Transcript An Introduction to the WTO (BA447) Revised Nov 2007.ppt

Agenda Nov. 6 and 8
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Finish discussion of “political strategy”
Introduction to WTO
Contemporary Issues – WTO
Plan for next three weeks
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Quiz
Consultations
Presentations
Next Quiz
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Re: global warming
 IPCC, Kyoto Protocol
 US position
Re: energy
 An idea of the global picture on crude oil
 Understanding the attractiveness of alternative sources (e.g. read
Summary of OSU study)
“Political strategy”
Re: WTO
 What it is? What does membership mean?
 Some idea of how some of its rules work
Role of Activists
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In general call attention to an environmental issue.
Use political strategy to call attention. For example,
against genetically modified seeds 
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In Brazil, filed or caused law suit to be filed to ban the
introduction of modified seeds
In Europe, lobbied parliament
In other countries, lobby congress or executive branch
Target key players as a way of attacking industry
Good use of the press – public relations
Need “good publicity” to survive
Other Examples of Political
Strategy
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Anti-Global Warming Campaign/
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Intention was to illustrate how an industry lobby group
conducted an effective “political strategy”
Note complex political process into which a political
strategy can become an important tool
Campaign to raise awareness on unfair labor
practices: NIKE
Campaign against Measure 50
Procurement and Tax Reform Legislation
Components of Political
Strategy
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Objectives: pre-empt, create or attack legislation or regulation
Proponents range from interest groups to NGOs, etc.
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Craft clear set of messages to be disseminated
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Spin has to be effective, e.g. doubt on science of climate change
Attract attention to the message
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Can draw from a coalition of supportive individuals and organizations
Sometimes targets entities large or popular enough to attract press
Use or create events
Drama
Advertising
Effective use of the press
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Talking heads, e.g. think tanks, prominent individuals
Press releases
Components of Political Strategy:
More direct methods
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Demonstrations, rallies, etc.
Door to door in the executive and legislative
branches
Use the court system
Conclusions – implications on
global businesses
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Reality of world-wide movements
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Climate change is supported by both public and private
entities globally
Response to genetically modified seeds
Other environment-related movements
These have spawned “targetting”/legislation
Direct and indirect costs to global firms including
legal costs, energy costs, etc.
Indirect costs in terms of negative publicity, etc.
An Introduction to the
WTO
What is the WTO?
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The World Trade Organisation (WTO)
Established on 1st January 1995 by treaty
As a result of the Uruguay Round negotiations (1986-1994)
Located in Geneva, Switzerland
Members: 150 countries (as of January 2007)
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At its simplest:
“A global organisation dealing with rules of trade between
nations”. (source: WTO)
Membership- open to sovereign states and customs unions
Membership is diverse - developed, developing, least developed countries and
economies in transition.
Evolution of the WTO
Predecessor of the WTO – GATT ’47
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The General Agreement on Tariffs and Trade (GATT) 1947 -the first
major effort to establish international rules governing trade in goods.
Though initially conceived as a provisional legal instrument, it endured
for almost 50 years.
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The GATT functioned without a formal organisational framework to
oversee its implementation as the proposed International Trade
Organisation (ITO) never came into being and the ITO Charter (aka
the Havana Charter) of which GATT was only to be a part, never came
into effect.
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GATT’s primary focus was the reciprocal reduction of tariffs which
later expanded to other trade related areas. In the years leading up to
the Uruguay Round, GATT expanded its competence through
several rounds of trade negotiations which witnessed the formulation
of complex legal instruments on specific aspects of trade, particularly
disciplines on the use of non tariff barriers.
The Uruguay Round (1986-1994)
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The results of the Uruguay Round (UR) were signed in Marrakech,
Morocco on 15 April 1994 .The WTO came into being on 1 January
1995 by virtue of the Agreement establishing the WTO.
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The scope of the multilateral trading system was broadened from
trade in goods (GATT) to encompass trade in services (GATS) and
trade related aspects of intellectual property rights (TRIPS). It is a
rule-based global trading system complete with its own dispute
resolution procedures.
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The “Single Undertaking” concept
The multilateral trade agreements under the WTO system are treated
as a single undertaking which means that every member state of the
WTO is a party to every one of these agreements and must implement
them accordingly.
Exception: Plurilateral agreements are binding on Member states that
have specifically agreed to be bound by them.
