  
 WORLD TRADE  
ORGANIZATION  WT/TPR/OV/10 
15 November 2004 
 
 (04-4850) 
Trade Policy Review Body  
  
OVERVIEW OF DEVELOPMENTS IN THE 
INTERNATIONAL TRADING ENVIRONMENT 
 
Annual Report by the Director-General 
 
1. Introduction 
1. Trade and foreign direct investment (FDI) have  continued to support growth in the world 
economy; indeed, according to the IMF,  growth in real global GDP is expected to be roughly 5% in 
2004
1, its strongest pace for some time.  In particular, for the OECD group of countries, both imports 
and exports of goods and services grew at an annua l rate of around 9% (in real terms) during the 
second quarter of 20042.  Trade has also grown rapidly in most developing countries.  The United 
States and China have accounted for almost half of the increase in world trade and growth during the 
past year or so3.  FDI declined in 2003 (the latest year for which data are available) but that to 
developing countries as a whole rose by 9%, most notably in Africa and Asia.  China is now the leading destination for FDI, followe d by France and the United States.  
2. Strong growth in the United States and China, and their resulting demand for imports has 
provided a stimulus to export-led growth among thei r trading partners during the past few years.  
However, growth in Japan (until very recently) a nd the euro-zone has still been relatively slow, 
thereby contributing to global economic imbalances, in cluding in international tr ade and capital flows.  
China, whose GDP grew by 9.7% annually in the second quarter of 2004
4 and which is now the fourth 
largest trader5, has emerged as a major engine of growth in the world economy, accounting for a large 
share of the increase in international trade.   
3. In September 2004, in its World Economic Outlook (WEO), the IMF raised its 2004 
projections to 5% and forecasts strong growth for the next two years in developed and developing 
countries.  The current recovery, which appears to be  broad-based and robust, is seen by the IMF as 
the result of much improved macroeconomic policies during the past few years6.  While the 
breakthrough in WTO negotiations achieved at th e end of July 2004 should be a source of added 
optimism for the economic recovery and long-term gr owth, several developments impart a degree of 
downside risk to the global economic outlook.   
4. The recent surge in oil prices rema ins a risk, although the anti-in flation credibility of central 
banks is such that this "is likely to prove less c onsequential to economic growth and inflation than in 
the 1970s".7  These breached US$50 a barrel in late September, an increase of nearly US$15 since the 
                                                      
 1 IMF, 2004, World Economic Outlook , September, Chapter 1, p. 1.   
2 OECD Statistics  Available online at: http ://www.oecd.org/dataoecd/55/27/18628014.pdf. 
3 The Economist , "The Dragon and the Eagle", 30 September 2004.    
4 http://www.stats.gov.cn/english/statisti caldata/monthlydata/t20031110_402177688.htm. 
5 WTO, 2004, World Trade Report . 
6 IMF, 2004, World Economic Outlook  September, Chapter 1, p. 6. 
7 Alan Greenspan, "Oil", Remarks to the National Italian American Foundation, Washington, D.C., 
15 October 2004.  Greater central bank credibility in cont rolling inflation is not the only factor that makes the 
trade-off between growth and th e inflationary effects of in creased oil prices less painful.  In particular, the oil 
intensity of production has fallen markedly since the 1970s.  Furthermore, an increasingly integrated global 
economy has fostered increased competition, which reduced the producers' sc ope for raising prices. WT/TPR/OV/10 
Page 2  
 
end of June and more than US$25 since the start of 2002.  According to the International Energy 
Agency (IEA) and OECD, a sustained US$10 increase in  the oil price reduces real GDP growth in 
OECD countries by 0.4 percentage points in  the first and second years of higher prices.
8  T h e  
corresponding GDP losses in Asia and poor highly inde bted countries, respectively, would be 0.8 and 
1.6 percentage points; the loss of GDP in Sub-Sa haran Africa would be more than 3 percentage 
points.  The rise in energy prices could also contri bute to inflationary pressures at a time when some 
central banks have already started to tighten mone tary policy and raise interest rates in order to 
contain such pressures.9 
5. An additional concern is that the effects of the monetary and fiscal policy stimuli in the 
United States on domestic demand may be waning.  In the United States, the main engine of global 
growth during the past few years, the cyclica lly-adjusted budget has gone from a 1.1% surplus in 
2001 to a forecast 3.2% deficit this year10, personal saving fell to 0.9% of  disposable personal income 
in August 200411 and consequently consumers remain h eavily indebted.  The outcome has been 
increasingly large structural trade and current account deficits; related bilateral trade imbalances could 
give rise to protectionist sentiment and constitute an irritant to international trade relations.12  As a 
consequence of the "twin deficits" in the budge t and current account, the United States economy may 
be becoming more vulnerable to internal or external shock.  Such shocks include:  sharp increases in 
oil prices;  lower prices of assets such as housing;  or a change in sentiment on the part of East Asian 
countries, especially Japan and China, making them reluctant to recycle their saving surpluses to the 
United States to finance its large "twin deficits", thus creating the potential for associated destabilising 
reversals in international capital flows.  (In 2003,  China, Japan and other countries in East Asia 
financed over half of the United States' current account deficit13.)  A slowdown in the United States 
could have adverse gl obal repercussions.   
6. There is also the question of a Chinese "soft landing".14  This is generally believed to involve 
growth slowing to 7-8%, substantially less than th e annual rate of 9-11% experienced during the past 
few years.  Even a soft landing could cause some discomfort to China's trading partners.  This is 
especially true in Japan and several other economie s in East Asia, whose economic recoveries have 
depended heavily on exports to China as well as to the United States; a harder landing would be even 
worse.   Needless to say, a slowdown in growth in  China and the United States, the two largest oil 
consumers, would relieve demand pr essure on oil prices (as well as other raw materials) and possibly 
help contain upward pressure on interest rates.   
                                                      
8 International Energy Agency, 2004, "Analysis of the Impact of High Oil Prices on the Global 
Economy", May. 
9 According to the IEA, inflation would rise by ha lf a percentage point in OECD countries and the 
unemployment by 0.1 of a percentage point. 
 10 Data from the U.S. Congressional Budget Office.  Available online at: http://www.cbo.gov/showdoc. 
cfm?index=5802&sequence=2.   
 11 http://www.bea.gov/bea/newsrel/pinewsrelease.htm, 6 October 2004.  
12 Interestingly, the Council of Economic Advisers (2004, p. 257), in last year's Economic Report of the 
President, maintains that " bilateral deficits , such as the U.S. trade de ficit with China, reveal nothing  about 
underlying economic forces in either country".  It goes  on to add that "[W]hile trade barriers are a cause for 
concern, there is no economic sense in which a bilatera l deficit is either good or bad.  It would be an 
extraordinary coincidence if all countries had balanced trade with each of their partners.  One of the benefits of 
the international financial system is that it frees countries from these bilateral constraints;  bilateral deficits and 
surpluses are a natural consequence of a trading world composed of many countries." 
13 IMF, 2004, World Economic Outlook September, Chapter 1, p. 6. 
14 Whereas China's overall trade position is close to ba lance, its investment boom has attracted large net 
inflows of FDI, particularly to export-oriented manufacturing industries.  With a fixed exchange rate in relation to the U.S. dollar, the resulting accumulation of foreign reserves has caused rapid growth in the money supply 
and bank lending, thereby contributing to increased inflation, for example, the CPI index increased by 5.3% 
annually in August 2004.  WT/TPR/OV/10 
 Page 3 
 
 
7. The economic boom in China has played a majo r role in the economic recovery of Japan, 
whose exports to China last year accounted for two-th irds of its total export gr owth and one-quarter of 
its real GDP growth.  If the increase in capital spendi ng by exporters is also taken into account, China 
accounted for between one-third and one-half of Japan's GDP growth15.  With the export-led recovery 
helping to solve Japan's structural problems, a nnualised real GDP growth of 4.2% in the second 
quarter of  2004 has raised hopes that a sustained r ecovery is under way following more than a decade 
of rather disappointing economic performance.  Howe ver, if  domestic demand in Japan (as well as 
some other East Asian countries) is not sufficien tly strong, it will remain vulnerable to economic 
downturns abroad, especially in  the United States and China. 
8. The euro-zone also remains heavily dependent on ex ternal demand.  This is especially true in 
the zone's largest economy, Germany, where growth in consumer demand continues to be sluggish so 
that the recovery is largely export-led.  
9. A further cause for concern is the state of pu blic finances in the six major industrialized 
economies (United States, Japan, Germany, United Kingdom, France and Italy16), where structural 
fiscal deficits and high levels of government debt  (as a proportion of GDP) could be exacerbated over 
the longer term by mounting public expenditures as sociated with their aging populations.  Several 
large developing countries (such as India) are also experiencing difficult fiscal situations17.  
10. Another possible element of downside risk in the IMF's current forecast of world economic 
growth is the state of the financial systems in so me countries, especially in Asia.  Much progress has 
been made in Asian countries, including those hardes t hit by the Asian financial crisis, to strengthen 
their banking systems (with many now achieving cap ital-adequacy ratios well above the 8% required 
by the Bank for International Settlement), although still more needs to be done.  In addition, their 
central banks have amassed some  US$2 trillion in low-yielding foreign exchange reserves as a 
cushion against financial instability.  However, the fa ct that authorities in some of these countries feel 
the need to prevent their currenc ies from rising and to maintain their current account surpluses and 
thereby accumulate such a high level of foreign reser ves suggests that they may not yet be sufficiently 
confident about the ability of their financial system s to withstand sudden reversals in foreign capital 
flows.   
2. Tariffs  
11. As a result of successive rounds of multilateral trade negotiations under the auspices of the 
General Agreement on Tariffs and Trade (GATT) and its successor, the World Trade Organization 
(WTO), tariffs on imported industrial goods have de clined substantially.  Indeed, once commitments 
made under the Uruguay Round (UR), are fully implem ented, the overall import-weighted MFN tariff 
average on such products in industrialized countries will have fallen to less than 4%.  This seemingly 
low current level of tariff protection may give the im pression that tariffs are no longer a major barrier 
to international trade , especially as far as industrial products in industrialized countries are 
concerned, and are not, therefore, a major issue in the DDA.18  However, even in industrialized 
countries, the existence of tariff "peaks" in certain  sectors, notably textiles and clothing as well as 
agriculture, suggest that the associated domestic de ad-weight and net welfare losses caused by tariff 
protection could be high.  Such losses and costs to co nsumers are also likely to be high in developing 
countries, where overall tariff protection tends to be greater than in industrialized countries, thereby constituting not only an impediment to trade between  industrialized and deve loping countries (North-
South trade), but also to trade among developi ng countries (South-South trade).  Additional 
                                                     
 
15 The Economist , "The Sun eventually rises", 30 September 2004. 
16 IMF, 2004, World Economic Outlook, September, Chapter 1, p. 14, Table 1.4. 
17 IMF, 2004, World Economic Outlook, September, Chapter 1, pp. 35 and 38.  
18 Tariffs are not only a barrier to imports, but are also an implicit "charge" on exports to the extent that 
exports comprise imported inputs on which duties are levied. WT/TPR/OV/10 
Page 4  
 
unsatisfactory features of tariffs include the lack of  tariff bindings together with considerable gaps 
between applied  and bound  rates, largely in developing countries, the use of opaque specific (as 
opposed to ad valorem) rates and tariff quotas, and tariff escalation.    
12. Particular attention is focused on the so-calle d "Quad" group of major traders (namely Canada 
the European Communities (EC), Japan and the Unite d States) as these Members' tariffs can have 
serious repercussions for their trading partners, especially developing and least developed countries 
(LDCs).  This is also perhaps true, albeit to a lesser  extent, of tariffs applie d by four major developing 
countries, notably Brazil, China, India, and South Africa.
19  The use of tariffs by the Quad and these 
four developing countries to impede access to thei r markets can lead to welfare losses on a global 
scale as well as domestically, not least because they tend to hamper developing countries' efforts to 
achieve export-led growth.20  These WTO Members also warrant special attention because they play a 
leading role in the current negotiations. 
13. Some simple summary indicators capturing the leve l and structure of tariffs in the Quad are 
reported in Table 1 for 1995, prior to the implementa tion of the UR tariff cuts (or 1996, if data for 
1995 were not available), and for the latest available year.21  They are also reported under full 
implementation of the UR (and the ITA);  the latter indicators are of interest because they provide a 
benchmark for the current WTO nego tiations on tariffs.  The same indicators for China, India, Brazil 
and South Africa are found in Table 2, insofar as data were available.  Tariff indicators for those other 
Members with a Trade Policy Review in 2003/2004, namely Belize, Benin, Burkina Faso, Jamaica, 
the Republic of Korea, Mali, Norway, Rwanda, Si ngapore, Sri Lanka and Switzerland are found in 
Table Annex 1.  
Table 1 
Structure of MFN tariffs in the "Quad" 
(Per cent) 
  United Statesa European Communities Japanb Canada 
    1996 2002 F.B.c1995d2004 F.B.eFY 96 FY 04 F.B.f 1995d 2002 F.B.g
 Bound tariffh                
1. Bound tariff lines (% of all 
tariff lines) 100.0i 100.0i 100.0i .. 100.0 100.0 98.9 98.9 98.9 .. .. 99.7 
2. Simple average bound rate .. .. 4.6 .. 6.5 6.3 10.3 6.4 6.4 .. .. 8.4 
 Agricultural products  
(HS01-24) .. .. 8.1 .. 16.7 16.3 .. 16.8 16.8 .. .. 23.1 
 Industrial products (HS25-97) .. .. 4.0 .. 3.7 3.6 .. 3.9 3.9 .. .. 5.8 
 WTO agricultural products .. .. 8.3 .. 16.6 16.3 .. 18.4 18.4 .. .. 24.4 
 WTO non-agricultural 
products .. .. 4.0 .. 4.1 4.0 .. 3.7 3.7 .. .. 5.7 
 Textiles and clothing .. .. 9.0 .. 8.0 8.0 9.8 6.7 6.7 .. .. 12.2 
3. Tariff quotas (% of all tariff 
lines) .. .. 1.9 .. 3.3 3.3 1.6 1.6 1.6 .. .. 2.2 
4. Duty free tariff lines (% of all tariff lines) .. .. 37.6 .. 26.8 28.0 .. 40.9 40.9 .. .. 29.7 
5. Non-ad valorem tariffs (% of 
all tariff lines) .. .. 10.8 .. 9.9 10.1 .. 6.3 6.3 .. .. 5.1 
Table 1 (cont'd)
                                                      
19 Since acceding to the WTO in 2 001, China has overtaken Canada to become the world's fourth 
largest trader. 
20 There is a theoretical possibility that export growth might reduce economic welfare if such growth 
leads to a deterioration in the exporting country's terms of trade that is sufficiently strong to more than offset the primary gain from growth, a phenomenon known as "immiserizing" growth, which is rarely observed in 
practice.  (See Bhagwati, Jagdish, 1958, "I mmiserizing Growth:  A Geometrical Note", Review of Economic 
Studies  25, pp. 201-205). 
21 The methodology used to construct these tariff indicators is outlined in Daly, Michael, and 
Hiroaki Kuwahara, 1998, "The Impact of the Uruguay Round on Tariff and Non-Tariff Trade Barriers in the 
Quad", The World Economy  21(1), pp. 207-234.   WT/TPR/OV/10 
 Page 5 
 
 
  United Statesa European Communities Japanb Canada 
    1996 2002 F.B.c1995d2004 F.B.eFY 96 FY 04 F.B.f 1995d 2002 F.B.g
6. Non-ad valorem tariffs with 
no AVEs (% of all tariff lines) .. .. 0.2 .. 2.7 3.5 .. 1.5 1.5 .. .. 0.2 
7. Nuisance bound rates (% of all tariff lines)
j .. .. 6.7 .. 6.8 6.4 .. 1.0 1.0 .. .. 1.1 
 Applied tariff                
8. Simple average applied rate 6.4 5.1 n.a. 10.2 6.5 n.a. 9.0 6.3 n.a. 13.2 6.8 n.a. 
 Agricultural products  
(HS01-24) 10.0 9.5 n.a. 23.7 16.6 n.a. .. 16.1 n.a. 28.6 21.2 n.a. 
 Industrial products (HS25-97) 5.7 4.2 n.a. 6.6 3.7 n.a. .. 3.8 n.a. 10.5 4.2 n.a. 
 WTO agricultural products 10.3 9.8 n.a. 24.5 16.5 n.a. .. 17.7 n.a. 30.3 21.7 n.a. 
 WTO non-agricultural 
products 5.7 4.2 n.a. 6.9 4.1 n.a. .. 3.7 n.a. 10.4 4.2 n.a. 
 Textiles and clothing 11.5 9.7 n.a. 10.4 8.0 n.a. 8.7 6.7 n.a. 18.4 9.9 n.a. 
9. Domestic tariff "peaks" (% of 
all tariff lines)k 4.0 5.3 n.a.     
4.0  5.8 n.a. .. 6.4 n.a. 1.4 1.6 n.a. 
10. International ta riff "peaks" (% 
of all tariff lines)l 8.9 6.3 n.a.     
11.0  8.6 n.a. .. 7.4 n.a. 17.0 9.8 n.a. 
11. Overall standard deviation of 
tariff rates 13.4 13.2 n.a. 16.5 11.5 n.a. 40.8 23.2 n.a. 30.0 24.4 n.a. 
12. Coefficient of variation of 
tariff rates 2.1 2.4 n.a. 1.6 1.8 n.a. .. 3.7 n.a. 2.3 3.6 n.a. 
13. Tariff quotas (% of all tariff 
lines) 1.9 1.9 n.a. 3.3 3.3 n.a. 1.6 1.6 n.a. 2.2 2.2 n.a. 
14. Duty free tariff lines (% of all 
tariff lines) 18.2 31.2 n.a. 9.4 26.9 n.a. 34.9 41.6 n.a. 18.2 49.0 n.a. 
15. Non-ad valorem tariffs (% of 
all tariff lines) 14.1 12.1 n.a. 10.2 9.9 n.a. 7.1 6.6 n.a. 7.4 3.9 n.a.  
16. Non-ad valorem tariffs with 
no AVEs (% of all tariff lines) 3.1 0.0 n.a. 2.0 2.7 n.a. .. 1.4 n.a. 5.8 0.5 n.a. 
17. Nuisance applied rates (% of 
all tariff lines)j 8.9 12.6 n.a. 1.0 6.8 n.a. .. 1.1 n.a. 1.2 2.2 n.a. 
 
.. Not available. 
F.B. Final bound. n.a. Not applicable. 
a The United States levies its ad valorem  duties on the basis of  the "f.o.b." ("free on Boar d") price, thereby excluding the costs of insurance and 
freight.  By contrast, most other WTO Members, including the EC, Japan and Canada, levy ad valorem  import duties on the "c.i.f." price, which 
includes these costs.  As the c.i.f. price exceeds the f.o.b. price by the amount of insurance and freight costs, a tariff levi ed on the f.o.b. price affords 
less protection than one levied at the same rate on the c.i.f. price. 
b Based on fiscal years. c Based on 1998 tariff schedule. d Pre-Uruguay Round tariff. e Based on 1999 tariff schedule. f Based on FY 2004 tariff schedule. g Based on 2000 tariff schedule. 
h Calculations are only based on bound tariffs. 
i Two lines, applying to crude petroleum, are not bound. j Nuisance rates are those greater than zero, but less than or equal to 2%. k Domestic tariff peaks are defined as th ose exceeding three times th e overall simple average ap plied rate (indicator 8). 
l International tariff peaks are defined as those exceeding 15%. 
 
Note:  
All calculations exclude "in-quota" rates.  Ad valorem  equivalents (AVEs) of non- ad valorem  duties are used insofar as they are 
 available.  Where AVEs are not available, the ad valorem  tariff component is used for compound and alternate rates. 
Source : WTO Secretariat calculations, based on data provided by the Members. WT/TPR/OV/10 
Page 6  
 
Table 2 
Structure of MFN tariffs in selected developing countries 
(Per cent) 
  China Brazil India South Africa 
    1996 2002 F.B.a 2000 2004 F.B.b 1997/98 2001/02 F.B.c 1997 2002 F.B.d 
 Bound tariffe                 
1. Bound tariff lines (% of all tariff lines)e n.a. 100.0 100.0 100.0 100.0 100.0 67.0 73.3 73.3 96.3 96.2 96.3 
2. Simple average bound rate .. 12.4 9.9 .. .. 30.2 .. .. 50.6 .. .. 20.9 
 Agricultural products (HS01-24) .. 17.9 14.5 .. .. 35.8 .. .. 115.7 .. .. 46.8 
 Industrial products (HS25-97) .. 11.4 9.1 .. .. 29.5 .. .. 37.7 .. .. 18.1 
 WTO agricultural products .. 18.2 15.2 .. .. 35.3 .. .. 114.7 .. .. 43.5 
 WTO non-agricultural products .. 11.5 9.0 .. .. 29.6 .. .. 36.2 .. .. 18.1 
 Textiles and clothing .. 17.6 11.5 .. .. 34.7 .. .. 29.9 .. .. 26.8 
3. Tariff quotas (% of all tariff lines) .. 0.8 0.8 .. .. 0.0 .. .. .. .. .. 3.9 
4. Duty free tariff lines (% of all tariff 
lines) .. 4.3 7.6 .. .. 0.7 .. .. 0.3 .. .. 10.2 
5. Non-ad valorem tariffs (% of all tariff 
lines) .. 0.0 0.0 .. .. 0.0 .. .. 6.4 .. .. 0.0 
6. Non-ad valorem tariffs with no AVEs 
(% of all tariff lines) .. 0.0 0.0 .. .. 0.0 .. .. 6.4 .. .. 0.0 
7. Nuisance bound rates (% of all tariff 
lines)f .. 1.9 2.4 .. .. 0.0* .. .. 0.0 .. .. 0.0 
 Applied tariff                 
8. Simple average applied rate 23.6 12.3 n.a. 13.7 10.4 n.a. 35.3 32.3 n.a. 15.0 11.4 n.a. 
 Agricultural products (HS01-24) 35.4 18.0 n.a. 12.9 10.4 n.a. 33.8 41.7 n.a. 11.3 11.5 n.a. 
 Industrial products (HS25-97) 21.7 11.3 n.a. 13.8 10.4 n.a. 35.6 30.8 n.a. 15.4 11.4 n.a. 
 WTO agricultural products 33.8 18.2 n.a. 12.6 10.2 n.a. 35.2 40.7 n.a. 9.4 9.6 n.a. 
 WTO non-agricultural products 22.1 11.3 n.a. 13.8 10.5 n.a. 35.4 31.0 n.a. 15.7 11.6 n.a. 
 Textiles and clothing 32.8 17.5 n.a. 20.3 17.2 n.a. 43.7 31.3 n.a. 35.1 24.4 n.a. 
9. Domestic tariff "peaks" (% of all tariff 
lines)g 1.1 1.8 n.a. 0.0 0.6 n.a. 0.2 1.3 n.a. 4.0 3.9 n.a.  
10. International tariff "peaks" (% of all 
tariff lines)h 55.2 17.2 n.a. 41.3 26.8 n.a. 90.5 96.8 n.a. 39.4 34.9 n.a. 
11. Overall standard deviation of tariff rates 17.4 9.1 n.a. 6.7 7.0 n.a. 14.5 13.0 n.a. 17.8 12.6 n.a. 
12. Coefficient of variation of tariff rates 0.7 0.7 n.a. 0.5 0.7 n.a. 0.4 0.4 n.a. 1.2 1.1 n.a. 
13. Tariff quotas (% of all tariff lines) .. 0.8 n.a. 0.0 0.0 n.a. .. .. n.a. 4.2 3.8 n.a. 
14. Duty free tariff lines (% of all tariff 
lines) 1.9 4.8 n.a. 1.5 10.4 n.a. 1.4 1.1 n.a. 42.4 43.4 n.a. 
15. Non-ad valorem tariffs (% of all tariff 
lines) 0.0 0.7 n.a. 0.0 0.0 n.a. 0.2 5.3 n.a. 25.6 25 n.a. 
16. Non-ad valorem tariffs with no AVEs 
(% of all tariff lines) 0.0 0.7 n.a. 0.0 0.0 n.a. 0.2 5.3 n.a. 25.6 25.0 n.a. 
17. Nuisance applied rates (% of all tariff 
lines)f 1.0 1.9 n.a. 0.8 15.1 n.a. 0.0 0.0 n.a. 0.2 0.0* n.a. 
 
