CHAPTER 6
THE URUGUAY ROUND NEGOTIATIONS AND THE
CREATION OF THE WTO
ERNEST H. PREEG
6.1 INTRODUCTION
THE Uruguay Round, launched at Punta del Este, Uruguay, in
September 1986, and concluded at Marrakesh, Morocco, in March
1994, was the most important and successful of the eight General
Agreement on Tariffs and Trade (GATT) rounds of multilateral
negotiations. Tariffs on non-agricultural trade were reduced
substantially and a trade liberalization framework for agriculture
was adopted. Trade in services and intellectual property rights were
incorporated within the trading system. Dispute procedures were
strengthened greatly and bilateral import quotas for textiles were
phased out. Other noteworthy agreements were reached for traderelated
investment measures, export subsidies, anti-dumping,
government procurement, safeguards, sanitary and phytosanitary
measures, and technical barriers to trade. And, although not part of
the original negotiating mandate, the World Trade Organization
(WTO) was created during the final phase of the negotiations, which
incorporated all elements of the Uruguay Round Agreement and the
long-standing provisions of the GATT.1
The presentation here is mostly chronological, with specific
issues addressed as they reached a decisive point, for two reasons.
First was the progressive course of the negotiations, with significant
achievements during each stage, which stands in contrast with the
prolonged Doha Round impasse over initial modalities for later
specific negotiation. And second, the evolution of participation by
developing countries, and differing positions within the grouping,
provide relevant historical context for what subsequently happened
in the WTO through a more rigid political dichotomy between
developed and developing countries.
6.2 LAUNCHING THE URUGUAY ROUND(1979–86)
The Uruguay Round agenda began to take shape when the previous
Tokyo Round was concluded in 1979.2 Developing countries were
greatly disappointed by the failure to agree on a more disciplined
multilateral safeguards system, which permitted developed countries
to impose temporary import restrictions to avoid injury to domestic
industry, including a broad network of bilateral import quotas for
textiles and apparel. The developing countries boycotted the
ceremony to initial the final agreement, and negotiations were to
continue on safeguards. Another unresolved issue was a
strengthening of the GATT dispute settlement mechanism.
The initiative for a new round, as in the past, came from the
United States, and in 1981 the new Reagan administration prepared
a bold trade agenda, leading to a new GATT round that would
concentrate on new issues—trade in services, trade-distorting
investment measures, trade in high-technology industries,
counterfeit goods, and transition of the more advanced developing
countries to fuller compliance with GATT obligations—as well as on
long-standing problems of agricultural subsidies and safeguards.
The new assault on agricultural subsidies was not welcomed by
the Europeans, while developing countries wanted action on
safeguards before opening a new round, which led to the failure of
the US attempt to launch a new round at the November 1982 GATT
ministerial meeting in Geneva. Despite the diplomatic disarray,
however, ministers did agree on a comprehensive 1983–4 GATT
work programme, including safeguards, textiles, dispute settlement,
trade in services, and counterfeit goods, which was to set the stage
for launching a new round.
A decisive point was the US call in April 1985 for a new round, in
large part to counter growing protectionism in the United States.
The US trade deficit was growing, and the ‘bicycle theory’ advised
that the best way to counter protectionist forces was to roll forward
with trade liberalization rather than to stand still. Continued US
pressure led to agreement in October to begin formal preparation of
the agenda for a new round, for adoption at a ministerial meeting at
Punta del Este in September 1986. Negotiations over the new round
agenda among the industrialized nations were contentious,
especially over agriculture and a European Community (EC)3
proposal for a ‘balance of benefits’ provision directed at Japanese
non-tariff barriers, but progress was made during 1986. The
participation of developing countries in a new round was more
complex, and a split in the grouping emerged. A group of 47 (G47)
industrialized and developing countries submitted an ambitious
draft ministerial declaration in July, while a hardline group of ten
(G10) developing countries, headed by Brazil and India, provided an
alternative draft with a far more limited scope of negotiation. Latin
American nations were evenly split, with Chile, Colombia, and
Mexico in the G47 and Argentina, Brazil, and Peru in the G10.
Among the Asians, India alone was in the G10, while ten East and
South Asians were among the strongest supporters of the G47 draft.
China, of course, was not yet a member of the GATT.
