Lecture 1 Concepts

Massimiliano Di Pace
INTERNATIONAL TRADE LECTURE 1
BA Master of science The topics are:

Tor Vergata University - Introduction to the internationalisation
process (the steps)
Lecture 1: Concepts of globalization, - The definition of globalisation
internationalization, principles of trade rules - The definition of internationalisation
and Wto agreements - The definition of international trade
- Principles of trade rules
Lecturer: Massimiliano Di Pace - Wto agreements
Massimiliano Di Pace 1 Massimiliano Di Pace 2
STEPS FOR INTERNATIONALISATION STEPS FOR INTERNATIONALISATION
The steps to achieve a successful operation of 4) understanding of techniques of export,

internationalization are: namely:
a) international marketing;
1) assessment of markets, and the choice of
the most promising one; b) international negotiations;
2) identification of potential partners and c) international contracts;
customers (and suppliers) in the foreign d) international payments;
market; e) international transport and logistics;
3) understanding of the rules of international
trade; Massimiliano Di Pace 3 Massimiliano Di Pace 4
5) assessment of The identification of a foreign market of

potential costs, potential interest is accomplished by:
risks, benefits
1) identification of market classification
stemming from an
criteria, suited for the company’s product;
internationalization
process (namely a 2) collection of data relating to the chosen
costs/benefits criteria for the markets evaluation;
analysis). 3) observation of market on the field, also
through participation in a local trade fair.
Concepts, principles of trade rules and Wto

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The scouting of potential customers and c) Experience of

suppliers in the foreign market can be made other enterprises;
through: d) Exhibitions
(catalogues of
a) Databases; exhibitors are
b) Chambers of commerce or public entities useful).
(e.g. governmental agencies for international
trade);
The knowledge of international trade rules can From the operational point of view is
be achieved navigating in the site of the World sufficient for European exporters to access the
Trade Organization, where you find Eu database ACCESS2MARKETS to get info
downloadable materials, principles and rules, about what is needed to be done to export any
as well as the texts of agreements, where there product to any (non-Eu) country in the world
are all rules relating to international trade
To do so you need the HS code of the product,
you can retrieve from www.tariffnumber.com
Access2Markets provides information relating 5) trade barriers;

to: 6) data on trade
flows between
1) duties; specific Eu
2) customs procedures; countries and
third countries.
3) documents required for customs clearance;
4) specific requirements to be met;

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STEPS FOR STEPS FOR INTERNATIONALISATION

INTERNATIONALISATION
The understanding of export techniques means c) how to draft an international contract;
having the know-how relating to: d) how to choose the right clauses in the
international contract;
a) how to take correct international marketing e) how to organize the international payment;
decisions; f) how to cover the risks of counterparts’
b) how to manage a negotiation with a foreign default;
counterpart, with his/her specific mindset, due g) how to choose the correct Incoterm;
to his/her national culture;
h) how to organize the international transport The assessment of costs stemming from
of goods from the seller’s premises to the operating in a new market can be done
buyer’s location; through:
i) how to select the best shipper and/or carrier;
l) how to carry out customs formalities; 1) Analysis of local costs for all the productive
m) how to manage the relationships with a factors to be bought locally;
foreign customer.
2) Estimate of costs for market tapping 4) Draft of a

(relating to the set-up of first facilities, the Business plan,
fulfilling of formalities, the management of putting together all
first operations); the steps to be
3) Estimate of investments needed to operate implemented in
in the foreign market; order to be in the
position to operate
in the foreign
market.

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The assessment of risks stemming from c) Assessment of

operating in a new market can be done possibilities that
through: your product is
imitated by local
a) Analysis of company’s competitive level producers, or that
versus its potential competitors; your trademark is
registered by others
b) Assessment of factors considered by the or copied.
customers in their purchase choices;
The evaluation of potential benefits you can 3) Observation of the real situation in the
expect from operating in a new market can be sector of interest;
made through: 4) Participation in an exhibition held in the
country of interest;
1) Evaluation of the market potential, and of 5) Experience of other companies (from your
its evolution; own country, for instance, through the
2) Estimate of the possible achievable market association the company is part of).
share;
In this context, it is necessary the analysis of d) Retrieval of information by specialized

competitors, in particular their market operators expert in gathering information on
strategies, which can be carried out with: companies.
a) Desk research via internet;

b) Reading of market studies;
c) Analysis of sales channels;

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GLOBALISATION GLOBALISATION
Globalisation and International Trade are 2 The concept (and term) of Globalisation was
faces of the same coin introduced in the 60s of the last century (1960
and on), when multinational corporations
We cannot start examining the International started to disseminate the world with their
Trade techniques without tackling the products, which were the same everywhere
phenomenon of Globalisation
The term “global village” was “invented” in The term of Globalisation became widespread
the ’60s by the mass media sociologist in the 80s (1980 and on), when some brands
Marshall McLuhan and logos became well known in every
country (i.e. Coca Cola, Mc Donald’s,
In the recent years many economists have Benetton, Exxon-Esso, Mercedes, Ibm)
written on globalisation (Baldwin, Beck,
Giddens, Harley, Pollin, Sen, Stiglitz)
But what is
“Globalisation”?
This is a very
used term,
which is
interpreted in
many ways

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Some use it, referring to a general Some groups of people use the term
phenomenon linked to the increase of “Globalisation” as a negative phenomenon
international trade, others advocate it as bringing about the disappearance of national
synonym of standardisation of products traditions and habits, while others highlight
the impact of trade on the environment
That said, it is important to issue an objective

definition of Globalisation
The main definition of Globalisation is: In other words

we have
possibility for everybody (all economic Globalisation
operators from every country of the world) to when we have
sell everything (every good and service), to a free
everybody (all consumers in every country of international
the world) trade
environment
If you think over, As a matter of fact there are still the following
you realise that, trade barriers:
except for some
areas of the world 1) tariffs (or duties);
(i.e. European 2) quotas;
Union), there are 3) standards;
still many obstacles 4) customs rules;
to free international 5) (custom officials’ corruption).
trade Massimiliano Di Pace 35 Massimiliano Di Pace 36

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Therefore, our world is not “globalised”, even There are

if it is not far from a real and complete alternative
globalisation definitions
relating to
This partial globalisation is due to the rules Globalisation
established by WTO
1° alternative definition: process leading This definition highlights the effects of trade
regional economies, societies, and cultures to which make populations more and more
integration on account of communication and similar to each other
trade
For instance, you may remark that young
people behave in a very similar way,
regardless the country they live
For instance, all young people cannot live Moreover they often
without a smartphone, which they use quite use the same
often for many aspects of their daily life products for
wearing, eating,
drinking, and they
spend leisure time in
the same way (i.e.
pubs, parties, discos)

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Furthermore, the topics studied at universities 2° alternative definition: integration of

are somewhat similar, also on account of national economies into the international
lecturers, who teach at the same time in economy through trade, foreign direct
different universities around the globe investment, capital flows, migration, and the
(e.g. your professor) spread of technology
This second alternative definition recalls the Actually, it is not a case that, in the
different aspects of international trade, which framework of international relations, the
consists not only in exchange of goods, but economic topics are at the top of agenda, and
also in international purchase of services, the meetings held by G7 and G20
transfer of assets or investment goods, organisations are quite often focussed on
movement of workers, use of same economic policies issues
technologies, etc.
This situation stems from the awareness that, Globalisation is the

due to huge exchanges of goods, services, result of break down
financial resources, assets, decisions taken by of borders, and
one country, especially if large, affect the practically, as far as
economic situation of other countries, and trade is concerned, of
therefore cooperation is actually required, in the overcome of
order to avoid shocks or sudden evolution of traditional trade
the national economy barriers, which were
previously quoted

