WORLD TRADE ORGANIZATION(WTO)

REFERENCES

WTO

1. Carnegie Endowment for International PeaceSandra Polaski. What Future for the WTO?www.carnegieendowment.org

2. The International Forum on Globalalization(IFG)Invisible Government- The WTO: Global Government for the new Millennium.www.ifg.org

3. World Economic Forum. The Global Trade Enabling Report, 2009

WTO

4. ADB/DFiD/ILO(2009).

Country Diagnostic Studies

Nepal: Critical Development Constraints.

5. UNDP. Enhancing Nepal’s Trade Related Capacity

www.entrec.org.np

6. Annapurna, Mangsir 29, 2066(Dec. 14, 2009) Monday.

7. Kantipur, 24 Poush, 2066, Friday.

GATT Founding Members

Australia, Belgium, Brazil, Burma, Canada,

Ceylon, Chile, China, Cuba, the Czechoslovak

Republic, France, India, Lebanon, Luxembourg,

Netherlands, New Zealand, Norway, Pakistan,

Southern Rhodesia, Syria, South Africa, the

United Kingdom, and the United States.

General Agreement on Tariffs and Trade

.(GATT)Definition

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GATT

• General Agreement on Tariffs and Trade.

• Treaty organization affiliated with the United Nations

whose purpose was to facilitate international trade.

• The primary actions of the organization were to freeze and reduce tariff levels on various commodities.

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GATT

• GATT was created in 1947, and was originally intended to become a part of the International Trade Organization (ITO);

• however, the ITO failed to be created,

• so the GATT was left as an independent organization.

• In 1994, GATT was superseded by the WTO.

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World Trade Organization (WTO)

Is one of the world's most important and influential International OrganizationThe 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

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WTO Covers:

1. Trade in goods

2. Trade in services

3. Intellectual Property Rights

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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"

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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. OVER 60 MEMBERS ON CHINA

2. OVER 65 MEMBERS ON RUSSIA

3. OVER 25 MEMBERS ON NEPAL

4. OVER 15 MEMBER ON CAMBODIA

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EXAMPLES

1. IT TOOK 15 YEARS FOR CHINA TO BE THE MEMBER

2. RUSSIA APPLIED IN 1993' IS STILL NEGOTIATING

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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NOTE• ACCEDING COUNTRIES ARE ASKED TO AGREE TO

COMMITMENTS THAT GO WELL BEYOND WHAT WTO LAW ACTUALLY REQUIRES, AND THAT OFTEN EVEN EXCEED THOS OF EXISTING WTO MEMBERS.

• ROMAN GRYUBERG ROY MICKEY POINT OUT THAT WHILE IT IS ONE OF THE '... ENDURING CONVENIENT CLICHES OF THE MULTILATERAL TRADING SYSTEM THAT THE WTO IS A 'RULES-BASED SYSTEM', THE ACTUALITY IS THAT ACCESSION IS INHERENTLY POWER BASED AND THE VERY ANTITHESIS OF THE WTO'S CREDO'.

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World Trade OrganizationStages of development:

1. 1947: 23 countries formed an association called The General Agreement on Tariffs and Trade (GATT) to negotiate reductions on trade restrictions and work towards common procedures for handling imports and exports.

2. 1986-93: Uruguay round of international trade negotiation agreed to establish World Trade Organization.

3. April 1994: Approved by the Trade Ministers in Marrakech, Morocco.

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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 2003: 148 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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WTO is defined as

• "The legal and institutional foundation of the multilateral trading system" – a term that encompasses its role as the forum for negations and settlement of disputes and the guardian of trade rules.

• It is a permanent organization created by international treaty ratified by the government and legislatures of members' states (unlike thee GATT).

• It has similar status to that of the international Monetary Fund (IMF), The World Bank etc, but it is not a United Nations Agency.

• A member driven organization and all decisions on any subject have to be taken by consensus, i.e., without objection from any members.

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Secretariat

Headed by a Director-General. The current one is from FranceGeneral Council

• WTO's main standing decision-making body• Each member country sends representatives normally led

by the head of its permanent mission in Geneva.• The council appoints the Deputy Director General after

consultation among member countries.• They would each serve three years each.• the General council appoints a Chairman from among the

Ambassadors and serves for one year.

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• Voting can in principle take place but would have to be a consensus to allow it.

• Binds all members to give equal treatment to the products and services of WTO members.

• Members can suspend this obligation in defense of national security or public health (USA and CUBA for example)

• Critics say it "as a cabal of faceless bureaucrats dictating trade policy to the world, is an administrative and research structure with no decision-making role on policy.

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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 that the equivalent.

3. Domestically produced goods.

4. 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 market-oriented 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 ¾ 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. Price—Hike Food, Drugs, Agricultural Inputs and other items of imports—foreign 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 BENEFITS2. MINIMIZE ITS RIGHTS AND DOWNSIDE

EFFECTS3. 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. STABLE MACROECONOMY

6. PRUDENT FINANCIAL MANAGEMENT

7. SOUND REGULATORY PRACTICES

8. 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 StudyThe 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, flowers, silver jewellery, handicrafts.

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3. Product profile should be enhanced4. Strengthen SAARC, SAPTA and SAFTA to SAFTA to improve

negotiating power, strengthen institutional mechanism.5. Educate people6. 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. Relaxation in custom barrier

2. Allowing easy exit to foreign companies

3. Reforming labor market

4. 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.