WORLD TRADE ORGANIZATION(WTO)

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WORLD TRADE ORGANIZATION(WTO)

• REFERENCES

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WTO

• Carnegie Endowment for International Peace
• Sandra Polaski. What Future for the WTO?
• www.carnegieendowment.org
• 2. The International Forum on Globalalization(IFG)
  
• Invisible Government- The WTO Global Government
  for the new Millennium.
• www.ifg.org
• 3. World Economic Forum. The Global Trade
  Enabling Report, 2009

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WTO

• 4. ADB/DFiD/ILO(2009).
• Country Diagnostic Studies
• Nepal Critical Development Constraints.
• 5. UNDP. Enhancing Nepals Trade Related Capacity
• www.entrec.org.np
• 6. Annapurna, Mangsir 29, 2066(Dec. 14, 2009)
  Monday.
• 7. Kantipur, 24 Poush, 2066, Friday.

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GATT Founding Members

• Australia, Belgium, Brazil, Burma, Canada,
• Ceylon, Chile, China, Cuba, the Czechoslovak
• Republic, France, India, Lebanon, Luxembourg,
• Netherlands, New Zealand, Norway, Pakistan,
• Southern Rhodesia, Syria, South Africa, the
• United Kingdom, and the United States.

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General Agreement on Tariffs and Trade.(GATT)

• Definition

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GATT

• General Agreement on Tariffs and Trade.
• Treaty organization affiliated with the United
  Nations
• whose purpose was to facilitate international
  trade.
• The primary actions of the organization were to
  freeze and reduce tariff levels on various
  commodities.

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GATT

• GATT was created in 1947, and was originally
  intended to become a part of the International
  Trade Organization (ITO)
• however, the ITO failed to be created,
• so the GATT was left as an independent
  organization.
• In 1994, GATT was superseded by the WTO.

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World Trade Organization (WTO)

• Is one of the world's most important and
  influential International Organization
• The role of WTO is
• To administer the multilateral trade
• Agreements adopted during the Uruguay
• Round of trade negotiations
• To review national policies
• To serve as framework for further trade
  negotiations

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• WTO has Power
• To issue bindings legal rulings on disputes
• To enforce these rules by allowing imposition of
  trade sanctions

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• WTO Covers
• Trade in goods
• Trade in services
• Intellectual Property Rights

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• WTO SYSTEM ACCOUNT FOR MORE THAN 97 PERCENT OF
  THE WORLD TRADE
• THE WTO AGREEMENT TOOK 7 YEARS TO NEGOTIATE AND
  THE RESULT IS BROAD AND COMPLICATED
• IS EXTREMELY BROAD AND COMPLEX PROBABLY ONLY A
  HANDFUL OF SPECIALIST REALLY UNDERSTAND ITS FULL
  IMPLICATIONS.
• WTO IS A MEMBER DRIVEN ORGANIZATION

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• POLICY DECISIONS CONSTITUTE THREE DIMENSIONS
• ALL MEMBERS CAN PARTICIPATE IN THE MINISTERIAL
  CONFERENCE
• GENERAL COUNCIL
• OTHER COUNCILS AND COMMITTEES

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• DOES NOT DELEGATE POWER TO SMALLER SUB-GROUPS OF
  MEMBERS SUCH AS THE EXECUTIVE BOARD.
• WTO IS DESCRIBED AS "COLLEGIATE OF DELEGATIONS
  SERVICED BY THE SECRETARIATE"

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• THE ACCESSION PROCESS
• COUNTRYPREPARES MEMORANDUM DESCRIBING ITS TRADE
  AND ECONOMIC POLICIES
• THIS IS EXAMINED BY 'WORKING PARTY'
• WORKING PARTY ARE OPEN TO ALL, BUT ONLY ABOUT 35
  MEMBERS PARTICIPATE IN EACH, USUALLY INCLUDING
  THE APPLICANT'S MOST ACTIVE TRADING PARTENER AND
  POWERFUL ECONOMIES LIKE THE USA, EC, CANADA AND
  JAPAN