The showdown meeting at Punta del Este was basically a victory
for the comprehensive G47 agenda, whose membership had grown
to 60, while the G10 became more and more isolated, and Brazil
became more amenable to compromise.4 For developing countries,
the final provisions included liberalized textile and apparel import
quotas, a reduction in barriers for tropical products, and a
‘standstill’ on new and a ‘roll-back’ of existing safeguard restrictions,
although this immediate commitment was largely ignored in
practice. The new issues of trade in services, investment measures,
and more recent proposals for protection of intellectual property,
were adopted. For agriculture, the United States and the Cairns
group of developed and developing country agricultural exporters
successfully pressed the EC to accept a three-pronged approach to
liberalization, dealing with internal price supports, access for
imports, and export subsidies. Other provisions of the declaration
included reductions in non-agricultural tariffs, export subsidies and
countervailing duties, strengthening of dispute settlement
procedures, and improvements in various existing GATT codes and
procedures. There was no mention, however, of possibly creating a
new WTO.
The Punta del Este meeting was a watershed for the world
trading system, for reducing barriers to trade and for broadening
and strengthening the rules-based trading system. The prospect for
success, however, was greeted with considerable scepticism, as by
the Financial Times: ‘Setting an agenda is one thing: repairing that
worn fabric of the GATT by rewriting the rules and negotiating
mutual concessions that would liberalize trade is another.’5
6.3 SPECIFYING OBJECTIVES AND EARLY HARVEST(1987–8)
Negotiations got off to a quick start. Fifteen negotiating groups were
established by January 1987 to address the specific issues in the
Punta declaration, and a mid-term ministerial meeting in Montreal
in December 1988 was agreed. The United States pressed for an
‘early harvest’ of results to open export markets as a counter to
growing protectionist pressures from the record $150 billion US
trade deficit in 1986. These pressures were to surface in the 1988
Omnibus Trade and Competitiveness Act, which gave President
Reagan ‘fast-track’ authority for a prompt, up or down Congressional
vote, without amendments, on the final agreement,6 but also greatly
expanded Section 301 authority for more aggressive unilateral
actions to open foreign markets for US exports and investment,
including protection of intellectual property. Section 301 became a
factor in the Uruguay Round negotiations, whereby multilateral
concessions in the round were viewed by some others as preferable
to threatened unilateral US actions.
A broader cloud rising over the multilateral GATT negotiations,
adding urgency to the Uruguay Round, was the prospect of
competing bilateral and regional free trade agreements (FTAs). The
emerging EC arrangement for market unification was viewed,
especially among Asian exporters, as a growing ‘Fortress Europe’
against imports. President Reagan spoke of expanding free trade in
the Western Hemisphere from Tierra del Fuego to the Arctic Circle,
while the American Ambassador in Tokyo called for a US-Japan
FTA. The Japanese Ministry of International Trade and Industry
developed a New Asian Industrial Development Plan, which
reminded some of the East Asia Co-Prosperity Sphere of the 1930s.
Canadian Trade Minister, John Crosbie, opened the Montreal
meeting proclaiming the recently concluded US-Canada FTA a
catalyst and building block for multilateral trade liberalization, but
many delegates were not convinced of the desirability of this twotrack
approach.
Another challenge for the negotiators was the status of the more
advanced, and increasingly export-competitive, developing
countries. GATT Part IV on trade and development elaborates
special and differential (S&D) treatment for developing countries,
including not to expect ‘reciprocity for commitments during GATT
negotiations’, but the Punta declaration restated the ‘Enabling
Clause’ of the previous Tokyo Round, that ‘with the progressive
development of their economies and improvements in their trade
situation, developing countries would be expected to participate
more fully in the framework of rights and obligations’. Greater
reciprocity was pressed by the United States and the EC, especially
with South Korea, other East Asians, and Brazil. Acting US Secretary
of the Treasury, Peter McPherson, who had previously served for six
years as the Administrator of the US Agency for International
Development, condemned import substitution policies of some
developing countries as ‘built on false assumptions’, and concluded
that GATT S&D provisions ‘are used as cover for protectionism that
has nothing to do with development’.7 Progressively greater
reciprocity by the more advanced developing countries became a
leitmotiv throughout the round, which stands in contrast to the 2001
Doha Development Agenda, which established a categorical
dichotomy between developed and developing nations with respect
to reciprocity.
The Montreal meeting produced mixed results. In terms of early
harvest, import barriers were lowered for tropical products, of
benefit to developing countries, although the trade impact was
small, and strengthened GATT dispute procedures were
implemented, for further development later in the negotiations. A
comprehensive framework for trade in services was agreed, although
commitments by sector, for actual market access, were left for later.
