World trade organization


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Countries under the aegis of the United Nations agreed to form an International Trade Organization.

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World trade organization

  1. 1. World Trade OrganizationWorld Trade Organization Special Reference to India
  2. 2. History of WTOHistory of WTO •1946-47: 50 countries under the aegis of the United Nations agreed to form an International Trade Organization •1948: GATT formed with 23 members of which 11 (including India) were developing countries •1948 -95: GATT remained a provisional agreement with no dispute settlement mechanism. 7 rounds of GATT completed during 1948-86. •1986: Uruguay Round of GATT launched. Biggest ever mandate to include tariff & non-tariff barriers as well as trade in services.Also decided to form an ITO to include dispute settlement as well as to replace the provisional agreement. •1993:The Uruguay Round completed after 8 rounds, with 23,000 pages of legal text and national commitments on goods and services •1995:WTO comes into agreement with the Marrakesh Agreement
  3. 3. History of WTO (contd)History of WTO (contd) •1995-2005: Most of the Uruguay Round agreements on agriculture, textiles, intellectual property, customs valuation and non-tariff barriers implemented •1997:Additional agreements on financial services and telecommunication •2001: Doha Round begins
  4. 4. The WTO SystemThe WTO System •There are about 60 individual agreements and decisions by 150 members •Nature of agreements specified •Ceilings, e.g on tariffs fixed but not actual rates •Phased agreements; no big bang •Promises may be broken but in a disciplined manner, e.g in times of food crisis, dumping •In the Uruguay Round of GATT, developing countries found policies lopsided (e.g agriculture and fishery subsidies), in the Doha Round beginning from 2001, developing countries more assertive
  5. 5. Organization of WTOOrganization of WTO Ministerial Conference (every 2 years) General Council (regular formal & informal sessions) Trade Policy review (6-8 countries each year) Dispute Settlement Trade Negotiation Committee (overseas the Doha Round) Council for Trade in Goods Council for Trade in Services Council for Trade-Related Aspects of Intellectual property Rights (Oversees TRIPS) Financial Services Specific committees Agriculture, Market access, Technical barriers, sanitary & phytosanitary measures, customs valuation, Rules of Origin, Anti-dumping measures
  6. 6. Primary WTO PrinciplesPrimary WTO Principles •Transparency – member countries are required to publish laws, regulations and practices regularly •Non-discrimination – At the first level, this refers to “Most Favored Nation” treatment, i.e member’s exports treated in the destination country no differently from the exports from other countries. At the second level,“national treatment” refers to safeguards against exports made uncompetitive due to special taxes, charges, administrative practices that are not applied to local producers •Progressive tariff liberalization – tariff bindings (maximum ceilings on tariff rates), reduction of tariff peaks (tariff rates above 20%) and tariff escalation (when an importing country imposes lower tariff rates on raw materials & components and higher on finished products). •No quantitative restrictions
  7. 7. Agreement on AgricultureAgreement on Agriculture •Market Access – “tariffication”: all non-tariff barriers like import ban, import quota or quantitative restrictions on imports to be replaced by bound tariffs •Domestic Support:Amber Box (trade-distorting measures like price support and input subsidies affecting production to be reduced), Green Box (not trade-distorting but affects production, like R&D, marketing assistance, etc. acceptable), Blue Box (direct payments to farmers to limit production acceptable) •Export competitiveness – export subsidies to be reduced
  8. 8. Critique of AoACritique of AoA •Skewed in favor of developing countries •From the producers’ perspective rather than consumers’ perspective •Subsidies under Amber Box decreased but those under Green Box and Blue Box increased •Food imports in developing countries increased •WTO addresses food security issues through imports
  9. 9. Non-Agricultural Market AccessNon-Agricultural Market Access •Refers to all products not covered by the Agreement on Agriculture. In practice, it includes manufacturing products, fuels and mining products, fish and fish products, and forestry products.They are sometimes referred to as industrial products or manufactured goods. •During the Uruguay Round, tariff averages were reduced from 6.3% to 3.8%. Binding coverage for NAMA products in developing countries increased from 21% to 73%, which has considerably increased the predictability of trade. •A tariff binding is a ceiling level above which a Member cannot apply a tariff. Difference between bound tariff and applied rate is called ‘water’. •Reduced tariffication is aimed to provide market access in developed as well as developing countries
  10. 10. Doha Round ControversyDoha Round Controversy •Negotiations on bound tariffs – develop formula for reduction of bound tariffs •Agriculture – India defensive in agriculture (not opening up markets), offensive in tropical products like rice (India wants market access). •Special safeguard mechanism •G33 (Indonesia is the leader, India included) seeking flexibility in safeguard mechanism •Doha Round free-trade talks collapsed in 2006, especially on agricultural domestic support and market access.
