The World Trade Organization (WTO) Linda Young POLS 400 International Political Economy Wilson Hall – Room 1122 Fall 2005

The World Trade Organization

(WTO)

Linda YoungPOLS 400International Political EconomyWilson Hall – Room 1122

Fall 2005

Linda Young, POLS 400, International Political Economy

► Impact of trade on the environment

Seattle 2000: What Were They Protesting About?

► A perception of increasing income inequality, both within nations and between nations — poor nations becoming more impoverished

► Labor: both domestic concerns and broaderconcerns – MNCs:their influence over WTO,over national governments,market power, labor exploitation

► Food security by some countries


A secretariat in Geneva having a relatively small staff/budget compared with many multilateral institutions

World Trade Organization (WTO)

A multilateral (many nations) institution that negotiates, implements and governs various agreements between nations to abide by a common set of rules governing trade


History of the WTO

In the 1930s there was a wave of protectionism

High tariffs were enacted: in the United States, the Smoot-Hawley tariffs (depression)

After WWII, governments looked for ways for international cooperation that would reduce the threat of war

Settled on Bretton Woods Institutions World Bank International Monetary Fund (IMF)

In 1948, General Agreement on Tariffs and Trade (GATT)


ITO/GATT

ITO: Not adopted – U.S. Congress in opposition

However, maintained as a secretariat for nearly 50 years (1948-1995)

Twenty-three of the founding members decided to reduce tariffs: Australia, Belgium, Brazil, Burma, Ceylon, Chile, China, Cuba, Czechoslovakia, France, India, Lebanon, Luxembourg, Netherlands, New Zealand, Norway, Pakistan, Southern Rhodesia, Syria, South Africa, United Kingdom, and the United States

Eight rounds completed, now Doha


World Trade Organization

In 1994, after seven years of negotiations, the Uruguay Round Agreement (URA) was signed

This formalized the WTO

Functions:• Provides rules to govern trade• Removes obstacles through negotiations• Provides stability• Resolves disputes


WTO Members

147 members

• 75% are developing countries

• more countries in accession

WTO run by member governments

Decisions by consensus

Ministerial conferences held every 2 years

25%

75%Developingcountries

All others

WTO Countries


What Are the Principles of the Multilateral Trading Agreement?

Most Favored Nation (MFN) Status Applies to goods, services, and trade-related aspects of intellectual

property rights (TRIPs)

Cannot discriminate between trading partners

Lower a tariff for one trading partner, lower it for all

Before China became a WTO member, yearly debate on whether or not

to give China MFN status

Exception — regional trade agreements


The EU has favorable trade rules for ex-colonies in Africa, Caribbean, Pacific (ACP)

Continuation of the Lome Convention

Banana Dispute

1993 Two-tier tariffs based on country of origin

ACP duty free up to 857,000 mt (quotas) –over this amount, a duty of 750 European Currency Units (ECU)

Non-ACP imports100 ECU duty per mt up to 2 mmt – over this amount, a 850 ECU duty


Challenges to the EU Regime

United States requested authorization for retaliation

EU to adjust regime

WTO decision on several grounds — including discrimination

WTO challenge by United States, Mexico, Guatemala and Honduras — violated non-discrimination

U.S. challenge —even though workers and product not from the United States


More Principles

National treatment — treating foreign goods the same as domestic

Dispute: Venezuelan reformulated gasoline higher standards for imports

Predictability bindings transparency — obligations to report

No quantitative restrictions

Quotas more trade-distorting than tariffs

Exception: agriculture


What Are the Elements of the Multilateral Trading System?

Trade-Related Aspects of Intellectual Property Rights (TRIPS)

General Agreement on Tariffs and Trade (GATT)

General Agreement on Trade in Services (GATS)


Basic Structure of the WTO Agreements:How the Six Main Areas Fit Together

Source


General Agreement on Tariffs and Trade(GATT)

Multilateral Agreement on Trade in Goods

Agriculture — new in 1994 Uruguay Round Agreements Act (URAA)

Sanitary and Phytosanitary Agreement

Agreement on Textiles and Clothing (ATC)

Product standards — Technical Barriers to Trade (TBT)

Anti-dumping duties, countervailing duties and safeguards

Customs valuation, pre-shipment inspection, rules of origin

Various agreements cover:


General Agreement on Trade in Services (GATS)

Cross border supply

Consumption abroad

Commercial presence

Presence of natural persons


Trade-Related Aspects ofIntellectual Property Rights

(TRIPS)

Also technology transfer — balancebetween protection and transfer

Covers copyrights and trademarks, geographical indicators, patents, patents, layouts of integrated circuits, other

Principles: Most Favored Nation (MFN) and national treatment


TRIPS (con’t)

Incorporated previous agreements — Paris Convention for Protection of Industrial Property, Berne Convention for Protection of Literary and Artistic Works for some items

Agreement specifies how it is to be enforced with domestic laws

Implemented in transition periods


Back to the Protests in Seattle

Ag negotiations began anyway,as scheduled in URA

Council of Ministers agreed tolaunch a general round of negotiations in Doha, Qatar, November 2001

