Working Party of the Trade Committee

Transcription

1 Unclassified TD/TC/WP(2003)7/FINAL TD/TC/WP(2003)7/FINAL Unclassified Organisation de Coopération et de Développement Economiques Organisation for Economic Co-operation and Development 04-Apr-2003 English - Or. English TRADE DIRECTORATE TRADE COMMITTEE Working Party of the Trade Committee ANALYSIS OF NON-TARIFF MEASURES: THE CASE OF EXPORT RESTRICTIONS Contact: Mr Jun KAZEKI, Trade Directorate: Tel ; jun.kazeki@oecd.org English - Or. English JT Document complet disponible sur OLIS dans son format d'origine Complete document available on OLIS in its original format

2 Acknowledgements This study has been prepared by Jun Kazeki of the Trade Directorate and was supervised by Anthony Kleitz. It is declassified under the responsibility of the Secretary-General and is available on the OECD website at the following address: Copyright OECD, 2002 Applications for permission to reproduce or translate all or part of this material should be made to: OECD Publications, 2 rue André Pascal, Paris Cedex 16, France 2

3 TABLE OF CONTENTS EXECUTIVE SUMMARY... 4 I. Introduction... 5 II. Export restrictions under the GATT/WTO... 5 A. WTO disciplines (Summary)... 6 B. Notifications after the Uruguay Round... 8 C. Defining the scope of this paper... 9 III. WTO Accession IV. Regional and Bilateral Disciplines V. Findings from TPR reports A. Minimum export prices B. Export quotas C. Export prohibitions/export licensing VI. Export restrictions for economic objectives A. In general B. Development dimension (including a south-south factor) VII. Possible orientations for future disciplines REFERENCES Annex 1.20 Annex

4 ANALYSIS OF NON-TARIFF MEASURES: THE CASE OF EXPORT RESTRICTIONS EXECUTIVE SUMMARY This paper analyses export restrictions as part of the Trade Committee s on-going project on nontariff measures, which aims at examining particular types of measures and deepening the understanding of the nature and effects of the measures. Export restrictions have been mentioned several times in communications from WTO Members to the Negotiating Group on Market Access for Non-Agricultural Products and the Committee on Agriculture in Special Session. In light of this process, this paper provides an overview of current disciplines on export restrictions under the GATT/WTO, including the scope of exceptions. It also indicates the current situation regarding the implementation of notification obligations concerning quantitative restrictions. The main questions that this paper deals with include: the nature of justifications invoked for exceptions, in particular in the case of economic reasons; whether current transparency disciplines are sufficient in terms of predictability; and whether there is room for strengthening disciplines in this area, on either a horizontal or a sectoral basis. The WTO accession processes provide references for possible disciplines in the field of export restrictions, such as scheduling of certain products and notification requirements. In regional trade agreements, disciplines on export restrictions are mostly in line with the structure of GATT, allowing Article XX and XXI type exceptions to general prohibition on quantitative restrictions. However, efforts have been undertaken inter alia to enhance transparency by specifying justifiable export regulations in the agreements and its annexes or subsequent regulations. The most systematic information available on export restrictions appears in the section on measures directly affecting exports in Trade Policy Review country reports. In assessing the economic impact of export restrictions, the TPR reports include much useful information. Key findings from reviews on minimum export price requirements, export quotas, export prohibitions, export licensing and other types of export restrictions indicate inter alia that one of the outstanding objectives of export restrictions for economic reasons is promotion of downstream industries. Outstanding sectors include hides and skins and leather, forestry products, certain mineral products and certain agricultural products. Considering that a number of developing countries are using these measures, this paper also refers to the development dimension of export restrictions. This paper finally provides some possible orientations for future disciplines. They include possibilities of scheduling, horizontal or sector-specific disciplines, and transparency measures. 4