.. Not available. 
n.a. Not applicable. 
* Negligible. F.B. Final bound. 
 
a Based on 2002 tariff schedule. b Based on 2004 tariff schedule. 
c Based on 2001/02 tariff schedule.  Averages do not include lin es where different parts of the HS six-digit line were bound at  
different rates. 
d Based on 2001 tariff schedule. 
e Calculations are only based on bound tariff lines .  Including fully bound and partially bound rates. 
f Nuisance rates are those greater than zero, but less than or equal to 2%. 
g Domestic tariff peaks are defined as those exceeding three ti mes the overall simple average applied rate (indicator 8). 
h International tariff peaks are defined as those exceeding 15%. 
 Note: Excluding in-quota rates.  Calculati ons exclude specific rates and include the ad valorem  part for compound and alternate rates. 
 
Source : WTO Secretariat calculations, base d on data provided by Members.  WT/TPR/OV/10 
 Page 7 
 
 
Bound MFN tariffs 
14. Tariff bindings are a key element of trade lib eralization as they reduce the uncertainty 
concerning Members' trade regimes.  In addition to  achieving higher levels of  bindings on industrial 
products, all Members bound virtually all their tariff lines on agricultural items as a result of the WTO 
Agreement on Agriculture.  The Quad have bound cl ose to 100% of all their tariff lines.  Full 
implementation of UR commitments will result in  relatively low simple average bound rates for 
industrial products in de veloped countries, although wide diffe rences exist across products.  While the 
simple average of bound MFN rates under the UR will be in the range of 4.6% in the United States to 
8.4% in Canada, the average for agricultural pro ducts is two to five times higher than that for 
industrial products.  As regards industrial products, bound rates are among the highest for textiles and 
clothing, with the post-UR average ranging from 6.7%  in Japan to 12.2% in Canada.  Whereas Brazil, 
China, and South Africa have also bound most, if not all, of their tariff lines, India has bound less than 
three quarters.  Final average bound rates (once th e UR commitments are fully implemented) range 
from nearly 10% in China to over 50% in India.  
Applied MFN tariffs 
15. Applied MFN tariffs in the Quad are generally at , or close to, bound rates.  The average for all 
products in 2002 ranged from 5.1% in the United Stat es to 6.8% in Canada;  the average for the Quad 
was 6.2%.  However, these low average applied ta riff levels disguise the fact that agricultural 
products and textiles and clothing, respectively, are subject to much higher average rates of 16.4% 
and 8.6%.  These applied (as well as bound) MFN aver ages tend to underestimate the overall level of 
tariff protection.  In particular, they do not include certain specific duties for which ad valorem  
equivalents (AVEs) are not available;  such duties tend to conceal tariff "peaks".   In the EC and 
Japan, for example,  AVEs were not available fo r 2.7% and 1.5% of tariff lines subject to non- ad 
valorem  duties (Table 1).  
16. Tariffs tend to be much higher in developing countries;  for example, the average applied 
MFN tariff rate for China (2002) was 12.3%, albeit ro ughly half the level in 1996 (Table 2).  By the 
time its commitments are fully implemented, Chin a's average bound rate will be 9.9%, which means 
that applied rates will need to be brought down to at  most this level.  The average applied MFN tariff 
rates in Brazil (2004) and South Africa (2002), respec tively, were 10.4% and 11.4%.  By contrast, the 
average in India (2001/02) was 32.3%, one of the highest among developing countries.22  Whereas in 
entering China and India, imports of agricultural prod ucts face tariffs that are on average considerably 
higher than those applied to non-agricultural pr oducts, in Brazil and South Africa, agricultural 
products are subject to roughly the same or even lowe r tariffs than those applied to non-agricultural 
products.  China, Brazil and South Africa, unlike Indi a, also levy relatively high tariffs on textiles, 
clothing and footwear.   
17. One possibly important reason for such high appl ied MFN tariff rates in India and some other 
developing-country Members is the fact that tariffs are also a major source of tax revenue.  It follows 
that tariff reform can have importa nt revenue implications in such countries and reductions in average 
applied tariffs depend heavily on tax reforms aimed at reducing relia nce on border taxes for 
revenues.23  However, the possible fall in the revenues resulting from across-the-board cuts in applied 
tariff rates can be mitigated by the elimination of exemptions and other concessions in Members' 
tariffs; moreover, to the extent that broad cuts in a pplied tariffs are reflected in lower domestic prices 
for imported products, the amount of revenue collected (from the tariff and internal indirect taxes) 
could rise insofar as demand for such products is sufficiently responsive.  Financial support (from 
                                                      
22 The simple average MFN rates do not include any ex emptions or concessions that are also offered  
on an MFN basis and may significantly  lower the effective tariff rate. 
23 WTO negotiations concerning cuts in tariffs involve bound MFN rates only; such cuts would affect 
tariff revenues only insofar as they lead  to reductions in applied rates.   WT/TPR/OV/10 
Page 8  
 
institutions such as the IMF or World Bank) might perhaps help developing countries to manage any 
loss of tax revenues arising from cuts in applied tari ffs.  A broad-based VAT would, in most cases, be 
a far less distorting source of tax revenue than tariff s, provided the administrative obstacles to such a 
tax can be overcome. 
18. Applied MFN tariffs are often well below bound  rates in developing countries, including 
India, Brazil and South Africa (but not China), thus providing considerable scope for applied tariffs to 
be raised and thereby imparting a degree of unpredictab ility to the tariff.  This gap is the result of two 
factors:  the negotiation of ceiling bindings a nd unilateral reductions in applied tariffs.   
19. So-called "nuisance" tariffs (whose applied ra tes exceed zero, but are no more than 2%)
24 
involve as many as 12.6% of all tariff lines in the United States and 6.8% in the EC, but only 1.1% in 
Japan.  In Brazil, they cover 15.1% of all tariff lines .  By contrast, in China, such tariffs cover only 
1.9% of all tariff lines and are negligible in India and South Africa.  
Tariff dispersion and "peaks" 
20. Efficiency losses associated with tariffs depend not just on average applied MFN levels, but 
also on the dispersion in rates across products. For an y given average tariff, the greater the dispersion 
in rates, the greater the likelihood that consumers' and producers' decisions are distorted by the tariff 
structure.  Among the Quad, applied MFN tariff ra tes three or more times the national average 
(domestic "peaks") continue to protect certain se ctors from imports.  These "peaks" cover from 1.6% 
of tariff lines in Canada to between 5.3% and 6.4%  in the United States, the EC, and Japan.  By and 
large, tariff "peaks" are concentrated  in agriculture and food products, partly due to "tariffication", as 
well as textiles and clothing, which tend to be labour  intensive (Chart 1).  Many of these products are 
of major export interest to developing countries;   indeed, LDCs' exports are disproportionately 
affected by tariff "peaks" in the Quad.25  Appropriately, the problem of tariff "peaks" features 
prominently in the DDA.  In most developing (and le ast developed) countries, domestic tariff "peaks" 
tend to be less pervasive, largely due to these countries ' higher overall levels of tariff protection.  In 
China, for example, such "peaks" cover only 1.8% of tariff lines.  In South Africa, the proportion is 
3.9%, while they are negligible in India (1.3 %) and Brazil (0.6%).  Although "peaks" in these 
countries do arise in agriculture and food products as well as textiles and clothing, they are less pronounced than in the Quad (Chart 2). 
                                                     
 
24 There is no agreed WTO definition of "nuisance" tariffs. 
25 The value of Quad imports subject  to international tariff "peaks" (that is, rates exceeding 15%) was 
nearly US$93 billion in 1999, roughly 60% of which origin ated in developing countries.  This represents about 
5% of  developing countries' total e xports to the Quad.  LDCs exports to the Quad subject to  "peaks" accounted 
for 15% to 30% of LDC's total exports to the United States, EC and Canada.  Up to US$22 billion of tariff revenue may be collected by Quad Members on those imports subject to such "peaks";  half of this amount is 
contributed by developing country exporters, and LDC exporters may pay up to US$200 million in tariff 
revenue notwithstanding their tariff preferences (See Francis Ng and Mar celo Olarreaga, 2002, "Tariff Peaks 
and Preferences" in B. Hoekman, A. Mattoo and P. English (editors), Development, Trade and WTO  (The World 
Bank)).  This situation may well have changed somewhat owing to unilateral preferences accorded by the 
United States and the EC, respectively, under AGOA and EBA.   WT/TPR/OV/10 
 Page 9 
 
 
0% 10% 20% 30% 40% 50% 60%212019181716151413121110987654321Chart 1
Simple average MFN tariff rates for the "Quad", by HS Section
HS Section
Calculations include AVEs where available;  where they are not available, the  ad valorem  part is used for 
alternate and compound rates.  Excluding in-quota rates.WTO Secretariat calculations, based on information provided by Members.Note:
Source : Canada 2002Japan 2004/05United States 2002
European Communities 2004
01 Live animals and prods       
02 Vegetable products03 Fats and oils      04 Prepared food, etc.
05 Mineral products
06 Chemicals and prods07 Plastic and rubber
08 Hides and skins09 Wood and articles10 Pulp, paper, etc.
11 Textiles and articles
12 Footwear, headgear, etc.13 Articles of stones
14 Precious stones, etc.15 Base metals and prods16 Machinery, etc.
17 Transport equipment
18 Precision instruments19 Arms and ammunition
20 Miscellaneous manufs21 Works of art, etc.
 
 WT/TPR/OV/10 
Page 10  
 
0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 55% 60% 65% 70%212019181716151413121110987654321Chart 2
Simple average MFN tariff rates for selected developing countries, by HS section
HS Section
Calculations exclude specific duties and include the ad valorem  part for alternate and compound rates.  
Excluding in-quota rates.
WTO Secretariat calculations, based on information provided by the Members.Note:
Source : 01 Live animals and prods       
02 Vegetable products
03 Fats and oils      04 Prepared food, etc.05 Mineral products
06 Chemicals and prods07 Plastic and rubber
08 Hides and skins
09 Wood and articles10 Pulp, paper, etc.11 Textiles and articles
12 Footwear, headgear, etc.13 Articles of stones
14 Precious stones, etc.
15 Base metals and prods16 Machinery, etc.17 Transport equipment
18 Precision instruments19 Arms and ammunition
20 Miscellaneous manufs
21 Works of art, etc.South Africa 2002Brazil 2004India 2001/02China 2002
 
  WT/TPR/OV/10 
 Page 11 
 
 
21. In general, a movement towards lower and more  uniform tariffs in de veloped and developing 
Members alike would tend to improve resource allocation and thereby raise economic welfare.26  High 
and disparate tariffs foster inefficiency by pe nalizing efficient activities, including exports; by 
promoting a high-cost economy, they impair the comp etitiveness of exporters.  Border taxes levied on 
imports are, in effect, shifted onto exports.  Reducing tariff dispersion will tend to reduce these 
adverse effects.   
22. It is estimated that if Quad Members were  to accord LDCs duty-free access for products 
subject to tariff "peaks", LDCs' exports to these ma jor markets would rise by between 30-60%, or by 
as much as US$2.5 billion;  the latter is equivalent  to an 11% increase in LDCs' total exports .27  Part 
of this increase in LDCs' exports would be at  the expense of other developing countries. 
Non- ad valorem  tariff rates 
23. Tariff "peaks" are often concealed by non- ad valorem  rates28, an important feature of the 
Quad Members' tariff schedules.29  This is particularly true for agricultural products, especially in the 
United States and the EC, where specific rates account for 12.1% and 9.9% of tariff lines, respectively, and will remain so even once the UR is fully implemented.
30  This is partly the 
consequence of the "tariffication" of agricultural NT Bs, which were largely c onverted into specific or 
mixed31 duties, rather than into pure ad valorem  tariffs, and often combined with quotas.  Non- ad 
valorem  rates are also an important feature of the tari ffs of India and especially South Africa, although 
in the latter they are expected to disappear once the UR is fully implemented.  By contrast, the tariffs 
of China and Brazil appear to be relatively transparen t in this regard, with only 0.7% of all tariff lines 
subject to non- ad valorem  rates in China and none in Brazil.  
24. Specific duties also tend to distort domestic production patterns more than ad valorem  tariffs 
do, providing disparate levels of assistance for si milar goods by taxing imports of cheaper products 
more heavily;  this encourages domestic firms to  produce cheaper goods that have higher protection 
from imports.  To the extent that developing coun tries are exporters of relatively cheap products 
falling within the same national tariff line, such  duties tend to impose a heavier burden on their 
exports;  specific duties thus tend to a fford higher levels of tariff protection (in ad valorem  terms) 
against imports from developing countries than from industrialized countries. Specific duties may also 
be more regressive than ad valorem  duties because they impose a heavier burden on cheaper products 
within the same tariff line.  Furthermore, as ad valorem  equivalents (AVEs) are inversely related to 
import prices, specific duties progressively cush ion domestic producers against competition from 
lower-priced imports, thereby counteracting cuts in sp ecific rates.  Consequently, they counteract the 
relative price effects of exchange rate changes on c ountries' trade balances.  The use of specific duties 
can lead to an increase in real tariff protection as the prices of traded goods decline (and to a fall in 
real protection as prices increase).  Interestingly, Members have agreed in the framework of 
                                                      
26 Strictly speaking, a uniform, non-zero nominal tariff minimizes the net welfare cost of such 
protection only if import demand elasticities are unifo rm across commodities and cross-price effects are 
negligible.  Tariff uniformity may be desirable on admi nistrative simplicity and political grounds, however.  
Chile and Mongolia provide examples of Members with low and quasi-uniform tariffs. 
27 Hoekman, Bernard, Francis Ng and Marcelo Olarre aga, 2002 "Reducing Agriculture Tariffs Versus 
Domestic Support:  What's More Important to Developing Countries?", CEPR Discussion Paper No. 3576. 
28 The simple average of ad valorem  equivalents (AVEs) for specific duties is 2½ to 20 times the 
simple average of ad valorem  duties in the Quad. 
29 Norway and particularly Switzerland also rely heavily on specific duties; indeed, all Switzerland's 
duties are specific. 
30 To the extent that specific rates do conceal ta riff "peaks" and estimates of their AVEs are not 
available, as in the EC, Japan, Canada, China, India and South Africa, the indicators of both the levels of tariff protection and the dispersion in rates are underestimated.  
31 Mixed (or alternative) tariff rates ensure a minimum (or maximum) level of protection through a 
choice between an ad valorem  rate and a specific rate, e.g., 15% or US$5 per kilo, whichever is more (or less).  WT/TPR/OV/10 
Page 12  
 
negotiations concerning non-agricultural market acc ess that duties on non-agricultural products shall 
be "bound in ad valorem  terms". 
Tariff quotas 
25. In consequence of the UR, and especially the "t ariffication" of agricultural NTBs, tariff rate 
quotas as a proportion of all tariffs increased consider ably in the United States, Japan and Canada; 
they were already significant in the EC prior to  the UR.  Thus, tariff quotas will account for between 
1.6% of tariff lines in Japan to 3.3% in the EC , once UR commitments are fully implemented.  By 
contrast, the tariffs of China and Brazil contains fe w, if any, tariff quotas.  "Out-of-quota" rates (and 
even "in-quota" rates) in the Quad, often entail potentially prohibitive tariff "peaks". Tariff rate quotas 
were designed to take into account "current access"  prior to the "tariffication" process and necessary 
to administer minimum access requirements under the UR.  However, they have left considerable 
scope for discretion in the allocation of "in-quot a" volumes, thereby retaining a number of the 
drawbacks associated with previous  quantitative restrictions, reducing the benefits of "tariffication".
32   
Tariff escalation 
26. A non-uniform tariff is often used to provide an  "escalating" degree of tariff protection to 
encourage downstream processing.  This may be attempted by levying relatively low duties on raw 
materials with progressively higher tariffs applied to  more processed goods.  The outcome is that the 
level of effective  protection increases as goods undergo further processing.33  Indeed, what may be 
mild escalation in nominal tariff terms can provide ve ry high effective (net) assistance to downstream 
activities.  Tariff escalation (often reflecting tariff "p eaks") is a feature of industrial-product tariffs in 
the Quad (Table 3).  Such escalation is present in th e same sectors that are affected by "peaks", most 
notably textiles and clothing, food, beverages a nd tobacco, and non-metallic mineral products.  Tariff 
escalation is also a feature of the tariffs of China, Brazil, South Africa and, to a lesser extent, India, 
especially in the case of textiles and clothing (T able 4).  Not only is tariff escalation a potential 
impediment to the efficient allocation of resources in the importing country, it also constitutes an obstacle to local processing of domestically-produ ced primary products as well as of semi-finished 
goods in the exporting country;  consequently, it can  impede the industrialization of developing 
countries and LDCs seeking to export products with hi gher value-added, if not mitigated by the GSP 
or other preferences.
34 
                                                      
32 Information regarding tariff rate quota (TRQ) "utili zation rates" and "administration" systems may be 
found in WTO documents TN/AG/S/2, TN /AG/S/5, TN/AG/S/6 and TN/AG/S/9. 
33 The effective rate of protection (ERP) measures the protection provided by the entire structure of 
tariffs, taking into account those levied on inputs as well as those on final products.  It is defined as ERP = (V D – 
VW)/V W, where V D is the value-added in the given sector at domestic prices, which includes tariffs, and V W is 
value added at world prices.   If the nominal tariff on the final product is t, the share of each imported input i in 
the total value of the final product is ai, and the nominal tariff on each imported input is ti, then the effective rate 
of protection can be written as:  ERP = ( t - Σaiti)/(1 - Σai).   Thus, if  t = 10%, ti  = 5% for all inputs and Σai = 
0.6, the ERP is nearly 20%.  For a full discussion of  this concept, see Corden, W.M., 1971, The Theory of 
Protection , London:  Oxford University Press. 
34 In principle, LDCs will not face any tariff escala tion once they are granted "duty-free and quota-free 
access" to the markets of developed coun tries, provided they can comply w ith associated preferential rules of 
origin.  WT/TPR/OV/10 
 Page 13 
 
 
Table 3 
Tariff escalation in the "Quad" by 2-digit ISIC industry 
(Per cent) 
  United States EC15 Japan Canada 
    2002 2004 2004/05 2002 
Food beverages and tobacco First st age of processing 3.1 14.6 12.6 10.2 
    Semi-processed 7.4 19.2 21.4 6.8 
 Fully processed 12.4 19.3 20.2 34.1 
Textiles and leather First stage of processing 2. 9 0.8 24.3 1.1 
 Semi-processed 9.1 6.2 6.5 6.9 
 Fully processed 10.0 9.2 11.4 13.5 
Wood and furniture First stage of processing 0.1 0.0 0.0 0.0 
 Semi-processed 2.1 3.1 4.3 2.1 
 Fully processed 2.2 2.1 2.1 5.1 
Paper, printing and publishing First stage of processing 0.0 0.0 0.0 0.0 
 Semi-processed 0.5 0.9 0.3 0.4 
 Fully processed 0.6 0.0 0.0 1.0 
Chemicals First stage of processing 1.9 1.5 2.4 1.5 
 Semi-processed 4.3 4.7 2.8 3.0 
 Fully processed 3.9 3.9 2.0 4.8 
Non-metallic mineral products First st age of processing 0.0 0.0 0.0 0.0 
 Semi-processed 2.1 2.9 1.5 0.7 
 Fully processed 5.6 4.1 1.1 3.8 
Basic metal First stage of processing 0.4 0.0 0.4 0.0 
 Semi-processed 1.7 1.3 0.8 0.9 
 Fully processed 2.5 0.0 3.0 3.7 
Fabricated metal products and 
machinery Semi-processed 2.7 1.6 1.5 1.5 
 Fully processed 2.2 2.5 0.3 2.6 
Other First stage of processing 1.6 1.2 0.2 1.2 
 Semi-processed 0.4 0.0 0.0 0.0 
 Fully processed 3.6 2.7 2.5 4.8 
Total industry First stage of processing 2.3 8.6 10.3 3.9 
 Semi-processed 4.7 4.8 4.7 3.9 
 Fully processed 5.5 7.0 7.2 8.9 
Overall escalation First stage of processing 3.8 8.4 7.4 4.8 
 Semi-processed 4.7 4.8 4.7 3.9 
 Fully processed 5.5 7.0 7.2 8.9 
 
Note: For countries with non- ad valorem  rates AVEs have been used as ava ilable.  In case of unavailability, the ad valorem  part is used 
for compound and alternate rates.  Excluding in-quota rates. 
 
