The WTO: Opportunities and Challenges

Dr. Abid Qaiyum Suleri

OutlineBrief Introduction to GATT/WTO

Decision Making Process and Structure of WTO

Developing Countries Experience with WTO

Trading into Future

Bilateral Agreements

WTO Agreements

WTO Organization

IFIs

WTO Challenges and opportunities

Sometimes we are Net Importers: We look for cheap prices

What to do if we

are both?

Sometimes we are Exporters: look for reduced tariffs

Life is never Easy

The interest and expectation level of 146 member states vary a lot and there

is never a win-win situation for all

WTO Historical Context

•Post World War II era and need for economic revival

•Bretton Woods Institutes (WB, IMF)

•International Trade Organization

•GATT

The World bank•The World Bank was formed at the UN Monetary and Financial Conference held in Bretton Woods, N.H., in 1944.

•Function: Lending money and funding projects in needy countries to alleviate poverty. Loans are conditioned on fundamental changes to the recipient country's economic and social policies.

•World Bank President: James Wolfensohn (Always an American)

The World Bank

•The Bank's five largest shareholders -- France, Germany, Japan, UK & USA -- each appoint an executive director. The remaining 175 member countries are represented by 19 executive directors.

USA by virtue of its shares can veto any policy.

•The seven richest countries (Canada, France, Germany, Italy, Japan, UK & USA), have 45 percent of the voting power.

The IMF•Established 1945 at Bretton Woods.

•The IMF was designed to stabilize international exchange rates and promote foreign exchange cooperation at a time when the gold standard was beginning to fail as a means of stabilizing currency values.

•Eight executive directors represent individual countries: China, France, Germany, Japan, Russia, Saudi Arabia, UK & USA. The remaining 16 executive directors represent groupings of the other 174 countries. Chairman always from EC

Asian Development Bank (nbw)

•Total 61 members (43 regional, 19 non regional).

•Japan and United States have 15.89 % shares, each. Both of them can block any initiative.

International Trade Organization

50 Countries floated the idea.

Among them 23 decided in 1946 to negotiate to reduce and bind customs tariffs.

The first round of negotiation resulted in 45,000 tariff concessions affecting $10 billion of trade.

The 23 also agreed to “provisionally” accept some of the trade rules of the draft ITO charter.

The combined package of trade rules and tariff concessions was known as the General Agreement on Tariffs and Trade (GATT). GATT entered into force in January 1948.

ITO: Charter was agreed in Havana March 1948

US Congress refused to ratify ITO in 1950

ITO was effectively dead in 1950

What Next?

The GATT Trade Rounds

1947 Geneva Tariffs 23

1949 Annecy Tariffs 13

1951 Torquay Tariffs 38

1956 Geneva Tariffs 26

1960-61 Dillon Round Tariffs 26

1964-67 Kennedy Round Tariffs and AD measures 62

1973-79 Tokyo Round Tariffs, NT Measures, framework agreements 102

1986-94 Uruguay Round Tfs, NTM, rules, services, IP, DS, textile, agriculture, creation of WTO 123

How WTO is different from GATT

GATT WTO

•Ad hoc/ provisional with no Agreements as well as provision for creation of Org. organization are Permanent.

•Had contracting parties has members.

•Dealt with trade in Goods covers services and IP as well.

•GATT DSD The WTO dispute settlement system is faster, more

automatic than the old GATT system. Its rulings cannot be blocked.

WTO is an organization Established: 1 January 1995Membership: 146 countries (as of July 2003), 3/4th membership comprisesDeveloping countries (self elected)

Functions:• Administering WTO trade agreements• Forum for trade negotiations• Handling trade disputes• Monitoring national trade policies• Technical assistance and training for developing countries• Cooperation with other international organizations 

WTO principles

The WTO trading system would be

without discrimination – (MFN and National treatment to all);

freer – with barriers coming down through negotiation;

predictable – bound tariffs

more competitive – by discouraging “unfair” practices such as export subsidies and dumping products at below cost to gain market share;

more beneficial for less developed countries – by giving them more time to adjust, greater flexibility, and special privileges

Industrial

Sanitary and Phytosanitary Measures (Health regulations for farm products)Textile and clothingTechnical Barriers to Trade (Product Standards)Investment measures (TRIMs)Anti-dumping measuresCustoms valuation methodsPre-shipment inspectionRules of originImport licensingSubsidies and counter measuresSafeguards

Movement of natural personsAir transportFinancial servicesShippingTelecommunications

Schedules of Commitments.

