WTO-consistent policies

Bravado has introduced a new goods and services tax which taxes locally produced goods at 10% and imported goods at 15%. Tariff and tax reforms are intertwined. Broadening the Bravado' internal tax base to reduce the Government's heavy reliance on border taxes would facilitate further tariff reductions.

While tariffs tax only foreign products, a true consumption tax, such as a conventional value-added tax, would be non-discriminatory and tax both imports and domestic goods equally. Thus, the protective effect of the tariff could be removed and the revenue base preserved by converting tariffs to a consumption tax and extending the same rate to domestic products, although many of these goods is not produced locally.

In compliance with article III of GATT, internal taxes and other internal charges, and laws, regulations and requirements affecting the internal sale, offering for sale, purchase, transportation, distribution or use of products, and internal quantitative regulations requiring the mixture, processing or use of products in specified amounts or proportions, should not be applied to imported or domestic products so as to afford protection to domestic production.

The products of the territory of any country imported into the territory of any other country shall not be subject, directly or indirectly, to internal taxes or other internal charges of any kind in excess of those applied, directly or indirectly, to like domestic products. They shall be accorded treatment no less favorable than that accorded to like products of national origin in respect of all laws, regulations and requirements affecting their internal sale, offering for sale, purchase, transportation, distribution or use.

No country shall establish or maintain any internal quantitative regulation relating to the mixture, processing or use of products in specified amounts or proportions which requires, directly or indirectly, that any specified amount or proportion of any product which is the subject of the regulation must be supplied from domestic sources. Furthermore, internal maximum price control measures can have effects prejudicial to the interests of countries supplying imported products.

Accordingly, countries applying such measures shall take account of the interests of exporting countries with a view to avoiding to the fullest practicable extent such prejudicial effects. Anti-dumping. Bravado has passed new legislation which provides that any goods sold in Bravado at a price less than the price that they are sold at in the country of manufacture will automatically be subject to anti-dumping duty at a rate which will require the goods to be sold at a price at least 10% higher than in the country of manufacture.

The various definitions contained in the WTO Agreements on Anti-Dumping and on Subsidies and Countervailing Duties apply fully, as these Agreements are an integral part of the Bravadan legislation. Bravado's legislation lacks a system for a prompt refund, upon request, of any duty paid in excess of the actual margin of dumping, according to Article VI of the GATT.

It set forth that dumping, by which products of one country are introduced into the commerce of another country at less than the normal value of the products, is to be condemned if it causes or threatens material injury to an established industry in the territory of a country or materially retards the establishment of a domestic industry. Thus Bravado's policy breaches GATT rules concerning anti-dumping.

Further, no countervailing duty shall be levied on any product of the territory of any country imported into the territory of another country in excess of an amount equal to the estimated bounty or subsidy determined to have been granted, directly or indirectly, on the manufacture, production or export of such product in the country of origin. No product of the territory of any country imported into the territory of any other country shall be subject to both anti-dumping and countervailing duties to compensate for the same situation of dumping or export subsidization.

Moreover, product of the territory of any country imported into the territory of any other country shall be subject to anti-dumping or countervailing duty by reason of the exemption of such product from duties or taxes borne by the like product when destined for consumption in the country of origin or exportation, or by reason of the refund of such duties or taxes. In order to offset or prevent dumping, a country may levy on any dumped product an anti-dumping duty not greater in amount than the margin of dumping in respect of such product.

Conclusion. The present review shows that despite substantial reforms, Bravado's domestic and trade policies remain highly distorted. Continued structural reforms, including trade and investment liberalization, could strengthen competition, thereby improving the economy's efficiency. Further tariff liberalization remains essential. But this task may turn out to be more difficult than generally believed. Tariffs constitute a significant source of revenue and can no longer be reduced to any significant degree without alternative taxes.

Tariff rationalization, including lower and more uniform rates with fewer exemptions, should facilitate better resource allocation and reduce distortions caused by this tax. Revenue losses associated with such reforms are of critical importance given the narrow tax base. A major challenge for the Bravado will be developing country graduation, which represents a necessary first step in the country's economic transition. Continued over-dependence on unilateral preferences may retard the economy's export diversification, and encourage inefficient industries.

Implementation of its multilateral commitments will aid the Bravado economic improvement. However, without appropriate technical assistance, it will be very difficult to implement WTO-consistent policies. Finally, domestic policy reforms must continue in virtually all sectors but especially in services. It will obtain all benefits from increased competition and private entry, both domestic and foreign. The government also needs to mobilize more resources to build infrastructure. Without it, the benefits from trade liberalization cannot