Source : WTO Secretariat calculations, base d on data provided by Members. WT/TPR/OV/10 
Page 14  
 
Table 4 
Tariff escalation in China, Brazil, India and South Africa, by 2-digit ISIC industry 
(Per cent) 
  China Brazil India South Africa 
    2002 2004 2001/02 2002 
Food beverages and tobacco First st age of processing 15.3 8.1 36.3 10.7 
    Semi-processed 28.1 11.2 36.6 10.3 
 Fully processed 21.5 13.5 48.2 15.4 
Textiles and leather First stage of processing 13. 0 8.3 25.9 5.0 
 Semi-processed 15.1 15.6 28.4 22.1 
 Fully processed 20.4 19.1 34.2 32.4 
Wood and furniture First stage of processing 0.0 2.0 12.5 0.0 
 Semi-processed 5.7 7.3 31.1 6.2 
 Fully processed 11.8 14.7 34.8 15.5 
Paper, printing and publishing First stage of processing 0.0 3.6 7.1 0.0 
 Semi-processed 8.4 12.1 34.7 5.9 
 Fully processed 11.5 11.9 29.4 7.7 
Chemicals First stage of processing 7.1 6.8 25.8 3.7 
 Semi-processed 7.2 6.3 33.6 3.5 
 Fully processed 10.7 6.6 33.5 7.9 
Non-metallic mineral products First st age of processing 2.3 6.0 33.0 0.0 
 Semi-processed 10.7 7.3 34.1 4.9 
 Fully processed 15.1 11.1 34.1 7.1 
Basic metal First stage of processing 2.8 2.4 23.8 0.0 
 Semi-processed 5.3 9.6 33.0 3.2 
 Fully processed 13.1 16.0 35.0 2.9 
Fabricated metal products and 
machinery Semi-processed 6.8 13.7 19.0 1.7 
 Fully processed 11.2 13.0 29.1 5.2 
Other First stage of processing 14.5 8.6 35.0 2.5 
 Semi-processed 8.9 12.0 35.0 4.3 
 Fully processed 17.1 17.3 33.4 7.3 
Total industry First stage of processing 11.3 7.2 28.1 5.5 
 Semi-processed 9.7 8.5 32.3 12.9 
 Fully processed 14.0 12.5 33.0 11.2 
Overall escalation First stage of processing 11.2 6.7 29.4 4.7 
 Semi-processed 9.7 8.5 32.3 12.9 
 Fully processed 14.0 12.5 33.0 11.2 
 Note: Calculations exclude specific rates and include the ad valorem  part for compound and alternate rates.  Excluding in-quota rates. 
 
Source : WTO Secretariat calculations, based on data provided by the Members. 
GSP and similar preferences for develo ping and least developed countries 
27. Applied tariff rates may be lower than MFN rates owing to non-reciprocal preferences 
granted to developing countries under the Gene ralized System of Preferences (GSP) and 
supplementary preferences for LDCs.  Such pr eferences are prominent forms of special and 
differential (S&D) treatment aimed at increasing the export opportunities of developing and least 
developed countries.  
28. Under the GSP, developed countries discrimin ate in favour of qualifying developing ones by 
granting them non-reciprocal tariff reductions belo w MFN rates for certain products.  For example, 
average GSP rates are 3.7% in the United States, 4.5%  in the EC, 5.1% in Japan and 5.4% in Canada 
(Table 5), 1.2 to 2 percentage points lower th an the corresponding averag e applied MFN rates.  
Recent Trade Policy Reviews of other major providers of GSP preferences show that the differentials 
between MFN and GSP rates are considerably smalle r for "sensitive sectors", such as agriculture and  WT/TPR/OV/10 
 Page 15 
 
 
textiles and clothing, both of which are frequently excluded from GSP and other unilateral preferences 
(see also section (4) below). 
29. This exception to MFN treatment under the GATT was authorised through a ten-year waiver 
in 1971 and given permanent legal status in 1979 through the "Enabling Clause" of the Tokyo Round 
agreements.  Such preferences are perceived to e nhance the ability of developing countries' exporters 
to compete in developed countries' markets.  More  than 30 years after the GATT first authorised the 
GSP as a "temporary" measure, it appears to re main popular among developing countries as an 
important instrument for ensuring "special and di fferential treatment" within the multilateral trading 
system through improved access to developed countrie s' markets without reciprocal liberalization.  
Recently, the "Quad" and other industrialized countri es have passed legislation providing improved, if 
not duty-free, access for LDCs for almost all pro ducts.  More specifically, the U.S. enacted the 
African Growth Opportunities Act (AGOA) in Ma y 2000 and the EC enacted the Everything But 
Arms (EBA) scheme in March 2001.35  New Zealand (as of 1 July 2001), Norway (as of 2002) and 
Australia (as of 1 July 2003), have also grante d LDCs duty-free access to their markets for all 
products.36   
Table 5 
MFN and developing country  preferential tariffs 
(Per cent) 
  MFN GSP a LDCb 
United States 2002 5.2 3.7 2.7 
 WTO agricultural products 10.4 8.4 6.2 
 Textiles and clot hing 9.7 9.4 9.4 
European Communities 2004c 6.5 4.5 1.7 
 WTO agricultural products 16.5 14.5 9.0 
 Textiles and clot hing 8.0 7.2 0.0 
Japan 2004/05 6.3 5.1 3.1 
 WTO agricultural products 17.7 16.7 15.3 
 Textiles and clot hing 6.7 5.0 0.0 
Canada 2002d 6.8 5.4 4.1 
 WTO agricultural products 21.7 20.8 18.2 
 Textiles and clot hing 9.9 8.9 7.1 
Australia 2001/02e 4.3 3.9 1.8 
 WTO agricultural products 1.3 1.0 0.0 
 Textiles and clot hing 12.3 12.3 8.6 
New Zealand 2002 4.1 3.5 0.0 
 WTO agricultural products 2.1 1.6 0.0 
 Textiles and clot hing 9.5 9.0 0.0 
Czech Republic 2001 6.1 5.1 .. 
 WTO agricultural products 13.4 13.2 .. 
 Textiles and clothing 6.6 6.2 .. 
Table 5 (cont'd) 
                                                      
35 Under AGOA, 38 African countrie s currently qualify for preferential treatment;  in order to qualify 
for AGOA, the country must already be eligible for GSP treatment.  AG OA extends GSP for eligible sub-
Saharan African countries until 1 September 2008.  Available online at:  http://www.agoa.gov/ [6 August 2003].  
The EBA grants duty free and quota free access for a ll products from LDCs except arms and munitions and 
three agricultural products (bananas, rice and sugar);  tari ffs and quotas on the three agricultural products will be 
liberalized gradually (tariffs will be removed in 2006 for bananas and 2009 for rice and sugar). 
36 Announcement made by Hon. Mark Vaile, Minister for Trade on 27 May 2003.  Available online at:  
http://www.trademinister.gov. au/speeches/2003/030527_deve lopment.html, [8 July 2003].  This follows 
publication by the Australian Productivity Commission (2002) of a report concluding that the removal of all 
barriers to trade with LDCs would have a small impact on Australia. WT/TPR/OV/10 
Page 16  
 
  MFN GSP a LDCb 
Slovak Republic 2001 6.1 5.2 4.6 
 WTO agricultural products 13.2 13.0 13.0 
 Textiles and clot hing 6.7 6.2 5.9 
Norway 2004 7.2 5.5 0.0 
 WTO agricultural products 38.2 31.2 0.0 
 Textiles and clot hing 3.4 1.1 0.0 
Switzerland 2004 9.3 8.1 5.1 
 WTO agricultural products 36.2 34.2 24.1 
 Textiles and clot hing 5.6 2.8 0.0 
 
.. Not available. 
 a Generalized System of Preferences. 
b Least developed countries Preferences. 
c Data for EC's GSP and LDC are based on the 2002 tariff. d Canada has provided duty- and quota-free access to imports of textiles and clot hing products from LDCs as of 1 January 2003. 
e As of 1 July 2003, Australia has removed all tariffs on LDCs. 
 Note: AVEs have been used as availa ble.  In case of unavailability, the ad valorem  part is used for compound and alternate rates. 
 
Source : WTO Secretariat calculations, base d on data provided by Members. 
30. However, as Table 5 and numerous empirical studies have shown, interests in developed 
countries often curtail the benefits of the GSP so t hat the scheme is not as  advantageous to developing 
countries as it appears ; the broad conclusion of these studies is that GSP has at best yielded only a 
"modest" increase in imports from beneficiary countr ies, with some of those gains due to trade 
diversion rather than trade creation.37  Even in the cases of more recent supplementary initiatives, 
such as the AGOA and the EBA, some analyses sugg est that market access will be only slightly 
improved for the countries concerned.38   
31. There are several possible reasons for this out come.  First, such preferences are seldom 
generalized; they frequently exclude precisely thos e products (e.g. textiles and clothing) in which 
developing countries have comparative advantage, and moreover, where their exports tend to face 
tariff "peaks" in major markets.  This is evident from preferential tariff rates for LDCs provided by the 
Quad and other countries in textiles and clothing a nd agriculture (Table 5).  Further, they can be 
unilaterally revoked or modified at any time by  the Member according such concessions, thereby 
leading to uncertainty.  In particular, a developing country may be "graduated" out of a preference for 
a product just as it begins to achieve significant success in an export market, thereby discouraging 
efforts to expand exports.39  Moreover, conditions may be attach ed to these preferences in order to 
obtain concessions from developing countries;   these concessions may be in non-trade areas.40  Even 
when eligibility is not a problem, full use of the GSP system and other recent initiatives is hampered 
                                                      
37 See, for example, studies cited in Ozden and Rein hardt, 2003, "The Pervers ity of Preferences:  GSP 
and Developing Country Trade Policies 1976-2000", World Bank Working Paper No. 2955, January.  
38 See, for example, Mattoo, Aaditya, Devesh Roy and Arvind Subramaniam, 2002, "African Growth 
and Opportunity Act and its Rules of Origin:  Generos ity Undermined?", World Bank Research Working Paper 
No. 2908, October;  and Brenton, Paul, 2003, "Integrating the Least-developed Countries into the World 
Trading System:  The Current Impact  of EU Preferences under Everything But Arms", World Bank Policy 
Research Working Pape r No. 3018, April. 
39 For example, since the GSP scheme of the United States was introduced in 1976, 36 of the 
154 eligible countries have graduated. 
40 In some instances, the EC explicitly links its gran ting of preferences in add ition to those provided by 
the GSP to beneficiary countries' adherence to labour and environmental standards (see for example, 
WTO, 2004 Trade Policy Review – European Communities  (WT/TPR/S/136)).  Likewise, U.S. trade laws allow 
the President to use GSP to promote labour standards and in tellectual property rights;  this has been extended to 
the AGOA Act.  WT/TPR/OV/10 
 Page 17 
 
 
by the complexity of the system and technical incapacity of developing countries' exporters.  In particular, certain "rules of origin" must be satis fied by exporting countries;  these rules usually 
involve a minimum amount of value added, which can be a deterrent to small countries with limited 
technological capacity.
41  Also, rules of origin often require beneficiaries to use inputs produced in the 
country granting the preference, with potential adverse effects on their exporters' competitiveness.42  
In addition, it would appear that Members acco rding GSP preferences disproportionately substitute 
non-tariff barriers for tariffs where sensitiv e GSP-eligible products are concerned.43  Last, developing 
countries' exports are often impede d by supply-side constraints, including lack of trade finance 
(possibly owing to market failure) and poor infrastructure.  
32. Perhaps a more fundamental aspect of the GSP and similar preferences is the fact that there is 
some evidence that such nonreciprocal preferences may have the effect of delaying trade 
liberalization by recipients ;  indeed, developing countries removed from GSP tend to adopt more 
liberal trade policies than those remaining eligible.44  The reason is that with trade barriers reflecting 
the Government's balancing of political support from import-competing and export sectors, the non-
reciprocity feature of the GSP shifts the balance in favour of the import-competing sectors in 
developing countries;  it does this by reducing one of the main incentives that developing countries' 
export industries have to oppose protectionist trad e policies at home instead of securing the export 
sectors' support for more liberal trade policies.  Further, given that GSP preferences tend to be devalued by negotiated multilateral reductions in MFN rates, they can provide the wrong signal to 
exporters in developing countries regarding their long-term comparative advantage and might even 
deter developing countries from agreeing to multila teral reductions in MFN rates.  The new "GSP-
plus" non-reciprocal preferences such as the EB A and AGOA may also create a systemic risk by 
excluding some countries that are already reci pients of preferences under a different GSP 
arrangement;  the resulting complex set of preferential trading arrangements arbitrarily exclude certain countries and reduce predictability and stability in the multilateral trading system.
45  T h i s  
raises the question of what measures, if any, might be taken to help developing countries adjust to the 
erosion of the tariff preferences they currently enjoy.46 
                                                      
41 In Europe, for example, the estimated cost of  collecting, managing and storing the information 
needed for origin verification and administration is about 3% of product prices.  Moreover, the EC's preferential 
rules of origin tend to be more re strictive for products (such as bevera ges, tobacco, textiles, clothing and 
footwear) with high preferential margins.  See WTO, 2004 Trade Policy Review – European Communities  
(WT/TPR/S/136), pp.50-51. 
42 Such sourcing may not be the cheapest available, thus raising the production costs of exporters and 
affording protection to preference-granting producers of the inputs. 
43 Clark, Don P. and Simonetta Zarilla, 1992, "Non-T ariff Measures and Industrial Nation Imports of 
GSP-Covered Products ", Southern Economic Journal 59, October, 284-293. 
44 Ozden and Reinhardt, 2003, "The Perversity of Preferences:  GSP and Developing Country Trade 
Policies 1976-2000, World Bank Working Paper 2955, January. 
45 In addition to countries such as Guyana and Kenya, other major "losers" from such trading 
arrangements are the large, poor, developing countries such as India, Pakistan and Indonesia.  (See Page S. and 
A. Hewitt, 2002, "The New European Trade Preferences:  Does 'Everythi ng but Arms (EBA) Help the Poor?", 
Development Policy Review, 20(1), pp. 1-13).  However, Pakistan was granted special EC and other preferences 
and debt relief and has now been added to the list of co untries who receive additiona l "super GSP" preferences 
as part of the war on drugs;  Indonesia, as a member of  OPEC also receives its own preferences.  With regard to 
additional preferences granted under th e EC's GSP scheme as part of the war on drugs, the WTO Panel in EC-
Tariff Preferences  recently found that the EC measure is incons istent with Article 1.1 of GATT 1994 because it 
failed to demonstrate that the measure is justified unde r the Enabling Clause or Article XX(6) of GATT 1994.  
The ruling was partially overturned by the Appellate Body in April 2004 (WTO document, WT/DS246/AB/R, 
7 April 2004). 
46 According to the IMF, in most LDCs the welfare losses associated with pr eference erosion are likely 
to be relatively modest – less than 2% of LDCs' aggregat e exports;  hence, the coun tries most affected by the 
adverse effects of such erosion could be "comfortab ly" compensated through incr eased assistance.  Such 
assistance would be especially importa nt for those LDCs that are curren tly most heavily dependent on such WT/TPR/OV/10 
Page 18  
 
33. Developing countries might be better served by their becoming more fully engaged as WTO 
Members, with full obligations and rights under the WTO agreements, than by special GSP-style tariff 
preferences.  Certain more temporary and targeted forms of special and differential (S&D) treatment might be appropriate, where these are designed:  to address constraints on developing countries' 
institutional capacity to implement existing, or ne w, WTO Agreements;  their different developmental 
priorities;  or where additional time and possible assi stance might be required to allow the appropriate 
sequencing of, and adjustment time for, various macroeconomic and structural reforms (including 
trade liberalization). 
Bilateral and regional preferences 
34. The proliferation of bilateral and regional agre ements since the WTO was established in 1995 
has eroded the scope of application of MFN tariffs , with the outcome that for a number of Members 
MFN tariffs tend to be the exception rather than the rule (see also Section 7 on Regional Trade 
Agreements).  This means that the preferences accorded  by these Members to developing and least 
developed Members are not as generous as they appear . 
3. Agriculture  -- the Most Distorted Sector 
35. Agriculture plays a relatively important role  in developing countries' economies, accounting 
for just over one quarter of their GDP and about half of their employment;  by contrast, agriculture in 
OECD countries accounts for only around 2% of GDP and 7.3% (in 2001) of employment.  With nearly three quarters of the world's poor concentrated  in rural areas, mainly in developing countries, 
and depending heavily on agriculture for their livelih oods, trade liberalization in agriculture is crucial 
to the alleviation of poverty.  In agriculture, th e conversion of quantitative restrictions into tariffs 
("tariffication") and the curtailment of subsidi es were among the major achievements of the UR;  
tariffication of NTBs, in particular, paved the wa y for future reductions in agricultural tariffs.
47  
Nonetheless, both tariffs and domestic support for ag riculture are still relatively high, especially in 
many OECD countries.  In the Quad, for exampl e, applied MFN tariffs on agricultural products 
average more than four times t hose on non-agricultural products, thus impinging on the opportunities 
of developing and other countries to benefit from tr ade in such products.  Total support to agriculture 
by OECD countries is close to US$1 billion per day, more than six times all development assistance.  
Much of this support is linked to production; th is encourages higher output resulting in large 
surpluses, especially in several OE CD countries where such support is most generous.  Support linked 
to production in combination w ith export subsidies tends to lower world prices of agricultural 
products and leads to the displacement of devel oping countries' products, not just from subsidizing 
countries' markets but also from their own and third markets, to the detriment of poor farmers in 
developing and least developed countries.  In ge neral, agriculture remains the most protected, 
subsidized, and thus distorted, sector of many Members' economies, with far-reaching social and 
economic repercussions not just domestically but globally.  Estimates by the World Bank and IMF 
suggest that the benefits from dismantling all border measures and eliminating subsidies affecting 
agriculture would be very large for indus trialized and developing countries alike.48   
                                                                                                                                                                     
preferences (see "Communication from the IMF:  Fi nancing of Losses from Preference Erosion", WTO 
document WT/TF/COH/14, 14 February 2003). 
47 The Uruguay Round Agreement of 1994 resulted in agricultural policies being subjected to 
multilateral rules and disciplines for the first time.  The Uruguay Round Agreement on Agriculture (URAA), replaced non-tariff import barriers by bound tariffs, opened previously closed markets, curbed export subsidies; 
categorized domestic programmes on the basis of their potential to distort trade, and disciplined the most trade-
distorting forms of support.  Agricu lture was also affected by other ag reements, notably SPS and TBT, whose 
aim was to forestall the use of such m easures for purposes of protection.   
48 Estimates of the benefits top US$350 billion for the world (World Bank, 2004, Global Economic 
Prospects , p. 105).  According to the IMF, the static glob al welfare gains from removing agricultural support  WT/TPR/OV/10 
 Page 19 
 
 
36. Agricultural support programmes are partly justified by those Members using them as being 
necessary to address non-trade concerns, notably income support for agricultural households, 
preservation of the environment and food security.  Wh ile the view that such non-trade concerns are 
legitimate domestic objectives is widely shared among WTO Members, some attach more importance 
to these concerns than others.  The debate, theref ore, has been more about the magnitudes of total 
support to agriculture together with the appropria teness and effectiveness of  various measures aimed 
at achieving these multiple objectives. 
37. Clearly, domestic agricultural policies and intern ational trade are closely intertwined, with 
protective border measures often necessary for the maintenance of domestic support programmes.  In 
particular, a domestic support programme that holds  the domestic price above the world level requires 
accompanying import restrictions, such as tariffs; th e higher the domestic support price, the higher the 
accompanying tariff or its equivalent.  Further,  to the extent that domestic support programmes 
generate a surplus, export subsidies may be deem ed necessary to help di spose of the surplus. 
38. Total support to agriculture by OECD countri es, as measured by the total support estimate 
(TSE), was US$350 billion in 200349, roughly the same amount as sub-Saharan Africa's annual GDP.  
The EC, Japan and the United States collectively account for approximately four fifths of such 
support (although as a percentage of the value of gross farm receipts, support is highest in 
Switzerland, Norway, the Republic of Korea, Icela nd and Japan, respectively).  Total support was the 
equivalent of 1.2% of GDP in the OECD area, compared to an annual average of 2.3% in the peak 1986-88 period.  Agriculture's contribution to GDP in the OECD area is currently about 2%.  In 
Japan, the Republic of Korea, Norway, and Switzerla nd, total support to agriculture is close to, or 
even exceeds, the sector's contribution to GDP.  
39. Nearly three quarters of total support is provide d to farmers.  Such support, as measured by 
the producer support estimate (PSE), represented 32% of  total farm receipts in 2003, slightly up from 
31% in 2002 (but down from 37% in 1986-88). This small increase in overall OECD support was due, 
inter alia,  to a rise in budgetary payments based on eith er overall farm income in the United States 
and Canada, or area/animal numbers in many European  countries, particularly those in central Europe 
acceding to the EC on 1 May 2004.  The PSEs for Ja pan, the EC, Canada and the United States were 
58%, 37%, 21% and 18%, respectively.  Thus, for every 100 yen a Japanese farmer earned in 2003, 58 yen were the result of transfers associated w ith agricultural support measures.  Among OECD 
countries, support levels in 2003 were the lowest  in New Zealand (2%) and Australia (4%).
50 Rice, 
sugar and milk are the most supported commoditi es, with transfers to producers close to, or 
exceeding, half of gross receipts.  The prices re ceived by OECD farmers in 2003, were on average 
31% above world prices (compared with 56% in th e mid-1980s), thereby shielding farmers in many 
countries from world market signals.  At the same time, the prices paid by OECD consumers in 2003 
were on average 38% higher than world prices.  Whereas domestic prices paid by consumers were, on 
average, the same as those at the border in Austra lia, they were 9% higher in the United States, 47% 
higher in the EC, and more than double in Japan, the Republic of Korea, Norway and Switzerland.  
Overall, consumers in OECD countries were implici tly taxed at a rate of 24% as a result of market 
price support (MPS) policies. 
                                                                                                                                                                     
tariffs and subsidies would be US$128 billion annually; the dynamic gains (from higher investment and faster 
productivity growth) may well be several times larger.  (IMF, 2002, World Economic Outlook , 
Washington, D.C, p. 85). 
49OECD, 2004, "OECD Agricultural Policies 2004: At a Glance", AGR/CA/A PM(2004)2, 19 April, 
Paris. 
50 While government support in Australia and New Zealand is low, these countries have relatively strict 
SPS regulations, thought necessary to ensure that th eir reputation as reliable exporters of high quality 
agricultural products is not jeopardized by pests and dise ases, but which nonetheless tend to impede imports of 
such products.   WT/TPR/OV/10 
Page 20  
 
