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Lesson 3 Mm Prof Rajeev Kumar
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WTO
World Trade Organizationis the only international
organization dealing with
the global rules of tradebetween nations.
Its main function is to ensurethat trade flows as
smoothly, predictably and
freely as possible
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The WTO
Location: Geneva, SwitzerlandEstablished: 1 January 1995
Created by: Uruguay Round negotiations
(1986-94)Membership: 153 countries (on 23 July
2008)
Budget: 189 million Swiss francs for 2009Secretariat staff: 625
Head: Director-General, Pascal Lamy
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ASSURANCE:
The result is assurance: Consumersand producers know that they canenjoy secure
supplies and greater choice of the
finished products, components, rawmaterials and
services that they use. Producers andexporters know that foreign markets
will remain
open to them.
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The result is also a more
prosperous, peaceful and
accountable economic world.
Decisionsin the WTO are typically taken by
consensus among all member
countries and they are
ratified by members parliaments.
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At the heart of the system known as the multilateral trading
system are the WTOs
agreements, negotiated and
signed by a large majority of the
worlds trading nations, andratified in their parliaments.
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These agreements are the legal
ground-rules for internationalcommerce. Essentially, they are
contracts, guaranteeing member
countries important trade
rights. They also bind governments to
keep their trade policies within
agreed limits to
everybodys benefit.
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The World Trade Organization came
into being in 1995. One of the
youngest of the
international organizations, the WTOis the successor to the General
Agreement on Tariffs
and Trade (GATT) established in thewake of the Second World War
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The system was developed through a
series of trade negotiations, or
rounds, held under
GATT. The first rounds dealt mainly
with tariff reductions but later
negotiations included
other areas such as anti-dumping and
non-tariff measures. The last round the 1986-94
Uruguay Round led to the WTOs
creation.
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In 2000, new talks started onagriculture and services. These have
now been incorporated
into a broader work programme, theDoha Development Agenda (DDA),
launched at the
fourth WTO Ministerial Conference inDoha, Qatar, in November 2001.
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The agenda adds negotiations and other
work on non-agricultural tariffs, trade and
environment, WTO rules such as anti-
dumping and subsidies, investment,
competition
policy, trade facilitation, transparency in
government procurement, intellectual
property,
and a range of issues raised by developing
countries as difficulties they face in
implementing the present WTO
agreements.
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How can you ensure that trade is
as fair as possible, and as free as is
practical? By
negotiating rules and abiding by
them.
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The WTOs rules the agreements
are the result of negotiationsbetween the members.
The current set were the outcome
of the 1986-94 Uruguay Round
negotiations which
included a major revision of theoriginal General Agreement on
Tariffs and Trade (GATT).
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The complete set runs to some
30,000 pages consisting of about
30 agreements and separate
commitments (calledschedules) made by individual
members in specific areas such as
lower customs duty rates
and services market-opening.
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Through these agreements, WTO
members operate a non-
discriminatory trading system
that spells out their rights and
their obligations.
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Each country receives guarantees that
its
exports will be treated fairly and
consistently in other countries
markets. Each promises todo the same for imports into its own
market. The system also gives
developing countriessome flexibility in implementing their
commitments.
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SERVICES
Banks, insurance firms,telecommunications companies, tour
operators, hotel chains and
transport companies looking to do
business abroad can now enjoy the
same principles offreer and fairer trade that originally
only applied to trade in goods.
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INTELLECTUAL PROPERTY
The WTOs Intellectual Property Agreement
amounts to rules for trade and investment in
ideas and creativity. The rules state how
copyrights, patents, trademarks, geographicalnames 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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DISPUTE SETTLEMENT
The WTOs procedure for resolving
trade quarrels under the Dispute
Settlement
Understanding is vital for enforcingthe rules and therefore for ensuring
that trade flows
smoothly. Countries bring disputes tothe WTO if they think their rights
under the
agreements are being infringed.
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The system encourages countries to
settle their differences throughconsultation. Failing
that, they can follow a carefully
mapped out, stage-by-stageprocedure that includes the
possibility of a ruling by a panel of
experts, and the chance to appeal the
ruling on legal
grounds.
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TRADE POLICY REVIEW
The Trade Policy Review
Mechanisms purpose is to
improve transparency, to create agreater understanding of the
policies that countries are
adopting, and to assess their
impact.
