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7. Trade Laws, Bilateral and Multilateral Trade Agreements, World Trade Organization, SAARC


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This presentation defines bilateral and multilateral trade laws, General Agreement on Trade and Tariffs (GATT), World Trade Organization – Different Rounds, Intellectual Property Rights (IPR), TRIPS, TRIMS, GATS, Ministerial Conferences and SAARC. The presentation closes with a case study on the India-US Basmati Rice dispute.

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7. Trade Laws, Bilateral and Multilateral Trade Agreements, World Trade Organization, SAARC

  1. 1. International Business Management
  2. 2.  Bilateral and multilateral trade laws General Agreement on Trade and Tariffs (GATT) World Trade Organization – Different Rounds Intellectual Property Rights (IPR) TRIPS TRIMS GATS Ministerial Conferences SAARC Mrs. Charu Rastogi, Asst. Prof.
  3. 3.  Trade agreements are either bilateral, involving two countries, or multilateral. While some believe that bilateral free trade agreements are a first step towards multilateral free trade, others point out that bilateral trade agreements are discriminatory and lead to fragmentation of the world trade system and decline of the multilateral free trade. Bilateral Trade is the exchange of goods between two countries. Bilateral trade agreements give preference to certain countries in commercial relationships, facilitating trade and investment between the home country and the foreign country by reducing or eliminating tariffs, import quotas, export restraints and other trade barriers. Mrs. Charu Rastogi, Asst. Prof.
  4. 4.  Read this Business Standard article India has bilateral agreements with the following countries and blocs: ◦ SAFTA (Bangladesh, Bhutan, the Maldives, Nepal, Pakistan, Sri Lanka and Afghanistan) ◦ ASEAN (ASEAN–India Free Trade Area) ◦ European Union (final stage) ◦ Sri Lanka ◦ Singapore ◦ Thailand (separate from FTA agreement with ASEAN) ◦ Malaysia (separate from FTA agreement with ASEAN) ◦ Japan ◦ European Free Trade Association (EFTA) (negotiation ongoing) ◦ Canada (negotiation ongoing) ◦ South Korea ◦ Japan Mrs. Charu Rastogi, Asst. Prof.
  5. 5.  A multilateral trade agreement involves three or more countries who wish to regulate trade between the nations without discrimination. They are usually intended to lower trade barriers between participating countries and, as a consequence, increase the degree of economic integration between the participants. Multilateral trade agreements are considered the most effective way of liberalizing trade in an interdependent global economy. Mrs. Charu Rastogi, Asst. Prof.
  6. 6.  Although multilateral trade existed earlier, it was only after World War II that nations recognized the need for a set of rules with the objective of securing market access for post-war recovering economies. The first such set of rules came in 1947 in the form of the General Agreement on Tariffs and Trade (GATT). GATT was replaced in 1995 by the World Trade Organization, which has more than 150 members. Mrs. Charu Rastogi, Asst. Prof.
  7. 7.  The General Agreement on Tariffs and Trade (GATT) is a multilateral agreement regulating international trade. According to its preamble, its purpose is the "substantial reduction of tariffs and other trade barriers and the elimination of preferences, on a reciprocal and mutually advantageous basis." It was negotiated during the UN Conference on Trade and Employment and was the outcome of the failure of negotiating governments to create the International Trade Organization (ITO). GATT was signed in 1947 and lasted until 1993, when it was replaced by the World Trade Organization in 1995. The original GATT text (GATT 1947) is still in effect under the WTO framework, subject to the modifications of GATT 1994. Mrs. Charu Rastogi, Asst. Prof.
  8. 8.  The WTO began life on 1 January 1995, but its trading system is half a century older. Since 1948, the General Agreement on Tariffs and Trade (GATT) had provided the rules for the system The World Trade Organization (WTO) deals with the rules of trade between nations at a global or near-global level. But there is more to it than that. There are a number of ways of looking at the WTO. It’s an organization for liberalizing trade. It’s a forum for governments to negotiate trade agreements. It’s a place for them to settle trade disputes. It operates a system of trade rules. There are a total of 157 member countries in the WTO, while 26 countries are currently negotiating their membership In 2012, the WTO welcomed 4 new members: Montenegro, Samoa, Russian Federation and Vanuatu Mrs. Charu Rastogi, Asst. Prof.