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The main actor of Globalisation has been This principle is that all parties involved in the
Gatt, renamed as Wto since 1995 negotiations had to gain from new rules, and
therefore the loss of protection they had to
This international organisation, based in concede to other countries, had to be offset by
Geneva, has shaped, through long-lasting an easier access to other markets
rounds of negotiations, a set of rules aimed at
reducing trade barriers, based on an important
principle
Another actor has been Imf, which has played At regional level there are important actors of
an important role for stabilisation of globalisation, represented by international
currencies rates and for easing financial organisations, aimed at facilitating trade
capital flows flows, and based on mutual recognition of
standards and documents, which makes it
possible to move goods from one country to
another, without red tape and problems
The most important international 2) Usmca (ex Nafta, 3 countries)

organisations, foreseeing free trade
agreements are: 3) Mercosur (6 countries)
1) Eu single market (27 countries, without
Uk)

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5) Rcep - Regional Comprehensive Economic

4) Asean – China (Acfta) (11 countries)
Partnership (10 + 6 nations)
But the most important actor of globalisation is The effects of globalisation are multifold:
the business world, made up of million of
exporting companies, able to find customers in
foreign markets, and to manage international
contracts, transports, and payments, as well as
other activities, such as international marketing
and negotiations, custom clearance and
compliance to local regulations
a) standardisation of goods and services: in b) increasing competition: thanks to the

order to export goods, companies have to growing number of sellers in a market, buyers
comply with international standards, which can choose among many providers, spurring
are accepted by the majority of countries, and automatically them to attract customers
this leads along the time to the acceptance of through lower price and/or higher quality;
those standards by all States;

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c) broader choice for consumers and d) more intense capital flows: on account of
economic operators: regardless of possible revenues stemming from the international sale
gain for buyers in terms of price and quality, a of goods and services, money has to move
larger number of sellers favours a better from one country to another, and this
choice, not being “obliged” to buy from a facilitates flow of capital, which can be also
limited number of producers; invested overseas;
e) more intense movements of workers: some f) stronger labour mobility: independently

international sale operations entail the from the movements of workers due to
movement of workers, who have to go to international contracts foreseeing the
another country in order to provide the performance of activities carried out abroad,
students and workers may decide to go
service, or to build the infrastructure overseas in search of better opportunities of
purchased by a foreign buyer, or to assemble study and job, and this is allowed on account
the product sold to the foreign client; of openness of markets due to international
trade;
g) faster pace of technological innovations: which turns out in new

the competition among a multitude of discoveries, new products,
companies, based in several countries, spurs a new technologies, new
higher engagement in research (i.e. the solutions to problems, and
vaccine for Covid-19), consequently in an
improvement of products
and services, helpful for
consumers and buyers
from all countries;

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h) higher mutual influence of economies: i) major need for governments’ policies

trade, bringing about movement of goods, has coordination: the consequence of the previous
a direct impact on Gdp, prices, balance of effect is that States have to consider economic
payments, employment, and therefore national policies implemented by other countries, in
economic performance depends on other order to assess the effectiveness of its own
countries performance; economic policy;
j) more difficult control activities for crime k) greater importance of international

fighting and fiscal monitoring: the large languages: the growing need to operate with
availability of tools and ways to wire money foreign counterparts highlights the relevance
from one place to another, and the easy of main international languages (English,
possibility to cover these money transfer with
fake export operations, make it more difficult French, Spanish, Portuguese, Russian), and
to contrast criminal groups in their also the importance of languages as Chinese
international illegal operations; and Arabic;
l) challenges for environmental protection: the so globalisation, so

transport activities, as well as the growing far, has negatively
level of production has a direct impact on the affected the health of
environment (e.g. use of products, packaging our planet,
disposal), contributing to
climate change,
reduction of wild
areas and species of
Massimiliano Di Pace 71
plants and animal; Massimiliano Di Pace 72

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Critics on globalisation relate to:

m) risk of political strains on commodities:
the increase of production, due to larger 1) unfair exploitation of poor countries;
exchanges of goods, entails a growing
2) multinational companies imposing their
demand of commodities, which may products;
determine disagreements between nations,
above all for maritime resources and mines
located in Developing countries.
3) delocalisation 4) external policies driven by commercial

towards purpose;
countries with 5) income inequality worsened between and
lower labour within nations;
cost and more 6) fading away of local cultures.
flexible
environmental
rules;
INTERNATIONALISATION INTERNATIONALISATION
The concept of internationalisation can be When referred to economies,

referred to: internationalisation means that the domestic
market is open to foreign companies, and that
- economies national companies operate overseas
- companies
The above described situation can occur to

different degrees

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As a matter of fact the degree of openness of Otherwise, there can be an agreement with
domestic market can change in absolute third countries foreseeing for their companies
terms, as well as in relative terms, depending a higher degree of access to domestic market
on the kind of the product, or on the country
where foreign companies are located
It may happen that only one, or few, no-

national companies are allowed to operate
domestically in all markets
In the same way When referred to

there can be a companies,
strategic reason for internationalisation
letting foreign can have 2 possible
providers to sell meanings:
their
goods/services in
the internal market
1° (stricter concept): a company is 2° (broader concept): a company is

“international”, when it is present in foreign “international”, when it sells abroad directly,
markets with its own facilities (such as branches, even if it has not permanent facilities in
local companies, offices, warehouses, foreign market (i.e. selling via web, through
showrooms, production plants), for commercial
and/or productive purposes local distributors, during overseas exhibitions)

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According to the latter As a matter of fact, companies, before

concept, the establishing facilities abroad, they consolidate
internationalisation their experience of sales in a foreign market,
process of a company and just after that, they may consider to build
starts with exports up a facility, which is at the beginning a
commercial branch, and afterwards, if
necessary, a manufacturing local company
Companies’ Internationalisation can be driven 3) on account of the

in 3 different manners: need to balance the
reduction of the
1) by importers, which buy directly from the internal market (i.e.
foreign company, being the latter very Italian companies).
competitive (i.e. Chinese companies);
2) on the basis of a strategy, aimed at finding
new business opportunities overseas (i.e.
Japanese and American companies);
INTERNATIONAL TRADE INTERNATIONAL TRADE
International trade is the outcome of the In practical terms,

activities carried out by international international trade
companies, that is, exporting and importing is the exchange of
companies, operating in international goods (and
economies, namely, countries which are open services) carried
to the exchange of goods and services out by different
countries

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International trade is made possible thanks to It’s not possible

rules which define mechanisms such as to tackle the
customs procedures, tariffs, documents and topic of
standards requirements, authorisations, international
powers and duties of countries trade rules
without learning
the rules, and
knowing where
they are written
The sources of trade rules are: In order to export companies, directly or

indirectly (e.g. through professionals expert of
1) Wto agreements; international trade rules, such as shippers and
2) Free trade areas agreements (i.e. Eu carriers), have to know these rules
treaties);
3) Bilateral agreements.
PRINCIPLES OF WTO PRINCIPLES OF WTO