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• EXAMPLES
• OVER 60 MEMBERS ON CHINA
• OVER 65 MEMBERS ON RUSSIA
• OVER 25 MEMBERS ON NEPAL
• OVER 15 MEMBER ON CAMBODIA

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• EXAMPLES
• IT TOOK 15 YEARS FOR CHINA TO BE THE MEMBER
• RUSSIA APPLIED IN 1993' IS STILL NEGOTIATING
• IT TOOK 14 YEARS FOR NEPAL TO BE THE MEMBER
• IT TOOK ONLY 34 MONTHS FOR KYRGUSTAN TO BE THE
  MEMBER

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• NOTE
• ACCEDING COUNTRIES ARE ASKED TO AGREE TO
  COMMITMENTS THAT GO WELL BEYOND WHAT WTO LAW
  ACTUALLY REQUIRES, AND THAT OFTEN EVEN EXCEED
  THOS OF EXISTING WTO MEMBERS.
• ROMAN GRYUBERG ROY MICKEY POINT OUT THAT WHILE IT
  IS ONE OF THE '... ENDURING CONVENIENT CLICHES OF
  THE MULTILATERAL TRADING SYSTEM THAT THE WTO IS A
  'RULES-BASED SYSTEM', THE ACTUALITY IS THAT
  ACCESSION IS INHERENTLY POWER BASED AND THE VERY
  ANTITHESIS OF THE WTO'S CREDO'.

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World Trade Organization

• Stages of development
• 1947 23 countries formed an association called
  The General Agreement on Tariffs and Trade (GATT)
  to negotiate reductions on trade restrictions and
  work towards common procedures for handling
  imports and exports.
• 1986-93 Uruguay round of international trade
  negotiation agreed to establish World Trade
  Organization.
• April 1994 Approved by the Trade Ministers in
  Marrakech, Morocco.

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• January 1, 1995 Established WTO and replaced the
  old GATT which had acted as "interim" World Trade
  watchdog and negotiating forum since 1948.
• Ministerial meeting (highest decision making
  body)
• December 1996 First meeting in Singapore
• May 1998 Second meeting in Geneva
• December 1999 Third meeting in Seattle
• November 2001 Fourth meeting in Doha
• September 2003 Fifth meeting in Cancun

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• As of September 2003 148 countries are members.
  Nepal became the member in September 2003
  meeting.
• Special benefits WTO has special provisions to
  help least developed countries
• Special provisions to provide technical
  assistance to food importing countries to remove
  negative effect with regard to food supplied.
• Small tariff reduction commitments and longer
  timeframe to implement market access measures.
• Can benefit from technical assistance of
  International Trade Center.

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• WTO is defined as
• "The legal and institutional foundation of the
  multilateral trading system" a term that
  encompasses its role as the forum for negations
  and settlement of disputes and the guardian of
  trade rules.
• It is a permanent organization created by
  international treaty ratified by the government
  and legislatures of members' states (unlike thee
  GATT).
• It has similar status to that of the
  international Monetary Fund (IMF), The World Bank
  etc, but it is not a United Nations Agency.
• A member driven organization and all decisions on
  any subject have to be taken by consensus, i.e.,
  without objection from any members.

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• Secretariat
• Headed by a Director-General. The current one is
  from France
• General Council
• WTO's main standing decision-making body
• Each member country sends representatives
  normally led by the head of its permanent mission
  in Geneva.
• The council appoints the Deputy Director General
  after consultation among member countries.
• They would each serve three years each.
• the General council appoints a Chairman from
  among the Ambassadors and serves for one year.

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• Voting can in principle take place but would have
  to be a consensus to allow it.
• Binds all members to give equal treatment to the
  products and services of WTO members.
• Members can suspend this obligation in defense of
  national security or public health (USA and CUBA
  for example)
• Critics say it "as a cabal of faceless
  bureaucrats dictating trade policy to the world,
  is an administrative and research structure with
  no decision-making role on policy.