  9. 9.  Above all, it’s a negotiating forum ◦ The bulk of the WTOs current work comes from the 1986-94 negotiations called the Uruguay Round and earlier negotiations under GATT. The WTO is currently the host to new negotiations, under the ―Doha Development Agenda‖ launched in 2001. ◦ Where countries have faced trade barriers and wanted them lowered, the negotiations have helped to liberalize trade It’s a set of rules ◦ At its heart are the WTO agreements, negotiated and signed by the bulk of the world’s trading nations. They are essentially contracts, binding governments to keep their trade policies within agreed limits. ◦ Although negotiated and signed by governments, the goal is to help producers of goods and services, exporters, and importers conduct their business, while allowing governments to meet social and environmental objectives. And it helps to settle disputes ◦ Trade relations often involve conflicting interests and interpretation of agreements. The most harmonious way to settle these differences is through some neutral procedure based on an agreed legal foundation. That is the purpose behind the dispute settlement process written into the WTO agreements Assisting developing countries in trade policy issues, through technical assistance and training programmes Cooperating with other international organizations Reviewing national trade policies Mrs. Charu Rastogi, Asst. Prof.
  10. 10.  Trade without discrimination ◦ Most-favoured-nation (MFN): treating other people equally ◦ National treatment: Treating foreigners and locals equally Freer trade: gradually, through negotiation Predictability: through binding and transparency ◦ In the WTO, when countries agree to open their markets for goods or services, they ―bind‖ their commitments. ◦ A country can change its bindings, but only after negotiating with its trading partners, which could mean compensating them for loss of trade. Promoting fair competition Encouraging development and economic reform Mrs. Charu Rastogi, Asst. Prof.
  11. 11.  The WTO agreements cover goods, services and intellectual property. They spell out the principles of liberalization, and the permitted exceptions. They include individual countries’ commitments to lower customs tariffs and other trade barriers, and to open and keep open services markets. They set procedures for settling disputes. They prescribe special treatment for developing countries. They require governments to make their trade policies transparent by notifying the WTO about laws in force and measures adopted, and through regular reports by the secretariat on countries’ trade policies. These agreements are often called the WTO’s trade rules, and the WTO is often described as ―rules-based‖, a system based on rules. But it’s important to remember that the rules are actually agreements that governments negotiated. Mrs. Charu Rastogi, Asst. Prof.
  12. 12. Umbrella Agreement establishing WTO Goods Services Intellectual PropertyBasic Principles GATT GATS TRIPS Other goodsAdditional Details agreements Services annexes and annexes Countries’ Countries’Market access schedules of schedules ofcommitments commitments(and commitments MFN exemptions)Dispute Settlement Dispute SettlementTransparency Trade Policy Reviews Mrs. Charu Rastogi, Asst. Prof.
  13. 13. Mrs. Charu Rastogi, Asst. Prof.
  14. 14. Subjects Name Start Duration Countries Achievements covered Signing of GATT, 45,000Geneva April 1946 7 months 23 Tariffs tariff concessions affecting $10 billion of trade Countries exchanged someAnnecy April 1949 5 months 13 Tariffs 5,000 tariff concessions Countries exchanged some September 8,700 tariff concessions,Torquay 8 months 38 Tariffs 1950 cutting the 1948 tariff levels by 25% Tariffs, January $2.5 billion in tariffGeneva II 5 months 26 admission 1956 reductions of Japan September 11 Tariff concessions worth Dillon 26 Tariffs 1960 months $4.9 billion of world trade Tariffs, 37 Tariff concessions worth $40Kennedy May 1964 62 Anti- months billion of world trade dumping Mrs. Charu Rastogi, Asst. Prof.
