“WTO Accession with a Particular Emphasis
on the Textile Sector”
Presentation by
Paolo R. Vergano
Partner, FratiniVergano – European Lawyers
16 May 2014 Dushanbe, Tajikistan
1
Table of Contents
1.
Introduction to the WTO
2.
Textiles under the WTO
3.
Impact of WTO accession for Tajikistan’s textile sector
4.
Implications for businesses
5.
Conclusions and recommendations
2
Introduction to the WTO
3
Introduction to the WTO
What is the WTO?

International organisation;





Established in 1995;
As a result of the Uruguay Round negotiations;
Located in Geneva (Switzerland); and
With 159 Members (123 original and 36 acceded, the last
one, Tajikistan)
Dealing with the rules of trade between countries at a global
level.
4
Introduction to the WTO
What are its functions?

Administration and facilitation of the implementation of the
WTO Agreements;

Forum for negotiations;

Forum for the settlement of disputes;

Periodic reviews of WTO Members’ trade policies;

Cooperation with other international organisations; and

Technical assistance for developing countries.
5
Introduction to the WTO
What are its principles?

Non discrimination;


Most-Favoured Nation (MFN);
National Treatment;

Further trade liberalisation;

Transparency and predictability;

Promotion of fair competition; and

Development and economic reform.
6
Introduction to the WTO
Benefits for businesses

Stable multilateral trade environment, based on a set of rules;

Enhanced market access opportunities
business opportunities; and

Certain rights conferred to the private sector to ensure:



enhanced
Secure access;
Stable access; and
Protection against unfair trade.
7
Introduction to the WTO
Historical background

The GATT (1947) as the primary WTO predecessor:



Due to the lack of entry into force of the ITO;
Provisional instrument;
Focussed on tariff reduction.

Several trade rounds (1947 – 1986).

The Uruguay Round (1986 – 1994).

Results signed in the Marrakesh Agreement Establishing the
WTO.
8
Introduction to the WTO
Historical background (cont.)

Single undertaking approach.

Expanded scope of the negotiations
the resulting Agreements:




expanded scope of
Trade in goods;
Trade in services; and
Trade-related intellectual property rights.
Institutional mechanism:


Dispute settlement mechanism;
Trade Policy Review Mechanism (TPRM).
9
Introduction to the WTO
Scope of the WTO Agreements

The Annexes to the Marrakesh Agreement are:






Annex 1A – Multilateral trade in goods;
Annex 1B – Trade in services;
Annex 1C – Trade-related aspects of intellectual
property rights;
Annex 2 – Dispute Settlement Understanding;
Annex 3 – Trade Policy Review Mechanism; and
Annex 4 – Plurilateral Trade Agreements.
10
Introduction to the WTO
Dispute settlement

Compulsory, exclusive and adjudicatory system to solve
disputes between WTO Members concerning their respective
rights and obligations under WTO law.

Phases of the proceedings.

Timeframes.
11
Introduction to the WTO
Trade Policy Review Mechanism

Transparency mechanism.

Periodic review.

Publicity of the outcome.
12
Textiles under the WTO
13
Textiles under the WTO
The pre-WTO days

Short-term Arrangement Regarding International Trade in
Cotton Textiles (1961).

Long-term Arrangement Regarding International Trade in
Textiles (1962).

Scope limited to cotton-based textiles.

Resulted in strong market fragmentation.
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Textiles under the WTO
The pre-WTO days (cont.)

The Multi-Fibre Arrangement (1974):

Product coverage extended to wool and man-made
fibres.

Targets for increased trade through minimum growth
rates and progressive liberalisation of textile trade.

Basis for the adoption of quantitative restrictions on a
bilateral basis, thus departing from the GATT nondiscrimination principles.

Renewed and extended several times.
15
Textiles under the WTO
The WTO Agreement on Textiles and Clothing (ATC)

Transitional instrument (1995 – 2004) to bring textile and
clothing goods under the general rules of the multilateral
trading system.

Product coverage: yarns, fabrics, made-up textile products
and clothing.

Four-stage quota liberalisation schedule to progressively
integrate covered products into the GATT rules.

Enlargement of existing quotas by increasing annual growth
rates.
16
Textiles under the WTO
The WTO Agreement on Textiles and Clothing (cont.)