Little reported at the time, bilateral textile and apparel import
quotas were to be phased out, but with the schedule still to be
agreed. Less progress was made on tariff reductions, beyond a 33
per cent average overall target, and no significant progress was
made on anti-dumping and safeguards more broadly. Negotiation of
an agreement on intellectual property rights also remained at the
preliminary stage, with a number of developing countries, and India
in particular, voicing strong reservations or opposition.
The central impasse at Montreal, however, was agriculture,
which pitted the United States against the EC, with other
agricultural exporters highly critical of both parties. The United
States proposed total elimination of protection by 2000, which was
clearly unacceptable to the EC, while the EC, in turn, proposed a
freeze on current protection and some modest short-term
reductions. Australian Trade Minister, Michael Duffy, referred to the
United States and the EC as ‘a pair of rippers’, and concluded: ‘I
think we’re staring down the barrel of an all-out farm trade war.’8
Principally as a result of the agricultural impasse, on 9 December
1988 GATT Director-General, Arthur Dunkel, suspended the
Montreal mid-term review until April, and most press reports
concluded that the meeting had been a failure. Lester Thurow, Dean
of the Sloan School of Management at MIT, came close to impinging
on Nieztschean intellectual property in pronouncing: ‘GATT is
dead.’9 This obituary, however, was premature. One reason for
suspending the talks was that both the US and the EU
representatives were lame ducks. After winning re-election in
November, President Reagan’s new trade representative would not
take over until early in the new year, as would a new EC
Commission. Another positive result was that Dunkel was given the
task of consulting in capitals to bring the positions closer together,
which he did with consummate skill. And thus, by mid-April a midterm
package of agreements was reached. For agriculture, a freeze in
support prices for 1989–90 was coupled with commitments for
substantial progressive reductions of up to 100 per cent, including
for export subsidies, while work was to begin on a multilateral
framework for sanitary and phytosanitary regulations. As for
intellectual property, India and other earlier resistors to any
agreement accepted ‘the importance of the successful conclusion of
the multilateral negotiations’ for trade-related aspects of intellectual
property rights.
6.4 SHAPING THE FINAL PACKAGE (1989–90)
The second half period of negotiating group meetings, from April
1989 to summer 1990, was definitive in shaping the final Uruguay
Agreement, scheduled for conclusion at a ministerial meeting in
Brussels in December.10 Among the issues that moved towards
majority if not consensus support:
• a draft comprehensive agreement on safeguards, including
time limits for temporary import restrictions
• a six- to ten-year phase-out of textile quotas
• an export subsidy agreement based on three categories of
subsidies, one of which was ‘actionable’, meaning subject to
countervailing duties
• general provisions for the framework agreement for trade in
services
• alternative draft texts for a comprehensive intellectual
property agreement.
Agriculture, however, remained at an impasse, and differences
remained as to whether the one-third reductions in non-agricultural
tariffs should be made on a formula basis or through itemized offer
lists. In April 1990, Canada proposed the creation of a new World
Trade Organization, although it was received coolly, as explained in
Section 6.5 below. In any event, Director-General Dunkel instructed
all negotiating groups to submit clearly defined issue ‘profiles’ as a
basis for decision-making at senior levels, with only the most difficult
issues left for the ministerial meeting in Brussels.
The Uruguay Round prospect leading up to the Brussels meeting
was influenced by dramatic developments elsewhere, to both
positive and negative effect. Most dramatic was the collapse of the
Berlin Wall and communist regimes throughout Eastern Europe,
replaced by democratically elected governments committed to
market-oriented economic reforms, including free trade. Similar
movements to elected governments and economic reform took place
in South Korea, Taiwan, and throughout Latin America. GATT
membership was growing, including Chinese accession negotiations
and observer status for the Soviet Union. The principles of liberal
trade and market-oriented prices, embedded in the GATT, became
mainstream thinking for economic reform almost everywhere.
The precise role of the GATT multilateral trading system within a
vaguely defined ‘new world order’, however, was less clear.
Momentum continued to build for bilateral and regional free trade.
The EC became deeply engaged in adjusting to a unified German
economy and developing initiatives for broadening and deepening
regional economic integration. The US-Canada FTA moved towards
a North American agreement, including Mexico, and in June 1990
President Bush proposed an Enterprise for the Americas, with ‘a
comprehensive free trade zone for the Americas our long term
goal’.11 In November 1989, the Asia-Pacific Economic Cooperation
(APEC) grouping had been established, which began discussion of
more open, if not free, trade across the Pacific, and in December
1990 Malaysian Prime Minister, Mahathir Mohamad, proposed an
East Asian economic grouping excluding the United States.
