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World Trade Organization |
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WT/TPR/S/163 12 April 2006 | |
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(06-1692) |
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Trade Policy Review Body |
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TRADE POLICY REVIEW Report by the Secretariat URUGUAY |
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This report, prepared for the third Trade Policy Review of Uruguay, has been drawn up by the WTO Secretariat on its own responsibility. The Secretariat has, as required by the Agreement establishing the Trade Policy Review Mechanism (Annex 3 of the Marrakesh Agreement Establishing the World Trade Organization), sought clarification from Uruguay on its trade policies and practices. Any technical questions arising from this report may be addressed to Mr Angelo Silvy (tel.: 022/739 5249), or Mrs Ulla Kask (tel.: 022/739 5627) or Mr Raymundo Valdés (tel.: 022/739 5346). Document WT/TPR/G/163 contains the policy statement submitted by Uruguay. |
Note: This report is subject to restricted circulation and press embargo until the end of the first session of the meeting of the Trade Policy Review Body on Uruguay.
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SUMMARY OBSERVATIONS vii
(1) INTRODUCTION vii
(2) ECONOMIC ENVIRONMENT vii
(3) TRADE AND INVESTMENT POLICY viii
(4) MARKET ACCESS FOR GOODS ix
(5) OTHER MEASURES AFFECTING TRADE ix
(6) SECTORAL POLICIES x
I. Economic environment 1
(1) Overview 1
(2) Macroeconomic Trends 1
(i) Structure and reform of the economy 1
(ii) Production and employment 3
(iii) Fiscal policy 5
(iv) Monetary and exchange policy 7
(v) Balance of payments 9
(3) Trade and Investment Flows 11
(i) Trend in trade in goods 11
(ii) Trade in services 12
(iii) Foreign investment 13
(4) Outlook 13
II. trade and investment regime 14
(1) Overview 14
(2) Formulation and Implementation of Trade Policy 14
(i) General legal and institutional framework 14
(ii) Trade and investment policy objectives 16
(iii) Formulation and implementation of trade policy 16
(3) Foreign Investment Regime 17
(4) International Relations 18
(i) World Trade Organization 18
(ii) Preferential agreements 20
(5) Trade-Related Technical Assistance 24
III. trade policies by measure 25
(1) Overview 25
(2) Measures Directly Affecting Imports 26
(i) Procedures, documentation and registration 26
(ii) Customs valuation 30
(iii) Rules of origin 31
(iv) Tariffs 33
(v) Other charges affecting imports 44
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(vi) Import prohibitions, restrictions and licences 50
(vii) Contingency measures 54
(viii) Standards and technical regulations 59
(ix) Sanitary and phytosanitary measures 64
(3) Measures Directly Affecting Exports 67
(i) Procedures, documentation and registration 67
(ii) Taxes, levies and other export charges 68
(iii) Export prohibitions, restrictions and licensing regimes 69
(iv) Tariff and tax concessions (including subsidies and export processing zones) 70
(v) Export promotion, financing, insurance and guarantees 72
(4) Other Measures Affecting Production and Trade 74
(i) Establishment and taxation of enterprises 74
(ii) Price controls and competition policy 77
(iii) Incentives 79
(iv) State-trading enterprises 81
(v) Government procurement 82
(vi) Protection of intellectual property 84
IV. trade policies by sector 92
(1) Overview 92
(2) Agriculture and Food Processing (Including Forestry and Fisheries) 93
(i) Agriculture and food processing 93
(ii) Forestry 98
(iii) Fisheries 99
(3) Hydrocarbons 100
(4) Other Manufactures 102
(5) Electricity 104
(6) Services 107
(i) Main features and multilateral commitments 107
(ii) Telecommunications 108
(iii) Financial services 112
(iv) Air transport and airports 120
(v) Maritime transport 123
(vi) Tourism 125
(vii) Professional services 127
REFERENCES 129
appendix tables 133
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III. trade policies by measure
III.1 Breakdown of frequency of MFN tariffs, 2005 36
I. Economic environment
I.1 Sectoral structure of GDP, 1998-2004 2
I.2 Basic economic indicators, 1998-2005 4
I.3 Non-financial public sector (NFPS) financial accounts, fiscal years 1998-2005 5
I.4 Main monetary indicators, 1999-2005 7
I.5 Balance of payments, 1998-2005 9
I.6 Trade in services, 1998-2004 12
I.7 Foreign investment position, 2001-2004 13
