Confidence-building measure, in 

international relations, an action that reflects goodwill toward

or a willingness to exchange information with an adversary. The purpose of such measures is to
decrease misunderstanding, tension, fear, anxiety, and conflict between two or more parties by
emphasizing trust and limiting conflict escalation as a form of preventive diplomacy.

the World Trade Organization (WTO) introduced various confidence-building measures in

response to the Seattle protests of 1999. The measures introduced by the WTO director
general Mike Moore and chairman of the General Council Kåre Bryn specifically focused upon
transparency and communication initiatives: increased participation and communication to
identify the difficulties facing developing countries, a reassessment of technical cooperation and
capacity-building initiatives, and increased openness in regard to implementation issues and
concerns.

It goes without saying, but confidence is essential to trading or anything individuals set out to do.
There are certain ways to approach building confidence, maintaining it, and making sure traders
stay on track. Without confidence, traders can’t perform optimally. There are necessary steps to
take to not

The World Energy Council is pleased to have an opportunity to address the relationship between
international trade and natural resources. Our focus here is on trade in energy goods and services.
We will leave aside the precise definition of “energy”, but in what follows, we assume that it
covers not only traditional forms of energy, such as hydrocarbons, but also renewable energy
forms, such as biofuels, wind, solar, but importantly on the range of products and services which
are themselves traded and/or which are otherwise involved in transborder movement.

Historically, neither the GATT nor the WTO Agreement were considered as having a direct
bearing on international energy trade. Trade in hydrocarbons, fissionable materials and cross-
border transmission of electricity largely took place outside the multilateral trading system. The
GATS covers only limited kinds of energy services and doesn’t address these comprehensively
or in terms of sectors. While a few discrete issues involving energy goods reached the GATT and
WTO dispute settlement stage (Reformulated Gasoline for example), these were relatively rare.

Another reason why energy trade and GATT/WTO rules seemed to largely operate in isolation
from one another was that, for the most part, these agreements contain rules of general
application. Neither refers to “energy” or deals specifically with energy matters, although the
coverage of the GATS includes market access commitments on various kinds of services equally
pertinent to the energy sector.

Even though there are structural elements in the energy sector that differentiate it from issues
involving typical goods and services trade, there are important developments that show a
convergence between the international energy business and the rules embodied in the WTO
regime.

The first is the accession and impending accession of major oil-producing States to the
Organization. Saudi Arabia is now a WTO member and Libya, Algeria, Russia and other oil
producers are waiting in the wings. The accessions of these producing States may well change
the dynamics of the WTO as an organization.

The second is climate change and the recognition that progress in reducing greenhouse gases
through the UNFCCC and various national measures directly engages the application of WTO
rules. This was an important issue at the recent COP meeting in Copenhagen in December 2009.

Recognizing the changing picture globally and the interrelationship between energy, trade rules
and climate change, the WEC began addressing these matters over the last three years: first, by
inviting the Director-General of the WTO to address the World Energy Congress in Rome in
2007; and second, by appointing a Task Force to undertake an examination of trade and
investment rules for energy, leading to its first report in September 2009.
World Energy Council Task Force Report
Using some of the comments of the Secretary General at the Rome Congress as a point of
departure, the Task Force report stresses the importance of WTO rules for maintaining open
energy markets, more crucial than ever in the context of the current recession and of efforts
aimed at stimulating global economic recovery. The Report also signals the benefits of
completing the Doha Round, particularly as a means of promoting trade in energy-related goods
and services in general and in climate-friendly goods and services in particular, both of which
can assist in the economic recovery and in GHG reduction through stimulating exchanges in
“green” technologies.
Where does all of this take us today?
Responding to the question whether the WTO can play a role in encouraging “a more efficient
management” of energy resources, it is possible to propose three guiding principles. The first,
taking a cue from the Doha Development Agenda, is that open trade in energy goods and
services is indispensible for economic progress generally and for meeting the needs of
developing countries in particular. There is thus an intertwining of trade in energy and issues of
economic development as parts of a whole.

The second, is that, to meet economic development objectives, energy markets must be allowed
to operate as efficiently as possible. This requires a rules-based system that guarantees the
operations of market mechanisms through non-discrimination (meaning national and most-
favoured-nation treatment), regulatory transparency and access to fair, open and impartial
adjudicative processes. These rights and obligations are embedded in the WTO system and,
because of that, the WTO and the interests of the energy sector converge.