These far-reaching developments, while broadly supportive of
more open trade, also competed with the multilateral approach
pursued in the Uruguay Round, and distracted leaders from giving
priority to the GATT negotiations. European leaders clearly gave top
priority to developments within Europe. US leadership in the
Uruguay Round faltered in the face of having to make difficult
decisions, such as for the phase-out of textile quotas and reductions
in farm subsidies. Projections of an increase in the US trade deficit
as a result of the final agreement reduced political support further.
The informal ‘Quad’ framework—the United States, the EC, Japan,
and Canada—that had provided active joint leadership during the
earlier phases, was relatively quiescent in 1989–90. Nevertheless,
despite inner doubts, official optimism was widely expressed as the
Brussels meeting approached, and, at its opening, the ubiquitous
official poster blazoned the conference motto: ‘World Trade: The
Courage To Go Further.’
The objective of the Brussels meeting was for ministers to resolve
the most difficult outstanding issues, leaving the final negotiations
and conclusion of the agreement for early 1991, before US fast-track
negotiating authority expired on 31 May. It was not an unreasonable
goal, given sufficient political will, or ‘courage’. The GATT
Secretariat had prepared a heavily bracketed 391-page draft
comprehensive agreement, and by the second day of the meeting
reports indicated progress in most of the seven consolidated
negotiating groups. Agriculture, however, remained at an impasse,
with the EC more and more isolated, causing the other groups to
begin to hold back. On the final day, the EC negotiators indicated
that they could be more flexible on agriculture if other areas of the
negotiation moved forward as well, and guarded relief permeated
the conference centre as the late night final negotiating session
approached.
The next morning, 7 December, the headline, ‘Concessions break
trade talks deadlock’ led a Financial Times story that opened: ‘The
deadlock was broken in the Uruguay Round of talks to reform the
world trade system last night after the European Community offered
concessions on farm support and the United States shifted its
position on services such as banking, telecommunications, and
insurance.’ The Financial Times prided itself on its full coverage of
GATT issues, and all week free copies had been distributed at
breakfast in hotels housing conference guests. Unhappy hubris. The
story, signed by three reporters, got it wrong.
The press misreading stemmed from faulty EC decision-making.
The Commission negotiators believed they had greater flexibility on
agriculture and communicated this to others, but member state
approval was still lacking, despite a prominently reported meeting
between French President Mitterand and German Chancellor Kohl,
and France still objected to any further concessions. During the
night meeting, the EC simply restated its existing position, the US
delegation became exasperated, and the Argentine and Brazilian
delegates refused further negotiations. The following morning, amid
gloom and confusion, the conference chairman suspended the
negotiations and, once again, Director-General Dunkel was
requested to pursue intensive consultations to resolve outstanding
differences. Recriminations abounded and press reports were
overwhelmingly negative. Much criticism focused on the EC and
agriculture, while the United States stepped back as champion of last
resort for the GATT multilateral system. US Secretary of Commerce,
Robert Mosbacher, when asked about multilateral versus regional
agreements, replied: ‘We could be okay either way… In all truth,
we’re doing that now.’12
Ministers at Brussels failed to exhibit courage, and it would take
another two years to resolve the agricultural impasse. And yet the
Brussels negotiators did narrow the gaps on many issues and shaped
the framework for the final agreement.
6.5 CONCLUDING THE AGREEMENT(1991–4)
Basic agreement could have been reached in December 1990 at
Brussels if the agricultural impasse had been resolved, but the result
would have been considerably narrower in scope than the final
agreement ultimately signed in Marrakesh in April 1994. The extra
three years of negotiation enabled substantial broadening and
deepening of commitments on a number of fronts. Most importantly,
the creation of the WTO to replace the GATT would not have
happened if basic agreement had been reached at Brussels.13
Director-General Dunkel consulted in capitals and intensified
negotiating group meetings during the spring and summer of 1991.
Significant progress was made in most areas. One noteworthy
breakthrough, with relevance to the long-standing Doha Round
impasse, was for reduction of non-agricultural tariffs. The target of a
one-third average reduction had bogged down over various formula
proposals and the US preference for specific offer lists.
Industrialized country private sector organizations then proposed a
sectoral approach of ‘zero-for-zero’ free trade for some sectors,
including farm machinery and toys, and harmonized low rates for
other sectors, such as pharmaceuticals. This proved to be a more
practical approach to demonstrate reciprocity and was pursued with
success.
Agriculture, however, as well as a few other difficult issues,
remained at an impasse. To force participants to move towards a
package deal consensus, in December 1991 the Director-General
circulated his 436-page ‘Dunkel draft’, which the EC found ‘not
acceptable’ and the United States only supported with reservations.