Basic Principle

Additional Annex

Commitments

Agriculture

In a nut shellThree part broad outline of WTO Agreements

Goods--------GATT

Services-----GATS

IPRs--------Trade related Intellectual Property Rights

 Disputes------Dispute Settlement

Inve

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Dispute

Com

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Gov

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Tra

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Fac

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Goods GATT

Services GATS

IPRS TRIPS

SINGAPORE ISSUES

Industrial

Agriculture

Trade & Environment

SPS

Textile and clothing

TBT

Anti Dumping

Voting

Principle One member, one vote

Primary aim Consensus

No consensus Majority vote

Interpretation of agreements

¾ in favor

Amendment to agreements

2/3 in favor

Propose amendments Countries and Councils

Voting Principles in WTO

WTO Decision Making Process •Some members are more equal than others.

•Lack of transparency in the multitude of talks held in small groups.

•Being Present is important but not easy for all.

•Alliance building.

•Role of IFIs

WTO is run by member states: One Country one vote

EC JAPANGermany USAFrance

Rest of the World

WB IMFADB

In WTO decisions are taken through consensus: USA, UK, Germany, France, and Japan

know how to achieve it.

Development Box

UPOV and Bangladesh

Nepal’s Accession to WTO

Main Objections

•Dictates Policies

•For free trade at any cost?

•Destroy jobs and worsen poverty

•Small countries are powerless

•Tool of powerful lobbies.

Developed countries are not fulfilling their commitments

WTO

WTO experience for developing countries

•Tariff Peaks (high import duties on certain products) remain

•No gains yet from the supposed phasing-out of textiles quotas.

•Increase in non-tariff barriers (AD, SPS, TBT)

•Continued high protection in Agriculture (USA- Sugar 244%, Peanuts 174%; Japan- Wheat 353%) up to 36% reduction?

•Implementation Problems faced by developing countries.

WTO Ministerial Conferences

1st Ministerial conference Singapore 19962nd Ministerial conference Geneva 19983rd Ministerial conference Seattle 19994th Ministerial conference Doha 20015th Ministerial conference Cancun 2003

WTO for Developing Countries

• Why developing countries such as Pakistan should be members of WTO?

– Alternative?– Possible gains through theoretical principle of non-

discrimination– Member based, rule based organization.

• Developing countries role in WTO?– More active involvement– Giving tough time to USA and EU– More cases in Dispute Settlement Body

Developing countries in DSBOut of 22 Disputes, brought forward in year 2003 so far

7 against USA.

7 against EC

& 1 against Australia

7 cases were brought forwarded by developing countries i.e.,

Argentina 1

Antigua 1

Thailand 2

Mexico 3

One case against Mexico was brought forwarded by USA.

Doha Agenda

 

Implementation Negotiations on outstanding implementation issues shall be an integral part of the Work Program.

Deadline: by 1 January 2005, part of single undertaking.AgricultureServicesMarket Access (Non-Agriculture)Anti-DumpingSubsidiesRegional AgreementsEnvironment  InvestmentCompetitionTransparency in government procurementTrade Facilitation

Negotiations: after 5th Ministerial Conference, 2003 (in Mexico) “on the basis of a decision to be taken, by explicit consensus.

What does it entail for Pakistan after 2005?

•WTO would not start implementing in 2005. It is already functional.

•AOA

•Agreement on Textiles and Clothing

•Singapore Issues

•Trade and Environment

What are the risk and opportunities at Cancun

Agriculture

TRIPS

GATS (Movement of natural person)

Singapore Issues

Trade and environment

Role of Legislatures in WTO Negotiations

1950 US Congress and ITO

•We should debate our positions on various issues in parliament.

•To avoid what happened after Doha, there must be standing committee on WTO, constituting all relevant ministers.

•Official delegation to Cancun should include elected representatives as well.

•Commerce Minister should brief NA about Pakistan’s position in Cancun after the Ministerial Conference

Let us start it from today

Please discuss our position for Cancun in the coming session of NA.