  15. 15. Name Start Duration Countries Subjects covered Achievements Tariffs, non-tariff Tariff reductions worth Sept’ 74 measures,Tokyo 102 more than $300 billion 1973 months "framework" dollars achieved agreements The round led to the Tariffs, non-tariff creation of WTO, and measures, rules, extended the range of trade services, negotiations, leading to intellectual major reductions in tariffs Sept’ 87 property, dispute (about 40%) and agriculturalUruguay 123 1986 months settlement, subsidies, an agreement to textiles, allow full access for textiles agriculture, and clothing from creation of WTO, developing countries, and etc an extension of intellectual property rights. Tariffs, non-tariff measures, agriculture, labor standards, Nov’ The round is not yet Doha - 141 environment, 2001 concluded. competition, investment, transparency, patents etc Mrs. Charu Rastogi, Asst. Prof.
  16. 16.  The WTO’s Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), negotiated in the 1986-94 Uruguay Round, introduced intellectual property rules into the multilateral trading system for the first time. Ideas and knowledge are an increasingly important part of trade. Most of the value of new medicines and other high technology products lies in the amount of invention, innovation, research, design and testing involved. Films, music recordings, books, computer software and on-line services are bought and sold because of the information and creativity they contain, not usually because of the plastic, metal or paper used to make them. Creators can be given the right to prevent others from using their inventions, designs or other creations — and to use that right to negotiate payment in return for others using them. These are ―intellectual property rights‖. They take a number of forms. For example books, paintings and films come under copyright; inventions can be patented; brand names and product logos can be registered as trademarks; and so on. Mrs. Charu Rastogi, Asst. Prof.
  17. 17.  The WTO’s TRIPS Agreement is an attempt to narrow the gaps in the way these rights are protected around the world, and to bring them under common international rules. It establishes minimum levels of protection that each government has to give to the intellectual property of fellow WTO members. The agreement covers five broad issues: ◦ how basic principles of the trading system and other international intellectual property agreements should be applied ◦ how to give adequate protection to intellectual property rights ◦ how countries should enforce those rights adequately in their own territories ◦ how to settle disputes on intellectual property between members of the WTO ◦ special transitional arrangements during the period when the new system is being introduced. Mrs. Charu Rastogi, Asst. Prof.
  18. 18.  The Agreement on Trade Related Investment Measures (TRIMs) are rules that apply to the domestic regulations a country applies to foreign investors, often as part of an industrial policy. The agreement was agreed upon by all members of the World Trade Organization. Policies such as local content requirements and trade balancing rules that have traditionally been used to both promote the interests of domestic industries and combat restrictive business practices are now banned. TRIMs are rules that restrict preference of domestic firms and thereby enable international firms to operate more easily within foreign markets. Mrs. Charu Rastogi, Asst. Prof.
  19. 19.  Local content requirement ◦ Measures requiring the purchase or use by an enterprise of domestic products Trade balancing requirements ◦ Measures requiring that an enterprises purchases or use of imported products be limited to an amount related to the volume or value of local products that it exports. Foreign exchange restrictions Export restrictions (Domestic sales requirements) Exceptions: ◦ Transitional period to eliminate these measures ◦ Exceptions for developing countries (for economic development) ◦ Equitable provisions to new companies during transitional period Mrs. Charu Rastogi, Asst. Prof.
  20. 20.  The General Agreement on Trade in Services (GATS) is a treaty of the World Trade Organization (WTO) that entered into force in January 1995 as a result of the Uruguay Round negotiations. The treaty was created to extend the multilateral trading system to service sector, in the same way the General Agreement on Tariffs and Trade (GATT) provides such a system for merchandise trade. All members of the WTO are signatories to the GATS. The basic WTO principle of most favoured nation (MFN) applies to GATS as well. While the overall goal of GATS is to remove barriers to trade, members are free to choose which sectors are to be progressively "liberalised", i.e. marketised and privatised, which mode of supply would apply to a particular sector, and to what extent liberalisation will occur over a given period of time. Mrs. Charu Rastogi, Asst. Prof.
