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3.2: BASIC TEXT OF GATT

1. Most Favored Nation principle does not require member states to accord the mostfavorable tariff and regulatory treatment given to the product of any WTO member at the

time of import/export of “like products” to all other GATT members.

Ans. F pg.12 Article 1, para-1

2. As per Article 1 of GATT, if a country gives favorable treatment to one countryregarding a particular international trade issue, it must treat all WTO members equally

regarding the same issue.

Ans. T pg.12 Article 1, para-1

3. Incorporation of Most Favored Nation clauses in the General Agreement on Trade and

Tariff (GATT) has contributed to the stability of the world trade and for sustaining the

multilateral free trade system.

Ans. T pg. 12 Article 1

4. __________________ means the absolute difference between the MFN rate of duty andthe preferential rate of duty for the like product.

Ans. Margin of preference pg. 12 Article I: 4(a)

5. Most favored nation treatment makes it impossible for countries to import from the most

efficient supplier, in accordance with the principle of comparative advantage

Ans. F pg 12 Article-1

6. The establishment and maintenance of the most favored nation rule enables member

countries to reduce their monitoring and negotiating costs- the cost of watching and

comparing treatment received with that given to third countries.

Ans. T pg. 12 Article-1

7. Article I requires that any advantage granted by a GATT members to imports from any

country must be granted ‘immediately’ and ‘conditionally’ to imports form all other Members.

Ans. F pg. 12 Article-1

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8. As per GATT Article II, tariff concessions granted in negotiations with one member arenot necessarily extended to all GATT members.

Ans. F pg. 12 Article II-1(a)

9. GATT Article II states that once a tariff concession is made on a particular item, that item

is "bound" against any increase above the agreed level. A contracting party is committednot to impose duties or other charges that would tend to undercut such concessions.

Ans. T pg. 12 Article II-1(b)

10.“Schedules of concessions” reflect specific tariff concessions and other commitments thatmembers have given in the context of multilateral trade negotiations

Ans. T pg. 12 Article II

11.All WTO Members have a schedule of tariff concessions which is either annexed to theMarrakesh Protocol to the GATT 1994 or to a Protocol of Accession.

Ans. T pg. 12/13 Article II

12. The products described in Part I of the Schedule relating to any contracting party shall ontheir importation into the territory to which the Schedule relates be exempt from ordinary

customs duties in excess of those set forth and provided for therein.

Ans. T pg. 12/13 Article II-1(b)

13. The products described in Part II of the Schedule relating to any contracting party whichare the products of territories entitled to receive preferential treatment, shall not be

exempt from ordinary customs duties and from all other duties or charges of any kind.

Ans. F pg. 12/13 Article II-1(c)

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14. Article II of the GATT 1994 is the main provision dealing with the Schedules of

concessions in goods that requires members, among others, to persist imposing ordinary

customs duties in excess of those provided in their Schedules of concessions.

Ans. F pg. 12/13 Article II

15. Contracting party are allowed to alter their method of determining dutiable value or of

converting currencies so as to impair the value of any of the concessions provided for inthe appropriate Schedule annexed to this Agreement.

Ans. F pg. 12/13 Article II-3

16.The products of the territory of any contracting party imported into the territory of any

other contracting party shall be subject, directly or indirectly, to internal taxes or other internal charges of any kind in excess of those applied, directly or indirectly, to like

domestic products.

Ans. F pg. 13 Article III-2

17. The "national treatment" principle means that internal taxes and regulations can be used

as substitutes for tariffs by discriminating against imported goods.

Ans. F pg. 13 Article III

18. As per Article III, Local-content rules (i.e., regulations requiring specific proportions or

amounts of domestic goods in production) are not allowed, and no contracting party may

apply internal quotas in a way that affects the national treatment of imports.

Ans. T pg. 13/14 Article III-5

19. National treatment is a basic principle of GATT/WTO that prohibits discrimination

between imported and domestically produced goods with respect to internal taxation or other government regulation

Ans. T pg. 13/14 Article III

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20.Under the national treatment rule, Members are allowed to accord discriminatory

treatment between imports and like domestic products.

