity with paragraph 3 of the "Understanding of the Interpretation of Article XXIV of the
GATT 1994" which provides the "reasonable length of time" referred to in paragraph 5(c) ofArticle XXIV "should exceed ten years only in exceptional cases" (paragraph 21, page 21 of the
Secretariat Report).
(2) Regional trade agreements signed between MERCOSUR and neighbouring countries includes
some provisions which do not seem to be in conformi ty with Article XXIV of the GATT.  For example, free
trade agreement between MERCOSUR and Chile phase out the internal tariff within 18 years in spite of
paragraph 3 of the "Understanding of the Interp retation of Article XXIV of the GATT 1994".  The
negotiations for the establishment of the Free-Trade Area of the Americas (FTAA) are also reported in
paragraph 30, page 23 of the Secretariat Report.
Could Uruguay confirm that the FTAA is established in conformity with the WTO Agreements i.e., the
duties and other restrictive regulations of commerce are eliminated on substantially all trade within tenyears?  (paragraphs 27-30, pp. 22-23 of the Secretariat Report).
Answer
In the context of the present review of Uruguay's trade policy and given the expressed concern of
some Members to be updated on the current stat us of, and negotiations underway in,  MERCOSUR,
Uruguay believes it is relevant to provide a general summary of some aspects of the current integration
process.
MERCOSUR, created in 1991 by virtue of the Trea ty of Asunción, is designed to form a common
market for member countries allowing for the free movement of goods, services and production factors inWT/TPR/M/50
Page 42
order to promote the economic and social development of the States parties and enhance their competitive
integration into the world economy.
The process of gradual, linear and automatic tariff reduction among the four countries culminated
in 1994, with some exceptions limited to a small number of products whose tariffs were to be eliminated
over a period of four years for Argentina and Brazil  and five years for Paraguay and Uruguay.  The
so-called Regime of Final Adjustment to the Customs Union will end on 31 December 1998 (for
Argentina and Brazil) and in 1999 for Paraguay and Uruguay.
In 1995, the MERCOSUR countries adopted a Common Nomenclature and a Common External
Tariff, in accordance with the objective of promotin g external competitiveness and opening up of their
economies.  The levels of the Common External Ta riff range between 0 and 20%, in steps of two
percentage points.
To facilitate transition to the new tariff structure, certain temporary exceptions from the Common
External Tariff were agreed upon, as were mechanisms for their convergence, which was to be completedon 1 January 2001, thus covering most of the MERCOSU R tariff items.  It was agreed that a small
number of products would complete their convergence on 1 January 2006.
At the end of 1997, the steps in the Common External Tariff were temporarily widened to
3 percentage points until 31 December 2000.  As of 1 January 2001 the Common External Tariff will
revert to the steps agreed upon in Ouro Preto in December 1994 which came into effect on1 January 1995.
So far, the agreed convergences for the remova l of tariffs between MERC OSUR countries and for
the full implementation of the Common External Tari ff have been implemented in accordance with the
Agreement.
As to trade in services, in December 1997 MERCOSUR approved the Protocol of Montevideo to
liberalize intraregional trade and negotiations are currently under way to agree upon the relevant specific
commitments.
At this stage of deepening and consolida ting the MERCOSUR customs union, several common
trade policy instruments have been approved, such as the common regulation on safeguards, anti-dumping
rules and the competition protocol.  Several provisions relating to consumer protection and governmentprocurement are currently being negotiated.
Furthermore, in this context of consolidating and deepening the customs union, technical
committees are working on drawing up a Common Customs Code and defining criteria for customs
procedures which will allow for the free movement of goods within the State parties in the time-frames
agreed upon by MERCOSUR.
As a common trade policy has not yet been fully developed, MERCOSUR agreed on a temporary
provision whereby its member States could apply a generalized regime for intraregional trade in goods.Once the Common External Tariff comes into full effect, there will be free movement of goods in the
extended area, as laid down in the Treaty of Asunción.
In keeping with its strategy of economic and regional openness, Uruguay, along with its
MERCOSUR partners, is conducting a large number of trade negotiations with other countries and
regions.  MERCOSUR has signed agreements with Chile and Bolivia for the creation of free trade areasunder the 1980 Treaty of Montevideo (ALADI).WT/TPR/M/50
Page 43
The Agreement with Chile came into effect in October 1996 and with Bolivia in March 1997.
Both Agreements provide for the liberalization of most aspects of trade within a ten-year period, with it
being extended for a small number of products.  These Agreements are in accordance with the multilateral
standards defined under the Enabling Clause and have been duly notified to the WTO Committee on
Trade and Development.
As a body, MERCOSUR is also in the process of  renegotiating several bilateral agreements
between its member States and countries of the A ndean Community.  At the end of September 1998, the
existing bilateral agreements between MERCOSUR  and the Andean Community will be extended to
31 March 1999.  The  current negotiations will continue during that time with the aim of reaching an
agreement between both blocs.
With regard to the FTAA, negotiations were launched this year at the Summit Meeting of
Presidents and Heads of State in Chile.  The Nego tiating Groups set up then held their first working
meetings in September in Miami.  The Trade Negotiations Committee is scheduled to meet in Surinam inDecember to continue the process of negotiation.
The preparatory stage of identifying the main aspects of trade relations between the European
Union and MERCOSUR has been completed.  The aim is to attain mutual and gradual liberalization of
trade.
Uruguay also meets periodically with other countries and regions, within the context of
MERCOSUR, in order to promote and strengthen ec onomic ties, trade and investment.  Consequently,
agreements were signed with Canada and the countr ies of the Central American Common Market in 1998.
MERCOSUR is currently being reviewed by the WTO Committee on Regional Trade
Arrangements.  MERCOSUR member States have made the relevant presentations and have submitted
the information requested.  Contacts have already been made to proceed with the pertinent negotiations.
Uruguay believes that bilateral and regional agreements complement the processes of multilateral
trade liberalization in that they facilitate the opening up of economies, thereby improving market access.
II. TRADE POLICIES AND MEASURES
Tariffs:  CET convergence and complexity;  tempor ary increase;  bound and applied rates;  other
charges, including IMESI and VAT;  IDB
AUSTRALIA
Australia welcomes the considerable progress that Uruguay has made in unilateral trade liberalization
and economic reforms.  Unweighted average applie d rates have fallen to 12.2% in 1998, despite bound
rates remaining at ceilings of 55% and 35% (for agricultural and manufactured goods respectively).
