RESTRICTED
WORLD TRADE WT/COMTD/W/4
29May1995
ORGANIZATION(95-1386)
Committee onTrade andDevelopment
Second Session
28June 1995
CREDIT AND RECOGNITION FOR
AUTONOMOUS LIBERALIZATION MEASURES
Note bytheSecretariat
1. When theSub-Committee onInstitutional, Procedural andLegal Matters ofthePreparatory
Committee fortheWorld Trade Organization (WTO) adopted theTerms ofReference fortheCommittee
onTrade andDevelopment, theChairman stated that"theprogramme ofwork oftheWTO Committee
onTrade andDevelopment for1995would ...alsoinclude consideration ofthequestion ofcredit and
recognition forautonomous trade liberalization measures".1Thisstatement followed anagreement
reached during discussions related totheTerms ofReference fortheCommittee onTrade and
Development under theWTO. Asnoagreement wasreached onacommon approach todealwith
thismatter during theUruguay Round, itwasagreed thattheCommittee onTrade andDevelopment
would address credit andrecognition forliberalization measures taken asfrom theentry intoforce
oftheWTO.
2. Thisnotesummarizes thediscussions heldinGATT oncredit andrecognition. Itisbeing
circulated asacontribution fordiscussions under ItemEoftheagenda.
Uruguay Round
3. Pastconsideration ofcredit andrecognition forautonomous liberalization measures hasfocused
oncredit forthebinding oftariffs andnon-tariff measures andrecognition forunbound autonomous
trade liberalization. Thematter hasbeenaddressed intwoUruguay Round fora: Negotiating Group
onFunctioning oftheGATT System andNegotiating Group onMarket Access (preceded bydiscussions
intheNegotiating Groups onTariffs andNon-Tariff Measures).2
(i) Functioning oftheGATT System (FOGs) Group
4. Oneoftheobjectives oftheFOGs Group was"toincrease thecontribution oftheGATT to
achieving greater coherence inglobal economic policy-making through strengthening itsrelationship
withother international organizations responsible formonetary andfinancial matters". According to
many delegations, onewayoftranslating theobjective ofcoherence intopractical initiatives wasto
provide negotiating credit inGATT -inthecontext oftheUruguay Round orfuture tradenegotiations -
1SeePC/IPL/M/9, paragraph 4,13December 1994.
2Theissue wasalsoraised withrespect totheTokyo Round Codes, particularly intheNegotiating Group
onMTN Agreements andArrangements, where developing countries were seeking credit foracceptance of
individual Codes. Thiswasprior totheadoption ofthe"single undertaking" approach.WT/COMTD/W/4
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fortradeliberalization undertaken autonomously inthecontext ofInternational Monetary Fund (IMF)
and/or World Bankprogrammes.3Thiscould bedonethrough theestablishment ofamechanism within
thecontractual framework oftheGATT thatwould formally acknowledge theliberalization undertaken.
Itwasthought thatsuchamechanism would provide anincentive forcountries tobindthemore liberal
measures inGATT atabout thesame timeoftheliberalization (i.e.without postponing bindings to
future rounds ofmultilateral tradenegotiations).4Despite agenerally positive reaction totheconcept
ofcredit forbindings, noclear result emerged.
(ii) Market Access Group
5. AttheMid-Term Review, Ministers agreed5:on"The needforanapproach tobeelaborated
togivecredit forbindings; itisalsorecognized thatparticipants willreceive appropriate recognition
forliberalization measures adopted since 1June1986" (section ontariffs, paragraph 2(c)); that
"Participantswillreceiveappropriaterecognitionfortheliberalizationmeasureswhichtheyhaveadopted"
(section onnon-tariff measures, paragraph 2(h)); andthat"Credit willbegiven formeasures
implemented sincethePunta delEsteDeclaration which contribute positively tothereform programme"
(section onagriculture, partA,paragraph vi).6Although theissue ofcredit andrecognition was
formalizedinthe1989Mid-TermReview,discussionsonlygainedmomentumin1991.Thediscussions,
3Somecountriespointedoutthatitwasirrelevantwhethertheseliberalizationmeasuresweretakenautonomously
orinthecontext ofIMF/World Bank programmes.