5 I. Introduction 1. The Working Party of the Trade Committee has discussed the case of export duties as part of its on-going project on non-tariff measures, aiming at contributing to negotiations on non-agricultural and agricultural products and to other relevant aspects of the WTO process: Analysis of Non-Tariff Measures: The case of Export Duties [TD/TC/WP(2002)54/FINAL]. The Working Party agreed that further elaboration on the wider context of export restrictions should be undertaken by following an analytical approach similar to that used for export duties. 2. Since the launch of the Doha Development Agenda in 2001, export restrictions have been mentioned several times in the communications from WTO Members to the Negotiating Group on Market Access for Non-Agricultural Products and the Committee on Agriculture in Special Session. In the nonagricultural field, some WTO Members have indicated specific non-tariff measures in which they are interested. Members are also working to agree on negotiating modalities and expect further analytical elaboration of specific type of measures. Export restrictions, together with export duties, would be one of issues pursued. 3. Against this background, this paper begins by providing an overview of existing disciplines on export restrictions in the WTO and in other relevant regimes. Then, it analyses factual information on products subject to such export restrictions and describes key findings, including trade and economic implications to the extent possible. It thus aims to be a factual guide and provide observations to support the process of market access negotiations on non-agricultural products and negotiations on agriculture. It could also contribute to other relevant WTO processes, e.g. related to future accessions. This paper complements the earlier paper on export duties. II. Export restrictions under the GATT/WTO 4. Export restrictions are a classic area in Trade in Goods in the GATT/WTO, sometimes considered as a synonym for export controls 1 or export restraints 2. While reducing import tariffs and restrictions has been a primary goal in market access negotiations, export related measures have also been addressed in various contexts such as export prohibitions, quantitative export restrictions, export quotas, voluntary export restraints 3, and export duties The Dictionary of Trade Policy Terms defines export controls as measures instituted by exporting countries to supervise export flows. Reasons for them can be many, including, but not exhaustively, compliance with United Nations economic sanctions, adherence to voluntary restraint arrangements, observance of export quotas under international commodity arrangements, management of strategic exports and administration of rules concerning dual purpose exports as well as a policy preserving some raw materials and other articles for domestic production or consumption. Walter Goode, Centre for International Economic Studies, University of Adelaide A Panel under the DSU, though in the context of the application of the Subsidies and Countervailing Measures Agreements, delineated the scope of export restraint as a border measure that takes the form of a government law or regulation which expressly limits the quantity of exports or places explicit conditions on the circumstances under which exports are permitted, or that takes the form of a government-imposed fee or tax on exports of the products calculated to limit the quantity of exports, (WT/DS194/R) A voluntary export restraint is undertaken when a country agrees to limit its export to another country on certain sensitive product only to the extent that the exporting country wishes to avert a threat to its trade with the partner. The character of the restriction is different from other export restrictive measures in that it includes the 5

6 5. The recent WTO Trade Policy Review reports include a section on measures directly affecting exports. Under this heading, besides export incentive measures (i.e., export subsidies; duty and tax drawback; export processing zones; export finance, insurance, and guarantees; and other export promotion measures), those reports include export restrictive measures (i.e., typically, export prohibitions; export quotas; export licensing; export duties and levies; and minimum export prices). There are various other relevant sub-headings 4, too. To provide an analytical basis, the current WTO disciplines are surveyed below with a view to identifying what types of measures are disciplined and what types of measures are not, and what are remaining outstanding issues to be addressed in terms of negotiations and other relevant process. A. WTO disciplines (Summary) 6. Article XI of the GATT 1994 is a key provision which stipulates a general prohibition of quantitative restrictions. It states that no prohibitions or restrictions other than duties, taxes or other charges, whether made effective through quotas, import or export licences or other measures, shall be instituted or maintained by any contracting party on the importation of any product destined for the territory of any other contracting party. There are, however, certain exceptions to this general prohibition such as Article XI:2 (a)(critical shortage of foodstuffs), (b)(restrictions necessary to the application of standards, etc.), Article XX (general exceptions, in particular, (g), (i), and (j)) 5 and Article XXI (security exceptions). Article XIII of the GATT 1994 stipulates that when export restrictions are used, they must be applied on a non-discriminatory basis. Article XII of the GATT 1994 (Article XVIII in the case of developing countries) allows members to apply restrictions to safeguard the balance of payments other country s interest to limit the import. In any event, voluntary export restraints are prohibited under the Agreement on Safeguards. While efforts to make uniform sub-headings are seen in the TPR reports, there are many variations reflecting different actual practices and realities. Examples of sub-headings in the reports are; procedures, registration and documentations, export taxes, charges, levies, index prices, minimum reference prices, export prohibitions, export licensing, export restrictions and controls, export permit requirements, access related export quotas, export cartels, voluntary restraints, surveillance, retention schemes, export performance requirements, etc. For example, (g) relating to the conservation of exhaustible natural resources if such measure are made effective in conjunction with restrictions on domestic production or consumption; (i) involving restrictions on exports of domestic materials necessary to ensure essential quantities of such materials to a domestic processing industry during periods when the domestic price of such materials is held below the world price as part of a governmental stabilization plan; Provided that such restrictions shall not operate to increase the exports of or the protection afforded to such domestic industry, and shall not depart from the provisions of this Agreement relating to nondiscrimination; (j) essential to the acquisition or distribution of products in general or local short supply; Provided that any such measures shall be consistent with the principle that all contracting parties are entitled to an equitable share of the international supply of such products, and that any such measures, which are inconsistent with the other provisions of the Agreement shall be discontinued as soon as the conditions giving rise to them have ceased to exist With regard to the applicability of Agreement of Subsidies and Countervailing Measures, at issue is, inter alia, whether the measure is subsidy for the ASCM Article 1. There is an outstanding argument whether export restrictions on raw materials could be de fact subsidy to the domestic processing industry because they enable the industry to obtain low cost raw materials. A subsidy under the Article 1 of the ASCM agreements only exists if: a) a financial contribution is provided and b) the contribution is made by a government or public body and c) that contribution confers a benefit. Furthermore, for example in the case of new drastic introduction of export restrictions, arguably the concept of non-violation nullification and impairment based on Article XXIII of GATT 1994 may provide a basis of challenging the measures that fundamentally undermine bargained other 6