The third principle is to recognize structural factors unique to the energy sector constrain or at
least qualify the full application of WTO rules, the most important being that energy resources
typically belong to the State and that many countries have structured their petroleum and
electricity sectors around state owned enterprises. State ownership and sovereignty interests
differentiate energy goods from typical goods and services in international trade. This affects any
consideration of an enlarged role of the WTO in this area.
Applying these principles, the report recommends that WTO members take two specific actions
that can be negotiated immediately:

First, as the global community looks for solutions to the challenge of climate change, we believe
agreement to reduce trade barriers and open markets in energy services, including
environmentally-friendly goods and services, should be pursued as a priority. We believe such
action should be within the WTO and be as broadly-based and cover as many like-minded
countries as possible. If the Doha Round cannot effectively bring closure on this subject, a
possible plurilateral accord on energy services within the WTO would make an important
contribution to global “governance” in this area.

Second, in ongoing consideration under the UNFCCC and elsewhere, it will be important to
ensure the integrity of the rule of law under the WTO Agreement, both to ensure stability of
international energy markets and to promote the realization of global development priorities
under the principles referred to above. The WTO should bring its unique expertise to bear on the
question of what, if any, forms of border measures could legitimately be applied by countries
that adopt domestic greenhouse gas reduction measures.

With rapid changes in the sector, combined with challenges of climate change, a more
comprehensive discussion by the international community of this and other areas of potential
WTO “governance” relevant to energy markets would be useful.

WEC is pleased to have had the opportunity to submit these recommendations and would be
pleased to provide support to further work in these areas.
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Agricultural markets and international trade

The EU is the first trader in agricultural products of the world, both in terms of exports and
imports. Agricultural trade helps to answer possible food production shortages due to climatic or
other reasons. Ultimately, it contributes to the prosperity of farmers, industries and consumers. In
recent years, global agriculture markets faced an increased volatility, directly impacting
stakeholders of the food chain. Price volatility makes planning for farmers and buyers the world
over extremely difficult and may result in political unrest, like in the recent food prices peak in
2007-2008.

The dynamic development of agricultural markets requires permanent monitoring and

prospective analysis. Economic models have become indispensable tools in preparing and
negotiating policy decisions like trade multi- or bilateral negotiations. The JRC also contributes
to an annual exercise of medium-term outlook with the prospects for agricultural markets and
income for the next decade. Furthermore, the development of the food supply chain in Europe is
investigated, in general concerning the bio-economy or for certain high value added niche
products.

Agricultural market developments are at the heart of policy debates, particularly since the
increasing food prices and short term price fluctuations of commodity prices. The annual outlook
exercise provides a projection for the major EU agricultural commodity markets and agricultural
income for the coming ten years ('baseline') which permits a better understanding of the markets
and their dynamics and also contributes to identify key issues for market and policy
developments. Furthermore, it serves as a benchmark for assessing the medium-term impact of
future market and policy issues.

The outlook for EU agricultural markets and income is based on a specific set of assumptions
regarding the future economic, market and policy environment. The baseline assumes normal
weather conditions, steady yield trends and no disruptions caused by factors like animal disease
outbreaks or food safety issues. The projections are not intended as a forecast of future
outcomes, but instead as a description of what may happen given a specific set of assumptions
and circumstances, which at the time of making the projections were judged plausible.

The JRC is deeply involved in this exercise under the responsibility of the Directorate-General
for Agriculture and Rural Development. The JRC prepares the baseline on the base of a
modelling approach relying on agro-economic models that represent the state of the art as well as
attempts to identify and quantify the main areas of uncertainty and assess several scenarios. The
JRC also organises an external review of the baseline and uncertainty scenarios in a workshop
held every October in Brussels, gathering high-level policy makers, modelling and market
experts from the EU, third countries and international organisations.

Agricultural market developments are at the heart of policy debates, particularly since the
increasing food prices and short term price fluctuations of commodity prices. The annual outlook
exercise provides a projection for the major EU agricultural commodity markets and agricultural
income for the coming ten years ('baseline') which permits a better understanding of the markets
and their dynamics and also contributes to identify key issues for market and policy
developments. Furthermore, it serves as a benchmark for assessing the medium-term impact of
future market and policy issues.

