World Trade Organization: Preview and Overview

8/14/2019 World Trade Organization: Preview and Overview

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World Trade Organization:Brief History

The World Trade Organization came into being in1995 originating from the General Agreement on

Tariffs and Trade (GATT), a provisional agreementby 23 contracting parties signed on 30 October 1947at the Palais des Nations in Geneva and eventuallybecame an ad hoc international organization createdto support the agreement. From 1948 to 1994, theprovisional GATT provided the rules for much ofworld trade and presided over periods that saw someof the highest growth rates in internationalcommerce. The Agreement contained tariffconcessions agreed to during the first multilateraltrade negotiations and a set of rules designed toprevent these concessions from being frustrated byrestrictive trade measures. Eventually, there were

123 participants and the final agreements coveredalmost all trade.

Today, the WTO is the only international organizationdealing with the global rules of trade betweennations. WTO agreements, negotiated and signed bythe bulk of the worlds trading nations, bindgovernments to keep their trade policies withinagreed limits. Whereas GATT had mainly dealt withtrade in goods, the WTO and its agreements alsocover trade in services, and in traded inventions,creations and designs (intellectual property).

The WTOs main objective is to help trade flowsmoothly, freely, fairly and predictably byadministering WTO trade agreements, acting as aforum for trade negotiations, settling trade disputes,reviewing national trade policies, assisting developingcountries in trade policy issues, through technicalassistance/training, and cooperating with otherinternational organizations.

The WTO has 148 Members, accounting for 90% ofworld trade. Three-quarters of the Members aredeveloping countries, least developed countries andcustoms territories. A quarter is composed ofdeveloped countries. At the present time, nearly 30applicants are negotiating to become members of theWTO. Notable of these 30 observer-applicants arethe Russian Federation, Ukraine, Saudi Arabia, andVietnam. (WTO, 2005)

In the intervals between sessions of the MinisterialConference, the next highest-level decision-makingbody is the General Council where Members areusually represented by ambassadors or heads ofdelegation. The General Council acts on behalf of theMinisterial Conference and oversees the work andmanagement of the WTO. The General Council also

meets as the Trade Policy Review Body and DisputeSettlement Body. At the next level, the Council forTrade in Goods, Council for Trade in Services andTRIPS Council all report to the General Council.

Basic PrinciplesThe WTO agreements are lengthy and complex.There are, however, a number of simple andfundamental principles that run throughout all thedocuments, as follow:

Non-discrimination - Two WTO key principles are involvedhere: Most-favored-nation treatment. Countries cannotnormally discriminate between their trading partners. Grant

one country a special favor, and the Member is obliged to dothe same for all other WTO Members. National Treatment.Imported and locally-produced goods are treated equally atleast after the foreign goods have entered the market.Freer trade - Lowering trade barriers is one of the mostobvious means of encouraging trade. The barriers concernedinclude both tariff barriers and non-tariff barriers.Predictability - When countries agree to open their marketsfor goods or services, they bind their commitments.Promoting fair competition - Tariffs and, in limitedcircumstances, other forms of protection are allowed butdedicated to open, fair and undistorted competition.Special Provisions for Developing Countries - Flexibleimplementation of the various WTO agreements, specialassistance and trade concessions are afforded to developingcountries.

Multilateral Trade NegotiationsMuch of the growth was achieved through a series ofeight multilateral trade negotiations known as traderounds. In all trade rounds, the concentration was onreducing tariffs. In the latter rounds, however, otherelements were also addressed or introduced. TheKennedy Round in the mid-1960s brought about aGATT Anti-Dumping Agreement and a section ondevelopment; the Tokyo Round saw the first major


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attempt to tackle trade barriers that do not take theform of tariffs, and to improve the system. TheUruguay Round in the 1980s led a systemic overhaulunder the GATT.Entry into Force, 01 January 1948.

The 23 members of

the PreparatoryCommittee establishedby the United NationsEconomic and SocialCouncil in 1946drafted the charter ofthe InternationalTrade Organization(ITO). The ITO wasenvisaged as the final leg of a triad of post-Wareconomic agencies (the other two were theInternational Monetary Fund and the InternationalBank for Reconstruction - later the World Bank).From April to October 1947, Members completedsome 123 negotiations and established 20 schedulescontaining the tariff reductions and bindings whichbecame an integral part of GATT. The first Roundcovered some 45,000 tariff concessions and about$10B in trade. On 1 January 1948, GATT enteredinto force. The first Session was held from Februaryto March in Havana, Cuba. After long and difficultnegotiations, some 53 countries signed the Final Actauthenticating the Havana Charter in March1948.The Contracting Parties held their secondsession in Geneva from August to September.Second RoundAnnecy, France April August 1949

The contracting parties exchanged some 5,000tariffconcessions. At their third Session, they also dealtwith the accession of ten more countries.Third RoundTorquay, England September 1950 April 1951

The contracting parties exchanged some 8,700tariffconcessions in the English town, yielding tariffreductions of about 25% in relation to the 1948level. Four more countries acceded to GATT. Duringthe fifth Session of the Contracting Parties, theUnited States indicated that the ITO Charter wouldnot be re-submitted to the US Congress; this, ineffect, meant that ITO would not come into operation.