7 7. On the procedural side, Article X of the GATT 1994 establishes a general transparency requirement (e.g., publication of regulations). Article VIII of the GATT 1994 addresses fees and formalities, prohibiting fees and other charges rendered in connection with exportation (or importation) that exceeds the costs of the services rendered, and recognising the need for minimising the incidence and complexity of formalities and for decreasing documentation requirements. 8. As a result of the Uruguay Round, so-called grey measures including voluntary export restraints are prohibited under the Agreement on Safeguards. The agreement on Trade Related Investment Measures prohibits the use of TRIMs inconsistent with Article III (national treatment) and Article XI (general elimination of quantitative restrictions), i.e., typically local content requirements for exports, and export balancing requirements. With respect to State Trading, while Article XVII of the GATT 1994 stipulates general obligations, 7 the Understanding on the interpretation of Article XVII of the GATT 1994 at the end of the Uruguay Round provided working definitions of state trading enterprises which have to be notified, 8 and established a Working Group to study the issue. Its process has been on-going. 9. Article 12 of the Agreement on Agriculture (disciplines on export prohibition and restrictions) stipulates the details when the exception in Article XI:2(a) of the GATT 1994 is to be applied. It requires Members introducing new export restrictions on foodstuffs to give due consideration to the effects of such restrictions on importing Member s food security. Members, except non-net exporting developing country, must notify the Committee on Agriculture before introducing new export restrictions on foodstuffs, and must consult with affected Members Regarding the possibility of scheduling commitments concerning export restrictions, the Marrakesh Protocol to the General Agreement on Tariffs and Trade 1994, in its paragraph 6, created a mechanism for scheduling non tariff measures; In case of modification or withdrawal of concessions relating to non-tariff measures as contained in Part III of the schedules, the provisions of Article XXVIII of GATT 1994 shall apply. However, since there was no definition of non-tariff measures here, this scheduling mechanism has not been used except for rare examples of import licensing, and no country has assumed the obligation of scheduling on export restrictions in the Part III of its schedule concessions. Again the interpretation is not the objective of this paper and here for reference, these issues are introduced in connection to these measures, export restrictions. The basic obligation with respect to state trading enterprises as contained in Article XVII of GATT 1994 is that enterprises which are state-owned, or receive exclusive or special privileges from the state, shall act in a manner consistent with the general principles of non-discriminatory treatment, that is, should make any purchases or sales strictly on the basis of commercial considerations. Members are required to notify the relevant products. The Understanding on the interpretation of Article XVII of GATT 1994 states the working definition as governmental and non-governmental enterprises, including marketing boards, which have been granted exclusive rights or privileges, including statutory or constitutional powers, in the exercise of which they influence through their purchases or sales the level or direction of imports or exports. The rules and disciplines on export restrictions of the GATT 1994 apply to both non agricultural and agricultural products and the section on export measures in the TPR reports deals with both categories of measures; the basic analysis in this paper thus focuses on horizontal aspects of all products. However, in the context of the negotiations under the DDA, the existence of additional disciplines on agricultural products under Article 12 of the Agreement of Agriculture should be taken into account. The scope of agricultural products is defined in ANNEX1 (product coverage) of the Agreement on Agriculture. These products are the subject to the negotiations in the Committee on Agriculture in Special Session; Other products are dealt with in the Negotiating Group on Market Access for Non-Agricultural Products. 7