40. Output-based support (market price support and ou tput payments) and input subsidies remain 
the dominant forms of producer support in most OE CD countries, together accounting for more than 
76% of support to producers in 2003 (Table 6), compared to 91% in 1986-88.  These measures are the 
most distorting forms of assistance as far as production and trade are concerned, contributing to over-production in the OECD area to the detriment of both those OECD Members where support is 
relatively low and of developing countries.
51  Such measures are also relatively ineffective in 
transferring income to farmers or in achieving environmental objectives.  By contrast, there is only a 
very modest use of policies targeted at specific objectives and beneficiaries. 
Table 6 
Composition of Producer Support Estimate by measure, 2003 
(Percentage share in PSE) 
Measure United States European 
Communities Japan Canada OECD 
 1986-88 2003 1986-88 2003 1986-88 2003 1986-88 2003 1986-88 2003 
Market Price 
Support 47 38 86 57 90 90 49 48 77 62 
Payments based on 
output 7 8 5 3 3 3 17 5 5 4 
Payments based on 
area planted/animal 
numbers 27 5 3 27 0 0 17 6 7 16 
Payments based on 
historical 
entitlements 0 13 0 1 0 0 0 17 0 4 
Payments based on 
input use 16 19 5 8 4 4 16 6 8 9 
Payments based on 
input constraints 2 5 1 4 3 3 0 0 1 3 
Payments based on 
overall farm 
income 2 6 0 0 0 0 0 14 1 2 
Source: OECD, PSE/CSE database 2004. 
41. In 2003, OECD countries introduced a number of policy changes.  The United States 
implemented the 2002 Farm Act, providing new form s of payment to producers for the purpose of 
stabilizing farm incomes.   In  the EC, agreem ent was reached on the 2003 reform of the Common 
Agricultural Policy, involving a significant further step in the direction of decoupling support from 
production decisions, to be implemented from 2004 onwa rds.  At the same time, the Czech Republic, 
Hungary, Poland and Slovakia continued to prepar e for accession to the EC which took place in May 
2004, including through changes to producer paym ents, spending on infrastructure, and development 
of food safety systems.  In Japan and the Republic of Korea (in the case of rice) and Norway (dairy 
products), efforts were made to improve the effi ciency of domestic markets behind significant border 
protection.  A decision was also reached in Swit zerland on the new agricultural package that will be 
implemented over the period 2004-2007, continuing the long-term shift away from the most trade-distorting measures.  Canada implemented its Ag ricultural Policy Framework, aimed at stabilizing 
                                                     
 
51 Under the WTO Agriculture Agreement, domestic s upport measures that are considered to distort 
production and trade (with some exceptions) fall into the "amber" box which is defined in Article 6 of the Agreement as all domestic support other than that in the "blue" and "green" boxes.  The "blue" box, the "amber 
box with conditions" contains payments under product-limiting programmes to limit production to reduce 
distortion by, for example, placing limits on production.  "Green" box subsidies are those that do not distort production or involve minimal distortion.  Whereas in the United States and Japan "amber" box subsidies 
accounted for somewhat less than  one quarter of total domestic support in 1998 (the latest year for which such 
data are available), such subsidies accounted for more than half of total support in the EC and Canada.  WT/TPR/OV/10 
 Page 21 
 
 
farm incomes, and made emergency payments to compensate for losses related to BSE.  Emergency payments, related to drought, we re also provided in Australia.  
42. Government intervention in agriculture is al so extensive in many developing countries; 
whereas tariffs on agricultural products are often just  as high in developing as in OECD countries, if 
not higher, subsidies tend to be used rath er less, owing to their budgetary cost.
52  
43. Farm support programmes have multiple domestic objectives, in cluding:  income support for 
agricultural households;  preservation of the enviro nment, notably traditional rural life and amenities; 
food security; and food safety.53  The last three of these objectives involve matters where markets 
alone may fail to achieve a socially desirable outco me due to the existence of "externalities" or 
"public goods".54  Accordingly, one can distinguish between two broad types of agricultural policies; 
those intended to redistribute income and those ai med more at addressing market failure.  In this 
regard, there would appear to be a serious mismat ch between these objectives and the policy measures 
designed to achieve them, thus casting doubt on the appropriateness and effectiveness of such 
measures.   
44. In particular, policy measures linked to productio n and consumption are relatively inefficient 
instruments for delivering income support to rural households. According to OECD55, estimates of 
income transfer efficiency, no policy measure lin ked to agricultural activity succeeds in delivering 
more than half of the monetary transfers from c onsumers and taxpayers as additional income to farm 
households.  The proportion is one quarter or less in the cases of market-price support and deficiency 
payments and less than one fifth for input subsid ies.  Notwithstanding this, roughly two thirds of 
agricultural support in OECD countries involves measur es that keep product prices above levels that 
would otherwise prevail.  An intrinsic feature of measures based on agricultural activity is that they 
cannot be targeted at relatively po or households.  In the case of ope n-ended price support, the size of 
the transfer is directly proportional to  the level of production.  Consequently, the bulk of the support 
that does reach farmers go es to the larger farms,  many of whom already have higher incomes.  It is 
not surprising, therefore, that under the CAP, 70% of support (that is, market-price support plus 
payments to producers) is allocated to  the largest 25% of the EC's farms56;  in the United States, 
Canada and Japan, the corresponding amounts of suppor t allocated to the largest 25% of farms are 
89%, 75% and 68%, respectively.  In contrast to the above measures, direct income payments are 
much more efficient in delivering income support, especially if they are de-coupled from agricultural 
activity; such payments can also be targeted more eas ily at those households felt to be most in need of 
assistance.  If the current production-based suppor t measures were replaced by direct income 
                                                      
52 Some developing countries, including India, are heavy users of subsidies, notably those for inputs 
such as fertilizer, power and water.  
53 OECD, 2002, "Agricultural Policies in OECD Countries:  A Positive Reform Agenda", 6 November 
2002 (COM/AGR/TD/WP(2002)19/FINAL. 
54 An externality arises where a decision by one ag ent, whether a producer or consumer, has side-
effects that impinge on others.  For example, farm s may produce excessive pes ticide residues (negative 
externalities) as well as crops; they may also produ ce environmental as well as aesthetic benefits (positive 
externalities).  In these cases, the market determined output may be too much because of unpaid external costs 
or too little owing to uncompensated external benefits.  Public goods (or services), such as clean air or an 
attractive countryside, are those for wh ich the use by one agent does not diminish the amount available to 
others.  A public good may be a joint-output, and therefor e an externality, of private production.  As in the case 
of positive externalities, the market tends to result in to o little public goods.    
55 OECD, 2002, "Farm household income issues in OECD Countries:  a synthesis report", 
AGR/CA/APM(2002)FINAL, Paris. 
56 Farms are classified according to the size of thei r gross sales (for more details, see OECD, 2002, "A 
Synthesis of Emprical Studies of SPS Regulations and a Proposal for Future Work" 
(COM/AGR/TD/WP(2002)72, 27 August 2002, Paris.   WT/TPR/OV/10 
Page 22  
 
payments, efficiency costs could be halved without reducing the incomes of farm households
57;  the 
savings would be even greater if support were targ eted at lower income farm households through the 
income tax system or social security programmes.  The more a policy measure pays to domestic farmers without affecting their production decisions, th e greater the share of income retained by farm 
households and the smaller the impact on production and trade. 
45. Governments also justify assistance for agri culture on the grounds that market-oriented 
agriculture would fail to take due account of external ities, particularly protection of the environment, 
a concern explicitly mentioned in the Preamble of the WTO Agreement on Agriculture.  In their view, 
a certain level of domestic support and border pr otection is necessary to maintain agricultural 
production, especially in areas with low agricultu ral potential, and thus ensure provision of 
environmental externalities.  This presumably re flects their belief that there is a very close 
relationship between agricultural production and th e provision of positive externalities, including 
those associated with public goods.  In fact, ther e is very little evidence on the extent of the 
externalities generated by agriculture, which makes it very difficult to measure the full benefits of 
government-support measures and thus to ensure that th ese benefits are not outweighed by their costs.  
Hence, it is also difficult to compare the effectiv eness of different support measures in achieving their 
objectives.  
46. The externalities generated by agriculture are not  exclusively positive;  there may also be 
some significant negative externalities, directly li nked to production.  Thus, protection and domestic 
support policies may encourage environmentally harm ful agricultural practices, such as intensive 
farming, including high use of fertilizers and pesticides.  The outcome is resource degradation and 
environmental stress, such as adverse effects on ground water, the soil and biodiversity.  Further, by 
depressing incomes and exacerbating p overty in developing countries, such policies make it more 
difficult for farmers in these countries to move towa rds more environmentally sustainable practices. 
47. Governments may also be concerned by the possi ble failure of market forces to ensure food 
security.  However, as noted, in most OECD countries domestic food prices are already considerably 
higher than world prices (roughly one third higher in the EC and more than double in Iceland, Japan, 
the Republic of Korea, Norway and Switzerland).  The burden of higher domestic food prices is borne 
disproportionately by low-income consumers, for whom food constitutes a relatively large share of 
total household expenditure.  With most support linked directly to output and inputs and a high share of agricultural support thus going to larger farm s, the outcome is significant transfers from low-
income consumers to high-income farmers.  Fu rther, heavy reliance on domestic production exposes 
countries to the risk of domestic crop failure a nd the outbreak of livestock disease as well as to 
interruptions in the supply of key inputs (such as fuel) that are essential for food production.  The 
effects of supply shocks can be mitigated more e ffectively by a combination of domestic production, 
maintenance of domestic productio n capacity, stockholding and access to a wide range of foreign 
suppliers.   
48. More careful design and better targeting of agri cultural policies would enable Governments to 
pursue their multiple objectives in a more cost -effective manner with minimal disruption to 
international markets for agricultural products.  Th e DDA presents Members with the opportunity to 
achieve such reforms multilaterally, thereby benefitin g industrialized and developing countries alike.  
According to the IMF, removal of agricultural support (tariffs and subsidies) as part of a comprehensive effort to lower trade barriers woul d raise global economic welfare by US$128 billion 
annually, the bulk of which appears to be due to the removal of tariffs.  While nearly US$98 billion of 
this welfare gain would accrue to industrial count ries, through more efficient production and lower 
food prices for many consumers, the benefits to deve loping countries would also be substantial, at 
                                                     
 
57 OECD, 2002, "Agricultural Policies in OECD Countries;  A Positive Reform Agenda", 
6 November 2002 (COM/AGR/TD/WP(2002)19/FINAL).  WT/TPR/OV/10 
 Page 23 
 
 
some US$30 billion.58  These benefits are particularly larg e for food-exporting regions, including sub-
Saharan Africa, where many of the world's poorest live.   
49. Despite the large overall gains from liberalizati on of agriculture, some developing countries 
may gain very little, or even be harmed, by libera lization of commodity markets.  For example, there 
is some evidence that the long-run benefits of liber alization in the cocoa ma rket, where changes have 
been most pronounced, accrue largely to consumer s in developed countries at the expense of the 
exporting countries (owing to loss of implicit or e xplicit export taxes) and fa rmers in non-liberalizing 
countries – farmers in liberalized African mark ets are broadly neither better nor worse off.59  
Countries that are significant food importers may also be harmed by such liberalization.  Therefore, 
not only should trade liberalization be accompanied by complementary policies, it may, in the case of 
some countries, require support from internationa l agencies to redress unfavourable effects.  
50. While agriculture is of great immediate im portance to developing countries, pronounced 
declines in many commodity prices during the past d ecade have meant that, by and large, agricultural 
exporters face declining terms of  trade, which can reduce the beneficial impact of growth on 
economic welfare in an open economy.  If, as exp ected, this downward trend continues over the long 
term, developing countries will have to export increasing volumes of such products in exchange for 
the same value of manufactured goods and services.  Consequently, developing countries need to look 
beyond agriculture in the current negotiations .  Furthermore, for developing countries to benefit from 
lower protection of agriculture (and other sectors), th ey also need to overcome a wide range of supply 
constraints on their exports, including lack of finance and poor infrastructure; developed countries' barriers to market access may in cases pale in comparison with such s upply constraints in developing 
and especially least developed countries. 
4. Textiles and Clothing:  Preparations for the end of quotas 
Introduction 
51. The expiry of the Agreement on Textiles and Cl othing (ATC) at the end of 2004 will result in 
great benefits to efficient producers and consumers of such products.  The approaching deadline for 
removal of quotas on the remaining 49% of items has given rise to a debate on whether countries 
(both importing and exporting) have made the n ecessary adjustments for a post-ATC regime.  The 
question becomes particularly pertinent when one considers that the remaining quotas are also likely 
to relate to products considered most sensitive by  the restricting countries.  The removal of these 
remaining restrictions is thus likely to cause disr uption, including possibly a surge in imports, that 
may lead to temporary restrictions, such as safeguards and contingency measures, and cause 
considerable disruption in current market shar es and welfare gains and losses for exporters and 
importers.   
52. The use of quotas and tariffs to regulate intern ational trade in textiles and clothing for some 
four decades has led to various distortions in the market including:  substantial "quota rents" for 
producers in developing countries, which they now stand to lose as a result of liberalization
60;  "quota 
                                                      
58 According to a recent study, a 50% cut in tariffs would have a much greater positive effect on the 
exports and welfare of developing countries than a 50% cut in domestic support (Hoekman, Bernard, Francis Ng 
and Marcello Olarreaga, 2002, "Reducing Agriculture Tariffs Versus Domestic Support:  What's More 
Important to Developing Countries?", CEPR Discussion Paper No. 3576. 
59 Whereas producer prices have tended to rise as a sh are of f.o.b. prices as intermediation costs and tax 
have declined, the downward shift in the aggregate supp ly curve in conjunction with inelastic demand results in 
lower world prices.  Farmers thus get a larger sh are of a lower price (see Christopher Gilberts and 
Panos Varangis, 2003, "Globalization and International Commodity Trade with Specific Reference to the West African Cocoa Producers" in R.E. Ba ldwin and L.A. Winters (Editors), Challenges to Globalization , NBER). 
60 The distribution of quotas, which was left up to the exporting countries often takes place on the basis 
of past export performance and may not necessarily be allo cated to the most efficient producers.  The quota rent WT/TPR/OV/10 
Page 24  
 
jumping" as producers who filled their quotas moved to  countries with, as well as without, available 
quotas, thus creating textiles and clothing industries in third countries;  and preferential agreements 
that accord producers in certain countries added advantages over countries not party to similar 
agreements.  The nearing of the deadline has also led to calls by some, including producers in 
developing and least developed countri es, to postpone the integration by another two or three years to 
allow them more time to adjust.  This call was by  private sector groupings in several developing and 
developed Members.  Such a call was neither made nor proposed within the WTO, where it would not 
have achieved consensus.
61  This section examines some of the adjustment costs and gains that are 
likely to be made as a result of the immine nt liberalization of textiles and clothing. 
Welfare implications of the end of quotas 
53. Given the high degree of distortion in the market for textiles and clothing, it is difficult to 
evaluate the impact of quota liberalization on future  patterns of production an d exports.  Nevertheless, 
some attempts have been made to quantify the potential comparative advantages for various 
Members.62  These estimates vary depending on the assumpti ons of the model (e.g . partial or general 
equilibrium) and the tariff equivalents used.  Howe ver, the majority of estimates suggest that the 
overall welfare impact of a removal of quotas will be positive and will result in consumer welfare 
gains.  Nevertheless, consumer gains in the majo r importing markets will be mitigated by adjustment 
costs resulting from changes in production patterns.  In particular, as quotas protecting producers in the major importers are removed, there will be adjust ment costs associated with the shifting of labour 
and capital out of textiles and clothing and, eventual ly, into their sectors of comparative advantages.  
54. Some studies have also focused on regional or  individual country efficiency and welfare 
implications.  Francois, Glisman and Spinanger (2000),  for example, look at the implications for the 
EC.
 63  They find that the EC would make welfare gains of €25.3 billion a year of which 97% would 
be from the removal of quotas and the rest from a re duction in tariffs.  The main textiles and clothing 
producers in the southern part of the EC would e xperience a larger share of the welfare cost but 
consumer gains would compensate for these costs.  The United States would also benefit by up to 
US$12 billion annually64 and up to over US$7 billion.65  
55. The experience for exporting countries is likely to be mixed.  China's producers especially 
have become increasingly competitive, with their sh are rising in key markets from 13.8% in 2001 to 
17.5% in 2003 in the United States, and from 8.1% and 9.8%, in the EC.  However, it needs to be noted that during the most recent three years for which figures are available, China's combined 
exports of textiles and clothing as a share of tota l merchandise exports has been decreasing.  China's 
clothing sector is seen as having great potential, a nd estimates of increased exports, in real terms, 
range from almost 250% to 330% over a ten year period following accession to the WTO
66;  and 
                                                                                                                                                                     
from the higher prices associated with the restricted  market also mainly accrue  to producers in exporting 
countries. 
61 Some Members have followed up the matter at the WTO. 
62 A literature review of these studies is provided for example in OECD, 2003, "Liberalizing Trade in 
Textiles and Clothing:  A Survey of Quantitative Studie s", OECD Trade Directorate, Working Party of the 
Trade Committee (TD/TC/WP(2004)23/FINAL), 13 August 2004. 
63 Francois, J. F., H.H. Glismann and D. Spinanger, 2000, "The Cost of EC Protection in Textiles and 
Clothing", Kiel Institute of World Economics, Working Paper No. 997, August. 
64 De Melo J. and D. Tarr, 1990  "Welfare Costs of U.S. Quotas in Textiles, Steel and Autos", Review of 
Economics and Statistics , 72:  pp. 489-497. 
65 Reinert, K.A., 1993, "Textile and Apparel Protec tion in the United States:  A General Equilibrium 
Analysis", World Economy  16:  pp. 359-376. 
66 Ianchovichina, Martin and Fukase, 2000 "Assessing the Impléications of Merchandise Trade 
Liberalization In China's Accession to the WTO",  the World Bank, June.  WT/TPR/OV/10 
 Page 25 
 
 
200% for textiles and clothing exports by 2020.67  However, these estimates concerning China's 
impact on the global textiles and clothing sector should be seen in the broader context of China's emergence as a major engine of growth in the world economy, where it accounts for a large share of 
the increase in international trade.   China's major competitors (such as India) benefit initially when the 
removal of quotas are delayed but the adjustment in  terms of employment moving out of the textiles 
and clothing sector into other manufacturing sectors su ch as electronics eventua lly occurs when China 
is fully integrated.  The International Textil es and Clothing Bureau, an alliance of 24 major 
developing country (or territory) exporters of tex tiles and clothing, has also expressed concern about 
reference by the EC to labour rights and sustainable development, especially with regard to bilateral 
trade agreements.
68 
56. Efforts have been made in the importing (princ ipally industrialized) countries to adjust to 
changes over the past few decades in  the textiles and clothing market.69  This includes investment in 
new technology in textiles with the result that th e industry has become more capital intensive and 
labour productivity has improved.70  In the clothing sector, ma nufacturers have reorganized 
production processes to take advantage of thei r geographical proximity to markets.  The 
reorganization in the United States has led to impr ovements in productivity, substantially greater in 
textiles than in clothing (almost 70% compared to 26%), during the period 1972-1992.71  
Nevertheless, it is widely expected that employme nt in the sector, which has been in a continuous 
decline since the early 1980 s is likely to fall further as textiles a nd clothing industries adjust to more 
competitive imports.  Although there are no similar empirical studies yet available, statements by 
several developing countries and international financ ial institutions indicate that there are on-going 
adjustments in several of these countries in a range of areas.   
57. Manufacturers in both industrial and higher-l abour-cost developing countries are also outward 
processing to lower cost countries.72  Producers in the EC, for example, have taken advantage of 
                                                      
