What is the WTO ?
• The World Trade Organization (WTO) is the only global international organization dealing with the rules of trade between nations. • The WTO agreements, negotiation. • The goal of WTO.
• International Trade Organization (ITO) • Rules on employment, commodity agreements, restrictive business practices, international investment, and services. • The combined package of trade rules and tariff concessions became known as the General Agreement on Tariffs and Trade. • The most serious opposition was in the US Congress
ITO,GATT & WTO
• ITO was effectively dead • The GATT remained the only multilateral instrument governing international trade from 1948 until the WTO was established in 1995.
The Multilateral Trading System-- Past, Present and Future
• The World Trade Organization came into being in 1995. • One of the youngest of the international organizations, • The WTO is the successor to the General Agreement on Tariffs and Trade (GATT).
Development in world
• • • • WTO is still young GATT is 50 years old. The past 50 years have seen an exceptional growth in world trade. GATT and the WTO have helped to create a strong and prosperous trading system contributing to exceptional growth. • The WTO was established on the basis of GATT customary practice
• The GATT trade rounds concentrated on further reducing tariffs. • The Kennedy Round in the mid-sixties brought about a GATT Anti-Dumping Agreement and a section on development. • The Tokyo Round during the seventies was the first major attempt to tackle trade barriers that do not take the form of tariffs, and to improve the system. • The eighth, the Uruguay Round of 1986-94, was the last and most extensive of all.
WTO Structure and Decision Making
• 150 members, accounting for over 97% of world trade. • Around 30 others are negotiating membership. • Decisions are made by the entire membership. By consensus • Ratified in all members’ parliaments. • The WTO’s top level decision-making body is the Ministerial Conference • Below this is the General Council which meets several times in Geneva headquarters.
Structure and Decision Making
• The General Council also meets as the Trade Policy Review Body and the Dispute Settlement Body. • The Goods Council, Services Council and Intellectual Property (TRIPS) Council report to the General Council. • Numerous specialized committees, working groups and working parties deal with the individual agreements and other areas
• • • • • The WTO Secretariat, In Geneva Around 600 staff and is headed by a director-general. Its annual budget is roughly 160 million Swiss francs. The Secretariat does not have the decision-making role
Duties of Secretariats
• To supply technical support for the various councils and committees and the ministerial conferences • To provide technical assistance for developing countries, • To analyze world trade • To explain WTO affairs to the public and media. • Providing legal assistance in the dispute settlement process and advises governments wishing to become members of the WTO.
Creation of New Rules
• • • • • • The Uruguay Round also created new rules for dealing with trade In services Relevant aspects of intellectual property Dispute settlement Trade policy reviews Schedules/separate commitments made by individual members in specific areas such as lower customs duty rates and services market-opening.
• From 1947 to 1994 • GATT was the forum for negotiating lower customs duty rates and other trade barriers • The text of the General Agreement spelt out important rules. • It has annexes dealing with specific sectors such as agriculture and textiles • Specific issues are considered • State trading, product standards, subsidies and actions taken against dumping.
• φ φ φ φ φ φ • • Freer and fairer trade principles Banks insurance firms telecommunications companies tour operators hotel chains transport companies General Agreement on Trade in Services (GATS). WTO members have also made individual commitments under GATS stating which of their services sectors they are willing to open to foreign competition, and how to open those markets
• The WTO’s intellectual property agreement amounts to rules for trade and investment in ideas and creativity. • Copyrights, patents, trademarks, geographical names used to identify products, industrial designs, integrated circuit layoutdesigns etc. • Protection of undisclosed information such as trade secrets — “intellectual property”
Types of Intellectual Property
• φ φ φ φ φ φ φ The areas covered by the TRIPS Agreement Copyright and related rights Trademarks, Service marks Geographical indications Industrial designs Patents Layout-designs of integrated circuits
• Resolving trade quarrels in case of any dispute in rules enforcement. • Countries bring disputes to the WTO if they think their rights under the agreements are being infringed. • Judgments by specially-appointed independent experts are based on interpretations of the agreements and individual countries’ commitments. • The system encourages countries to settle their differences through consultation. • Confidence in the system is borne out by the number of cases brought to the WTO.