II. trade and investment regime
II.1 Framework and free-trade agreements concluded by MERCOSUR, December 2005 23
III. trade policies by measure
III.1 Registration requirements for importers and their products 27
III.2 Special requirements for customs procedures or documentation 29
III.3 Summary analysis of Uruguay's MFN tariff, 2005 34
III.4 Breakdown of Uruguay's customs tariff, 2005 35
III.5 Tariffs applied in preferential agreements concluded by Uruguay, 2005 41
III.6 Goods and services exempt from VAT 46
III.7 Specific Internal Tax 48
III.8 Import prohibitions in effect during the period 1998-2005 50
III.9 Requirements on import licensing and prior authorization in effect
during the period 1998-2005 53
III.10 Some technical regulations 61
III.11 Sanitary and phytosanitary requirements for imported goods 65
III.12 Import restrictions for sanitary reasons in effect during the period 1998-2005 66
III.13 Requirements for exporters, November 2005 69
III.14 Free zones, February 2006 72
III.15 Principal taxes applicable to production and investment 76
III.16 Overall view of the protection of intellectual property rights in Uruguay, 2005a 85
III.17 International intellectual property agreements ratified by Uruguay 86
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I. Economic environment
AI.1 Merchandise exports by product group, 1998-2004 135
AI.2 Merchandise imports by product group, 1998-2004 137
AI.3 Merchandise exports by trading partner, 1998-2004 138
AI.4 Merchandise imports by trading partner, 1998-2004 139
II. trade and investment regime
AII.1 Summary of notifications by Uruguay to the WTO, 1999-30 November 2005 140
IV. trade policies by sector
AIV.1 Manufacturing sector: tariffs and international trade 142
AIV.2 Summary of Uruguay's specific commitments under the GATS 145
(1) Introduction
1. Since its last Trade Policy Review in 1998, Uruguay has continued to revise its laws and regulations to facilitate trade and the implementation of its international commitments. Thus, the average MFN tariff has been reduced, and improvements have been effected in areas such as import procedures, customs valuation and intellectual property protection, while additional reforms are under consideration. Uruguay has made scant use of contingency measures and non-tariff trade barriers appear limited. However issues remain concerning taxation, particularly the differential application of certain internal taxes to imported and domestic products as well as the numerous fiscal incentives in place. Although market competition appears to have increased in recent years, in some important areas the State maintains a dominant presence. Addressing these questions would be important to help ensure the sustainability of economic growth, which has resumed vigorously since 2003 but was disappointing in earlier years. In this regard, and to promote greater economic efficiency and diversification, it would be particularly important for Uruguay to further liberalize its economy on an MFN basis, and anchor these efforts through multilateral commitments.
(2) Economic Environment
2. During the period since its last Review, Uruguay's economy had to overcome four years of economic contraction, as a result of which GDP declined at an annual rate of 0.2% between 1998 and 2004. Strong growth, of over 6%, was expected for 2005. Uruguay's poor growth record during much of the period under review reflects a combination of domestic and external factors, starting with sanitary problems in its agricultural sector and followed by events in neighbouring countries, especially Argentina, which led to a financial crisis in 2002. The crisis was accompanied by increases in inflation, unemployment, the fiscal deficit and public debt, and a fall in imports and international reserves.
3. Importantly, Uruguay did not make use of trade restrictive measures to address the crisis. Instead, to restore growth, Uruguay applied a macroeconomic adjustment programme, including floating the currency and reducing public expenditure, together with measures to strengthen the financial sector. The main macroeconomic indicators started to improve after 2002, aided by a favourable external situation, which supported substantial export growth. Despite recent improvements, Uruguay continues to be vulnerable to external shocks particularly in view of its still high external debt (just over 90% of GDP in 2005).