The text did focus the minds, however, and by late 1992 almost all
issues had moved towards consensus, with the intent of reaching
agreement by December so that the US Congress could approve it
under the two-year extension of fast track authority, which expired
in April 1993. But agriculture remained under intense negotiation as
the French became more obdurate, and, on 5 November, EC
Agricultural Commissioner, Ray MacSharry, resigned, accusing the
French of sabotaging the negotiations.
At this point the agricultural impasse was broken through an
extraordinary US diplomatic manoeuvre which demonstrated that
history is often made, not through the dialectical forces in play, but
by individual initiative. George Bush lost the presidential election on
3 November, and the expectation was for a hiatus in the Uruguay
Round until the new Clinton administration was in place in early
1993. But Bush, and his Trade Representative, Carla Hills, continued
on with a strong and credible ultimatum to the EC. The Uruguay
Round agricultural package had always been linked to a bilateral
problem over a $1 billion US loss of oilseed exports through the
workings of the EC agricultural policy, on which GATT dispute
panels had twice found in favour of the United States. On 6
November, Hills announced a 200 per cent oilseed retaliatory tariff
on $300 million of white wine and other agricultural imports from
the EC, effective from 5 December, with another $700 million of
retaliation to follow. This was a make or break showdown for the
Uruguay Round, since there was no way the lame duck American
president would reverse this decision, and President Clinton, once in
office, would be greatly reluctant to do so before consultations with
the new, more protectionist Congress. Meanwhile, French wine and
other EC farm exports would be paying 200 per cent extra duties. As
a result, the French blinked, Mac Sharry was reinstated with a new
mandate, and the ‘Blair House Accord’ of 20 November resolved the
long-standing agricultural impasse, including deeper cuts in EC
export subsidies and a compromise on US oilseed exports to the EC.
The Blair House agricultural accord opened the way to the final
stage of Uruguay Round negotiations. President Clinton obtained yet
another one-year extension of negotiating authority from the
Congress, and his Trade Representative, Mickey Kantor, the ‘fixer’,
worked closely with the new EC Trade Commissioner, Leon Brittan,
the liberal trade ‘ideologue’. A new GATT Director-General, former
Irish Prime Minister, Peter Sutherland, added political forcefulness
to the negotiating process. Progress was made on all fronts.
Compromises were necessary on a number of issues, including some
weakening of the Blair House agricultural accord.
In any event, time was short and final agreement had to be
reached by 15 December 1993, in order to meet notification
requirements of the US trade legislation. The two final substantive
issues were not resolved until the night of 14 December. The tenyear
phase-out of textile quotas was agreed when the Indian delegate
accepted a commitment to ‘achieve improved access’ for imports by
textile exporters, although this reciprocal commitment was never
implemented. And for the Anti-Dumping Agreement, the United
States obtained agreement for no changes in two key provisions,
standards of review and anti-circumvention actions, which
weakened enforcement. As for organizational reform, the creation of
a new WTO was only approved by the United States on 15 December,
when Director-General Sutherland was then able to announce, live
on CNN, that a very far-reaching and historic trade accord had been
achieved.
There were still many loose ends to resolve before the signing of
the final agreement at Marrakesh, but no major problems were
encountered. The sectoral lists for inclusion in the Services
Agreement were broadened substantially, although they remained
limited in scope by developing countries. An agreement on the
relationship between trade and environmental policies was adopted
—another example of a late-starting initiative that would not have
been included at the time of the Brussels meeting. Implementation
of this agreement, however, was left for a new WTO Committee, and
its operations in practice have been lacklustre.
At the signing ceremony on 14 April, Moroccan King Hassan II
welcomed this ‘gigantic step forward towards broader and more
intensive international cooperation’. The new challenges for
cooperative leadership in world trade, however, under
circumstances far different from those that prevailed during the
Uruguay Round, would prove to be daunting and not long in
coming.
6.6 THE CREATION OF THE WORLD TRADE ORGANIZATION
The creation of the WTO during the course of the Uruguay Round,
with its far-reaching implications for the world trading system,
deserves a more detailed presentation to conclude this historical
account.14
The failure of governments to ratify the International Trade
Organization (ITO) in 1948, while adopting the provisional GATT
framework, with limited membership, led to four decades of
discussion and proposals for a permanent trade organization. Some
called for UN-style global membership. Others, especially after the
failed 1982 GATT ministerial meeting, proposed a more restricted
membership of like-minded free traders. As late as 1989, a study by
American economist, Gary Hufbauer, in collaboration with a task
force of 12 distinguished US trade experts, recommended the
creation of an OECD Free Trade and Investment Area.