Ans. F pg. 13/14 Article III

21.The purpose of the national treatment rule is to construct “hidden” domestic barriers to

trade by WTO Members according imported products treatment less favourable than that

accorded to products of national origin.Ans. F pg. 13/14 Article III

22.In relation to internal taxes or other internal charges, Article III:2 stipulates that WTO

Members are allowed to apply standards higher than those imposed on domestic products

between imported goods and “like” domestic goods, or between imported goods and “adirectly competitive or substitutable product.”

Ans. F pg. 13/14 Article III-2

23.The provisions in Article III: 4 prevent the application of differential internal sale, purchase, transportation, distribution or usage charges which are based exclusively on the

economic operations and not on the nationality of the product.

Ans. F pg. 13/14 Article III-4

24.Hollywood Article IV stipulates that domestic theaters may reserve a portion of screentime for showing of exclusively domestic films and hence screen-time quotas may be

established on an annual basis for individual theaters.

Ans. T pg. 14 Article IV.

25.Land locked countries like Nepal do not enjoy freedom of movement through the

territory of each contracting party and need not be assured for goods (and their

conveyances), which are destined to or come from any other contracting party.

Ans. F pg. 14 Article V-2

26. As per Article V, movement of goods shall be exempt from customs or transit duties; and

is to be free from unnecessary delays or restrictions.

Ans. T pg. 14 Article V-6

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27. Freedom of Transit insists that apart from standard customs procedures, no trade

measures or other regulations to be applied by Members to goods in transit between other

Members.

28. GATT Article V: 2 states that transit of goods should be via the routes most convenient

for international transit and discrimination may be imposed based on the flag of vessels,the place of origin, departure, entry, exit or destination, or on any circumstances relatingto the ownership of goods, of vessels or of other means of transport.

Ans. F pg. 14 Article V-2

29. Each contracting party shall accord to products which have been in transit through theterritory of any other contracting party treatment no less favorable than that which would

have been accorded to such products had they been transported from their place of origin

to their destination without going through the territory of such other contracting party.

Ans. T pg. 14/15 Article V-6

30. The provisions in Article-V are also applicable to the operation of aircraft in transit.

Ans. F pg. 14/15 Article V-7

31. Under GATT Article-VI, members may apply duties and other measures to goods

originating in other member countries which are dumped and/or enjoy export subsidiessubject to specific conditions.

Ans. T pg. 15 Article VI-1

32. Article VI specify that contracting parties retain the right to protect themselves from

dumping and subsidization, which cause or threaten material injury to an established

domestic industry, or retard the establishment of a domestic industry.Ans. T pg. 15 Article VI-6(a)

33. __________________ refers to a special duty levied for the purpose of offsetting any

bounty or subsidy bestowed, directly or indirectly, upon the manufacture, production or export of any merchandise.

Ans. "Countervailing duty" pg. 15 Article VI-3

34. __________________ means charging extra import duty on the particular product from

the particular exporting country in order to bring its price closer to the “normal value” or

to remove the injury to domestic industry in the importing country.

Ans. Anti-dumping duty pg. 15 Article VI-2

35. As per Article VI: 5, no product of the territory of any contracting party imported into the

territory of any other contracting party shall be subject to both anti- dumping andcountervailing duties to compensate for the same situation of dumping or export

subsidization.

Ans. T pg. 15 Article VI-5

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36. ____________________ is a customs procedure applied to determine the customs value

of imported goods.

Ans. Custom valuation pg. 16 Article VII

37. Article VII stipulate that the value for customs purposes of imported merchandise should

be based on the on the basis of value of merchandise of national origin or on arbitrary or fictitious values and not on the actual value of the imported merchandise on which duty is

assessed, or of like merchandise.