The outlook for EU agricultural markets and income is based on a specific set of assumptions
regarding the future economic, market and policy environment. The baseline assumes normal
weather conditions, steady yield trends and no disruptions caused by factors like animal disease
outbreaks or food safety issues. The projections are not intended as a forecast of future
outcomes, but instead as a description of what may happen given a specific set of assumptions
and circumstances, which at the time of making the projections were judged plausible.

The JRC is deeply involved in this exercise under the responsibility of the Directorate-General
for Agriculture and Rural Development. The JRC prepares the baseline on the base of a
modelling approach relying on agro-economic models that represent the state of the art as well as
attempts to identify and quantify the main areas of uncertainty and assess several scenarios. The
JRC also organises an external review of the baseline and uncertainty scenarios in a workshop
held every October in Brussels, gathering high-level policy makers, modelling and market
experts from the EU, third countries and international organisations.

gricultural Trade

Agriculture is often the economic driving force in

developing countries. WTO statistics show that agriculture
accounts for over one-third of export earnings for almost
50 developing countries, and for about 40 of them this
sector accounts for over half of export earnings.

However, significant agricultural subsidies provided by

OECD country governments to their farmers compromises
the ability of developing country farmers to participate in
global agricultural trade reducing their income and profit
streams and their ability to escape poverty.

At the same time, consumers in OECD countries are

denied the benefits of the lower prices food and
agricultural products resulting from a competitive
marketplace while as tax payers they are forced to
subsidize high-cost and often environmentally damaging
production. Barriers to agricultural imports also remain
high in both developed and many developing countries,
creating obstacles not only to North-South trade but also to
South-South trade.

The World Bank's Agricultural Trade Group is committed

to a pro-development, pro-poor global trading system for
agriculture. As part of that commitment the World Bank
provides technical assistance and policy advice to its
clients, engages in joint analytical work and knowledge
sharing, and works through partnerships.
The goal is to ensure that developing country clients have
the skills and capacity to participate in the global
marketplace on an equal footing, to negotiate both with
partners and in international fora, such as the World Trade
Organization (WTO), so that they can maximize their
opportunities in the global agricultural marketplace.

International trade in agriculture is governed by a variety

of forces that affect the location and quantity of foods
produced by nations. Tariffs, trading blocs, and regulations
on farm products significantly impact a country's gross
domestic product (GDP), and can cause a nation to either
enter the market of international trade in agriculture, or exit
it and sell to domestic consumption only. These factors are
more prominent in developing world nations since their
economies are often largely based on the production of
agricultural products, but first world nations are also
continuously involved in regulatory maneuvering to
promote their products abroad.

From the point of view of industrialized first world nations,

studies have shown that the choice to export products of
any kind by business is rare. A year 2000 report and
analysis of roughly 5,500,000 US companies found that
only 4% of them were engaged in the export market. Such
exporters, however, were seen as more stable companies
than their non-exporting counterparts, surviving longer and
having higher profits for their industries that allowed them
to pay higher wages to workers. This supports the
supposition that engaging in exporting and
overcoming tariff and regulatory barriers improves a
company's productivity level overall. These trends directly
impact international trade in agriculture, as it has
traditionally been one of the highest regulated global
markets.

By contrast, it has been estimated that, as of 2003, almost

70% of the world's population in poverty lives in nations
whose GDP is almost entirely based on the production of
agricultural products, where exports are critical to
their economic growth. These nations, however, are often
locked out of first world foreign markets where agricultural
imports are heavily taxed, or subsidies on local products
make those from poor developing nations more expensive.
Groups like the Organization for Economic Co-operation
and Development (OECD), a group of 34 first world
countries including the EU nations, US, Japan, and
Australia, that creates policies that penalize and restrict
imports of agricultural products from developing nations.