8 11. In sum, while Article XI stipulates strict prohibitive disciplines over export restrictions, there are rather broad exceptions or justifications under the other provisions based on non-economic reasons (e.g., security, public health, and safety). The Uruguay Round provided additional strengthened disciplines in many respects, but issues may remain in the area of export restrictions that could be for either noneconomic reasons or economic reasons, while as long as a relevant case is not justified by Article XX (general exceptions) and Article XXI (security exceptions), the general principle of elimination of export restrictions established by Article XI governs the case. In contrast with import regulations, where tariffication of quantitative import restrictions has been strongly encouraged over several rounds of multilateral negotiations, export restrictions have not been substantially discussed as a priority, except for the prohibition of voluntary export restraints. Perhaps this reflects the difficulty of dealing with issues such as national sovereignty over natural resources (e.g., petroleum) and national financial policy for tackling inflation by controlling adequate domestic supplies of key products, although importing country s strong interest in ensuring access to supplies of raw materials or products is outstanding. B. Notifications after the Uruguay Round 12. Decisions at the end of the Uruguay round include a Notification Procedure that has an indicative list of notifiable measures, which includes Quantitative restrictions; Other non-tariff measures such as licensing; Export taxes; and Export restrictions, including voluntary export restraints and orderly marketing arrangements. 10 It was indicative and not specific, but on December 1995, a decision by the Council for Trade in Goods in 1995 created procedures on biennial notification of quantitative restrictions. 11 Members have been expected to notify relevant information including a full description of the products and tariff lines, a precise indication of the type of restriction, an indication of the grounds and WTO justification for the measures, and a statement on the trade effects of the measures. 13. The other decision by the CTG on December 1995 established so called reverse notification procedures to allow Members to indicate specific non tariff measures of other Members for transparency purposes. The reverse notifications are to contain the following information: an indication of the precise nature of the measures, a full description of the products affected, a reference to the relevant WTO provisions and a statement on the trade effects of the measures. This process, however, has rarely been used by Members Notifiable measures; Tariffs (including range and scope of bindings, GSP provisions, rates applied to members of free-trade areas/customs unions, other preferences), Tariff quotas and surcharges, Quantitative restrictions, including voluntary export restraints and orderly marketing arrangements affecting imports, Other non-tariff measures such as licensing and mixing requirements; variable levies, Custom valuation, Rules of origin, Government procurement, Technical barriers, Safeguard actions, Anti-dumping actions, Countervailing actions, Export taxes, Export subsidies, tax exemptions and concessionary export financing, Free-trade zones, including in-bond manufacturing, Export restrictions, including voluntary export restraints and orderly marketing arrangements, Other government assistance, including subsidies, tax exemptions, Role of state-trading enterprise, Foreign exchange controls related to imports and exports, Government-mandated countertrade, Any other measure covered by the Multilateral Trade Agreements in ANNEX 1A to the WTO Agreement. (Ministerial Decision on Notification Procedures adopted by the Trade Negotiating Committee on 15 December 1993) G/L/59 Members shall make complete notification of the quantitative restrictions which they maintain by 31 January 1996 and at two-yearly intervals thereafter G/L/60 Decision on Reverse Notification of Non-Tariff Measures. The reverse notification by Members has rarely been used so far. (See TN/MA/S/5) 8

9 14. The implementation of WTO notification obligations regarding quantitative restrictions seems to have been far from satisfactory in terms of the transparency objective. Currently only half the members have submitted quantitative restriction notifications (Table 1). In addition, among members having submitted notifications, some of them notified that they had no QRs. 13 It seems that in some cases the notification obligation has been interpreted as only relating to WTO inconsistent quantitative restrictions, while other members have notified details of many existing quantitative restrictions for transparency purposes despite the fact that these measures could be justifiable under the Article XX or XXI. Table 1. Number of Members who submitted notifications on Quantitative Restrictions Number of relevant WTO Members at the time of the review at CTG Number of WTO Members submitted notifications on QRs LDCs 30 8 OECD Others Total Note: Notifications in accordance with the WTO decision (G/L/59). Based upon the record of Council for Trade in Goods from 1995 to 2001 (G/L/223/Rev.8, 5 June 2002). EU is counted as The number of QR notifications by developing and least developing countries is relatively low. This may be due to their capacity problems. Moreover, although notified information is stocked in a database in the WTO and available to members, it may be consulted only on request to the WTO Secretariat. Given the variety of the measures seen in the TPR reports, it is not clear whether a publicly available database would be feasible and adequate under the current structure. C. Defining the scope of this paper 16. Overall, while progress has been realised as a result of the Uruguay Round to strengthen disciplines on export restrictions, as in the case of voluntary export restraints, there remain certain related issues. Procedural aspects could be pursued in the context of the on-going agenda of trade facilitation under the DDA. State Trading, in particular of agricultural products, might be dealt with in the broader context which includes aspects of import and export as well as competition policy implication as in the case of export cartels. It seems that in the process of the market access negotiations on non-agricultural and agricultural products, however, it is the typical export restrictions and export taxes for economic reasons that have been the most frequently discussed at the initial stage. This paper thus deals with these typical export restrictions. 17. Against this background, and because of the broad exceptions to the general prohibition of export restrictions, the main questions to be dealt with in the rest of this paper are: the nature of justifications invoked for exceptions, in particular in the case of economic reasons; whether current transparency disciplines are sufficient in terms of predictability; and whether there is room for strengthening disciplines in this area, on either a horizontal or a sectoral basis. In order to pursue these points, the following sections analyse practices in various layers. 13 A note by the WTO Secretariat reports that 24 members had indicated that they do not maintain any quantitative restrictions. (G/MA/NTM/QR/W/1) 9

