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TRADE POLICY REVIEWS: SECOND PRESS RELEASE AND CHAIRPERSON'S  CONCLUSIONS
Uruguay: November 1998

“ The opening of the economy, pursued both unilaterally and through regional and multilateral fora, had resulted in a better allocation of resources and an increase in trade flows.”

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See also:

First press release
Summary of Secretariat report
  > Summary of Government report


PRESS RELEASE
PRESS/TPRB/93
26 November 1998

TRADE POLICY REVIEW BODY: REVIEW OF URUGUAY
TPRB'S EVALUATION
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The Trade Policy Review Body of the World Trade Organization (WTO) concluded its second review of the trade policies of Uruguay 23 and 25 November 1998. The text of the Chairperson's concluding remarks is attached as a summary of the salient points which emerged during the discussion. The review enables the TPRB to conduct a collective examination of the full range of trade policies and practices of each WTO member country at regular periodic intervals to monitor significant trends and developments which may have an impact on the global trading system.

The review is based on two reports which are prepared respectively by the WTO Secretariat and the government under review and which cover all aspects of the country's trade policies, including its domestic laws and regulations, the institutional framework, bilateral, regional and other preferential agreements, the wider economic needs and the external environment. A record of the discussion and the Chairperson's summing-up together with the reports will be published in due course as the complete trade policy review of Uruguay and will be available from the WTO Secretariat, Centre William Rappard, 154 rue de Lausanne, 1211 Geneva 21.

Since December 1989, the following reports have been completed: Argentina (1992), Australia (1989, 1994 & 1998), Austria (1992), Bangladesh (1992), Benin (1997), Bolivia (1993), Botswana (1998), Brazil (1992 & 1996), Burkina Faso (1998), Cameroon (1995), Canada (1990, 1992, 1994 & 1996), Chile (1991 & 1997), Colombia (1990 & 1996), Costa Rica (1995), C˘te d'Ivoire (1995), Cyprus (1997), the Czech Republic (1996), the Dominican Republic (1996), Egypt (1992), El Salvador (1996), the European Communities (1991, 1993, 1995 & 1997), Fiji (1997), Finland (1992), Ghana (1992), Hong Kong (1990 & 1994), Hungary (1991 & 1998), Iceland (1994), India (1993 & 1998), Indonesia (1991 and 1994), Israel (1994), Jamaica (1998), Japan (1990, 1992, 1995 & 1998), Kenya (1993), Korea, Rep. of (1992 & 1996), Lesotho (1998), Macau (1994), Malaysia (1993 & 1997), Mali (1998), Mauritius (1995), Mexico (1993 & 1997), Morocco (1989 & 1996), New Zealand (1990 & 1996), Namibia (1998), Nigeria (1991 & 1998), Norway (1991 & 1996), Pakistan (1995), Paraguay (1997), Peru (1994), the Philippines (1993), Poland (1993), Romania (1992), Senegal (1994), Singapore (1992 & 1996), Slovak Republic (1995), the Solomon Islands (1998), South Africa (1993 & 1998), Sri Lanka (1995), Swaziland (1998), Sweden (1990 & 1994), Switzerland (1991 & 1996), Thailand (1991 & 1995), Trinidad and Tobago (1998), Tunisia (1994), Turkey (1994 & 1998), the United States (1989, 1992, 1994 & 1996), Uganda (1995), Uruguay (1992 & 1998), Venezuela (1996), Zambia (1996) and Zimbabwe (1994).

TRADE POLICY REVIEW BODY:   REVIEW OF URUGUAY
CONCLUDING REMARKS BY THE CHAIRPERSON
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The second Trade Policy Review of Uruguay was conducted by the TPR Body on 23 and 25 November 1998. These remarks, prepared on my own responsibility, are intended to summarize the main points of the discussion; they are not intended as a full report. Further details of the discussion will be fully reflected in the minutes.

The discussion developed under three main themes: (i) economic environment; (ii) trade policies and measures; and (iii) sectoral issues.

Economic environment

Members congratulated Uruguay on the economic and structural reforms undertaken since 1992, which have resulted in steady growth and a sharp decline in inflation. The opening of the economy, pursued both unilaterally and through regional and multilateral fora, had resulted in a better allocation of resources and an increase in trade flows. However, unemployment had increased and the current account deficit had widened, with imports outpacing exports. Some Members, in expressing concern about the deficit, asked if the real appreciation of the peso had played a role, and enquired about the reliance on external resources for financing the current account, especially in the context of today's financial crisis. Members encouraged Uruguay to diversify both its export products and markets and asked about the role of existing tax incentives in achieving this goal.

Members commended Uruguay for the reform of its public sector and for dismantling several monopolies, but noted that state intervention remained important and that there was no competition legislation. Members welcomed Uruguay's new investment regulations which put domestic and foreign investment on the same footing.

Members acknowledged MERCOSUR's importance in shaping Uruguay's trade and economic policy. Some concern was raised on the convergence to the Common External Tariff (CET); the possibility of trade diversion; and the lack of a regional mechanism for managing the collection of import duties. Questions were also raised on the state of MERCOSUR's negotiations with the Andean Community, and with the European Union.

In response, the representative of Uruguay stated that the effect of the current world financial problems on Uruguay was likely to be modest. Uruguay's ability to withstand external shocks resulted from its drive to improve competitiveness by reducing taxes and public charges, maintaining prudent fiscal policies, and deepening integration within MERCOSUR. Recently private savings and investment had risen, while inflation had fallen sharply. The current account deficit was sustainable, particularly with the reduced foreign external debt to GDP ratio. Unemployment had increased, but measures were in place to address this and improvement was discernible. Fiscal incentives were provided to the forestry, tourism and manufacturing sectors, but any resulting reductions on direct tax revenues were largely offset by increased revenues from expanded economic activity.