Ans. F pg. 16 Article VII-2(a)38. Article VII states that where goods are exempted in the exporting country from internal

taxes applicable to sales for home consumption, such taxes should not be included in the

computation of dutiable value in the importing country

Ans. T pg. 16 Article VII-3

39. __________________ is the price at which merchandise is sold or offered for sale in the

ordinary course of trade under fully competitive conditions.

Ans. "Actual value" pg. 16 Article VII-2

40. As per article VII: 3, the value for customs purposes of any imported product shouldinclude the amount of internal tax, applicable within the country of origin or export, from

which the imported product has been exempted or has been or will be relieved by means

of refund.Ans. F pg. 16 Article VII-3

41. As per Article VII: 4a, in order to assess the value of imported merchandise the

conversion rate of exchange shall be based on the par value as established byInternational Monetary Fund or on the rate of exchange recognized by the Fund, or on the

par value established in accordance with a special exchange agreement.

Ans. T pg. 16 Article VII-4(a)

42. In order to minimize impediments to trade due to customs procedures, fees charged by

customs authorities need not be limited to the approximate cost of customs services; theymay be used for protective or fiscal purposes.

Ans. F pg. 16 Article VIII-1

43. _____________________ can be defined as administrative procedure requiring thesubmission of an application or other documentation to the relevant administrative body

as a prior condition for importation of goods.

Ans. Import licensing pg. 16 Article VIII-4

44. Article VIII: 1(c) establishes a general obligation concerning formalities whereby

Members recognize the need for minimizing the incidence and complexity of import andexport formalities and for decreasing and simplifying import and export documentation

requirements.

Ans. T pg. 16 Article VIII-1(c)

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45. Article VIII: 3 permit Members from imposing “substantial penalties for minor breaches

of customs regulations or procedural requirements.”

Ans. F pg. 16/17 Article VIII-3

46. Article VIII: 2 requires each Member “to review the operation of its laws and regulations

in the light of the provisions of this Article” upon request by another Member.Ans. T pg. 16/17 Article VIII-2

47. The contracting parties recognize that, in adopting and enforcing laws and regulations

relating to marks of origin, the difficulties and inconveniences should be reduced to a

minimum with least concern of protecting consumers against fraudulent or misleadingindications.

Ans. F pg. 17 Article IX-2

48. As per Article IX: 4, the laws and regulations of contracting parties relating to the

marking of imported products shall be such as to permit compliance without seriouslydamaging the products, or materially reducing their value, or unreasonably increasing

their cost.Ans. T pg. 17 Article IX-4

49.As per Article IX: 5, special duty or penalty may be imposed by contracting party for failure to comply with marking requirements prior to importation unless corrective

marking is unreasonably delayed or deceptive marks have been affixed or the required

marking has been intentionally omitted.

Ans. T pg. 17 Article IX-5

50. The contracting parties shall co-operate with each other in order to prevent the use of trade names so as to misrepresent the true origin of a product, or to damage thedistinctive regional or geographical names of products of the territory of a contracting

party as are protected by its legislation.

Ans. T pg. 17 Article IX-6

51. The basic "transparency" obligation requires contracting parties to ensure prompt

publication of laws and regulations affecting imports and exports so that foreigngovernments and traders may clearly understand them

Ans. T pg. 17 Article X-1

52. Increases in customs duties and more burdensome restrictions on imports can freely be

enforced even when such measures have not been officially published.Ans. F pg. 17 Article X-2

53. As per Article X, agreements affecting international trade policy which are in force between the government or a governmental agency of any contracting party and the

government or governmental agency of any other contracting party need not be

published.Ans. F pg. 17 Article X-1

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54. The provisions of Article X requires contracting party to disclose confidential

information which would impede law enforcement or otherwise be contrary to the public

interest or would prejudice the legitimate commercial interests of particular enterprises, public or private.

Ans. F pg. 17 Article X-1

55. As per article X: 3b, Each contracting party shall maintain, or institute as soon as

practicable, judicial, arbitral or administrative tribunals or procedures for the purpose,inter alia, of the prompt review and correction of administrative action relating to

customs matters

Ans. T pg. 17 Article X-3(b)

56. Under Article XI, contracting parties are prohibited from introducing new quotas and are

required to eliminate existing ones.Ans. T pg. 18 Article XI-1

57. Article XI of the GATT generally encourages quantitative restrictions on the importationor the exportation of any product, by stating prohibitions or restrictions shall be instituted

or maintained by any Member.