When heavy subsidies are given to local farmers in wealthy

nations, this cannot be counteracted by developing
countries who lack the means to equally subsidize their
products. Cotton producers in the US were given
$4,000,000,000 US Dollars (USD) in subsidies in 2002.
The developing nation of Benin in West Africa, relies on
cotton exports for 85% of its GDP, and could not compete
against such heavy subsidies, effectively locking it out of
the US cotton market. These trade barriers also result in
unnecessary government expenses in rich nations and
encourage mass production of agricultural goods so that
they can be sold at low cost, which leads to unnecessary
environmental degradation.
As policies of trade liberalization open up foreign markets,
the impact on local agriculture is one of the short-term
problems of structural adjustment. As foreign foods
become increasingly available locally, farmers must
reexamine their crop choices to determine if they can grow
something else that will be more profitable. This harms
rural communities and farmers who have little room or
financial means to adapt, but the long-term effect of trade
liberalization is that it increases the flow of agricultural
goods across borders.

The three main factors with interdependent effects on

international trade in agriculture are local farm crop
subsidies, import tariffs, and anti-dumping laws. When
nations attempt to export their agricultural products to
geographic neighbors who have similar climates and grow
similar foods, problems often arise and anti-dumping
lawsuits are filed. These claims that a nation is selling its
exports below cost in an attempt to gain market share
dominance in another country are used as a mechanism to
block imports. Examples of this include anti-dumping
allegations in 2001 by the US against Canada, and Canada
against the US for tomato and timber exports. Such
disputes are often resolved by the World Trade
Organization (WTO) where regional agreements such as
the North American Free Trade Agreement (NAFTA) fail
to do so.
Globalization has facilitated the movement of goods
across many borders. As the flow of goods increases,
however, so does price manipulation. When garlic imports
into the US from China increased by 636% in 1992 to
1993, the US Fresh Garlic Producers Association (FGPA)
sought anti-dumping protection, which led to import tariffs
on garlic from China to equalize prices that still existed
when last reported in 2003. This continual regulatory war
between advanced economies over the international trade
in agriculture distorts the actual cost of goods produced,
and forces small developing nations out of foreign markets.