67 Walmsley, Terrie, L. and Thomas W. Hertel, 20 00, "China's Accession to the WTO:  Timing is 
Everything", Centre for Global Trade Analysis, Purdue University, September. 
68 For example, the summary conclusions from the Conference organized by the European Commission 
on "The Future of the Textile and Clothing Industry in an Enlarged Europe" in March 2003, calls for clauses 
guaranteeing the respect of fundamental labour rights to  be included in all EC trade agreements and for 
reinforcing GSP preferences by making preferences conditional upon the respect of basic labour rights;  the 
ITCB also reacted to an European Commission discu ssion paper entitled "The Non-Trade Impacts of Trade 
Policy—asking questions, seeking sustainable development" , which seemed to suggest that trade liberalization 
would result in a shift in production from developed to de veloping countries, leading to higher levels of water 
and air pollution and may also correlate with negative social developments (ITCB, 2001, "Integrating 
Sustainability Concerns into Trade Policy:  Developing Count ries alarmed at EU ideas", Press Release, 25 April.  
Available online at:  http://www.itcb.org/Documents/ITCB-MI12.pdf, [29 June 2004]). 
69 In the United States, for example, employment in textiles and clothing fell by 50% between 1995 and 
2003. 
70 Levinsohn and Petropoulos (2001) for example point out that in the United States the two industries 
have responded in very different ways.  While te xtiles has responded by substantial capitalization and 
investment in newer technology, the apparel industry ha s moved much of the lower skilled parts of the industry, 
including through outsourcing encouraged by "production sharing" provisions in U.S. law, out of the United 
States (Levinson, J. and Petropoulos, 2001, "Creative De struction or Just Plain Destruction?  The U.S. Textile 
and Apparel Industries since 1972", NBER Working Paper No. 8348) .  Similar reorganization in the textiles and 
clothing industries appears to have taken place in the EC  (Stengg, W., 2001,  The Textile and Clothing Industry 
in the EU—A Survey , Enterprise Papers, No. 2, European Commission). 
71 The conclusion reached by Levinsohn and Petropoulos contrasts with earlier studies such as Cline 
(1989) who concluded that textiles and apparel prot ection had been relatively ineffective in promoting 
adjustment. 
72 IMF and World Bank, 2002, Market Access for Developing C ountry Exports—Selected Issues , 
27 September.  Countries in south east Asia such as  Malaysia are also increasingly opening factories in 
countries with lower labour costs, such as China and Cambodia.  In contrast, the same Malaysian company cited WT/TPR/OV/10 
Page 26  
 
lower costs of production as well as of preferential trade under the euro-Medite rranean agreements to 
develop outward processing.
73  In the United States there has be en a large increase in trade with 
Mexico and the Caribbean Basin Countries, part of which is attributed to "production sharing" 
agreements to encourage outsourcing.74  The importance of proximity to markets and the consequent 
development of regional relationships may dampen , to some extent, the import increases expected 
from countries such as China and India into the EC  and North America.  Such relocation activities 
have also taken place among the developing countries, especially from the higher cost east Asian and 
some African economies to lower cost countries in Africa that have increasingly opened up to FDI 
(Box 1.doc).  The south-south relocation from highe r-cost East Asian economies is principally to 
other economies within Asia.  The relocation to  Africa, under AGOA, while minimal in terms of 
global trade flows, resulted in dramatic export growth in recent years to the United States. 
58. The United States, among the Quad, has imposed safeguards to protect the local industry from 
a surge in imports of specific textiles and clothi ng products.  While the safeguards have provided 
some protection to producers of the specific products  concerned, there have also been recent calls by 
industry groups in various countries to postpone a ltogether the phase-out of all remaining quotas until 
31 December 2007.  The "Istanbul Declaration", si gned thus far by about 100 private-sector trade 
groups in 50 industrialized, developing and least de veloped countries, has requested that the WTO 
convene an emergency session to discuss such an extension. 
59. In July 2004, Mauritius formally requested th e Director-General to convene an emergency 
meeting of the Council for Trade in Goods (CTG) to  "examine the unintende d consequences of the 
abolition of quotas on LDCs and other vulnerable ec onomies and to explore ways to protect least-
developed countries and other vulnerable econom ies from the loss of trade and employment 
opportunities upon which their fragile economies depend" .  Similar requests were also addressed to 
the Director-General by Bangladesh and Nepal.  On  the basis of these request s, the Director-General 
convened informal consultations on the issues raised in the letters with a range of the membership on 
3 August 2004.  At the informal consultations, over which the Direct or-General presided, the proposal 
to convene an emergency meeting of the CTG to consider post-ATC adjustment issues was supported 
by the representatives of Bangladesh, Dominican Re public, Turkey, Sri Lanka and Nepal.  Although 
there was broad support for and understanding expressed  by participating delegations of adjustment 
challenges, there were also divergent reactions and opposition to convening an emergency session for 
a variety of reasons.  Under the circumstances, the Director-General concluded, and delegations 
understood, that it would not be possible to proceed with an emergency session of the CTG.  
Participating delegations agreed with the conclu sion by the Director-General that the relevant 
concerns and priorities raised by Members coul d be addressed, preferably, within the already 
scheduled session of the CTG on 1 October 2004.  Po st-ATC adjustment-related issues are now being 
considered by Members in the CTG.   
 
                                                                                                                                                                     
closed a factory it had set up in Bangladesh because of  infrastructure problems ("Ch ina Puts Southeast Asian 
Factories in a Competitive Pinch", Wall Street Journal , 7 October 2003). 
73 Stengg, W., 2001, The Textile and Clothing Industry in the EU—A Survey , Enterprise Papers, No. 2, 
European Commission;  and Nordås, H. K., 2004, "The Global Textile and Clothing Industry Post the 
Agreement on Textiles and Clothing," , WTO Discussion Paper, No. 5. 
74 Levinsohn and Petropoulos note that while imports under Section 807 (goods essentially re-imported 
after their components were first exported and assembled abroad with duty paid only on the value added) 
accounted for 5% of U.S. apparel and textile imports in 1987, ten years later their share was about a fifth of 
textile and clothing imports to the United States. (See Le vinson, J. and Petropoulos, 2001, "Creative Destruction 
or Just Plain Destruction?  The U.S. Textile and Apparel Industries since 1972", NBER Working Paper 
No. 8348 p. 7).  WT/TPR/OV/10 
 Page 27 
 
 
Box 1:  South-south co-operation through investment 
In addition to increasing trade between developing countries, there is also increasingly evidence of 
investment flows between developing countries.  As the higher-income developing countries, notably in 
east and south-east Asia find that th eir labour costs are too high to co mpete with other exporters of like 
products, they have sought to invest in countries with lower input costs.  Many of these low input cost countries are found in Africa and th ere is some evidence to show that  FDI into some African countries, 
notably those that have reformed their economies over the last decade or so, has increased substantially.   
An example of such successful FDI based development is Mauritius, which through relatively liberal FDI 
policies, incentives through export processing zones and preferen tial market access to major export markets 
has successfully developed a textiles and clothing sector.  Mauritius in turn is now facing rising production 
(especially labour) costs and is increasingly delocalizing low-cost and low value added activities to 
neighbouring countries, such as Madagascar and Mozambique, to overcome these disadvantages (WTO, 
2001;  IMF, 2003).  The export of certain low value added textiles and clothing products from Mauritius to Madagascar in recent years for example has increased su bstantially.  The textiles s ector in Mauritius is thus 
increasingly being transformed into a capital in tensive, high skills based industry (IMF, 2003). 
Several other countries in Africa have also lowered barriers to investment and pursued sound 
macroeconomic policies, attrac ting FDI.  Some have also provided tax and other incentives to investors.  
The result has been increased investment by higher income developing countries in Africa and Asia, 
especially in labour intensive sectors such as te xtiles and clothing (Basu and Srinivasan, 2002).   
In addition to incentives and cheap, productive labour, preferential access to major export markets appears 
also to have played a major role in directing such investment.  For countries such as Botswana, Namibia, 
Lesotho and Swaziland, for example, membership of the Southern African Customs Union (SACU), the Southern African Development Community (SADC) and the Common Market for Eastern and Southern 
Africa (COMESA) gives preferential access to a much la rger market.  Sub-Sahara n African countries also 
have preferential access to major industrialized country markets th rough preferences such as the 
Generalized System of Preferences, the AGOA, the Lomé Convention and the EBA (provided they meet 
the rules of origin requirements).  The reduction and eventual removal of preferences as MFN tariff rates 
(and quotas in the case of textiles and clothing) come down may therefore have adverse effects on such 
FDI flows.  
Source : Basu, Anupam and Krishna Srinivasan, 2002, "Foreign Direct Investment in Africa—Some Case 
Studies", IMF Working Paper WP/02/61 , March;  IMF, 2003, Mauritius:  2003 Article IV 
Consultation – Staff Report;   and WTO, 2001, Trade Policy Review – Mauritius 2001 . 
 
60. The removal of quotas serve to highlight the relatively high tariffs maintained by countries, 
including many developing, which also distort tr ade in textiles and clothing.  Amongst the large 
developing countries shown in Table 2, for example,  India maintains the highest average tariffs on 
textiles and clothing, some 31% in 2001/02, compared with 17.5% in China in 2002, 24.4% in South 
Africa in 2002 and 17.2% in Brazil in 2004.  Tariffs on textiles and clothing are also higher in the 
Quad than overall MFN average rates.  Table 1 s hows that the average simple average MFN tariff on 
textiles and clothing range from 6.7% in Japan (FY 2004) to 9.9% in Canada (2002);  in comparison, 
the overall MFN average rate ranges from 5.1% in th e United States to 6.8% in Canada.  Depending 
on the country, a significant percentage of tariff lin es in the textiles and clothing sector, moreover, 
carry non ad valorem  rates (either specific, compound or alte rnate rates);  as these tend to conceal 
relatively high ad valorem  equivalents, their inclusion in the tariff analysis would likely raise the 
average tariff further.  Among the Quad countries, for example, non- ad valorem  tariffs make up 7.9% 
and 10.1% of the textiles and clothing tariffs in the United States and Japan, respectively;  the share of 
non-ad valorem  lines is much lower in Canada (1.2%) and the EC (0.2%).   Among the developing 
countries, whose tariff is presented in Table 2, a re latively high share of tariff lines in textiles and WT/TPR/OV/10 
Page 28  
 
clothing are subject to non ad valorem  rates in South Africa (75.5%) and India (32.7%).
75  A  
reduction in these tariffs, especially those maintained by the large developing countries, may be beneficial for south-south trade and may improve market access for the least developed countries.  By contrast, exporters in competing countries with pr eferential (quota free) access to export markets are 
likely to see negative results as they lose their preferences (section below).    
61. Among the main conclusions of a meeting on tex tiles and clothing organized by the European 
Commission was the suggestion that preferential acc ess should be maintained or even enhanced for 
LDCs to ensure current market access.
76  Removal of quotas and the conclusion of regional and 
bilateral preferential agreements including with countries not classified as least developed, will result 
in an erosion of preferences.  A related concern, therefore, is the adjustment required of LDCs, many 
of which have built up a textiles and clothing sect or on the basis of guaranteed access through quotas 
and lower (or no) duties in export markets.  The quota regime, by guaranteeing access to certain markets, allowed countries to develop their textiles and clothing sectors in a distorted market.  LDCs 
and countries involved in preferential trade agreem ents with the major importers, moreover, had 
access to export markets on a preferential basis.   
62. In addition to quota-free access, a number of countries provide preferential tariff treatment, 
for example, under the Generalized System of Pr eferences (GSP).  In most cases, however, GSP 
programmes do not appear to provide greatly improve d market access for textiles and clothing, often 
regarded as sensitive products and th erefore not eligible for GSP preferences;  the Quad, for example, 
provides improved market access  for developing co untries ranging between 0.3 percentage points for 
the United States to 1.7 percentage points for Japan  (Table 5).  Tariffs on imports of textiles and 
clothing from LDCs are significantly lower, with many countries providing them duty-free access 
(Australia, Canada, the EC, Japan, New Zealand, Norway, Switzerland);  some Members, notably the EC and the United States, also have regional and issue-specific agreements, such as the EBA and 
AGOA, that provide improved access for some deve loping and least developed economies.   
63. In addition to excluding sensitive sectors, sever al programmes also place rules of origin or 
sourcing requirements on eligible imports:  for ex ample, the United States' AGOA and CBTPA grant 
preferences to imports of textiles and cl othing using U.S.-made textiles or yarn
77;  similarly for U.S. 
partners to the Central American Free Trade Agreement (CAFTA), Costa Rica, El Salvador, 
Guatemala, Honduras, Nicaragua and most recently th e Dominican Republic.  It is estimated that the 
latter will expand two-way trade in textiles and clot hing between the United States and its partners, in 
great part due to the sourcing of U.S. inputs. 
64. It is not clear how the textiles and clothing sector in LDCs will adjust to the new 
environment.  Recent literature on this issue see ms to confirm that as ATC barriers are removed, 
current preferences received by countries involved in  free-trade areas or preferential agreements will 
be eroded and have a negative impact on their te xtiles and clothing exports.  Ozden and Sharma 
(2004), for example, find that beneficiaries of th e Caribbean Basin Initiative (CBI), with quota and 
duty free access to the U.S. market, could receive highe r prices (on average by 24%) in categories that 
                                                      
75 In most cases, either ad valorem  equivalent rates have been used where available (mostly for the 
Quad countries), or the ad valorem  part of the tariff line in the case of a lternate rates;  in the case of alternate 
rates, the use of just the ad valorem  part of the tariff line may underestimate the tariff. 
76 Online information available at:  http://trade-info. cec.eu.int/textiles/prog_en.pdf, [10 July 2003]. 
77 The nature of the rules of origin may be partly a reason why LDCs especially have tended to make 
relatively little use of such agreements (Mattoo, Aadity a, Devesh Roy and Arvind Subramaniam, 2002, "Africa 
Growth and Opportunity Act and its Rules of Origin:  Generosity Undermined?"  World Bank Research 
Working Paper, No. 2908, October;  Brenton, Paul, 2003, "Integrating the Least-developed Countries into the 
World Trading System:  The Current Impact of EU Pr eferences under Everything But Arms", World Bank 
Policy Research Working Paper, No. 3018, April;  and Br enton, Paul and Takako Ikezuki, 2004, "The Initial and 
Potential Impact of Preferential A ccess to the U.S. Market under the Africa Growth and Opportunity Act", 
World Bank Research Working Paper, No. 3262, April).  WT/TPR/OV/10 
 Page 29 
 
 
have not yet been integrated into the GATT.78  Anecdotal evidence from other major LDC exporters 
such as Bangladesh, suggest sim ilar concerns about the impact of the phase-out of quotas on 
exports.79  Moreover, a comparative advantage in low- cost, labour-intensive assembly work does not 
necessarily result in increased exports, as these also re quire the very logistical and infrastructural 
facilities that remain inadequate in many developi ng and especially least developed countries.  The 
potential erosion of these price advantages or rents with the full integration of textiles and clothing 
into the GATT suggests that countries cannot continue to rely on preferences and must plan their trade 
policies accordingly. 
65. The removal of quotas, while providing better market access for Members of the WTO, will 
also disadvantage countries that remain outside the WTO as at 1 January 2005.  These countries will 
remain subject to unilateral quotas and tariffs after 2005.  The fear is that the textiles and clothing 
sector in a country such as Viet Nam, which compet es with large exporters, such as China, would not 
be able to sustain exports when quotas on WTO Members, including China, are removed.  Viet Nam has reached an agreement with the United Stat es on quantitative restrictions from May 2003 to 
December 2004, extendable for additional one year periods for as long as Viet Nam is not a Member 
of the WTO.
80   
5. Contingency measures  
Anti-dumping 
66. The number of anti-dumping initiations by WT O Members rose between 1995 and 2001 but 
has since fallen, from 366 in 2001 to 310 in 2002 and furt her to 231 in 2003 (Chart 3).  In the first half 
of 2004, 101 initiations were reported.  In 2003 the initiations were main ly in the areas of chemicals 
and base metals;  these two sectors ha ve consistently been the most affected since 1995.  Base Metals 
remained the most affected in the first half of 2004, followed by chemicals and plastics (Chart 4).  
The largest number of initiations since 1995 have been reported by India (383), followed by the 
United States (350), and the EC (287);  in 2003, th e most anti-dumping cases were initiated by India 
(46), the United States (37) and China (22), while in the first half of 2004, the United States reported 
the most initiations (21), followed by Turkey and the EC (13 each) and China (11).  The initiations 
have been mainly targeted at China (386) and the EC and member states (386). 
67. Approximately 60% of cases initiated result in measures being taken by Members.  The 
number of new measures imposed peaked in 2000 (235 measure) before falling to 166 in the following year.  It has since then risen to 212 and 221 measures in 2002 and 2003, respectively.  In the first half of 2004, Members reported taking 56 measures.  In 2003, the Members who notified the 
largest number of measures were India (53), Chin a (33), Turkey (28), Thailand (20) and Argentina 
(19).  In the first half of 2004, the EC, India, a nd the US reported the largest number of measure taken 
(six each), followed by Canada (5) and Australia, Ch ina, Peru and Turkey (four each). Overall, since 
1995 India (279), the United States (211), the EC (193) and Argentina (139) have reported the largest number of anti-dumping measures.  Those that have  most frequently been targeted by the anti-
dumping measures include:   China (272), the EC an d member states (213) and the Republic of Korea 
(110). At the end of 2003, a total of 1,388 anti-dumpi ng measures were in force,  compared to 1,285 at 
the end of 2002.  As of 30 June 2004, the num ber of anti-dumping measures in force was 1,345. 
                                                     
 
78 Özden, Çaglar and Gunjan Sharma, 2004, "Pri ce Effects of Preferentia l Market Access:  The 
Caribbean Basic Initiative and the Apparel Sector", World Bank Working Paper 3244, February. 
79 "End to Garment Quotas is Cloaking Bangladesh in Worries about the Future", Wall Street Journal , 
20 November 2003;  "China Puts Southeast Asian Factories in a Competitive Pinch", Wall Street Journal , 
7 October 2003. 
80 WTO, 2004 (forthcoming), Trade Policy Review – United States , p. 122. WT/TPR/OV/10 
Page 30  
 
157224243256355
294366
310
231
101119
90124160184235
166212221
56
050100150200250300350400
1995 1996 1997 1998 1999 2000 2001 2002 2003 June 2004NumberChart 3
Anti-dumping:  initiations of investigations and measures taken, 1995 to end-June 2004
Source :WTO Secretariat.Initiations
Measures taken
 
 
 
 
Per cent
Base metals & articles thereo f
30.4
Chemicals & articles thereof 
19.5
Plastics, rubber & articles 
thereof
12.4Chart 4
Anti-dumping initiations by sector, 1995 to end-June 2004
Source :  WTO Secretariat.Mineral products   2.5
Textiles & articles thereof   6.9Articles of stone   3.3
Pulp of wood, paper, paperboard   4.6Other  9.9Machinery & mechanical/electrical appliances
8.3
Misc. manufactured articles  2.3
Note:     Other includes live animals & products (1.8%);  vegetable products (1.3%);  fats & oils (0.3%);  prepared foodstuffs,  
              beverages, tobacco (1.6%);  raw hides & skins (0.1%);   wood & articles (1.4%);   footwear & headgear, etc.  (0.8 %);
              precious stones etc. (0.04%);  transport equipment (0.8%);  precision instruments (1.1%);  and works of art (0.5% ).
  WT/TPR/OV/10 
 Page 31 
 
 
Countervailing and safeguard measures 
68. Countervailing measures tend to be used less frequently by Members than anti-dumping 
measures.  During the period 1995-2003, 168 initiati ons were reported by Members (compared to 
2,436 for anti-dumping).  The number of initiations  fell between 2001 and 200 2 from 27 to nine, but 
rose in 2003 to 15 – there were six initiations in the first half of 2004.  In contrast to anti-dumping 
measures, around 35% of which have been taken by developed country Members, around 75% of 
countervailing measures have been taken by develope d Members.   The main initiators overall since 
1995 have been the United States (69) and the EC (42);  in 2003 the United States (four) and Australia 
(three) initiated the largest number of cases, while in  the first half of 2004, the US and Canada each 
initiated three cases.   The sectors that have been  most affected since 1995 include base metals 
(71 initiations), followed by prepared foods, beverag es and spirits and tobacco (23), and plastics (17). 
69. Almost 60% of investigations (104) since 1995 have resulted in countervailing measures 
being taken by Members.  As for investigations, th e United States (44) and the EC (21) have reported 
the largest number of countervailing measures;  this  was also the case for 2003 with the EC and the 
United States reporting three and two measures, respec tively.  In the first half of 2004, 4 measures 
were imposed, one each by the EC, Costa Rica, the United States, and Venezuela.  Since 1995 over 
half (54) of the measures taken affected base metals.   
70. The use of safeguards, although minor compar ed to anti-dumping and even countervailing 
measures, continues to be active.  In 2003, Memb ers notified 17 safeguard initiations, a decline from 
the 34 initiations in 2002 but higher th an the 13 initiations notified in 2001.81  The number of 
definitive safeguard measures notif ied decreased to 13 in 2003, from 15 in 2002.  Members had 
notified only eight definitive safeguard measures in  2001.  In 2004, as of 1 November, Members had 
notified nine initiations and six definitive measures.   The main users since 1995 have been India 
(eight measures imposed) followed by the United St ates (six) and Chile, the Czech Republic, and the 
Philippines (five each).  Most safeguard initiations  occur with regard to agricultural/food products, 
chemicals, and base metals. 
6. Services 
Overview 
71. Services account for an increasingly large share of world GDP.  Their share in industrialized 
countries' GDP is around 70%, compared to some 50% in developing countries.82  Three regions, the 
EC (15), North America and East Asia account for almost 80% of world trade in services.83  However, 
developing countries' share of trade in services ha s been growing over the last decade, with an 
apparent comparative advantage in services in which labour is a major input, such as tourism.  
Nevertheless, increasingly, some are becoming s uppliers of services that use high-skilled labour, 
notably communications and information technolog y.  While developing countries are increasingly 
liberalizing their domestic economies, including the lib eralization and regulation of  related services 
such as transport, electricity, telecommunications, they are also seeking increased market access to 
promote their activities in communications a nd information technology related services. 
72. The remainder of this section focuses on the four  modes of international trade in services as 
defined under the GATS:  Modes 1 and 3 (cross border supply and commercial presence), which are 
the two largest modes of supply (accounting for over th ree quarters of total trade in services);  Mode 2 
(consumption abroad);  and Mode 4 (temporary move ment of natural persons).  Mode 4, despite 
accounting for a negligible share of total servic es trade, has been the source of much recent 
                                                      
