Presentation 7 .pdf

PRESENTATION 7 WORLD TRADE ORGANIZATION The table of contents of ‘‘The Results of the Uruguay Round of Multilateral Trade Negotiations: The Legal Texts’’ is a daunting list of about 60 agreements, annexes, decisions and understandings. In fact, the agreements fall into a simple structure with six ma...

PRESENTATION 7 WORLD TRADE ORGANIZATION The table of contents of ‘‘The Results of the Uruguay Round of Multilateral Trade Negotiations: The Legal Texts’’ is a daunting list of about 60 agreements, annexes, decisions and understandings. In fact, the agreements fall into a simple structure with six main parts: an umbrella agreement (the Agreement Establishing the WTO); agreements for each of the three broad areas of trade that the WTO covers (goods, services and intellectual property); dispute settlement; and reviews of governments’ trade policies. the World Trade Organization (WTO) deals with the rules of trade between nations at a global or near-global level. But there is more to it than that.... There are a number of ways of looking at the WTO. It’s an organization for liberalizing trade. It’s a forum for governments to negotiate trade agreements. It’s a place for them to settle trade disputes. It operates a system of trade rules. 2 CONTINUED…. The WTO came into being on January 1, 1995, but its predecessor, the General Agreement on Tariffs and Trade (GATT), had been around since 1947. The WTO began life on 1 January 1995, but its trading system is half a century older. Since 1948, the General Agreement on Tariffs and Trade (GATT) had provided the rules for the system.... The last and largest GATT round was the Uruguay Round, which lasted from 1986 to 1994 and led to the WTO’s creation. Whereas GATT had mainly dealt with trade in goods, the WTO and its agreements now cover trade in services, and in traded inventions, creations and designs (intellectual property). The World Trade Organization (WTO) is the only global international organization dealing with the rules of trade between nations. At its heart are the WTO agreements, negotiated and signed by the bulk of the world’s trading nations and ratified in their parliaments. The goal is to help producers of goods and services, exporters, and importers conduct their business. 3 MEMBERSHIP: 164 members since 29 July 2016. This includes almost every important trading country in the world. The most conspicuous exception is Russia, which is not yet a member but is engaged in negotiations to join the WTO. The most important recent entrant is China, which joined in 2001. The number of members continues to grow as the states outside the system seek to be admitted. Note that one does not need to be a ‘‘state’’ to become a WTO member. Article XII:1 of the WTO Agreement provides that the WTO is open to ‘‘[a]ny state or separate customs territory possessing full autonomy in the conduct of its external commercial relations and of the other matters provided for in this Agreement and the Multilateral Trade Agreements [annexed thereto].’’ Good examples of WTO members that are not ‘‘states’’ are the European Union (a separate customs territory currently comprising 27 European states, which are also WTO members in their own right) and Macau or Hong Kong (politically speaking, parts of China, but in economic terms, separate customs territories). The Kingdom of Saudi Arabia has been a member of WTO since 11 December 2005. 4 MEMBERSHIP….. All parties to the GATT became members of the WTO when the later institution was born in 1995 (with the exception of Yugoslavia). Other states have joined (and will join in the future) through the accession process. To do so, a state must agree on a set of terms negotiated between itself and the WTO. This includes a set of commitments to be made by the entering state with respect to tariff rates, market access, and so on. Hammering out the terms of WTO accession can be a protracted process. It took China more than 15 years. Based on this agreement, the state enters the WTO upon approval by the General Council or Ministerial Conference (and after any domestic legal requirements within the state are satisfied). Formally speaking, accession of a new member is decided upon by two-thirds majority of existing members (Article XII:2, WTO Agreement). Yet, in practice, as with all WTO decisions (other than dispute settlement), accession occurs by consensus so that every existing WTO member can block the accession of any newcomer. This has led to some tensions, for example, as to the order of accession of China versus Taiwan (both of which are now WTO members), or Ukraine and Georgia joining the WTO before Russia. 