4. Uruguay's fiscal policy is geared to achieving a primary surplus (3.5% of GDP in 2005) to allow for the payment of the public debt. The fiscal situation has improved with the resumption of economic growth, aided as well by tax increases and a reduction in expenditure. Monetary policy has followed an "inflation monitoring" regime since 2004, which is intended to evolve into a full inflation targeting regime. The adoption of a floating exchange rate regime in 2002 was accompanied by an initial sharp real currency depreciation, but the exchange rate has appreciated in real effective terms since 2004.
5. International trade in goods and services is important for the Uruguayan economy, representing as it does some 60% of GDP. Although the external current account is traditionally in deficit, since 2003 these deficits have been moderate (around 1% of GDP). The merchandise trade balance generally shows a deficit, while the service balance is traditionally in surplus.
6. Both imports and exports declined as a result of the 2002 recession but have recovered since. Uruguay's exports are mainly commodities and agro-industrial goods (particularly bovine meat and rice), which accounted for some 69% of exports in 2004. A salient feature of the period under review has been the redirection of exports to countries outside MERCOSUR, with the United States having become the destination for 21% of Uruguay's exports in 2004, replacing Brazil as Uruguay's main export market. Exports to MERCOSUR have fallen mainly on account of a decline of exports to Argentina. On the other hand, import patterns have remained relatively unchanged: some 45% of Uruguayan imports still originate in other MERCOSUR countries, partly reflecting their preferential market access to the Uruguayan market.
(3) Trade and Investment Policy
7. Uruguay is an original Member of the WTO and an active participant in the multilateral trading system. Uruguay considers the multilateral trading system as a vital guarantor of non-discrimination and the prevention of unilateral trade measures. Uruguay has been an active participant in the Doha Development Agenda (DDA), having submitted numerous proposals individually or together with other WTO Members. Uruguay's main focus in the DDA has been on agricultural issues.
8. Uruguay has made commitments under the GATS in six of the 12 sectors identified in the classification. Uruguay participated in the extended GATS negotiations on financial services and has ratified the Fifth Protocol to the GATS. Uruguay did not participate in the extended negotiations on telecommunications, a sector in which it has no WTO commitments. Uruguay has submitted an Initial Offer on Services in the context of the DDA.
9. Uruguay maintains an active programme of notifications to the WTO but there have been some delays with respect to notifications in areas such as agriculture, subsidies and countervailing measures, and state trading enterprises. Uruguay has made
relatively little use of the WTO dispute settlement mechanism since its last review, having participated in only four disputes: one as respondent (concerning Uruguay's internal taxes) and three as third party.
10. Uruguay leads an autonomous trade policy which, however, is to be compatible with its membership in the Southern Common Market (MERCOSUR). Through its participation in MERCOSUR, Uruguay has gained access to a much larger market for its exports; such participation has also provided impetus for liberalization, and enhanced the stability of Uruguay's trade regime. It may, however, have magnified Uruguay's dependency on neighbouring economies and, while fostering competition in the domestic market, placed strong pressure on Uruguay's manufacturing sector. The latter has been able to take only limited advantage of the regional market.
11. Through its participation in MERCOSUR, Uruguay is party to trade agreements with the Andean Community (Colombia, Ecuador and Venezuela), Bolivia, Chile, and Peru. Uruguay also has other preferential trade arrangements through its participation in the Latin American Integration Association, within which the agreement with the widest scope is that with México.
12. Uruguay's investment regime is open to private, including foreign, investors except in sectors considered of national public interest, such as fixed telephony services, water and sewage services, and some specific areas in insurance and transport. Foreign investors are excluded from some activities, such as the operation of radio and television stations, air or sea cabotage, as well as fishing within an area of 12 marine miles from the coast. Uruguay grants national treatment in the granting of investment incentives. Uruguay has signed bilateral investment agreements with several countries, which
complement the general principles of non-discrimination and investment guarantees in its Constitution.