81WTO Secretariat. 
82 Data from the WTO's Economic Research and Statistics Division. 
83 WTO International Trade Statistics, 2004 (forthcoming), Table A8 and Table A9, Geneva. WT/TPR/OV/10 
Page 32  
 
discussion, particularly on the part of developi ng countries seeking increased market access under the 
GATS for this mode of supply. 
Modes 1, 2 and 3 
73. Although calculations of world trade in services are imprecise, it is estimated that Mode 1 
(cross border supply) accounts for around 28% of total trade in services.
84  Commitments under 
Mode 1 vary under the GATS, with  32% and 40% of developing and transition economies making full 
commitments with regard to market access and na tional treatment respectively, while the shares for 
developed economies are lower at 26%;  the highest share of full commitments appear to have been 
made by acceding economies (over 50%).  Partial commitments are higher for industrial economies 
45% for both market access and national treatment  compared to 32% and 25% for developing and 
transition economies.85  
74. Members appear to have scheduled the least number of limitations under Mode 2 
(consumption abroad).  Around half of all market  access and national treatment commitments under 
this Mode are without limitation, significantly higher than for Mode 3, the largest mode of delivery of services (see below).  Th ere also appears to be little difference between the level of full commitments 
made by developed and developing country Members under Mode 2.  Partial commitments were made 
in 40% (for market access) and 38% (national treatme nt) of cases.  An estimated 14% of international 
trade in services is conducted through this Mode. 
75. Mode 3 (commercial presence) is the largest of the four Modes of delivery, accounting for 
around 56% of total services trade, but nevertheless is subject to a significantly higher number of limitations than Modes 1 and 2.  Mode 3 is, however , subject to more bindings (full and partial) than 
Mode 1.  Amongst developed Member s, 11% and 19% made full commitments with respect to market 
access and national treatment, compared to 18% an d 37%, respectively for developing and transition 
economies.  Partial commitments are made by 88% and 80% of developed economies for market 
access and national treatment;  the corresponding  figures are 78% and 56%, respectively, for 
developing and transition economies.  In general, it appears that lim itations are particularly frequent 
in infrastructure-related sectors such as telecomm unication services, financial services and transport 
services.  These are sectors that un til relatively recently tended to be  dominated by large incumbent 
public-sector companies;  recent Trade Policy Re views, however, show that these sectors have 
undergone major reform and liberalization both in developed and develo ping economies and the 
GATS schedules may in fact be more restrictive than  the actual practice.  The types of limitations 
include market access restrictions on the nu mber of suppliers (e.g. in banking and 
telecommunications) and foreign investment limitati ons, and national treatment limitations such as 
nationality, residence, authorization, and tax restrictions.
86 
Mode 4:  Temporary movement of natural persons 
76. Very few commitments have been made by Members on the movement of natural persons 
(Mode 4).  Mode 4 accounts for barely 1% of trade in services.87  This, in addition to the current 
restrictiveness of barriers and other regulations, w ould suggest that liberalization in this Mode of 
delivery would lead to considerable growth in tr ade in services through the temporary movement of 
natural persons.  This is also a Mode of deliver y that is important for a number of developing and 
least developed countries, many of which rema in highly dependent on workers' remittances for 
                                                      
84 Data from the WTO's Economic Research and Statistics Division. 
85 WTO document S/C/W/99, 3 March 1999. 
86 WTO document S/C/W/99, 3 March 1999. 
87 The estimates by the WTO's Economic Research and Statistics Division are based on compensation 
of foreign employees as shown in the balance of payments (obtained from balance-of-payments statistics from 
the IMF and Foreign Affiliates Tr ade Statistics from the OECD).  WT/TPR/OV/10 
 Page 33 
 
 
foreign exchange earnings.88  Many developing countries are also a source of relatively low cost and 
high skilled labour which is increasingly being so ught out by companies through "outsourcing" 
(Box 2).  These countries are therefore increasingly looking for further liberalization and market access for their nationals. 
Box 2:  Business process outsourcing  
Business process outsourcing (BPO) services, or outsourcing, have been described as one of the most 
rapidly expanding business services.  In India, for exampl e, it is estimated that IT enabled services such as 
outsourcing expanded by 65% in 2003.  Precise figures are not available on trade in BPO services but it is 
estimated that a number of developing countries, including India, Israel, Dominica and Brazil have experienced growth of over 20% per year since the mid 1990s and other developing countries such as 
Mauritius, Nicaragua, Barbados and China have also se en rapid growth in this sector (Mattoo and Wunsch 
2004).  While India is often cited as the main provider of such services, outsourcing to other developing countries especially given regional proximity and language advantages, has also picked up rapidly;  
companies in the EC, for example, find language, techni cal and cost advantages in outsourcing to countries 
in Central Europe.  According to the OECD, the main factors driving outsourcing include cost and efficiency advantages, as well as the increased speci alization of companies and external sourcing of 
increasingly technically sophisticated supplies of goods and services (OECD, 2000).  Indeed, evidence 
from research on the impact of such  outsourcing on IT hardware suggests that the benefits to consumers 
were considerable, contributing to a decline by 10-30% of IT hardware prices during the 1990s.  A decline 
in prices and increased productivity make a contribution to overall GDP growth and therefore the 
generation of further employment in the economy (Mann, 2003). 
The growth of outsourcing activities has created considerable controversy, especially with regard to its 
impact on employment in the industri alized counties.  In the United St ates, for example, a proposal was 
made in the Senate to ban outsourcing of some types of federal government work;  other suggestions include regulation and tax measures to try to reduce out sourcing activities.  There is inadequate evidence, 
however, on the number of jobs lost through such out sourcing activities.  In fact, recent research suggests 
that employment in occupations deemed vulnerable to outsourcing appears to have been stable or 
recovering in recent years.  Employmen t in the United States has been aff ected more by rising productivity 
rather than outsourcing activities.  The United States also remains a major exporter of services and the 
ability of U.S. firms to improve productivity further will most likely yield even stronger job demand in the 
United States for workers with IT pr oficiency and skills (Mann, 2003). 
Calls for a ban or regulation of outsourcing activities ha ve also created concerns in the major suppliers of 
such services, most notably developing countries.  They argue that such bans are intended to deny 
developing countries the benefits of their comparative advantage in BPO services 
Source: Mann, Catherine, L. (2003),  "Globalization of IT Services and White Collar Jobs:  The Next 
Wave of Productivity Growth", International Economics Policy Briefs , Institute for 
International Economics, December;  Matt oo, A. M. and S. Wunsch, "Pre-empting 
Protectionism:  The WTO and Outsourcing", World Bank Policy Research Working Paper no. 
3237 , March;  OECD [STI]   
 
 
77. Current GATS commitments in Mode 4 are signifi cantly more restrictive than for the other 
three Modes.  For example, no industrialized count ry has scheduled a "no limitations" entry for its 
Mode 4 commitments and only 1% of market acces s commitments by developing countries are fully 
liberal.89  Schedules also appear to be skewed in favour of higher rather than lower skilled labour with 
                                                      
88 According to research undertaken by the World Bank, remittances by workers in 2001 were 
estimated at around US$72.3 billion (World Bank, 2003, Global Development Finance, 2003 , pp. 157-8). 
89 In contrast it is estimated that in Mode 2, one out of every two entries is based on full commitments 
(WTO Secretariat, 2002, "GATS, Mode 4 and the Pattern of Commitments:  Background Information" prepared 
for the Joint WTO-World Bank Symposium on the Movement of Natural Persons (Mode 4) Under the GATS, 
WTO, Geneva, 11-12 April). WT/TPR/OV/10 
Page 34  
 
many countries specifying quotas and/or economics needs tests.
90  Exceptions to national treatment 
include residency requirements and non-eligibility for subsidies in addition to restrictions on foreign 
ownership of real estate. Also, the movement of in tra-corporate transferees higher up in the hierarchy 
is given preference, thus linking market access to Mode 3 (commercial presence).91  F o r  m a n y  
developing countries which are not large foreign investor s, this type of access is not as interesting or 
feasible.  Instead, they look to liberalization of the movement of natural persons not necessarily linked 
to Mode 3.   
78. It is not only countries that have comparative advantage in Mode 4 that are keen to ease 
restrictions to trade in services through this Mode.  While they seek greater openness in the temporary 
movement of service providers unrelated to comme rcial presence abroad, multinational corporations 
are seeking an easing of restrictions to intra-co rporate movement of personnel.  Judging from the 
modal structure of current commitments, Mode 4 seems  to be as sensitive an issue for developing, as 
for developed, countries. 
79. Obtaining further commitments from Members, developed and developi ng, in Mode 4 is 
constrained by several barriers.  These fall mainly in to domestic regulations, often not related to trade 
policy, including immigration policy, quotas on fore ign providers, either explicit or implicit, the 
recognition (or non-recognition) of qualifications, and distinctions between the treatment of domestic 
and foreign workers and between temporary and perm anent immigrants (for example with respect to 
taxes or access to social security).92  Among the Quad countries, which have the largest potential 
markets for delivery of services through Mode 4, GATS schedules do contain commitments permitting the temporary movement of  labour under certain circumstances.  For example, the United 
States in its GATS Schedule permits the entry of in tra-corporate transferees (defined as managers, 
executives and specialists) without the need for an economic needs test, up to three years, extendable 
by up to two additional years. The EC permits a ccess for temporary movement of persons without 
requiring compliance with an economic needs test pr ovided that the juridical person has obtained a 
service contract for a period not exceeding three m onths through an open tendering procedure, for a 
period of not more than three months in any 12-m onth period (24 months for the Netherlands) or the 
duration of the contract, whichever is less.
93  Canada permits entry for a maximum period of 90 days 
or the duration of the contract, whichever is le ss, once during a 12-month period for business visitors, 
and up to three years for natural persons of other Members that have been employed by juridical 
persons of that Member for a period of not less than one year.94  Japan permits entry by a natural 
person employed by a juridical person of a Member (other than Japan) for a period of not less than 
one year immediately preceding the date of applica tion for entry, for up to five years for certain 
activities.95 
80. Several of these schedules have been improve d in the initial conditional offers presented 
during the current round of services trade negotiations .  Improvements generally include an increase 
                                                      
90 Only around 17% of horizontal entries include low skilled persons ("business sellers" and "other") 
(WTO Secretariat, 2002).  Some countries do have sp ecific quotas for unskilled la bour, for example seasonal 
labour and preference for labour from certain traditional sources. 
91 As at April 2002 for example, an overview of horizontal GATS commitments showed that some 280 
out of 400 entries scheduled relate to executives, managers and specialists of which around 170 explicitly refer 
to intra-corporate transferees (WTO S ecretariat, 2002). 
92 See for example, Chaudhuri, S., A. Mattoo and R. Self (2004), "Moving People to Deliver Services:  
How Can the WTO Help?"  World Bank Policy Research Working Paper No. 3238, March. 
93 The activities covered are:  legal services;  acco unting services;  taxation advisory services;  
architectural services, urban planning and landscape arch itectural services;  engine ering services, integrated 
engineering services;  computer and related services;  and research and development services  (WTO documents 
GATS/SC/31, 15 April 1994 and GATS/SC/Suppl.2, 28 July 1995).   
94 WTO documents GATS/SC/16, 15 April 1994 and GATS/SC/16/Suppl.2, 28 July 1995. 
95 WTO document GATS/SC/46, 15 April 1994.  WT/TPR/OV/10 
 Page 35 
 
 
in the period-of-stay for business visitors and for Managers and Specialists, although these offers 
constitute only the first step in a multi- stage process of submission of offers. 
81. Services trade through contract based workers (i .e. those who move temporarily to fulfil a 
service contract as opposed to intra-corporate transfers) may be more desirable for both the host and origin countries.  For the host country, such movement s are likely to be of a shorter time duration than 
intra-corporate transfers, with important implicati ons for immigration and social security and health 
policies, whereas for the source country, short-term contracts are likely to result in gains through 
remittances but may not result in "brain drain".  It has also been suggested that it may be easier to 
liberalize access through such short-term contractua l services rather than on longer term employment 
based movement.
96   
82. A few countries already provide such a distinc tion in their GATS schedules and new offers.  
The EC for example, distinguishes between independe nt professionals who are permitted to stay for a 
maximum period of six months (previously three mo nths in its GATS Schedule) and those employed 
by firms based abroad.  Canada permits such professi onals to stay for an initial period of one year to 
complete their contracts with the possibility of extensions.  Other countries such as India which has an 
interest in obtaining further market access for professionals, have also suggested that a special 
category of visa, a "GATS Visa" could be consider ed.  The GATS visa would be issued more rapidly 
than other categories of visas, be time limited, cove r independent service suppliers and intra corporate 
transferees and be backed up by a bond, with th e possibility of using sanc tions in cases of abuse. 
7. Regional trade agreements 
83. The number of regional trade agreements (R TAs) has continued to rise in 2004 making 
preferential, discriminatory trade relations an ever more established and perhaps irreversible feature of 
the international trading system.  The rush to forge RTAs over the last decade, appears to have gained 
further pace in the wake of the impasse experienced at Cancún on the DDA.  Between January and August 2004 alone, 21  RTAs were notified to th e WTO, increasing the total number of notified 
preferential agreements in force to 206
97;  in addition to these, around 30 agreements were signed 
between 2003 and 2004 and awaiting entry into fo rce, and approximately 60 RTAs are in the 
negotiations/proposal stage.  The intensification of  RTA activities has been re corded across all world's 
regions even though it has been more pronounced in  the Western Hemisphere and Asia-Pacific.  The 
most notable developments of this latest phase of  RTA proliferation include the expansion in the 
number of cross regional RTAs, of developed-developing countr y RTAs and the emergence of 
agreements among developing countries. 
84. In Europe, 2004 was a year of both RTA expa nsion and consolidation.  The accession to the 
EC of ten new members on 1 May expanded the European internal market to 28 countries98, 
encompassing 450 million citizens and accounting for roughly 18% of world trade.  The EC enlargement also consolidated the extensive netw ork on intra-European RTAs built over the years by 
considerably reducing the number of existing agreements.
99  This process of expansion and 
consolidation is due to continue in the coming year s as countries are added to the list of candidates for 
                                                      
96 Chaudhuri, S. , A. Mattoo and R. Self, 2004, "Moving People to Deliver Services:  How Can the 
WTO Help?", World Bank Policy Research Working Paper, No. 3238, March. 
97 This number totals notifications made unde r GATT Article XXIV, GATS Article V, and the 
Enabling Clause as well as accessions to existing RTAs ;  for a complete list of RTAs notified to the 
GATT/WTO see http://www.wt o.org/english/tratop_e/region_e/region_e.htm 
98 The EC plus three EFTA member states. 
99 The accession of Cyprus, the Czech Republic, Estoni a, Hungary, Latvia, Lithuania, Malta, Poland, 
the Slovak Republic, and Slovenia terminates the bila teral agreements between the new members and the EC, 
whilst it repeals the trade-related aspects of all existing agreements among the new members as well as those 
between the latter and third parties with whic h the EC already has preferential agreements. WT/TPR/OV/10 
Page 36  
 
EC accession.
100  In South Eastern Europe, the EC has been negotiating a Stabilization and 
Association Agreement (SAA) with Albania and has concluded the feasibility study for an SAA with 
Bosnia and Herzegovina.101  At the sub-regional level, a netw ork of bilateral FTAs being developed 
under the auspices of the Stability Pact has been concluded and is progressively being implemented.
102  A similar process is under way between the EC and countries in North Africa and 
the Middle East, which aims to the establishmen t of a Euro-Mediterranean Free Trade Area by 
2010;103 the grid of EC's bilateral agreements has almost been completed, thus replacing first 
generation, non-reciprocal co-operation ag reements between the EC and these countries.104 
85. Negotiations on the FTA between the EC and th e countries of the Gulf Co-operation Council 
(GCC) are in progress, with offers having been ex changed on both goods and services trade.  EC 
negotiations for an FTA with MERCOSUR have in tensified with improved offers on services, 
government procurement, investment and goods (inc luding agriculture) being exchanged.  In South 
East Asia, further discussions have been held  on the "Trans-regional EC-ASEAN Trade Initiative” 
(TREATI), which aims at the expansion of trad e and investment flows between the two regions, 
though no FTA appears to be yet on the agenda.  The EFTA States, however, having concluded an 
FTA with Singapore in 2003 have b een exploring the possibility of FTA negotiations with Thailand 
and with the Republic of Korea.  With respect to  EC relations with the ACP (African, Caribbean and 
Pacific) countries, negotiations on Ec onomic Partnership Agreements (EPAs)105 were officially 
opened in 2004 with Eastern and Southern Afri ca (ESA), the Caribbean Forum of ACP States 
(CARIFORUM) and with the Southern African Development Community (SADC).  EPAs negotiations with the Pacific ACP States are scheduled to be launched in 2004.
106   
86. In the Western Hemisphere, the United States h as lived up to its ambitious preferential trade 
agenda announced in 2003 by si gning FTAs with Australia, Morocco and, as part of the Dominican 
Republic – Central American Free Trade Agreement (DR-CAFTA), with Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, and Ni caragua;  it has concluded negotiations with 
Bahrain;
107  it has advanced negotiations with the South African Customs Union (SACU); opened 
negotiations with three members of the Andean Co mmunity (Colombia, Ecuador and Peru) and with 
Panama;  and announced its intention to  open FTA negotiations with Thailand. 
87. RTA developments in Latin America suggest increasing efforts towards consolidation and 
deepening of the network of RTAs among Sout h and Central American countries.  MERCOSUR 
                                                      
100 Croatia received candidate status in June 200 4, thus joining Bulgar ia, Romania and Turkey. 
101 Two such agreements have been concluded to date with the Former Yugoslav Republic of 
Macedonia (FYROM) and Croatia respectively.  Members of the European Free-Trade Association (EFTA) are 
pursuing a similar set of negotiations. 
102 The Stability Pact process involves Albania, Bo snia and Herzegovina, Bulgaria, Croatia, FYROM, 
Romania, and Serbia and Montenegro.  A Memorandum of Understanding on trade facilitation and liberalization in 2001 commits these countries to conclude a network of bilateral FTAs among themselves.  At a later stage, 
Moldova became associated  with this process. 
103 The Mediterranean partners are Algeria, Egypt,  Israel, Jordan, Lebanon, Morocco, Palestinian 
Authority, Syria, Tunisia and Turkey.  Cyprus and Malta were partners to the process before acceding to the EC. 
104 The Association Agreement between the EC and Eg ypt entered into force on 1 June 2004, while 
negotiations with Syria are in progress. 
105 EPAs are reciprocal FTAs supposed to replace th e existing Cotonou Agreement between the EC and 
the 77 ACP countries. 
106 EPA negotiations with Central Africa (CEMAC ) and West Africa (ECOWAS) were opened in 
October 2003. 
107 The FTA with Bahrain and Morocco fall under the Middle East Free Trade Initiative proposed by 
President G. W. Bush in May 2003, which foresees a plan of graduated steps to expand and deepen economic 
ties between the United States and Middle Eastern nations through Trade and Investment Framework 
Agreements (TIFAs), Bilateral Investment Treaties (B ITs), and comprehensive Free Trade Agreements (FTAs).  WT/TPR/OV/10 
 Page 37 
 
 
members have been working towards the objective of a fully fledged customs union,108 and have 
concluded a framework agreement with three member s of the Andean Community, which aims to the 
gradual establishment of an FTA.109  Recently, Mexico has signalled its intention to apply for 
associate membership in MERCOSUR.110  Latin American countries have also been very active in 
FTA negotiations with partners further afield.  Me xico has concluded negotiations with Japan; Chile 
with the Republic of Korea; Panama is negotia ting with Singapore; MERCOSUR with India, and a 
MERCOSUR-China FTA is being considered.  At th e continental level, negotiations for the Free 
Trade Area of the Americas (FTAA) are ongoing; however, it appears that not much progress has been made since the last Ministerial Meeting (the eighth) in Miami in November 2003.
111   
88. The debate over RTAs in the Asia-Pacific furt her intensified in 2004.  Singapore has signed 
an FTA with Jordan, has launched negotiations with  the Republic of Korea and with Panama, and is 
considering negotiations with Bahrain, Egypt and Sri Lanka.112  Japan has agreed an FTA with 
Mexico, and it has launched negotia tions with the Republic of Korea, Malaysia, the Philippines and 
Thailand in order to strengthen its ties with AS EAN countries:  in parallel, a working group is 
studying the feasibility of an FTA between Japan and ASEAN as a whole.  The Republic of Korea, 
besides its negotiations with Japan and Singapore an d the agreement concluded with Chile, has been 
holding joint-study talks with ASEAN on plans fo r an FTA.  Thailand has opened negotiations with 
New Zealand, signed an FTA with Australia, and is  considering FTAs with the EFTA States and with 
the  United States.  As for China, negotiations  on the FTA with ASEAN are in progress, while 
feasibility studies are being undertaken on FTAs with Au stralia and New Zealand.  Further, in July, it 
signed a framework agreement on economic co-opera tion with the countries of the GCC.  At the 
broader regional level, ASEAN, China, Japan and the Republic of Korea are discussing plans for an 
East Asian Community as a new framework for regi onal co-operation.  Australia and New Zealand's 
participation in the ASEAN leaders' summit in November may involve discussions on a possible FTA 
with ASEAN. 
89. In South Asia, India has been the main focus of RTA activities.  With its SAARC 
counterparts,113 it has signed the South Asian Free Trade Agreement (SAFTA), designed to revamp 
the SAPTA, and a Framework Agreement under the na me BIMST-EC (Bangladesh, India, Myanmar, 
Sri Lanka, Thailand – Economic Co-o peration); it is also engaged in  FTA negotiations with ASEAN 
and Thailand, having signed Framew ork Agreements with both, and is negotiating a Comprehensive 
Economic Cooperation Agreement (CECA) with Singa pore.  India has also signed a partial scope 
agreement with MERCOSUR, as a preliminary step to  an FTA.  Further FTA negotiations are in the 
pipeline.   
90. Developments in the global RTA landscape in 2004 reaffirm the resilience of preferential 
trade relations as a major force in international trad e.  In the wake of uncertainty of the multilateral 
trade negotiations under the DDA, RTAs are being embraced by many WTO Members as trade policy instruments and, in the best of cases, as complementary to the multilateral trading system.
114  While 
                                                      