Uruguay is also in the final stages of implementing its commitment to eliminate most tariffs with its
MERCOSUR partners.  Beyond this, Australia notes that Uruguay has indicated a continuing
commitment to trade liberalization, and we would welcome details about any specific plans it has forfurther liberalization of its trade both with respect to bound and applied tariffs, and non-tariff measures.WT/TPR/M/50
Page 44
NEW ZEALAND
Why are tariff concessions granted on the import of certain products when they promote tariff escalation?
HONG KONG, CHINA
We note that the simple average tariff rate would increase from 10.4% in 2001 to 11.1% in 2006.  We are
interested to know whether Uruguay has plans to bring down its tariff rate.
UNITED STATES
As a result of the increase of three percentage points in applied tariffs in MERCOSUR in late 1997, we
understand that nine products now have tariff rates which are above their bound rates.  Could Uruguay
confirm whether these products still have tariffs above the bound rates?  If so, when will Uruguay make
these tariffs consistent with its WTO commitments?
EUROPEAN UNION
Could Uruguay specify where the list of products subj ect to the additional "temporary" increase is to be
found and indicate when it is envisaged that this increase could be removed?
NEW ZEALAND
We note that Uruguay adopted a temporary 3 percen tage points increase of the MERCOSUR CET in
December 1997 which is scheduled to be eliminated by 31 December 2000.  We also note that Uruguay is
applying exceptions to this increase.  Will Uruguay continue to apply those exceptions to the increase in
CET, and is there an intention to eliminate the temp orary increase earlier than that date if the economic
situation allows it?
HUNGARY
According to the Secretariat Report the Uruguayan cu stoms tariff shows marked tariff escalation for most
of the industrial products.  Paragraph 29 of Part III of the Report states that this pattern of protection is
being maintained as Uruguay converges towards the MERCOSUR CET.  The 3% tariff increase I havealready referred to as well as the extensive and fairly complex regime of duty and tax concessions and
exemptions tend to reinforce the effects of tariff escalation.  We would be interested to hear how this
corresponds to Uruguay's position often expressed in various WTO bodies that tariff escalation is a
priority target for reduction and what steps the Government intends to take in this respect?
JAPAN
(1) Uruguay agreed with its MERCOSUR partners on a CET in December 1994, and, on
1 January 1995, the CET entered into effect on imports from non-member countries at rates up to 20%.
Although negotiation on Article XXIV:6 of other GATT has not been in place, in some products, applied
tariff level is above the bound tariff level of Uruguay.
(a) Has negotiation on Article XXIV:6 been initiated with any third country?
(b) Please provide expected timetable for the negotiations on Article XXIV:6 of the GATT
and for the modification of the Schedule.WT/TPR/M/50
Page 45
(2) Uruguay and other MERCOSUR countries have raised the CET by 3% at the end of 1997.
Although this is a temporary measure to be eliminated  next year, is not this measure against the spirit of
Article XXIV:4 of the GATT which provides that the purpose of a customs union or a free-trade area
should not be "to raise barriers to the trade of other contracting parties with such territories"?
(paragraph 21, page 30)
EUROPEAN UNION
The EU understands that convergence towards the CET will in certain cases imply the application of
tariff rates beyond the levels previously bound by Uruguay.  Could Uruguay specify when it has or will
notify new bindings for the products concerned and explain when and on the basis of which modalities it
intends to negotiate appropriate compensation for affected WTO Members?
COLOMBIA
What is the trade volume of the nine products for which the applied rate exceeds the bound rate
(Table III.3).
HUNGARY
On the basis of paragraph 24 of Part III of the Report we understand that since 1995 all customs duties,
surcharges, service and other charges have been combin ed into a unified customs charge (TGA).  Could
Uruguay describe in detail all the various elemen ts included in the TGA with special emphasis on
additional surcharges and the single tax on imports (IMADUNI)?
UNITED STATES
The Banco de la República Oriental del Uruguay (BROU), a private bank, charges a commission for
services rendered to imports.  This charge is not based on the cost of the service, but rather on the c.i.f.
value of the import.  Could Uruguay explain how th ese private bank charges are administered?  Who are
the beneficiaries of this revenue and how is it reported?  It appears that these charges are only applied toparticular products such as wheat.  What criteria are used to determine products that face these charges?
What other products are subjected to this charge?  Although the BROU is a private bank, this charge
does not appear to be in conformity with Article VIII of the GATT.  When does Uruguay plan to bring this
practice into conformity?
HUNGARY
Regarding charges on imports paragraph 11 of Part III states that BROU (Banco de la República
Oriental del Uruguay) charges a commission for its services related to the import procedures.  However,
the commission is levied on an ad valorem basis and is not based on the cost of services rendered.
Bearing in mind that Article VIII:1(a) of the GATT states that "all fees and charges of whatever
character … imposed by contracting parties in connection with importation or exportation shall be
limited in amount to the approximate cost of servic es rendered …" we would be interested to know what
is the legal basis for the ad valorem BROU commission.  The same questions arises with regard to thefees charged by LATU (Technological Laboratory of Uruguay) (see paragraph 35 of Part III).WT/TPR/M/50
Page 46
EUROPEAN UNION
Does Uruguay envisage modifying the commission charged by the BROU for services rendered related to
import procedures with a view to ensuring that  the amounts paid are genuinely based on services
rendered rather than the c.i.f. value of imports?
UNITED STATES
The Report indicates that Uruguay levies an excise tax, the specific Internal Tax (IMESI), at the
wholesale level on certain domestic goods and equivalent imported goods.  In addition, the IMESI levied
on non-alcoholic beverages varies according to national  content.  In addition, our industry is concerned
that the formula used to calculate the IMESI discri minates against imported spirits because each product
category is assigned a notional fixed price per litre, which does not accurately reflect real market value.
In addition, a September 1996 decree placed additional burdens on imported distilled spirits by requiring
that 100% of the value-added tax be prepaid, in add ition to prepayment of 60% of the excise tax.
This tax scheme appears to afford protection to domestic production inconsistent with GATT Article III.
Does the Government of Uruguay have plans to bring these taxes into conformity with GATT Article III?
How does Uruguay justify the fixed price system for determining the excise tax?
We understand that Uruguay requires prepayment of certain internal taxes.  Is this requirement the same
for domestically produced distilled spirits?
EUROPEAN UNION
Could Uruguay envisage joining the Information Technol ogy Agreement (ITA)?  If so, when?  If not, what
is the reason of such reluctance?
Uruguay has not to date given any contribution to the WTO Integrated Data Base (IDB) although the first
contribution was due in December 1997.  When will Uruguay fulfill its obligations in this respect?  It
should be noted that most – if not all – the tariff and import data which would be necessary for such acontribution have already been provided to the WTO Secretariat for the purpose of this TPR.  Could
Uruguay authorize the WTO Secretariat to use these data to format an IDB contribution?
