11 - 13 World Trade Organisation

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World Trade Organisation

Functions

AgreementsMinisterial Conferences

Thursday, February 14, 2013 1Dr. S. Jain


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Dr. S. Jain 2

Learning Objectives

To elucidate the significance of WTO and its genesis

To briefly explain the functions and structure of WTO

To describe the principles of multilateral trading system under

WTO

To provide an overview of WTO agreements

To explicate the dispute settlement system under WTO

To discuss the ministerial conferences and emerging issues

To evaluate the WTO system in context of developing countries

Thursday, February 14, 2013


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Significance of WTO

The World Trade Organization (WTO) is the only

international organization that deals with global rules of

trade between nations. It provides a framework for

conduct of international trade in goods and services. It

lays down the rights and obligations of governments in

the set of multilateral agreements.



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History of WTO -

Year Place/name Subjects covered Countries

1947 Geneva Tariffs 23

1949 Annecy Tariffs 13

1951 Torquay Tariffs 38

1956 Geneva Tariffs 261960-1961 Geneva Tariffs 26

Dillon Round

1964-1967 Geneva Tariffs and anti 62

Kennedy Round dumping measures

1973-1979 Geneva Tariffs, non-tariff measures, 102

Tokyo Round framework agreements1986-1994 Geneva Tariffs, non-tariff measures, 123

Uruguay Round rules, services, intellectual property,

dispute settlement, textiles,

agriculture, creation of WTO, etc



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The Directors-general of GATT and WTO -

GATT 1948 1994

Sir Eric Wyndham-White (UK) 1948-68

Olivier Long (Switzerland) 1968-80

Arthur Dunkel (Switzerland) 1980-93

Peter Sutherland (Ireland) 1993-94;

WTO 1995

Renato Ruggiero (Italy) 1995-1999

Mike Moore (New Zealand) 1999-2002 Supachai Panitchpakdi (Thailand) 2002-2005

Pascal Lamy (France) 2005



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Members

Observers

Others

Members and Observers of WTO -


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Composition of geographical regions of WTO

North America

South America

Europe

CIS

Africa

Middle East

Asia


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WTO vs. GATT

GATT remained a provisional agreement and organization

whereas WTO commitments are permanent.

GATT rules mainly applied to trade in goods whereas the WTO

covers other areas, such as services, intellectual property, etc.

GATT had contracting parties whereas the WTO has members.

GATT was essentially a set of rules of the multilateral treaty with

no institutional foundation whereas the WTO is a permanentinstitution with its own Secretariat.



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A country could essentially follow domestic legislation even if

it violated a provision of the GATT agreement which is not

allowed by the WTO. In WTO, almost all the agreements are multilateral in nature

involving commitment of the entire membership whereas a

number of GATT provisions were plurilateral and therefore

selective.

The WTO also covers certain grey areas, such as agriculture,

textiles and clothing, not covered under the GATT.

The dispute settlement system under the WTO is much more

efficient, speedy, and transparent unlike the GATT system

which was highly susceptible to blockages.



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Functions of WTO

To facilitate the implementation, administration, and

operation of trade agreements

To provide a forum for further negotiations among

member countries

Settlement of differences and disputes among itsmember countries

To carry out periodic reviews of the trade policies of

its member countries

To assist developing countries in trade policy issues,

through technical assistance and training programs

To cooperate with other international organizations



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Decision-making

WTO is a member-driven consensus-based organizationwhere all major decisions are made by its members as a

whole. The WTOs agreements have been ratified in all

members parliaments.

Unlike other international organizations, such as the

World Bank and the IMF, in WTO the power is notdelegated to the board of directors or the organizations

head.



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WTO - In a nutshell

The basic structure of the WTO agreements: how the six main areas fit together

the umbrella WTO Agreement, goods, services, intellectual property, disputes andtrade policy reviews.

