Understanding WTO and
International Trade
R S Deshpande
National Fellow ICSSR
Former Director ISEC
E-mail:rs.kalbandi@gmai...
A. What is the WTO?
 The World Trade Organisation (WTO)
Established on 1st January 1995
As a result of the Uruguay Round ...
Evolution of the WTOPredecessor of the WTO – The GATT ‘47
 The General Agreement on Tariffs and Trade (GATT) 1947 -the
fi...
The Uruguay Round (1986-
1994)
 The results of the Uruguay Round (UR) were signed in
Marrakech, Morocco on 15 April 1994 ...
The WTO’s functions
 Administers the WTO Agreements and facilitates their
operation and implementation
 Provides a forum...
Principles of the world trading
system under the WTO
 Non discrimination- Most Favoured Nation (MFN) and
National Treatme...
Organisational structure of the WTO
 Ministerial Conference- The apex body for decision making
(meets every 2 years). Com...
The Ten benefits
1.The system helps promote peace
2. Disputes are handled constructively
3. Rules make life easier for all...
THE 10 MISUNDERSTANDINGS
1. WTO dictates
2. Blindly for trade
3. Ignores development
4. Anti-green
5. Anti-health
6. Wreck...
Four main Principles
 Most Favoured Nation –
 National Treatment;
 Tarrification;
 Tariff Concession
 MFN: Art. 1 of ...
Principles (Cont.)
 National Treatment –
The national treatment rule in Art. 3 of GATT provides
that internal taxes, char...
Principles (Cont.)
 Tarrification
- Protection of the domestic industry by tariffs only.
- Reinforced through rules which...
General Obligations
MFN (Art.2)
“With respect to any measure covered by this Agreement, each Member
shall accord immediate...
Specific obligations
Market Access Art. 16
“With respect to market access through the modes of supply identified in
Articl...
Cont.
Domestic regulations Art. 6
Article 6 addresses domestic regulations as these may act as barriers to
trade even if t...
WTO: Benefits for business
 Creation of a stable, rule based, multilateral trading regime
 Market access translates into...
History of Negotiations
# Date Host City
1st 9 - 13 December 1996 Singapore
2nd 18 - 20 May 1998 Geneva , Switzerland
3rd
...
The Uruguay Round
 The Agreement establishing the WTO Its Annexes
 Annex
1A - GATT 1994 , related agreements (e.g. Agree...
Important Aspects of Agreement on
Agriculture
.Sl.
No
Components Specific Recommendations
1. Market Access i. Tarrificatio...
Contd
2. Export-
Competition
i. Defined limits on budget
expenditure on existing
export subsidies. Phased
programme to red...
 Contd.
v. Export credit and credit
guarantees to be covered
under a separate agreement.
3. Domestic
Support
Policies
i. ...
 Domestic Support: Encourages further shift away
from trade-distorting measures and policies.
However certain subsidies a...
Amber Box Measures excluded from
exemption measures:
 “de minimis” support; support not exceeding 5%
of the value of prod...
Doha Round In Brief
 Launched in Dec.2001 in ministerial level meeting in Doha
 List 21 subjects; original deadline Jan ...
Key Issues in Doha Round
 Market Access and Agriculture
 Rules on export subsidies, domestic support, and Tariff cuts.
...
Continued…
• Developmental Issues
 Access to Patented Medicines – relates to Agreement on Trade-Related
Aspects of Intell...
Failure of Doha Round
 Divergent Interests Groups
 Heterogeneity across the newer group and between old
members
 Belong...
Issues in Bali Negotiation
 Trade facilitation –
 Put forward by developed nations (particularly, US and EU with a large...
Contd…
 Innovation and international
competitiveness will be the theme of the
debate on the second day of the Forum.
Exch...
. Food Security and Issues-
 Proposed by G33 nations (India, China and
Philippines in particular. These countries have m...
Contd….
 Cotton-4 – Benin, Burkina Faso, Chad, Mali have
proposed to allow cotton from least developed
countries duty-fre...
Enhanced Integrated Framework
(EIF)
 A non-negotiating subject matter, but of
critical importance to the LDCs in the
cont...