4In1989, following discussions withthePresident oftheWorld Bank andtheManaging Director ofthe
IMF, theDirector-General reported totheCONTRACTING PARTIES: "Much interest hasbeenshown byFOGs
Group participants inthepossibility thatdeveloping countries might obtain negotiating credit inGATT fortrade
policy reforms introduced bythem under Fund orBank programmes. Thisinterest isshared bytheheads of
theFund andBank, andtheirstaffs have enquired about themodalities which governments intend toadopt for
granting negotiating credit. Although suchreforms willgenerally befully justified bytheir favourable effects
ontheeconomy ofthecountry which undertakes them, theycanserve adouble purpose iftheyalsoprovide
negotiating credit which cansecure market-opening concessions from acountry 'strading partners. Forthisto
bepossible, thereforms must takeaform which canprovide assurance thattheliberalization willbelasting in
character andinconformity withtheGATT rules, i.e.,theymust be"GATTable" innature. Moreover, the
negotiating credit potentially available canprobably onlyberealized ifthecountry introducing thereforms enters
intoGATT negotiations, andoffers them asbound concessions orotherwise provides assurance thattheywill
notbewithdrawn without dueprocess. Afewcountries, notcontracting parties totheGATT atthetimetrade
reforms were undertaken bythem under Fund orBank programmes, havebeenabletogainnegotiating benefits
bybinding thereforms inthecourse ofnegotiating foraccession totheGATT. Forother countries which have
undertaken similar reforms, theUruguay Round hasbeen recognized asoffering anexceptional opportunity to
obtaincounterpartconcessionsfromtheirtradingpartners.TheFOGsGroupisonlyoneamongseveralnegotiating
groups which areconsidering thepractical requirements forrealizing these opportunities. (Theothers areTariffs,
Non-tariff Measures, Tropical Products andAgriculture.) ThefactthattheUruguay Round haslittlemore than
ayeartorunlends particular urgency tothisissue." SeeWays toAchieve Greater Coherence inGlobal Economic
Policy-MakingthroughStrengthenedGATTRelationshipswithotherRelevantInternationalOrganizations,document
MTN.GNG/NG14/W/35, paragraph 32,20September 1989.
5SeeMTN.TNC/11 of21April 1989.
6Intheagriculture agreement, thiswasapplied intheareaofdomestic support, thusallowing some countries
toapplythereductionrequiredtakingasstartingpointtheyearofhighersupportinsteadoftheaverageof1986-88.WT/COMTD/W/4
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heldintheNegotiatingGrouponMarketAccess(establishedfollowingtheBrusselsMinisterialMeeting),
followed thesubmission ofanon-paper byMexico,7which wasco-sponsored bynineteen developing
countries.
6. Inthispaper, thesecountries proposed atwotrackapproach: (i)apartial solution tobeagreed
inashort period, inorder todealwiththose liberalization measures adopted during theRound; and,
(ii)work tobeconducted following theconclusion oftheUruguay Round, inorder toelaborate more
definitive ruleswhich would provide foraccount tobetaken ofautonomous liberalization measures.
Theproposal wasforcredit tobegiven tobothconcessions offered onaproduct-by-product basis(the
traditional GATT approach), aswellastoincreases inthescope ofbindings. Further, withthe
emergence oftheconcept ofbinding ofnon-tariff measures (NTMs), credit wasalsobeing sought for
these bindings. Onrecognition forautonomous trade liberalization measures,8long-term solutions
wereoutlined (seeparagraph 17below); forliberalization undertaken within thecontext oftheUruguay
Round, proposals were asfollows:
(1) Increased access bydeveloping countries tothemarkets oftheirtrading partners:
(a) Incertain cases, theautonomous liberalization measures inspecific products
would bereciprocated bytrading partners applying theMontreal target atthat
specific tariff-line levelandimplementing immediately suchareduction; and,
(b) early/accelerated implementation bytrading partners ofliberalization measures
intextiles andagricultural products ofinterest todeveloping countries
undertaking liberalizing measures autonomously.
(2) Adaptation oftheMontreal target forthetariff commitments ofdeveloping countries:
(a) Those NTMs eliminated since June1986would betariffied soastocover part
oftheMontreal target;
(b) special treatment forcountries having acceded toGATT during theRound;
and,
(c) insome cases, autonomous-liberalizing countries could useliberalization
measures aspartoftheircontribution tothetariff negotiations.
7. While therewasageneral acceptance ofthenotion ofcredit forincreasing thescope ofbindings
andforliberalizing NTMs, matters relating torecognition ofautonomous liberalization proved more
controversial. Inareport totheTrade Negotiations Committee, theChairman oftheNegotiating Group
onMarket Access reported that: "certain developed countries continue tobereluctant topursue this
ideaunless there areoffers tobindtrade related liberalization measures"9.