  21. 21.  The topmost decision-making body of the WTO is the Ministerial Conference, which usually meets every two years. It brings together all members of the WTO, all of which are countries or customs unions. The Ministerial Conference can take decisions on all matters under any of the multilateral trade agreements. It has to meet at least once every two years. The Ministerial Conference can take decisions on all matters under any of the multilateral trade agreements The General Council, during its meeting on 25-26 July 2012, agreed that the 9th WTO Ministerial Conference would be held in Bali, Indonesia in the first week of December 2013 Mrs. Charu Rastogi, Asst. Prof.
  22. 22.  The South Asian Association for Regional Cooperation (SAARC) is an organisation of South Asian nations, which was established on 8 December 1985 when the government of Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka formally adopted its charter providing for the promotion of economic and social progress, cultural development within the South Asia region and also for friendship and cooperation with other developing countries. Afghanistan was added to the regional grouping on 13 November 2005 It is dedicated to economic, technological, social, and cultural development emphasising collective self-reliance. Meetings of heads of state are usually scheduled annually; meetings of foreign secretaries, twice annually. It is headquartered in Kathmandu, Nepal. Mrs. Charu Rastogi, Asst. Prof.
  23. 23.  to promote the welfare of the people of South Asia and to improve their quality of life; to accelerate economic growth, social progress and cultural development in the region and to provide all individuals the opportunity to live in dignity and to realize their full potential; to promote and strengthen selective self-reliance among the countries of South Asia; to contribute to mutual trust, understanding and appreciation of one anothers problems; to promote active collaboration and mutual assistance in the economic, social, cultural, technical and scientific fields; to strengthen cooperation with other developing countries; to strengthen cooperation among themselves in international forums on matters of common interest; and to cooperate with international and regional organisations with similar aims and purposes. Mrs. Charu Rastogi, Asst. Prof.
  24. 24. Case Study Mrs. Charu Rastogi, Asst. Prof.
  25. 25.  In late 1997, an American company RiceTec Inc, was granted a patent by the US patent office to call the aromatic rice grown outside India Basmati. RiceTec Inc, had been trying to enter the international Basmati market with brands like Kasmati and Texmati described as Basmati-type rice with minimal success. However, with the Basmati patent rights, RiceTec will now be able to not only call its aromatic rice Basmati within the US, but also label it Basmati for its exports. This has grave repercussions for India and Pakistan because not only will India lose out on the 45,000 tonne US import market, which forms 10 percent of the total Basmati exports, but also its position in crucial markets like the European Union, the United Kingdom, Middle East and West Asia. In addition, the patent on Basmati is believed to be a violation of the fundamental fact that the long grain aromatic rice grown only in Punjab, Haryana, and Uttar Pradesh is called Basmati. According to sources from the Indian Newspaper, Economic Times, "Patenting Basmati in the US is like snatching away our history and culture." Mrs. Charu Rastogi, Asst. Prof.
  26. 26.  Basmati rice means the "queen of fragrance or the perfumed one." This type of rice has been grown in the foothills of the Himalayas for thousands of years. Its perfumy, nut-like flavor and aroma can be attributed to the fact that the grain is aged to decrease its moisture content. Basmati, a long-grained rice with a fine texture is the costliest rice in the world and has been favored by emperors and praised by poets for hundreds of years. According to the Agricultural and Processed Food Products Export Development Authority (APEDA), India is the second largest producer of rice after China, and grows over a tenth of the worlds wheat. In 1993, Basmati rice attracted the highest premium because it is a very-long grained rice, with an aroma of its own which enhances the flavors its mixed with. Mrs. Charu Rastogi, Asst. Prof.