(4) Market Access for Goods
13. The average MFN tariff has fallen, from 12.2% in 1998 to 9.3% in 2005, mainly due to the elimination of the general tariff increase maintained between 1998 and 2003. Agricultural products (WTO definition) face a slightly higher average tariff (9.7%) than non-agricultural products (9.3%). All tariffs are ad valorem. Tariff dispersion is relatively low, but the tariff shows signs of escalation. Uruguay has bound its whole tariff in the WTO, which increases the predictability of its trade regime. However, this is somewhat undermined by the considerable gap between average applied and bound tariffs (30.7%). Uruguay applies MERCOSUR's Common External Tariff, with exceptions.
14. Apart from tariffs, Uruguay applies other charges that fall exclusively on imports, such as a commission for the Banco de la República Oriental del Uruguay and a consular levy collected, respectively, at 2.5% and 2% of the c.i.f. value of most imports. As a consequence, the average tariff underestimates the tax burden faced by imports. Moreover, during the period under review, special import duties (derechos específicos de importación) were applied on some textile products.
15. Imports receive national treatment with respect to the application of internal taxes but some exceptions appear to exist. These include the Specific Internal Tax (IMESI), which varies according to national content when applied on certain non-alcoholic beverages. Additionally, for some products the IMESI is charged on values established by the authorities, which are twice as high for imported products as for domestic products on beer, non-alcoholic beverages, bitters, and liquid foods. The application of the Value Added Tax also varies between imported and
domestic products: only imports are subject to an additional ten percentage points advanced payment which, although subsequently refunded, imposes financial costs on importers.
16. Uruguay has made scant use of contingency measures since 1998, having applied no countervailing or global safeguard measures, and having used anti-dumping duties in only one case (on certain vegetable oils). Uruguay maintains legislation that allows the use of special trade measures to restrict imports; it was used during the period under review to adopt measures against a range of Argentinean products.
17. Uruguay applies non-automatic import licensing to products such as certain textiles and footwear, as well as new tyres. Additionally, the importation of a number of products is subject to prior authorization for sanitary, phytosanitary, safety, or environmental protection reasons. In the period under review, Uruguay introduced a significant number of new sanitary and phytosanitary measures as well as technical regulations; of these, it notified to the WTO three of the former and two of the latter.
18. Uruguay has adopted measures to streamline import procedures and adjust its import regime to multilateral rules, including by adopting the WTO Customs Valuation Agreement's transaction value definition and eliminating minimum import prices (so called "precios mínimos de exportación").
(5) Other Measures Affecting Trade
19. The Investment Law of 1998 sets the general investment incentives framework in Uruguay, which consists primarily of tax incentives. Under the Investment Law, incentives may be granted for activities that, inter alia, aim to increase and diversify exports, or encourage the use of local inputs and labour. In view of the fiscal constraints
Uruguay faces, it would be important to quantify the net economic benefits of the various incentives schemes; the authorities noted that such a study was already being conducted.
20. Uruguay also grants fiscal incentives for exports under various regimes. To obtain the refund of indirect taxes, the exported product must have a minimum of 20% of domestic inputs. Uruguay has notified its automotive industry regime to the WTO as granting export subsidies. Uruguay has also notified the WTO that it has granted no subsidies on agricultural exports. Uruguay applies export taxes on certain hides and skins; exports of some other agricultural products face duties or levies to finance the activities of certain entities. Exports may be subject to restrictions for various reasons, including to ensure domestic supply. Exports of steel and cast iron scrap are forbidden.
21. Prices in Uruguay are generally market-determined, although administered prices are used for certain agricultural products and maximum tariffs are fixed for certain services. In some key sectors the State remains dominant, such as electricity and fixed telephony; in banking, two state banks hold over half of all deposits. There are state monopolies in the provision of water and sewage services and in the distribution, importation, exportation and commercialization of petroleum and most petroleum products.
22. Specific competition statutes exist in certain sectors, including energy and telecommunications, but there is no general competition policy legislation in place. However, as at early 2006 a draft competition law was being considered by the General Assembly. This initiative to promote competition is important as Uruguay's economy, in part due to its small size, tends to generate market concentration.