AGREEMENTS AGREEMENTS
Wto The main
agreements principles are:
contains rules
which have 1) Negotiations:
been designed talking,
on the basis of governments have
some very to try to sort out the
important trade problems they
principles face with each
other;

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The history of Gatt agreements is there to
prove how much can be achieved through Negotiations tackle tariff and non–tariff
negotiations measures, and improvements are introduced
gradually to let economies have the time to
After 8 negotiations, and 75 years, the value adjust to them
of international trade has passed from 59
billions of Us$ (1948) to 24.312 (2022), that
is 3412 times more, and this thanks to the
gradual opening of markets

2) Most-favoured-nation (Mfn): it means A country should

treating other countries equally, that is, not discriminate
prohibition of discrimination not only between its trading
between national and foreign products, but partners and it
also between products from different
should not
countries;
discriminate
between its own and
foreign
products/services
PRINCIPLES OF WTO PRINCIPLES OF

AGREEMENTS INTERNATIONAL TRADE
The Mfn The rules on non-discrimination are designed

principle has to secure fair conditions of trade
the goal to
help trade to
Rules try to establish what is fair or unfair,
flow as
and how governments can respond fairly
freely as
possible

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3) Tariff and rules change according to

For this reason some exceptions are permitted:
product and country: countries apply different
1) free trade areas; duties and rules to the same product,
2) free access agreements with Developing depending on what country it comes from, as
countries; well as they apply different duties and rules to
different products, even if they come from the
3) countermeasures in case of proved unfair
same country;
practices;

The reasons for tariffs and rules change

4) National treatment: imported and locally
according to the country and vary on the basis
produced goods should be treated equally,
of the product is that Wto agreements points
after the foreign goods have entered the
out the rate of reduction to be implemented by
market, paid the duties, and complied with
each country to existing tariffs and rules,
local customs regulations;
which were (and still are) different among
Wto member countries, and for the same
country, among different wares

The national treatment principle does not 5) Progressive reduction of trade barriers
imply that charging customs duty on an (duties, quotas, standards, customs rules,
import is a violation of national treatment, unfair movements of exchange rates), even if
even if locally-produced products are not they can be left to a certain extent, in order to
charged by an equivalent tax protect consumers, prevent the spread of
disease, or safeguard the environment;

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Lowering In fact, reducing customs duties and

trade barriers eliminating measures, such as import bans or
is one of the quotas, that restrict imports in term of quantity
most obvious selectively, help firms to export
means of
encouraging
trade

From the establishment of Gatt in 1948, 9 6) Rules predictability: companies have to

rounds of negotiations have been launched to rely on the stability of regulations, otherwise
achieve this goal, even if room for it is harder to run a business based on
improvements is still there import/export when managers don’t know
what to expect when dealing with customs;
Businesses need a clear view on the future of

their operations (export/import)

Foreign companies, investors and With stability and predictability, investment is

governments should be confident that trade encouraged, jobs are created, and consumers
barriers should not be raised arbitrarily can fully enjoy the benefits of competition

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Practically, stability In this framework it is important the concept

is guaranteed by of “bound rate”, which is the duty every Wto
binding member is committed to apply when a foreign
commitments on product enters its market
ceilings on customs
tariff rates For Developed countries, the bound rates are
generally the rates actually charged

Most Developing countries have bound rates Countries can break the commitment (i.e.
higher than the actual rates charged, so the raising a tariff above the bound rate), but only
bound rates serve as ceilings, and Developing after negotiating it with the countries most
countries can adjust them according to their concerned by the raise, pointing out the
economic situation possible compensation for trading partners’
loss of trade
For Developed countries the bound rate is
usually very low

7) Promoting fair competition: prohibition of Trade, as sport, needs that all participating
subsidies, or the possibility to compensate members behave fairly, and that all players
them with extra-duties, stirs fair competition, respect the same rules
benefiting consumers and best producers;

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That’s why some In fact, state aid helps exporting companies to

initiatives are be more performant, chiefly on the price side,
forbidden, as damaging competitors in the importing
subsides and country and in other exporting countries
dumping, which
have the same The same happen when a large multinational
effect as doping corporation applies dumping when exporting
in the sport

Thanks to its strength and the presence in Discouraging unfair practices, such as export
multiple market, a multinational company can subsidies and dumping, aimed at gaining
afford to sell its product overseas at a price market share, is a complex issue, and the Wto
which is lower than the one practiced in the rules try to establish what is fair or unfair, and
domestic market (and not necessarily lower how governments can respond, in particular
than the cost of the product) by charging additional import duties
calculated to compensate for damage caused
by unfair trade

8) Encouraging This principle regards chiefly weak countries,

development and such as LICs, to which is recognised more
economic time to adjust to Wto rules, greater flexibility
reform: history and special privileges
has proven that
Gdp growth is
strictly linked to
the increase of
trade;

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The advantage for those countries, stemming

On the other hand, along the last decades over
from the participation to Wto, is that they are
3/4 of Wto members are, or have been,
not obliged to implement rules established by
Developing countries, or countries which
the strongest countries (under the economic
were in transition to market economies (i.e. ex
and political point of view)
Soviet Union republics)

The recognition of Participating to international trade is an

some privileges opportunity of economic growth, considering
allows small and that Developed countries have allowed duty-
poor countries to free and quota-free imports for almost all
participate to products from least-developed countries
international trade (except for agricultural products)
in a flexible way

9) Protecting environment: Wto agreements However, these

permit members to take measures to protect measures must
not only the environment, but also public be applied in
health, animal health and plant health; the same way
on national and
foreign
businesses

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PRINCIPLES OF WTO WTO AGREEMENTS

AGREEMENTS
The Wto agreements are 6:
In other words, members must not use
environmental protection measures as a means 1) Gatt (General Agreement on Trade and
of disguising protectionist policies Tariffs for goods);
2) Gats (General Agreement on Trade in
Services);
3) Trips (Trade Related aspects Intellectual
Property RightS on products containing
intellectual property rights);
WTO AGREEMENTS WTO AGREEMENTS
4) Dsu (Dispute settlement understanding); The ongoing valid Gatt agreement is the result
5) Tprm (Trade policy review mechanism); of 8 reforms which occurred during 8 rounds
of negotiations
6) Wto Institution.
These agreements are downloadable from this

web page:
https://www.wto.org/english/docs_e/legal_e/le
gal_e.htm
As a matter of fact, the existing rules are the

result of Uruguay round, which gave birth to
the 6 Wto agreements

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The progress was possible thanks to the Agreement resulted easier to reach, on
“package approach”, that can sometimes be account of trade-offs
more fruitful than negotiations on a single
issue When a government wanted to make a
concession, politically difficult to defend,
A large size of the package has meant more attractive benefits stemming from other
benefits because participants could seek sectors were used as compensation
and secure advantages across a wide
range of issues
Moreover, Developing countries and other Wto agreements are aimed at facilitating the
less powerful participants had a greater exchange of goods and services, which is
chance of influencing the multilateral system beneficial for all countries participating to
in a trade round than in bilateral relationships
international trade, as it was proven by
with major trading nations
economists
The problem is that the perfect means for But this is not possible due to the fact that
easing the flow of goods and services among customs rules, tariffs, and standards are the
countries would be the harmonization of outcome of a long national legislative
customs rules, tariffs, and standards tradition, and it is not feasible to change them
abruptly