Principles of the world trading system
under the WTO
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Non discrimination- Most Favoured Nation (MFN) and National Treatment
obligations
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Freer trade – negotiations aimed at lowering trade barriers
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Predictability and transparency – a rule based system, binding
commitments, restrictions on the use of barriers to trade and transparent
trade policies and regulatory frameworks (e.g. transparency obligations in
the major trade agreements and the Trade Policy Review Mechanism)
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The promotion of fair competition- MFN and national treatment
obligations and rules against unfair trade practices (e.g. anti dumping)
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Encouragement of development and economic reform
The Uruguay Round agreements
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The Agreement establishing the WTO
Annexes
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Annex
1A - GATT 1994 (basically GATT ‘47), related agreements (e.g. Agreements
on Agriculture, Subsidies etc.) and texts
1B- General Agreement on Trade in Services (GATS) and Annexes
1C- Agreement on Trade Related Aspects of Intellectual Property Rights
(TRIPS)
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Annex 2 Understanding on the Rules and Procedures Governing the
Settlement of Disputes (aka Dispute Settlement Understanding /DSU)
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Annex 3 Trade Policy Review Mechanism
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Annex 4 Plurilateral Agreements
(Agreements on Trade in Civil Aircraft and Government Procurement)
Four main principles of GATT
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Most Favoured Nation (MFN)
Art. 1 of GATT embodies the MFN rule. At its simplest, it requires
any favourable treatment granted to a product originating in
or destined for any other country, to be accorded
immediately and unconditionally to the like product
originating in or destined for the territories of all other
member states.
E.g. Spanish coffee case: Spain modified its tariff applied to imports of unroasted coffee,
applying a higher tariff to certain types of unroasted coffee beans imported from Brazil
(Arabica and Robusta) while granting duty free access to other types of “mild” unroasted
coffee beans considered to be “like products”. The Panel considered this to be a breach of
the GATT MFN obligation and concluded that the tariff regime was discriminatory in its
treatment of unroasted coffee originating from Brazil.
[The principle of MFN is also found in GATS(Art.2) and TRIPS (Art.4)]
MFN (cont.)
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There are permitted exceptions to the MFN rule:
Free trade areas (e.g. NAFTA)
Customs unions (e.g. the EU)
Preferential systems [e.g. Generalized System of
Preferences (GSP) which grants preferential treatment for
products from developing countries]
Regional examples of FTAs: MERCOSUR (Southern
Common Market), COMESA (Common Market for Eastern
and Southern Africa), ASEAN.
Principles (Cont.)
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National Treatment
The national treatment rule in Art. 3 of GATT provides that internal
taxes, charges, laws and regulations must not be applied to imported or
domestic products so as to afford protection to domestic production.
The imported product must not be subject directly or indirectly to
internal taxes in excess of those applied directly or indirectly to the like
domestic product.
[The national treatment principle is also found in GATS (Art.17) and
TRIPS (Art.3).]
E.g. Japan- Alcoholic beverages case (1996)
The dispute concerned imported vodka (and other imported alcoholic beverages) and
domestically produced shochu (a distilled white spirit) and excessive Japanese taxes on
the former.
Principles (Cont.)
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“Tarrification”
- Protection of the domestic industry by tariffs only.
- Reinforced through rules which prohibit use of quantitative
restrictions.
(Art 11 GATT).
Limited exceptions are allowed e.g. for BOP reasons (Art 12
GATT).
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Tariff Concessions- negotiations shall be aimed at reducing
tariffs (Preamble and Art. 28bis GATT). Tariffs shall also be
bound against further increases [Art 2.1(b) GATT].
(The tariff concessions of each Member are recorded in schedules of concessions that
are annexed to GATT. Schedules of concessions are an integral part of GATT.)
The WTO as a dispute settlement forum
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Settlement of disputes under the DSU
1. Bilateral consultations, use of good offices, availability of conciliation and
mediation
2. Panel proceedings
3. Appellate review [appeal to Appellate Body (AB) on a point of law]
4. Consideration and adoption of Panel/AB reports by the DSB.
If the report concludes that a measure is inconsistent with a covered agreement, the
Panel (/AB) must recommend that the Member concerned bring the measure into
conformity with that agreement.
Panel (or AB) reports are adopted automatically by the DSB unless there is consensus
against such adoption.
5. Implementation of recommendations by a losing party:
- Emphasis is on full compliance.
- Negotiation of compensation (must be voluntary and mutually acceptable) if there is a
delay in implementation beyond a reasonable time.
- Failure to implement may result in DSB authorization of retaliatory action (i.e.
suspension of concessions/obligations).