The Haberler Report: In honor of Professor GottfriedHaberler, the chairman of the panel of eminent economists,GATT published in October 1958 the Trends in InternationalTrade, which provided initial guidelines for the work of GATT.The Contracting Parties at their 13th Sessions, attended byMinisters, subsequently established three committees inGATT: Committee I to convene a further tariff negotiatingconference; Committee II to review the agricultural policies ofmember governments and Committee III to tackle theproblems facing developing countries in their trade.

Fourth RoundGeneva, Switzerland May 1956.

This Round produced some $2.5Bn worth of tariffreductions. At the beginning of the year, the GATTcommercial policy course for officials of developingcountries was inaugurated.

The Short-Term Arrangement covering cotton textiles wasagreed in 1961 as an exception to the GATT rules. It permittedthe negotiation of quota restrictions affecting the exports ofcotton-producing countries. In 1962 the "Short-term"Arrangement became the "Long-term" Arrangement, lastinguntil 1974 when the Multifibre Arrangement entered into force.

Fifth Round: The Dillon RoundSeptember 1960 July 1962

In honor of US Undersecretary of State DouglasDillon who proposed the negotiations, this Roundresulted in about 4,400 tariff concessions covering$4.9B of trade. The Round was divided into twophases: the first was concerned with negotiations

with EEC member states for the creation of a singleschedule of concessions for the Community based onits Common External Tariff; and the second was afurther general round of tariff negotiations.Sixth Round: The Kennedy RoundMay 1964 June 1967.

In June 1967, the Round's Final Act was signed bysome 50 participating countries which togetheraccounted for 75% of world trade. For the first time,negotiations departed from the product-by-productto an across-the-board or linear method of cuttingtariffs for industrial goods. The working hypothesis ofa 50% target cut in tariff levels was achieved in many

areas. Concessions covered an estimated total valueof trade of about $40B. Separate agreements werereached on grains, chemical products and a Code onAnti-Dumping.

The early 1960s marked the accession to the GeneralAgreement of many newly-independent developing countries.In February, the Contracting Parties adopted the text of Part IVon Trade and Development. The additional chapter to theGATT required developed countries to accord high priority tothe reduction of trade barriers to products of developingcountries. A Committee on Trade and Development wasestablished to oversee the functioning of the new GATTprovisions. In 1968, GATT had established the InternationalTrade Centre (ITC) to help developing countries in tradepromotion and identification of potential markets.

Seventh Round: The Tokyo RoundTokyo, Japan, September 1973 November 1979

Some 99 countries exchanged tariff reductions andbindings which covered more than $300B of trade. Asa result of these cuts, the weighted average tariff onmanufactured goods in the world's nine majorindustrial markets declined from 7.0 to 4.7%.Agreements were reached in the following areas:subsidies and countervailing measures, technical


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barriers to trade, import licensing procedures,government procurement, customs valuation, arevised anti-dumping code, trade in bovine meat,trade in dairy products and trade in civil aircraft. Thisround reduced import duties and other trade barriersby industrial countries on tropical products exported

by developing countries.On 1 January 1974, the Arrangement Regarding InternationalTrade in Textiles, known as the Multifibre Arrangement(MFA), entered into force. It superseded the arrangements thathad been governing trade in cotton textiles since 1961. TheMFA was extended in 1978, 1982, 1986, 1991 and 1992.

GATT (Article 6) allows countries to take action againstdumping. The Anti-Dumping Agreement clarifies andexpands Article 6, allowing countries to act in a way that wouldnormally break the GATT principles of binding a tariff and notdiscriminating between trading partners. The agreement is thesuccessor to the Tokyo Round Anti-dumping Code which,itself, was the successor to the original Anti-dumping Codeconcluded during the Kennedy Round.

Eighth Round: The Uruguay RoundPunta del Este, 20 Sep 198615 Dec 1993

The Punta del Este Declaration was divided into twosections: the first covered negotiations on trade ingoods, and the second initiated negotiations on tradein services. The Round was quite simply the largesttrade negotiation ever, and most probably the largestnegotiation of any kind in history. It brought aboutthe biggest reform of the worlds trading systemand led to the creation of the WTO.

GATT 1994 is the updated version of GATT 1947 and takesinto account the substantive changes negotiated in theUruguay Round. GATT 1994 is an integral part of the World

Trade Organization established on 1 January 1995. It wasagreed that there be a one-year transition period during whichcertain GATT 1947 bodies and commitments would co-existwith those of the World Trade Organization. (WTO, 1994)

Most of the WTO agreements are the result thisRound, signed as the Final Act at the Marrakeshministerial meeting in April 1994. There are about 60agreements. Foremost is the Agreement Establishingthe WTO, which serves as an umbrella agreement.Annexed are the agreements on goods (GATT 1994,Annex 1A), services (GATS, Annex 1B) andintellectual property (TRIPS, Annex 1C), disputesettlement (Annex 2), trade policy review mechanism(Annex 3) and the plurilateral agreements (Annex 4).

The Services Agreement (GATS) which forms part of theFinal Act rests on three pillars. The first is a FrameworkAgreement containing basic obligations which apply to allmember countries. The second concerns national schedules ofcommitments containing specific further national commitmentswhich will be the subject of a continuing process ofliberalization. The third is a number of annexes addressing thespecial situations of individual services sectors.