  27. 27.  RiceTec Inc, was issued the Patent number 5663484 on Basmati rice lines and grains on September 2, 1997. In abstract, "the invention relates to novel rice lines and to plants and grains of these lines. The invention also relates to a novel means for determining the cooking and starch properties of rice grains and its use in identifying desirable rice lines. Specifically, one aspect of the invention relates to novel rice lines whose plants are semi-dwarf in stature, substantially photoperiod insensitive and high yielding, and produce rice grains having characteristics similar or superior to those of good quality Basmati rice. Another aspect of the invention relates to novel rice lines produced from novel rice lines. The invention provides a method for breeding these novel lines. A third aspect...relates to the finding that the starch index (SI) of a rice grain can predict the grains cooking and starch properties, to a method based thereon for identifying grains that can be cooked to the firmness of traditional Basmati rice preparations, and to the use of this method in selecting desirable segregants in rice breeding programs." Mrs. Charu Rastogi, Asst. Prof.
  28. 28.  Rice is an important aspect of life in the Southeast and other parts of Asia. For centuries, it has been the cornerstone of their food and culture. During this period, farming communities throughout the region developed, nurtured, and conserved over a hundred thousand distinct varieties of rice to suit different tastes and needs. It is for this reason that patenting of Basmati by RiceTec Inc. is perceived as not only intellectual property and cultural theft, but it also directly threatens farm communities in Southeast Asia. According to Dr Vandana Shiva, director of a Delhi-based research foundation which monitors issues involving patents and biopiracy, the main aim for obtaining the patent by RiceTec Inc. is to fool the consumers in believing there is no difference between spurious Basmati and real Basmati. Moreover, she claims the "theft involved in the Basmati patent is, therefore, threefold: a theft of collective intellectual and biodiversity heritage on Indian farmers, a theft from Indian traders and exporters whose markets are being stolen by RiceTec Inc., and finally a deception of consumers since RiceTec is using a stolen name Basmati for rice which are derived from Indian rice but not grown in India, and hence are not the same quality.― In fact, Basmati rice has been one of the fastest growing export items from India in recent years. In the year to March 1997, India exported more than half a million tonnes of Basmati to the Gulf, Saudi Arabia, Europe and the United States, a small part of its total rice exports, but high in value. More substantively, Indian farmers export $250 million in Basmati every year and U.S. is a target market. (4) RiceTec Inc. had attempted to sell its long-grain rice in Europe under such brand names as Texmati and Kasmati but not as Basmati. However, if the patent is not revoked, RiceTec Inc., can now sell its rice under the brand name Basmati which will definitely cut into Indias and Pakistans global market share, especially as the rice grown in the US could be sold cheaper than the Indian and Pakistani varieties. Mrs. Charu Rastogi, Asst. Prof.
  29. 29.  In an official release, the government of India reacted immediately after learning of the Basmati patent issued to RiceTec Inc., stating that it would approach the US patent office and urge them to re-examine the patent to a United States firm to grow and sell rice under the Basmati brand name in order to protect Indias interests, particularly those of growers and exporters. Furthermore, a high level inter-ministerial group comprising of representatives of the ministries and departments of commerce, industry, external affairs, Council for scientific and industrial research (CSIR), Agriculture, Bio-technology, All India Rice Exporters Association (AIREA), APEDA, and Indian Council of Agricultural Research (ICAR) were mobilized to begin an in-depth examination of the case. The contents and implications of the patent are currently being analyzed in consultation with patent attorneys and agricultural scientists. The government of India is particularly concerned about the patenting of Basmati because of an earlier case where the US granted a patent to two Indian-born scientists on the use of Turmeric as a wound healing agent. This case worked in favor of India because the patent was subsequently revoked after scientists of (CSIR) successfully challenged the patenting on the ground that the healing properties of Turmeric had been common knowledge in India for centuries. There is a clause in US patent laws that will accept any information already available in published or written form anywhere in the world as common knowledge. As a result, India was able to furnish published evidence to support their case that the healing characteristics of Turmeric is not a new invention and as such cannot be patented. Mrs. Charu Rastogi, Asst. Prof.