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• Documentation
• General Agreement, a 38 article code aimed at
  ensuring open, non-discriminatory trade in goods,
  services, agricultural produce and textiles.
• 500 pages specific accords shaped in Uruguay
  Round.

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• Functions
• To administer and implement the multilateral and
  plurilateral trade agreement which together make
  up WTO
• To act as a forum of multilateral trade
  negotiations.
• To seek to resolve trade disputes.
• To oversee national trade policies.
• To cooperate with international institutions
  involved global economic policy-making.

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• Helping Least Developed and Food Importing
  Countries
• Appropriate mechanism related to the availability
  of food and the provision of basic foodstuffs in
  full grant form and for agricultural development.
• Possibility of assistance from the IMF and the
  World Bank with respect to the short-term
  financing of commercial food imports.

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• PRINCIPLES
• Promote trade without discrimination.
• National treatment-Once goods have been entered a
  market, they must be treated no less favorably
  that the equivalent.
• Domestically produced goods.
• Intellectual property protection by WTO member
  countries provides for Most Favored Nations (MFN)
  and national treatment.

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• Agreement requires members to offer MFN treatment
  to services and service supplies of other
  members.
• Non-discrimination provisions include those on
• Rules of origin
• Pre-shipment inspection
• Trade related investment measures
• Application of sanitary and phytosanitory
  measures

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• Major Provisions
• Agriculture
• Reform trade and provide the basis for
  market-oriented policies, thereby improving
  economic cooperation for importing and exporting
  countries alike.
• Established new rules and commitments in

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• Market access
• Domestic support
• Export competition
• Encourage the use of less trade-distorting
  domestic support
• Policies to maintain the rural economy.
• Specific concerns for developing countries are
  addressed including those of net-food importing
  developing countries and less developed economies.

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• Health and Safety Measures
• Application of Food safety and animal and pl
  health regulations
• Government's rights to take sanitary and
  phytosanitory measures but stipulates that they
  must be based on science, should be applied only
  to the extent necessary to protect human, animal
  or plant life or health and should be arbitrarily
  or unjustifiably discriminate among members where
  identical or similar conditions prevail.

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• Textile and Clothing
• To secure the integration of the textiles and
  clothing sector-where much of the trade is
  currently subject to bilateral quota negotiations
  under the Multi-fiber Agreement (MFA) into the
  main stream of WTO.

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• Anti-dumping Measures
• Imposed on imports, if such dumped imports cause
  injury to the domestic industry in the territory
  of the importing member.
• Additional criteria for determining the injury
  caused to a domestic industry by the dumped
  product.
• Procedure to be followed in initiating and
  conducting anti-dumping investigations.
• The role of dispute settlement panels in disputes
  relating to anti-dumping actions taken by WTO
  members.

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• TRIPS (Trade Related Aspects of Intellectual
  Property Rights)
• Protection and enforcement of intellectual
  property rights.
• Effective enforcement measures for those rights.
• Multilateral dispute settlement.

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• GATS (The General Agreement on Trade and
  Services)
• The agreement contains three elements
• A framework of general rules and disciples
• Special conditions relating individual sectors
  (movement of natural persons, financial services,
  telecommunication and air transport services)
• A council of trade in services overseas the
  operation of the agreement.

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Some of the important steps undertaken by Nepal
during the WTO accession and negotiation

• Applied under GATT on 16 May 1989
• Working party was established on 21-22 May 1989
• Memorandum of foreign trade regime of Nepal was
  submitted on 26 February 1990
• Nepal communicated interest on 5 December 1995
• General council decided to give continuity the
  working group on 31 January 1996

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• Memorandum of foreign trade regime of Nepal
  submitted on 10 August 1998
• First formal meeting of working party held on 22
  May 2000
• Schedules on goods and services in July 2002
• Second formal meeting of working party held on 12
  September 2002
• Protocol of accession submitted on 15 August 2003
• Working party concluded Nepal's membership on 15
  August 2003
• Fifth ministerial conference held in Cancun,
  approved for accession on Nepal's membership.
• Nepal ratified on March 2004 and has become full
  fledge member of WTO.

