World Trade Organization (WTO)

Is one of the world's most important and influential International Organization The role of WTO is:
To administer the multilateral trade Agreements adopted during the Uruguay Round of trade negotiations To review national policies To serve as framework for further trade negotiations
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WTO has Power: To issue bindings legal rulings on disputes To enforce these rules by allowing imposition of trade sanctions

WTO
FROM GATT TO WTO 4 PILLERS OF GATT
TRANSPARENCY NON-DISCRIMINATION LIBERALIZATION SELF-ENFORCEMENT

WTO Covers:
1. Trade in goods 2. Trade in services 3. Intellectual Property Rights

WTO SYSTEM ACCOUNT FOR MORE THAN 97 PERCENT OF THE WORLD TRADE THE WTO AGREEMENT TOOK 7 YEARS TO NEGOTIATE AND THE RESULT IS BROAD AND COMPLICATED IS EXTREMELY BROAD AND COMPLEX PROBABLY ONLY A HANDFUL OF SPECIALIST REALLY UNDERSTAND ITS FULL IMPLICATIONS. WTO IS A MEMBER DRIVEN ORGANIZATION
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POLICY DECISIONS CONSTITUTE THREE DIMENSIONS:

ALL MEMBERS CAN PARTICIPATE IN THE MINISTERIAL CONFERENCE GENERAL COUNCIL OTHER COUNCILS AND COMMITTEES
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 DOES NOT DELEGATE POWER TO SMALLER SUB-GROUPS OF MEMBERS SUCH AS THE EXECUTIVE BOARD. WTO IS DESCRIBED AS "COLLEGIATE OF DELEGATIONS SERVICED BY THE SECRETARIATE"

THE ACCESSION PROCESS

1. COUNTRYPREPARES MEMORANDUM DESCRIBING ITS TRADE AND ECONOMIC POLICIES 2. THIS IS EXAMINED BY 'WORKING PARTY' 3. WORKING PARTY ARE OPEN TO ALL, BUT ONLY ABOUT 35 MEMBERS PARTICIPATE IN EACH, USUALLY INCLUDING THE APPLICANT'S MOST ACTIVE TRADING PARTENER AND POWERFUL ECONOMIES LIKE THE USA, EC, CANADA AND JAPAN
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EXAMPLES
1. 2. 3. 4. OVER 60 MEMBERS ON CHINA OVER 65 MEMBERS ON RUSSIA OVER 25 MEMBERS ON NEPAL OVER 15 MEMBER ON CAMBODIA

EXAMPLES
1. IT TOOK 15 YEARS FOR CHINA TO BE THE MEMBER 2. RUSSIA APPLIED IN 1993 and IS STILL NEGOTIATING( The recent news in October 2011 has indication that Russia may get membership) 3. IT TOOK 14 YEARS FOR NEPAL TO BE THE MEMBER 4. IT TOOK ONLY 34 MONTHS FOR KYRGUSTAN TO BE THE MEMBER
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4. January 1, 1995: Established WTO and replaced the old GATT which had acted as "interim" World Trade watchdog and negotiating forum since 1948.
5. Ministerial meeting (highest decision making body):
December 1996: First meeting in Singapore May 1998: Second meeting in Geneva December 1999: Third meeting in Seattle November 2001: Fourth meeting in Doha September 2003: Fifth meeting in Cancun
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6. As of September 2012: 157 countries are members. Nepal became the member in September 2003 meeting.
7. Special benefits WTO has special provisions to help least developed countries

Special provisions to provide technical assistance to food importing countries to remove negative effect with regard to food supplied. Small tariff reduction commitments and longer timeframe to implement market access measures. Can benefit from technical assistance of International Trade Center.
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Documentation
1. General Agreement, a 38 article code aimed at ensuring open, non-discriminatory trade in goods, services, agricultural produce and textiles.
2. 500 pages specific accords shaped in Uruguay Round.

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Functions
1. To administer and implement the multilateral and plurilateral trade agreement which together make up WTO 2. To act as a forum of multilateral trade negotiations. 3. To seek to resolve trade disputes. 4. To oversee national trade policies. 5. To cooperate with international institutions involved global economic policy-making.
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Helping Least Developed and Food Importing Countries

1. Appropriate mechanism related to the availability of food and the provision of basic foodstuffs in full grant form and for agricultural development. 2. Possibility of assistance from the IMF and the World Bank with respect to the short-term financing of commercial food imports.

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PRINCIPLES
1. Promote trade without discrimination. 2. National treatment-Once goods have been entered a market, they must be treated no less favorably than the domestically produced goods equivalent. 3. Intellectual property protection by WTO member countries provides for Most Favored Nations (MFN) and national treatment.

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5. Agreement requires members to offer MFN treatment to services and service supplies of other members. 6. Non-discrimination provisions include those on: Rules of origin Pre-shipment inspection Trade related investment measures Application of sanitary and phytosanitory measures
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Major Provisions
Agriculture 1. Reform trade and provide the basis for marketoriented policies, thereby improving economic cooperation for importing and exporting countries alike.

2. Established new rules and commitments in:

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Market access Domestic support Export competition Encourage the use of less trade-distorting domestic support Policies to maintain the rural economy. Specific concerns for developing countries are addressed including those of net-food importing developing countries and less developed economies.
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Health and Safety Measures 1. Application of Food safety and animal and pl health regulations 2. Government's rights to take sanitary and phytosanitory measures but stipulates that they must be based on science, should be applied only to the extent necessary to protect human, animal or plant life or health and should be arbitrarily or unjustifiably discriminate among members where identical or similar conditions prevail.
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Textile and Clothing To secure the integration of the textiles and clothing sector-where much of the trade is currently subject to bilateral quota negotiations under the Multi-fiber Agreement (MFA) into the main stream of WTO.