7ThepaperwasoriginallysubmittedbyMexicoata"GreenRoom"meetingattheendof1990.Thedeveloping
countries which associated themselves withthenon-paper wereArgentina, Bolivia, Colombia, Costa Rica, Egypt,
Indonesia,Jamaica,Malaysia,Morocco,Nicaragua,Nigeria,Pakistan,Peru,thePhilippines,Romania,Thailand,
Uruguay, Venezuela andYugoslavia.
8Document MTN.GNG/MA/W/10/Rev.2 of14December 1993 liststhose liberalization measures taken by
developed anddeveloping countries participants intheUruguay Round since June1986 which hadbeennotified
totheGATT Secretariat.
9SeeMTN.GNG/MA/W/1, 24June 1991.WT/COMTD/W/4
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8. Finally, guidelines -asdistinct from formal rules -oncredit fortariff bindings andthe
liberalization ofNTMs, andrecognition forautonomous liberalization measures were presented by
theChairman oftheMarket Access Group10"inorder toassist themarket access negotiations between
developed anddeveloping countries ...[and] foruseasappropriate". Basically, theguidelines would
"provide aminimum level ofcredit which should begiven practical effect inthenegotiations ...",
andwere tobeusedasasupplement tothetraditional GATT approach toassess thevalue oftariff
concessions. Theguidelines stated thata"meaningful rateofceiling binding" could takeintoaccount
"particular developing countries 'trade andeconomic development stage" inlinewiththePunta del
Esteguidelines, andthat"developing countries which reduce substantially oreliminate totally NTMs
shouldbegivenadditionalcredittowardsachievingtheMontrealtarget".Further,amatrixwaspresented
indicating howcredit would begiven forceiling bindings: credit would berelated tothebound level
oftariff offered andthepercentage ofimports offered forbinding.11Countries which acceded tothe
GATT during theUruguay Round negotiations could usetheiraccession commitment forreaching the
Montreal target inaccordance withtheguidelines. Withrespect toliberalization measures autonomously
taken, theguidelines stated onlythatthey"will begiven appropriate recognition byother individual
participants ...[andthat]...Longer termapproaches tothisissueneedtobedetermined". While there
isnodoubt that,inlinewithGATT practice, theUruguay Round negotiations resulted incredit being
given forbinding, thesituation withrespect torecognition forautonomous liberalization measures is
much lessclear.
(iii) Negotiating Group onServices
9. Inthediscussions intheGroup forNegotiations onServices (GNS), Switzerland pointed out
thatspecial provisions werenotnecessary todealwithunilateral, autonomous liberalization inservices.12
Autonomous liberalization measures would bepartofthelong-term process ofprogressive liberalization
andbindings, onthesamefooting asliberalization achieved through bilateral, plurilateral ormultilateral
negotiations.
10. Intheirsubmission outlining astructure fortheMultilateral Framework forTrade inServices,
eleven Latin-American andCaribbean countries proposed thatautonomous liberalization measures taken
bydeveloping countries beconsidered acontribution tonegotiations andbe"treated ascredits inthose
negotiations".13Thisproposal gained some support fromanumber ofcountries, which linked theidea
ofcredit andrecognition tothebinding oftheautonomous measures innational schedules.
11. Areference toautonomous liberalization measures isfound inthetextoftheGeneral Agreement
onTrade inServices, PartIV(Progressive Liberalization), Article XIX:3, which reads asfollows:
"...Negotiating guidelines shallestablish modalities forthetreatment ofliberalization
undertaken autonomously byMembers since previous negotiations, ..."
10SeeMTN.GNG/MA/W/13, 19December 1991.
11Although itwasnever formally recognized, itwasconsidered thatanacross theboard ceiling
binding of35percentbydeveloping countries would beseenasreaching theMontreal target.
12SeeMTN.GNS/W/69, 15September 1989.
13SeeMTN.GNS/W/95, 26February 1990, Article 1:7(d).WT/COMTD/W/4
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Committee onTrade andDevelopment
12. Inthediscussions heldintheGATT Committee onTrade andDevelopment during 1991,
developing countries indicated thatreceiving credit andrecognition forliberalization measures would
helptheminresistingdomesticpressuretoliberalizetrade,andwouldbeanincentiveforthecontinuation
ofsuchpolicies. Thiswasparticularly soinlightofthefactthat,incertain cases, theservicing of
foreign debtimposed limitations oncontinuing theprocess oftradeliberalization asthemeasures adopted
hadalready resulted inasignificant increase inimports. Inregard toapproaches tobefollowed, some
countries feltthat,withrespect tocredit, existing GATT procedures (such asadherence toMTN Codes
andbindings) should befurther elaborated bythedefinition ofappropriate criteria orguidelines, and
thatdifferent procedures orarrangements should becreated forproviding recognition.14These would
takeintoaccount theparticular circumstances indeveloping countries andwould beinaccordance with
theprinciple ofrelative reciprocity.15Ontheother hand, theneedfordefining thecriteria forgiving
credit wasopposed bysome countries, which favoured acase-by-case approach inthegive-and-take
process ofnegotiations. Some countries alsoopposed theideaofcreating anewmechanism forgiving
recognition, emphasizing thatinorder toreceive credit forliberalization measures, these hadtolose
theirunpredictable character andbebound inGATT.