The level of customs duties actually applied by Uruguay are very difficult to assess because of the
complex schedule of convergence and numerous lists of exceptions described on pages 29 to 33 of the
Report of the WTO Secretariat.  Could Uruguay supply a matrix showing year after year from 1995to 2006 the rates (CET, CET + 3% or national exception rates) applicable to each of the categories of
products corresponding to the various Annexes listed in Table III.1 on page 31 of the Report?  Could
Uruguay also specify if the Uruguayan Applied Tariff and its seven Annexes are available in electronic
format and, if so, where such computer files can be obtained?
JAPAN
It is reported that the BROU charges a commission for the services rendered related to the import
procedures and that this is not based on the cost of th e service but the rate varies according to the c.i.f.
value of imports.  Article VIII:1(a) of the GATT 19 94 stipulates "(a) 11 fees and charges of whatever
character imposed by contracting parties on or in  connection with importation or exportation shall be
limited in amount to the approximate cost of serv ices rendered".  Please explain Uruguay's view on theWT/TPR/M/50
Page 47
conformity of the above measure with this Article.  Does Uruguay have intention to revise this scheme to
meet the GATT provision?
Answer
Tariffs are the main instrument of Uruguay's trade policy.  Over the past few years the average
import duty has gradually been reduced significantly.  The breakdown of the Unified Customs Charge
(TGA), which corresponds to the steps of the Common External Tariff, is irrelevant for external purposesand basically concerns the simplification of internal collection and the destination of customs revenue.
On 1 January 1995, Uruguayan adopted MERCOSUR's Common External Tariff.  This tariff was
negotiated and agreed upon by MERCOSUR partners and is a main aspect of the common trade policy.
Therefore, any changes to the Common External Tariff must be agreed upon by all four parties.  As was
already mentioned, the Tariff is divided into 11 levels between 0% and 20%, with two percentage point
steps between them.  At the end of 1997, MERCOSUR decided to broaden the steps to three percentage
points temporarily for a limited period of time up to 31 December 2000.
On 1 January 1998, Uruguay established the current tariff levels by virtue of Decree 484/997,
including the three-percentage-point increase, with some exceptions to be found in the basic list of
exceptions to the Common External Tariff – the basis for Uruguay's current convergence process.
The existing tariff complies with Uruguay's WTO bindings.  However, it has been noticed that for
a small number of tariff lines, the current tariff is slightly above the bound rate.  Uruguay will rectify thissituation effective 1 January 1999.  As these tariff lines do not cover a significant amount of trade,
Uruguay will provide information on the trade volume and origin of these imported products.
With respect to other import charges, it should be noted that the Banco de la República Oriental
del Uruguay (BROU) is a State institution empowered to participate in foreign trade operations, among
other things, under Decree Nos. 333/92 and 582/9 4.  The amount collected by the BROU represents an
approximate cost of the services offered by the institution which has been trimmed and rationalized over
the last few years.  By simplifying external trade procedures and rationalizing administrative procedures
in accordance with the State reform, Uruguay is cons tantly seeking to reduce the cost of external trade
services in order to continue promoting the openness of its economy, as well as ensure greater
international integration.
Regarding the questions on IMESI, Uruguay is currently preparing rules which will ensure equal
treatment for all products, regardless of their origin.  A decree on the IMESI applied to alcoholic
beverages should be approved over the next few days.
Concerning the Integrated Data Base (IDB), Ur uguay would not be opposed to having the import
and tariff data that had been supplied to the WTO Secretariat for the purposes of this trade policy review
transmitted to the relevant Division for inclusion in the IDB.
Rules of origin
EUROPEAN UNION
Are the so-called "MERCOSUR (preferential) rules of origin" applicable to all goods traded between
member countries including those already subject to the CET in all four countries?  Will such rules beWT/TPR/M/50
Page 48
maintained after the adoption of the CET for all products  has been completed in all four countries or will
it be replaced by a regime of free circulation?
Answer
See I.5.
Customs procedures and valuation;  import prohibitions
NEW ZEALAND
On what basis is prior authorization for entry of pr oducts of the sea into Uruguay granted or withheld?
We welcome the proposed reforms to modernize an d further simplify Uruguayan customs procedures.
When does Uruguay hope to complete this process of reform?
HONG KONG, CHINA
It is reported that only commercial fi rms, industrial firms or individuals listed in the Registry of Importers
at BROU may legally import products into Uruguay.  We would like to know if there are any limitations
or conditions for registration.
UNITED STATES
Generally, when would the National Customs Office require an investigation to determine the value of
imported goods?  We note that there is an inspection charge assessed by the National Customs Office.  Is
there a charge for verifying the documentation of goods which are not actually inspected?  What is the
amount, or rate, of the inspection charge for the actual inspection of merchandise imports?  Is this, likethe examination carried out by the Banco de la República Oriental del Uruguay (BROU), based on the
c.i.f. value of the goods or on the basis of the value of the service rendered?
JAPAN
Customs valuation (paragraph 56, page 41)
It is reported that specific regulations exist to dete rmine the value of used c apital goods, informatics and
telecommunications goods, vehicles, and motors, other components and parts of automotive vehicles.
Please explain how the value of these goods is determined.
Import prohibitions (paragraph 61, page 42)
Certain import prohibitions for phyto and zoo sanitary reasons are reported in paragraph 61, page 42 of
the Secretariat Report.  Please explain on tariff line basis which products fall to "other products of thesea" prohibited by Law No. 13.833 (29 December 1969) and Decree No. 521/93.
SPAIN
The EU (Spain) would like to know why Uruguay does not authorize imports of ham on the bone.
We do not believe this prohibition is scientifically justified as exporting producers comply with the curing
periods required to guarantee food safety.WT/TPR/M/50
Page 49
EUROPEAN UNION
What is Uruguay's experience in the operation of its transit regime in conformity with the Customs
Convention on the International Transport of Goods?  Is the regime suffering from a high level of fraud?
If so, what are the measures implemented to fight such fraud?
Answer
With respect to the current reforms to modernize standards and procedures of the National
Customs Office, it was thought best to reduce the num ber of forms to one Simplified Import Declaration
for goods entering and leaving and goods in transit.  This is an improvement for both the operator and the
tax collecting body.  A new computerized system (Lucía) is also being used to control customs
operations.  The system is currently being implemented in Montevideo with plans to extend it to the entire
country during the first few months of 1999.