Uruguay round
1. 1.  Soon after the conclusion of the Tokyo round, countries started feeling that it would
be desirable and necessary to expand the coverage of multilateral trading system so is to
include new issues such as services, IPR, and investment.  It took seven and a half years,
almost twice the original schedule. By the end, 123 countries were taking part.  The
seeds of the Uruguay Round were sown in November 1982 at a ministerial meeting of
GATT members in Geneva. Although the ministers intended to launch a major new
negotiation, it took four more years of exploring, clarifying issues and ministers agreed to
launch the new round.
2. 2.  During 1982- 1985 GATT Council Held Special meetings to review the
understanding regarding Notification, consultation Dispute settlement and Surveillance of
Tokyo round  In 1985 a preparatory committee for the Uruguay round was established
by the contracting parties to determine the objectives, subject matter for the participation
of in the upcoming round of multilateral negotiations.  Discussed about the agriculture,
subsidies, tariffs, dispute settlement, safeguards etc.
3. 3.  In April 1986- the us representative suggested that there was an urgent need of : 1.
To liberalize trade 2. To strengthen the multilateral trading system 3. Need to improve
existing GATT Disciplines such as safeguards, agriculture, dispute settlement etc. 4.
Expand the scope of the GATT into areas of growing economic concern such as services,
intellectual property rights and investment
4. 4.  The Ministerial meeting at the special session of the contracting parties at Punta del
este, Uruguay, launched a new and very broad incomparable to any earlier rounds of
multilateral trade negotiation.  PUNTA DEL ESTE declaration can be summarized as
follow: First Section: Covering negotiation on trade in goods consisting of preamble.
Preamble – to negotiate, remove distortions to trade, preserve GATT and develop
multilateral trading system to promote and development, relevance of the round to
 international finance, money and debt, strengthening the trade and other economic
policies.
5. 5.  Second section: General principals of negotiations  Third Section: 13 subjects were
settled for negotiations, tariff, nontariff measure, tropical products, natural resources
product, textile and clothing, Agriculture, GATT articles, safeguards and Arrangements
(i.e. codes negotiated in the Tokyo round), Subsidies and countervailing measures, Anti
Dumping Measures dispute settlement, trade related aspect of intellectual property and
trade related investment measures and functioning of GATT system  All the original
GATT articles were up for review. It was the biggest negotiating mandate on trade ever
agreed, and the ministers gave themselves four years to complete it
6. 6.  Two years later, in December 1988, ministers met again in Montreal, Canada, for
what was supposed to be an assessment of progress at the round’s half-way point. The
purpose was to clarify the agenda for the remaining two years, but the talks ended in a
deadlock.  Despite the difficulty, during the Montreal meeting, ministers did agree a
package of early results. Aimed at assisting developing countries as well as a streamlined
dispute settlement system, and the Trade Policy Review Mechanism which provided for
the first comprehensive, systematic and regular reviews of national trade policies and
practices of GATT members.
7. 7.  The round was supposed to end when ministers met once more in Brussels, in
December 1990. But they disagreed on how to reform agricultural trade and decided to
extend the talks. The Uruguay Round entered its bleakest period.  Despite the poor
political outlook, a considerable amount of technical work continued, leading to the first
draft of a final legal agreement. This draft “Final Act” was compiled by the GATT
director-general, Arthur Dunkel, who chaired the negotiations at officials’ level. It was
put on the table in Geneva in December 1991
8. 8.  In November 1992, the US and EU settled most of their differences on agriculture in
a deal known informally as the “Blair House accord”(agreement between the United
States and the European Union on export subsidy). By July 1993 the “Quad” (US, EU,
Japan and Canada) announced significant progress in negotiations on tariffs and related
subjects. It took until 15 December 1993 for every issue to be finally resolved. On 15
April 1994, the deal was signed by ministers from most of the 123 participating
governments at a meeting in Marrakesh, Morocco. The WTO replaced GATT as an
international organization, but the General Agreement still exists as the WTO’s umbrella
treaty for trade in goods, updated as a result of the Uruguay Round negotiations..
9. 9.  The Doha Round is the latest round of trade negotiations among the WTO
membership. Its aim is to achieve major reform of the international trading system
through the introduction of lower trade barriers and revised trade rules. The work
programme covers about 20 areas of trade. The Round is also known semi-officially as
the Doha Development Agenda as a fundamental objective is to improve the trading
prospects of developing countries.
10. 10.  The Round was officially launched at the WTO’s Fourth Ministerial Conference in
Doha, Qatar, in November 2001.  The Doha Ministerial Declaration provided the
mandate for the negotiations, including on agriculture, services and an intellectual
property topic, which began earlier.  In Doha, ministers also approved a decision on how
to address the problems developing countries face in implementing the current WTO
agreements.
 11. Uruguay Round • The Round came into effect in 1995 and has been implemented
over the period to 2000 (2004 in the case of developing country) under the
administrative direction of the newly created WTO. • The Round transformed GAAT
(General Agreement on Tariffs and Trade) into WTO.
12. The main objectives of the Uruguay Round were: • to reduce agricultural subsidies
• to put restrictions on foreign investment, and • to begin the process of opening trade
in services like banking and insurance

1.6 The Uruguay Round

LEARNING OBJECTIVE

1. Learn how the Uruguay Round of the General Agreement on Tariffs and Trade
(GATT) greatly expanded the coverage of trade liberalization efforts to previously
uncovered sectors.

The Uruguay Round was the last of eight completed rounds of the GATT. Discussion for the
round began in Montevideo, Uruguay, in 1986, and it was hoped that the round would be
completed by 1990. However, impasses were frequent, and the round was not finalized until
1994. One reason for the delay is that this round incorporated many new issues in the
negotiations.

In earlier rounds, the primary focus was always a continuing reduction in the bound tariff rates
charged on imported manufactured goods. As a result of seven completed GATT rounds, by the
mid-1980s tariffs in the main developed countries were as low as 5 percent to 10 percent and
there was less and less room for further liberalization. At the same time, there were a series of
trade issues that sidestepped the GATT trade liberalization efforts over the years. In those areas
—like agriculture, textiles and apparel, services, and intellectual property—trade barriers of one
sort or another persisted. Thus the ambitious objective of the Uruguay Round was to bring those
issues to the table and try to forge a more comprehensive trade liberalization agreement. The
goals were reached by establishing a series of supplementary agreements on top of the traditional
tariff reduction commitments of the GATT. A few of these agreements are highlighted next.
The Agreement on Agriculture (AoA)

Protections and support for agricultural industries began wholeheartedly during the Great
Depression in the 1930s. Not only were tariffs raised along with most other import products, but
a series of price and income support programs were implemented in many countries. When the
first GATT agreement was negotiated, special exceptions for agriculture were included,
including an allowance to use export subsidies. Recall that export subsidies are subject to
retaliation under the antisubsidy code but that requirement was negated for agricultural products.
This enabled countries to keep prices for farm products high in the domestic market and, when
those prices generated a surplus of food, to dump that surplus on international markets by using
export subsidies.