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Therefore, Wto On the other hand Wto agreements consider

agreements are the different degree of economic development
meant to pursue the of Wto members, and hence, it is accepted a
reduction of higher protection of Developing countries,
differences between while Developed countries are expected to
national rules, and, open their markets more than Developing
as to tariff, to countries
squeeze them as
much as possible
STRUCTURE OF GATT AGREEMENT STRUCTURE OF GATT AGREEMENT
The most important Wto agreement is Gatt The Gatt agreement is made up of 3 parts:
(General Agreement on Trade and Tariffs)
1) Main agreement and annexes describing
It outlines the rules for the international trade principles;
of goods 2) Subagreements establishing rules for
specific sectors or activities needed for
It is the oldest agreement of Wto, being the carrying out international trade operations;
first version drafted in 1948 3) National commitments as to tariffs and
customs rules.
The first part of Gatt is based on the following - Waivers of Obligations;

documents: - Concession withdrawal;
- Marrakesh Protocol to the Gatt 1994.
- Gatt 1994 (and Explanations);
- Other duties and charges;
- State trading enterprises;
- Balance-of-payments;
- Regional trade;

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The second part of Gatt is made up of the - Customs Valuation;

following subagreements: - Preshipment Inspection;
- Rules of Origin;
- Agriculture; - Import Licensing;
- Sanitary and Phytosanitary Measures; - Subsidies and Countervailing Measures;
- Technical Barriers to Trade; - Safeguards;
- Trade-Related Investment Measures - Trade Facilitation.
(TRIMs);
- Anti-dumping;
STRUCTURE OF GATT AGREEMENT AGRICULTURE SUBAGREEMENT
The third part of Gatt is based on

commitments taken by each Wto member In the past, international trade of agricultural
country as to: products was highly distorted, especially with
the use of export subsidies and other non-tariff
1) Tariff to be applied to each product (Hs measures, such as import quotas
code);
2) Specific rules as to customs procedures
(documents and standards).
AGRICULTURE SUBAGREEMENT AGRICULTURE SUBAGREEMENT
It’s the case to remind that agricultural sector 2) to protect producers from price movements;
is strategic for many countries for the 3) to guarantee an adequate income to farmers.
following reasons:
Besides, some poor importing countries
1) to ensure a sufficient production of depend on supplies of cheap, subsidised food
foodstuff for domestic demand; from major industrialized nations

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AGRICULTURE SUBAGREEMENT AGRICULTURE SUBAGREEMENT
The subagreement on Agriculture contains • export subsidies and other methods used to
commitments on: make exports artificially competitive.
• market access, that is reducing various trade
restrictions confronting imports; The subagreement still allows governments to
support their rural economies, but preferably
• domestic support, eliminating subsidies and through policies that cause less distortion to
other programmes, including those that raise trade (avoiding subsidies and restrictions to
or guarantee farmgate prices and farmers’ imports)
incomes (as Eu’s Acp);
SPS SUBAGREEMENT SPS SUBAGREEMENT
The Sps (Sanitary and Phytosanitary Actually, consumers have to be sure, when
Measures) subagreement deals with the they buy food and drinks, that those products
protection of human, animal or plant life or are safe, and can be consumed without any
health danger
As a matter of fact it happens that, from time

to time, some news regard the consumption of
food which brings about diseases, or even the
death of people eating it
So, it is government’s responsibility to verify This Sps subagreement tries to find a balance
that alimentary products sold in the country between the need to ensure safety and the
are safe, and this has to be checked also for opportunity to shun protectionism, being
imported foodstuff possible that measures aimed at protecting
health may be used to protect national
The same concern has to be guaranteed for production
animals and plants, which can be harmed by
diseases originated abroad

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In this respect Sps subagreement sets out rules At the same time countries can to some extent
for safety of foodstuff, allowing countries to apply the precautionary principle, a kind of
set their own standards, but stating that “safety first” approach to deal with scientific
regulations must be based on science, and uncertainty
applied only to the extent necessary to protect
human, animal or plant life or health
SPS SUBAGREEMENT TBT SUBAGREEMENT
That said, Wto member countries are The Tbt (Technical Barriers to Trade)
encouraged to use international standards, subagreement deals with technical regulations
guidelines and recommendations, where they and standards relating to products, which play
exist an important role for environmental
protection, personal safety, consumer
information, national security
If they do so, it is unlikely to be challenged
legally in a Wto dispute
TBT SUBAGREEMENT TBT SUBAGREEMENT
The problem is that standards vary from Moreover, too many different standards make
country to country, and if they are set life difficult for producers and exporters,
arbitrarily, they could be used as an excuse for because they have to tailor the products
protectionism according to national standards and
regulations
That’s why standards can become an obstacle

to trade

agreements 28
The subagreement Tbt tries to ensure that Furthermore, countries are not prevented from
regulations, standards, testing and certification taking measures necessary to ensure their
procedures do not create unnecessary obstacles standards are met, but they are encouraged to
apply international standards
At the same time it recognizes countries’ rights
to adopt the standards they consider
appropriate
The subagreement says the procedures used to The Tbt subagreement also encourages
decide whether a product conforms with countries to recognize each other’s procedures
relevant standards have to be fair, and it for assessing whether a product conforms to
discourages any methods that would give standards
domestically produced goods an unfair
advantage On the other hand, without recognition,
products might have to be tested twice, first
by the exporting country and then by the
importing country
TRIMS SUBAGREEMENT TRIMS SUBAGREEMENT
The TRIMs (Trade-Related Investment They are forbidden, for instance, measures
Measures) subagreement states that no Wto which require particular levels of local
member shall apply any measure that procurement by an enterprise (“local content
discriminates against foreigners or foreign requirements”)
products, useful to set up a productive facility,
and it outlaws investment measures that lead
to restrictions in quantities The subagreement also discourages measures
which limit a company’s imports or set targets
for the company to export

agreements 29
RULES OF ORIGIN SUBAGREEMENT RULES OF ORIGIN SUBAGREEMENT
The Rules of origin subgreement deals with an The origin of a merchandise is very important
essential part of international trade: the for different reasons
guarantee that a product is produced where the
tag (Made in…) says First of all, tariffs may change according to the
country of origin
In other words this subagreement sets the
criteria for defining where a product has been
made
In addition the origin of a merchandise is Furthermore, customers require that the

necessary to compile trade statistics, and product they purchased is actually originated
therefore the origin of goods should be the from the country indicated in the tag
declared one
In fact, the perceived quality of goods
depends on the country of origin
Some examples may help the understanding The same would happen if a person purchases
of this concept a Scottish Whiskey, which was actually
produced in China
If a customer buys the well known Italian
Parmigiano cheese, he/she will be On the other hand, a Chinese silk produced in
disappointed to discover that it was produced South Africa would surprise a potential client,
in Brazil, where there is not the experience and generate doubt on the quality of the item
and ingredients required for making a real
Parmesan cheese

agreements 30
The solution to this problem has been defined

The problem about the origin of a product is by this subagreement on the basis of the
due to the fact that, on account of principle of major contribution to the
globalization, a product can be processed in production process
several countries, before it is ready for the
market In fact, the subagreement states that the
condition for printing the label Made in a
specific country (i.e. Made in Italy) is that the
product has received the last and most
important phase of production in that country
CUSTOMS VALUATION CUSTOMS VALUATION