Let Us Play Intelligently and Get in our Favour
Ye Dharati Apani Hai Apana Ambar Hai Re
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WTO Some Primary information and History

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This is a good compilation of History of WTO for those who are beginners as also those who need advanced knowledge

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WTO Some Primary information and History

  1. 1. Understanding WTO and International Trade R S Deshpande National Fellow ICSSR Former Director ISEC E-mail:rs.kalbandi@gmail.com
  2. 2. A. What is the WTO?  The World Trade Organisation (WTO) Established on 1st January 1995 As a result of the Uruguay Round negotiations (1986- 1994) Located in Geneva, Switzerland Members: 149 countries  At its simplest: “A global organisation dealing with rules of trade between nations”. (source: WTO)
  3. 3. Evolution of the WTOPredecessor of the WTO – The GATT ‘47  The General Agreement on Tariffs and Trade (GATT) 1947 -the first major effort to establish international rules governing trade in goods. Though initially conceived as a provisional legal instrument, it endured for almost 50 years.  It functioned without a formal organisational framework to oversee its implementation as the proposed International Trade Organisation (ITO) never came into being and the ITO Charter (aka the Havana Charter) of which GATT was only to be a part, never came into effect.  GATT’s primary focus was the reciprocal reduction of tariffs which later expanded to other trade related areas. In the years leading up to the Uruguay Round, GATT expanded its competence through several rounds of trade negotiations which witnessed the formulation of complex legal instruments on specific aspects of trade, particularly disciplines on the use of non tariff barriers.
  4. 4. The Uruguay Round (1986- 1994)  The results of the Uruguay Round (UR) were signed in Marrakech, Morocco on 15 April 1994 .The WTO came into being on 1 January 1995 by virtue of the Agreement establishing the WTO.  The scope of the multilateral trading system was broadened from trade in goods (GATT) to encompass trade in services (GATS) and trade related aspects of intellectual property rights (TRIPS). It was a rule-based global trading system complete with its own dispute resolution procedures .  The “Single Undertaking” concept The multilateral trade agreements under the WTO system are treated as a single undertaking which means that every member state of the WTO is a party to every one of these agreements and must implement them accordingly.
  5. 5. The WTO’s functions  Administers the WTO Agreements and facilitates their operation and implementation  Provides a forum for trade negotiations among member states on matters covered by the Agreements and for further liberalisation of trade amongst members  Responsible for the settlement of differences and disputes between members  Responsible for periodic reviews of the trade policies of members  Also provides technical assistance and training for developing countries  Cooperates with other international organisations on subjects of mutual interest
  6. 6. Principles of the world trading system under the WTO  Non discrimination- Most Favoured Nation (MFN) and National Treatment obligations  Freer trade – negotiations aimed at lowering trade barriers  Predictability and transparency - binding commitments, restrictions on the use of barriers to trade and transparent trade policies and regulatory frameworks (e.g. transparency obligations in the major trade agreements and the Trade Policy Review Mechanism)  The promotion of fair competition- MFN, national treatment and rules against unfair trade practices (e.g. anti dumping)  Encouragement of development and economic reform  Two Principles : Developed –Developing and Under- Developed Nations; Differential Time Treatments
  7. 7. Organisational structure of the WTO  Ministerial Conference- The apex body for decision making (meets every 2 years). Composition:-ministerial representatives.  General Council- performs the functions of the Conference between meetings and has specific duties assigned to it by the WTO agreements. Composition:- governmental representatives.  The General Council also meets as the Dispute Settlement Body and the Trade Policy Review Body.  Councils for Trade in Goods (oversees GATT), Trade in Services (oversees GATS) and TRIPS which report to and assist the General Council.  Committees on special subjects, Committees functioning under the Councils and Committees for the Plurilateral Agreements. Decision making is by consensus. If consensus is not possible decisions will be taken by a majority vote.
