INTRODUCTION

The General Agreement on Tariffs and Trade (GATT) was initiated in 1947, principally, to

begin the process which wou4ld lead, eventually, to full liberalization of world trade.

However, the negotiation process and commitment to agreement suffered some setbacks along

the line. Protectionist activities of many countries imposed severe constraints to global to

trade. Essentially, the basic principles of the GATT focused on gradual trade liberalization;

reciprocity; non-discrimination; transparency of regulations; fair trade, and the use of

quantitative import restrictions only under very serious and difficult economic situations.

The GATT negotiations took several rounds to conclude. The major rounds of negotiations

include, the Kennedy Round, the Tokyo Round, the Round in Punta del Este and the Uruguay

Round. The various negotiations of the GATT ended with the Final Act of the Uruguay Round

and the Marrakesh Agreement establishing the World Trade Organization effective January 1,

1995 with its Headquarters at Geneva, Switzerland. The WTO is charged with the

responsibility of prosecuting the ideals of the multilateral trade general agreements. In brief,

the ultimate objectives of the agreements include!

(a) Ensuring that relations in the field of trade and economic endeavour should be conducted

in a manner that will raise the living standards, ensure full employment, improve real income

and effective demand and expand production and trade in goods and services of member

countries.

(b) Optimal use of world’s resources in a way that guarantees sustainable development,

protects and preserves environment in a manner that is consistent with individual country’s

respective need and concern for different levels of the economic development; and
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(c) Ensuring reciprocal and mutually advantageous arrangements which are targeted at

substantial reduction of tariff and non-tariff barriers to international trade. The implementation

of the provisions of the GATT is expected to impact differently on the member countries

depending on the level of economic development. The recognition of this fact has necessitated

the special provisions for different countries at various stages of development. In particular,

the least developed countries are expected to face high import bills because of certain

provisions of the agreement and it is for these reasons that certain remedies were thought of.

WHAT DOES GATT MEAN

The acronym “GATT” stands for the “General Agreement on Tariffs and Trade”. It is an

agreement between States aiming at eliminating discrimination and reducing tariffs

and other trade barriers with respect to trade in goods.

The GATT was originally, and is still today, only concerned with trade in goods,

although its main principles now also apply to trade in services, and intellectual

property rights as dealt with respectively by the General Agreement on Trade in

Services and the TRIPS Agreement. The GATT is a WTO agreement that deals

exclusively with trade in goods, but it is not the only one.

PROVISIONS OF THE GATT 1994

The provisions of the GATT 1947, now the provisions of the GATT 1994, consist of 38

articles – numbered in roman digits – which are split up into four “parts”

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Part I of the GATT 1994 contains Articles I, enshrining the most-favoured- nation

treatment obligation, and Article II, setting out the obligations applicable to the

Schedules of Concessions of each WTO Member.

Part II of the GATT 1994 comprises Articles III through XXIII. Article III

establishes the national treatment obligation. Articles IV to Article XIX cover mainly

non-tariff measures, such as unfair trade practices (dumping and export subsidies),

quantitative restrictions, restrictions for balance-of-payments reasons, state-trading

enterprises, government assistance to economic development, and emergency

safeguards measures. In addition, this Part also deals with numerous technical issues

relating to the application of border measures. Articles XX and XXI deal with the

possible exceptions to the GATT 1994, namely the general exceptions and those for

security reasons. Articles XXII and XXIII provide for dispute settlement procedures,

which are further elaborated in the Understanding on the Principles Governing the

Settlement of Disputes (hereinafter the “DSU”).

Part III of the GATT 1994 consists of Article XXIV through Article XXXV. Article

XXIV concerns mainly customs unions and free trade areas and the responsibility of

Members for the acts of their regional and local governments. Articles XXVIII and

XXVIII(bis) deal with the negotiation and renegotiation of tariff concessions.

Finally, Part IV of the GATT 1994 is entitled “Trade and Development” and aims to

increase trade opportunities for developing country Members in various ways.