  30. 30.  In the presence of widespread uprising among farmers and exporters, the nation of India as a whole feel confident of being able to successfully challenge the Basmati patent by RiceTec Inc. According to the Economic Times of India, the law firm of Sagar and Suri who won the Turmeric patent case and presently representing the government against RiceTec Inc. in existing cases, said; "RiceTec has got a patent for three things: growing rice plants with certain characteristics identical to Basmati, the grain produced by such plants, and the method of selecting the rice plant based on a starch index (SI) test devised by RiceTec Inc." The lawyers plan to challenge this patent on the basis that the above mentioned plant varieties and grains already exist and thus cannot be patented. In addition, they encountered some information from the US National Agricultural Statistics Service in its latest Rice Year book 1997, released in January 1998, which states that almost 75 percent of US rice imports are the Jasmine rice from Thailand and most of the remainder are from India and Pakistan,"varieties that cannot be grown in the US" This piece of information is rather interesting and can be used as a weapon against the RiceTec Basmati patent Mrs. Charu Rastogi, Asst. Prof.
  31. 31.  The law firm representing India in the dispute, Sagar and Suri, criticized the procedures for granting patents in the US claiming it is diametrically opposite to the one followed in India and Europe. According to them, India first examines a patent application, then widely publishes it for third parties to challenge, and only then grants the patent. However, the US keeps the patent application a closely guarded secret and grants it without allowing other parties to challenge it. After the patent has been granted, third parties are then allowed to petition against the patent as India is currently doing in the Basmati case. This criticism clearly illustrates the shortfalls in the patent process in the US that ultimately needs to be revised to prevent future cases like this from occurring. Mrs. Charu Rastogi, Asst. Prof.
  32. 32.  Indians feel that the US governments decision to grant a patent for the prized Basmati rice violates the International Treaty on Trade Related Intellectual Property Rights (TRIPS). The president of the Associated Chambers of Commerce (ASSOCHAM) said Basmati rice is traditionally grown in India and Pakistan and granting patent to it violated the Geographical Indications act under the TRIPS. The TRIPS clause defines Geographical indication as "a good originating in the territory of a member, or a region or locality in that territory, where a given quality, reputation, or other characteristic of the good is essentially attributable to its geographical origin." As a result, it is safe to say Basmati rice is as exclusively associated with India and Pakistan as Champagne is to France and Scotch Whiskey is to Scotland. Indians argue that just as the US cannot label their wine as champagne, they should not be able to label their rice Basmati. If the patent is not revoked in the US because unlike the Turmeric case, rice growers lack documentation of their traditional skills and knowledge, then India as have been urged by many activist in the field should take the case to the WTO for an authoritative ruling based on the violation of TRIPS. Mrs. Charu Rastogi, Asst. Prof.
  33. 33.  In the wake of the problems with patents that India has experienced in recent years, they have now realized the importance of enacting laws for conserving biodiversity and controlling piracy as well as intellectual protection legislation that conform to international laws. There is a widespread belief that RiceTec Inc., took out a patent on Basmati only because of weak, non- existent Indian laws and the governments philosophical attitude that natural products should not be patented. According to some Indian Experts in the field of genetic wealth, India needs to formulate a long-term strategy to protect its bio-resources from future bio-piracy and or theft. India and Pakistan who are joining hands to tackle the crisis have a strong case against RiceTec Inc. British traders are also supporting India and Pakistan. According to Howard Jones, marketing controller of the UKs privately owned distributor Tilda Ltd, "True Basmati can only be grown in India or Pakisatn. We will support them in any way if its necessary." The Middle East is also showing support by only labeling Indian or Pakistani rice as Basmati. The case is still unfolding and it will be interesting to find out what happens in the end once the government and government agencies have gathered the necessary data and information to support their case and to prevent their cultural heritage from being taken away from them. Mrs. Charu Rastogi, Asst. Prof.
  34. 34. Mrs. Charu Rastogi, Asst. Prof.