11 - 13 World Trade Organisation

World Trade Organisation
Functions Agreements Ministerial Conferences

Thursday, February 14, 2013 Dr. S. Jain 1
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
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.
History of WTO Year 1947 1949 1951 1956 1960-1961 1964-1967 1973-1979 1986-1994 Place/name Geneva Annecy Torquay Geneva Geneva Dillon Round Geneva Kennedy Round Geneva Tokyo Round Geneva Uruguay Round Subjects covered Tariffs Tariffs Tariffs Tariffs Tariffs Countries 23 13 38 26 26
Tariffs and anti 62 dumping measures Tariffs, non-tariff measures, 102 framework agreements Tariffs, non-tariff measures, 123 rules, services, intellectual property, dispute settlement, textiles, agriculture, creation of WTO, etc
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Thursday, February 14, 2013
The Directors-general of GATT and WTO GATT 1948 1994

Sir Eric Wyndham-White (UK) Olivier Long (Switzerland) Arthur Dunkel (Switzerland) Peter Sutherland (Ireland) 1948-68 1968-80 1980-93 1993-94;
WTO 1995
Renato Ruggiero (Italy) Mike Moore (New Zealand) Supachai Panitchpakdi (Thailand) Pascal Lamy (France) 1995-1999 1999-2002 2002-2005 2005
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Members and Observers of WTO -
Members Observers Others
Composition of geographical regions of WTO
North America South America Europe CIS Africa Middle East Asia
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 permanent
institution 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.
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 its member 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
Decision-making
WTO is a member-driven consensus-based organization where 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 not delegated to the board of directors or the organizations head.
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 and trade policy reviews.
Umbrella Goods Basic principles Additional details GATT Other goods agreements and annexes Countries schedules of commitments
AGREEMENT ESTABLISHING WTO
Services GATS Services annexes
Intellectual property
TRIPS
Market access commitments
Countries schedules of commitments(and MFN exemptions) DISPUTE SETTLEMENT TRADE POLICY REVIEWS
Dispute settlement Transparency
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Organizational Structure of the WTO

Highest authority Second level Third level : The Ministerial Conference : General Council : 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
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 nondiscrimination. 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 against dumping.
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Creating Fairer Markets in Agriculture Sector

Although earlier rules of GATT did apply to agriculture trade they contained loopholes. As a result, international trade in agriculture became highly distorted, especially with the use of export subsidies which would not normally have been allowed for industrial products. The Uruguay Round produced the first multilateral agreement dedicated to the agriculture sector. The objective of the agreement on agriculture was to reform trade in agriculture and to make policies more market oriented.
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.
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 also
permitted 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. Where
they 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.
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.
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.
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.
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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, telecommunications companies, 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 to another. Consumers or firms making use of a service in another country A foreign company setting up subsidiaries or branches to provide services in another country, i.e. commercial presence Individuals travelling from their own country to supply services in another, i.e. presence of natural persons
Mode 2:
Mode 3:
Mode 4:
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Salient Features of GATS

Most-favoured-nation (MFN) treatment Commitments treatment Transparency on market access and national
Objectivity and reasonability of regulations

Recognition International payments and transfers Progressive liberalization
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

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.
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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Agreements on 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.
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The Agreement on Subsidies and Countervailing Measures (SCM)

This agreement disciplines the use of subsidies and regulates 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 to
meet certain export targets, or to use domestic goods instead of imported goods.
Actionable Subsidies: Subsidy has an adverse effect on its
interest 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.
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.
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.
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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 conflicts of interest by the inspection agencies.
Rules of Origin
Rules of origin 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.
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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.
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 fellowmembers of specific measures, policies, or laws through regular notifications. The WTO conducts regular reviews of individual countries 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.
Dispute Settlement Process

Time Taken
60 days 45 days 6 months 3 weeks 60 days
Stages
Consultations, mediation, etc. Panel set up and panellists appointed Final panel report to parties Final panel report to WTO members Dispute Settlement Body adopts report (if no appeal) One Year (without appeal) Appeal report Dispute Settlement Body adopts appeals report One year 3 months (with appeal)
Total
6090 days 30 days Total
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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)
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 protection agreed 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 minimum cut per product Domestic support total cuts for sector (base period: 1986-88) Exports value of subsidies -36% -21% -24% -14% -20% -13% -36% -15% -24% -10%
subsidized quantities (base period: 1986-90)
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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) 16% (minimum, taking 1990 imports as base) 17% 18% 49% (maximum) Percentage of products to be brought under GATT (including removal of any quotas) 6.96% per year 8.7% per year 11.05% per year No quotas left
Step 1: 1 Jan 1995 (to 31 Dec 1997) Step 2: 1 Jan 1998 (to 31 Dec 2001) Step 3: 1 Jan 2002 (to 31 Dec 2004) Step 4: 1 Jan 2005 >Full integration into GATT (and final elimination of quotas).
>Agreement on Textiles and Clothing terminates.

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World Trade Organisation

Functions Agreements Ministerial Conferences

To provide an overview of WTO agreements

Thursday, February 14, 2013

The Directors-general of GATT and WTO GATT 1948 1994

Thursday, February 14, 2013

Members and Observers of WTO -

Members Observers Others

Composition of geographical regions of WTO

WTO vs. GATT

whereas WTO commitments are permanent.

GATT had contracting parties whereas the WTO has members.

institution with its own Secretariat.

Thursday, February 14, 2013

Services GATS Services annexes

Market access commitments

Dispute settlement Transparency

Thursday, February 14, 2013

Organizational Structure of the WTO

Thursday, February 14, 2013

Principles of the Multilateral Trading System under the WTO

Thursday, February 14, 2013

WTO AGREEMENTS: AN OVERVIEW

General Agreement on Tariffs and Trade (GATT)

Thursday, February 14, 2013

GATT General Agreement of Tariff and Trade

Thursday, February 14, 2013

Creating Fairer Markets in Agriculture Sector

Elimination of Non-tariff Measures through the Tariffication Process

Binding Against Further Increase of Tariffs

Thursday, February 14, 2013

Under the Agreement on Agriculture, domestic policies

that have a direct effect on production and trade have to

Thursday, February 14, 2013

permitted where farmers are required to limit production. This also

Thursday, February 14, 2013

they are listed, the agreement requires WTO members to

Standards and Safety Measures

health, provided no discrimination is made and this is

Thursday, February 14, 2013

Agreement on Sanitary and Phytosanitary (SPS) Measures

Agreement on Technical Barriers to Trade (TBT)

Thursday, February 14, 2013

Opening Up International Business Opportunities in Textiles

framework for bilateral agreements or unilateral actions

Post-MFN Textile and Clothing Scenario

Thursday, February 14, 2013

General Agreement on Trade in Services (GATS)

in response to the strong growth of the services

Thursday, February 14, 2013

Thursday, February 14, 2013

General Obligations and Disciplines

Thursday, February 14, 2013

Salient Features of GATS

Objectivity and reasonability of regulations

TRIPS Trade Related Intellectual Property Rights

Thursday, February 14, 2013

Protection and Enforcement of IPRs

Property Rights (TRIPS), introduced intellectual property rules in

establishes a mechanism for consultations and surveillance at the

international level to ensure compliance with these standards by

Curbing Unfair Marketing Practices

Thursday, February 14, 2013