THE GCC AND THE WTO

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THE GCC AND THE WTO
by Mona F. Ashour

The World Trade Organization (WTO) is an international organization that
regulates international trade between its member countries.  It's aim is to
ensure that trade flows freely with the least number of restrictions
possible.  The WTO regulates commerce by establishing the rules and
regulations for its members to adhere to, as well as, contains a dispute
resolution mechanism in the event of a violation of these regulations by one of the member countries.

The WTO is run by its member governments.  Major decisions are made by the
organization's entire membership.  All GCC countries are categorized as
developing countries by the WTO.

[TABLE 1 - WTO STATUS OF GCC COUNTRIES - See below]

Because of many countries' challenging economic circumstances, the WTO has
tailored its regulations to accommodate them.  These accommodations include:

     1.  Longer periods of time to implement agreements and obligations;

     2.  The implementation of measures to increase their trading
opportunities;

     3.  Inserting safeguards calling for all WTO members to protect the
trade inserts of developing countries; and

     4.  Overall support, technical and otherwise, to assist developing
countries in developing their trade and commerce.

At the heart of the WTO are various agreements implemented to help the WTO
achieve its goals of international trade.  These agreements result from
negotiations carried out by member countries.  Three primary agreements are
the General Agreement on Tariffs and Trade (GATT), the General Agreement on
Trade in Services (GATS) and the Agreement on Trade Related Aspects of
Intellectual Property (TRIPS).

GATT

GATT comprises the rules and regulations that govern international trade.
It calls for more open markets as they relate to both imports and exports.
Some of the main essential principles of GATT are the concepts of
most-favored nation (MFN), transparency, increased certainty of trading
conditions and trade facilitation.   The idea of most-favored nation implies the notion of non-discrimination.  That is that a member country must extend the best trading conditions it offers one country to all other WTO members it trades with.  With respect to transparency, each WTO member is required to make certain that all of its laws, rules and regulations are published and available to the public, as well as, ensure that there is a competent body set up to answer any inquiries that may arise regarding the said rules and regulations.  With respect to increased certainty of trading conditions, such certainty stems from commitments that each Member country is obligated to make in lowering its trade barriers and increasing other Member countries' access to its markets.  These commitments, once made, become legally binding.  In addition, GATT calls for its members to facilitate trade by inter alia simplifying and standardizing its customs procedures and centralizing its databases of information.

CUSTOMS

Article VIII:1(c) of GATT calls for WTO members to simplify their customs
procedures.  It recognizes the "need for minimizing the incidence and
complexity of import and export formalities."

The UAE has adhered GATT's call for simplifying its customs procedures by
amending its customs law in Dubai.  Such simplified procedures include:

     1.  Receiving information electronically;

     2. Receiving documents and checking them in advance before the import
or the export of the goods;

     3.  Having one customs declaration for more than one consignment or
vehicle;

     4.  Carrying out a random check of the goods;

     5.  Payment of customs fees;

     6.  Simplifying the relevant customs document to be processed;

     7.  Establishing a simpler re-export system; and

     8.  Establishing customs warehouses for trading and re-exports.

Furthermore, the Customs Law gives the Dubai Customs Authority the
discretion in determining which of the imported or exported goods to inspect in order to ensure smooth trading transactions, without prejudicing an effective inspection.  Also, the goods must be inspected in the presence of their owner or his representative.  However, in the event that the
inspection is to be carried out in the absence of the owner or his
representative, the Director of the Customs Department must approve such
inspection and establish a committee to carry out such inspection.  Upon
completing such inspection, all the members of the committee must sign a
report setting out the details of the inspection and its final outcome.