Agreement on Trade Related Aspects of IntellectualProperty Rights, Including Trade in Counterfeit Goods(TRIPS) addresses the applicability of basic GATT principlesand those of relevant international intellectual propertyagreements; the provision of adequate intellectual propertyrights; the provision of effective enforcement measures forthose rights; multilateral dispute settlement; and transitionalarrangements.

The schedules of commitments also form part of theUruguay Round agreements.

WTO Ministerial ConferencesThe WTO is a member-driven organization anddecisions are taken by the entire membership,typically by consensus. The WTOs top leveldecision-making body is the MinisterialConference which meets at least once every twoyears. WTO Ministerial Conferences have been heldin Singapore in 1996, Geneva in 1998, Seattle in1999, Doha in 2001, and Cancn in 2003.First WTO ConferenceSingapore, 9 - 13 December 1996

The first regular biennial meeting ofthe WTO at Ministerial level aimed tofurther strengthen the WTO as aforum for negotiation, the continuingliberalization of trade within a rule-based system, and the multilateral

review and assessment of trade policies. Thefollowing were tackled during this meeting: assessthe implementation of commitments under the WTOAgreements and decisions; review the ongoingnegotiations and Work Programme; examinedevelopments in world trade; and address thechallenges of an evolving world economy.

Agreement on Trade-related Aspects of IntellectualProperty Rights (TRIPS) entered into force for developedcountries on 01 January 1996.Basic Telecommunications negotiations are suspended inMay 1996 until 1997 in spite of substantial offers.

Second WTO ConferenceGeneva, Switzerland, 18 20 May 1998

The Conference coincided with the 50th

Anniversary Commemoration, thus it paidtribute to the system's importantcontribution over the past half-century to

growth, employment and stability by promoting theliberalization and expansion of trade and providing aframework for the conduct of international traderelations. New WTO Members who have joined sincethe Singapore meeting: Congo, Democratic Republicof Congo, Mongolia, Niger and Panama.

Adopted the Declaration on Global Electronic Commerceon 20 May 1998. It urged Members to continue their currentpractice of not imposing customs duties on electronictransmissions.


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Third WTO ConferenceSeattle, USA, 30 November 03 December 1999

The Seattle Conference attractedwide attention because of proposalsby some countries to press for thelaunching of a comprehensive round

of negotiations covering subjects aswide ranging as labor issues,coherence in global economic architecture,agriculture etc. The inaugural session which was tobe held in the forenoon of 30th November, 1999 hadto be abandoned because of disturbances.

Susan Westin, an Associate Director, InternationalRelations and Trade Issues of the National Securityand International Affairs Division later reported to theUS General Accounting Office, the conference wassuspended without initiating a new round or issuing aministerial declaration. No one factor, but acombination of circumstances, led to the impasse.Disagreements between and among countries onmany issues: the scope of the round, the sensitivityand complexity of the issues being addressed; aswell as the basis for negotiations as a poor startingpoint for reaching consensus, in addition to thenewness of the WTO leadership team provedunfortunate circumstances leading to the failure ofachieving the conference objectives. (Westin, 2000)Fourth WTO ConferenceDoha, Qatar, 09 13 November 2001

Ministers adopted a MinisterialDeclaration and other decisionssetting out a work programme for theWTO for the coming years. Thetopics listed in the MinisterialDeclaration are: Implementation-

Related Issues and Concerns; Agriculture; Services;Market Access for Non-Agricultural Products; Trade-Related Aspects of Intellectual Property Rights;Relationship between Trade and Investment;Interaction between Trade and Competition Policy;Transparency in Government Procurement; TradeFacilitation; WTO Rules; Dispute SettlementUnderstanding; Trade and Environment; ElectronicCommerce; Small Economies; Trade, Debt andFinance; Trade and Transfer of Technology;

Technical Cooperation and Capacity Building; Least-Developed Countries; Special and DifferentialTreatment.

The Doha Development Agenda, also known as the workprogramme, includes specific negotiations in a range of areasincluding agriculture, services, market access for non-agricultural products, aspects of intellectual property, rules(covering antidumping, subsidies and countervailingmeasures, and regional trade agreements), dispute settlement,and aspects of trade and environment.

The Decision on Implementation-Related Issues andConcerns was also adopted urging to take immediate actionon a number of problems faced by developing countryMembers with regard to implementation of WTO Agreements.Adopted the Declaration on the TRIPS Agreement andPublic Health in response to concerns expressed about thepossible implications of the TRIPS Agreement for access todrugs. The Declaration affirmed that the TRIPS Agreement

can and should be interpreted and implemented in a mannersupportive of WTO Members right to protect public health and,in particular, to promote access to medicines for all.

The initial deadline for agreement on all the issueswas January 2005. However, none of the Dohadeadlines has been kept and 2007 is now thesuggested likely date for completion. The DohaAgenda included a provision that the negotiationslead to a single undertaking meaning that the seriesof agreements on various issues (agriculture,services, industrial products, etc.) will be signed asone. Countries must accept or refuse them all.The Doha Round, launched in Qatar in 2001, is in

deadlock largely because of problems in farm-tradetalks, hampering preparations for the WTOs 13-18Dec 2005 conference in Hong Kong. (AFP, 2005)Fifth WTO Ministerial ConferenceCancn, Mexico 10 14 September 2003

The key objectives at this sessionwere to take stock of progress in thenegotiations, provide any necessarypolitical guidance, and takedecisions as necessary.