Special transitional safeguard mechanism to protect WTO
Members from damaging surges in imports.

Supervised by the Textiles Monitoring Body.

Other rules addressing, inter alia, quota circumvention and
the administration of restrictions.
17
Textiles under the WTO
The aftermath of the WTO ATC
Article 9 of the ATC:
“This Agreement and all restrictions thereunder shall stand
terminated on the first day of the 121st month that the WTO
Agreement is in effect, on which date the textiles and clothing
sector shall be fully integrated into GATT 1994. There shall be
no extension of this Agreement”.
18
Impact of WTO accession
for Tajikistan’s textile sector
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Impact of WTO accession for Tajikistan’s textile sector
Relevant WTO Agreements

The most relevant Agreements for trade in textiles are:







General Agreement on Tariffs and Trade;
Agreement on Customs Valuation;
Agreement on Technical Barriers to Trade;
Agreement on Rules of Origin;
Anti-Dumping Agreement;
Agreement on Subsidies and Countervailing Measures;
and
Agreement on Safeguards.
20
Impact of WTO accession for Tajikistan’s textile sector
Textiles under the general WTO framework

The GATT lays down a number of basic rules and principles,
notably:

MFN and National Treatment (Articles I and III);

Prohibition of treatment less favourable than provided
for in the Schedule of Concessions (Article II);

Prohibition of quantitative restrictions (Article XI); and

General Exceptions (Article XX).
21
Impact of WTO accession for Tajikistan’s textile sector
Textiles under the general WTO framework (cont.)

Tariff “bindings”:

According to Article II of the GATT, Tajikistan may not
apply duties and charges higher than those it committed
to in its “Schedule of Concessions and Commitments on
Goods”.

Increased predictability for importers and improved
competition to the benefit of consumers.
22
Impact of WTO accession for Tajikistan’s textile sector
Textiles under the general WTO framework (cont.)

Similarly, other WTO Members cannot raise their tariff
“bindings” (without granting compensation to their most
affected trading partners).

Enhanced security and predictability for Tajikistan’s
exporters.
23
Impact of WTO accession for Tajikistan’s textile sector
Textiles under the general WTO framework (cont.)

Tajikistan’s import tariff rates:
Product group
Average bound
rate
Average MFN
applied rate
Total
8.1 %
7.8 %
Textiles
11.2 %
10.2 %
Clothing
19.3 %
10.2 %
Source: WTO (2013).
24
Impact of WTO accession for Tajikistan’s textile sector
Textiles under the general WTO framework (cont.)

Import tariff rates of relevant trading partners:
Trading partner
Average bound
rate
Average MFN
applied rate
Armenia
Textiles (T) - 9.4 %
Clothing (C) - 15 %
Textiles (T) - 1.6 %
Clothing (C) - 10 %
China
T - 9.7 %
C - 16.2 %
T - 9.5 %
C - 16 %
European Union
T - 6.5 %
C - 11.5 %
T - 6.6 %
C -11.5 %
Kazakhstan
n.a.
T - 11.1 %
C - 12.6 %
Kyrgyz Republic
T - 8.7 %
C - 11.9 %
T - 6.5 %
C - 11.5 %
25
Impact of WTO accession for Tajikistan’s textile sector
Textiles under the general WTO framework (cont.)
Trading partner
Average bound
rate
Average MFN
applied rate
Russia
Textiles (T) - 7.8 %
Clothing (C) - 11.8 %
Textiles (T) - 10.9 %
Clothing (C) - 19.6 %
Turkey
T - 24.5 %
C - 27.3 %
T - 6.5 %
C - 11.5 %
United States
T - 7.9 %
C - 11.4 %
T - 7.9 %
C - 11.6 %
Uzbekistan
n.a.
T - 24.5%
C - 31.4 %
Viet Nam
T - 10.5 %
C - 19.9 %
T - 9.6 %
C - 19.8 %
Source: WTO (2014).
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Impact of WTO accession for Tajikistan’s textile sector
Textiles under the general WTO framework (cont.)

Export duties:

Tajikistan undertook a general commitment not to
introduce any export duties.

However, 300 tariff lines may be subject to export
duties in Tajikistan. These include certain types of raw
silk, cotton and cotton products.
27
Impact of WTO accession for Tajikistan’s textile sector
Textiles under the general WTO framework (cont.)