10 III. WTO Accession 18. Disciplines agreed to in WTO accession processes provide references for possible disciplines in the field of export restrictions, such as scheduling of certain products and notification requirements. Some observations may be made concerning so-called commitment clauses in accession agreements: (See Annex 1 for details) Most of the commitments include compliance with provisions of Articles XI, XII, XIII, XVII, XVIII, XIX, XX, and XXI of the GATT 1994, the Agreement on Agriculture, and the Agreement on Safeguards, in terms of export restrictions; The transparency requirements of the Article X are emphasised; Some cases reflect specific interests of certain Members in products of acceding countries, e.g. for Mongolia (raw cashmere; ferrous and non-ferrous metal), Albania (raw hides and skins and leather), and Moldova (unbottled wine); (See Annex 1 and Annex 2) An example of an additional commitment beyond GATT in terms of transparency (besides the cases of export duties 14 ) is provided for in the case of China, where remaining nonautomatic restrictions on exports are to be notified to the WTO annually. IV. Regional and Bilateral Disciplines 19. In regional trade agreements 15, disciplines on export restrictions are mostly in line with the structure of GATT, allowing Article XX and XXI type exceptions to general prohibition on quantitative restrictions. However, efforts have been undertaken inter alia to enhance transparency by specifying justifiable export regulations in the agreements and its annexes or subsequent regulations. 20. In the EU, the Article 29 of the Treaty establishing the European Community stipulates that quantitative restrictions on exports, and all measures having equivalent effect, shall be prohibited between Member States. Article 30 draws justifications of prohibitions or restrictions on grounds of public, morality, public policy or public security. Subsequent directives, regulations, decisions and cases have enhanced predictability of the rules. With regard to exports to third countries, the general principle of EU policy is freedom from quantitative restrictions In Europe, structures of disciplines on exports are again in line with GATT. In the European Free Trade Association (EFTA 18 ), for example, Article 7 states that quantitative restrictions on imports and exports and all measures having equivalent effect, shall be prohibited between the Member States with general exceptions (Article 13) and security exceptions (Article 39) See [TD/TC/WP(2002)54FINAL] Table 4 Example of disciplines undertaken at the time of WTO accessions and its Annex 2 China Accession schedule. See relevant government sites for information of specific provisions. The OAS provides information, too. Council Regulation 2603/69, as amended. Exceptions include measures to prevent a critical situation arising from due to a shortage of essential products; these may be limited to exports from certain regions of the Community or only to certain destinations. See TPR EU (2002). By Iceland, Liechtenstein, Norway and Switzerland. 10

11 22. In the Europe Agreements 19, as well, quantitative restrictions on exports and all measures with equivalent effect are to be abolished by the date of the entry of the Agreement into force except measures explicitly mentioned in the annex, which however were abolished by the end of the fifth year after entry of the Agreement into force (Article ). No new quantitative restrictions on exports or measures having equivalent effect are to be introduced, nor are existing ones to be made more restrictive (Article 26). 21 Reflecting the long history of the Europe to tackle quantitative restrictions for free movement of goods in the integrated market, the aspect of abolishment of quantitative restrictions has been emphasised in the disciplines in the region, too. 23. In the EU-Mexico Agreement, in the chapter on Non-tariff measures, Article 12 prohibits quantitative restrictions in trade between the Community and Mexico, with Annex IV setting out its exceptions. Article 16 (Shortage clause) draws the possibilities of export restrictions in the case of critical shortage of foodstuffs, but it also requires inter alia that the measure shall not operate to increase the exports of or protection afforded to the domestic processing industry concerned. In addition, the EU and Mexico, on the occasion of their free trade agreement, declared in addition to the prohibition of export duties that Within the context of the multilateral negotiations, both Parties shall seek to establish disciplines for the elimination of export taxes or restrictions that operate to increase the exports of, or the protection afforded to, domestic industries, such as leather The North American Free Trade Agreement (NAFTA) stipulates export disciplines in the section on Non-Tariff Measures. It provides general rules in line with Article XI of the GATT 1994 while its annex indicates exceptional export restrictions maintained by each party. 23 Each party articulates existing export regulations in the annex. 24 Article 315 deepens conditions of exceptions set out in Article XI:2(a) or XX(g), (i), or (j) of the GATT 1994 by articulating detailed requirements such as comparison of trade volumes. 25 With regard to security exceptions, Part Eight of the NAFTA draws general exceptions and national security. Overall, these provisions are at least contributing to enhance transparency and narrow unpredictable scope by articulating regulations in annexes and detailed requirements in the provisions The EU has concluded these with Bulgaria, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovak Republic, and Slovenia. For industrial products. Article 32 and Article 34 enable use of exceptional measures under given conditions, such as serious shortage of essential products. EC Joint Declaration VI NO See Part Two, Section C, Non-Tariff Measures, Article and their Annex. For example, the right of export controls on logs of all species is reserved by each party. Article 315 (Mexico is exempted by Annex 315): a Party may adopt or maintain a restriction otherwise justified under Article XI:2(a) or XX(g), (i) or (j) of the GATT with respect to the export of a good of the Party to the territory of another Party, only if: (a) the restriction does not reduce the proportion of the total export shipments of the specific good made available to that other Party relative to the total supply of that good of the Party maintaining the restrictions as compared to the proportion prevailing in the most recent 36 month period for which data are available prior to the imposition of the measure, or in such other representative period on which the Parties may agree; (b) the Party does not impose a higher price for exports of a good to that other party than the price changed for such good when consumed domestically, by means of any measure, such as licenses, fees, taxation and minimum price requirements. The foregoing provision does not apply to a higher price that may result from a measure taken pursuant to subparagraph (a) that only restricts the volume of exports; and (c) the restriction does not require the disruption of normal channels of supply to that other Party or normal proportions among specific goods or categories of goods supplied to that other Party. 11