Ans. F pg. 18 Article XI-1

58. India could maintain an import licensing regime for over 4 decades only under Article

XII which allows contracting patties facing balance-of-payments difficulties to impose

import quotas so as to prevent a deficit in monetary reserves.Ans. T pg. 18/19 Article XII-1

59. Article XII gives liberty to a country to impose new restrictions or intensifying old oneswithout prior consultation with the other contracting parties.

Ans. F pg. 18/19 Article XII-4(a)

60. India had to dismantle its import licensing regime mainly due to Article XII: 2b, whichrequires contracting parties applying restrictions to safeguard its external financial

position and its balance of payments by restricting the quantity or value of merchandise

permitted to be imported and shall progressively relax them as such conditions improve.Ans. T pg. 18/19 Article XII-2(b)

61. Article XIII allows discrimination in the application of import or export quotas amongstmember countries.

Ans. F pg. 20 Article XIII-1

62. Article XIII requires that when import quotas are applied, each supplier country's share of

trade in the product concerned should approximate the share which it would be likely to

have in the absence of the quotas.Ans. T pg. 20 Article XIII-2

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63. Article XV provides for coordination between the GATT and IMF in times of foreign

exchange, monetary reserves and balances of payments emergencies

Ans. T pg. 21 Article XV-2

64. Article XVI calls for elimination of export subsidies on non- primary products, and states

that all subsidies on the exportation of primary products should be avoided.Ans. T pg. 22 Article XVI-1

65. Article XV emphasizes that currency or exchange controls should be used as disguisedquantitative restrictions in order to discourage the intent of GA TT or IMF provisions.

Ans. F pg. 21 Article XV-4

66. Article XVI requires that Members should be notified in writing about subsidies thataffect exports and imports.

Ans. T pg. 22 Article XVI-1

67. State Trading Enterprises must be accorded favorable government assistance and neednot act in a general manner consistent with commercial considerations.

Ans. F pg. 22 Article XVII-1

68. A state-trading enterprise must conduct import or export operations on a

nondiscriminatory basis.Ans. T pg. 22 Article XVII-1

69. Article XVII establishes the principle that state-trading enterprises need not draw on

market factors in making decisions regarding purchases or sales.Ans. F pg. 22 Article XVII-1(b)

70. LDC contracting parties are not permitted to impose quantitative restrictions infurtherance of their economic development programs or in response to foreign exchange

problems attributable to their development status.

Ans. F pg. 22 Article XVIII-2

71. LDCs are not allowed to withdraw from or modify a tariff binding or apply import quotas

to establish or protect an "infant industry".

Ans. F pg. 22 Article XVIII-2

72. Article XIX extends scope for remedial action, including the suspension of trade

measures, if increase in imports of certain products cause damage to like products,domestic producers and competition.

Ans. T pg. 26 Article XIX-1

73. If an operative concession leads unexpectedly to serious injury to a domestic industry, the

affected contracting party may invoke this "escape clause" to temporarily withdraw the

concession

Ans. T pg. 26 Article XIX-1(b)

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74. Under Article XIX, the country to which the concession was originally granted is not

entitled to withdraw equivalent concessions even if the concession causes serious injuryto domestic producers of like or directly competitive products.

Ans. F pg. 26 Article XIX-1(b)

75. Article XXI does not allow a contracting party to withhold any information that must be

kept confidential in order to protect national security interests

Ans. F pg. 27 Article XXI

76. Article XXIII facilitates members to make representations and seek satisfactory

adjustment of all benefits that are nullified or impaired by the failure of other Members to

fulfill their obligations under GATT.Ans. T pg. 27 Article XXIII-1

77. Article XXIV allows formation of customs unions and free trade areas by Members.

Ans. T pg. 28 Article XXIV-1

78. Article XXIV also provides that, regardless of political status, any customs unions andfree trade area that maintain its own tariffs and commercial regulations may not be

treated as a contracting party.