Negotiations are most successfulif trade-offs can be made betweencountries


“The Development Round”

African countries 1/3 of WTO membership

140 countries, roughly 100 developing economies and many economies in transition

Few developing countries playeda significant role in the Uruguay Round Agreements (URA)

Changing composition of the membership of the WTO


Decision-Making in the WTO

Not like the International Monetary Fund (IMF)and the World Bank

− Voting is tied to quota shares in the Bank (although moderated by other features) Decision-making by consensus!!!!− 147 members, diverse, new

Council of Ministers (every other year)


Decision-Making (con’t)

Day to Day — General Council− also Dispute Settlement and Trade Policy Review− all countries are members of each

Outcomes are through negotiations

Decisions mostly by consensus− when voting, one country, one vote

No sanctions from the organization− again, different than the IMF/World Bank


One View:Institute for International Economics

Before: Few players and not a “single undertaking” (which means a country has to sign on to thewhole thing)

Then: Decision-making through consensus, developed by self-selected players, worked reasonably well

Seattle: No longer worked


WTO Processes Have Responded

More transparency: information available

More participants

Decisions only after extensive informal

consultations open to all

Lesson from Seattle:avoid last minute proposals

from exclusive groups


Leadership Selection in the WTO

Few restrictions on choice of candidates– so much active competition led to difficulty

Unlike conventions in the IMF (European) andthe World Bank (United States)

WTO: part 50 years old, part 5 years old

– had only three Director-Generals from 1948-1993, then things changed


Leadership in the WTO

Mike Moore1999–2002

New Zealand

Renato Ruggiero1995–1999Italy

Supachai Panitchpakdi 2002-2005Thailand

Peter Sutherland 1993–1995Ireland


Old Understanding Faded

Membership much larger

Developing countries wanted a voice

Factors: regionalism, favoritism, other leadership posts — i.e., Organisation for EconomicCo-operation and Development (OECD)

Gridlock led to split terms (difficult during Seattle)

Moore – 1999-2002Supachai – 2002-2005


Trade Promotion Authority (formerly called “fast-track”)

Means that Congress gives the President the authority to negotiate, to accept or reject a deal

Lapsed with the Clinton administration

Restored by Congress in August 2002

Is essential to U.S. credibility in negotiations


Dillon

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Geneva

Annecy

Torquay

Geneva

Kennedy

Tokyo

Uruguay

Doha

No. MembersRounds

GATT-WTONegotiating Rounds and Number of Members

Source: WTO and the Institute for International Trade Negotiations (ICONE)


WTO Membership:Increased Number of Developing Countries

Source: WTO and the Institute for International Trade Negotiations (ICONE) Elaboration: ABARE-Australia

0

20

40

60

80

100

120

140

160

1986 1995 2004

Me

mb

ers

DevelopingDeveloped


Notes: Data for GDP (2001) population (2001) and trade (2003). EU excludes intra-trade.Source: FAO, Worldbank, and Institute for International Trade Negotiations (ICONE) Elaboration: ICONE

Agricultural Negotiations in the Doha Round: Main Coalitions

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Total GDP AgriculturalGDP

TotalPopulation

RuralPopulation

AgriculturalExports

AgriculturalImports

G-20 USA EU (15) G-10


Legitimacy

Geographic distribution: Asia, Africa, LAC

Most dynamic exporters and markets with the highest

rates of growth

Traditional Coalitions x New Forms of Pressure

Cairns: old coalition based on common interests.

G-20: heterogeneous pressure group based on technical

and political capacity: fast response, measurable results

G-20 as an Effective Pressure Group?

Source: Institute for International Trade Negotiations (ICONE)


LDCs and othersDeveloping: net

food importers

G-90 and G-33Developing: SP,

preference erosion

India

China

Brazil, Argentina

G-20 main players

G10: J apan, Korea, Taiwan, Switz, Norw

Ag resistant countries

Australia, Chile, New Zealand, S.Africa

Free traders (Cairns)

European Union

United States

AccessSubsidiesServices

I ndustrial Goods

AgricultureCountriesGroup

LDCs and othersDeveloping: net

food importers

G-90 and G-33Developing: SP,

preference erosion

India

China

Brazil, Argentina

G-20 main players

G10: J apan, Korea, Taiwan, Switz, Norw

Ag resistant countries

Australia, Chile, New Zealand, S.Africa

Free traders (Cairns)

European Union

United States

AccessSubsidiesServices

I ndustrial Goods

AgricultureCountriesGroup

= Offensive position = Defensive position

Doha Interest Groups



G-20 as an Effective Pressure Group?

G-20 Main Positive Results Pragmatism: oriented towards consensus building Pressure to speed up the full integration of agriculture in

the WTO: avoiding the traps of a new EC-US “Blair House” Agreement

Defensive positions from China, India…but new offensive interests in industrial goods (China) and services (India)

G-20 Contradictions

Market access beyond tariff overhangs (ex. India) Too many new exceptions

- Newly acceded members (China), Special Products, SSMs


Documents

The World Trade Organization (WTO) Linda Young POLS 400 International Political Economy Wilson Hall – Room 1122 Fall 2005