108 MERCOSUR has focused on the elimination of the exceptions to the common external tariff, the 
entry into force of the Protocol of Mo ntevideo on Trade in Services, and the entry into force of  the Protocol of 
Olivos for the Settlement of Disputes. 
109 These are Colombia, Ecuador and Venezuela.  Free- trade with Bolivia and Peru is regulated under 
the agreements concluded between MERCOSU R and Bolivia and Peru, respectively. 
110 Bolivia, Chile and Peru are alread y associate members of MERCOSUR. 
111 Paragraph 7 of the Ministerial Declaration envisages countries taking different levels of 
commitments which may result in a multi-layered FTAA regime of economic integration among the 
34 countries. 
112 Singapore has ongoing negotiations with Canada, India, Mexico, and P3 (Trilateral FTA comprising 
Chile and New Zealand) 
113 South Asian Association for Regional Co-operation (SAARC) comprising Bangladesh, Bhutan, 
India, Maldives, Nepal, Pakistan and Sri Lanka. 
114 For some WTO Members, preferential trade represents over 90% of their total trade. WT/TPR/OV/10 
Page 38  
 
the promotion of free trade at a preferential le vel may exert leverage for openness and competitive 
liberalization in international trade relations, thus  benefiting the multilateral process, this strategy 
carries certain inherent risks.  More significantly,  proliferation of RTAs and the development of 
complex networks of preferential trade are altering global trade patterns and undermining 
transparency and predictability in international trad e relations, pillars of the WTO system.  This has 
implications for all third parties to RTAs through, inter alia , trade and investment diversion, 
diminished attention to the multilateral system, and the creation of vested interests in FTA partners 
which will resist dilution of preferential margins at the multilateral level. 
91. Notwithstanding these risks, WTO Members are allowed to participate in regional initiatives, 
albeit subject to a number of criteria and procedures.
115  The Committee on Regional Trade 
Agreements (CRTA), the body entrusted with verify ing the compliance of RTAs with the relevant 
WTO provisions, continued its examination of RTAs in 2004.116  However, the CRTA made no 
further progress on its mandate of consistency assessment, due to l ong-standing institutional, political 
and legal difficulties.  Since the establishment of  the WTO, Members have been unable to reach 
consensus on the format, and the substance, of the re ports on any of the examinations entrusted to the 
CRTA. 
92. The negotiations on RTA rules launched at the F ourth Ministerial Conference in Doha aim at 
clarifying and improving the relevant disciplines and procedures under existing WTO provisions with 
a view to resolve the impasse of the CRTA, exerci se better control of RTA dynamics, and minimize 
the risks related to the proliferation of RTAs.  These negotiations, which are taking place within the 
Negotiating Group on Rules, had prog ressed meaningfully on transparency issues by the time of the 
Cancún Ministerial.  The resumption of negotiations in 2004 has furthered the Group's work on 
transparency to the point that one of the procedur al improvements considered by the Group (to ask the 
Secretariat to prepare factual presentations of RT As under examination) has been forwarded to the 
CRTA for testing, on a preliminary and voluntary basis.   The Group has also enlarged the scope of its 
negotiations to include systemic issues, which may suggest increasing concern by Members about the 
possible effects of RTAs on third parties and on the multilateral trading system as a whole. 
8. Dispute Settlement 
93. The Dispute Settlement Mechanism, set up in 1995, is often cited as one of the major 
achievements of the multilateral rules-based system.  The number of cases brought before the dispute settlement mechanism has continued to increase.  Between 1 January 19 95 and 22 October 2004, 
317 cases had been filed with the Dispute Settlement  Body (DSB), of which 129 have resulted in 
panels covering 159 disputes.  The majority of cases
117 are brought to the DSB by the industrialized 
countries, 204 as complainant and 191 as respondent s.  Developing countries have brought 136 cases 
as complainant and 122 cases as responde nts.  The main areas of complaint118 have been:  
GATT 1994 (230 requests of which 89 are on nati onal treatment, 80 on MFN treatment and 71 on 
quantitative restrictions)119, subsidies (57), agriculture (52) and anti-dumping (54). 
                                                      
115 Contained in GATT Article XXIV, for agreements covering trade in goods, and in GATS Article V, 
for agreements in the area of trade in services. The 1979 Decision of the GATT Council on Differential and 
More Favourable Treatment (Enabling Clause) governs the conclusion of preferential arrangements among 
developing countries (trade in goods only). 
116 As of July 2004, the CRTA had a total of 158 agreements under examination. 
117 Based on 314 cases (as at 17 September 2004. 
118 Based on 315 cases (as at 30 September 2004). 
119 There is some double counting as some of the cases brought under Article III of the GATT 1994 are 
also brought under Article I.   WT/TPR/OV/10 
 Page 39 
 
 
94. The LDCs have, in general, not used the di spute settlement mechanism although some have 
participated as third parties in disputes120;  in addition, Bangladesh was the first LDC to request 
consultations under the mechanism in January 2004.121    Assistance is being provided to LDCs that 
do wish to use the mechanism, notably through the Advisory Centre on WTO Law (ACWL).  The 
ACWL was formed in October 2001 to help devel oping, and especially LDC Members, to make more 
effective use of the WTO’s dispute settlement m echanism;  all countries designated by the United 
Nations as least developed that are Members of the WTO are entitled to its services.  It charges 
modest fees.  Since July 2001, the Centre has pr ovided legal advice to LDCs on a number of issues, 
including the implications of paragraph 6 of the Doha Ministerial Declaration on the TRIPS 
Agreement and Public Health;  the WTO consistency of certain subsidies;  the viability of initiating a 
dispute under Article VI of the GATT 1994;  and the viability of resort to Article XVIII of the GATT 
1994. 
95. Among the main users of the WTO dispute settle ment mechanism, the EC, the United States, 
Canada and Japan have been the largest.  Up  to 17 September 2004, the United States brought 
78 complaints and was respondent in 83;  the EC and its member states brought 64 complaints and 
were respondent in 63;  Canada was involved in  26 cases as complainant and 12 as respondent;  and 
Japan was complainant in 11 cases and respondent in  13.  A significant number of cases (55 or 17%) 
have occurred between the two la rgest users, the United States and the EC.  Among the developing 
countries, the largest users continue to be Brazil (22 cases as complainant and 12 as respondent), India 
(16 cases as complainant and 16 as respondent), a nd Argentina (9 and 15 cases, respectively, as 
complainant and respondent).   
96. Panel reports had been circulated (up to 22 October 2004) in 90 cases of which 59 were 
appealed.  Of these 90 cases, 30 were initiated by deve loping countries, 57 by industrialized countries 
and three by a combination of both.  With regard to the two largest traders, the EC initiated 17 cases 
as sole complainant and seven jo intly with others;  the United States initiated 15 cases as sole 
complainant and seven jointly.  The United States an d the EC were also the largest respondents with 
regard to cases for which panel reports have been  circulated:  34 and 16 cases, respectively.  
Developing countries were respondents in 26 cases for which panel reports have been circulated. 
97. Of the cases that go through WTO dispute settle ment procedures, a large number tend to be 
resolved through bilateral consultations between th e Members.  For those cases that go beyond 
consultations to formal panels it appears that most  go to the appeal stage.  In cases where Members 
have failed to agree through c onsultations on implementation of  the DSB’s recommendations and 
rulings, recourse to the dispute settlement proced ures under Article 21.5 of the Dispute Settlement 
Understanding (DSU) has been sought.  Memb ers have, in general, implemented the 
recommendations and rulings made by  panels and by the Appellate Body in the “reasonable period of 
time” determined under Article 21.3 of the DSU.  However, in a few cases under the Compliance 
Review Procedure of the DSU, compliance by Me mbers has been contested and has resulted in 
authorization by the DSB to suspend concessions a nd obligations against the non-complying Member.  
The cases that have resulted in such an author ization since the formation of the WTO are: 
- EC ban on meat and meat products (com plaints by the United States and Canada) 
- EC banana regime (complaints by the United States and Ecuador) 
                                                      
120 Least developed countries that have participated in disputes as third parties include Bangladesh, 
Benin, Chad, Madagascar, Malawi, Senegal and Tanzania. 
121 Bangladesh requested consultations with India on 28 January 2004 regarding the latter's imposition 
of anti-dumping duties on imports of lead acid batteries from Bangladesh (WTO document, WT/DS306/1, 
2 February 2004);  in February 2004, the EC requested to join these consultations (WTO document 
WT/DS306/2, 16 February 2004). WT/TPR/OV/10 
Page 40  
 
- Brazil export financing for aircraft (complaint by Canada) 
- United States Foreign Sales Corporations (FSCs) (complaint by the EC) 
- Canada export credits and loan guarantees for aircraft (complaint by Brazil) 
- United States 1916 Anti-Dumping Act (complaint by the EC) 
98. The United States and Ecuador decided not to reta liate, because of a change in the EC banana 
import regime.  In the case of the United States 1916 Anti-Dumping Act, an arbitration decision was 
circulated on 24 February 2004 although the EC has not as yet requested authorization to suspend concessions and obligations.
122  In the case of the FSC dispute, the EC suspended concessions and 
obligations on 1 March 2004 on a number of pr oducts imported from the United States.  Such 
countermeasures consist of an additional customs duty of 5% to be enforced on 1 March 2004, 
followed by an automatic, monthly increase by 1% up to a ceiling of 17% to be reached on 1 March 
2005 if the United States had failed to comply with the ruling by then.123 
                                                      
122 WTO document WT/DS136/ARB, 24 February 2004.  The United States notified the Secretariat that 
it was working continuously with the United States Congre ss to enact legislation and would confer with the EC 
and Japan to reach a mutually satisfactory resolution of the matter (WTO document , WT/DS/136/14/Add.26, 7 
May 2004).  In a subsequent notification, the United Stat es notified the Secretariat that it had urged the U.S. 
House of Representatives to support legislation to repeal the 1916 Act at the earliest opportunity (WTO 
document WT/DS136/14/Add.28, 9 July 2004). 
123 European Commission Press Release IP/04/282, "US Foreign Sales Corporations (FSC): EU starts 
countermeasures on U.S. produ cts", Brussels 1 March 2004, [Online].  Available at:  
http://Europe.eu.int/rapid /pressReleasesAction.do?reference=IP/ 04/282&format=HT..., [1 June 2004].  WT/TPR/OV/10 
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Table Annex 1 
Structure of MFN tariffs in least-developed countries reviewed in 2003/04 
(Per cent) 
  Benin Burkina Faso Mali Rwanda 
    2003 U.R.a 2003 U.R.a 2003 U.R.a 2003 U.R.a 
 Bound tariffb             
1. Bound tariff lines (% of all tariff lines) 40.4 40.4 40.9 40.9 42.1 42.1 100.0 100.0 
2. Simple average bound rate .. 29.5 .. 43.1 .. 29.6 .. 89.1 
 Agricultural products (HS01-24) .. 60.1 .. 95.1 .. 57.5 .. 76.2 
 Industrial products (HS25-97) .. 14.6 .. 18.4 .. 16.9 .. 91.3 
 WTO agricultural products .. 61.5 .. 97.6 .. 58.8 .. 74.8 
 WTO non-agricultural products .. 11.9 .. 13.7 .. 14.4 .. 91.4 
 Textiles and clothing .. 16.8 .. 16.8 .. 16.8 .. 71.9 
3. Tariff quotas (% of all tariff lines) .. 0.0 .. 0.0 .. 0.0 .. 0.0 
4. Duty free tariff lines (% of all tariff lines) .. 1.3 .. 1.2 .. 1.2 .. 0.8 
5. Non-ad valorem tariffs (% of all tariff 
lines) .. 0.0 .. 0.0 .. 0.0 .. 0.0 
6. Non-ad valorem tariffs with no AVEs 
(% of all tariff lines) .. 0.0 .. 0.0 .. 0.0 .. 0.0 
7. Nuisance bound rates (% of all tariff 
lines)c .. 0.0 .. 0.0 .. 0.0 .. 0.0 
 Applied tariff             
8. Simple average applied rate 14.6 n.a. 14.6 n.a. 14.6 n.a. 18.0 n.a. 
 Agricultural products (HS01-24) 17.7 n.a. 17.6 n.a. 17.5 n.a. 14.2 n.a. 
 Industrial products (HS25-97) 14.1 n.a. 14.1 n.a. 14.1 n.a. 18.6 n.a. 
 WTO agricultural products 16.9 n.a. 16.8 n.a. 16.7 n.a. 13.2 n.a. 
 WTO non-agricultural products 14.2 n.a. 14.3 n.a. 14.2 n.a. 18.8 n.a. 
 Textiles and clothing 19.9 n.a. 19.8 n.a. 19.8 n. a. 20.7 n.a. 
9. Domestic tariff "peaks" (% of all tariff 
lines)d 0.0 n.a. 0.0 n.a. 0.0 n.a. 0.0 n.a. 
10. International tariff "peaks" (% of all tariff 
lines)e 41.1 n.a. 41.3 n.a. 41.2 n.a. 39.3 n.a. 
11. Overall standard deviation of tariff ra tes 6.9 n.a. 6.9 n.a. 6.9 n.a. 10.6 n.a. 
12. Coefficient of variation of tariff rates 0.5 n.a. 0.5 n.a. 0.5 n.a. 0.6 n.a. 
13. Tariff quotas (% of all tariff lines) 0.0 n.a. 0.0 n.a. 0.0 n.a. 0.0 n.a. 
14. Duty free tariff lines (% of all tariff lines) 0.0 n.a. 0.0 n.a. 0.0 n.a. 4.9 n.a. 
15. Non-ad valorem tariffs (% of all tariff 
lines) 0.0 n.a. 0.0 n.a. 0.0 n.a. 0.0 n.a. 
16. Non-ad valorem tariffs with no AVEs 
(% of all tariff lines) 0.0 n.a. 0.0 n.a. 0.0 n.a. 0.0 n.a. 
17. Nuisance applied rates (% of all tariff 
lines)c 0.0* n.a. 0.0 n.a. 0.0 n.a. 0.0 n.a. 
 
.. Not available. 
n.a. Not applicable. * Negligible. 
 
a Based on 2003 tariff schedule. b Calculations are only based on bound tariff lines. 
c Nuisance rates are those greater than zero, but less than or equal to 2%. 
d Domestic tariff peaks are defined as those exceeding three ti mes the overall simple average applied rate (indicator 8). 
e International tariff peaks are defined as those exceeding 15%. 
 
Note: MFN tariff calculations are based on effectively applied rates (including taxes) for Benin, Burkina Faso and Mali. 
 
Source : WTO Secretariat calculations, based on data provided by the Members. WT/TPR/OV/10 
Page 42  
 
Annex 1 (cont'd) 
Structure of MFN tariffs in sel ected countries reviewed in 2003/04 
(Per cent) 
  Switzerland Norway Belize Jamaica 
    2000 2004 F.B.a 2000 2004 F.B.a 2004 F.B. 2004 F.B. 
 Bound tariffb               
1. Bound tariff lines (% of all tariff lines) 99.0 100.0 100.0 100.0 100.0 100.0 97.1 97.1 100.0  100.0  
2. Simple average bound rate 12.4 12.0 12.0 27.5 29.5 29.5 60.1 60.1 53.2 53.2 
 Agricultural products (HS01-24) 47.3 47.5 47.5 130.8 128.2 128.2 101.9 101.9 91.5 91.5 
 Industrial products (HS25-97) 2.9 2.4 2.4 4.6 4.2 4.2 52.6 52.6 44.4 44.4 
 WTO agricultural products 48.9 49.4 49.4 154.1 150.2 150.2 101.8 101.8 97.4 97.4 
 WTO non-agricultural products 2.9 2.3 2.3 4.1 3.6 3.6 51.8 51.8 43.7 43.7 
 Textiles and clothing 7.6 5.6 5. 6 10.6 8.6 8.6 57. 0 57.0 49.7 49.7 
3. Tariff quotas (% of all tariff lines) 3.5 3.4 3.4 .. 0.4 0.4 0.0 0.0 0.0 0.0 
4. Duty free tariff lines (% of all tariff 
lines) 15.2 16.4 16.4 41.9 43.8 43.8 0.0 0.0 0.6 0.6 
5. Non-ad valorem tariffs (% of all tariff 
lines) 82.8 83.7 83.7 15.4 15.3 15.3 0.0 0.0 0.0* 0.0* 
6. Non-ad valorem tariffs with no AVEs 
(% of all tariff lines) 5.0 5.5 5.5 15.4 6.4 6.4 0.0 0.0 0.0* 0.0* 
7. Nuisance bound rates (% of all tariff 
lines)c 36.5 38.4 38.4 2.3 3.0 3.0 0.0 0.0 0.0 0.0 
 Applied tariff               
8. Simple average applied rate 8.9 9.3 n.a. 8.1 7.2 n.a. 11.3 n.a. 8.6 n.a. 
 Agricultural products (HS01-24) 33.1 34.8 n.a. 33.6 33.7 n.a. 20.5 n.a. 20.6 n.a. 
 Industrial products (HS25-97) 2.4 2.3 n.a. 2.4 0.8 n.a. 9.4 n.a. 6 n.a. 
 WTO agricultural products 34.3 36.2 n.a. 38.7 38.2 n.a. 17.9 n.a. 18.1 n.a. 
 WTO non-agricultural products 2.3 2.2 n.a. 2.3 0.9 n.a. 10.0 n.a. 6.7 n.a. 
 Textiles and clothing 6. 2 5.6 n.a. 8.1 3.4 n.a. 11.6 n. a. 8.7 n.a. 
9. Domestic tariff "peaks" (% of all tariff 
lines)d 6.3 5.9 n.a. 4.6 5.0 n.a. 7.8 n.a. 6.4 n.a. 
10. International tariff "peaks" (% of all 
tariff lines)e 8.8 8.6 n.a. 8.7 5.7 n.a. 27.2 n.a. 28.5 n.a. 
11. Overall standard deviation (SD) of tariff 
rates 33.1 42.5 n.a. 33.9 44.1 n.a. 11.4 n.a. 12.4 n.a. 
12. Coefficient of variation (CV) of tariff 
rates 3.7 4.6 n.a. 4.2 6.2 n.a. 1.0 n.a. 1.4 n.a. 
13. Tariff quotas (% of all tariff lines) 3.5 3.4 n.a. .. 0.4 n.a. 0.0 n.a. 0.0 n.a. 
14. Duty free tariff lines (% of all tariff 
lines) 17.2 17.7 n.a. 65.5 83.9 n.a. 9.6 n.a. 60.5 n.a. 
15. Non-ad valorem tariffs (% of all tariff 
lines) 82.8 82.3 n.a. 11.9 10.4 n.a. 0.7 n.a. 0.0 n.a. 
16. Non-ad valorem tariffs with no AVEs 
(% of all tariff lines) 5.0 5.2 n.a. 2.9 2.3 n.a. 0.7 n.a. 0.0 n.a. 
17. Nuisance applied rates (% of all tariff 
lines)c 39.1 39.0 n.a. 2.9 1.2 n.a. 0.0 n.a. 0.0 n.a. 
 
.. Not available. 
n.a. Not applicable. * Negligible. 
F.B. Final Bound. 
 a Bound on 2004 tariff schedule. 
b Calculations are only based on bound tariff lines. 
c Nuisance rates are those greater than zero, but less than or equal to 2%. 
d Domestic tariff peaks are defined as those exceeding three ti mes the overall simple average applied rate (indicator 8). 
e International tariff peaks are defined as those exceeding 15%. 
 Note: Excluding in-quota rates.  Calculati ons exclude specific rates and include the ad valorem  part for compound and alternate rates. 
 
Source : WTO Secretariat calculations, based on data provided by the Members.  WT/TPR/OV/10 
 Page 43 
 
 
Annex 1 (cont'd) 
Structure of MFN tariffs in sel ected countries reviewed in 2003/04 
(Per cent) 
  Korea, Rep. of Sri Lanka Singapore 
    1996 2004 F.B.a 1998 2003 F.B.b 1999 2003 F.B.c 
 Bound tariff             
1. Bound tariff lines (% of all tariff lines)d 91.0 91.5 91.5 36.7 .. 36.6 70.5 70.6 70.6 
2. Simple average bound rate 27.6 17.2 17.0 .. .. 31.2 9.7 7.5 6.9 
 Agricultural products (HS01-24) 72.4 61.1 61.1 .. .. 49.5 16.8 11.0 9.6 
 Industrial products (HS25-97) 20.0 10.0 9.7 .. .. 19.7 7.9 6.5 6.2 
 WTO agricultural products 71.3 61.1 61.1 .. .. 49.8 17.7 11.1 9.5 
 WTO non-agricultural products 19.8 9.7 9.5 .. .. 19.9 7.8 7.3 6.3 
 Textiles and clothing 28.5 18. 5 18.5 .. .. 12.5 14.8 10.9 9.9 
3. Tariff quotas (% of all tariff lines) 1.7 1.7 1.8 .. .. 0.0 0.0 0.0 0.0 
4. Duty free tariff lines (% of all tariff lines) 2.0 14.2 14.4 .. .. 0.5 14.9 18.5 22.6 
5. Non-ad valorem tariffs (% of all tariff lines) 0.5 1.0 1.0 .. .. 1.8 1.3 1.3 1.3 
6. Non-ad valorem tariffs with no AVEs (% of 
all tariff lines) 0.5 1.0 1.0 .. .. 1.8 1.3 1.3 1.3 
7. Nuisance bound rates (% of all tariff lines)e 0.6 2.1 2.1 .. .. 0.0 0.1 3.7 0.0* 
 Applied tariff             
8. Simple average applied rate 14.4 12.8 n.a. 11.8 9.8 n.a. 0.0 0.0 n.a. 
 Agricultural products (HS01-24) 51.8 47.9 n.a. 27.0 21 n.a. 0.0 0.0 n.a. 
 Industrial products (HS25-97) 7.7 6.6 n.a. 9.4 7.9 n.a. 0.0 0.0 n.a. 
 WTO agricultural products 56.2 52.2 n.a. 27.6 21.3 n.a. 0.0 0.0 n.a. 
 WTO non-agricultural products 7.7 6.7 n.a. 11.5 8.0 n.a. 0.0 0.0 n.a. 
 Textiles and clothing 7.8 9.8 n. a. 6.9 5.2 n.a.  0.0 0.0 n.a. 
9. Domestic tariff "peaks" (% of all tariff 
lines)f 2.4 2.5 n.a. 0.3 0.3 n.a. 0.0 0.0 n.a. 
10. International tariff "peaks" (% of all tariff 
lines)g 8.7 8.9 n.a. 26.5 21.9 n.a. 0.0 0.0 n.a. 
11. Overall standard deviation of tariff rate s 57.5 52.0 n.a. 14.2 12.4 n.a. 0.0 0.0 n.a. 
12. Coefficient of variation of tariff rate s 4.0 4.1 n.a. 1.2 1.3 n.a. 0.0 0.0 n.a. 
13. Tariff quotas (% of all tariff lines) 1.7 1.7 n.a. 0.0 0.0 n.a. 0.0 0.0 n.a. 
14. Duty free tariff lines (% of all tariff lines) 2.0 13.3 n.a. 19.8 10.0 n.a. 99.9 99.9 n.a. 
15. Non-ad valorem tariffs (% of all tariff lines) 0.5 0.6 n.a. 0.6 1.2 n.a. 0.1 0.1 n.a. 
16. Non-ad valorem tariffs with no AVEs (% of 
all tariff lines) 0.5 0.6 n.a. 0.6 1.2 n.a. 0.1 0.1 n.a. 
17. Nuisance applied rates (% of all tariff lines)e 2.7 2.7 n.a. 0.0 27.1 n.a. 0.0 0.0 n.a. 
 