  8. 8. The Ten benefits 1.The system helps promote peace 2. Disputes are handled constructively 3. Rules make life easier for all 4. Freer trade cuts the costs of living 5. It provides more choice of products and qualities 6. Trade raises incomes 7. Trade stimulates economic growth 8. The basic principles make life more efficient 9. Governments are shielded from lobbying 10.The system encourages good governments
  9. 9. THE 10 MISUNDERSTANDINGS 1. WTO dictates 2. Blindly for trade 3. Ignores development 4. Anti-green 5. Anti-health 6. Wrecks jobs 7. Small left out 8. Tool of lobbies 9. Weak forced to join 10. Undemocratic
  10. 10. Four main Principles  Most Favoured Nation –  National Treatment;  Tarrification;  Tariff Concession  MFN: Art. 1 of GATT embodies the MFN rule. At its simplest, it requires any favourable treatment granted to a product originating in or destined for any other country, to be accorded immediately and unconditionally to the like product originating in or destined for the territories of all other member states. E.g. Spanish coffee case: Spain applied a higher duty on the types of coffee imported from Brazil while applying a lower duty on other coffees considered to be ‘like products’. The Panel considered this to be a breach of its GATT MFN obligation.  There are permitted exceptions to the MFN rule: for e.g. free trade areas/customs unions and preferential systems. [The principle of MFN is also found in GATS(Art.2) and TRIPS (Art.4)]
  11. 11. Principles (Cont.)  National Treatment – The national treatment rule in Art. 3 of GATT provides that internal taxes, charges, laws and regulations must not be applied so as to afford protection to domestic production. The imported product must not be subject directly or indirectly to internal taxes in excess of those applied directly or indirectly to the like domestic product. E.g. Japan- Alcoholic beverages case (1996) Imported vodka (and other alcoholic beverages) vs. local shochu (a distilled white spirit) and excessive taxes on the former. [The national treatment principle is also found in GATS (Art.17) and TRIPS (Art.3).]
  12. 12. Principles (Cont.)  Tarrification - Protection of the domestic industry by tariffs only. - Reinforced through rules which prohibit use of quantitative restrictions (Art 11 GATT). Limited exceptions are allowed e.g. for BOP reasons (Art 12 GATT).  Tariff Concessions- negotiations shall be aimed at reducing tariffs (Preamble and Art. 28bis GATT). Tariffs shall also be bound against further increases [Art 2.1(b) GATT]. (Tariff concessions are recorded in schedules of concessions)
  13. 13. General Obligations MFN (Art.2) “With respect to any measure covered by this Agreement, each Member shall accord immediately and unconditionally to services and service suppliers of any other Member treatment no less favorable than that it accords to like services and service suppliers of any other country.” Note qualifications to the MFN rule via Art. 2 exemptions and RTAs (Art.5) Transparency (Art.3) Art. 3 is mainly concerned with the provision of information. The rule requires the “prompt” publication of general measures, notification of changes to/introduction of measures that affect sectors covered by specific commitments to the Services Council. Also requires the establishment of national enquiry points.
  14. 14. Specific obligations Market Access Art. 16 “With respect to market access through the modes of supply identified in Article 1, each Member shall accord services and service suppliers of any other Member treatment no less favorable than that provided for under the terms, limitations and conditions agreed and specified in its Schedule.” Art. 16 contains a prohibition of a list of measures (mostly quantitative) which Members cannot maintain unless they specify them in their Schedules as limitations on market access. These measures include: - limitations on the number of suppliers (e.g. quotas) - limitations on the quantity of service out put (e.g. limited broadcasting time for foreign films) - limitations on the participation of foreign capital or restrictions on the type of legal entity (e.g. joint venture)
  15. 15. Cont. Domestic regulations Art. 6 Article 6 addresses domestic regulations as these may act as barriers to trade even if they are non-discriminatory. E.g. professional qualifications, licensing procedures and technical regulations. Certain Art. 6 obligations apply only to service sectors in which commitments have been undertaken. They include: - obligations to ensure that general measures are administered in “a reasonable, objective and impartial manner”. - obligations aimed at preventing licensing and qualification requirements and technical standards from being unnecessary barriers to trade.