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 THE GATT AND BASIC PROVISIONS REGARDING MULTILATERAL

AGREEMENTS ON TRADE IN GOODS

The Uruguay Round of multilateral trade negotiations culminated in the Final Act which

embodied many agreements. These agreements are those relating to Multilateral Agreements

on Trade in Goods, General Agreement on Trade in Services and the Agreement on Trade-

Related Aspects of Intellectual Property Rights. There are several agreements under the

Multilateral Agreements on Trade in Goods alone which are of essence. These include those in

tariffs and trade and their implementation, agriculture, application of sanitary and

phytosanitary measures, textile and clothing, technical barriers to trade- related investment

measures, pre-shipment inspection and rules or origin. The others under this group are import

licensing procedures, subsidies and countervailing measures and that on safeguards. The major

provisions of the agreements are summarised as follows.

MULTILATERAL AGREEMENTS ON TRADE IN GOODS

These agreements are those directly relating to all aspects of trade in goods which are a set of

rules which bind all members of the WTO. The whole idea is to ensure that members operate

in line with the basic principles of the GATT. Some provisions of the agreements under the

trade in goods are:

1. General Agreement on Tariff and Trade 1994

This agreement incorporates all the provisions of GATT dated 30th October, 1947,

annexed to the Final Act adopted at the conclusion of second session of the

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 committee of the United Nations Conference on Trade and Employment, as

rectified, amended or modified by the terms of legal instruments which have

entered into force before the WTO agreement; provisions of the other legal

instruments of the GATT 1947 which had entered into force before the WTO

Agreement; the Understandings under the GATT 1994 including those of all the

articles relating to trade, balance of payments, waivers of obligations and

interpretations of such other articles; and the Marrakesh protocols to GAIT 1994.

All of the above are aimed, essentially, at ensuring that tariff and non- tariff barriers to

trade are eliminated or reduced to a band that is compatible with global trade development,

as well as to ensure that state trading enterprises manner that is consistent with the general

principles of non- discriminatory treatment.

2. Agreement on Agriculture

The agreement, as contained in the Punta del Este declaration, is aimed at establishing a

fair and market oriented agricultural trading system. The long term objective is to provide

for substantial progressive reductions in agricultural support and protection sustained over

an agreed period of time.

3. Agreement on the Application of Sanitary and Phytosanitary Measures:

This provision is intended to ensure that any sanitary or phytosanitary measure is applied

only to the extent necessary to protect human, animal or plant life or health. Such measures

should, however, be based on scientific principles. The measures should not be applied in a

manner which constitutes a disguised restriction on international trade or as a means of

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 arbitrary or unjustifiable discrimination between members where the same conditions

prevail.

4. Agreement on Textiles and Clothing

The agreement on textile and clothing sets out provisions that should be applied to

members during the transition period for the integration of the textiles and clothing sector

into GATT 1994. According to the April 1989 decision of the Trade Negotiation

Committee on the GATT, it had been agreed that the inclusion of the textile and clothing

section into the multilateral trade agreement can only begin after the conclusion of the

Uruguay Round of Multilateral Trade Negotiations.

5. Agreement on Technical Barriers to Trade

Although this agreement recognizes the important contribution that international standards

and conformity assessment system can make by improving efficiency of production and

facilitating the conduct of international trade, it frowns seriously if such procedure for

assessment of conformity with technical regulations and standard should create

unnecessary obstacles to international Thus, technical regulations should not be more trade

restrictive than necessary to fulfil legitimate objective such as national security

requirements, prevention of deceptive practices and protection of human health or safety,

animal or plant or the environment.

6. Agreement on Trade-Related Investment Measures (TRIMs)

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 The agreement applies to investment measures that affect trade in goods. Even though this

agreement gives some qualified exemptions to developing country members and countries

facing serious balance of payments problems, discourages imposition of investment

measures that have trade restrictive and distorting effects. For example, TRIMs that are

inconsistent with the obligation of national treatment under the GATT rules include those

which are mandatory and enforceable under domestic law or administrative rulings which

require the purchase or use by an enterprise of products of domestic origin, in terms of

volume or value of products or in terms of a proportion volume or value of its local

production.