Financial Services Accord: Of some 76 WTO Members withcommitments in the financial services sector, around 30offered improvements in the negotiations which led up to this

agreement. United States did not sign.

Sixth WTO Ministerial ConferenceHongkong, 13 18 December 2005

Agriculture negotiations will takecenter stage. The Institute forAgriculture and Trade Policy (IATP,2005) outlined the key issues facingWTO negotiators, such as the US

WTO agriculture proposal on 10 October 2005, thenew Blue Box, NAMA negotiations, the impact ofGATS on agriculture, US dumping on world markets.

Non-Agricultural Market Access [NAMA] negotiations are

mandated under the Doha Ministerial Declaration, which WTOmembers agreed to in November 2001. The aim is to reduceborder measures to trade, especially tariffs, and other barriersto market access for industrial exports. The negotiations coverall goods not covered under the Agreement on Agriculture.The products are essentially industrial but WTO members arealso negotiating on natural resources, including fisheries,forests, gems and minerals.

European Union Trade Commissioner PeterMandelson said there would be no deal at the Hong


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Kong ministerial conference in December aftercomplaining that EU offers had been rebuffed by"very aggressive" farming countries such as Brazil,Australia, New Zealand and the USA.(AU-AFP, 2005)

WTO & the Developing WorldAbout two thirds of the WTOs around 150 membersare developing countries. They play an increasinglyimportant and active role in the WTO because of theirnumbers, because they are becoming more importantin the global economy, and because they increasinglylook to trade as a vital tool in their developmentefforts. Developing countries are a highly diversegroup often with very different views and concerns.

Both GATT and GATS allow developing countriessome preferential treatment. Other measuresconcerning developing countries in the WTOagreements include:

extra time for developing countries to fulfill theircommitments (in many of the WTO agreements) increase developing countries trading opportunitiesthrough greater market access (e.g. in textiles, services,technical barriers to trade) safeguard the interests of developing countries whenadopting some domestic or international measures (e.g.in anti-dumping, safeguards, technical barriers to trade) various means of helping developing countries (e.g. todeal with commitments on animal and plant healthstandards, technical standards, and in strengthening theirdomestic telecommunications sectors).

Furthermore, developed countries tariff cuts were forthe most part phased in over five years from 01January 1995. The result is a 40% cut in theirtariffs on industrial products, from an average of

6.3% to 3.8%. The value of imported industrialproducts that receive duty-free treatment indeveloped countries jump from 20% to 44%.

Specific commitments are made by individualmember governments and called schedules ofconcessions. For trade in goods in general, theseconsist of maximum tariff levels. For agriculture theyalso include tariff quotas, limits on export subsidies,and some kinds of domestic support. The goodsschedules are annexed to GATT and are bound(GATT Article II).

One of the achievements of the Uruguay Round ofmultilateral trade talks was to increase the amount oftrade under binding commitments (see table).Percentages oftariffs boundbefore and afterthe 1986-94 talksIn agriculture,

100% of products now have bound tariffs. The resultof all this: a substantially higher degree of marketsecurity for traders and investors. (WTO, 1995)

Developing countries would be much better off withthe tariff and subsidy cuts already tabled in global

trade talks, WTO Director General Pascal Lamy said29 November 2005 (AFP, 2005). But he said thatthey could face disastrous consequences if thefaltering talks on the Doha round fail to makeprogress. From 1995 to 2003, developingcountries increased farm exports by 24% raisingtheir share of global agricultural exports from40% to 42%. Trade growth was especially strongamong developing countries, growing by 32% overthe same period, and Lamy insisted the Doha roundmust accelerate that progress.

Last 28 November 2005 (AFP,2005) nine developingcountries accused rich nations of sidelining the

interests of the poor in the talks aimed at bringingdown more trade barriers.

WTO & the ASEAN :The Association of Southeast Asian Nations[ASEAN] through the APEC Ministerial Meeting inBusan on 18-19 November 2005, reaffirmed itsbelief that the engine of this region's economicgrowth is a strengthened multilateral tradingsystem (APEC, 2005). The APEC EconomicLeaders, stated the Busan Declaration, havesupported the WTO since the inception of theLeaders' Meeting. Furthermore, ASEAN hoped that

the WTO Doha Development Agenda negotiations toproceed expeditiously so as to achieve an ambitiousand overall balanced outcome at the end of theRound and emphatically lent its support for theaccession of Russia and Viet Nam to the WTO.

As early as 2002, many analysts predicted that theaccession of China to the WTO would spell doom forASEAN economies. McKibbin and Woo (2003)argued, however, that Chinas WTO accession wouldbenefit China but create significant welfare losses inthe ASEAN-4 only if foreign-direct investment (FDI)is significantly redirected away from the latter to the

former. Alas the only-if statement did not happen.

Pangestu (2002) noted that with a shallow integrationin AFTA, the strategic option for ASEAN after ChinasWTO Accession would be regionalism, thus onNovember 2001, negotiations between China andASEAN, through the Early Harvest Agreement,surprised everyone.


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On 18 November 2005, Malaysia, Indonesia, thePhilippines, Thailand and Brunei presented two

joint statements to defend their right to regulateforeign firms in the services sector and opposed theWTOs Hong Kong Ministerial draft declaration thatwould erode the present right of countries to choose

which sectors to liberalize, to what extent and when.