  16. 16. WTO: Benefits for business  Creation of a stable, rule based, multilateral trading regime  Market access translates into market opportunities  The rule based system creates certain rights of access - Security of access tariff bindings and disciplines on barriers to trade whether tariff or non tariff. It also provides non discriminatory treatment of products and services. - Stability of access the application of uniform rules in key areas of the trading process e.g. customs valuation, import licenses etc. - Rights against unfair trade practices for  Domestic industry  Export industry  Import industry
  17. 17. History of Negotiations # Date Host City 1st 9 - 13 December 1996 Singapore 2nd 18 - 20 May 1998 Geneva , Switzerland 3rd 30 November - 3 December 1999 Seattle , United States 4th 10 - 14 November 2001 Doha , Qatar 5th 10 - 14 September 2003 Cancun , Mexico 6th 13 - 18 December 2005 Hong Kong 7th 30 November - 3 December 2009 Geneva , Switzerland 8th 15 December - 17 December 2011 Geneva , Switzerland 9th December 2013 [1] Bali, Indonesia
  18. 18. The Uruguay Round  The Agreement establishing the WTO Its Annexes  Annex 1A - GATT 1994 , related agreements (e.g. Agreements on Agriculture, Subsidies etc.) and texts 1B- General Agreement on Trade in Services (GATS) and Annexes 1C- Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS)  Annex 2 Understanding on the Rules and Procedures Governing the Settlement of Disputes (aka Dispute Settlement Understanding /DSU)  Annex 3 Trade Policy Review Mechanism  Annex 4 Plurilateral Agreements (e.g. Agreement on Trade in Civil Aircraft)
  19. 19. Important Aspects of Agreement on Agriculture .Sl. No Components Specific Recommendations 1. Market Access i. Tarrification- change from non-tariff to tariff, thereby rationalising the access. ii. Negotiable restrictions on tariff and binding lines drawn for tariffs. iii. Guaranteed access at a pre-decided share of domestic market. iv. Special safeguard measures for importers. v. Safeguards against eventualities like- import surge, world price fluctuations and developing economies.
  20. 20. Contd 2. Export- Competition i. Defined limits on budget expenditure on existing export subsidies. Phased programme to reduce it. ii. Ban on introducing new export subsidies. iii. Adherence to food aid rules. Genuine food aid to be exempted from trade restrictions. iv. Other subsidies should not be applied that would undermine the cut in export subsidies..
  21. 21.  Contd. v. Export credit and credit guarantees to be covered under a separate agreement. 3. Domestic Support Policies i. Reduction in total trade distorting domestic subsidies. ii. Separate treatment for developing countries. iii. Exemption for developing countries based on Aggregate Measure of Support. iv. Direct payments under production reduction programme not subject to reduction. v. “Green Box” defined for allowable subsidies.
  22. 22.  Domestic Support: Encourages further shift away from trade-distorting measures and policies. However certain subsidies are allowed under the agreement- the Green Box and Amber Box Measures. Green Box includes expenditures on:  Support for research  Control of Pests and Diseases  Training, Extension & Advisory services  Public stock for Food Security  Direct Payment to Producers  Farm Income Insurance  Safety Nets & Disaster Management  Investment Subsidies and Agricultural input services to Resource Poor Farmers
  23. 23. Amber Box Measures excluded from exemption measures:  “de minimis” support; support not exceeding 5% of the value of production of individual products of the value of total agricultural production. For developing countries, the level is 10%.  Certain measures to encourage agricultural and rural development in developing countries, including generally available investment subsidies, subsidies to low-income producers, and support to diversification away from growing illegal narcotic crops; and  certain direct payments under production- limiting programmes. (Blue Box).
  24. 24. Doha Round In Brief  Launched in Dec.2001 in ministerial level meeting in Doha  List 21 subjects; original deadline Jan 2005; extended up to Dec 2006  Round included several Meetings-  Ministerial : Cancun (2003); Hong Kong (2005);  Other: Geneva (2004,2006,2008); Paris (2005); Potsdam (2007)  Formation of different interest groups  Developed nations ( US; EU; Japan)  Developing nations (India, Brazil, China, South Africa & South Korea)  Differences between interest groups  Between US & EU (over agricultural subsidies as trade barrier)  Between Developed and Developing Nations  Between Developing Nations (Exporters vis -a- vis Importers)  The talk collapsed in Dec. 2008 over  Agricultural subsidies  Reduction of industrial tariffs and non-tariff barriers  Services and trade remedies
  25. 25. Key Issues in Doha Round  Market Access and Agriculture  Rules on export subsidies, domestic support, and Tariff cuts.  Hong Kong Meeting (2005)- consensus on elimination of farm export subsidies by 2013 (2006 for cotton export subsidies), and modalities for tariff cuts, with four ranges of tariffs, each being subjected to a different percentage cut.  Non-Agricultural Market Access  Considerable asymmetry in tariff levels between countries and across sectors within countries. Tariffs are quite high in developed countries.  included provision of bound tariffs; settlement mechanism in which developed countries would offer more in agriculture, services, and rules; flexible provisions to take in to account the special needs & interests of developing countries.  Services  Market access to services like financial services, telecoms, energy services, express delivery and distribution services. But, decision left to the state to decide which sectors it wants to open to foreign companies and to what extent.  To open, improve and clarify the rules on regulations, the poorest countries and flexibilities.