The result of this set of rules implemented worldwide was a severe distortion in agricultural
markets and numerous problems, especially for developing countries, whose producers would
regularly be forced to compete with low-priced subsidized food for the developed world.

The intention at the start of the Uruguay Round was a major reduction in tariffs and quotas and
also in domestic support programs. Indeed, in the United States, the Reagan administration
initially proposed a complete elimination of all trade-distorting subsidies to be phased in over a
ten-year period. What ultimately was achieved was much more modest. The Uruguay Round
agreement missed its deadlines several times because of the reluctance of some countries,
especially the European Community (EC), to make many concessions to reduce agricultural
subsidies.

Countries did agree to one thing: to make a transition away from quota restrictions on
agricultural commodity imports toward tariffs instead—a process called tariffication. The logic is
that tariffs are more transparent and would be easier to negotiate downward in future World
Trade Organization (WTO) rounds. A second concession countries made was to accept at least
low levels of market access for important commodities. For many countries, important food
products had prohibitive quotas in place. A prime example was the complete restriction on rice
imports to Japan. The mechanism used to guarantee these minimum levels was to implement
tariff-rate quotas. A tariff-rate quota sets a low tariff on a fixed quantity of imports and a high
tariff on any imports over that quota. By setting the quota appropriately and setting a relatively
low tariff on that amount, a country can easily meet its target minimum import levels.

The General Agreement on Trade in Services (GATS)

Trade in services has become an increasingly important share of international trade. Trade in
transportation, insurance, banking, health, and other services now accounts for over 20 percent of
world trade. However, trade in services is not restricted by tariffs, largely because services are
not shipped in a container on a ship, truck, or train. Instead, they are transmitted in four distinct
ways. First, they are transmitted by mail, phone, fax, or the Internet; this is called cross-border
supply of services, or Mode 1. Second, services are delivered when foreign residents travel to a
host country; this is called consumption abroad, or Mode 2. Third, services trade occurs when a
foreign company establishes a subsidiary abroad; this is called commercial presence, or Mode 3.
Finally, services are delivered when foreign residents travel abroad to supply them; this is
called presence of natural persons, or Mode 4. Because of the transparent nature of services,
economists often refer to services as “invisibles trade.”

Because services are delivered invisibly, services trade is affected not by tariffs but rather by
domestic regulations. For example, the United States has a law in place called the Jones Act,
which prohibits products being transported between two U.S. ports on a foreign ship. Consider
this circumstance: a foreign ship arrives at one U.S. port and unloads half its cargo. It then
proceeds to a second U.S. port where it unloads the remainder. During the trip between ports 1
and 2, the ship is half empty and the shipping company may be quite eager to sell cargo transport
services to U.S. firms. After all, since the ship is going to port 2 anyway, the marginal cost of
additional cargo is almost zero. This would be an example of Mode 1 services trade, except for
the fact that the Jones Act prohibits this activity even though these services could be beneficial to
both U.S. firms and to the foreign shipping company.
The Jones Act is only one of innumerable domestic regulations in the United States that restrict
foreign supply of services. Other countries maintain numerous regulations of their own,
restricting access to U.S. and other service suppliers as well. When the original GATT was
negotiated in the 1940s, services trade was relatively unimportant, and thus at the time there was
no discussion of services regulations affecting trade. By the time of the Uruguay Round,
however, services trade was increasingly important, and yet there were no provisions to discuss
regulatory changes that could liberalize services trade. The Uruguay Round changed that.

As a result of Uruguay Round negotiations, GATT member countries introduced the General
Agreement on Trade in Services, or GATS. The GATS includes a set of specific commitments
countries have made to each other with respect to market access, market access limitations, and
exceptions to national treatment in specified services. For example, a country may commit to
allowing foreign insurance companies to operate without restrictions. Alternatively, a country
may specify limitations perhaps restricting foreign insurance company licenses to a fixed
number. A country can also specify a national treatment exception if, say, domestic banks are to
be granted certain privileges that foreign banks are not allowed.