As to specific customs issues, the only charges paid to the National Customs Office accrue from
the computerized processing of data and the uninterrupted provision of services.  There is no cost forverifying or checking documents, and there is no inspection charge for the inspection of goods or
documents.
The transaction value is the basis used for calculating the customs value of used informatics,
telecommunications and capital goods imported for consumption.  If there is no immediate sale, prior to
the importation of the used merchandise, Decree 567/94 of 29 December 1994 establishes the basis forcalculating the customs value.
For used vehicles which have been allowed to be imported (sports or classical vehicles over
20 years of age to be used for display or competitions), the customs value is calculated on the basis of the
transaction value, as long as the latter stays within reasonable limits of relevant, specific, international
lists.  Otherwise, the customs value is calculated on the basis of the value of identical or similar goods.
There are no limitations on registration with the Registry of Importers at the BROU.  The only
requirement is to register with the General Tax Office and the Social Security Bank and be in conformity
with the requirements of both bodies.
Turning to the question on the import prohibition of ham on the bone, it should be noted that in
accordance with the OIE - Animal Health International Code, pork products imported from countriesaffected by Classical Swine Fever must be subjected to treatment guaranteeing the destruction of the fever
virus.
The ageing process would ensure that the virus is destroyed in the muscle but not in the marrow,
which would imply that pork products that have not been properly treated could pose a risk to the national
livestock industry owing to their possib le consumption in swine feedstuffs.
Considering the favourable situation with re spect to Classical Swine Fever in the Member
country which posed the question, movements of animals from affected areas as well as other measurestaken would have to be observed in situ.  If the observations are favourable, then the measure governing
raw ham on the bone could be reviewed.WT/TPR/M/50
Page 50
With regard to the question on fish products, Article 14 of Law 13.833 of 29 December 1969
prohibits the importation of (live) exotic species regardless of their stage of development or their
introduction in domestic waters, except where special authorization is granted.  This prohibition is strictly
for sanitary reasons in order to prevent exotic diseases carried by aquatic animals from entering Uruguay.
The National Fisheries Institute (INAPE) is the Government body responsible for issuing special
authorization to import such species.  Once permission has been granted and the relevant import dutiespaid, the exotic species may be brought into the country without any discrimination whatsoever.
Decree 521/93 provides for import prohibition of fish products (fish feed) for health reasons from
countries where cholera has been declared.  Once the sanitary admission requirements laid down by the
competent authorities, that is, the Ministry of Public Health and INAPE, have been met, fish products
thus imported may enter the country without any tariff discrimination applied against similar fish
products imported from countries where cholera has not been declared.  Thanks to this sanitary measure,
along with other measures adopted by Uruguay, V. cholerae  has been prevented from entering the
national territory.
Government procurement
EUROPEAN UNION
Could Uruguay envisage joining the Government Procurement Agreement (GPA)?  If so, when?  Will the
"Ad Hoc Group" in charge of designing a governmen t procurement regime for MERCOSUR try to ensure
the compatibility of this regime with the GPA?
Answer
To date, Uruguay has not envisaged joining the Agreement on Government Procurement.
Standards
NEW ZEALAND
We note that Uruguay usually accepts international standards/specifications except when they are not
compatible with national technology and/or national risk factors.  Could Uruguay provide information on
when international standards have not been accepted?
Could Uruguay detail the procedures required for acceptance of a certificate issued by the sanitary
authorities in the country of origin stating that specific sanitary and phytosanitary requirements are met?
Answer
The use of international standards has been, and continues to be, current practice in Uruguay.  In
relation to possible non-acceptance of such standards, Uruguay is willing to draw up a review of such
cases if it receives a specific request to that effect.
As to established animal health procedures for accepting certificates issued in the country of
origin, veterinary information and sanitary requirements have to be exchanged and agreed upon by the
competent authorities.  A model certificate is then drawn up and must be approved by both authorities.The certificate may be different for different products.  The competent Uruguayan authority is the General
Directorate of Livestock Services of the Mini stry of Livestock, Agriculture and Fisheries.WT/TPR/M/50
Page 51
The procedure governing goods of vegetable origin is laid down in Decree 328/991 of June 1991.
The Decree stipulates that importers of plant-based goods should declare imports of such goods to the
Office for Agricultural Protection Services of the Ministry of Livestock, Agriculture and Fisheries, five
working days before the arrival of the goods.  Phytosanitary Clearance Import Certificate (AFIDI) should
be requested for products considered to present a high health risk, prior to the shipping of the goods.  The
Directorate of Agricultural Protection Services has five working days in which to grant the request.  Afterthis time-limit, the goods will be subject to the normal conditions of inspection and sale.  The
phytosanitary requirements provided for in the AFDI should be contained in the phytosanitary certificate
provided by the country of origin.
Exports:  export taxes;  export incentives and subsidies;  barriers to Uruguay's exports
AUSTRALIA
As a developing country which is reliant on exports of agricultural goods, Uruguay's economic reforms
have made a substantial contribution to improving th e competitiveness of producers and processed food
industries.  Has Uruguay been able to gain sufficient access to international markets to maximize the
benefits of this improved competitiveness in world ma rkets?  What implications do barriers to Uruguay's
exports and international market distortions have for Uruguay's approach to the next round of WTO
agricultural negotiations?
AUSTRALIA
We understand that Uruguay has deferred on a number of occasions proposals to eliminate taxation
rebates on export items.  Could Uruguay explain the reasons for these deferrals and Uruguay's future
intentions regarding the rebate?
HUNGARY
The concessionary and tax exemption schemes bring me to my next point.  Paragraphs 86 and 106 of
Part III and paragraph 1 of Part IV of the Secretaria t Report specifically states that the drawback regime
and the reimbursement of indirect taxes are tied to national content.  In case of both schemes the higher
the local content, the higher the reimbursements are.  We would be interested to know how these schemes
are in conformity with Uruguay's commitments und er the TRIMs Agreement.  (Here I would like to
specifically refer to paragraph 1(a) of the Illustrative List.)  Is our understanding correct that (asparagraph 142 of Part III implies) Uruguay did not notify these measures as TRIMs?  If not, what steps
and time-frame does the Government of Uruguay foresee to bring these measures into conformity with its
obligations?  We would also be interested to hear whether Uruguay notified these measures in
accordance with Article 27 of the SCM Agreement.
COSTA RICA
What is the nature of the discriminatory treatment granted to Uruguayan exports, especially agricultural
products?  What concrete measures does this discriminatory treatment consist of, and which productsdoes this involve?  (page 17, paragraph 2 of the Secretariat's Report WT/TPR/S/50).
