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
Linda Young, POLS 400, International Political Economy
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
Linda Young, POLS 400, International Political Economy
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)
Linda Young, POLS 400, International Political Economy
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
Linda Young, POLS 400, International Political Economy
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
Linda Young, POLS 400, International Political Economy
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
Linda Young, POLS 400, International Political Economy
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
Linda Young, POLS 400, International Political Economy
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
Linda Young, POLS 400, International Political Economy
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
Linda Young, POLS 400, International Political Economy
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
Linda Young, POLS 400, International Political Economy
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)
Linda Young, POLS 400, International Political Economy
Basic Structure of the WTO Agreements:How the Six Main Areas Fit Together
Source
Linda Young, POLS 400, International Political Economy
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:
Linda Young, POLS 400, International Political Economy
General Agreement on Trade in Services (GATS)
Cross border supply
Consumption abroad
Commercial presence
Presence of natural persons
Linda Young, POLS 400, International Political Economy
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
Linda Young, POLS 400, International Political Economy
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
Linda Young, POLS 400, International Political Economy
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
Linda Young, POLS 400, International Political Economy
“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
Linda Young, POLS 400, International Political Economy
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)
Linda Young, POLS 400, International Political Economy
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
Linda Young, POLS 400, International Political Economy
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
Linda Young, POLS 400, International Political Economy
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
Linda Young, POLS 400, International Political Economy
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
Linda Young, POLS 400, International Political Economy
Leadership in the WTO
Mike Moore1999–2002
New Zealand
Renato Ruggiero1995–1999Italy
Supachai Panitchpakdi 2002-2005Thailand
Peter Sutherland 1993–1995Ireland
Linda Young, POLS 400, International Political Economy
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
Linda Young, POLS 400, International Political Economy
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
Linda Young, POLS 400, International Political Economy
Dillon
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19
47
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62
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07
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)
Linda Young, POLS 400, International Political Economy
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
Linda Young, POLS 400, International Political Economy
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
Linda Young, POLS 400, International Political Economy
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)
Linda Young, POLS 400, International Political Economy
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
Source: Institute for International Trade Negotiations (ICONE)
Linda Young, POLS 400, International Political Economy
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
Source: Institute for International Trade Negotiations (ICONE)