With respect to calculating the customs duty to be paid on imports, the
Dubai Customs Authority levies its customs duty on an ad valorem basis
(i.e., 4% of the value of the imported product).  The WTO's Agreement on
Customs Valuation (ACV) sets the standard for determining the value of the
imported product.  The basic rule provided by the ACV is that the value for
customs purposes should be based on the price actually paid or payable when
sold for export to the country of importation (i.e., invoice price),
adjusted where appropriate.  The ACV provides that payment made for the
following elements can be added to the price paid or payable by the importer of the imported goods:

     1.  Commissions and brokerage, except buying commissions;

     2.  Costs of, and charges for, packing and containers;

     3.  Assists, i.e., goods (materials, components, tools, dies, etc.) or
services (designs, plans, etc.) supplied free or at reduced cost by the
buyer for use in the production of the imported goods;

     4.  Royalties and license fees;

     5.  Subsequent proceeds of any sale accruing to the seller as a result
of the resale or use of imported goods;

     6.  The cost of transport, insurance and related charges to the place
of importation, if the country bases its valuation on CIF prices.

     In accordance with the above, Article 14 of the Dubai Customs Law
requires that customs duties must be paid on the actual value of the goods
as purchased.  Handling fees, insurance fees, any commission payable,
packaging and storage charges are applied to the actual value of the goods.

Furthermore, the Decision Regarding Cases where Customs Administration Have
Reasons to Doubt the Truth or Accuracy of the Declared Value (also known as
the Decision on Shifting the Burden of Proof) at the Uruguay Round shifts
the burden of proof on the importers when Customs, on the basis of
information on prices and other data available to it, "has reason to doubt
the truth or accuracy of the particulars or of documents produced in
support" of declarations made by the importers.

In order to ensure that the value of the goods is rejected by Customs on an
objective basis, the ACV stipulates that national legislation should provide the following primary rights to importers:

     1.  Where Customs expresses doubts as to the truth or accuracy of the
declared value, importers should have a right to provide an explanation,
including documents or other evidence to prove that the value declared by
them reflects the correct value of the imported goods.

     2.   Where Customs is not satisfied with the explanations given,
importers should have a right to ask Customs to communicate to them in
writing its reasons for doubting the truth or accuracy of the declared
value.  This in turn, allows the importers to appeal the decision to higher
authorities.

As is called for by the ACV, the Dubai Customs Law grants the Customs
Authority the discretion in evaluating the value of the goods on the basis
of the documents and invoices submitted by the importer.  If, however, the
Customs Authority is not convinced by the documents submitted by the
importer, then the Law calls for them to notify the importer of the same in
writing.  Upon receiving such notification, the importer has 10 days to
respond.  If the importer fails to respond, or the Customs Authority is not
convinced by his response, they will then transfer the matter to the
Evaluation Committee.  The Evaluation Committee will then notify the
importer of their decision in writing.  The importer can then appeal their
decision to the civil court within 10 days from such notification.

GATS

The General Agreement on Trade in Services (GATS) is the WTO agreement that
all Member countries must comply with in relation to their services sectors. Under GATS, services are categorized into the following 12 sectors:

     1.  Business, including professional and computer services;

     2.  Communications services;

     3.  Construction and engineering services;

     4.  Distribution services;

     5.  Educational services;

     6.  Environmental services;

     7.  Financial services (i.e., insurance and banking);

     8.  Health services;

     9.  Tourism and travel services;

    10.  Recreational, cultural and sporting services;

    11.  Transport services; and

    12.  Other services not included in any of the other above categories.

GATS covers all aspects of the above sectors, including production,
distribution, marketing, sales and delivery.  Furthermore, there are four
modes of supply that constitute the definition of trade in services and are
covered by GATS.  They are cross-border supply, consumption abroad,
commercial presence and presence of natural persons.  Cross-border supply
entails the supply of services that cross the border into a Member's country by non-resident service suppliers.  Consumption abroad pertains to the freedom of a Member country's residents to purchase services in the
territory of another Member country.  Commercial presence involves the
ability of foreign service suppliers to establish, operate or expand a
commercial presence (i.e., a branch, agency or wholly-owned subsidiary) in a Members country.  Finally, presence of natural persons entails the ability of foreign individuals to enter and temporarily remain in a Member's territory for purposes of supplying a service.