The 1986 Uruguay Round mandate did not include the creation
of a new trade organization, but there were several objectives for
institutional reform, including a more effective dispute settlement
mechanism, country trade policy reviews by the GATT Secretariat,
and ministerial meetings at regular intervals. Discussion of a new,
permanent trade organization began in the Quad framework, in
October 1989, at Canadian initiative, with support from the EC. The
United States, however, was decidedly cool, if not negative,
concerned about Congressional opposition over loss of sovereignty
and the possibility that negotiations would shift towards
institutional reform and away from the substantive objectives for
trade liberalization.
In April 1990, Canada formally proposed the creation of the
WTO, based largely on a January book by the American legal
scholar, John Jackson, who served as a consultant to the Canadian
delegation.15 Little headway was made through the December
Brussels meeting, but more serious negotiations got underway
during 1991–3, first in the Quad, and then in an expanded Genevabased
negotiating group.
Three issues became central to the outcome:
• Decision-making. The United States pressed for continuation
of the GATT consensus approach, with qualified majority
voting when necessary, on key issues. Others supported UNstyle
one-nation-one-vote majority voting, although in 1994 50
per cent of GATT members accounted for only 1 per cent of
GATT exports. The final result was for decisions to be made by
consensus or, failing this, on a one-nation-one-vote basis, with
key decisions requiring a two-thirds or three-quarters vote,
and with amendments to certain articles of agreement subject
to unanimity.
• Single undertaking membership. There had been uncertainty
as to how new agreements for trade in services and protection
of intellectual property would relate to existing obligations for
trade in goods. The WTO resolved this issue by bringing all
provisions of the final Uruguay Round Agreement, as well as
existing GATT commitments, within a single WTO
undertaking, subject to the overall WTO management
structures. Moreover, membership of the new organization
required agreement on almost all provisions of the single
undertaking. This was very different from earlier GATT
rounds, where some developing countries did not sign the final
agreement, and from earlier proposals, including the original
Canadian proposal to have WTO global membership, with or
without agreement to the final Uruguay Round obligations.
• Strengthened and integrated dispute settlement procedures.
This had been the most important organizational objective
throughout the Round, and dispute procedures were
strengthened greatly in the final Agreement. The new WTO
dispute mechanism tightened procedural disciplines, dropped
earlier GATT veto power over the establishment of a dispute
panel, even by the accused party, and established an appellate
review procedure. The Agreement also permitted ‘crossretaliation’
among components of the single undertaking,
whereby, for example, retaliatory sanctions on traded goods
could be applied for violation of intellectual property rights.
The final results from these three issues constituted a political tradeoff
between the developing countries, who wanted a stronger
multilateral organization with enhanced influence within it, and the
industrialized countries, who insisted on agreement to the full range
of Uruguay Round commitments by developing countries as the price
for WTO membership.
The United States continued to resist agreement on the WTO
during the final phase of the negotiations, in part over continuing
concern about Congressional support, and in part as a tactical ploy
to gain concessions on other issues, but, as stated earlier, it finally
agreed to WTO creation on the final day of the negotiations.
President Clinton did have difficulties with Congress, and had to
make some concessions, including the establishment of a panel of
retired US judges to monitor WTO dispute panel findings, followed
by a Congressional vote on withdrawal from the WTO if the judges
disagreed with the WTO panels three times in five years, but this
never happened. Congress approved the Uruguay Round Agreement
with large majorities, 288–146 in the House and 76–24 in the
Senate.
Many questions remained as to how the WTO would operate in
practice, and the first important decision, on selection of the first
WTO Director-General, resulted in discord. Competing Italian,
Mexican, and South Korean candidates eluded consensus, and the
EU insisted on a one-nation-one-vote majority vote. The EU had 17
member state votes, ten pending new member votes, and numerous
associated African state votes, and this carried the day for the
Italian, Renato Ruggiero. It was a disturbing harbinger for WTO
decision-making, on a different track from the long-standing GATT
consensus approach.
6.7 THE FINAL AGREEMENT: A FORWARD-LOOKING ASSESSMENT
A full assessment of the final Agreement is beyond the scope of this
chapter, and is, in fact, the substance of a number of other chapters
in this work. The presentation here is limited to a brief listing of the
principal elements of the final Agreement, to show the broad scope of
accomplishment, and commentary on three overarching issues that
have influenced the course of the WTO during its initial 15 years.
