The regulation of state trading under the WTO system
of the GATT 1994 is the principal Article dealing with state trading enterprises
(referred to as "STEs") and their operations. It sets out that such enterprises
in their purchases or sales involving either imports or exports are to act
in accordance with the general principles of non-discrimination, and that commercial
considerations only are to guide their decisions on imports and exports. It also
instructs that Members are to notify their state trading enterprises to the WTO annually.
Clarification of what is considered to be a state trading enterprise, and thus notifiable,
is provided in the WTO Understanding on the Interpretation of Article XVII.
Paragraph 1 of this text states that Members shall notify state trading enterprises in
accordance with the following working definition:
and non-governmental enterprises, including marketing boards, which have been granted
exclusive or special rights or privileges, including statutory or constitutional powers,
in the exercise of which they influence through their purchases or sales the level or
direction of imports or exports."
important in this definition is the phrase "in the exercise of which they influence
the level or direction of imports or exports", as this goes to the heart of
what the regulation of state trading in the WTO is aimed at that is, the
potentially distorting effects on trade of the operations of state trading enterprises.
Conversely, the WTO does not seek to prohibit or even discourage the establishment or
maintenance of state trading enterprises, but merely to ensure that they are not operated
in a manner inconsistent with WTO principles and rules.
It should be
noted that the notification requirement does not apply to what is termed "government
procurement", i.e. imports of products for immediate or ultimate consumption in
governmental use, and this is specified in both of the above legal texts. (Government
procurement is regulated by the Agreement on Government Procurement for those Members
which are parties to it.)
to the core provisions in Article XVII and the Understanding, a number of other GATT
Articles deal with state trading in one way or another. The Interpretative Note to
Articles XI (General Elimination of Quantitative Restrictions), XII (Restrictions to
Safeguard the Balance of Payments), XIII (Non-discriminatory Administration of
Quantitative Restrictions), XIV (Exceptions to the Rule of Non-discrimination) and XVIII
(Governmental Assistance to Economic Development) states that throughout these Articles,
the terms "import restrictions" or "export restrictions" include
restrictions made effective through state trading operations. Added to the Article XVII
requirement to notify, it can be seen that the thrust of the rules on state trading are
two-fold: to increase the transparency of the use of state trading to implement various
trade-related policies, and to ensure that the state trading enterprise is not used to
implement WTO-inconsistent measures.
substantive obligations of Members under the rules governing state trading can be
summarized in the following four points:
non-discrimination, commonly referred to as "most favoured nation" or
no quantitative restrictions;
preservation of the value of tariff concessions; and