Umbrella AGREEMENT ESTABLISHING WTO

Goods Services Intellectual property

Basic principles GATT GATS TRIPS

Additional details Other goods

agreements and

annexes

Services annexes

Market access

commitments

Countries

schedules of

commitments

Countries

schedules of

commitments(andMFN exemptions)

Dispute settlement DISPUTE SETTLEMENT

Transparency TRADE POLICY REVIEWS



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Organizational Structure of the WTO

Highest authority : The Ministerial Conference

Second level : General Council

Third level : Councils for each broad area

of trade

Fourth level : Subsidiary bodies



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Principles of the Multilateral Trading System

under the WTO

Trade without discrimination

Gradual move towards freer markets through negotiations

Increased predictability of international business

environment

Promoting fair competition



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WTO AGREEMENTS: AN OVERVIEW

An umbrella agreement establishing WTO

Agreements for each of the three broad areas of trade

covered by WTO

Goods

Services

Intellectual Property

Dispute settlement

Reviews of governments trade policies



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General Agreement on Tariffs and Trade

(GATT)

Opening up of the industrial sector

Reduction in tariffs

Tariff bindings



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GATT General Agreement of Tariff and Trade

It all began with trade in goods. From 1947 to 1994,GATT was the forum for negotiating lower customs duty

rates and other trade barriers; the text of the General

Agreement spelt out important rules, particularly non-

discrimination.

Since 1995, the updated GATT has become the WTOs

umbrella agreement for trade in goods. It has annexes

dealing with specific sectors such as agriculture and

textiles, and with specific issues such as state trading,

product standards, subsidies and actions taken againstdumping.



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Creating Fairer Markets in Agriculture Sector

Although earlier rules of GATT did apply to agriculturetrade they contained loopholes. As a result, internationaltrade in agriculture became highly distorted,especially with the use of export subsidies which wouldnot normally have been allowed for industrial products.

The Uruguay Round produced the first multilateral

agreement dedicated to the agriculture sector. Theobjective of the agreement on agriculture was to reformtrade in agriculture and to make policies more marketoriented.



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Elimination of Non-tariff Measures through the

Tariffication Process

Subsequent to the Uruguay Round, quotas and other

types of trade restrictive measures were to be

replaced by tariffs that provide more or less

equivalent levels of protection.

This process of converting quotas and other types of

non-tariff measures to tariffs that represent about the

same level of protection, is termed tariffication.



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Binding Against Further Increase of Tariffs

In addition to elimination of all non-tariff measures by

tariffication, all countries have bound all tariffs

applicable to agricultural products. In most cases,

developing countries have given binding at rates that

are higher than their current applied or reduced rates.



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Domestic Support

Under the Agreement on Agriculture, domestic policies

that have a direct effect on production and trade have to

be cut back. The domestic support in the agriculture

sector is categorized under Green, Amber, and Blue

boxes.



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Green Box: All subsidies that have little or all most minimal trade

distorting effects are exempted from commitments towards

reduction.

Amber Box: It is a ceiling on the total domestic support that a

government may provide to domestic producers.

Blue Box: Certain categories of direct payment to farmers are alsopermitted where farmers are required to limit production. This also

includes government assistance programmes to encourage

agricultural and rural development in developing countries



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Export Subsidies

The agreement on agriculture prohibits export subsidies

on agricultural products unless the subsidies are

specified in a members lists of commitments. Wherethey are listed, the agreement requires WTO members to

cut both the amount of money they spend on export

subsidies and the quantities of exports that receive

subsidies.



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Standards and Safety Measures

Article 20 of the GATT allows governments to act on

trade in order to protect human, animal, or plant life or

health, provided no discrimination is made and this is

not used as disguised protectionism.



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Agreement on Sanitary and Phytosanitary (SPS)

Measures

The SPS measures sets out the basic rules on food

safety and plant health standards. This allows countries

to set their own standards which have to be based on

science and should not arbitrarily or unjustifiably

discriminate between countries where identical or

similar conditions prevail.



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Agreement on Technical Barriers to Trade (TBT)

This agreement complements with SPS measures and

attempts to ensure that regulations, standards, testing,

and certification procedures do no create unnecessary

obstacles to trade.



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Opening Up International Business

Opportunities in Textiles

From 1974, until the end of the Uruguay Round, the

international trade in textiles was governed by the

Multi-fibre Arrangement (MFA). This was a

framework for bilateral agreements or unilateral actions

that established quotas limiting imports into countries

whose domestic industries were facing serious damage

from rapidly increasing imports.



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Post-MFN Textile and Clothing Scenario

On full integration into GATT and final elimination of quotas, the

Agreement on Textiles and Clothing ceased to exist on 1 January,

2005. This has opened immense opportunities and challenges for

the developing countries.


G l A t T d i S i


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General Agreement on Trade in Services

(GATS)

GATS is the first and the only set of multilateral

rules governing international trade in services.