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DEVELOPING COUNTRIES
DEVELOPMENT AND TRADE
Over three-quarters of WTO
members are developing or least
developed countries.
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All WTO agreements contain special
provision for
them, including longer time periods toimplement agreements and
commitments, measures to increase their
trading opportunities,provisions requiring all WTO members to
safeguard their trade
interests, and support to help them buildthe infrastructure for WTO
work, handle disputes, and implement
technical standards.
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The 2001 Ministerial Conferencein Doha set out tasks, including
negotiations, for a wide range of
issues concerning developing
countries. Some people call the
new negotiations the DohaDevelopment Round.
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A WTO Committee on Trade and
Development, assisted by a Sub-
Committee on Least-Developed
Countries, looks at developing
countries special needs.
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Its responsibility includesimplementation of
the agreements, technical
cooperation, and the increased
participation of developing
countries in the global tradingsystem.
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TECHNICAL ASSISTANCE AND
TRAININGThe WTO organizes hundreds of
technical cooperation missions to
developing countries annually. It
holds on average three trade
policycourses each year in Geneva for
government officials.
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The WTO has set up reference
centres in over 100 trade
ministries and regionalorganizations in capitals of
developing and least-developed
countries.
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THE ORGANIZATION
FUNCTIONS
The WTOs overriding objective isto help trade flow smoothly,
freely, fairly and
predictably.
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It does this by:
?Administering trade agreements
? Acting as a forum for trade
negotiations
? Settling trade disputes
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Reviewing national trade
Assisting developing countriesin trade policy
issues, through technical
assistance and
training programmes
Cooperating with otherinternational organizations
policies
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STRUCTURE
The WTO has 153 members,
accounting for over 97% of worldtrade. Around 30
others are negotiating
membership.
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Decisions are made by the entire
membership. This is typically byconsensus. A majority
vote is also possible but it has
never been used in the WTO, and
was extremely rare under
the WTOs predecessor, theGeneral Agreement on Tariffs and
Trade (GATT).
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The WTOs top level decision-
making body is the MinisterialConference which meets at
least once every two years.
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Below this is the General Council
(normally ambassadors and heads
of delegation in
Geneva, but sometimes officialssent from members capitals)
which meets several times ayear in the Geneva headquarters.
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SECRETARIAT
The WTO Secretariat, based in
Geneva, has around 625 staff andis headed by a director general.
It does not have branch offices
outside Geneva.
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Global Business Environment
the 1990s saw air travel increase
by 7%per annum.
Europe, North America and Asiawere the biggest markets. but the
terrorists attacks in the US in
September 2001 rocked the
industry.
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Global airline industry suffered
losses of 10 billion ponds in 2001after the attacks mainly because of
the concern over the issue of safty
in air travel.
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Globalization Is a Three
Dimensional Concept:
a phenomenona philosophy
and
a process
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Global Business Environment & its
Components:GBE can be defined as the
environment in different sovereign
countries , with factors exogenous
to the home environment of the
organization, influencing decisionmaking on resource use and
capabilities.
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Social Environments:companies operating
internationally must understand
the social environment of the host
country they are operating
in(working in a foreign cultureetc.)
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Emphasis On The Individual RatherThan The Group:
most western societies emphasize
individual performance while many
Asian countries like Japan , China
an d India emphasize group/teamperformance.
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Japanese organizations depend
highly on the employees
socialization into the companiesculture.
Lifetime employment is the usual
practice in such societies.
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Religion and International
Business:
Islam believes in social justice.
Islam prohibits giving or receiving
interest on money.
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Values , Attitudes and International
Business:
for eg ., in India Hindus regard thecow as sacred. Therefore Mc
Donald's sells lamb instead of beef
hamburgers in India
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Customs and Manners and
International Business:
in the US orange juice isconsidered a breakfast drink but in
France , it has to be marketed as a
refreshing drink.
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Language:companies should be careful when
translating advertising and other
communication messages eg.. Ford
motors FIERA TRUCK did not sell
well in Spain because it meantugly old woman in Spanish.
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Political environment:
foreign companies face political
constraints like tax programs,pollution laws, pricing policies etc
aiming at protecting the
consumers and the local industry .
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Economic Environment:the economic environment in the
host country relates to all the
factors that contribute to a
companys attractiveness for
foreign business like volume oftrade and FDI.