ASEAN aimed at promoting economic, social, culturaland scientific ties, as well as trade and monetarypolicies. Other areas of cooperation among ASEANmembers, include harmonization of standards,reciprocal recognition of tests and certification ofproducts. In 1992, members called for theformation of an ASEAN Free Trade Area. In thisregard, the Philippines, Brunei, Indonesia,Malaysia, Singapore and Thailand, beganimplementing the ASEAN Free Trade Area on 1 ofJanuary 2002, bringing a reduction in tariff ratesto 5% or less on all goods made at least with 40%

of ASEAN goods, which tariff rates will bereduced to 0% by 2010, and quantitativerestrictions and other non tariff barriers removed.

As for the latecomers, Vietnam joined ASEAN in1995, and began implementing AFTA on 1 of January2003, Burma and Laos joined the group in 1997 andwill complete tariff reduction by 2005, whereasCambodia which joined in 1999, will complete the

tariff reduction by 2007; in the year 2015, finalreductions will be achieved by these 4 countries. Nocommon external tariff is planned; tariff rates onimports from non-ASEAN countries will continueto be determined individually.

Since 1 of January 2003, the ASEAN countries haveannounced the abolishment of tariffs on 60% oftraded goods and the introduction of a 5% on importtariffs within its six original members, i.e. thePhilippines, Brunei, Indonesia, Malaysia,Singapore, and Thailand. Products affectedessentially by this measure are electronic products,

machinery items and petrochemicals. And goodsexcluded from the tariff-reduction agreement aregoods of key industries in some of the membercountries, for example, the Philippines and Indonesiawill delay the 5% cap on sugar and petroleum, andMalaysia will shelve the cap on car imports, until2005.

As for Cambodia, Myanmar, Lao People'sDemocratic Republic and Vietnam, the four ASEAN'slatecomers, will introduce the 5% tariff cap only in2010. With the ASEAN Industrial CooperationScheme, AICO, a final maximum 5% tariff rate is set

on automotive products. In addition, unlike theCommon Effective Preferential Tariff (CEPT) whichallows a 0-5% tariff rate on all products traded by2004, the AICO grants an immediate tariff of between0-5% on products enrolled under the program.By showing 40% cost projection from our SLAB

- to - CRCA,we can get Form D, which will helpus sell at remium in all these countries.

At the 8

thASEAN summit held in Phnom Penh,

Cambodia, from 4 to 6 Nov 2002, several free tradeplans were developed involving 14 Asian countries,i.e. the 10 ASEAN members (the Philippines,Brunei, Cambodia, Indonesia, Lao PDR, Malaysia,Myanmar, Singapore, Thailand, and Vietnam),China, India, Japan and the Republic of Korea.The

objectives of these free trade plans are toquicken the pace of trade liberalization and fostermultilateralism in the region. In addition to intra-ASEAN trade and ties, ASEAN aims at strengtheninglinks with other preferential trade regimes in theregion, for example, the high-level task force betweenthe AFTA and the Closer Economic Relations(CER), i.e. a trade agreement between Australia andNew Zealand) established to study the feasibility ofsettling and AFTA-CER free-trade agreement by2010. ASEAN is pursuing similar agreements withother regional grouping such as the SouthernCommon Market (Mercosur), and the Southern

African Development Community (SADC).

ASEAN maintains a commercial and economiccooperation agreement with the European Union.The agreement provides for most favored-nationtreatment and studies to remove trade barriers,create new trade patterns, and recommend tradepromotion measures.


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A new trade initiative between the ASEAN and theU.S.A. has been set up as the Enterprise for ASEANInitiative (EAI), which objectives aim at developingthe Southeast Asian Region, and enhance closeU.S. ties with ASEAN. The EAI offers bilateral freetrade agreements (FTAs) between the United States

and individual ASEAN countries, by determining jointly the launching of FTA negotiations. ASEANmembers and China leaders decided in Brunei onNovember 2001 to work on creating a free trade areawithin the next ten years. (UNCTAD, 2005)

WTO & the PhilippinesThe Philippines joined the WTO in 1995. From 1995,the Philippines have been involved with 4 cases ascomplainant, 4 as respondent, and 5 cases as thirdparty. Most of these cases are agricultural in nature.

As Complainant:DS22: Desiccated Coconut; Respondent: BrazilDS61: Shrimp Products; Respondent: USA

DS270: Fresh Fruit and Vegetables; Respondent: AustraliaDS271: Fresh Pineapple; Respondent: AustraliaAs Respondent:DS74: Pork and Poultry; Complainant: USADS102: Pork and Poultry; Complainant: USADS195: Motor Vehicle Sector; Complainant: USADS215: Polypropylene Resins; Complainant: Korea

Walden Bello (2003) argued that the Philippine WTOmembership can be appropriately called multilateraldisaster. Since 1995, the country derived no benefitsfrom membership but incurred tremendous costs.