The principal elements of the final Agreement were:16
• Market access for non-agricultural products. The
industrialized countries reduced tariffs on industrial products
by 40 per cent, from 6.3 per cent to 3.8 per cent, and
developing countries reduced their tariffs by 20 per cent, from
15.3 per cent to 12.3 per cent.
• Agriculture. Non-tariff import barriers were converted to
tariffs, and all tariffs were reduced by 36 per cent for
industrialized countries and 24 per cent for developing
countries. Industrialized countries reduced export subsidies by
36 per cent in value and 21 per cent in quantity, and internal
support prices by about 20 per cent.
• Textiles and apparel. Industrialized country import quotas
were phased out over ten years.
• Services. The General Agreement on Trade in Services (GATS)
provided a framework of rules and principles for trade in
services, including most-favoured-nation treatment, national
treatment, safeguards, transparency, dispute settlement, and
the free flow of payments and transfers. The framework
agreement was complemented by country sectoral schedules of
applicability, with coverage relatively complete for
industrialized countries, but far less so for developing
countries. The sectoral agreements for financial and
telecommunications services were negotiated post-Uruguay
Round.
• Intellectual property rights. The Agreement on Trade-Related
Aspects of Intellectual Property Rights (TRIPS) established
strengthened standards and the enforcement of these
standards, including for patents, copyrights, trademarks, and
geographic indicators.
• Trade-related investment measures. The Agreement on
Trade-Related Investment Measures (TRIMs) reinforced
GATT provisions, specifically including local content, tradebalancing,
and foreign exchange-balancing requirements.
• Anti-dumping. The revised Anti-Dumping Agreement
provided greater transparency and specification for antidumping
procedures, but did little to strengthen the
disciplines to restrict dumping and anti-dumping duties.
• Export subsidies and countervailing duties. The Agreement
established clearer rules and stronger disciplines for subsidies
related to trade, while exempting certain subsidies from
countervailing duties.
• Government procurement. The Agreement strengthened the
disciplines applicable to government procurement and
expanded coverage to new areas of procurement. It was the
only major part of the overall Uruguay Round Agreement that
allowed voluntary rather than full participation by WTO
members, with participation limited predominantly to
industrialized nations.
• Safeguards. The safeguard provisions of GATT Article XIX
were elaborated to ensure that such temporary import
restrictions are transparent, temporary, degressive, and
subject to review and termination.
• Sanitary and phytosanitary measures. This Agreement
established rules and disciplines for measures taken to protect
human, animal, and plant life and health in the areas of food
safety and agriculture.
Other noteworthy sections of the Agreement dealt with import
licensing procedures, customs valuation, pre-shipment inspections,
rules of origin, technical barriers to trade, and revisions of various
Articles of the GATT.
Three overarching and interacting issues, as they developed
during the course of the Uruguay Round, have had follow-on
importance for the course of the WTO trading system:
The WTO as an international institution. The WTO has risen
towards becoming a global trade organization as membership has
grown to include almost all substantial trading nations. The
strengthened dispute settlement procedures have played a central
and largely successful role in enforcing trade liberalization
obligations and the rules-based system, both greatly extended in the
Uruguay Round Agreement. Management and decision-making,
however, have moved towards UN-style political groupings,
principally on a developed versus developing country basis, which
has slowed down and weakened further progress towards
multilateral trade liberalization. Decision-making has tended
towards a one-nation-one-vote basis rather than the dominant
consensus process under the GATT, where major trading nations
would not be voted down on significant issues. The informal yet
decisive Quad leadership role during the Uruguay Round is no
longer viable and needs to be replaced, most sensibly by a sextet
leadership grouping consisting of Brazil, China, the EU, India,
Japan, and the United States.
Multilateral trade liberalization versus bilateral and regional
free trade agreements. This two-track trade policy path was largely
competitive during the course of the Uruguay Round, and the
competition has intensified post-Uruguay Round, with momentum
clearly on the FTA track as the Doha Round bogged down in a tenyear
impasse.17 Most recently, FTA proliferation has centred on
Asia. South Korea has concluded comprehensive free trade and
investment agreements with the United States, the EU, and India,
and is pursuing others, including with Japan and possibly China.
India, in addition to South Korea, has concluded such an agreement
with Singapore, is well advanced in negotiations with the EU, Japan,
and Malaysia, and is pursuing others with South-east Asian trading
partners and Canada. The obvious resolution to this competitive
movement towards free trade would be to consolidate all existing
FTAs within a multilateral, or plurilateral, FTA for non-agricultural
trade, including at least the mature and newly industrialized nations
that account for 90 per cent of global trade. This idea received
noteworthy post-Uruguay Round attention. Fred Bergsten, director
of the Washington-based Peterson Institute for International
Economics, proposed such a free trade ‘Grand Bargain’ in 1996.18
The opening US position in the Uruguay Round for non-agricultural
trade was multilateral free trade, which was supported by some
other nations, but rejected by the EU, China, and India. A booklength
assessment, From Here to Free Trade in Manufactures: How
and Why, was presented by the author at the WTO Cancún
Ministerial in 2004.19 Since 2004, however, there has been little
official interest in consolidating the ever-growing number of FTAs.