  26. 26. Continued… • Developmental Issues  Access to Patented Medicines – relates to Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). The issue involves the balance of interests between the pharmaceutical companies in developed countries that held patents on medicines and the public health needs in developing countries.  Special and Differential Treatments to developing countries -  Implementation Issues - market access, investment measures, safeguards, rules of origin, and subsidies and countervailing measures, among others  Trade Facilitation- to support the capacity of developing countries to implement trade liberalization and structural change. It could potentially be extended to all activities involved in the international movement of goods and services, such as building transport infrastructure and facilities, operating trade-related services such as telecommunications, and providing specialized legal and insurance services.  Rules Negotiations - clarifying and improving WTO disciplines and procedures on fisheries subsidies as well as regional trade agreements.  Dispute Settlement -
  27. 27. Failure of Doha Round  Divergent Interests Groups  Heterogeneity across the newer group and between old members  Belonging to different stages of development;  different perceptions of trade-off between global markets and issues of national interest; developed countries for deeper integration and liberalisation, whereas new participants for greater special safeguards against import surge.  Inherent conflict of interest – in negotiation agenda on elimination of price-distorting policies, harms the interest of net exporters (low income for farmers) and importers of commodities (poverty concerns)  Shifting national priorities –  structural change in developing countries warranted both better access to markets (developed country) in manufacturing and agriculture and safeguards against vulnerabilities. Whereas, developed countries continued to insist on greater market access and enforcement of IPRs.
  28. 28. Issues in Bali Negotiation  Trade facilitation –  Put forward by developed nations (particularly, US and EU with a large export interest). Smoothening cross-border trade by removing red tape, improving infrastructure and harmonising customs procedures, is on their agenda  Trade and Innovation-  how open trade and innovation work together and how new technologies have changed the traditional way of doing business or whether technological innovation has changed the way we trade, and if so, how?  whether trade has helped countries to innovate?  how innovation can enhance the trading capacities of developing countries and create trade opportunities.?  how trade can keep up with the rapid evolution of technology?
  29. 29. Contd…  Innovation and international competitiveness will be the theme of the debate on the second day of the Forum. Exchange views on how open trade and innovation work together and how new technologies have changed the traditional way of doing business.  A total of 16 sessions on the third day of the Forum will be dedicated to Bali Ministerial Conference issues, such as trade facilitation, development issues, topics related to small and medium- sized enterprises, e-commerce, food security, and future challenges .
  30. 30. . Food Security and Issues-  Proposed by G33 nations (India, China and Philippines in particular. These countries have many food security schemes for the poor in place)  Stock holding & Food Aid- an important measure for developing countries to assure minimum returns to their poor farmers and domestic food security. It is far more crucial for highly populated countries having significant area under rainfed conditions.  Expected position of India in Bali - India is likely to convey that the Peace Clause in Article 13 of the agreement on agriculture (AOA) that is vogue since 9 years. India can only go so far as accepting a Peace Clause as an interim mechanism till an acceptable final solution is arrived at.  India is even prepared to commit non-releasing of procured food grains for international trade and the management of public stocks to be done in a transparent manner.
  31. 31. Contd….  Cotton-4 – Benin, Burkina Faso, Chad, Mali have proposed to allow cotton from least developed countries duty-free, quota-free market access into developed countries and at least some developing countries by 2015, to eliminate any remaining export subsidies for cotton in developed countries immediately. They are also asking for a decision by the end of 2014 on how to cut domestic support for cotton.  Development -  LDC specific issues:  Duty and quota free market access  Operationalisation of waiver on services  Cotton and preferential rules of origin.
  32. 32. Enhanced Integrated Framework (EIF)  A non-negotiating subject matter, but of critical importance to the LDCs in the context of their trade capacity-building is the EIF programme which aims to build institutional and productive capacity in the LDCs.   The EIF is also an instrument for the LDCs to access larger aid-for-trade resources. In fact, the LDCs could very well use the occasion of the Bali Ministerial to further reinforce the aid- for-trade initiative in the WTO.
  33. 33. Let Us Play Intelligently and Get in our Favour Ye Dharati Apani Hai Apana Ambar Hai Re

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