5 PRINCIPLES OF THE TRADING SYSTEM The WTO agreements are lengthy and complex because they are legal texts covering a wide range of activities. They deal with: agriculture, textiles and clothing, banking, telecommunications, government purchases, industrial standards and product safety, food sanitation regulations, intellectual property, and much more. But a number of simple, fundamental principles run throughout all of these documents. These principles are the foundation of the multilateral trading system: First principles: trade without discrimination and it has two components: 1. The most favored nation 2. The national treatment policy 6 1. MOST-FAVORED-NATION (MFN): Treating other people equally Under the WTO agreements, countries cannot normally discriminate between their trading partners. Grant someone a special favor (such as a lower customs duty rate for one of their products) and you have to do the same for all other WTO members. This principle is known as most-favoured -nation (MFN) treatment. It is so important that it is the first article of the General Agreement on Tariffs and Trade (GATT), which governs trade in goods. MFN is also a priority in the General Agreement on Trade in Services (GATS) (Article 2) and the Agreement on TradeRelated Aspects of Intellectual Property Rights (TRIPS) (Article 4), although in each agreement the principle is handled slightly differently. Together, those three agreements cover all three main areas of trade handled by the WTO. 7 1. CONTINUED…. Some exceptions are allowed. For example, countries can set up a free trade agreement that applies only to goods traded within the group — discriminating against goods from outside. Or they can give developing countries special access to their markets. Or a country can raise barriers against products that are considered to be traded unfairly from specific countries. And in services, countries are allowed, in limited circumstances, to discriminate. But the agreements only permit these exceptions under strict conditions. In general, MFN means that every time a country lowers a trade barrier or opens up a market, it has to do so for the same goods or services from all its trading partners — whether rich or poor, weak or strong. 8 2. NATIONAL TREATMENT: Imported and locally Treating foreigners and locals equally produced goods should be treated equally — at least after the foreign goods have entered the market. The same should apply to foreign and domestic services, and to foreign and local trademarks, copyrights and patents. This principle of “national treatment” (giving others the same treatment as one’s own nationals) is also found in all the three main WTO agreements (Article 3 of GATT, Article 17 of GATS and Article 3 of TRIPS), although once again the principle is handled slightly differently in each of these. National treatment only applies once a product, service or item of intellectual property has entered the market. Therefore, charging customs duty on an import is not a violation of national treatment even if locally-produced products are not charged an equivalent tax. 9 SECOND: FREER TRADE: GRADUALLY, THROUGH NEGOTIATION Lowering trade barriers is one of the most obvious means of encouraging trade. The barriers concerned include customs duties (or tariffs) and measures such as import bans or quotas that restrict quantities selectively. From time to time other issues such as red tape and exchange rate policies have also been discussed. Since GATT’s creation in 1947-48 there have been eight rounds of trade negotiations. A ninth round, under the Doha Development Agenda, is now underway. At first these focused on lowering tariffs (customs duties) on imported goods. As a result of the negotiations, by the mid-1990s industrial countries’ tariff rates on industrial goods had fallen steadily to less than 4%. But by the 1980s, the negotiations had expanded to cover non-tariff barriers on goods, and to the new areas such as services and intellectual property. Opening markets can be beneficial, but it also requires adjustment. The WTO agreements allow countries to introduce changes gradually, through “progressive liberalization”. Developing countries are usually given longer to fulfil their obligations. 10 THIRD: PREDICTABILITY: THROUGH BINDING AND TRANSPARENCY Sometimes, promising not to raise a trade barrier can be as important as lowering one, because the promise gives businesses a clearer view of their future opportunities. With stability and predictability, investment is encouraged, jobs are created and consumers can fully enjoy the benefits of competition — choice and lower prices. The multilateral trading system is an attempt by governments to make the business environment stable and predictable. In the WTO, when countries agree to open their markets for goods or services, they “bind” their commitments. For goods, these bindings amount to ceilings on customs tariff rates. Sometimes countries tax imports at rates that are lower than the bound rates. Frequently this is the case in developing countries. In developed countries the rates actually charged and the bound rates tend to be the same. 11