SUBAGREEMENT SUBAGREEMENT
The Customs valuation subagreement deals Consequently it is crucial to have rules for
with rules for the valuation of goods at assessing the value of imported goods
customs
This is a fundamental aspect of customs rules,
As a matter of fact duties are usually applied which differ from country to country
in terms of percentage on the value of
imported goods

The customs procedure leads to the definition The subagreement aims for a fair, uniform and
of the tariff to be paid by the importer, on the neutral system for the valuation of goods for
basis of the value of the product customs purposes
It outlaws the use of arbitrary or fictitious
In this framework importers may encounter customs values, and provides a set of valuation
problems at customs during the process of rules
estimation of the value of a product

agreements 31

The basic rule is that the value declared in the Fob and Cif are Incoterms, which are
invoice is the reference explained in the lecture devoted to
international transportation
But it has to be recalled that some countries
request that in the invoice it is indicated not Here it is enough to underline that in some
the Fob price, since the Cif price cases the cost of transportation and insurance
may be included in the price (as it is in the
case of Cif incoterms), while in others these
costs are not included (as for Fob)

Therefore, national rules (i.e. requesting a Cif Customs administrations have the right to
price) may change the outcome of tariff request further information in cases where
quantification they have reason to doubt the accuracy of the
declared value of imported good

If the Customs administration maintains a In such a case, an investigation can be

reasonable doubt, despite any additional activated, so as to quantify the real price of the
information, it may be deemed that the goods to be cleared at the customs
customs value of the imported goods cannot
be determined on the basis of the declared
value

agreements 32
IMPORT LICENSING SUBAGREEMENT IMPORT LICENSING SUBAGREEMENT
The Import licensing subagreement was A first reason is the government’s will to
conceived because there are some countries, as control the economic activity, so as to plan
China, which require a business license for better its interventions in view of improving
importing country’s economic situation
A second reason is the control of national and

There are several reasons for applying a foreign currencies flow, useful for monetary
system of licences for imports policy decisions
IMPORT LICENSING SUBAGREEMENT PRESHIPMENT INSPECTION

SUBAGREEMENT
Considered that some Wto member countries The Preshipment inspection subagreement is
use this licence system, the subagreement says about the practice of employing specialized
that import licensing should be simple, private companies to check shipment details
transparent and predictable (price, quantity and quality) of imported
goods
Hence, governments are asked to publish
sufficient information for traders to know how
to get licences
PRESHIPMENT INSPECTION PRESHIPMENT INSPECTION

It is used by governments of Developing The subagreement places on governments,

countries, for safeguarding national financial which use preshipment inspections, some
interests (preventing capital flight, commercial obligations placed such as non-discrimination,
fraud, and customs duty evasion) transparency, protection of confidential
business information

agreements 33
PRESHIPMENT INSPECTION ANTI-DUMPING SUBAGREEMENT

SUBAGREEMENT
This subagreement forbids unreasonable delay, The Anti-dumping subagreement deals with a
and obliges to the use of specific guidelines practice carried out by some multinational
for conducting price verification and avoiding companies, wishing to conquer new markets
conflicts of interest by the inspection agencies
This practice consists in selling products
overseas at a price lower than the one applied
in the exporting company’s domestic market
ANTI-DUMPING SUBAGREEMENT ANTI-DUMPING SUBAGREEMENT
Hence, if a company exports a product at a On the other hand, large companies, with a
price lower than the price it normally charges sound financial position, may afford not to
on its own home market, it makes “dumping” gain from sales in a new market, for a certain
period of time, in view of attracting new
The consequence of this behaviour is that customers
smaller producers, located in the importing
country, suffer an unfair competition, not
being in the position to afford to sell their
products at a low price
In order to protect national producers, some Therefore, this subgreement disciplines anti-
governments react applying higher tariffs on dumping actions, allowing governments to act
products originating from countries where are against dumping where there is a real injury to
based companies practicing dumping the competing domestic industry
The problem is that governments may

overreact, or use higher tariffs also when there
is no harm for domestic companies

agreements 34
The subagreement obliges the importing 1) the effective existence of dumping (that is
country, in order to control its reaction and to price is lower than normal value);
keep it proportionate, to prove the that 2) the extent of dumping is larger than the
dumping is there minimum established by the subagreement;
3) the damage to national industry or the
Therefore importing countries have to collect threat/risk of it.
evidence on:
Normal value can be (in order of priority): The anti-dumping procedure may start when
the importing country proves, on the basis of
a) the price in the exporter’s domestic market; an investigation, that price is lower than 2% of
b) the price charged by the exporter in another normal value, and percentage of dumping
country; imports is more than 3% of all imports of that
c) exporter’s production costs + normal good
expenses + normal profit margins.
In such a case the importing country can apply The exporter can decide to raise its price to
extra duties on the particular product from the avoid anti-dumping measures
particular exporting country in order to bring
its price closer to the “normal value”, or to The aim of the extra duty is to bring the price
remove the injury to domestic industry in the closer to the “normal value”, or to remove the
importing country injury to domestic industry in the importing
country

agreements 35
SUBSIDIES SUBAGREEMENT SUBSIDIES SUBAGREEMENT
The Subsidies and Countervailing measures The subgreement defines a subsidy as a state
subagreement has the same purpose as the aid when it has selective nature (just some
anti-dumping subagreement enterprises, or just one sector) and its purpose
is general (i.e. it’s not a subsidy a grant for
In fact, subsidies have the same distortion role research activity)
as dumping, harming competitors of the
exporting company residing in a State which
provides state aid to exporters
This subagreement disciplines the use of The actions the complaining country (that is,
subsidies, and it regulates the actions the importing country) can take are:
importing countries can take to offset the
effects of subsidies (positive for the exporter 1) use the Wto’s dispute settlement procedure,
benefitting of it, and negative for companies to seek the withdrawal of the subsidy, or the
operating in the importing nation) removal of its adverse effects;
2) launch its own investigation and charge The subagreement makes a distinction
extra duty (known as “countervailing duty”) between:
on subsidised imports, found to be hurting 1) Prohibited subsidies: subsidies that require
domestic producers. recipients to meet certain export targets, or to
use domestic goods instead of imported goods
(they are specifically designed to distort
international trade, and therefore they are
likely to hurt other countries’ trade);

agreements 36
2) Actionable subsidies: the complaining As to actionable subsidies, the subagreement

country has to show that the subsidy has an defines 3 types of damage actionable subsidies
adverse effect on its interests, otherwise the can cause:
subsidy is permitted.
1) hurt a domestic industry in an importing

country;
2) hurt rival exporters from another country
when the two compete in third markets;
3) hurt exporters trying to compete in the Again, if domestic producers are hurt by
subsidising country’s domestic market. imports of subsidized products, countervailing
duty can be imposed
If the Dispute Settlement Body rules that the
subsidy does have an adverse effect, the The procedure for taking countervailing
subsidy must be withdrawn, or its adverse measures is the same as the one for anti-
effect must be removed dumping measures
The subagreement foresees that the importing As matter of fact it sets detailed rules for
country has to conduct an investigation, deciding whether a product is being
whose rules are set by the subagreement subsidised, criteria for determining whether
imports of subsidised products are hurting
domestic industry, procedures for initiating
and conducting investigations, and on the
implementation and duration (normally 5
years) of countervailing measures