What specific multilateral actions does Uruguay intend to adopt in order to diversify its trade structure
and its dependency on the regional integration process, and to enhance competitiveness?WT/TPR/M/50
Page 52
How does Uruguay intend to achieve greater participation in multilateral trade while its main objective is
still compliance with the commitments made during the Uruguay Round?
JAPAN
Export taxes, charges and levies (paragraph 92, page 47)
Please explain on tariff line basis which agricultural goods are subject to export taxes and/or fees.
Export subsidies
(1) The following measures seem to be export subsidies which are prohibited in Article 3.1(a) of the
Agreement on Subsidies and Countervailing Measures.  Please explain Uruguay's view on this point.
(a) Enterprises which export vehicles wholly or partly constructed in Uruguay, or motor
parts of national origin may benefit from a customs concession, applicable to the
importation of motor vehicles assembled in th e place of origin destined for the domestic
market (paragraph 101, page 49).
(b) Industries whose output is exclusively destined for export are allowed to import inputs
under the temporary admission regime that allows importation without payment of tariffs
(paragraph 103, page 49)
(2) The following measures seem to be subsidies which are prohibited in Article 3.1(b) of the SCM
Agreement.  Please explain Uruguay's view on this point.
(a) There is a special regime under which exports are exempt from the VAT, as well as a
mechanism that allows the exporter to recover the tax levied on its inputs, so that the cost
incidence of this tax on the product to be exported is neutralized (paragraph 105,
page 50).
(b) In order to neutralize the incidence of indirect taxes, these are reimbursed on exports, but
the regime only applies to exports for which the c.i.f. value of inputs exceeds 80% of thef.o.b. value of the export itself (paragraph 106, page 50).
(c) The Uruguayan drawback scheme allows the partial or total reimbursement of duties and
charges paid for imported goods uses in adding value assembling or preparation of
merchandise to be exported.  This regime applies to all exports, except those whose
inputs have a c.i.f. value exceeding 80% of the f.o.b. value of the export itself(paragraph 107, page 50).
Answer
In relation to the first question on Uruguay's agricultural products access to markets, the answer
is, regrettably, no.  The effort deployed by Uruguay to strengthen the international competitiveness of its
agricultural exports has not been rewarded with better conditions of access to the main markets.
There are various reasons for this.  One reason has to do with the high levels of protection and
distortion which continue to characterize the international trade of agricultural products, in spite of theapplication of the results of the Uruguay Round.
Agricultural subsidies granted by OECD countries currently stand at $280 billion, exceeding the
total amounts of exports from Latin America.WT/TPR/M/50
Page 53
The main barriers to market access are related to:
- Excessively high tariffs resulting from the Uruguay Round tariffication exercise and
which, in practice, constitute prohibitive barriers to trade;
- the maintenance of tariff peaks;
- the lack of transparency and some Members' complex way of applying minimum access
commitments, exacerbated by the participation and competition of non-WTO Members inmarket access through these means;
- the application of various types of non-tariff barriers, including systems of administering
tariff quotas;
- the difficulties, exaggerated requirements and administrative hurdles to obtain sanitary
and phytosanitary certificates.
Various types of domestic agricultural aid also continue to distort agricultural trade.
Lastly, export subsidies, including export credits, are still keeping Uruguay out of traditional
markets and depressing the prices of products that could be exported to international markets.
Because of this far-from-exhaustive negative picture, Uruguay will seek to ensure that, in the next
round of trade negotiations, agriculture and agricultural by-products are fully integrated into the rules and
disciplines of the WTO, as in the case of other types of goods.
With respect to export taxes, Uruguay only applies this measure to "wet blue" leather at a rate of
5% of the f.o.b. value.  Whether this measure continues to be applied or not will depend on the outcome
of current MERCOSUR negotiations to harmonize trad e policy instruments affecting the entire range of
leather-based products.
To answer Japan's specific questions on subsidies, Uruguay has duly notified the Committee on
Subsidies and Countervailing Measures of the measure relating to the automotive sector(SCM/N/1/URY/2).  As to Japan's other comments, Ur uguay is of the opinion that the measures are fully
consistent with WTO rules in that regard.
As far as reimbursement of duties and charges paid on imported goods in the case of imported
inputs for exports are concerned, Uruguay believes that they are fully compatible with WTO regulations.
As for the tax reimbursement regime, Uruguay does not agree with the Secretariat's Report
(Chapter III, paragraph 106) as it does not reflect the current situation in the country.  Probably this is
why the Secretariat has arrived at the conclusion that the Government is promoting national content in
exports.  Article 3 of Decree 487/97 of 31 December 1997 literally stipulates that "The regimes for the
reimbursement of indirect taxes and duties does not ( emphasis added ) apply to exports of products which
include imported inputs whose c.i.f. value exceeds 80% of the f.o.b. export value of such products".
Intellectual property:  legislation;  enforcement and training
MEXICO
Uruguay is currently reviewing its legislation on intellectual property, relating to measures affecting
production and trade, to make it fully consistent with WTO Agreements.WT/TPR/M/50
Page 54
Please give an update on that process as, according to the Report submitted by the Government of
Uruguay, the Executive Power has tabled a draft law in Parliament introducing amendments to current
legislation.
UNITED STATES
What is the status of the pending legislation co vering patents and copyrights?  Will the proposed
legislation be TRIPS-consistent for both patents and copyrights?  What are the prospects for passagebefore the Congress recesses for the year?  What strategies does the GOU hav e for passage of TRIPS-
consistent copyright legislation?
What is the status of Uruguay's efforts to end speculative registrations of trade marks?  Will the
provisions in the draft law on trade marks that allow for a transitory period of two years for
implementation of the law be consistent with Uruguay's TRIPS legislation?
We would appreciate receiving information about Uruguayan efforts to strengthen enforcement of
intellectual property rights, including to protect against software, video and CD piracy.
What efforts is Uruguay taking to provide training for the judiciary in intellectual property law litigation
to ensure effective enforcement of the statutes?
CANADA
Chapter III, Section (4), subsection (vi), paragraph 157 notes Uruguay's issuance of a resolution,
pursuant to the ratification of the TRIPS Agreement, to be able to fulfil the obligation contained inArticle 70.8 of the Agreement.  Footnote 221, which accompanies this reference, pertains specifically to
Article 70.8(a).  As Article 70.9 refers back to Article 70.8(a), why is there no mention of Uruguay's
application of Article 70.9?
How has Uruguay applied Article 70.9?
JAPAN
IPR (paragraph 162, page 62)
(1) It is reported that the Trade Mark Act was modified in 1992 to establish a summary anti-piracy
proceeding.  Please explain further on the "summary anti-piracy proceeding".