23. Uruguay is not a party to the WTO Plurilateral Agreement on Government Procurement. However, since 2002 the Government has adopted measures to increase the transparency of the procurement process. Moreover, Uruguayan legislation mandates that procurement take place primarily through open tendering. Although the main criterion to evaluate bids is price, preferences of up to 10% of the domestic value added of a bid are granted to domestic bidders.
24. Since 1998, Uruguay has modified its legislation with respect to patents, trade marks and copyright with a view to aligning its domestic statutes with the provisions of the TRIPS Agreement. Parallel imports of patented products are allowed, but not of goods protected by copyright.
(6) Sectoral Policies
25. Agriculture continues to be a pillar of Uruguay's economy with agricultural products generating close to two thirds of export revenue. The main agricultural products are livestock, cereals, dairy products and wool. Tariff protection for agriculture and food processing is slightly higher than for other products. Minimum import prices and anti-dumping measures have been used to protect sugar and oil production. Additionally, the sector as a whole benefits from certain subsidies and fiscal exemptions or lower tax rates.
26. Excluding agro-industry, the manufacturing sector is small. Uruguay grants fiscal incentives to manufacturing activities through a number of schemes, including a special regime for the automotive industry, which links benefits to achieving a minimum 20% domestic content. The textile and clothing industry benefited from minimum import prices until end 2000.
27. The electricity sector has been liberalized with respect to generation, commercialization and international trade; although transmission and distribution remain a prerogative of the State, concessions may be granted to private operators. In practice, a public enterprise continues to dominate the generation, transmission and distribution of electricity. There is no foreign investment in the sector, although this is not precluded by law.
28. The service sector is of considerable importance to the Uruguayan economy, accounting for some 62% of GDP in 2004. Although private participation in services has increased since Uruguay's last Review, public enterprises continue to play an important role, particularly in areas such as telecommunications and banking.
29. In telecommunications, an independent body has regulated the sector since 2001. Although the State continues to have a de jure monopoly in fixed urban telephony and in domestic long distance calls, competition has been introduced in mobile telephony services, which are provided by private operators. Foreign companies may engage in activities in any of the areas not reserved for the State. In 2002, international long distance telephony services were opened to competition, and some 14 licences were granted; subsequent amendments to the law prevent the possibility of granting additional licences.
30. There are some limitations to foreign participation in transportation services. Domestic air services are reserved to domestic companies operating aircraft registered in Uruguay. However, in early 2006 the authorities were considering changes to this and other provisions of the Aeronautic Code. Airports are owned by the State, but their administration may be given in concession to private, including foreign, firms; this has been the case for Uruguay's two main airports.
31. Cabotage restrictions also apply to maritime transport. International transport is, however, open to foreigners and the majority of international trade takes place in foreign-flag vessels. In practice, Uruguay applies
cargo preferences only to Brazil and passenger transportation preferences to Argentina. Port services are provided by private operators under concessions granted by the State, which is the owner of all the ports.
32. The severe crisis experienced by the financial sector in 2002 resulted in a 45% contraction in bank deposits between February and September of that year. In the wake of the crisis, deposits in public banks were rescheduled, four private banks were suspended and a deposit guarantee fund was created. Although the banking system has largely recovered from the crisis, and supervision has been strengthened, deposits and credits remain at levels below those prior to the crisis, the number of banks has shrunk, and interest rates continue to be high. Foreign banks wishing to establish operations in Uruguay must be organized either as a corporation or as a foreign bank subsidiary. The number of banks in operation may not exceed by more than 10% those in operation the previous year.
33. The insurance market is mainly composed of foreign-firm subsidiaries. There is no limit to foreign participation in the industry, but companies must be established in Uruguay to provide insurance policies covering risks in Uruguay. This does not apply to passive reinsurance contracts.
34. Tourism continues to be an important source of foreign exchange for Uruguay, although the industry has been significantly affected by the fluctuations in overall economic activity. The sector receives specific tax benefits. Uruguay does not have a general law regulating the exercise of professional services; professions are regulated by specific laws, and professional associations do not possess self-regulatory powers.