Ans. F pg. 28 Article XXIV-2

79. ____________________ means any territory with respect to which separate tariffs or

other regulations of commerce are maintained for a substantial part of the trade of such

territory with other territories.Ans. Custom territory pg. 28 Article XXIV-2

80. Customs unions and free trade ease are exempted from the MFN clause, but such anarrangement must not increase existing levels of trade restrictions affecting nonmember

countries.

Ans. T pg. 28 Article XXIV-5(a)

81. Article XXIV: 4 state that the purpose of a customs union or of a free-trade area should

be to restrict trade between the constituent territories and to raise barriers to the trade of

other contracting parties with such territories.Ans. F pg. 28 Article XXIV-4

82. Any contracting party deciding to enter into a customs union or free-trade area need notnotify the same to the contracting parties.

Ans. F pg. 28 Article XXIV-7(a)

83. Article XXVI sets out the ratification requirements for bringing GATT into force.

Ans. T pg. 28 Article XXVI

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84. The Article establishes procedures for former dependencies of contracting parties to

become contracting parties in its own right upon sponsorship by the former metropolitan

government.Ans. T pg. 28 Article XXVI-5(c)

85. Article XXVIII states that in order to provide flexibility to members' commercial policies, a contracting party may renegotiate its tariff concession every three years.

Ans. T pg. 28 Article XXVIII-1

86. Article XXVIII bis urges that less developed contracting parties are obliged to reduce

tariffs needed for economic development and revenue purposes.

Ans. F pg. 29 Article XXVIII bis-3(b)

87. Contracting parties are obligated to participate in multilateral trade negotiations as

success of these negotiations largely depends on the participation by trading nations.

Ans. F pg. 29 Article XXVIII bis-1

88. Article XXVIII bis facilitates the use of negotiations to further reduce tariffs and other

trade measures between Members on a reciprocal and mutually advantageous basis.Ans. T pg. 29 Article XXVIII bis-1

89. Admitting new members into GATT requires support of existing members as ArticleXXXIII provides a nonmember government to seek approval by two-thirds of the

contracting parties to negotiate the terms of its accession to GATT.

Ans. T pg. 30 Article XXXIII

90. Article XXXVI acknowledges the special trade problems of LDCs but fails to understand

that export earnings can play an important role in their development.

Ans. F pg. 31 Article XXXVI

91. Article XXXVI: 5 proclaims that the rapid expansion of the economies of the LDCs will

be facilitated by a diversification of the structure of their economies and the avoidance of an excessive dependence on the export of primary products.

Ans. T pg. 31 Article XXXVI-5

92. Article XXXVI: 8 insist that the developed contracting parties expect reciprocity for commitments made by them in trade negotiations to reduce or remove tariffs and other

barriers to the trade of less-developed contracting parties.

Ans. F pg. 31 Article XXXVI-8

93. Article XXXVII exhorts developed countries to increase import barriers to products most

easily exported from LDCs.Ans. F pg. 31/32 Article XXXVII-1(a)

94. Article XXXVII converse of the commitments by developed Members to accord higher

priority and elimination of trade barriers on products of interest to developing countries

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Ans. T pg. 31/32 Article XXXVII-3

95. Article XXXVII: 1(b) persist from introducing or increasing the customs duties or non-tariff import barriers on products of particular export interest to less-developed

contracting parties;

Ans. F pg. 31/32 Article XXXVII-1(b)

96. Article XXXVIII calls for joint action of the contracting Parties to improve access to

world markets of primary products commonly exported by LDCs.Ans. T pg. 32 Article XXXVIII-2(a)

97. Article XXXVIII emphasizes the need of international harmonization and adjustment of

national policies to stabilize world markets and allow LDCs to expand their trade.Ans. T pg. 32/33 Article XXXVIII-2(a)

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