7. Agreement on Implementation of Article VI of the GATT 1994 (The Anti-Dumping

Measures)

This Agreement relates to the anti-dumping measures that shall be applied under the

circumstances provided for in Article VI of GATT 1994. It provides for procedure for

proper investigation of anti-dumping activities. It defines a product as being dumped when

it is introduced into the commerce of another country at less than its normal value. That is,

if the export price of a product exported from one country to another is less than the

comparable price, in the ordinary course of trade, for the like product when destined for

consumption in the exporting country.

8. Agreement on Implementation of Articles VII of the GATT 1994

This Agreement relates to issues of valuation of goods for customs purposes such that the

use of arbitrary or fictitious customs values are avoided. The agreement calls for a fair,

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 uniform and neutral system for valuation of goods which should be based on simple and

equitable criteria which are consistent with commercial practices. It provided for rules on

customs valuation which define the customs value of imported goods as the transaction

value, which is the price actually paid or payable for goods sold for export to other country.

The price should, however, be adjusted to include the commission and brokerage; the cost

of containers used in the goods in question; and the cost of packing, whether labour or

materials.

9. Agreement on Pre-Shipment Inspection

The pre-shipment inspection of goods is undertaken particularly by a number of developing

countries in order to verify the quality, quantity and price of imported goods. The pre-

shipment inspection agreement is, therefore, intended to ensure that in as much as it is

necessary to carry out pre-shipment inspection, should be done without unnecessary delay

and unequal treatment of members. The agreement contains, among others, the coverage of

inspection, the obligations of user and exporter members and the procedure for dispute

settlement between members.

10.Agreement on Subsidies and Countervailing Measures

This agreement defines subsidy as the financial contribution of a government through a

direct transfer and potential transfer of funds of liabilities, foregoing or not collecting

government revenue that is otherwise due (e.g fiscal incentives), provision of goods and

services other than general infrastructure or purchase of goods and or offering income or

price support to an enterprise, industry or group of enterprises or industries. Thus, it

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 provides for exemption for five years for developing member countries and eight years for

the least developed countries from the date of entry into force of the WTO agreement

during which the above rules would not affect them. The period can, however, be extended

for two years, it is expected that developing countries that have reached export

competitiveness shall phase out subsidy in two years. Such countries are described as those

whose shares of total world trade in the product is at least 3.25 per cent for two consecutive

years. For the economies in transition, they have seven years within which to phase out

application of subsidies. For the avoidance of doubt, the developing country members in

reference are defined as:

 Least developed countries, designated as such by the United Nations, and are members

of the WTO; and

 Those countries that are members of WTO whose GNP per capita has reached

$1,000.00 per annum. Specifically, under this category, twenty countries were named as

belonging to developing countries including Ghana and Nigeria.

THE IMPLICATIONS OF THE GATT FOR THE NIGERIAN ECONOMY

In order to really appreciate the possible implication of the agreement of the Uruguay Round

of multilateral trade negotiations on Nigeria, it is important to review the structure of Nigeria’s

merchandise trade which these agreements are expected to impact upon.

During 1960s to early 1970s, the Nigerian economy was largely dependent on the agricultural

sector which contributed over 50.0 per cent of the GDP and 80.0 per cent of total foreign

exchange earnings. The basic export commodities included cocoa, groundnut, palm produce
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and rubber, to mention a few. With the discovery of crude oil and the oil boom arising from

the crisis to in the middle East in the mid 1970s, the agricultural sector lost its prime position

to crude oil, which currently accounts for over 90.0 per cent of foreign exchange earnings.

While Agricultural sector contribution to GDP had decline to 40.4 per cent in 1998. The

deterioration in non-oil export was both in volume and value terms following the neglect

which the sector suffered and the falling prices of the commondities in international market.