In 2002, (Canuday, 2002) the Philippines wasrethinking its involvement in the WTO and other

international alliances promoting trade liberalization.Moves by the United States to impose tariff onsteel and the EU's continued refusal to grant thePhilippines demands for zero tariffs on tuna "makecountries such as ours and other small developingpoor countries, question the entire fairness of theWTO principle," said Trade Secretary Mar Roxas."They preach one thing, they practice another thing,"he added. Roxas noted that the European Union hascontinued imposing a 24% tariff on canned tuna fromthe Philippines, even as it granted zero tariffs on thesame products from its former colonies in theCaribbean and Africa. (Bridges, 2002)

MFN The Philippines grants at least most-favorednations treatment to all trading partners. With theMFN tariff schedule in force as of 1 of January 1999through Executive Order 63 effective 21 Jan 1999,176 tariff lines are duty free, essentially, goodssuch as compound chemicals, rubber and articlesthereof, wood, textile yarns, laboratory and hygienicglassware, ferrous waste and scrap, machinery, plant

of laboratory equipment, apparatus and equipmentfor photography, instruments and appliances used inmedical, surgical and veterinary sciences. Thelargest part of tariff lines bearing the following rates of3%, 5%, 7%, 10%, 20%, 25% and 30% are set onbasic products, agricultural goods, fish and

crustaceans, raw materials, and manufacturingactivities of intermediate and finished goods. Alimited number of tariff items subject to rates startingfrom 35, to 80% include sensitive agriculturalproducts, maize, rice, sugar, meat and meatproducts, food preparations, beverages & spirits.

Effective December 2000 the Philippine governmenthad agreed to maintain tariffs of petrochemicals andautomotive parts at current levels up to year 2004.This policy covers most MFN tariff rates levied ongoods coming from countries outside ASEAN. Thetariff freeze would cover all agricultural commodities,industrial goods, and locally finished produced goods

in low quantity.

Bound Rates are set on selected agricultural,chemical and industrial products, certain machineryand electrical equipment and measuring instruments.These rates apply to WTO members, and to non-WTO countries if they have an agreement in forcewith the Philippines providing for a most-favourednation (MFN) treatment on tariffs, i.e., Bulgaria, Iraq,Vietnam and the Russian Federation. As a result ofthe Uruguay Round, almost all agricultural goods(except rice) and about half of the manufacturing tarifflines have been bound.

Philippines (Casio, 2003) is one of the most openeconomy in the ASEAN region and maybe the world.The Import Liberalization Program (ILP) and TariffReform Program (TRP) was sodrastic that 90% ofits tariff lines have already fallen under the 0-5%rate, way ahead its Southeast Asian neighbors. In2004, 97% are in below 5% rate.All these are wayahead of our commitments under the WTO andthe ASEAN Free Trade Agreement (AFTA).

Tariff quota rates With the Uruguay Roundimplementation, quantitative restrictions onagricultural goods have been converted into tariff

quotas set mainly on live animals, meat,; potatoes;coffee; maize and sugar. In addition, under the Tariffand Customs Code of the Philippines, some (25)agricultural products are subject to both in-and out-quota tariff rates, i.e. no tariff quotas or minimumaccess volumes have been defined for some items.(UNCTAD, 2005) Out of 5,639 tariff lines, 3,664 werebound, or around 65%. 2,859 tariff lines or 51% werebound for industrial products. 805 tariff lines, or 14%were bound for agricultural products. (Ray, 2005)


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Preferential duties under trade agreements. ThePhilippines participates in the Global System ofTrade Preferences among Developing Countries(GSTP), which provides for the exchange of tradeconcessions among developing countries. The tariffconcessions granted by the Philippines consist of

four products under HS 7308.30.00, HS 7308.90.00,HS 8213.00.00, and 8301.10.00, each of which getsa 10% margin preference from its base. ThePhilippines is member of the Bangkok Agreementfor liberalized trade among the less developedmember countries of the Economic and SocialCommission for Asia and the Pacific together withIndia, Korea, Laos, Sri Lanka, and Thailand. Theagreement provides for tariff concessions on someagricultural items, manufactured goods, chemicalsand minerals.

Aside from ASEAN, the Philippines is also a memberof the Asian Pacific Economic Cooperation

(APEC) along with Australia, Brunei, Canada,Chile, China, Chinese Taipei, Hong Kong, Japan,Rep. of Korea, Malaysia, Mexico, New Zealand,Papua New Guinea, Peru, Russia, Singapore,Thailand, the United States and Vietnam. APEC isa multilateral forum formed in 1989 so that Asian andPacific economies can promote economiccooperation and mutual assistance in developing keyeconomic sectors, including trade and investment.

On 15 of November 1994, member countriesagreed to implement Open and Free trade amongthemselves by 2020, with advanced industrialized

nations realizing the trade liberalization goal by 2010.At their 1997 meeting in Vancouver, APEC leadersagreed on Voluntary Sectoral Liberalization(EVSL) to take place in 15 sectors, and the tariffelements of nine sectors were identified under the"accelerated tariff liberalization" (ATL) package i.e.chemicals, energy, environment, fish and fishproducts, forest products, gems and jewelry, medicalequipment and instruments, and toys, as well as amutual recognition agreement concerningtelecommunications. The ATL initiative aims atachieving a zero target for almost all sectors by2008. (UNCTAD, 2005)

Teddy Casio, secretary-general of BagongAlyansang Makabayan (BAYAN, New PatrioticAlliance), said 28 February 2003 at the Conferenceon WTO, Globalization and War, that the Philippineentry into the WTO has resulted in more povertyand greater inequality brought about by thedestruction of local agriculture and industry, thestagnation of the economy and its increased

dependence on foreign capital, debt andspeculation.