GATS addresses government rules and regulations that affect services
provided on a commercial basis.  As such, GATS applies to the private
sector, as well as, government-owned or government-controlled companies that provide services commercially.

WTO Members have two types of obligations under GATS.  The first are General Obligations to which all Member countries must adhere.  These include MFN treatment with respect to service products and suppliers of services, transparency of regulations, mutual recognition of the qualifications required for the supply of services, ensuring that exclusive service suppliers do not abuse their monopoly or exclusive rights or act in a manner inconsistent with GATS and adopting measures to liberalize trade.

The second type of obligations under GATS are Conditional Obligations, which are part of each Member's individual Schedule of Commitments.  These
commitments differ for each country as they are a result of each Member's
WTO negotiations.  Once a country makes a specific commitment regarding a
service sector or sub-sector, it basically commits to facilitate market
access and/or national treatment to trade in the said service.  It also
commits that it will not adopt new measures or regulations that would
restrict market access or the current operations of services.  However,
Member may impost its own limitations on these commitments.

It is possible for commitments to be withdrawn or modified but only after
the agreement of compensatory adjustments with affected countries and not
before three years after the Agreement has been entered into force.
However, such changes cannot compromise MFN treatment.  In addition,
commitments can be added or improved at any time.

Therefore, the GCC countries that are members of the WTO are in compliance
with the General Obligations under GATS.  However, in addition to this, each of those countries have committed themselves to certain obligations in their respective Schedule of Commitments.

COMMERCIAL PRESENCE

In Kuwait's Schedule of Commitments, there are limitations on market access
in all sectors with respect to commercial presence.  With respect to
tendering to supply goods and/or services in all service sectors, companies
must be successfully tendered and approved by the Kuwait Central Tender
Committee.  These companies must adhere to the Counter-Trade Off-Set
Program, the provisions of which are set out in the Supply Contracts and the Memorandum of Agreement.  The Government, Counter-Trade Off-Set Program, executive office and the supplying company must sign the Memorandum of Agreement.

In Kuwait, a significant limitation on market access is establishing a
foreign commercial presence within the country.  A foreign entity may only
establish a commercial presence in Kuwait through a commercial agent working in the same or related sector as that of the foreign entity, or through a partnership with a Kuwaiti entity, whereby the local entity must possess a minimum share of 51% of the partnership's capital.  Such sectors as banks, insurance companies and financial institutions are not part of this commitment.  In additions, such a foreign commercial presence must
contribute to Kuwait's economic interests.  This contribution may be in the
form of technology transfer, technical assistance, marketing assistance,
research and development programs or training of local workers.  Thirty
percent of the foreign entity's employees must be Kuwaitis.  As such,
although Kuwait has not committed itself to change these prerequisites to
establishing a foreign commercial presence in Kuwait, it has committed not
to add further restrictions in this regard.

Qatar also has a Schedule of Commitments that it entered into upon becoming
a member of the WTO.  With respect to establishing a foreign commercial
presence, Qatar's commitments are like those of Kuwait.  For all service
sectors, other that banks, financial institutions, insurance institutions,
and those sectors which are not stipulated as areas of commitments, a
foreign entity may only establish a commercial presence in Qatar through a
Qatari agent working in the same or related area of services or through a
partnership that includes Qatari contribution to its capital.  Foreign
entities establishing a commercial presence in Qatar may also be required to benefit the country's interests through transfer of technology, research and development programs, technical assistance, marketing assistance and
training/educational programs for the local workforce.  Although this is a
limitation on Qatar's market access, Qatar has committed not to adopt
measures that would further restrict market access through this mode of
supply.