Negotiated in the Uruguay Round, it was developed

in response to the strong growth of the services

economy and the greater potential for marketing

services internationally.



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GATS General agreement on Trade in Service

Banks, insurance firms, telecommunicationscompanies, tour operators, hotel chains and transport

companies looking to do business abroad can now enjoy

the same principles of freer and fairer trade that

originally only applied to trade in goods.These principles appear in the new General Agreement

on Trade in Services (GATS). WTO members have also

made individual commitments under GATS stating which

of their services sectors they are willing to open to

foreign competition, and how open those markets are.



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General Obligations and Disciplines

Mode 1: Services supplied from one country toanother.

Mode 2: Consumers or firms making use of aservice in another country

Mode 3: A foreign company setting up subsidiariesor branches to provide services in anothercountry, i.e. commercialpresence

Mode 4: Individuals travelling from their own

country to supply services in another,i.e. presence of naturalpersons



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Salient Features of GATS

Most-favoured-nation (MFN) treatment Commitments on market access and national

treatment

Transparency

Objectivity and reasonability of regulations

Recognition

International payments and transfers

Progressive liberalization



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TRIPS Trade Related Intellectual Property Rights

The WTOs Intellectual Property Agreement amounts to

rules for trade and investment in ideas and creativity.

The rules state how copyrights, patents, trademarks,

geographical names used to identify products,industrial designs, integrated circuit layout-designs

and undisclosed information such as trade secrets

intellectual property should be protected when

trade is involved.



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Protection and Enforcement of IPRs

The WTOs agreement on Trade-Related Aspects of Intellectual

Property Rights (TRIPS), introduced intellectual property rules in

the multilateral trading system for the first time. TRIPS lays

down minimum standards for the protection of IPRs as well as

the procedures and remedies for their enforcement. It also

establishes a mechanism for consultations and surveillance at the

international level to ensure compliance with these standards by

member countries at the national level.


Curbing Unfair Marketing Practices


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Curbing Unfair Marketing Practices

International market competitions get distorted mainly by unfair

trade practices, as:

If the exported goods benefit from the subsidies

If exported goods are dumped in overseas markets

The agreements on Anti-Dumping Practices (ADP) and on

Subsidies and Countervailing Measures (SCM) authorize importing

countries to levy compensatory duties on import of products.



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Dumping

A product is considered to be dumped if

The export price is less than the price charged for the same

product in the exporting country, or it is sold for less than

its cost of production and

Dumping is causing injury to domestic industry in the

importing country.



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Agreementson Anti-dumping Practices (ADP)

The WTO agreement on anti-dumping allows governments to act

against dumping where there is genuine (material) injury to the

competing domestic industry.


Th A t S b idi d C t ili


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The Agreement on Subsidies and Countervailing

Measures(SCM)

This agreement disciplines the use of subsidies andregulates the actions countries can take to counter the

effects of subsidies by other countries.

It can launch its own investigations and ultimately

charge extra duty (known as countervailing duty) on

subsidized imports that are found to be hurting domestic

producers.



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Category of Subsidies included under SCM

Prohibited Subsidies: Those subsidies that require recipients tomeet certain export targets, or to use domestic goods instead of

imported goods.

Actionable Subsidies: Subsidy has an adverse effect on itsinterest such as :

Hurts domestic industry of importing country

Hurts rival exporters from another country when the two compete in

third market

Hurt exporters trying to compete in the subsidized countrys domestic

market.



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Emergency Protection from Imports

A WTO member may restrict imports of a product

temporarily (take safeguard actions) if its domestic

industry is seriously injured or threatened with injury

caused by a surge in imports.



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Attempting to Reduce Non-Tariff Barriers

Growing use of unconventional Non-Tariff Measures

(NTMs), such as health and safety measures, technical

regulations, environmental controls, customs valuation

procedures, and labour laws by developed countries has

become a major barrier to market access to exports from

developing countries.



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Import Licensing Procedures

The agreement attempts to simplify and bring

transparency to import procedures.

It requires governments to publish sufficient

information for international traders to know how and

why licences are granted.


C V l i


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Customs Valuation

The WTO agreement aims for a fair, uniform, and

neutral system for the valuation of goods for customs

purposesa system that conforms to commercial

realities, and which outlaws the use of arbitrary or

fictitious customs values.