Most importantly, if exceptions have not been specified, countries have agreed to maintain most-
favored nation (MFN) and national treatment with respect to services provision. This is an
important step in the direction of trade liberalization largely because a previously uncovered area
of trade that is rapidly growing is now a part of the trade liberalization effort.

The Agreement on Textiles and Clothing (ATC)

During the 1950s, 1960s, and 1970s, as tariffs were being negotiated downward, another type of
trade restriction was being used in the textile and apparel industry: voluntary export restraints. A
voluntary export restraint (VER) is a restriction set by a government on the quantity of goods
that can be exported out of a country during a specified period of time. Often the word
“voluntary” is placed in quotes because these restraints were often implemented upon the
insistence of the importing nations.
For example, in the mid 1950s, U.S. cotton textile producers faced increases in Japanese exports
of cotton textiles that negatively affected their profitability. The U.S. government subsequently
negotiated a VER on cotton textiles with Japan. Afterward, textiles began to flood the U.S.
market from other sources like Taiwan and South Korea. A similar wave of imports affected the
nations in Europe.

The United States and Europe responded by negotiating VERs on cotton textiles with those
countries. By the early 1960s, other textile producers, who were producing clothing using the
new synthetic fibers like polyester, began to experience the same problem with Japanese exports
that cotton producers faced a few years earlier. So VERs were negotiated on exports of synthetic
fibers, first from Japan and eventually from many other Southeast Asian nations. These bilateral
VERs continued until eventually exporters and importers of textile products around the world
held a multilateral negotiation resulting in the Multi-Fiber Agreement (MFA) in 1974. The MFA
specified quotas on exports from all major exporting countries to all major importing countries.
Essentially, it represented a complex arrangement of multilateral VERs.

The MFA was renewed periodically throughout the 1970s, 1980s, and 1990s, and it represented a
significant setback in the pursuit of trade liberalization. Thus, as a part of the Uruguay Round
discussions, countries agreed to a significant overhaul of the MFA. First, the agreement was
brought under the control of the WTO and renamed the Agreement on Textiles and Clothing
(ATC). Second, countries decided to phase out the quotas completely over a ten-year transition
period ending on January 1, 2005.

That transition to a quota-less industry did occur as scheduled; however, it is worth noting that
many countries continue to maintain higher-than-average tariffs on textile and apparel products.
Therefore, one still cannot say that free trade has been achieved.

Trade-Related Aspects of Intellectual Property Rights (TRIPS)

One major expansion of coverage of a trade liberalization agreement was the inclusion of
intellectual property rights (IPR) into the discussion during the Uruguay Round. IPR covers the
protections of written materials (copyrights), inventions (patents), and brand names and logos
(trademarks). Most countries have established monopoly provisions for these types of creations
in order to spur the creation of new writing and inventions and to protect the investments made
in the establishment of trademarks. However, many of these protections have been unequally
enforced around the world, resulting in a substantial amount of counterfeiting and pirating. The
world is abound in fake CDs and DVDs, Gucci and Coach purses, and of course the international
favorite, Rolex watches.

To harmonize the IPR protections around the world and to encourage enforcement of these
provisions, countries created an IPR agreement called the Trade-Related Aspects of Intellectual
Property Rights Agreement, or TRIPS. The TRIPS intends to both encourage trade and protect
writers, inventors, and companies from the theft of their hard work and investments.

Other Agreements

What is listed and discussed above are just a few of the agreements negotiated during the
Uruguay Round. In addition, any round of trade discussions provides an excellent forum for
consideration of many other issues that are of particular interest to specific industries. Some of
the others include the Agreement on Sanitary and Phytosanitary Measures, which provides
guidelines for countries on food safety and plant and animal trade; an agreement on antidumping;
the Agreement on Subsidies and Countervailing Measures; the Agreement on Trade-Related
Investment Measures (TRIMS); the Agreement on Import-Licensing Procedures; the Agreement
on Customs Valuation; the Preshipment Inspection Agreement; the Rules of Origin Agreement;
and finally, several plurilateral agreements (meaning they don’t cover everybody) concerning
civilian aircraft, government procurement, and dairy products.