The United Arab Emirates has made significant horizontal commitments
affecting the commercial presence of foreign entities within the country in
its Schedule of commitments.  It has placed limits on market access by only
allowing foreign entities to establish a foreign presence in the UAE through either a representative office or by incorporating a company with a maximum foreign capital participation of 49%.  Because this requirement applies to all other WTO Members, it does not violate the MFN principle.  It is important to note, however, that national treatment is restricted with respect to foreign commercial presence within the UAE.  This is because foreign nationals or companies with foreign shareholdings may be obligated to pay taxes on income derived from work or operations in the UAE.  Also, foreign nationals and companies in which foreign nationals have a shareholding are prohibited from acquiring land and real estate.
Furthermore, services, which are subsidized by the UAE government, may only
be extended to UAE nationals.

Most GCC countries, including the UAE, require that registered commercial
agents be 100% nationals of their respective country.  This is not perceived as a violation of GATS as, for example, the UAE's Schedule of Commitments do not bind the UAE to change this requirement.  As such, despite heavy lobbying by the United States and other entities, UAE officials have confirmed that they do not have any intention of eliminating this requirement unless they are forced to do so in the future by the WTO.
Bahrain, on the other hand, has eliminated this requirement over a year ago
of its own accord in order to encourage foreign investment and improve its
economy.

BANKING

Market access and national treatment of the lending sector (i.e., consumer
credit, mortgage credit, factoring and financing of commercial transactions) are unbound with respect to cross-border supply of such lending services into Kuwait.  The only exception is syndicated loans through Kuwaiti banks or Kuwaiti investment companies.  As far as Kuwaiti residents' ability to receive lending services from abroad, there do not exist any market access or national treatment limitations.  However, the remainder modes of supply, namely commercial presence and the presence of natural persons are unbound with respect to lending services.  As such, Kuwait may freely pass regulations that would limit market access and national treatment concerning the presence of commercial entities and individuals in Kuwait, except for branches of foreign banks in which the Kuwaiti government or other Kuwaiti financial or banking institutions are shareholders.  In such a situation, the Kuwaiti Council of Ministers shall determine each case.

Furthermore, Kuwait is unbound in its Schedule of Commitments with respect
to the cross-border supply of the following financial sectors, and thus, may freely limit market access and national treatment:

     1.  Financial leasing;

     2.  Payment and money transmission services;

     3.  Guarantees and commitments;

     4.  Financial trading of money market instruments, derivative products, exchange rate and interest rate instruments, transferable securities and other negotiable instruments on an exchange, in a over-the-counter market or otherwise; and

     5.  Money brokering, including cash or portfolio management, all forms
of collective investment management, pension fund management, custodial
depository and trust services.

Commercial presence and the presence of natural persons in Kuwait related to the above-mentioned sectors are also unbound.  However, there are
exceptions.  One exception is the same as that of lending services
concerning branches of foreign banks in which the Kuwaiti government or
other Kuwaiti financial or banking institutions are shareholders.  Another
exception is the requirement that foreign participation (other than GCC
citizens) cannot exceed 49% of the capital of a Kuwaiti investment company.
For these two exceptions, Kuwait cannot adopt any new measures to further
restrict market access to the above-mentioned financial services.  On an
opposite note, however, Kuwait has committed itself not to impose
restrictions on the consumption abroad of the abovementioned financial
services that would limit market access or national treatment.

With respect to banking and other financial services, Qatar has committed
itself not to impose any restrictions on market access and the national
treatment of entities involved in the cross-border supply and consumption
abroad of such services.  It has also committed not to make any limitations
on the national treatment of foreign entities that have a commercial
presence within Qatar.  However, as far as gaining market access to
establish such a commercial presence with the country, Qatar has frozen the
number of branches of foreign banking institutions at the level existing in
March 1995 pursuant to the schedule of Commitments it entered into on
November 10, 1995.  Furthermore, Qatar has left itself unbound with respect
to the presence of natural persons in these services.

As for banking and other financial services, the UAE has committed not to
limit market access and compromise national treatment with respect to the
cross-border supply and consumption abroad of these services, as well as the commercial presence of such services.  However, with respect to the foreign commercial presence of banking and other financial institutions, although the UAE has committed itself not to limit the number of representative offices, it remains unbound for new licenses for operating bank branches and remains unbound for the expansion of activities of existing financial entities.  Furthermore, the UAE also did not make any commitments with respect to restricting market access and national treatment of foreign natural persons, except as indicated in its horizontal commitments.