National Treatment, Balanced Protection
• As in the two other agreements, non-discrimination features prominently: φ National treatment. φ Most-favored-nation treatment • The TRIPS Agreement has an additional important principle: φ Intellectual property protection should contribute to technical innovation and the transfer of technology. Both producers and users should benefit, and economic and social welfare should be enhanced.
WTO A Bill Of Rights for Multinational Corporations
• Trade has in the past been considered a mysterious subject relevant only to commercial interests • No apparent awareness that other societal values might be at stake • But “A truly astonishing assessment about an agreement that dealt explicitly with energy, agriculture, environmental standards, forests and fisheries. “
• To reflect a rowing awareness of the inter-linkages among all issues • Not only to pretend that the trading systems has to find an answer to each and every one of them • To ensure that at the highest level they will be brought within an inclusive global architecture.
φ φ φ φ φ φ φ Industrial tariff and non-tariff barriers. biotechnology, trade and labor, electronic commerce, trade and the environment, competition policy, investment policy and bribery.
On each of these, the key issues are deciding φ whether the WTO is an appropriate forum? φ what sort of role the WTO should play? φ whether new agreements are needed or the issues can be incorporated in existing agreements?
Need of the Round
• Poor countries get some favorable changes to that earlier round's commitments. It could go a long way, particularly for the textiles and agricultural products that matter most to poor countries. The draft also commits the WTO to look at other "implementation" issues that stem from the Uruguay round. World Bank forecast the impact of global trade liberalization. Once impact is of greater openness for poor countries On productivity is taken into account, the Bank considers that the elimination of import tariffs, export subsidies and domestic production subsidies would increase global income by $2.8 trillion over ten years
• • •
Europe and Japan are dragging their feet on freeing up agricultural trade; Europe is balking at any commitment to end export subsidies. The Europeans also claim the draft text is too weak on environmental concerns, but others see Europe's emphasis on the environment as a backdoor way of reintroducing agricultural protection. America, meanwhile, is resisting any efforts to accelerate textile Liberalization as part of the "implementation" concessions offered to poor countries It is against to renegotiate anti-dumping rules.
Goals of new round
It must move the WTO agenda forward on an accelerated basis, focusing on such key issues as further opening trade in services and agriculture,and address new issues such as electronic components and biotechnology We must strive toward increased cooperation and coordination between the WTO and other important international institutions, such as the IMF and the World Banks. Uruguay Round established the WTO as a forum for on-going liberalization and consultation. For a new Round to be credible, it must enhance the WTO's ability to deliver market opening results as negotiations in tile Round proceed.
Trade Policy Review Mechanism
The Trade Policy Review Mechanism’s purpose is • • • • • To increase the transparency To create a greater understanding of the policies that countries are adopting,, through regular monitoring To assess their impact. To improve the quality of public and intergovernmental debate on the issues To enable a multilateral assessment of the effects of policies on the world trading system.
Requirement for Review
All WTO members must undergo periodic inspection, each review containing reports by the country concerned and the WTO Secretariat. It is therefore fundamentally important that regulations and policies are transparent.
Ways to Review
This is achieved in two ways: Governments have to inform the WTO and fellow-members through regular “notifications” The WTO conducts regular reviews of individual countries’ trade policies
Frequency of Review
The frequency of the reviews depends on the country’s size: • The four biggest traders — the European Union, the United States, Japan and Canada— are examined approximately once every two years. • The next 16 countries are reviewed every four years. • The remaining countries are reviewed every six years, with the possibility of a longer temporary period for the least-developed countries.