Services and the WTO
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The WTO regulates trade in services through the General
Agreement on Trade in Services (GATS). The GATS is “broadly
comparable” to the GATT but there are significant differences in its
approach to liberalization.
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Services cover a wide range of activities. Under the GATS, the term
“services” include any service in any sector except services
supplied in the exercise of governmental authority.
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The GATS applies to all measures by Members affecting trade in
services.
Measures can be laws, regulations, procedures, decisions,
administrative action etc., of Member governments.
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Trade in services under the GATS is defined in terms of four modes of
supply.
GATS obligations
Two main categories of obligations
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General obligations which apply to all service sectors of all
Members.
E.g. MFN, Transparency obligations
Specific obligations which apply only to service sectors
specified in the Member’s “Schedule of specific
commitments”.
E.g. Market access and national treatment obligations.
Extract from a Schedule of specific commitments
Modes of supply(1) Cross border supply (2) Consumptions abroad (3) Commercial presence (4) Presence of
natural persons
Sector or sub-sector
Limitations on market access
Limitations on national
treatment
(h) Medical and dental
services (CPC 9312)
(1) None
(2) None
(3) Foreign service suppliers
are permitted to establish joint
venture hospitals or clinics
with Arcadian partners with
quantitative limitations in line
with Arcadian needs with
foreign majority ownership
permitted.
(4) Unbound except as
indicated in horizontal
commitments and as follows:
Foreign doctors with
professional licenses issued by
their home country are
permitted to provide short
term medical services after
obtaining licenses from the
Arcadia Ministry of Health.
Term of service limited to one
year.
(1)
None
(2) None
(3) Majority of doctors and
medical personnel of the joint
venture hospital and clinics
shall be of Arcadian
nationality.
(4) Unbound, except as
indicated in horizontal
commitments
Additional commitments
The Doha Round
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Ambitious round of negotiations launched in 2001, by the 4th Ministerial
Conference of the WTO in Doha, Qatar.
The Doha Round covers a wide area of subjects and includes negotiations in
agriculture, industrial goods and services. It also covers a number of
implementation issues.
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Dead lock in trade talks in 2003 but break through in Geneva the following year
(August, 2004 ).
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Success in the area of public health and access to essential medicines for
developing countries through an amendment to TRIPS.
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Targets set at the 6th Ministerial Meeting in Hong Kong (December 2005). Talks
suspended in July 2006 and resumed again in February 2007.
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Leadership of the US and EU in agriculture talks is necessary if the round is to
succeed.
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Is the failure of the WTO’s first round of talks imminent?
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Issue - U.S. President’s Trade Promotion Authority expires end June, 2007.
http://www.wto.org/english/tratop_e/dda_e/dda_e.htm
Main Areas of focus in the Doha Round
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Agriculture –
Modalities for negotiations to be established.
Elimination date for export subsidies in agriculture(2013) and substantial reductions by 2010;
disciplines to be established on export measures of equivalent effect; reductions in trade distorting
domestic subsidies, with the EU, US and Japan undertaking the biggest cuts; special flexibilities for
developing countries.
Developed countries to end export subsidies for cotton and undertake deeper cuts for domestic
support for cotton than for agriculture in general.
Duty free/quota free access to cotton exports from LDCs.
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Industrial products
Modalities for negotiations to be established.
Interests of developing countries to be taken into account when negotiating reductions in tariffs.
Possibility of duty free/quota free access to products from LDCs, to be implemented over time.
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Services – possibility of plurilateral negotiations to speed up negotiations in the services sector.
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Aid for trade particularly for LDCs.
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Agreement on key details still needed
- specific formula for cutting tariffs and subsidies in agriculture; flexibilities for ‘sensitive products’.
- details of the final agreement on special products , special safeguard mechanisms and food aid in
agriculture.
- modalities for reducing tariffs in industrial goods.
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International Trade Complaints- so where do you go?
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Lodge complaint with Trade Compliance Centre (TCC) of the
International Trade Administration, Department of Commerce.
If voluntary compliance cannot be secured the TCC will utilize the
USTR Enforcement Office, which will consider use of the WTO
dispute settlement procedures.
http://tcc.export.gov/
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For complaints on dumping or unfair subsidies
- the Import Administration http://www.trade.gov/ia/ and
- the International Trade Commission http://www.usitc.gov/
Refer websites for detailed information
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The WTO Website : www.wto.org
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United States Trade Representative
www.ustr.gov/
Some related websites of interest
 OECD www.oecd.org
 ITC www.intracen.org
 World Bank www.worldbank.org