(2) It is also reported that the application of the procedure, and of the special elimination standards,
by a special anti-piracy unit within the Patent and Trade Mark Office appears to have been successful.Please explain the competence and the activities of the "special anti-piracy unit".
Answer
In reply to the questions posed on intellectual property rights, it should be noted that:
The Executive Power has tabled a draft patents law in the Parliament which is currently being
examined by the Senate of the Republic.  Law No. 17.001 on trademarks, which improves and completes
standards in this important area, entered into force very recently.  The Law introduces provisions on
distinctive signs in full compliance with the re quirements laid down in the TRIPS Agreement.WT/TPR/M/50
Page 55
As for the speculative registration of trade marks, this type of conduct is virtually non-existent
because specific legislation was introduced in Uruguay to cancel pirate trade marks administratively
through a summary procedure to that end.  We should poi nt out that there are almost no other examples in
comparative law of this summary procedure, including in developed countries.
The summary procedure was so successful that it brought an end to speculative registration and
removed the need for the special anti-piracy unit.  This unit was dismantled, in the framework of the Staterestructuring, once the problem ceased to exist.  As  a result, the Unit's personnel was absorbed by the
legal departments of the National Directorate of Industrial Property of the Ministry of Industry, Energy
and Mining.
As far as copyright law is concerned, the Executive Power has submitted to Parliament a draft
copyright law which provides for a complete regime for software protection and a system of criminal and
civil infringements and penalties for the protection of these rights.  In practice, the judicial and
administrative authorities are working very hard to ensu re that these rights are respected and to eradicate
software, CD and video piracy.
The Judicial Power is working on the training of the judiciary.  Over the last few years, training
courses and seminars on intellectual property protection have been organized for judges by the
Supreme Court of Justice under the auspices of th e Uruguayan Association of Judges.  Efforts will
intensify in the future.
As for the application of Article 70.9 of the TRIPS Agreement, the TRIPS Agreement is
incorporated into domestic law by virtue of Law No. 16.761, the Executive being responsible for its
regulation.  Furthermore Uruguay has received patent applications in accordance with paragraph 70.8 of
the TRIPS Agreement.  With regard to paragraph 70.9 of the TRIPS Agreement, the Uruguay authorities
are now studying the content and scope of exclusive marketing rights, bearing in mind that this is a newdevelopment and that there are no clear international precedents in the matter.
III. SECTORAL ISSUES
Agriculture:  export pricing
NEW ZEALAND
We note that Uruguay still enforces a price support mechanism for milk producers through controlled
pricing and marketing arrangements.  Does Uruguay have any provisions in place for the review of these
arrangements?
Answer
With respect to the comments and questions on the price setting mechanisms in the dairy sector, it
should be noted that for a long time in the past Uruguay maintained a production support system aimed at
guaranteeing fixed prices for producers of fresh milk, the majority of whom are small suppliers (60 litres
per day) to the main processing industry, a cooperative with State representation on the Board.  TheMinistry of Agriculture therefore sets the price per kilo of butterfat (which is the basis of the price
accorded to the producer on his quota of up to 60 litres per day) while the Ministry of the Economy sets
the price for the end product marketed in plastic containers.  Any quantity of milk in excess of the "quota"
of 60 litres is considered "industrial" milk.  With the development of the sector, this variable has becomeWT/TPR/M/50
Page 56
a determining factor in milk producers' income generation as Uruguay is currently exporting most of the
milk produced in the country.
While these points are included in the Secretariat Report (paragraphs 29-33), additional
comments must be made.  Firstly, perhaps it has not been sufficiently explained that the "quota"
mentioned therein, rather than being a quantity guaranteeing full coverage of consumption, is confined
exclusively to the 60 litres per producer mentioned earlier.  Secondly, while certain changes have beenmade to the legislation which lays down quality standards of the milk supply - increasing demands
directly linked to standards aimed at improving the product - it is also true that those requirements have
been made necessary by greater exposure to external marketing.  This is an extremely important factor
which will determine whether producers leave or stay in the sector.
In other words, there is clearly a growing dependency of the sector on external trade which has
lately become of crucial importance in income generation and sectoral profitability.  The Government's
support mechanism for small producers is viewed as a measure which addresses a specific social realityand it has been duly communicated to the WTO, in conformity with the provisions relating to total
aggregate measurements of support.
Industrial Promotion Law – "national interest"
UNITED STATES
The Report notes under the Industrial Promotion Law of 1974, the Government can consider fiscal
incentives for industries considered of "national interest".  The Law allows for total or partial exemption
of all taxes, exemption of up to 60% of the employers'  social security contributions, exemptions of taxes
on income generated by the enterprise, exemption of port and other charges levied upon imported
industrial material required to equip the enterpri se, and exemption of taxes and surcharges, customs
duties, and port charges on imported merchandise required for the initiation of a new activity orenlargement of an existing one.
How does the Executive determine which industries are of "national interest"?  Which industries have
received benefits from this provision and on what basis are exemptions conferred?
The Report states that small- and medium-size enterp rises can obtain preferential lines of credit, financed
with grants, through the BROU.  In addition, other banks – the Banco Pan de Azúcar and Banco La CajaObrera – also provide subsidized credit to these enterprises.
What criteria are used in determining the recipients of the preferential lines of credit?
What industry sectors have benefitted from the credit lines?
NEW ZEALAND
What are the criteria used for determining national interest in the Industrial Promotion Law?WT/TPR/M/50
Page 57
JAPAN
Tourism (paragraph 111, page 95)
It is reported that the tourism sector is eligible for incentives, including tax and duty exemptions,
provided under the Industrial Promotion Law of 1974.  Please explain the requirements for service
providers to be able to benefit from these incentives.
Answer
Article 3 of the Industrial Promotion Law No. 14.178 stipulates that the Advisory Unit created by
the Law is to study applications made by industrial sectors or activities, groups of companies or
individual companies considered to be of national in terest, provided that the application is based on one
of the following objectives:
(a) Greater efficiency in production and marketing based on appropriate levels of scale,
technology and quality;
(b) increased and diversified export of manufactured goods which include the greatest
possible added value to raw materials;
(c) the setting up of new industries and enlargement of existing ones to make better use of
raw-material supplier markets and available labour;
(d) support for selected applied-technology research programmes whose aim is to make
economic use of unexploited national raw materials and obtain, produce and improve thecountry's products, train skilled and unskilled labour, and monitor and certify quality.