Internal taxes:

WTO Members cannot use them as an instrument to
discriminate against imported goods.

Tajikistan’s 2012 Tax Code subjects imported and
domestic goods to excise taxes and value added tax
(VAT, applied at a single 20% rate).

Imported and domestic cotton fibre, cotton yarn and
cotton are VAT-exempt.
28
Impact of WTO accession for Tajikistan’s textile sector
Textiles under the general WTO framework (cont.)

Prohibition of quantitative restrictions:

According to Article XI of the GATT, restrictions on imports
and exports other than duties or taxes are prohibited.

Tajikistan and its trading partners may not impose quotas,
import or export licensing requirements or any other
measure restricting or prohibiting imports or exports of
goods.

There are specific rules to ensure that import licensing
procedures be transparent, neutral and administered in a fair
and equitable manner.
29
Impact of WTO accession for Tajikistan’s textile sector
Textiles under the general WTO framework (cont.)

General Exceptions:

Article XX of the GATT allows for WTO-inconsistent measures
to be maintained, provided that they:

Are provisionally justified under one of the listed policy
objectives (inter alia, public morals; human, animal or
plant life or health; and the environment); and

Are in accordance with the chapeau (i.e., that they are
“not applied in a manner which would constitute a means
of arbitrary or unjustifiable discrimination between
countries where the same conditions prevail, or a
disguised restriction on international trade”).
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Impact of WTO accession for Tajikistan’s textile sector
Textiles under the general WTO framework (cont.)

Customs valuation and fees:

The Agreement on Customs Valuation requires that, for the
determination of the dutiable value, customs authorities
accept the price actually paid by importers in their
transactions and not base their calculation on other
unreasonable methods, which would bring uncertainty and
unpredictability to private operators.

Fees must be commensurate to the services rendered.

Right of administrative appeal against decisions of Customs
bodies.
31
Impact of WTO accession for Tajikistan’s textile sector
Textiles under the general WTO framework (cont.)

Rules on technical barriers to trade:

The Agreement on Technical Barriers to Trade applies to
technical regulations, including mandatory standards on,
e.g., labelling requirements, packaging and marking.

Tajikistan and other WTO Members cannot use technical
regulations to discriminate between imported and domestic
goods or between imported goods.

In addition, technical regulations must be proportionate (i.e.,
not more trade-restrictive than necessary to achieve the
legitimate policy objective pursued).
32
Impact of WTO accession for Tajikistan’s textile sector
Textiles under the general WTO framework (cont.)

For example, the EU’s REACH Regulation (concerning the
Registration, Evaluation, Authorisation and Restriction of
Chemicals) applies to textile products.

In relevant part, the REACH Regulation requires that
information on chemicals used during products’ supply chain
be provided upon importation, as well as that such chemicals
not be used in a manner that poses risks for human health or
the environment. It also restricts the use of certain
substances, such as organic pollutants.
33
Impact of WTO accession for Tajikistan’s textile sector
Textiles under the general WTO framework (cont.)

Rules of origin:

Tajikistan applies identical rules of origin for preferential
and non-preferential purposes. These are based on the
“wholly obtained” and “substantial transformation”
criteria (i.e., change of tariff heading).

A document stating the origin of goods is only required
in Tajikistan where the application of preferential duty
rates is sought.
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Impact of WTO accession for Tajikistan’s textile sector
Textiles under the general WTO framework (cont.)

Rules of origin are also relevant for exports from
Tajikistan, whether subject to:

Non-preferential tariff treatment (MFN); or

Preferential tariff treatment (for example, under FTAs or
GSP).
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Implications for businesses
36
Implications for businesses
Relevant trade data

World trade in textiles and clothing:
(In billion USD)

Source: UN Comtrade (2011)
Tajikistan’s exports of textiles and clothing:
(In million USD)
Source: ITC (2010)
37
Implications for businesses
Relevant trade data (cont.)

Tajikistan’s main export markets for textiles are WTO
Members.
38
Implications for businesses
Advantages and challenges of WTO accession

Tajikistan will benefit from MFN treatment and have access to
WTO remedies.

Tajik companies will operate within a rules-based system and
transparent framework.

Tajikistan will be able to take part in trade negotiations and
partake in developing future global trade rules.

