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INSIGHTS ON GATT & WTOPresented by : Group 3National College, Center for Development Studies5/7/2013RegiMilan
HISTORICAL BACKGROUND AND DEVELOPMENTMercantilist economist(1500-1750AD)Focus on country’s economic welfare and growthBut focused on Protectionism trade policy rather than freetrade.UK, France, Germany, Austria and other- EuropeImperialism concept developed in Asia, Africa and SouthAmerica by European countriesBut trade didn’t foster within European nations(trade barriersand protectionism)
BRETTON WOOD CONFERENCE AND GATT•New Hampshire, USA(1944, July)-45 nations•IBRD(World Bank): established on 1945, December•IMF: established on 1945, December•International Trade Organization(ITO): No agreementbetween USA and other nations
1945,December: 15 countries group sat for tariffs reductionand boundary of trading goods. 1st round: trading rules determination, 4500 goods tariffscutoff Trading: $10 Arab(1/5th of world trade) Member nations increased to 23. 1947,October 30: GATT came into existence until ITO will beformed 1948, January 1: GATT Contracting Parties 1948, June 30: Tariff subsidy regulations came into existence
Havana, Cuba(1947, November): Charter prepared and presentedon United Nations Conference on Trade and Employment. But failed. Between 1st Jan 1948-1st Jan 1995: GATT worked as the facilitatorfor multilateral trade system and monitoring body.• 1989, may16 applied for GATT membership.• 1995, dec05 formal application for membership.• 2004, april23 Nepal got membership.
Year Country Negotiation Topics Participation1947 Geneva,SwitzerlandCustom Duty Reduction 231949 Annissee, France Custom Duty Reduction 131951 Torkee, U.S. Custom Duty Reduction 381956 Geneva,SwitzerlandCustom Duty Reduction 261960-61 Geneva(DillonRound)Custom Duty Reduction 261964-67 Geneva(KennedyRound)Custom Duty Reduction and Anti-dumpingprovision621973-79 Geneva(TokyoRound)Custom, non-custom and frameworknegotiation1021986-1994Geneva(Uruaguay Round)Custom, non-custom rules, service sector,TRIPS, conflict management, establishment ofWTO123
NEPAL’S COMMITMENTS IN THE WTO Agricultural products- Non- Agricultural products- Services Trade-related Aspects of IntellectualProperty Rights (TRIPS) Regulatory reforms
BENEFITS OF JOINING WTO TO NEPAL1. Degree of certainty of market access:WTO trading system provides a degree ofcertainty of market access. Trade become morepredictable, which in turn encourages trade and investin the country.2. Transit right :The WTO rules grant transit rights to the membercountries. This is a most important benefit of WTOmembership for a landlocked country such as Nepal. Ithas a crucial impact not only on Nepal’s foreign tradebut also on the whole process of its development. Anunhindered and cost-effective transit facility enhancesthe competitive strength of the economy.
3. Rule based trade regime:-WTO membership enforces a rules-based trade regime,increasing transparency and reducing corruption anduncertainties in trading activities.4. Market access:-Market access opportunities provided by the WTO systemcan lead to further investment addressing the constraint oflimited domestic market for economic scale of productiveoperation, which will also help to raise investment, economicproduction of goods and services and industrialization process .5. Policy stability.6. Attract foreign direct investment.7. Benefits from liberalization8. Mobility of trade related technical assistance.
MARKET ACCESS BARRIERS FOR NEPALTARIFF AND NON-TARIFF BARRIERS Tariff barriers serve the legitimate interest of theimporting countries to protect their domesticindustrial or agricultural sectors from foreigncompetition. The tariff barriers for Nepal are asfollowing:-10
Tariff barriers on leather. Tariff barriers on readymade garments. Tariff barriers on tea. Tariff barriers on readymade garments.5/7/2013RegiMilan
NON- TARIFF BARRIERS The term “non-tariff ” is a residual one that covers allmeasures that restrict imports other than tariffs. Nontariff barriers are as follows:- Rules of origin Regulatory barriers
SUPPLY SIDE CONSTRAINT Despite the market access barriers mentionedabove, Nepal’s WTO membership offers predictablemarket access in a range of products of exportinterest to Nepal. However, several supply-sideconstraints reduce the competitiveness of Nepaleseexports and they are as follows: Human capital Infrastructures Quality assurance and certification Access to finance5/7/2013RegiMilan
IMPACT OF TRADE BARRIERS Advanced industrial nations committed themselves afterWorld War II to removing barriers to the free flow ofgoods, services, and capital between nations This goal was enshrined in the General Agreement onTrade and Tariffs . Under the umbrella of GATT, eight rounds of negotiationsamong member states(now numbering 146) have workedto lower barriers to the free flow of goods and services The most recent round of negotiations, known as theUruguay Round, was completed in Dec,1993.The Uruguayround further reduced trade barriers; extended GATT tocover services as well as manufactured goods; providedenhanced protection for patents, trademarks, andcopyrights; and established the World Trade Organization(WTO)to police the international trading system5/7/2013RegiMilan
IMPACT OF TRADE BARRIERS In the late 2001, the WTO launched a new round of talks[Doha,Qatar] aimed at further liberalizing the globaltrade and investment framework. The agenda included cutting tariffs on industrial goods,services,and agricultural products; phasing out subsidiesto agricultural producers; reducing barriers to crossborder investments; and limiting the antidumping laws. The rich nations spend around $300 billion a year insubsidies to support their farm sectors. The worldspoorer nations have the most to gain from any reductionsin agricultural tariffs and subsidies.5/7/2013RegiMilan
• Trade openness: Trade/GDP is one of the variablesused to measure trade openness of an economy.• Export: Nepal has witnessed a slow increase in theabsolute value of exports in recent years.• Import: In terms of imports, Nepal’s imports overthe years have been higher than exportsNepal’s trade performance after WTO membership