13. Anumber ofquestions relating tocredit forautonomous liberalization raised attheCommittee
onTrade andDevelopment were, however, never addressed indepth. These included: (i)thetype
ofmeasures forwhich credit might besought; (ii)whether credit should begiven evenforliberalization
ofGATT-inconsistent measures; (iii)thetrade significance ofbindings required forreceiving credit;
(iv)whether credit forbinding tariffs would begiven iftheeffect ofsuchmeasures wasnullified by
quantitative restrictions orvice-versa; and(v)whether unbound liberalization measures forwhich a
country wasseeking recognition could bereversed through the"escape" provisions oftheGATT (such
asArticles XVIII andXIX).
Credit andRecognition intheWTO
(i) Credit forbindings
14. Twoissues mayrequire examination, particularly inviewofthefactthatmultilateral rounds
ofnegotiation areexpected totakeplace lessfrequently thaninthepast. First, whether credit should
begiven foranunilaterally decided increase inthescope ofbindings, andhowmuch.16Second, whether
credit should begiven forconcessions unilaterally granted.
15. Mechanismstotranslateintoconcretetermssuchcreditallocations,ifany,shouldalsobedevised
atalaterstage. These might include, interalia,supplementing Articles XXVIII andXXVIII biswith
rulesdealing withreduction inbound ratesagreed tobyalimited number ofMembers -i.e.mini-rounds
ofnegotiations ontariffs andnon-tariff measures; andestablishing asystem under which concessions
14Theproposals included: acontractual agreement which would contain commitments atalesser level than
thetraditional bindings, andtheprovision ofincreased, more secure andpredictable market-access conditions
toexports oftheliberalizing countries, forexample, within theGSPschemes applied bytheirtrading partners.
15Relative reciprocity wasinterpreted tomean thatdeveloping countries should notberequested tomake
contributions innegotiations beyond their individual capabilities.
16Ofcourse, thisissue could alsoarise inthecontext ofanyfuture multilateral rounds ofnegotiations, as
itwasthecaseduring theUruguay Round (seeparagraph 8above).WT/COMTD/W/4
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unilaterally granted would bereciprocated bytrading partners atalaterstage -i.e.giving credit but
deferring itscashing.
(ii) Recognition forautonomous liberalization measures
16. Itwasindicated inboththedeveloping countries 'non-paper andtheChairman 'sguidelines
(seerespectively paragraphs 6and8above) thatalong-term solution should befound foraccommodating
autonomousliberalizationmeasureswithintheWTO.Developingcountrieswhichsupportedthisinitiative
wereoftheviewthatthe"traditional GATT binding" wasnotfullyadapted tothesituation indeveloping
countries, because liberalization oftheirtradeshould becarried outinaflexible andprogressive way.
Evenmoreimportantly, theypointed outthatitcould actasanincentive tocountries todeferautonomous
liberalization measures until afuture round oftrade negotiations, where such efforts could be
reciprocated. Hence theideaofintroducing within GATT an"intermediate position between binding
andfullautonomy"forgrantingrecognitionforautonomousliberalizationmeasuresasawayofincreasing
predictability.
17. Inthenon-paper tabled bydeveloping countries andreferred toabove, thebasic ideawasto
provide thepossibility forrecognition through either a"conditional tariff concession" (CTC) ora
"temporary tariff concession" (TTC). Inbothcases, trading partners would offertariffs below their
bound ratestothecountry liberalizing autonomously. While aCTC would beretained foraslong
astheautonomous-liberalizing country keptthemeasure inplace, inaTTCthetwocountries involved
would agree toretain the"concessions" forafixed, renewable period. Developing countries which
proposed thatapproach alsogave indications ofsome rules thatshould bedeveloped inorder to
implement theintermediate position between binding andfullautonomy.
(iii) Progressive liberalization ontrade inservices
18. Themultilateralcommitmenttoestablish,inthecontextoffutureroundsofnegotiations,specific
guidelines onthecredit tobegiven forautonomous liberalizing measures undertaken between rounds
isexpected tofunction asanincentive tofurther thecontinuous liberalization oftrade inservices.