Tajikistan will not be able to raise its level of tariff protection
without granting compensation.
39
Implications for businesses
Tajikistan’s textile sector has concrete instruments at
its disposal

Multilateral instruments and remedies; and

Unilateral remedies.
40
Implications for businesses
Multilateral instruments and remedies

Participation in the WTO technical committees:

Various technical committees oversee the
implementation of the WTO Agreements and provide a
forum for Tajikistan to consult with other WTO
Members on related issues.

WTO Members may raise specific trade concerns.

Governmental engagement largely results from inputs
from the domestic industry.
41
Implications for businesses
Multilateral instruments and remedies (cont.)

Trade Policy Review Mechanism:




Open process of review of WTO Members’ domestic policies.
Although it does not seek to trigger disputes, this
mechanism often has the effect of “shaming” WTO Members
with WTO-inconsistent policies in place.
Tajikistan’s first trade policy review (2019).
Trade negotiations:


Tajikistan has a stand in discussions and negotiations to
further advance in the process of trade liberalisation.
Tajikistan may modify its tariff “bindings” by negotiating
with the most affected WTO Members.
42
Implications for businesses
Multilateral instruments and remedies (cont.)

WTO Dispute settlement:

Disputes are brought by Governments on the basis of
inputs and support from their industrial sector.

Some statistics:



Consultations are requested by developed countries
(57%) and developing countries (43%);
Controversial measures are maintained by developed
countries (58%) and developing countries (42%);
70% of panel reports are appealed.
43
Implications for businesses
Unilateral remedies

Anti-dumping and countervailing measures:

May be adopted in cases of dumped or illegally
subsidised imports hurting Tajikistan’s domestic industry.

Dumping occurs where imports of a product are sold at
less than its “normal value”.

Subsidies may be incompatible with WTO rules if they are
particularly harmful.


Export subsidies and local-content subsidies are prohibited.
“Specific” subsidies are illegal if they cause adverse effects
to the interests of another WTO Member.
44
Implications for businesses
Unilateral remedies (cont.)

Anti-dumping and countervailing investigations must be
conducted according to a set of rules and fixed
timeframes.

Provisional duties may be imposed.

Definitive duties will be in place for as long as necessary
during a maximum of 5 years, unless a review
determines that the termination would lead to a
continuation of the injury.
45
Implications for businesses
Unilateral remedies (cont.)

Safeguard measures:

May be imposed if Tajikistan’s industry is injured as a
result of a sharp and unexpected increase of imports.

Safeguard measures may adopt the form of tariff
raises, import restrictions or licensing requirements,
and may be in place for up to 8 years.

Requirements for the imposition of safeguard
measures are stricter than for anti-dumping or
countervailing duties, and their adoption may require
that compensation be granted.
46
Implications for businesses
Unilateral remedies (cont.)

However, Tajikistan’s textile products may also be targeted by
unilateral remedies adopted by other WTO Members.

Anti-dumping measures imposed on textiles (1995 – 2013) by:
India
Turkey
European Union
61
35
23
Source: WTO (2013).

Should an investigation be triggered against goods from
Tajikistan, participation in the proceedings is essential.

WTO dispute settlement remains available to Tajikistan in case
its rights are not respected in the course of the proceedings.
47
Conclusions and recommendations
48
Conclusions and recommendations
Conclusions

As the engine of Tajikistan’s economy, Tajikistan’s private
operators will be directly affected by a more transparent,
secure and predictable trading framework;

The positive effects of WTO accession will likely be felt in the
medium or long term, while certain negative impacts may be
observed in the short run.
49
Conclusions and recommendations
Recommendations

Tajikistan’s textile sector has access to the relevant WTO fora
and mechanisms through Tajikistan’s Government;

Transparent and continuous engagement with the
Government is essential to secure that the interests of
Tajikistan’s industry are taken into account in trade
negotiations and technical discussions;

Need for business to familiarise and take advantage of WTO
available WTO instruments and resources.
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THANK YOU!
FratiniVergano – European Lawyers
Rue de Haerne 42, B-1040 Brussels, Belgium
Tel. +32 2 648 21 61 – Fax +32 2 646 02 70
E-mail : p.vergano@fratinivergano.eu
Website : www.fratinivergano.eu
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