Moreover, domestic production and consumption depended heavily on imports, resulting in

persistent increase in the level of imports to an unsustainable level at the end of 1983. The

introduction of Structural Adjustment Programme (SAP) in 1986 was, among others,

essentially to reverse the deteriorating trend of the performance of the non-oil sector and make

the economy less dependent on crude oil and imports. A number of measures were put in place

to realise these objectives. Among them were, exchange and trade liberalisation which

necessitated the removal of all forms of restrictions that could hamper free trade especially in

export, adoption of several export incentives and adoption of a more realistic exchange rate

policy. In an attempt to reverse the trend in capital flight following the economic crisis of the

early 1980s and encourage resource inflow especially in the form of direct investment, the

Exchange Control Act 1962 was abrogated while foreign investment promotion measures were

put in place. Since these measures were not designed to influence crude oil production, they

have not significantly influenced the performance of the merchandise account of Nigeria’s

balance of payments.

In view of the aforementioned and the fact that crude oil, which is Nigeria’s major foreign

exchange earner, does not fall under GATT rules, it is important to review the possible
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implications of the GATT 1994 on Nigeria’s economy. As was earlier highlighted, the GATT

rules are aimed at removing all hindrances to free trade, both in the form of trade and non-

trade barriers and all price distorting measures. In sum it is expected that all these should lead

to greater flow of trade, enhance the global level of resource utilization and improve the level

of output and the general living standard of the people. Although the relative disadvantaged

positions of the developing and the least developed countries are re-organized and provided

for in order to mitigate the negative impact of the GATT measures, there is no doubt that,

overall, they will suffer initial losses from the implementation of these rules. Nigeria, which

falls into this group, cannot but have similar problems. These problems include:

1. Reduction in Export Earnings: The agreement on agriculture, for instance, calls for

gradual reduction of support and protection over an agreed period of time. The implication

of this is that by the time the support given to cash crop production is reduced, production

cost and export prices are likely to increase with the attendant loss of competitiveness for

such produce in international market. This may, in turn, lead to decline in export earning

for Nigeria’.

2. Higher Cost of Food Imports: Nigeria is a net food importer. The removal of subsidy,

particularly on agricultural produce, by the developed countries who are Nigeria’s major

trading partners implies that the cost of food import will rise by about 7. 0 per cent>. In

1995, total import of food was estimated at about N70,819. 1 million. This is capable of

worsening the current account position of Nigeria’s balance of payments.

3. Loss of Revenue to Government: Nigeria, like most other developing countries, generates

a lot of revenue from duties paid on imports. In 1995 alone total revenue from import
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 duties amounted to N37.4 billion, representing 8. 1 per cent of total revenue The

anticipated general reduction in tariff is expected to affect significantly the revenue

accruable to government from this source. Although low tariff on import itself is capable of

propelling economic growth, and in the long run improve government revenue, the

immediate impact can worsen the government fiscal operations which, until very recently,

had remained in deficit.

4. The Negative Impact of Extensive Trade Liberalisation: The GATT rules on trade

liberalisation when implemented without adequate caution may cause serious injuries to

domestic industries and result in declining domestic production. Unless adequate caution is

exhibited, the extensive trade 18 liberalization policy can cause serious danger to the

Nigeria economy, especially the informal sector.

5. Lack of Capacity to Take Advantage of Benefit: The capacity to take advantage of the

benefits of the GATT is lacking in Nigeria. Social services have broken down while

capacity utilization industries fell to 36.8 per cent due to the absence of both domestic and

foreign resources, to attain full capacity utilization that can generate greater output. In

addition, Nigeria’s export will continue to be hindered by lack of competent quality control

arrangement. This has reduced the competitiveness of exportable manufactured products,

and even in the domestic market.

CONCLUSION

Despite all the above stated problems that are likely to confront Nigeria in the immediate

future, there is no doubt that in the long run, and especially if the country can take some
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pre-emptive measures that can mitigate all the negative impacts of the GATT rules, the

economy will be better for it.

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