agreements 37
SAFEGUARDS SUBAGREEMENT SAFEGUARDS SUBAGREEMENT
The Safeguards subagreement takes into To this regard the subagreement allows a Wto
consideration the possibility that Wto member country to restrict imports of a
members may be subject to a flooding of product temporarily, if its domestic industry is
imported goods from another Wto country injured, or threatened with a serious injury,
caused by a surge in imports
This may happen when the price of an
imported merchandise is remarkably lower
than the price of the domestic product
The subagreement sets out criteria for According to the subagreement, an import
assessing whether “serious injury” is being “surge” justifying safeguard action can be a
caused or threatened, and the factors which real increase in imports (an absolute increase),
must be considered in determining the impact or it can be an increase in the imports’ share of
of imports on the domestic industry a shrinking market, even if the import quantity
has not increased (relative increase)
The measures which the importing country Where quantitative restrictions (quotas) are
may take regard quotas or tariffs, and cannot imposed, they normally should not reduce the
last more than 4 years (but they can be quantities of imports below the annual average
extended to 8) for the last 3 years, unless clear justification is
given that a different level is necessary to
prevent or remedy serious injury

agreements 38
A safeguard measure should be applied only to When a country restricts imports in order to
the extent necessary to prevent or remedy safeguard its domestic producers, has to
serious injury to domestic industry, and to help compensate the exporting country, and if no
the industry of the importing country to adjust agreement is reached, the exporting country
to the new market conditions can retaliate by taking equivalent action (i.e.
rising tariffs on exports of the country
applying safeguards measures)
TRADE FACILITATION TRADE FACILITATION

The last subagreement is Trade facilitation, It sets out measures aimed at enhancing
which is one of the few outcome of the Doha impartiality, non-discrimination and
round of negotiations transparency in managing international trade,
at customs level
This subagreement entered into force on 22
February 2017, and it applies only to Wto In particular this subagreement commits
member countries which signed it (nearly all) countries to provide information on customs
rules, also via internet and inquiry points
WAYS OF PROVIDING SERVICES

GATS AGREEMENT OVERSEAS
The General Agreement on Trade in Services The international sale of services can be
(GATS) is the first agreement governing carried out in different manners:
international trade in services
1) cross-border supply: services supplied from
one country to another (e.g. phone calls);
Negotiated in the Uruguay Round, it was
developed in response to the huge growth of 2) consumption abroad: consumers or firms
making use of a service in another country
the services economy in the last decades (e.g. tourism);

agreements 39
WAYS OF PROVIDING SERVICES

GATS COVERAGE
OVERSEAS
3) commercial presence: foreign companies Gats agreement covers many internationally-
setting up subsidiaries or branches to provide traded services:
services in another country (e.g. foreign banks
setting up branches); 1) tourism and movements of persons;
4) presence of natural persons: individuals
2) air and maritime transport;
travelling from their own country to supply
services in another (e.g. consultants, lecturers). 3) banking and financial services;
4) telecommunications;
5) professional services.
GATS COVERAGE GATS STRUCTURE
Gats does not cover governmental (public) Gats has the same structure as Gatt:
services, that is the ones funded by the State,
and countries are not obliged to privatize
1) the main text containing general obligations
services, which are private in other nations
and disciplines;
2) subagreements (or annexes) dealing with
In some nations some services (i.e. health, rules for specific sectors;
education) are provided by state and private
entities
GATS STRUCTURE COUNTRIES’ COMMITTMENTS
3) individual countries’ specific commitments Countries’ commitments in terms of level of

to provide access to their markets, including opening domestic services market can be
indications of where countries are temporarily different:
not applying the “most-favoured-nation”
1) market access commitment: foreign
principle of non-discrimination.
companies are allowed to operate in domestic
market;

agreements 40
COUNTRIES’ COMMITTMENTS GATS SUBAGREEMENTS
2) market access limitation: the government Gats includes some sub-agreements, being
limits the number of licences it will issue for necessary to consider diversity among
foreign companies; several types of services:
3) exception to the national treatment
principle: foreign companies can operate, but 1) Movement of natural persons;
only in some specific sectors, and not in all 2) Financial services;
(as domestic companies can do). 3) Telecommunications;
4) Air transport services.
TRIPS AGREEMENT TRIPS AGREEMENT
The Trips agreement (Trade-Related Aspects of The problem tackled by Trips agreement is that
Intellectual Property Rights) introduces some the extent of protection and enforcement of
basic rules relating the international trade of these rights varied widely around the world,
goods incorporating Intellectual Property and as intellectual property became more
Rights (Iprs), such as copyrights, patents, important in trade, these differences became a
geographical indications (i.e. wine Chianti) source of tension in international economic
relations
ROLE OF IPRS IN
TRIPS AGREEMENT INTERNATIONAL TRADE
The Trips agreement has therefore the aim to As a matter of fact many products incorporate
ensure that intellectual property protection goes Intellectual property rights
on contributing to technical innovation and the
transfer of technology They can take many different forms, such as
technical solutions (i.e. an electronic device),
artistic expressions (i.e. an image), signs (i.e.
a trademark), symbols and names (logo and
word representing a product, as Big Mac)
used in commerce

agreements 41
ROLE OF IPRS IN ROLE OF IPRS IN

Governments grant creators of those creations Governments grant creators these rights as an
the right to prevent others from using their incentive to produce and spread ideas that will
inventions, designs or other creations, and to benefit society as a whole
use that right to negotiate payment in return
for others using them In order to prevent litigations, and facilitate
the recording of Iprs, since many decades
These are “intellectual property rights” some international conventions have been
signed

Most of the value of medicines and high In other words the value of merchandise
technology products lies in the amount of depends on the content of innovation,
invention, innovation, research, design carried creativity and branding, and if a producer
out copies products containing those elements, it
actually steals them from the owner of those
Movies, music recordings, books, computer elements, not less than pickpocketing
software and on-line services are bought and
sold because of the information and creativity
they contain, not usually because of the
plastic, metal or paper used to make them

The rights of the producer of a Ipr take a Patents, industrial designs, integrated circuit
number of forms (and names) designs, geographical indications and
trademarks have to be registered in order to
For example books, paintings and movies receive protection
come under copyright
Inventions can be patented The registration includes a description of what
is being protected (the invention, design,
Brands and product logos can be registered as brandname, logo, etc)
trademarks

agreements 42

Copyright and trade secrets are protected Iprs are necessary representing an incentive to
automatically according to specified produce ideas that will benefit all society
conditions, and they do not have to be
registered, and therefore there is no need to
disclose, for example, how copyrighted The extent of protection and enforcement of
computer software is constructed these rights varies widely around the world
ROLE OF IPRS IN TRIPS COVERAGE

INTERNATIONAL TRADE
Iprs are ruled by national laws and by Trips covers the following different Iprs:
international agreements which are supervised
by Wipo (World intellectual property 1) Copyrights (i.e. Microsoft Office, Dan
organisation) Brown’s novels);
2) Trademarks (i.e. Coca Cola);
3) Geographical indications (i.e. Parmigiano
reggiano);
TRIPS COVERAGE TRIPS COVARAGE
4) Industrial design (i.e. Ferrari automotive The Trips agreement takes as reference the
models); Iprs protection rules envisaged by
5) Patents (new product or new manufacturing international conventions, under the umbrella
process, such as SmartPhone Components); of Wipo (World Intellectual Property
Organization), such as:
6) Layout-designs of integrated circuits (i.e.
chips);
7) Undisclosed information, including trade
secrets.