Members of WTO
• About two thirds members are from developing countries. • They play an increasingly important and active role in the WTO because of their numbers, because they are becoming more important in the global economy, and because they increasingly look to trade as a vital tool in their development efforts • Among these are provisions that allow developed countries to be treated more favorably than other WTO members
Dealing with the special needs of developing countries in three ways: – The WTO agreements contain special provisions on developing countries – The Committee on Trade and Development with some others dealing about specific topics such as trade and debt, and technology transfer – The WTO Secretariat provides technical assistance
Measures of WTO
Other measures concerning developing countries in the WTO agreements include: φ Extra time to fulfill their commitments in many of the WTO agreements φ Trading opportunities through greater market access (e.g. in textiles, services, technical barriers to trade) φ Safeguard the interests when adopting some domestic or international measures (e.g. in anti-dumping, safeguards, technical barriers to trade) φ Means of helping (e.g. to deal with commitments on animal and plant health standards, technical standards, and in strengthening their domestic telecommunications sectors).
• Has special legal advisers for assisting developing countries in any WTO dispute and for giving them legal counsel • In 2001, 32 WTO governments set up an Advisory Centre on WTO law
Awareness of WTO in Pakistan
• • • Government is primarily responsible Training courses aiming at enhancing the efficiency, productivity and competitiveness of the industry should be initiated. Companies should allocate budget for training, research and development to enhance skills of manpower, to reduce/eliminate wastage and to improve competitiveness and quality of their products. Problems of the local industry should be addressed for increasing the exports of their products and enhancing their competitiveness in the international markets. High rates of duties, taxes and surcharges on raw materials are one of the major problems, which should be brought to zero or minimized.
Awareness of WTO in Pakistan
• Seminars and studies should be conducted aimed at finding ways of cost reduction. • Prices of utilities should be reduced for the industry to compete with the cheap imports. • The wastage in the industry should be minimized using modern methods and technologies. • Wastage in public organizations like line losses of WAPDA should be minimized to reduce the prices of utilities. • The industrialists should get authentic certification to make their exports acceptable and competitive in the international markets. • WTO agreements on Anti-dumping, Subsidies & Countervailing and Safeguard Measures have the provisions, which can be used to protect the local industry and safeguard the interests of exporters in the international as well as local markets.
WTO Watch Group
• WTO Watch Group (WWG) is an initiative by civil society organizations to develop critical awareness and pressure regarding Pakistan’s engagement with the World Trade Organization (WTO) and its implications through research, monitoring and advocacy. • The overall objective of the WWG is to protect people’s rights in this era of trade liberalization and to ensure that vision of WTO i.e. sustainable development, employment generation and technology transfer etc. guide trade • At the domestic level, the WWG aims to help transform the relevant national policies into ones those are sensitive to people’s basic rights, protect their livelihoods, and promote their competitiveness.
The WTO And The Global Economy
• The WTO represents a watershed in the process of establishing a truly global economic order • Because it lays out a comprehensive set of rules intended to guide all aspects of global economic activity • The WTO will undoubtedly exert a profound influence over the future course of human affairs
• Multinational corporations control more than one third of the world's productive assets, and the organization of their production and distribution systems has little to do with national or even regional boundaries. • Decisions about locating factories, sourcing materials, processing information or raising capital are made on a global basis, and any particular product may include components from several countries. • To consolidate these processes of globalization, the rules upon which it depends needed to be codified in binding international agreements - hence the WTO.
Trade agreements and WTO
Historically, trade agreements were concerned with the trade of goods - for example manufactured goods and natural resource products - across international borders. But under the WTO, international trade agreements have been dramatically extended to include investment measures, intellectual property rights, domestic regulations of all kinds, and services.
Trade agreements and WTO
• But arguably the most important source of WTO authority and influence stems from the powerful enforcement tools it has available to ensure that all governments respect the limits on their authority imposed by its trade rules • For example, in the first trade complaint to be resolved under the WTO, US Clean Air Act Regulations were deemed to violate WTO rules. In consequence, the US was given two options remove the offending provisions of its environmental statute or face retaliatory trade sanctions to the order of $150 million a year.