The representative gave details on liberalization within MERCOSUR. MERCOSUR had approved a number of common trade policy instruments, including safeguards and anti-dumping. A Common Customs Code and customs procedures were being prepared, and rules on consumer protection and public procurement were under negotiation. There were also negotiations on commitments to liberalize trade in services. Uruguay had no competition authority or statutes, but MERCOSUR discussions in this area were ongoing. On incentives under the new Investment Law, Uruguay had introduced regulations that would be made available to the WTO Secretariat.

Diversified trade flows, notably with Argentina and Brazil, had reduced reliance on European export markets. Consistent with open regionalism and complementary to multilateral liberalization, Uruguay and its MERCOSUR partners had completed free trade agreements with Bolivia and Chile, and were pursuing initiatives with the Andean Community, Canada, the Central American Common Market, the European Union and under the FTAA.

Trade policies and measures

Members welcomed Uruguay's trade liberalization, including the lowering of applied tariffs within MERCOSUR's framework. However, the schedule of convergence to the CET was complex. Several Members questioned the recent temporary increase in the CET by 3 percentage points, noting that as a result tariff bindings have been exceeded in some instances. Questions were also asked about the provision of information to the Integrated Data Base (IDB); import charges for services rendered; and the consistency of excise taxes with national treatment obligations.

Members congratulated Uruguay on streamlining customs procedures. There were questions about customs valuation procedures; preferential rules of origin; the use of international standards; and preferences for domestic products in government procurement and about Uruguay's possible accession to the Government Procurement Agreement (GPA).

Uruguay was commended for eliminating export taxes in all but one area. Several questions were raised regarding export incentives and subsidies, and on existing barriers to Uruguay's exports. Questions arose about the status of pending legislation on intellectual property rights and on efforts to strengthen their enforcement and train the judiciary in this area.

In reply, the representative noted that Uruguay had adopted MERCOSUR's Common External Tariff (CET) on 1 January 1995, with rates between 0 and 20%. The temporary increase of CET rates by 3 percentage points, would end on 31 December 2000. Applied tariffs were within WTO bindings, except for a few lines, which Uruguay intended to correct by 1 January 1999. Uruguay agreed to the tariff schedule being provided to the WTO's Integrated Data Base. Other import charges were based on the estimated cost of services rendered. Uruguay was reviewing its regulations to ensure that excise duties were applied in a non-discriminatory manner.

On customs valuation, the representative noted that transaction value was used whenever possible. Rules of origin were currently applied to MERCOSUR intraregional trade, but would be eliminated when convergence to the CET was completed. Uruguay did not now envisage joining the Agreement on Government Procurement. The use of international standards was common practice in Uruguay.

The representative noted that Uruguay's agricultural exports faced a number of barriers, including tariff peaks and non-tariff barriers; access was also distorted by subsidies in a number of countries. Export taxes in Uruguay were applied only on one product; elimination depended on negotiations within MERCOSUR. On export subsidies, the concessions granted to the motor vehicles industry had been notified to the WTO. Uruguay applied a system of temporary admission and import duty drawbacks in a manner consistent with WTO obligations. Uruguay had recently introduced new trademark legislation; draft laws on copyrights and patents were in Parliament. Uruguay was addressing the problem of enforcement of intellectual property rights, particularly regarding trademark and copyright infringement.

Sectoral issues

Members commended Uruguay on the performance of its agriculture sector, but posed questions on the pricing mechanism for milk and its impact on exports. Clarification was sought regarding the criteria to grant incentives under the "national interest" provision of the Industrial Promotion Law. Questions were also asked about the minimum "export" price system for textiles and clothing, and on the automotive regime. On services, Members welcomed Uruguay's liberalization and encouraged further private sector participation. Questions were raised on specific service issues, including the contribution of financial services to GDP and high spreads in interest rates; promotion of competition, particularly in basic telecommunications; commercial presence in port services; and incentives granted to the tourism sector.

The representative of Uruguay explained the pricing mechanism for milk, clarifying the objectives and nature of the quota system and quality controls. The national development bank (BROU) granted credit in a transparent manner. Details were provided on the criteria for "national interest" under the Industrial Promotion Law, and on the operation of the system of minimum "export" prices. Since 1995, this system had applied only to sugar and textiles and would in the future be replaced by the trade defence and safeguard mechanisms established in the Uruguay Round. Uruguay had notified one TRIM in the automotive industry; MERCOSUR partners were negotiating a common regime for the industry.

On financial services, the representative noted the sector's continued importance in terms of GDP, the increased bank deposits by non-residents, and the availability to firms of credit at highly competitive interest rates. The provision that banks authorizations may not exceed 10% of the number of banks in the preceding year was maintained for prudential reasons. The insurance sector was open to foreign investment, but there were no plans to eliminate the state monopoly on insurance related to work accidents and public procurement. Neither were there plans to eliminate the state monopoly on basic telecommunications services (ANTEL), although private investment was possible in value added services. There were no restrictions to private participation in port services, and locally established foreign firms received national treatment. Restrictions on foreign professionals were virtually non-existent.

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In conclusion, it is my feeling that this Body welcomed Uruguay's wide-ranging structural reform programme, including the significant steps taken in trade liberalization and the reform of the public sector. Delegations appreciated Uruguay's involvement in and commitment to the multilateral trading system and were in no doubt that Uruguay would play, as in the past, an important and constructive role in future negotiations. Members encouraged Uruguay to continue to liberalize its economy thus consolidating the basis for steady growth and diversification, including of export markets and products. It is also my sense that Members saw the importance for trade liberalization within MERCOSUR to contribute to strengthening the multilateral trading system.