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Explain the Multilateral Trade Agreements Regarding Agriculture, Textiles and Clothing and Technical Barriers to Trade.

Explain the Multilateral Trade Agreements Regarding Agriculture, Textiles and Clothing and Technical Barriers to Trade.

Course: M.Com

1 Answer

Multilateral Trade Agreement on Agriculture:

One of the salient feature of Uruguay Round was the inclusion of agriculture in the GATT for the first time. The agreement on agriculture has significantly liberalized agricultural trade. The agreement Includes the establishment of a committee on agriculture. The important aspects of the Uruguay Round Agreement can be listed as under:

  • Tariffication.
  • Tariff cuts.
  • Tariff binding.
  • Reduction in subsidies and domestic support.

Tariffication means the replacement of existing non-tariff restrictions on trade such as import quotas by such tariffs as would provide substantially the same .level of protection. Thus, countries cannot make use of non-tariff barriers i.e. quantitative restrictions, to protect agriculture.

Tariffs on agricultural products are to be reduced:
  • By an average of 36% in six years from 1995 for developed countries.
  • By an average of 24% in ten years from 1995 for developing countries.
  • Least developed countries are not required to make .any commitment for reduction of tariffs.

The countries have agreed to bind their import tariffs and not to increase their rates from the first year of the agreement’s implementation, nearly all border protection is to be bound by tariffs which are to be no longer higher than the tariff equivalent of the protection levels prevailing in the base periods. On agricultural tariffs, developing countries have the flexibility of indicating ceiling binding.

Members have made an undertaking to cut the overall level of internal market support to farmers by the following amounts:
  • Developed countries 20% over 6 years.
  • Less developed- countries 20% over 10 years.
  • Least developed countries no change.

The level of direct export subsidies is to be reduced as follows:

  • Developed countries to a level of 36% below that of the 1986-90 base period over 6 years.
  • Less developed countries to a level of 36% below that of the 1986-90 base period over 10 years.
  • Least developed countries no change.

Multilateral Trade Agreement on Textiles and Clothing:

A significant implication of the Uruguay Round has been the Agreement on Textiles and Clothing (ATC) with the developed countries namely, USA, EU countries, Canada and Norway replacing the existing multi-fiber arrangement (MFA). This agreement (ATC) requires the member countries to phase out, in four stages, the quantitative restrictions under the existing Multi-Fiber Arrangement (MFA) within a period often years from the date of implementation of GATT 94. Since GATT 94 is being implemented with effect from 1st January, 1995, the MFA would be completely abolished by 1st January, 2005.

Under MFA, the member countries viz. USA, EU countries, Canada and Norway, were allowed by the GATT to impose quantitative restrictions i.e. determine quota, on import of ready made garments and other textiles items made of cotton, rayon and blended fabrics from specified countries including India. This arrangement had adversely affected India’s exports to the member countries of MFA since the exporters from India could export only upto the quantities of various items of ready made garments and textiles as agreed to between India and the member countries of MFA under respective bilateral textile as agreements. The phasing out of MFA will result in integration of trade in textiles and clothing with the .normal GATT regime i.e. the exporters would not be required to obtain quota for the export of the ready-made garments and other textile products.

The phasing out is taking place in four phases beginning 1.1.1995, 1.1.1998, 1.1.2002, and 1.1.2005. The member countries of MFA are given the freedom to select he textile products they would wish to integrate in each phase provided the products are selected from each of the categories represented by clothing (ready-made garments), yarns, fabrics and processed textile products as listed in the ATC. The phase-wise integration shall take place as prescribed under Article 2.18 of the Agreement on Textiles and Clothing.

Accordingly, at the beginning of the first phase, member countries of MFA would announce the removal of items from the quota list to the extent of 16% of the products from the specified list of the volume of countries imports in 1990, 17% at the beginning of the second phase, 18% at the beginning of the third phase and remaining 49% at the beginning of the fourth phase, i.e. 1.1.2005. This is expected to provide more opportunities to the exporters from India and other countries covered by MFA.

A redeeming feature of this agreement is that it tries to provide improved and enlarged access for textile products that may continue to be on the quota list during the ten years transitional period. The agreement provides for annual increases in the quotas fixed for each category of textile products under bilateral agreements at the specified growth rates. The annual growth rates for increase in the quota of textile products are to be increased by the rates as specified in Articles 2.13 and 2.14 of the Agreement on Textiles and Clothing, in the following manner:

  • 16% per year in the first three years.
  • 25% per year in the next four years.
  • 27% in the next three years.

Multilateral Trade Agreement on Technical farriers to Trade:

The Agreement on Technical Barriers to Trade came into effect from 1st January, 1995 following the decision taken by the Tokyo Round TBT Committee. Though the countries have agreed not to use the quantitative restrictions, yet there is a concerted attempt by the developed countries to subvert it by introducing another set of regulations in the name of quality, protecting public health, safety, environment and human rights and so on. These regulations have the effect of protecting their domestic industries by making the imports difficult and as such have the same effect as non-tariff barriers. For example, the developed countries have introduced very strict phytosanitary regulations in respect of agricultural products such as fruits and food products, dairy products, marine products, tea etc.

Besides there are regulations as regards Eco-labelling, non-application of certain chemicals, clear-cut specification of production methods, ban on the use of azo dyes, child labor etc. affecting the export of various items from developing countries. This is being done under the provisions of the Agreement on Technical Barriers to Trade which enables the countries to take measures necessary for the protection of human, animal and plant life or health, of environment. However it has been provided under Article 2.2 of this agreement that the countries, while using this facility shall ensure that the technical regulations are not prepared, adopted or applied with a view to, or with the effect of, creating unnecessary obstacles to trade.

With a view to harmonize technical regulations on a wide basis, members shall participate in the preparation by appropriate international standardizing bodies of international standards for products for which they either have adopted or expect to adopt, technical regulations. Whenever a relevant international standard does not exist or the proposed technical regulation is not in accordance with the technical content of the relevant international standards and if the proposed technical regulation may have a significant effect on international trade of other members, as stated earlier, shall

  • Publish a notice as to enable interested parties in other members to become acquainted with the proposed technical regulations.
  • Notify other members through W.T.O, Secretariat of the products to be covered by the proposed technical regulations.
  • Upon request provide other members, copies of the proposed technical regulations.
  • Take into by discussion or otherwise, of any comments of other members.

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March 12, 2019