WTO SWOT Analysis
Strengths • Dispute resolution mechanism – allows small or developing economies the opportunity to obtain a fair hearing without being a subject to threats from bigger countries • Intellectual property rights which were included in TRIPS and were not included in GATT – in a lot of countries it is something that doesn’t exist, but if the country is willing to join WTO it must accept the TRIPS • Focus on trade to the exclusion of non-trade matters
WTO SWOT Analysis
Opportunities • Integration of the former Soviet states, the PRC and the countries of Eastern Europe into the framework of open international trade • Expansion of telecommunications sector and electronic trade • Opportunity to bring international industrial espionage to the end Threats • Nationalism • Regionalism in the form of trade blocks – groups such as NAFTA or E.U have regulations that conflict with those of the WTO
WTO SWOT Analysis
Weaknesses • No mechanism for weighting the influence of a member proportionally to the size of the member’s economy • Insensitivity of Director-General to the fears held by many member regarding the loss of national sovereignty under the WTO • The fact that Russia, though is willing to join the WTO, is unable to meet the requirements for membership • Insistence on food self-sufficiency in developing country members • Insufficient liberalization of foreign direct investment
Five major lessons for successful global trade management emerge from the first fifty years of the GATT/WTO system. They need to Need of momentum Big scale is Beneficial. Building Blocks, Not Stumbling Blocs. Money is Central Leadership is Essential
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Need of Momentum
• The lesson for 1998 and beyond is clear: launch a new liberalizing initiative in the WTO to restart the bicycle as soon as possible. As noted, the sectoral follow-ups to the Uruguay Round-in telecommunications services, financial services and information technology products-maintained a degree of momentum after its conclusion • And the Uruguay Round wrap up was extremely wise to incorporate a "built-in agenda" for the future, including such major topics as agriculture and overall services.
Large Scale is Beneficial
• The history of the GATT/WTO, and especially trade policy in the United States, clearly reveals that large-scale initiatives fare better than modest ones. • Application of that lesson to the period ahead is of crucial importance because of the severe threat to the open trading system from opponents of globalization in the United States, Europe and some key developing countries
• The Kennedy Round sharply increased the amount of multilateral cuts in tariffs, which remained an important obstacle to trade at that time. • The Tokyo Round began the process of extending the GATT system to no tariff measures. • The Uruguay Round brought agriculture and textiles into the system, seriously addressed services and intellectual property rights, and dramatically improved the dispute settlement mechanism. "Bigger was better" in attracting sufficient political support to bring each succeeding negotiation to a successful conclusion, despite the bigger battles that had to be taken on to do so.
• The prescribed course of action is, in any event, the earliest possible launch of a Millennium Round within the context of setting a policy objective of achieving global free trade by 2010 or 2020.
Regional Free Trade Arrangements
• Regional Free Trade Arrangements Share of World Trade, 1998 • EU EUROMED NAFTA MERCOSUR FTAA AFTA AUSTRALIA-NEW ZEALAND APEC
Building Blocks, Not Stumbling Blocks
• Some observers fear that regional participants, once having liberalized regionally, will not want to give up their preferential arrangements and/or will have "used up" their liberalization potential and/or trade attention • There are, indeed, a few disquieting signs. NAFTA employs rules of origin in the textile/apparel sector that discriminate sharply against nonmembers. Mercosur raised its common external tariff in late 1997 and sometimes expresses doubts about extending its liberalization to broader groupings. • The dimension of the prior rounds aimed primarily to reduce the discriminatory impact of the European Union. Similarly NAFTA, • Mercosur, and several other regional groupings that have become economically significant in the 1990s. • Now try to promote WTO
Money is Central
• Monetary and macroeconomic imbalances trigger a need for new global negotiations, to contain the protectionist impulses generated by large trade deficits; • New regional arrangements, which create new trade discrimination and thus motivate outsiders to negotiate globally in response, also trigger such a need • The Tokyo Round was in fact launched as part of the agreement, insisted upon by the United States, to restore fixed exchange rates among the major countries and terminate the import surcharge that it had instituted in August 1971
• The new bipolar power structure will still require joint US-EU leadership to launch the Millennium Round and all other global trade initiatives for the foreseeable future. • United States and the European Union, it is thus even more important to provide leadership for the WTO system. • APEC too lead world at time of Uruguay Round
. The system helps promote peace . Disputes are handled constructively . Rules make life easier for all . Freer trade cuts the costs of living . It provides more choice of products and qualities . Trade raises incomes . Trade stimulates economic growth . The basic principles make life more efficient . The system encourages good government