The increasingly irrational dichotomy between developed and
developing economies. This has become the most detrimental issue
for an effectively functioning WTO, including its impact on the two
previous issues. Greater obligations by the more advanced and
export-competitive developing countries towards ‘graduation’ was a
major issue throughout the Uruguay Round, as recounted here, and
the more advanced developing countries did take on relatively
greater obligations. The North-South dichotomy issue, moreover, in
stark and ironic contrast, has largely disappeared on the FTA track,
wherein both developed and developing country participants see a
mutual interest in going to free trade, usually resulting in the
developing country undertaking relatively greater reductions in
import and investment barriers because its barriers were much
higher to begin with. In the Doha Round, however, the Tokyo and
Uruguay Round Enabling Clause provision for more tradecompetitive
developing countries ‘to participate more fully in the
framework of rights and obligations’ was jettisoned and replaced by
a categorical dichotomy, most graphically illustrated by the
differential formulas proposed for trade liberalization, with much
weaker obligations for all developing countries.
The increasing irrationality of this categorical dichotomy is
highlighted by China’s dramatic rise during the first decade of the
twenty-first century, which coincided with the troubled course of the
Doha Round, to displace the United States as the number one
exporter of manufactures, the dominant sector of trade. In 2000, US
global exports of manufactures were three times larger than Chinese
exports, while by 2010 Chinese exports were half as large again as
US exports, and on track to double them in two to three years. In
parallel, China has maintained an unprecedented trade surplus in
manufactures, and the United States an unprecedented deficit.20
‘What’s to be done?’, to borrow from Lenin. In simplest terms,
the three issues presented here need to be addressed as the
integrated challenge they pose.21 Restoration of the WTO as the
dominant centre of a multilateral trading system will require bold
and concerted leadership, especially among the big six. The principal
objective should be the consolidation of the ever-growing number of
FTAs within a multilateral free trade agreement for non-agricultural
trade, that includes at least the mature and newly industrialized
country groupings. Such an agreement would also facilitate
substantial trade liberalization for agriculture and services. And
these two steps, by definition, would greatly reduce the divisive
North-South dichotomy issue, except for warranted special
treatment for the poorest, least developed countries.
The outlook for this actually happening is bleak. The big Six, in
particular, would need to display far more courage and foresight
than they have yet done. But a starting point, at least, would be
serious discussion of the lessons of history, and why, in particular,
the Uruguay Round was a sweeping success, while the Doha Round
appears to be headed towards a modest, face-saving conclusion, or
worse.
REFERENCES
Bergsten, C. Fred. 1996. Globalizing Free Trade: The Ascent of
Regionalism. Foreign Affairs 75 (3):105–20.
Jackson, John. 1990. Restructuring the GATT System. London:
Royal Institute of International Affairs.
Preeg, Ernest H. 1995. Traders in a Brave New World: The
Uruguay Round and the Future of the International Trading
System. Chicago: University of Chicago Press.
Preeg, Ernest H. 1998. From Here to Free Trade: Essays in PostUruguay
Round Trade Strategy. Chicago: University of Chicago
Press, and Washington, DC: The Center for Strategic and
International Studies.
Preeg, Ernest H. 2004. From Here to Free Trade in Manufactures:
How and Why. Washington, DC: Manufacturers Alliance/MAPI.
Preeg, Ernest H. 2005. The Emerging Chinese Advanced
Technology Superstate. Washington, DC: Manufacturers
Alliance/MAPI and the Hudson Institute.
Preeg, Ernest H. 2008. India and China: An Advanced Technology
Race and How the United States Should Respond. Washington,
DC: Manufacturers Alliance/MAPI and the Center for Strategic
and International Studies.
Preeg, Ernest H. 2010. Restoring Bretton Woods: An International
Economic System Overtaken by Success. Washington, DC:
Manufacturers Alliance/MAPI.
Preeg, Ernest H. 2011. The United States and China Trade Places:
Trade in Manufactures During the First Decade of the TwentyFirst
Century and How the United States Should Respond.
Washington, DC: Manufacturers Alliance/MAPI.