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• IMPACT OF WTO ON NEPAL'S ECONOMY
• Positive Impact
• Trade Expansion
• Trade Diversification
• Freedom of Transit will provide legal and
  secure transit rights to Nepal through India and
  China
• Dispute Settlement will ensure a stronger,
  faster, impartial and binding mechanism for
  settlement of disputes related to trade
• End of Bilateralism Bilateral agreement with 17
  countries. Trade and Transit Treaty with India
  will do away with the need for bilateral trade
  agreement
• Image and Power Almost ¾ of WTO members are
  developing countries. This will empower Nepal.

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• NEGATIVE IMPACT
• Erosion of Preference (enjoyed under bilateral
  agreement and treaties)
• Tariff Rates Concession
• Removal of concession
• Removal of subsidies in agriculture
• Opening up of trade and services etc.
• Prohibition of quota restrictions
• Affect domestic industries

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1. PriceHike Food, Drugs, Agricultural Inputs and
   other items of importsforeign exchange outflow
2. Accession Commitment Accept stringent
   commitments by existing members
3. Reduce flexibility in policy and strategy
   formulation relating to trade
4. Institutional Requirements
5. Burden of WTO may be too heavy as there is no
   level playing field in practice.
6. Lacks knowledge, information, experience,
   capacity, resources, institutional
   infrastructure, competent personnel

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1. Dependence on foreign firms will increase for
   technology and resources
2. Difficult to enforce its intellectual property
   rights
3. Patents taken by US Companies of traditional
   generic commodities like Basmati Rice, Neem
   leaves, Turmeric etc.
4. Gaps in Theory and Practice
5. European Union and Japan are unwillingness to
   reduce subsidies on agricultural products
6. Trade harassment is high for LDCs and Nepal

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• CHALLENGES
• MAXIMIZE THE BENEFITS
• MINIMIZE ITS RIGHTS AND DOWNSIDE EFFECTS
• EQUIP OURSELVES WITH THE CAPACITY NECESSARY TO
  PARTICIPATE EFFICIENTLY IN GLOBAL MARKETS
• ABILITY TO ADJUST OUR ECONOMIC STRUCTURES TO A
  CHANGING EXTERNAL ENVIRONMENT

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1. STABLE MACROECONOMY
2. PRUDENT FINANCIAL MANAGEMENT
3. SOUND REGULATORY PRACTICES
4. NECESSARY STRUCTURAL AND INSTITUTIONAL REFORMS IN
   THE FINANCIAL AND CORPORATE SECTORS

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The World Bank (2003)Diagnostic Trade
IntegrationStudy (DTIS) or Trade Competitiveness
Study

• The study appraised Nepal's constraints to
  effective integration into the global trading
  system. It has made policy level recommendations
  to capacity building.
• Conclusion
• Improve production capacity, productivity and
  competitive strength through quality improvement,
  reduction of costs and wastages, remove supply
  constraints.
• Export of products in which is has sustainable
  comparative advantage tourism, hydropower, hers,
  flowers, silver jewellery, handicrafts.

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• Product profile should be enhanced
• Strengthen SAARC, SAPTA and SAFTA to SAFTA to
  improve negotiating power, strengthen
  institutional mechanism.
• Educate people
• Create legal safeguard for bio-diversity,
  genetics, protection of domestic industries and
  females' rights.
• Amend laws to make them WTO friendly.

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Nepal's contribution to the world trade is 0.02

• The study recommends
• Relaxation in custom barrier
• Allowing easy exit to foreign companies
• Reforming labor market
• Strengthening the government private sector
  coordination

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• Comparative and competitive advantage areas
• Dried leguminous
• Spices
• Seeds (Niger Seeds)
• Leather and leather products
• Fibers (hand knotted wool carpets)
• Yarn and textile garments
• The study has shown that it costs us US 130
  million (NRs. 10 Billions over 10 of estimated
  budget for fiscal year 2002/2003) to implement
  just three of the WTO agreements namely TRIPS,
  SPS and custom valuations.