The Banco de la República Oriental del Urugua y (BROU) is a State institution which operates
both as a commercial bank and as a promotion and development bank for industrial and agricultural
activities.  It therefore administers different lines of credit for these activities.  Loan conditions and
requirements are of a public nature and are available to all interested parties.
Textiles and clothing
UNITED STATES
The Report indicates that 117 tariff lines comprising sugar, textiles and clothing are still under the
Minimum Export Price (MEP) system.  How does the MEP system work?  What other products are
included in this system?
HONG KONG, CHINA
We note that the "Minimum Export Prices" system has been put in place to offset "abnormally" low world
prices and it covers a number of tariff lines including textiles and clothing.  In the light of WTO rules and
in view of the many similarities, we would like to know why the system could not be replaced by
Uruguay's anti-dumping regime which has already been institutionalized.  We are also interested to know
if there is any plan to enhance the transparency of th e system, including the release of information on the
frequency of its use, the items affected and their orig in, and how the authority devises the specific factors
for use in multiplying the export prices.WT/TPR/M/50
Page 58
HUNGARY
Paragraph 43 of Part III of the Secretariat Report mentions that the minimum export price scheme was
valid until 30 September 1998.  We would appreciate clarification whether the validity of this scheme has
been extended or not?  If yes, could the delegation of Uruguay indicate the legal basis of this trade
defence instrument under the WTO?  Has the relevant domestic legislation been notified?
NEW ZEALAND
Why does Uruguay apply special mechanisms in the textile sector, for example?
Answer
Since the Minimum Export Price system was introduced in the early 1980s, Uruguay has been
making amendments to legislation relating to price support and its consequences. Although at the outset
the instrument had no limits in terms of the types of products it covered, as of 1995, following a political
decision to gradually dismantle the system, it came to be applied exclusively to sugar and various textile
products.
In the latter case, the list of products included s hows a clear desire to systematically narrow the
system with a view to eliminating the instrument a nd substituting it with mechanisms for the protection of
trade and safeguards, as provided for under the Urug uay Round.  It should be pointed out, therefore, that
between 1995 and 1997.  The use of minimum prices was steadily decreasing, as shown in the table
below.
Month Year Textiles Clothing Total
01 1995 113 117 230
10 1995 73 88 161
08 1996 68 86 154
04 1997 61 86 147
10 1997 45 63 108
Decree No. 315/993, the summary description of which is given in the Secretariat's Report, lays
down the operation of the system which monitors and minimizes the effects of price distortion.  Minimum
prices - temporary for four months or definitive for a year -  are applied to all third-market goods.
Information referring to the non-confidential activities of the Application Commission is accessible by all
interested parties who can demonstrate that they belong to the sector regulated by the instrument.  The
minimum prices set for made-up products result from an examination of an input-product matrix which
links conversion factors between fabrics and inputs used in producing made-up articles.
Automobiles:  local content
HUNGARY
As Article 5.2 of the TRIMS Agreement states, notified TRIMs have to be eliminated by developing
countries by 1 January 2000.  We also would be intere sted to hear what the Government's plans are with
regard to the notified automotive TRIM.WT/TPR/M/50
Page 59
JAPAN
TRIMS
Uruguay maintains a trade-related investment measur e in the automotive industry which was notified to
the WTO in 1995 (paragraph 142, page 58 of the Secretariat Report).
(1) Have there been any changes in the measure since the notification in 1995?  If any, please
provide the detail of the change of other measures including when the change was made.  Please also
explain how the changed measure conforms to the TRIMS Agreement.
(2) Please explain the timetable and process to eliminate the above TRIM by 1 January 2000.
Answer
Uruguay notified a trade-related investment measure (TRIM) in the automotive sector.  Under
this measure, imported vehicles benefit from a tariff reduction in cases where vehicles or auto parts which
comply with specific requirements laid down in the respective regulation are exported.  Uruguay has kept
the mechanism, having made adjustments which do not alter either its objectives or effect.  MERCOSUR
members are currently discussing the elaboration of a common regime for this sector.
Services;  Financial services – contribution to GDP;  interest rates;  commercial presence; monopoly
elements; telecommunications-competition;  value-added services;  port services; professional services;
tourism
AUSTRALIA
We note that Uruguay has a commitment to the privatization of maritime services.  We also note that
Uruguay will shortly be privatizing one port.  Au stralia would welcome further information on what
plans, if any, the Government of Uruguay has for the further privatization of the ports?
COLOMBIA
Please comment on the statement in the Secretariat Report that "the decline in the financial subsector's
contribution to GDP may signal a decline in Uruguay's traditional role as a financial centre for the
region" (Chapter IV, paragraph 67).
Please comment on the statement in the Secretariat Report that "both public and private banking are
inefficient" and that "these inefficiencies are reflected in high interest rates and wide spreads between
borrowing and lending rates".
HONG KONG, CHINA
It is stated in Uruguay's schedule of specific commitments that commercial presence for banks is subject
to a quantitative limit that in any one year, the number of authorizations for new banks to operate may
not exceed 10% of the number in the immediately pr eceding year.  We would like to know the policy
objective behind this restriction.  Will the Government consider relaxing this limitation?WT/TPR/M/50
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We note that the State Insurance Bank (BSE) holds a monopoly in the provision of insurance for state-
owned enterprises, as well as for accidents and work-related sickness insurance.  We would like to know
whether there is any plan to remove this monopoly.
Uruguay has scheduled in its specific commitments t hat only institutions established as Uruguayan public
limited companies can act as insu rance companies providing motor vehicle, marine aviation and other
transport insurance services and freight insurance.  However, the Secretariat Report seems to indicatethat the relevant law may apply to other insurance se rvices as well.  We should be grateful if Uruguay
could clarify the exact coverage of the law.
We note that basic telecommunication services are monopolized by the State-owned National
Telecommunications Administration (ANTEL).  In 1991, Parliament approved a package allowing the
Government to dismantle several public monopolies, including ANTEL.  However, the privatization of
ANTEL met with strong opposition.  A referendum was held in 1992 and the electorate rejected the
project.  We would like to know whether Uruguay has any plan to privatize ANTEL in the future.
NEW ZEALAND
We note that basic telecommunications services are still a state monopoly in Uruguay, although there is
competition in some sectors.  Does Uruguay plan to introduce competition throughout the
telecommunication sector?
CANADA
Chapter IV, Section (4), subsection (c), paragraphs 92 and 93, state that although basic telecom services
are operated by a state monopoly (ANTEL), certain services may be provided by local and foreign
companies.  These services include mobile cellular telephony, Internet, and other value added services.
There is no independent regulatory body overseeing the practices of this industry and no registry is kept
of foreign companies operating in this sector.  May we know the number and origin of the foreign
companies providing these services?