12 25. The RTAs in the Western Hemisphere (e.g., Canada-Chile, Canada-Costa Rica, available draft of FTAA, etc.) adopt a similar structure to the NAFTA by stipulating basic provisions in line with GATT 1994, with annex style transparent measures and additional disciplines such as deepened requirements relating to general exceptions and prohibition on export taxes and minimum price requirements. 26. The Australia and New Zealand Closer Economic Relations Trade Agreement (ANZCER) prohibits all quantitative export restrictions. This provisions is contained in Article 9 of the 1983 CER Agreement in conjunction with 1988 CER Protocol on the Acceleration of Free Trade in Goods under which all transitional arrangements and temporary exceptions to the basic free trade rule were eliminated as of 1 July Article 18 allows standard exceptions from its provisions, similar to general exceptions and security exceptions under the GATT APEC has been keen to deal with NTMs with a view to achieving its Bogor goal of free and open trade and investment in the Asia-Pacific region by 2010 for industrialised economies and 2020 for developing economies. The Osaka Action Agenda aiming at implementing this goal includes a section on Non-Tariff Measures stating that APEC economies will achieve free and open trade by inter alia progressively reducing non-tariff measures. In response to the Osaka Action Agenda, the Individual Action Plans for each member economies found in the E-IAP electronic format, explain current situations and future plans of liberalisation, though they are voluntary in nature. Four categories in the section of the NTMs 27 are related to export restrictions; 1) Export levies; 2) Quantitative export restrictions/prohibitions; 3) Discretionary export licensing; and 4) Voluntary export restraints. 28. The notifications in the IAP are various, but the following findings can be drawn from the records of 21 member economies on export restrictions; 28 Most economies notify that they do not impose voluntary export restraints; Others just leave the VER column empty or refer to relevant international agreements; The distinction between export restrictions/prohibitions and discretionary export licensing is not necessarily clear and both are mixed in some cases, so that each economy chooses either column based upon its own judgement; Like QR notifications in the WTO, a few economies choose to notify that they do not maintain quantitative export restrictions or prohibitions inconsistent with WTO rules, rather than to describe details of justifiable export regulations; many other economies notify, though some are detailed and others are brief, existing export controls schemes in accordance with international obligations such as the Convention on International Trade in Endangered Species and the Basel Convention, and with other reasons including security, public health and safety; WT/REG111/R/B/2, G/L/540, 13 May 2002 The full text of the footnote of NTMs in the Osaka Action Agenda is as follows: [N]on-tariff measures include but are not restricted to quantitative import/export restrictions/prohibitions, import/export levies, minimum import prices, discretionary import/export licensing, voluntary export restraints and export subsidies. Note that voluntary export restraints are still relevant despite prohibition under the Agreement on Safeguards since Russia and Viet Nam are APEC members, but not yet WTO members. With respect to export levies, see Table 2 Export levies in APEC Individual Action Plans in of [TD/TC/WP(2002)54FINAL] 12

