THE WORLD TRADE ORGANIZATION

Misconceptions

• The WTO replaced the General Agreement on Tariffs and Trade (GATT).

• The WTO creates the rules that govern international trade.

• WTO-member countries cannot deviate from the trade standards set by the organization.

• WTO negotiations only take place during ministerial meetings and summits.

What is the WTO?

• The World Trade Organization (WTO) is responsible for providing the common institutional framework for the conduct of trade relations among its members.

• It represents a rules-based approach to multilateral cooperation.

• Trade in Goods (GATT)

• Trade Services (GATS)

• Trade Related Intellectual Property (TRIPs)

• Dispute Settlement and Trade Policy Review

Functions of the WTO

• Facilitate the implementation of multilateral trade agreements.

• Provide a forum for negotiations on trade-related issues.

• Administer the Understanding among members on Dispute Settlement and Trade Policy Review.

• Enhance coherence in global economic policy-making.

Perspectives on the WTO

• A code of conduct among members.

• The WTO can be seen as a club of countries with respect to trade.

• Member countries must abide by the club’s rules or receive sanctions accordingly.

• A market for members.

• The WTO can be understood as a market where countries exchange trade policies.

• The objective of such exchange is to secure the maximum benefit for the countries concerned.

Non-discrimination

Reciprocity

Market Access

Fair Trade

CORNERSTONES OF THE

WORLD TRADE ORGANIZATION

• Two underlying principles:

• Most Favored Nation (MFN)

• Products from member countries must be treated no less favorably than coming from any other country.

• Precedent: Cobden-Chevalier Treaty (1860).

• National Treatment

• Foreign goods must be treated no less favorably than domestic goods.

• Equivalence of treatment is what matters.

Non-Discrimination

Reciprocity

• Within the WTO, countries engage in reciprocal exchange of market-access commitments.

• The exchange of trade concessions occurs on a quid pro quo basis.

• Countries are willing to lower trade restrictions only if their counterparts are willing to do the same.

• This also means that WTO stipulations (privileges and obligations) apply equally to new and old members alike.

Access and Competition

• These principles are often at odds with one another.

• The principle of market access means that countries have the right to seek redress should contracting parties renege on their trade concessions.

• The principle of fair competition in the WTO context means that member countries have the right to make erect trade barriers if competition from imports becomes injurious to domestic industries.

A History of Multilateral Trade

Negotiations

ROUND AGENDA OUTCOMES

Geneva (1947: 23)

• Tariff reductions on specific items. • Concessions on 45,000 tariff lines.

Annecy(1949: 29)

• Tariff reductions on specific items.• Accession negotiations.

• Modest tariff reductions.

Torquay(1950-51: 32)

• Tariff reductions on specific items.• Accession negotiations.

•8,700 tariff concessions.

Geneva(1955-56: 33)

• Tariff reductions on specific items. • Modest tariff reductions.

Dillon(1960-61: 39)

• Tariff reductions on specific items.• Tariff implications of the formation of the EEC.

• Tariff adjustments and 4,400 tariff concessions.

Kennedy(1963-67: 74)

• Across-the-board formula approach to tariff reductions for industrial products.• Preferential treatment for developing countries.• Non-tariff measures (1).

• 35% average tariff reductions by developed countries.• Binding of tariff lines.• Anti-dumping and customs valuation agreements.

Tokyo(1973-79: 99)

• Across-the-board formula approach to tariff reductions for industrial products.• Preferential treatment for developing countries.• Non-tariff measures (2).

• 1/3 reduction in average tariffs by developed countries.• Adoption of the Enabling Clause.• Establishment of codes of conduct on other non-tariff measures.

Uruguay(1986-94: 128)

• Tariff reductions: item negotiations and formula approach.• Non-tariff measures (3).• Agriculture, textiles, trade in services, intellectual property rights, dispute settlement, trade policy transparency and surveillance.

• 1/3 average reduction in tariffs by developed countries.• Agreements on services and intellectual property.• Creation of the WTO

Doha(2000-05: 148)

• Tariff reductions: item negotiations and formula approach.• Developing countries: implementation issues, market access, trade and the environment. ?

The Structure of the World Trade Organization

Some Features of the World Trade Organization

“New” Issues Addressed

• Agriculture and Textiles

• Trade Facilitation

• Elimination of Non-Tariff Barriers

• Trade Remedies

• Anti-dumping agreement

• Agreement on subsidies and countervailing measures

• Agreement on safeguards

Trade in Goods

• Customs tariff: in principle, the only instrument of protection allowed under the GATT.

• Non-discriminatory application of tariffs.

• Binding of tariff rates.

• Prohibition against quantitative restrictions (except for agricultural commodities under certain conditions).

• Trade in goods in the WTO can be described as a form of “shallow integration”.

• i.e. Cooperative agreements not to do certain things.

Trade in Services

• General Agreement on Trade in Services (GATS)

• Application of the MFN principle and national treatment to the service sector.

• Applies to the following types of services:

• Cross-border

• Movement of consumer abroad

• Movement of supplier abroad

• Temporary movement of people

TRIMs and TRIPs

• Trade-Related Investment Measures (TRIMs) pertain to government policies that impose performance standards on foreign investors.

• Examples: local content requirements, export obligations, trade balancing requirements, etc.

• The Agreement on Trade Related Intellectual Property Rights (TRIPs) imposes member governments to adopt specific, similar policies.

• Minimum standards of protection as outlined by existing IPR conventions and eventual harmonization with standards of industrialized countries.

Dispute Settlement

• Monitoring: Trade Policy Review Mechanism

• The General Council can sit as a Dispute Settlement Body (DSB) to resolve trade conflicts among members.

• Concerned parties must attempt to resolve their dispute bi-laterally.

• Failing that, the DSB creates a panel to investigate the matter at hand.

• Findings accepted by the DSB may be appealed.

• The implementation of panel decisions allows cross-compensation and retaliatory measures.

Singapore Issues:

• Labor Standards

• Trade and the Environment

• Investments

• Competition Policy

• E-commerce

Concerns over the equity of the system (particularly with respect to developing and least-developed countries).

Institutional and programmatic adjustments.

LOOKING FORWARD:

ISSUES FACING THE WTO

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