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Pre-shipment Inspection

The pre-shipment inspection agreement places

obligations on governments that use pre-shipment

inspection such as non-discrimination, transparency,

protection of confidential business information,

avoiding unreasonable delay, use of specific guidelines

for conducting price verification, and avoiding conflictsof interest by the inspection agencies.



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Rules of Origin

Rules oforigin are used as the criteria to define where a product was made.

The Rules of Origin Agreement requires WTO members to ensure that their

rules of origin are transparent; that they do not have restricting, distorting, or

disruptive effects on international trade. The Rules are administered in a

consistent, uniform, impartial, and reasonable manner.


Agreement on Trade Related Investment


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Agreement on Trade Related Investment

Measures (TRIMs)

The TRIMs stipulates that no member shall apply any

measure that discriminates against foreigners or foreign

products. It also outlaws investment measures that lead

to restrictions in quantities and measures requiring

particular levels of local procurement (local content

requirements) by an enterprise.



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Plurilaterals Agreements

Fair trade in civil aircraft

Opening up of competition in government procurement



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Ensuring Transparency in Trade Policy

WTOs Trade Policy Review Mechanism (TPRM) aims

to achieve transparency in regulations in the

following ways:

Governments have to inform the WTO and fellow-

members of specific measures, policies, or lawsthrough regular notifications.

The WTO conducts regular reviews of individualcountries trade policies.



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Settlement of International Trade Disputes

Dispute settlement is the WTOs unique contribution

which provides effectiveness to the rule based

multilateral trading system. The WTOs procedure for

settling disputes makes the trading system more secure

and predictable.


i S l


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Dispute Settlement ProcessTime Taken Stages60 days Consultations, mediation, etc.

45 days Panel set up and panellists appointed6 months Final panel report to parties

3 weeks Final panel report to WTO members

60 days Dispute Settlement Body adopts report

(if no appeal)Total One Year (without appeal)

6090 days Appeal report

30 days Dispute Settlement Body adopts

appeals reportTotal One year 3 months (with appeal)



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Ministerial Conferences

Singapore Ministerial Conference (913 December, 1996)

Geneva Ministerial Conference (1820 May, 1998)

Seattle Ministerial Conference (30 November - 03 December,

1999

Doha Ministerial Conference ( 914 November, 2001)

Cancun Ministerial Conference (1014 September 2003)

The Hong Kong Ministerial Conference (1318 December,2005)



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The Deadlock in WTO Negotiations

Doha work programme were suspended in July, 2006.

mainly due to lack of consensus between developing

and developed countries, and the complexity of issues

involved multilateral negotiations other get stalled.



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GATT/WTO System and Developing Countries

Although developing countries form a much bigger group

numerically under the WTO, decision-making is significantly

influenced by the developed countries. Therefore over the years,

the divide between the developed and developing countries in the

WTO has widened, leading to deadlocks in the process of

multilateral negotiations.



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Numerical targets for agriculture

The reductions in agricultural

subsidies and protectionagreed in the Uruguay Round.

Only the figures for cutting

export subsidies appear in the

agreement.

Developed

countries

6 years: 1995-2000

Developing

countries

10 years: 1995-2004

Tariffs

average cut for all agricultural

products-36% -24%

minimum cut per product -15% -10%

Domestic support

total cuts for sector (base

period: 1986-88)-20% -13%

Exports

value of subsidies -36% -24%

subsidized quantities (base

period: 1986-90)-21% -14%



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Textiles: back in the mainstream

The schedule for freeing textiles and garments products from import quotas (and returning them to GATT

rules),

The example is based on the commonly-used 6% annual expansion rate of the old Multifibre Arrangement.

Step Percentage of products

to be brought under GATT

(including

removal of any quotas)

Percentage of products

to be brought under GATT

(including

removal of any quotas)

Step 1:

1 Jan 1995 (to 31 Dec 1997)

16%

(minimum, taking 1990 imports as

base)

6.96%

per year

Step 2:

1 Jan 1998 (to 31 Dec 2001)

17% 8.7%

per year

Step 3:

1 Jan 2002 (to 31 Dec 2004)

18% 11.05%

per year

Step 4:

1 Jan 2005

>Full integration into GATT (and

final elimination of quotas).

49%

(maximum)

>Agreement on Textiles and

Clothing terminates.

No quotas left

11 - 13 World Trade Organisation

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