13 Most economies just describe existing regulations, and rarely undertake additional commitments here; A rare example is by Indonesia 29 where several reasons for export restrictions are also explained besides its unilateral commitment to reduce gradually export taxes on logs, swan timber, rattan and minerals; 30 Most economies indicate multiple enquiry points for export restrictions in the E-IAP, including address, and telephone and fax numbers of relevant authorities, to the extent possible. 29. In sum, although similar structures to GATT are quite common in RTAs, certain regional or bilateral efforts to strengthen disciplines on export restrictions have been envisaged on some points. However, additional disciplines on export restrictions in general have not been as extensive as in the case of export duties, where there has been a clear growing tendency in Europe and the Western Hemisphere to abolish these duties. Export restrictions are too various to make a simple streamlined discipline, and issues such as national sovereignty over natural resources might be hard to be addressed, but at least transparency approach in the style of annex to the agreements would be suggestive. Though these annexes rarely include commitment for elimination of certain export restrictions, they describe detailed regulations of a binding nature and definitely enhance transparency and predictability for business in comparison with otherwise simple domestic export regulations based solely upon alleged justifications of Article XX and XXI type exceptions. It is also noted that the EU-Mexico Agreement hints at a sector-specific approach on leather. V. Findings from TPR reports 30. The most systematic information available on export restrictions appears in the section on measures directly affecting exports in Trade Policy Review country reports. In assessing the economic impact of export restrictions, the TPR reports include much useful information. Basic information such as HS lines of applicable products is limited, but at least certain tendencies can be observed from these reports. Reports of a hundred members have been reviewed for this analysis. Since export duties has already been surveyed [TD/TC/WP(2002)54FINAL], this section reviews minimum export prices, export quota and export prohibitions/export licensing. A. Minimum export prices 31. Minimum export prices or index prices in certain cases tend to be used as complementary measures to secure target export prices in terms of controls for world market prices on certain dominant products, or to be used to gain competitive advantage of domestic downstream industries by allowing them Note that the IMF s support program in the Indonesia s case after the Asian Financial Crisis included removal of export restrictive measures in order to improve economic performance of the country. Indonesia (IAP 2002): Indonesia has undertaken unilateral actions to remove or reduce non-tariff barriers which are not included in the Uruguay Round commitments;, gradual reduction of export taxes on logs, sawn timber, rattan and minerals; It also states Export bans and prohibition covers several products such as fisheries, wildlife, hide and skins of certain animals such as reptiles, rubber materials (notably rubber block) and variety of waste and scrap products. The aim is to protect endangered species of wild flora and fauna as well as to prevent export of hazardous materials. Apart from imposing textiles quotas with importing countries, the reason of these export restrictions are based on (i) protection of natural resources and endangered species; (ii) promotion of higher-value-added downstream industries; (iii) upgrading the quality of export products; and (iv) ensuring adequate supply of "essential products", (v) and imposing to controls on textiles and clothing under MFA. Export restrictions will be further eliminated. 13

14 to obtain inexpensive raw materials. The descriptions on minimum export prices in an independent subheading are limited in the TPR reports, and clearly they are dealt with in relation to export duties. They are also referred in the context of voluntary export restraints, orderly marketing, export cartels and state trading. However, since the Agreement on Safeguards was introduced, so-called grey measures have been abolished, so that the remaining context to affect export prices might be in export cartels and state trading. These measures might be dealt with in a broader way in a different context, and here, typical minimum export prices measures as described in the named heading in the TPR reports have been reviewed. 32. Key findings from TPR reports are as follows: (Table 2) Around one-third of members applying export duties maintain minimum export price requirements as supplementary measures to implement or calculate export duties and to achieve objectives such as maintenance of world prices or price differentiation for domestic downstream industries vis-à-vis world competitors; Again, developing countries are the main users, but it seems that LDCs have not so much used these measures, reflecting the difficulty in the valuation of prices; Examples of products affected are inter alia forestry products, mineral and metal products, and various agricultural products; It is not clear in certain cases whether minimum export prices are binding in nature or just reference prices. Table 2. Number of countries applying export duties/taxes and minimum export prices, by regions and other groupings Number of WTO Members reviewed by TPRB Members imposing export duties Members imposing minimum export prices Europe/Middle East America Asia/Pacific Africa Total LDCs OECD Others Note: TPR reports from 1995 to 2002 (October). Some Members were reviewed two or three times, but are here counted as one. The EU is counted as 15. B. Export quotas 33. Export quotas are, in the Dictionary of Trade Policy Terms, as defined restriction or ceilings imposed by an exporting country on the total volume of certain products. They are designed to protect domestic producers and consumers from temporary shortages of these products or to improve the prices of specific products on world markets by shortening their supply. The latter is only possible where a country, or a group of countries, is the dominant exporter of a product. The scope of the descriptions of export 14