.. Not available. n.a. Not applicable. 
* Negligible. 
F.B. Final bound.  
a Based on 2004 tariff schedule. 
b Based on 2001 tariff schedule. c Based on 2003 tariff schedule. 
d Calculations are only based on bound tariff lines .  Including fully bound and partially bound rates. 
e Nuisance rates are those greater than zero, but less than or equal to 2%. 
f Domestic tariff peaks are defined as those exceeding three ti mes the overall simple average applied rate (indicator 8). 
g International tariff peaks are defined as those exceeding 15%. 
 Note: Excluding in-quota rates.  Calculatio ns exclude specific rates and include the ad valorem  part for compound and alternate rates.  
Final bound calculations are only based on bound tariff lines. 
 
Source : WTO Secretariat calculations, based on data provided by the Members. WT/TPR/OV/10 
Page 44  
 
Table Annex 2 
Tariff escalation by 2-digit ISIC industry 
(Per cent) 
Country/ 
Year Stage of 
processa Food, 
beverages
& tobacco Textiles & 
leather Wood & 
furniturePaper, 
printing & 
publishingChemicals Non-
metallic 
mineral 
products Base 
metal Fabricated 
metal 
products & 
machinery Other Total 
industry
            
North America           
            
United States 1 3.1 2.9 0.1 0.0 1.9 0.0 0.4 n.a. 1.6 2.3 
2002 2 7.4 9.1 2.1 0.5 4.3 2.1 1.7 2.7 0.4 4.7 
 3 12.4 10.0 2.2 0.6 3.9 5.6 2.5 2.2 3.6 5.5 
            
Canada 1 7.9 1.0 0.0 0.0 1.5 0.0 0.0 n.a. 1.2 3.9 
2002 2 6.8 7.0 2.1 0.4 2.9 0.7 0.9 1.3 0.0 3.9 
 3 34.3 13.5 5.2 1.0 4.7 3.8 3.0 2.6 4.8 8.9 
            
Mexico 1 22.2 12.7 13.0 4.8 12.5 8.0 10.1 n.a. 14.2 15.1 
2001 2 27.1 17.9 18.6 13.3 11.3 17.7 12.9 13.7 13.0 13.2 
 3 34.5 31.4 21.9 14.9 13.5 18.3 23.0 15.4 20.8 18.5 
            
Latin America           
            
Argentina 1 9.5 11.4 5.0 6.6 9.2 9.0 5.2 n.a. 11.6 9.3 
2000 2 14.1 18.8 9.9 14.6 10.1 10.3 13.2 16.7 14.2 12.0 
 3 16.5 22.4 17.9 15.2 12.1 14.2 19.0 14.1 20.4 15.0 
            
Belize 1 22.4 5.4 7.0 5.0 7.3 5.0 5.6 n.a. 26.4 14.8 
2001 2 16.5 5.0 12.4 4.9 5.5 6.0 4.4 5.0 5.0 5.8 
 3 19.5 17.3 17.4 11.8 10.3 10.9 5.0 9.7 14.5 12.7 
            
Brazil 1 8.1 8.3 2.0 3.6 6.8 6.0 2.4 n.a. 8.6 7.2 
2004 2 11.2 15.6 7.3 12.1 6.3 7.3 9.6 13.7 12.0 8.5 
 3 13.5 19.1 14.7 11.9 6.6 11.1 16.0 13.0 17.3 12.5 
            
Chile 1 6.0 6.0 6.0 6.0 6.0' 6.0 6.0 n.a. 6.0 6.0 
2003 2 8.2 6.0 6.0 6.0 6.0 6.0 6.0 6.0 6.0 6.1 
 3 5.9 6.0 6.0 5.7 6.0 6.0 6.0 5.7 6.0 5.9 
            
Costa Rica 1 10.2 2.9 6.6 1.7 2.5 6.0 1.9 n.a. 8.4 6.2 
2000 2 12.7 8.5 8.2 3.8 2.2 3.1 3.0 2.5 3.0 4.3 
 3 19.8 12.9 12.8 8.9 6.1 8.2 1.0 4.2 9.5 8.2 
            
Dominican Rep. 1 13.0 1.8 3.0 3.0 2.8 20.0 3.0 n.a. 8.2 7.3 
2002 2 14.0 2.0 4.7 3.1 3.9 5.1 6.1 9.0 2.8 4.4 
 3 17.1 17.3 14.9 12.5 9.0 11.1 14.0 7.2 16.4 10.8 
            
Guatemala 1 9.8 1.9 0.0 0.0 2.8 5.0 0.0 n.a. 8.8 5.6 
2001 2 10.4 14.3 7.0 3.4 1.3 2.3 2.0 1.7 1.3 5.1 
 3 12.9 18.9 12.5 7.7 6.4 7.2 0.0 4.0 9.4 8.1 
            
Guyana 1 23.3 5.4 7.0 5.0 7.0 5.0 5.6 n.a. 26.4 15.2 
2002 2 16.7 5.1 9.7 4.9 5.8 5.9 5.6 5.0 5.0 6.1 
 3 25.6 17.3 14.3 11.4 11.1 10.8 5.0 10.2 15.4 13.8 
            
Honduras 1 10.2 1,7 0.0 0.0 1.9 5.0 0.0 n.a. 8.2 5.6 
2002 2 10.8 10.3 7.3 4.9 1.4 2.3 1.9 1.7 1.3 4.4 
 3 12.4 13.2 12.5 7.4 5.7 7.1 0.0 3.6 9.3 7.0 
            
Haiti 1 2.6 4.5 0.0 0.0 0. 0 15.0 0.0 n. a. 8.7 2.3 
2002 2 4.7 5.3 0.0 0.5 0.7 1.4 1.3 0.8 0.0 2.0 
 3 6.5 5.2 6.1 1.5 3.4 5.2 0.0 1.7 4.2 3.3 
            
Jamaica 1 23.3 0.5 3.0 0.0 4.0 5.0 1.1 n.a. 16.1 12.4 
2004 2 11.0 0.0 6.6 0.0 1.5 1.7 1.4 0.0 0.0 1.5 
 3 19.2 16.6 13.0 10.2 9.1 8.2 0.0 5.9 12.1 10.5 
            
Venezuela 1 14.2 10.9 5.0 6.3 8.0 10.0 2.8 n.a. 10.9 10.4 
2002 2 17.7 17.5 12.1 12.3 7.4 9.3 11.1 8.5 15.0 10.9 
 3 18.7 19.2 16.6 15.1 10.9 14.7 15.0 11.0 15.6 13.4 
Table Annex 2 (cont'd)  WT/TPR/OV/10 
 Page 45 
 
 
Country/ 
Year Stage of 
processa Food, 
beverages
& tobacco Textiles & 
leather Wood & 
furniturePaper, 
printing & 
publishingChemicals Non-
metallic 
mineral 
products Base 
metal Fabricated 
metal 
products & 
machinery Other Total 
industry
           
Western Europe           
            
European  1 14.6 0.8 0.0 0.0 1.5 0.0 0.0 n.a. 1.2 8.6 
Communities 15 2 19.2 6.2 3.1 0. 9 4.7 2.9 1.3 1.6 0.0 4.8 
2004 3 19.3 9.5 2.1 0.0 3.9 4.1 0.0 2.5 2.7 7.0 
            
Norway 1 16.5 0.0 0.0 0.0 0.0 0.0 0.0 n.a. 0.1 8.0 
2004 2 20.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.1 
 3 49.8 6.3 0.0 0.0 0.2 0.0 0.0 0.0 0.0 8.5 
            
Switzerland 1 7.8 3.9 5.1 1.6 0.8 0.1 0.4 n.a. 0.4 4.3 
2004 2 37.9 5.1 3.0 7.8 0.9 2.7 1.8 1.3 4.5 4.5 
 3 43.1 5.6 2.4 4.3 2.2 2.6 1.9 1.1 2.2 9.7 
            
Eastern Europe            
            
Bulgaria 1 11.8 3.1 0.0 0.0 4.5 0.0 0.0 n.a. 2.3 7.8 
2003 2 22.7 12.7 5.0 8.9 7.3 9.7 4.8 7.8 0.6 8.8 
 3 27.4 19.7 13.8 9.4 9.2 13.4 0.0 6.7 8.0 13.5 
            
Czech Republic 1 0.9 0.2 0.6 0.0 1.9 0.0 0.3 n.a. 0.4 0.9 
2001 2 17.6 4.6 2.7 7.6 3.8 8.2 3.8 4.7 8.7 4.9 
 3 16.3 8.4 5.6 6.4 4.0 6.5 2.6 4.0 4.8 7.4 
            
Slovak Republic 1 0.8 0.2 0.5 0.0 1.9 0.0 0.3 n.a. 0.4 0.8 
2001 2 14.4 4.6 2.7 7.1 3.7 8.3 3.8 3.9 8.7 4.7 
 3 16.2 8.5 5.6 5.8 3.9 6.5 2.6 4.0 4.8 7.4 
            
Slovenia 1 4.3 1.8 1.2 0.4 3.9 0.0 0.1 n.a. 6.2 3.5 
2001 2 16.2 9.6 4.6 8.7 7.7 5.4 6.9 6.8 10.0 8.3 
 3 20.0 16.4 14.2 13.6 8.8 9.9 5.0 9.9 13.5 13.1 
            
Middle East            
            
Bahrain 1 4.8 9.5 7.0 5.0 6.4 10.0 5.0 n.a. 8.9 6.2 
2000 2 2.8 10.0 5.2 5.2 5.3 5.1 5.0 5.0 5.0 6.2 
 3 11.4 8.7 8.8 7.3 7.0 7.1 5.0 9.3 7.8 9.0 
            
East Asia            
            
Brunei  1 0.0 0.3 12.0 0.0 0.0 0.0 0.0 n.a. 1.2 0.3 
Darussalam 2 0.0 0.1 19.4 0.0 0.1 0.0 0.0 0.0 0.0 0.4 
2000 3 0.0 1.5 3.6 0.0 2.8 0.9 0.0 8.8 2.7 5.2 
            
China 1 15.3 12.5 1.2 0.0 7.1 0.0 2.8 n.a. 14.8 11.3 
2002 2 28.1 15.1 5.7 8.4 7.2 10.7 5.3 6.9 8.9 9.7 
 3 21.5 20.4 11.7 11.5 10.8 15.1 13.0 11.2 16.9 14.0 
            
Hong Kong, 
China 1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 n.a. 0.0 0.0 
2002 2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 
 3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 
            
Indonesia 1 3.7 5.5 2.0 2.6 4.1 0.0 2.9 n.a. 7.4 4.0 
2002 2 4.7 8.3 1.7 4.8 5.2 3.9 7.3 5.0 5.0 6.1 
 3 13.0 12.2 9.6 4.4 7.1 6.4 10.0 6.6 10.4 8.6 
            
Japan 1 12.6 24.3 0.0 0.0 2.4 0.0 0.4 n.a. 0.2 10.3 
2004/05 2 21.4 6.5 4.3 0.3 2.8 1.5 0.8 1.5 0.0 4.7 
 3 20.2 11.4 2.1 0.0 2.0 1.1 3.0 0.3 2.5 7.2 
            
Korea, Rep. of 1 60.0 5.2 4.4 0.1 6.6 5.0 1.7 n.a. 5.9 27.9 
2004 2 93.6 8.8 6.1 0.9 6.4 7.3 3.1 6.7 0.0 9.2 
 3 34.4 11.4 5.3 0.6 7.1 7.9 8.0 6.0 6.8 10.1 
            
Malaysia 1 1.4 0.3 12.0 0.0 7.6 0.0 0.3 n.a. 0.0 3.0 
2001 2 5.3 13.4 2.2 6.4 7.1 22.0 9.3 3.3 7.5 7.7 
 3 4.5 17.0 13.4 15.0 7.5 19.9 18.8 16.9 11.2 13.6 
Table Annex 2 (cont'd) WT/TPR/OV/10 
Page 46  
 
Country/ 
Year Stage of 
processa Food, 
beverages
& tobacco Textiles & 
leather Wood & 
furniturePaper, 
printing & 
publishingChemicals Non-
metallic 
mineral 
products Base 
metal Fabricated 
metal 
products & 
machinery Other Total 
industry
            
Singapore 1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 n.a. 0.0 0.0 
2003 2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 
 3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 
            
Thailand 1 17.3 3.7 1.0 1.0 8.8 1.0 1.0 n.a. 10.2 9.6 
2003 2 24.6 15.7 10.3 11.8 4.9 14.7 7.3 12.3 17.5 9.5 
 3 29.6 28.5 20.8 20.6 14.8 18.6 20.0 12.7 16.8 18.1 
            
South Asia            
            
Bangladesh 1 19.0 16.2 6.0 0.0 11.9 25.0 5.7 n.a. 25.1 14.2 
2000 2 24.8 26.5 16.0 25.5 16.2 29.7 19.2 27.1 25.0 20.7 
 3 29.5 36.3 30.2 28.1 24.4 25.2 25.0 18.5 32.3 24.1 
            
India 1 36.4 25.1 17.0 7.1 25.4 35.0 23.8 n.a. 35.0 28.1 
2001/02 2 36.6 28.5 31.1 34.7 33.6 34.1 33.0 21.7 35.0 32.3 
 3 48.3 34.2 34.8 29.4 33.2 34.1 35.0 29.2 33.5 33.0 
            
Maldives 1 16.6 18.9 15.0 25.0 21.3 25.0 21.3 n.a. 25.0 19.7 
2002 2 14.5 17.6 15.0 11.5 14.8 19.5 21.2 22.5 10.0 16.8 
 3 18.9 24.7 20.7 19.8 23.4 24.2 20.0 24.0 21.7 23.2 
            
Pakistan 1 12.1 10.1 8.0 6.1 13.2 5.0 14.7 n.a. 14.7 11.8 
2001 2 19.2 23.7 19.1 24.0 13.9 23.8 15.4 21.7 25.0 17.5 
 3 29.9 29.2 28.4 23.5 21.1 25.6 30.0 21.2 22.0 23.6 
            
Sri Lanka 1 16.2 4.1 6.8 2.0 2.9 0.0 2.0 n.a. 8.0 8.3 
2003 2 18.7 1.1 4.1 10.1 4.1 8.0 5.0 6.2 13.8 4.4 
 3 26.3 10.6 23.5 12.9 10.5 17.9 2.0 8.7 13.9 12.1 
            
Oceania            
            
Australia 1 0.3 0.1 2.0 0.0 1.7 0.0 0.3 n.a. 0.3 0.7 
2001/02 2 0.4 9.8 3.9 3.9 1.7 1.9 3.0 2.1 4.2 4.1 
 3 2.2 14.5 3.9 3.4 3.4 4.0 0.0 3.4 3.0 5.1 
            
New Zealand 1 0.5 2.2 0.0 0.0 0.9 0.0 0.0 n.a. 1.2 0.8 
2002 2 2.6 2.8 3.1 5.2 1.2 0.5 2.3 1.2 4.9 2.2 
 3 3.0 14.8 4.9 4.1 3.3 3.7 5.0 3.8 3.9 5.6 
            
Africa            
            
Benin 1 15.6 9.0 7.5 7.5 8.9 7.5 7.5 n.a. 10.3 11.3 
2003b 2 17.3 18.7 12.0 9.9 8.7 19.4 11.9 20.8 11.3 12.6 
 3 19.5 21.6 20.4 16.4 14.6 18.9 22.5 13.4 20.0 16.2 
            
Burkina Faso 1 15.4 9.0 7.5 7.5 9.0 7.5 7.5 n.a. 10.3 11.3 
2003b 2 17.4 18.3 12.5 10.1 8.6 19.4 12.3 20.8 11.3 12.5 
 3 19.6 21.6 20.2 16.7 15.0 19.0 22.5 13.3 20.8 16.3 
            
Burundi 1 34.7 13.8 13.3 10.0 10.3 40.0 10.0 n.a. 40.0 21.5 
2003 2 35.3 33.3 12.0 10.7 10.5 10.3 16.6 10.0 10.0 18.4 
 3 36.2 37.6 36.2 25.8 25.9 27.9 40.0 19.2 31.3 26.1 
            
Gabon 1 23.1 11.6 22.0 10.0 9.8 30.0 10.0 n.a. 23.3 16.2 
2000 2 22.8 18.1 29.7 11.0 10.6 21.6 14.4 9.2 7.5 14.6 
 3 25.8 27.9 27.4 18.2 17.0 22.8 30.0 15.9 27.0 20.2 
            
Gambia 1 15.5 14.4 10.0 18.0 9.0 18.0 4.4 n.a. 18.0 13.2 
2003 2 16.1 13.0 10.2 16.6 8.9 10.5 12.1 8.8 18.0 11.3 
 3 16.8 17.7 18.0 12.7 12.7 14.2 18.0 11.1 17.4 13.6 
            
Ghanab 1 15.8 15.1 16.0 12.2 10.2 15.0 15.6 n.a. 21.3 14.4 
2000 2 18.8 16.6 19.6 19.3 10.8 11.3 11.0 11.7 20.0 13.1 
 3 23.8 29.9 24.6 16.9 22.5 14.6 20.0 7.6 18.4 15.5 
            
Madagascarb 1 24.0 7.0 5.0 5.0 7.0 30.0 5.0 n.a. 21.1 14.4 
2000 2 18.3 22.2 14.7 9.5 5.6 8.4 8.4 13.3 7.0 11.9 
 3 23.8 28.4 20.5 22.5 17.8 18.5 30.0 13.7 24.7 19.0 
Table Annex 2 (cont'd)  WT/TPR/OV/10 
 Page 47 
 
 
Country/ 
Year Stage of 
processa Food, 
beverages
& tobacco Textiles & 
leather Wood & 
furniturePaper, 
printing & 
publishingChemicals Non-
metallic 
mineral 
products Base 
metal Fabricated 
metal 
products & 
machinery Other Total 
industry
            
Mali 1 15.4 9.0 7.5 7.5 8.7 7.5 7.5 n.a. 10.3 11.2 
2003b 2 17.1 18.5 11.9 10.3 8.6 19.4 12.0 20.8 11.3 12.5 
 3 19.3 21.6 20.2 16.6 14.8 19.0 22.5 13.3 20.7 16.2 
            
Mauritania 1 16.2 2.6 0.0 0.0 2.7 20.0 5.5 n.a. 10.6 8.3 
2001 2 10.9 12.6 9.3 6.9 4.6 9.7 8.3 7.5 5.0 8.0 
 3 14.5 18.3 17.5 11.7 11.5 14.8 20.0 9.0 18.1 12.3 
            
Mauritius 1 10.5 6.3 0.0 0.0 2.0 0.0 0.0 n.a. 16.7 6.4 
2001 2 18.9 0.8 1.8 0.0 3.8 5.9 12.3 0.0 7.5 5.5 
 3 29.4 64.7 54.7 43.4 32.2 29.5 80.0 17.6 33.8 30.4 
            
Marocco 1 39.0 9.6 31.0 21.5 17.0 25.0 20.7 n.a. 31.9 26.8 
2002 2 47.9 37.5 35.0 45.3 28.1 31.8 24.5 27.8 45.0 32.5 
 3 62.0 46.4 47.2 41.9 30.7 38.2 44.2 20.9 35.1 34.3 
            
Mozambique 1 22.3 3.8 2.5 7.5 3.4 7.5 2.5 n.a. 13.8 11.3 
2000 2 17.7 21.4 7.5 10.3 3.8 7.3 5.6 7.5 23.1 9.5 
 3 29.9 27.4 21.4 18.3 15.2 11.5 30.0 10.7 25.9 16.6 
            
Nigerb 1 15.3 9.0 7.5 7.5 8.9 7.5 7.5 n.a. 10.3 11.3 
2002 2 17.1 18.5 11.9 10.3 8.6 19.4 12.0 20.8 11.3 12.5 
 3 19.4 21.6 20.2 16.6 14.9 19.0 22.5 13.3 20.7 16.3 
            
Rwanda 1 10.3 8.0 13.3 12.9 12.2 15.0 5.0 n.a. 10.6 10.4 
2003 2 11.6 15.0 14.7 10.5 10.4 16.7 14.1 18.3 15.0 12.7 
 3 22.5 28.2 26.6 23.8 20.4 25.6 30.0 21.9 27.4 23.4 
            
Senegalb 1 15.7 9.0 7.5 7.5 8.9 7.5 7.5 n.a. 10.1 11.5 
2002 2 16.9 19.1 12.5 10.0 8.6 19.4 12.1 20.8 11.3 12.6 
 3 19.4 21.7 20.2 16.6 14.9 19.0 22.5 13.3 20.0 16.2 
            
South Africa 1 10.8 4.7 0.0 0.0 3.5 0.0 0.0 n.a. 2.5 5.5 
2002 2 10.3 22.0 6.2 5.8 3.3 4.9 3.2 2.4 4.3 12.9 
 3 15.5 32.3 15.6 7.7 7.7 7.1 0.0 5.2 7.2 11.2 
            
Zambia 1 19.3 14.6 21.0 5.0 6.5 25.0 2.8 n.a. 18.1 13.7 
2002 2 19.1 14.0 22.8 10.0 6.0 13.1 7.1 18.3 12.5 8.8 
 3 20.7 24.1 23.3 18.1 15.8 14.3 15.0 12.7 20.0 16.5 
n.a. Not applicable. 
a 1 = First stage of processing;  2 = Semi-processed;  3 = Fully processed. 
b Including taxes. 
Note: For countries with non- ad valorem  rates AVEs have been used as ava ilable.  In case of unavailability, the ad valorem  part is used 
for compound and alternate rates.   
Source : WTO Secretariat calculations, based on data provided by the Members. 
 
__________ 
 
 