  11. 11. Export competitionExport competition •Export subsidy will be phased out by 2013 •Specific attention to cotton, especially concerning small African countries
  12. 12. ServicesServices •India is offensive with respect to services as it wants market access and discipline of domestic producers •Regulation of financial services •Mode 1:Transborder exchange through telecommunication; Mode 4: People exchange (the problem area)
  13. 13. India’s participationIndia’s participation •India was not active in the GATT till the 1980s because of import substitution policies. It also had assured markets in the Soviet bloc. Opening up the domestic market to foreign competition was thought to be harmful. Instead discussed trade-related issues at UNCTAD. •In the first two rounds of WTO ministerial meetings (Singapore 1996 and Geneva 1998), new agreements on IT and Global E-Commerce were signed.These were in favor of India as it began to increase exports in IT.
  14. 14. India’s participation – 2India’s participation – 2ndnd half of 1990shalf of 1990s •Export growth rate slowed down, especially with the East Asian crisis, and the service sector emerged as the main foreign exchange earner. •India became offensive in services, especially in Mode 4, i.e movement of professionals. •Tariff barriers decreased in developed countries but WTO- compatible non-tariff barriers like labor and technical standards and contingency provisions like anti-dumping measures, safeguard provisions, were increasingly been used. •India victim of a number of dispute settlement cases at the WTO about WTO-compatibility of Indian policies.
  15. 15. India’s participation since 1999India’s participation since 1999 •India became most vocal at the Seattle Ministerial in 1999 against developed countries’ attempt to incorporate labor and environmental standards.There was no decision. •At the Doha ministerial in 2001, India was concerned with i) non-realisation of benefits from Agreement on Textiles & Clothing and AoA, ii) non-binding nature of provisions like market access, iii) inequities and imbalances in TRIPS, Subsidies, anti-dumping
  16. 16. India’s participation since 1999 (contd)India’s participation since 1999 (contd) •At Cancun in 2003, India and other developing countries protested against EU-US draft on agriculture. The ministerial decided to take stock of the Doha Round Agenda. It has not yet been resolved. •Since then, India has given submissions at various WTO forums on both export promotion (enhancement of market access) and domestic protection (provisions of special products, special safeguard mechanism in agriculture). •Geneva, 2004, Hong Kong, December 2007 have been continuation of the Doha Round Agenda
  17. 17. G-20 Achievements at Hong KongG-20 Achievements at Hong Kong •Development programs in developing countries that have the least trade distorting effects will be incorporated in the Green Box. •The heaviest subsidisers, EU, US and Japan, will attract the highest levels of cuts in trade-distorting domestic support entitlements. •All developed countries and developing countries that declare themselves capable will provide duty-free and quota-free market access on a lasting basis to all products originating from LDCs. •Call for intensification of consultation on TRIPS especially to address public health concerns in developing countries. •In cotton, export subsidies eliminated in 2006 and trade-distorting domestic subsidies to be reduced over time. •To eliminate all export subsidies by 2013.