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Anti-dumping Measures 1. Imposed on imports, if such dumped imports cause injury to the domestic industry in the territory of the importing member. 2. Additional criteria for determining the injury caused to a domestic industry by the dumped product. 3. Procedure to be followed in initiating and conducting anti-dumping investigations. 4. The role of dispute settlement panels in disputes relating to anti-dumping actions taken by WTO members.
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TRIPS (Trade Related Aspects of Intellectual Property Rights) Protection and enforcement of intellectual property rights. Effective enforcement measures for those rights. Multilateral dispute settlement.

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GATS (The General Agreement on Trade and Services) The agreement contains three elements: 1. A framework of general rules and disciples 2. Special conditions relating individual sectors (movement of natural persons, financial services, telecommunication and air transport services) 3. A council of trade in services overseas the operation of the agreement.
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Some of the important steps undertaken by Nepal during the WTO accession and negotiation
Applied under GATT on 16 May 1989 Working party was established on 21-22 May 1989 Memorandum of foreign trade regime of Nepal was submitted on 26 February 1990 Nepal communicated interest on 5 December 1995 General council decided to give continuity the working group on 31 January 1996
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 Memorandum of foreign trade regime of Nepal submitted on 10 August 1998

First formal meeting of working party held on 22 May 2000

Schedules on goods and services in July 2002

Second formal meeting of working party held on 12 September 2002

Protocol of accession submitted on 15 August 2003

Working party concluded Nepal's membership on 15 August 2003 Fifth ministerial conference held in Cancun, approved for accession on Nepal's membership. Nepal ratified on March 2004 and has become full fledge member of WTO.
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 IMPACT OF WTO ON NEPAL'S ECONOMY Positive Impact

Trade Expansion Trade Diversification Freedom of Transit will provide legal and secure transit rights to Nepal through India and China Dispute Settlement will ensure a stronger, faster, impartial and binding mechanism for settlement of disputes related to trade End of Bilateralism Bilateral agreement with 17 countries. Trade and Transit Treaty with India will do away with the need for bilateral trade agreement Image and Power Almost of WTO members are developing countries. This will empower Nepal.
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NEGATIVE IMPACT
1. Erosion of Preference (enjoyed under bilateral agreement and treaties)
Tariff Rates Concession Removal of concession Removal of subsidies in agriculture Opening up of trade and services etc. Prohibition of quota restrictions Affect domestic industries

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2. PriceHike Food, Drugs, Agricultural Inputs and other items of importsforeign exchange outflow 3. Accession Commitment Accept stringent commitments by existing members 4. Reduce flexibility in policy and strategy formulation relating to trade 5. Institutional Requirements 6. Burden of WTO may be too heavy as there is no level playing field in practice. 7. Lacks knowledge, information, experience, capacity, resources, institutional infrastructure, competent personnel
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8. Dependence on foreign firms will increase for technology and resources 9. Difficult to enforce its intellectual property rights 10. Patents taken by US Companies of traditional generic commodities like Basmati Rice, Neem leaves, Turmeric etc. 11. Gaps in Theory and Practice 12. European Union and Japan are unwillingness to reduce subsidies on agricultural products 13. Trade harassment is high for LDCs and Nepal

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CHALLENGES
1. MAXIMIZE THE BENEFITS 2. MINIMIZE ITS RIGHTS AND DOWNSIDE EFFECTS 3. EQUIP OURSELVES WITH THE CAPACITY NECESSARY TO PARTICIPATE EFFICIENTLY IN GLOBAL MARKETS 4. ABILITY TO ADJUST OUR ECONOMIC STRUCTURES TO A CHANGING EXTERNAL ENVIRONMENT

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5. 6. 7. 8.

STABLE MACROECONOMY PRUDENT FINANCIAL MANAGEMENT SOUND REGULATORY PRACTICES NECESSARY STRUCTURAL AND INSTITUTIONAL REFORMS IN THE FINANCIAL AND CORPORATE SECTORS

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The World Bank (2003) Diagnostic Trade Integration Study (DTIS) or Trade Competitiveness Study
The study appraised Nepal's constraints to effective integration into the global trading system. It has made policy level recommendations to capacity building. Conclusion 1. Improve production capacity, productivity and competitive strength through quality improvement, reduction of costs and wastages, remove supply constraints. 2. Export of products in which is has sustainable comparative advantage tourism, hydropower, hers, 33 flowers, silver jewellery, handicrafts.

3. Product profile should be enhanced 4. Strengthen SAARC, SAPTA and SAFTA to SAFTA to improve negotiating power, strengthen institutional mechanism. 5. Educate people 6. Create legal safeguard for bio-diversity, genetics, protection of domestic industries and females' rights. 7. Amend laws to make them WTO friendly.

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Nepal's contribution to the world trade is 0.02%

The study recommends
1. 2. 3. 4. Relaxation in custom barrier Allowing easy exit to foreign companies Reforming labor market Strengthening the government private sector coordination
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Comparative and competitive advantage areas:

Dried leguminous Spices Seeds (Niger Seeds) Leather and leather products Fibers (hand knotted wool carpets) Yarn and textile garments The study has shown that it costs us US$ 130 million (NRs. 10 Billions over 10% of estimated budget for fiscal year 2002/2003) to implement just three of the WTO agreements namely TRIPS, SPS and custom valuations.
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