agreements 43
TRIPS COVARAGE TRIPS COVARAGE
1) Paris Convention for the Protection of 4) Lisbon Agreement for the Protection of
Industrial Property (patents, industrial Appellations of Origin and their International
designs); Registration (geographical indications);
2) Bern Convention for the Protection of 5) Hague Agreement Concerning the
Literary and Artistic Works (copyrights); International Registration of Industrial
3) Madrid Agreement (and Protocol) Designs (industrial designs).
Concerning the International Registration of
Marks (trademarks);
TRIPS COVERAGE TRIPS COVERAGE
The agreement covers 4 broad issues: 3) how countries should enforce those rights
adequately in their own territories;
1) how general provisions and basic principles 4) how to settle disputes on intellectual
of the multilateral trading system and other property between members of the Wto.
international intellectual property agreements
should be applied;
2) how to give minimum standards of
protection to intellectual property rights;
TRIPS PRINCIPLES TRIPS PRINCIPLES
Trips agreement is an attempt to narrow the The Trips principles are the same as the ones
gaps in the way Ipr rights are protected around foreseen by Gatt and Gats (e.g. Mfn or no
the world, and to bring them under common discrimination, national treatment)
international rules
It establishes minimum levels of protection

and enforcement that each government has to
ensure to the intellectual property of other
Wto members companies

agreements 44
The Trips (and Wipo) basic principle is that The purpose of these rights is to ensure the
creators of Iprs can be given the right to incentive and therefore the commitment to
prevent others from using their inventions, find new solutions to problems, benefiting so
designs or other creations, and to use that everybody experiencing that problem or that
right to negotiate payment in return for others need
using them
The agreement says governments have to People involved should be able to ask a court
ensure that intellectual property rights can be to review an administrative decision or to
enforced under their laws, and that penalties appeal a lower court’s ruling
for infringement have to be tough enough to
deter further violations The agreement describes in some detail how
enforcement should be handled, including
The procedures must be fair and equitable, rules for obtaining evidence, provisional
and not unnecessarily complicated or costly measures, injunctions, damages and other
penalties
It says courts should have the right, under Governments also have to make sure that
certain conditions, to order the disposal or intellectual property rights owners can receive
destruction of pirated or counterfeited goods the assistance of customs authorities to
prevent imports of counterfeit and pirated
Trademark counterfeiting or copyright piracy goods
on a commercial scale should be considered a
criminal offence

agreements 45
DSU DSU
The Dsu (Dispute settlement understanding) The system of settling dispute is based on
agreement is pivotal in the multilateral trading clearly-defined process, with timetables for
system completing a case, but the priority is to find a
solution through consultations
Without a procedure for settling disputes, the
rules-based international trade system would If a case runs its full course to a first ruling, it
be less effective, because rules could not be should not normally take more than about one
enforced year, and 15 months if the case is appealed
DSU DSU
Disputes between Wto members on trade The Dsu agreement sets out a procedure,
issues are normal, and essentially are about which foresees at the beginning the
broken rules involvement of Wto director for helping
countries in dispute to find a solution, and if
A dispute arises when one country
(responding country) adopts a trade policy unsuccessful, the appointment of a panel of
measure or takes some action that one or more experts by the Dispute Settlement Body
fellow-Wto members (complaining countries)
consider to be breaking the agreements, or to This help is requested by litigating countries
be a failure to respect its obligations when their consultations are not fruitful
DSU DSU
The procedure comprises hearings of It’s possible to appellate to the Appellate

complaining country and of responding Body, if there is a wrong interpretation or
country, and of other interested countries, and application of trade rules
the draft of a report (final judgement)
The time limits are flexible, and if the case is
Settling disputes is the responsibility of the considered urgent (e.g. if perishable goods are
Dispute Settlement Body, which is made up of involved), it is accelerated as much as
representatives of all Wto members possible

agreements 46
DSU DSU
More in detail, the Dsu procedure is the 1) panel appointment (max 45 days) by the
following: Dispute Settlement Body (Dsb): if
consultations fail, the complaining country
can ask for a panel to be appointed;
0) consultation (max 60 days): before taking
any other actions the countries in dispute have 2) draft of a final report prepared by the panel
to talk to each other to see if they can settle (max 6 months, or 3 if perishable goods),
their differences by themselves, and if that which can be overturned only by a consensus
fails, they can also ask the Wto director- of Wto member in Dsb; the report is prepared
general to mediate or try to help in any other on the basis of:
way;
DSU DSU
a) collection of written declarations from e) panel’s first draft of final report, and its
disputing countries; transmission to involved countries;
b) hearings of countries representatives, and f) collection of comments on the first draft of
in case of other interested parties; final report from involved countries in a 2
c) collection of rebuttals written and oral from weeks term;
involved countries; g) drafting by the panel of an interim report,
d) hearing of experts (appointed by the panel), including findings and conclusions, and its
if there are technical or scientific aspects to be transmission to involved countries;
considered, who may present an advisory
report;
DSU DSU
h) collection of comments on the interim l) approval of the final report within 60 days
report from involved countries in a 1 week by the Dispute Settlement Body (unless a
term; consensus rejects it);
i) submission of a final report to the involved m) both sides can appeal the report.
countries and 3 weeks later to all Wto
members; if the panel decides that the
disputed trade measure breaks a Wto
agreement or an obligation, it recommends
what to do in order to comply with Wto rules;

agreements 47
DSU DSU
Appeals have to be based on points of law Each appeal is heard by 3 members of a

such as legal interpretation, and they cannot permanent 7-member Appellate Body, set up
reexamine existing evidence or examine new by the Dispute Settlement Body
issues
The appeal can uphold, modify or reverse the
panel’s legal findings and conclusions
DSU DSU
Normally appeals should not last more than The losing country has to implement the
60 days, with an absolute maximum of 90 ruling of the panel (or of the Appellate Body)
days within 30 days
The Dispute Settlement Body has to accept or

reject the appeals report within 30 days If complying is impractical in the short term,
(rejection is only possible by consensus) the Wto member losing the litigation will be
given a “reasonable period of time” to do so
DSU DSU
If it fails to act within this period, it has to If after 20 days, no satisfactory compensation
enter into negotiations with the winning is agreed, the winning country may ask the
country in order to determine mutually- Dispute Settlement Body for permission to
acceptable compensation impose limited trade sanctions against the
losing country, as retaliation

agreements 48
DSU TPRM
This is intended to be temporary, to encourage The Tprm (Trade Policy Review Mechanism)
the other country to comply agreement foresees the monitoring and
scrutiny of Wto members’ trade policy, in
order to make sure the respect of their
Sanctions should be imposed in the same commitments
sector as the dispute, but if this is not practical
or if it would not be effective, the sanctions
can be imposed in a different sector of the
same agreement (or in another agreement)
TPRM TPRM
This goal is achieved in 2 ways: The wider objectives of the Tprm agreement
are:
1) governments have to inform Wto and 1) to increase the transparency and
fellow-members of specific measures, policies understanding of countries’ trade policies and
or laws through regular “notifications”; practices, through regular monitoring;
2) Wto conducts regular reviews of individual 2) to improve the quality of public and
countries’ trade policies. intergovernmental debate on the issues;
3) to enable a multilateral assessment of the
effects of policies on the world trading
Massimiliano Di Pace 291 system. Massimiliano Di Pace 292
TPRM TPRM
For each review, 2 documents are prepared:

The Trade Policy Review Body of Wto drafts
periodically a review focused on members’
own trade policies and practices of member - a policy statement by the government under
countries’ policies review;
- a detailed report written independently by
the Wto Secretariat.
The frequency of the review is every 2 years
for Eu, Usa, Japan, China, 4 years for the 16
biggest traders after the “Quad”, 6 years for
remaining countries

agreements 49
TPRM WTO INSTITUTION
The reviews have two broad results: The Wto (World Trade Organisation)
insititution is based in Geneva and its
1) they enable all interested people to members are 164
understand a country’s trade policies;
2) they provide a feedback to the reviewed
country on its performance as to trade policy. The Wto Secretariat has around 700 staff and
is headed by a director-general
WTO INSTITUTION WTO INSTITUTION
The most important Wto body is the All major decisions are made by ministers or
Ministerial Conference, which gathers once by their ambassadors or delegates (who meet
every 2 years regularly in Geneva)
As a matter of fact Wto is run by its members’ Decisions are normally taken by consensus
governments
Reaching decisions by consensus among Consensus is not necessary in 4 situations:

more than 160 members can be difficult
1) interpretation of a rule can be adopted by a
majority of 3/4 of Wto members;
Its main advantage is that decisions made 2) Ministerial Conference can waive an
in this way are more acceptable to all obligation on a Wto member through a 3/4
members majority;

agreements 50
3) decisions to amend provisions can be Work is handled by 3 bodies:

adopted in some cases by a 2/3 majority; - General Council;
4) decision to admit a new member is taken
- Dispute Settlement Body;
by a 2/3 majority in the Ministerial
Conference. - Trade Policy Review Body.
Actually General Council gathers in 3

different versions, and it reports to the
Ministerial Conference
General Council conducts the organization's • The Council for Trade in Services (Services
business in the intervals between Ministerial Council);
Conferences • The Council for Trade-Related Aspects of
Intellectual Property Rights (Trips Council).
The General Council is based on 3 working
groups:
• The Council for Trade in Goods (Goods

Council);
Specialised subsidiary bodies (Committees, They report to the General Council

Sub-committees), also comprising all
members, administer and monitor the In the next slide it is shown the Wto
implementation by members of the various organization chart
Wto agreements

agreements 51
WTO INSTITUTION
Decision process is based on informality
The chairperson of a negotiating group holds

consultations with delegations individually, in
twos or threes, or in groups of 20–30
The key is to ensure that everyone is kept This means that countries participating to a
informed about what is going on (the process coalition can be represented by the
must be “transparent”), even if they are not in coordinator of the coalition itself
a particular consultation or meeting, and that
they have an opportunity to participate or
provide input (it must be “inclusive”) The coordinators also take responsibility for
both “transparency” and “inclusiveness”, by
keeping their coalitions informed and by
In order to increase their bargaining power, taking the positions negotiated within their
countries have formed coalitions alliances
International organisations, such as Eu, Asean, Wto secretariat tasks are:

Mercosur, speak with a single voice, but the
vote is the sum of their member countries 1) to administer and monitor the application
of the Wto's agreements;
2) to run negotiations for the reduction or
The consensus is reached because agreements
elimination of obstacles to trade;
just decide how much to reduce a tariff, and
do not decide a specific level of duty for a 3) to sort out commercial disputes among Wto
specific country members regarding the interpretation and
application of the agreements;

agreements 52
4) to monitor trade policies; The Wto budget is 200 million Swiss francs
5) to build a capacity of developing country with individual contributions calculated on the
government officials in international trade basis of shares in the total trade
matters;
6) to facilitate the accession of new countries
who are not yet members of Wto;
7) to conduct economic research and
collecting and disseminating trade data;
To enter Wto a country has to: If a two-thirds majority of Wto members vote
in favour, the applicant is free to sign the
1) illustrate in a memorandum its own trade protocol and to accede to the organization
policy;
2) take part to negotiations to define its
commitments for trade liberalisation;
3) contribute to the draft of a final protocol of
accession containing the terms of agreement
and a list of commitments.

agreements 53

Lecture 1 Concepts

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Lecture 1 Concepts

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Massimiliano Di Pace

INTERNATIONAL TRADE LECTURE 1

BA Master of science The topics are:

STEPS FOR INTERNATIONALISATION STEPS FOR INTERNATIONALISATION

The steps to achieve a successful operation of 4) understanding of techniques of export,

STEPS FOR INTERNATIONALISATION STEPS FOR INTERNATIONALISATION

5) assessment of The identification of a foreign market of

Concepts, principles of trade rules and Wto

STEPS FOR INTERNATIONALISATION STEPS FOR INTERNATIONALISATION

The scouting of potential customers and c) Experience of

STEPS FOR INTERNATIONALISATION STEPS FOR INTERNATIONALISATION

STEPS FOR INTERNATIONALISATION STEPS FOR INTERNATIONALISATION

Access2Markets provides information relating 5) trade barriers;

Massimiliano Di Pace 11 Massimiliano Di Pace 12

Concepts, principles of trade rules and Wto

STEPS FOR STEPS FOR INTERNATIONALISATION

STEPS FOR INTERNATIONALISATION STEPS FOR INTERNATIONALISATION

Massimiliano Di Pace 15 Massimiliano Di Pace 16

STEPS FOR INTERNATIONALISATION STEPS FOR INTERNATIONALISATION

2) Estimate of costs for market tapping 4) Draft of a

Concepts, principles of trade rules and Wto

STEPS FOR INTERNATIONALISATION STEPS FOR INTERNATIONALISATION

The assessment of risks stemming from c) Assessment of

STEPS FOR INTERNATIONALISATION STEPS FOR INTERNATIONALISATION

STEPS FOR INTERNATIONALISATION STEPS FOR INTERNATIONALISATION

In this context, it is necessary the analysis of d) Retrieval of information by specialized

a) Desk research via internet;

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Concepts, principles of trade rules and Wto

Massimiliano Di Pace 25 Massimiliano Di Pace 26

Massimiliano Di Pace 27 Massimiliano Di Pace 28

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Concepts, principles of trade rules and Wto

That said, it is important to issue an objective

The main definition of Globalisation is: In other words

Concepts, principles of trade rules and Wto

Therefore, our world is not “globalised”, even There are

Massimiliano Di Pace 37 Massimiliano Di Pace 38

Massimiliano Di Pace 39 Massimiliano Di Pace 40

Concepts, principles of trade rules and Wto

Furthermore, the topics studied at universities 2° alternative definition: integration of

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This situation stems from the awareness that, Globalisation is the

Concepts, principles of trade rules and Wto

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The most important international 2) Usmca (ex Nafta, 3 countries)

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Concepts, principles of trade rules and Wto

5) Rcep - Regional Comprehensive Economic

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a) standardisation of goods and services: in b) increasing competition: thanks to the

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Concepts, principles of trade rules and Wto

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e) more intense movements of workers: some f) stronger labour mobility: independently

g) faster pace of technological innovations: which turns out in new

Concepts, principles of trade rules and Wto

h) higher mutual influence of economies: i) major need for governments’ policies

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j) more difficult control activities for crime k) greater importance of international

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l) challenges for environmental protection: the so globalisation, so