  18. 18. India’s stand on AgricultureIndia’s stand on Agriculture •Overall tariff reduction on bound rates for developing countries of not more than 36%. •Threshold of bound tariff should be higher for developing countries •Self-designation of special products based on criteria of food security, livelihood security and rural development. No tariff cuts in these. •Special Safeguard Mechanism to check against price dips and import surges. •Substantial and effective cuts in overall trade-distorting domestic support by the US, EU
  19. 19. India’s stand on NAMAIndia’s stand on NAMA •A fair markup in the unbound tariff lines •Flexibilities that are adequate and appropriate to address sensitivities of developing countries. •Percentage reduction commitments from bound rates
  20. 20. India’s stand on ServicesIndia’s stand on Services •Commitments by developed countries on substantial openings for India’s contractual service suppliers and independent professionals in Mode 4 related movement of persons. •Development of disciplines in Domestic Regulations in Mode 4 involving qualifications and licensing requirements and procedures
  21. 21. India’s stand on RulesIndia’s stand on Rules •Strengthening of disciplines in anti-dumping include mandatory application of lesser duty rule, prohibition of zeroing in, stronger rules on reviews including sunset reviews. •Against the enlargement of the scope of the Agreement on Subsidies and Counterveiling Measures and limit existing flexibilities for the developing countries. •Special and differential treatment in any disciplines on fishery subsidies as there are employment and livelihood concerns for small, artisanal fishing communities.
  22. 22. Anti-dumping rulesAnti-dumping rules •A company is dumping if it is exporting a product to the EU at prices lower than the normal value of the product (the domestic prices of the product or the cost of production) on its own domestic market. •Anti-dumping investigation has to be conducted within 6 months. •Anti dumping duty usually take the form of an ad valorem duty, but could also be specific duties or price undertakings.The duties are paid by the importer and collected by the national customs authorities. •By a lesser duty rule, an assessment is made of the level of duty needed to remove the injurious effects of dumping. Measures are imposed at the level of dumping or injury whichever is the lower.
  23. 23. Zeroing in of anti-dumpingZeroing in of anti-dumping •In a typical antidumping investigation, the US calculates weighted- average net prices for each product sold in the United States. It then compares each of those U.S. prices to the product's normal value, which can be calculated a number of different ways but is ideally the weighted-average net price of the most similar product sold in the home market. Zeroing is introduced after the comparison of the U.S. price and normal value. •When normal value is higher than the U.S. price, the difference is treated as the dumping amount.When, however, the U.S. price is higher, the dumping amount is set to zero rather than its calculated negative value. •All dumping amounts are then added and divided by the aggregate export sales amount to yield the company's overall dumping margin. Zeroing thus eliminates "negative dumping margins" from the dumping calculation.
  24. 24. Learning from WTO negotiationsLearning from WTO negotiations •From being a victim of anti-dumping in the 1990s, India has become proactive in anti-dumping investigations. •India largest user of anti-dumping duties, China has the largest number of anti-dumping legislation against it. •Move towards regional trade agreements. •Made Indian exporters WTO-compatible and also more efficient in the domestic market.
  25. 25. Heterogeneity of developing countriesHeterogeneity of developing countries •Consists of advanced developing countries, small & vulnerable economies, landlocked countries and least developed countries (LDCs). Each have different agenda. •77 African, Caribbean and Pacific (ACP) countries, which are beneficiaries of trade with the EU, have interests around preference items like sugar and banana. •G-20 evolved in the Cancun Ministerial, including Brazil, China , South Africa and India. •G-33 has defensive interests in agriculture, through special safeguard mechanism and special products. •G-90 comprises ACP and some more LDCs. •NAMA-11 evolved in the Hong Kong ministerial focusing on non- agricultural market access.
  26. 26.  Campus Ahmedabad Campus: Karnavati Knowledge Village, A/907,Uvarsad, S.G.Highway, Gandhinagar Kolkata Campus: Infinity Benchmark Tower 10th Floor, Plot - G1, Block - EP& GP, Sec - V, Salt Lake, Kolkata. Reg. Office: 407, Zodiac Square, 4th Floor Opp. Gurudwara, S.G. Road, Bodakdev, Ahmedabad.