15 quotas in TPR reports varies. Sometimes, quotas are discussed in the same context as export restrictions, quantitative restrictions and licenses. Here, findings are drawn from relevant subheadings by collecting information to the extent possible. 34. Key findings are as follows: Around twenty member reports describe legitimate export quotas in response to restrictions by importing members under the WTO Agreement on Textiles and Clothing; International commodity agreements or arrangements are relevant as justification for measures on such agricultural products as sugar and coffee, and on crude oil; For certain agricultural items (in the absence of international arrangements), the objective of export measure may be to respond to an importing country s legitimate import restrictive measures, or to stabilise domestic prices and meet domestic needs; In the case of forestry products, hides and skins and leather, and non-ferrous metals, there could be an economic reason for fostering domestic downstream industries; Linkage to export cartels and voluntary orderly marketing is pointed out in certain cases, though the latter measure is currently prohibited by the Agreement on Safeguards. C. Export prohibitions/export licensing 35. TPR country reports describe export prohibitions and export licensing in various ways. Because of the variety of length of the sections in the hundred or so member reports, it would be hard to analyse these points quantitatively, although certain tendencies can be observed. It is noted that the difference between automatic and non-automatic export licensing has not been substantially treated in these reports and rather, both export prohibitions and licensing have been reviewed together. It should also be noted that export duties, minimum export prices and export quotas are specific aspects of export restrictions in a broader sense, so that sometimes overall assessments of measures are necessary. Table 3 shows a tentative classification drawn from sections in particular on export prohibitions and export licensing. 36. Key findings are as follows: Where there are multilateral agreements or arrangements, legitimacy of export restrictions are well recognised in particular in such areas as security, life, public health, safety, social and religious reasons; In the case of certain commodities such as sugar, coffee, and petroleum, international mechanisms affect the use of export restrictions; Reflecting introduction of the Agreement on Safeguards, so-called grey measures tend to be removed; It is noted that several reports introduce existence of certain surveillance and monitoring mechanism, but in any way, the objective of this paper is not the interpretation of the agreement. 15

16 It seems clear that restrictions on foodstuffs in the case of drought in LDCs are inevitable. When the alleged reason for restrictions is to secure adequate domestic supply of foodstuffs in developed as well as developing countries, it would be a matter of overall assessment and balance; 32 Export restrictions for quality controls are rather export promotion activities to meet minimum standards in importing countries and to maintain the reputation of goods; Questions remain when export restrictions are applied for economic reasons or mixed reasons in the absence of certain international arrangements; summary is as follows; Hides and skins and leather; the primary reason is to encourage downstream industries; Mineral products, metals and precious stones; the alleged reason is mainly conservation of natural resources but in some cases, the promotion of downstream processing industries; Fishery products; the main alleged reason is conservation of natural resources (including a seasonal rest); Forestry products; the environmental reason have been strongly invoked, but in some cases, the promotion of downstream processing industries is another major reason. Importing countries argue that export restrictions by dominant producing countries discriminate against foreign buyers by raising the level of export prices, (i.e. world prices) and creating difficulties for these buyers in obtaining essential raw materials and competing internationally; Some developing countries on the other hand argue that measures to promote processing industries are justified by the infant industry argument and by the existence of tariff escalation in developed countries; In relation to export regulations for economic reasons, in certain cases, governments exempt export restrictions (e.g. exemptions of licensing requirement in an export process zone) to promote foreign direct investment in export industries particularly in developing countries; Lack of transparency of regulations and licensing systems has been indicated frequently in the cases of developing members. 32 Article 12 of the Agreement on Agriculture stipulates a certain co-ordinating scheme between these conflicting interests. 16

17 Table 3: Export Restrictions in TPR reports according to rationales (See Note) 1. Export restrictions for non-economic reason: security -The United Nations Security Council Resolutions (e.g., sanctions against particular countries) -The Convention on Chemical Weapons -The Treaty on Nuclear Non-Proliferation -Multilateral export control arrangements (the Australia Group (to prevent the spread of chemical and biological weapons); the Missile Technology Control Regime; the Nuclear Suppliers Group; the Zangger Committee (control of nuclear materials and related high technology); the Wassenaar Arrangement (control of exports of conventional weapons and dual use products) 2. Export restrictions for non-economic reason: other international treaties or arrangements, and life, public health, safety, social and religious reason -The Basel Convention on the Transboundary Movement of Hazardous Waste and their Disposal -The Convention on International Trade in Endangered Species of Fauna and Flora (CITES) -The Montreal Protocol on Substances that Deplete the Ozone Layer 3. Export restrictions for economic reasons but in accordance with international or bilateral agreements or arrangements -The Agreement on Textile and Clothing -International commodities agreements on sugar, coffee, and petroleum -GSP and other preferential treatment related arrangements -In the process of counteract to countervailing duties of an importing country 4. Export restrictions for food security reason (prevention of critical shortage) -Staple products such as maize coping with drought in particular in LDCs (including seasonal regulations) 5. Export restrictions: for environmental reason; for conservation of exhaustible natural resources; for maintain of adequate supply of essential products; or for promotion of downstream industries (those could be either non-economic or economic) -Forestry products (such as log, timber) -Fishery products (including seasonable restraint for a biological rest period of fish) -Mineral products, metals, precious stones -Hides and skins and leather -Other agricultural products (seasonal measures are introduced in some cases) 6. Export restrictions for quality controls and regulatory aspects -Patent or copyright infringing products -Sanitary quality controls or standards assurance to meet importer s demand or to keep international reputations (e.g., SPS quality of foods, quality of diamonds, etc) 7. Export restrictions: others -Gold (financial security) -Exchange control related -Heritage goods (to protect national treasures) -Statistical and monitoring purposes Note: This list is illustrative, not exhaustive. 17