In 1995, the proponents in the Philippine Senate ofthe ratification of the countrys commitment to theGATT boasted that WTO membership would

transform the Philippines into a newly industrializedcountry: 500,000 new agricultural jobs a year;587,000 new industrial jobs a year; an additionalgross value added of P60B (US$1.1B) a year;economic growth of at least 6% per year; and asignificant improvement in poverty rates broughtabout by the booming economy. (Casio, 2003)

Ten years after WTO accession, the Philippinesfaced the following harsh realities: Over a millionagricultural jobs lost, with 690,000 families throwninto poverty since 1994; all-time high unemploymentwith 4.9M Filipinos jobless and 8.3M going overseas

just to earn a living. From being a relatively self-

reliant agricultural producer, it became a net foodimporter. A $1.3B agricultural trade surplus in 1990-1994 was wiped out and replaced by an accumulatedtrade deficit of $3.5B from 1995-1999. Rice importsincreased by 540% and corn by 520%. The countrysbalance of payments deficit has worsened, resultingin the 72% fall in the value of the peso against thedollar from 1995-2000, and an increase in foreigndebt from 52% to 66% of the GNP.

The promised growth was nowhere, as the GDPannual growth from 1996-2000 remains little changedcompared with those of the previous years prior to

WTO membership. As expected, poverty worsened.The official poverty rate is 40%, but independentestimates peg it as high as 86%. As if that wasnt badenough, the income of the top 10% of the populationincreased by over 23 times that of the poorest 10% in2000 compared to 19 times in 1994. (Casio, 2003)The Philippines is aiming for 5.0% GDP growth ratethis year. 2004-2010 Medium-Term PhilippineDevelopment Plan (MTPDP) targetted 7.0-8.0 forboth 2005 and 2006. The latter targets were revisedto 5.3-6.3% for the current due to the slow growthuntil November this year.

Until now, overall Philippines has not been

able to strategically benefit and grow well fromthe time it entered WTO despite havingcomplied with most of WTO Guidelines.

Although there were several other Socio-Economic, Political / Policy Related Issues likelack of local industrys development, leadingto high dependence on imports, etc. whichalso contributed to this situation.


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WTO & the SAARC:Prior to the Seattle Conference, the South AsianAssociation for Regional Cooperation (SAARC)states agreed on common strategy for WTO. (EPB,2001) A paper presented by Bangladesh on"problems of least developed countries (LDCs) in the

multilateral trading system" highlighted the need forincreased market access opportunities on preferentialteams for the LDCs. SAARC recognized that fullparticipation by LDCs in the WTO would befacilitated through the setting of a special cell ontechnical division within WTO.

India suggested last March 2005, a three-pointagenda to SAARC member nations for dealing withinstruments such as Trade Defense Measures,Implementation issues and Special and DifferentialTreatment regimes under the WTO framework. IndianCommerce Secretary, S. N. Menon, advised SAARC

to closely look at Trade Defense Measures like theAgreement on Anti-Dumping and the Agreementon Subsidies and Countervailing Measures andcalled for transparent anti-dumping rules. (CentralChronicle, 2005)

WTO & the Steel Industry

The most prominent issue concerning the WTO andthe steel industry began on March 20, 2002 when USPresident G.W. Bush imposed a 8-30% tariff on allsteel imports (US Gov, 2002). The European Union(Guardian, 2002) lodged a complaint in the WTOquestioning the legality of the US actions. Othercountries followed: Brazil, China, Japan, Korea,Norway, Switzerland, and New Zealand.Furthermore, the EU issued Regulation 1031/2002 inretaliation to the US actions. By June 2002, (CNN,2002) the WTO agreed to investigate whether U.S.steel tariffs violate international trade agreements,and ruled in favor of the EU. By November 2003, theEU, after WTO upheld its decision versus a USappeal, threathened to retaliate up to $2.2B ontariffs to include Harley Davidson motorcycles,Carolinian textiles, among others. (Economist, 2003)All ASEAN-5 countries are members of WTO, thusany concession given by any ASEAN country,

automatically apply to all WTO members.

The Philippines committed to WTO in 1995 that thereduction in tariffs and any expansion of tariff quotasprovided for goods schedules shall be implementedin equal annual installments beginning on 1995 andending on 2000. On 23 selected steel products, HS7201-7214, base-rate duty was fixed at 10%, while

bound-rate duty was fixed either 10% or 20%.(WTO, 1995).

A new Philippine tariff schedule committed in 2000about 160 steel products, HS 7201-29, bound from0%, 3%, 7%, 10% tariffs (APEC, 2000). These same

rates are extended to MFN, e.g. WTO, tradingpartners of the Philippines. (WCO, 2005)

On 22 October 2004, Pres. Gloria Macapagal-Arroyoissued Executive Order 375, which notes MFN-import duty currently 3% for selected HS 7208, 7209,7211 steel products, be increased to 7% onceGlobal Steelworks, now Global Steel Philippines(GSPI), is in commercial operation as determinedby the NEDA Tariff and Related Matters (TRM)Committee.(OPS, 2004)

It will be a TURNING POINT for us the momentthis duty gets increased from 3% to 7%. It will

immensely speed-up our Market Share locallyand will add premiums on our sales.

WTOs Impact to Trade:

WTO published a 10th

anniversary booklet (WTO,2003) which highlighted the ten benefits among manyover-riding reasons why the world is better off withthe system than without it.