AUSTRALIA
As a signatory to GATS, Uruguay has made solid progress on the liberalization of its services trade in a
range of areas.  Australia would welcome an indication of what plans Uruguay may have to incorporate
professional services in its comprehensive liberalization programme, including accountancy services,legal services, etc.?
COLOMBIA
The personal services subsector is the second biggest subsector within the services sector, after the
financial subsector.  What type of services does the personal services subsector comprise?
HONG KONG, CHINA
It is stated that port services were privatized in 1992.  We would like to know the general criteria for
obtaining permits to supply port services and the extent to which foreign investors' participation is
allowed.WT/TPR/M/50
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AUSTRALIA
With respect to the provision of port services:
(a) Is a foreign operator required to meet specific criteria, for example, in relation to
licensing, employment and investment?
(b) Do these requirements differ for national operators providing the same services?
Answer
The following are our comments on questions and comments on financial services.
The Secretariat's statement relating to Uruguay's possible decline as a financial sector does not
seem to be backed up by sufficient empirical evidence.  The information available reveals a considerable
increase in non-resident deposits in the Uruguayan banking system over the last few years, growing from
$3.519 billion in December 1995 to $4.220 billion in 1996, and to $4.661 billion in December 1997.
Similarly, there does not seem to have been any decline in the financial sector's share in GDP.
There has been a general increase in other service sectors while new financial activities have beendeveloped, for which relevant data have not been broken down from the information available.  This is
the case of credit card services and activities of the new institutions called AFAPS, which the Secretariat's
Report mentions briefly.
As to interest rates, there are different levels, depending on whether they concern consumer credit
or credit for first-rank corporations, as also happens in financial markets in other countries. Current bankrates for top-drawer corporations in Urugua y are considered to be highly competitive.
With regard to the number of permits accorded to new banking institutions in the Uruguayan
market, it should be noted that, Law No. 13.330 of April 1965 was passed as a result of the serious crisis
which affected the Uruguayan financial system in 1965.  Article 16 of this Law prohibits the setting-up of
financial companies, banks and credit unions, ( cajas populares ), as well as the opening of agencies and
branches, except for those resulting from the merging of  existing entities or the acquisition of agencies or
branches by banks.
Law No. 15.207 of 6 November 1981 repeals the ban on the setting up of new banks and the
opening of agencies and branches provided for in the above-mentioned Law, stipulating that the number
of authorizations for new banks in any one year should not be 10% higher than the number of new banksopened the previous year.
The reasoning behind this Law was that a sudden expansion of the banking network could hinder
or at least not allow for the reasonable and necessary control that the Central Bank exercises over this
activity.  Conversely, this solution would pace the growth rate, facilitating control by the Central Bank of
Uruguay.  In other words, it sought not to overburden the system, again in order to avoid a recurrence of
events which had had serious consequences for the country in the past, jeopardizing public savings.
During the amendment process of the financial intermediation law, succeeded by Law No. 16.327
of 11 November 1992, the possibility of repealing the Article establishing the 10% limit was raised.
However, it was finally maintained as a precautionary measure.WT/TPR/M/50
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As for the insurance sector, it is now open to foreign direct investment.  When most of the
insurance services were opened up to competition, the Uruguayan market displayed dynamic growth, to
the point where there are almost 20 companies now operating and supplying the full range of insurance
services.
There are no plans to dismantle the monopoly of the State Insurance Bank on work-related
accident insurance and purchase of State-owned entities.
Lastly, for a company to provide the full range of  insurance services, the Law requires that it be
established as a Uruguayan public limited company in order to ensure the necessary supervision by the
Insurance and Re-Insurance Superintendency of the Central Bank of Uruguay.
Telecommunications
Following are answers to questions posed by Hong Kong, China, Canada and New Zealand on
telecommunications.
There are no plans to privatize ANTEL in the future.  However, some telecommunications
services are being provided by private firms in competition with ANTEL.  This is particularly the case for
cellular telephony services and value-added telecommunication services.  It also applies to Internet access
services, which are supplied by several private companies.
In cellular telephony, two companies are operating one of the bands in Uruguay.  The first is the
State company – ANTEL – and the other is made up of capital from third countries.
There are ten companies providing Internet access services, most of which are domestic
companies.
Paging services are provided by four companies and two others have been granted the required
permits to operate.  One of them is a United States company.
Discussions are now under way to grant licences for some companies to begin providing data
transmission services or LMDS (Loc al Multipoint Distribution Systems).
As for satellite communication services, several companies, mostly foreign, have applied for
authorization to operate.
Port services
In answer to the questions asked by Hong Kong and Australia on port services, there are no
restrictions on any company to operate and provide port services or any other type of port activity.
Over 100 companies currently operate in the Port of Montevideo, providing different types of
services.  Six or seven of these companies provide stevedoring services.
Decree 413/92, statute of Ports Law No. 16.246, la ys down specific requirements for companies
that wish to operate and provide services in ports.  For a service provider to operate in a port, it must have
the necessary authorization from the Executive Power. To obtain this authorization, all local and foreign
operators must comply with certain requirements relating to fixed assets, capital, insurance, minimumnumber of pay-roll staff, and so on.  The requirements vary according to the different categories of
service.  The four categories are:  containers, general cargo, frozen goods and miscellaneous services.WT/TPR/M/50
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There is no limit on the participation of foreign investors, although companies must be
established as Uruguayan companies.  The National Port Administration (ANP), which oversees these
services, keeps an open register of companies operating in these activities.
Although the ports have not been privatized, the Ports Law liberalized the supply of port services
in Uruguay in a public bid for the supply of such services.  The commercial ports which fall under the
jurisdiction of the ANP are:  Montevideo, Coloni a, Juan Lacaze, Nueva Palmira and Fray Bentos.
Personal services
With regard to personal services, the information provided by the Secretariat is based on data
obtained from the Central Bank of Uruguay.
The Central Bank of Uruguay uses the International Industrial Classification for all Economic
Activities (second revised edition) and relevant data on personal services are included in the wider
category of community, social and personal services and services of Central Government, totalling around
US$4 billion in 1997.
Personal and domestic services, taken individually, exceed US$600 million and include
automobile and motor cycle repairs, shoe and other repairs, small-scale home repairs, dry cleaning and
laundering, domestic services, hairdressers and beauty salons and other personal and home services.
Professional services
In relation to professional services, the current regulatory framework is completely free with
practically no restrictions placed on foreign professionals.  The legislation in force provides mechanisms
for the recognition of qualifications and capacities of foreign professionals.
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