TRIPS

The Agreement on Trade-Related Aspects of Intellectual Property Rights
(TRIPS) came into effect on the January 1, 1995.  It covers the following
areas of intellectual property:  (1) copyright and related rights, (2)
trademarks, including service marks, (3) geographical indications, (4)
industrial designs, (5) patents, (6) lay-out designs of integrated circuits, and (7) undisclosed information (i.e., trade secrets and test data).  TRIPS lays out the minimum standards that WTO Member countries must adhere to in granting intellectual property protection.  In setting out these minimum standards, TRIPS requires that Members first comply with the primary requirements of main conventions of the World Intellectual Property
Organization (WIPO), the Paris Convention for the Protection of Industrial
Property and the Berne Convention of the Protection of Literary and Artistic Works.

TRIPS also addresses enforcement of intellectual property rights by Members
through various domestic procedures and remedies.  It contains articles on
civil procedures, administrative procedures and remedies, provisional
measures, special requirements related to border measures and criminal
procedures.  It also provides the WTO's dispute settlement mechanism as the
one to be utilized in the event of a dispute between Members relating to
intellectual property.

Furthermore, just like GATT and GATS, TRIPS imposes such core principles as
national treatment and MFN.   All Members must adhere to TRIPS.  However,
developing country members were granted a transitional period, whereby they
must come into compliance by the year 2000.  It must be noted, however, that with respect to such aspects as pharmaceutical products, developing
countries have until the year 2005 to comply with TRIPS.  Acceding countries or non-members to the WTO are not granted this transitional period.  In light of the guidelines set out in TRIPS, Members are granted the discretion in determining the requirements of the Agreement that is most appropriate for their respective legal systems.

Until recently, none of the Arab countries had come into complete compliance with TRIPS.  Different countries, including those that are WTO Members, had adopted and implemented varying provisions for the protection of intellectual property rights.  However, just recently, in its attempt to
become a WTO Member, Oman has redrafted its intellectual property laws to
come into full compliance with TRIPS.

Also, Kuwait has implemented a new copyright law approximately one year ago. Prior to this copyright law, copyright protection was virtually
non-existent.  However, despite this effort at providing intellectual
property protection, Kuwait's intellectual property laws fall short of
compliance with the WTO.

Currently, however, most of the GCC countries do not afford patent
protection for pharmaceutical products.  In fact, this is one of the crucial points that is keeping the UAE from becoming TRIPS compliant.  In addition, although many of them do protect computer software, such provisions of protection are lacking and fall short of TRIPS requirements.  As such, most of the GCC countries are currently working in conjunction with WIPO to bring their intellectual property laws into compliance with TRIPS.

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TABLE 1 - WTO STATUS OF GCC COUNTRIES
Bahrain ------------------Member as of January 1, 1995
Kuwait--------------------Member as of January 1, 1995
Qatar---------------------Member as of January 13, 1996
United Arab Emirates------Member as of April 10, 1996
Oman----------------------Member as of November 9, 2000
Saudi Arabia--------------Observer country that has applied for
                                 membership in the WTO but has not become a
                                 member as of yet  (May 2001)

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ABOUT THE AUTHOR

MONA F. ASHOUR is a lawyer with Al Tamimi & Company.  She graduated with
Bachelor of Arts degrees from the University of Southern California in both
Journalism and International Relations, receiving her Juris Doctor degree
from The John Marshall Law School in Chicago, Illinois.  She is licensed to
practice law in the State of Illinois, as well as, the United States
Northern Federal District.  She practiced law in the US before joining Al
Tamimi & Co.  Her areas of specialization at Al Tamimi & Co. are
Intellectual Property, Commercial and IT Law.  She writes regularly in the
IP section of her firm's newsletter, "The Law Update."

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