There will also be fewer products charged high dutyrates. The proportion of imports into developedcountries from all sources facing tariffs rates of more

than 15% will decline from 7% to 5%. Where as theproportion of developing countrys exports facingtariffs above 15% in industrial countries will fall from9% to 5%.On 26 March 1997, 40 countries accounting for morethan 92% of world trade in information technologyproducts, agreed to eliminate import duties and othercharges on these products by 2000 (by 2005 in ahandful of cases). As with other tariff commitments,each participating country is applying its


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commitments equally to exports from all WTOmembers (i.e. on a most-favored-nation basis), evenfrom members that did not make commitments.

Developed countries increased the number ofimport items whose tariff rates are bound (i.e.

committed and difficult to be increased further) from

78% of product lines to 99%. For developingcountries, the increase was considerable: from21% to 73%. Economies in transition from centralplanning increased their bindings from 73% to 98%.This all means a substantially higher degree ofmarket security for traders and investors.

Postscript1

st: There are two schools of thoughts facing the world this December 2005: is the WTO helping the world as a

whole to liberalized global trade or it is only a vehicle for the developed world to impose rules on the developingworld to open which sector, to what extent and when; and further exploit the natural resources of the least-developed countries?2

nd: A perception in Asia is shared that multilateral global free trade i. e. WTO, is beginning to be replaced by

regional trading blocs, e.g. AFTA, APEC, that favor their own members over the rest of the world.

References:

Books, PDFs, Working Papers, Databases:World Trade Organization (WTO), 1994-95, 2003-05, Understanding the WTO (October: World Trade Organization)World Customs Organization (WCO), 2005, Harmonized Commodity Description and Coding System

[http://www.wcoomd.org/]Institute of Agriculture and Trade Policy (IATP), 2005, Sailing Close to the Wind (Institute of Agriculture and Trade Policy: Nov)McKibbin, Warwick J. and Wing Thye Woo, 2003, The Consequences of Chinas WTO Ascension on its Neighbors,Pangestu, Mari, 2002, China and WTO: challenges and options for ASEAN, (Nov: 4

thAsia Development Forum, South Korea, 04-05).

Westin, Susan S. 2000, Seattle Ministerial: Outcomes and Lessons Learned, (US General Accounting Office, GAO/T-NSIAD-00-86)Bello, Walden, 2003, Multilateral Punishment : The Philippines in the WTO, 1995 2003, Focus on the Global South (FOCUS)Asian-Pacific Economic Cooperation (APEC), 2000, Tariff Database

[http://www.apectariff.org/]

News, Articles:ASEAN, 1999, ASEAN: WTO Round Should Consider the Interests of Southeast Asia, [http://www.aseansec.org/10857.htm]Asia-Pacific Economic Cooperation (APEC), 2005, Busan Declaration

[http://www.apecsec.org.sg/]Guardian, 2002. Europe complains to WTO over steel tariffs, (07 Mar),

[http://www.guardian.co.uk/print/0,3858,4369956-107226,00.html]South Asian Association for Regional Cooperation (SAARC), 2001, SAARC Forges Common Front on WTO issues, Joint

Statement by Commerce Ministers on Doha Ministerial conference,[http://commin.nic.in/doc/wtoaug01.htm]Export Promotion Bureau (EPB), 2001, SAARC states agree on common strategy for WTO,

[http://www.epbbd.com/]AFP Business News, 2005, No deal at Hong Kong WTO meeting in December: Mandelson,

[http://au.biz.yahoo.com/051111/33/d0wx.html]Cable News Network (CNN), 2002, WTO launches steel tariffs inquiry

[http://archives.cnn.com/2002/WORLD/europe/06/03/wto.eu/]Central Chronicle, 2005, India Suggests SAARC Agenda on WTO, (31 Mar)

[http://www.centralchronicle.com/20050331/3103163.htm]Alex Frew McMillan, CNN, 2002, Frustrated Japan Threatens WTO Steel Action, (15 Mar)US Gov, 2002, White House Says Steel Tariff Decision Consistent With WTO Rules,

[http://www.usembassy.it/file2002_03/alia/a2030513.htm]The Economist, 2003, Global Agenda: Cold Steel(13 Nov)

[http://www.economist.com/agenda/displayStory.cfm?story_id=2206255]UNCTAD, 2003, TRAINS: Philippines. (May 2003)

[http://r0.unctad.org/trains/2003%20Philippines.htm]

Agence France Presse (AFP) (Dec 2005). Poor told to accept WTO offers, cited in The Manila Times (01 Dec 2005 issue)[http://www.manilatimes.net/national/2005/dec/01/yehey/business/20051201bus2.html]

Canuday, Jowel F. (2002). Roxas on WTO: 'They preach one thing, practice another'http://www.cyberdyaryo.com/features/f2002_0311_02.htm

Casio, Teddy (2003). WTO and the Philippines, (23 April) Conference on WTO, Globalization and War, Quezon City, Feb 28, 2003.[http://www.yonip.com/View%20Point/Board06/messages/368.html].

Go, Marianne V. (2005), Global Steels hot, cold rolled coil lines start commercial operationThe Philippine Star (15 Oct 2005 issue)[http://www.philstar.com/philstar/NEWS200510150705.htm]

Bridges, (2002) Philippines Mulls Withdrawal From WTO, Cairns(Vol. 6 no.10, 19 March)[http://www.hartford-hwp.com/archives/54a/129.html]
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World Trade Organization: Preview and Overview