Dr.

Shibly Noman Khan

What is the WTO?

Wellwhat is it???
A place?
Today at the WTO

A law?
Based on the WTO Regulation

A group of people?
Members of the WTO agreed

A meeting?
The WTO meeting was held in

The idea of the WTO can seem a bit abstract

What is the WTO?

The WTO is an organization that deals with rules of trade between nations Functions include acting as:
An organization for liberalizing trade A forum for trade negotiations A set of rules A system to settle disputes

An Organization for Liberalizing Trade

Liberalism in economics refers to an ideology that supports the individual rights of property and free contract
In the context of the WTO it means the removal of trade barriers
Goes with the idea that the hands-off approach to markets is the most efficient in the long-run

WTOs Stated Aim:

Promote Free Trade Stimulate Economic Growth

A Forum for Trade Negotiations

A place where member governments go to try to sort out trade problems
Members start by talking it out WTO acts as a mediating body

The WTO as a Set of Rules

WTO Agreements Signed by most of the worlds trading nations The legal framework for international commerce Contracts for governments to maintain certain trading policies Purpose is to help exporters and importers, while making sure governments meet social objectives The WTO oversees the implementation, administration and operation of the covered agreements

A System to Settle Disputes

Conflict of interests exists in trade relations
Trade agreements need interpreting

WTO is meant to be a neutral party to help settle trade disputes

History
After World War II many nations had adopted a protectionist stance on trade Many felt closed-protectionist positions was a cause of WWII Victor nations set up economic institutions to prevent this from happening again

History
Bretton Woods System of 1946 International Monetary Fund (IMF) World Bank International Trade Organization (ITO) The General Agreement on Trade and Tariffs (GATT) was signed into place in 1947 The ITO did not fly The US said it was unfair GATT took the place of the ITO

History

GATT: main purpose was to reduce barriers to international trade

GATT was an agreement, not an organization Became the de facto organization for international trade

History - GATT
Trade Rounds negotiation meetings
First 6 rounds reduced tariffs from ~50% to ~12% 7th, the Tokyo Round of the early 70s was first major effort at trade reform
Mainly about non-tariff barriers to trade, such as:
Subsidies Quotas Foreign exchange controls Import bans Restrictive licensing

History GATT
The 1986 Uruguay Rounds of trade negotiations covered new trade topics
Trade in services and intellectual property Sensitive subjects, like textiles and agriculture

GATT was expanded by adding:

General Agreement on Trade in Services (GATS) Agreement on Trade Related Aspects of Intellectual Property (TRIPS)

Complexities of globalization strained the effectiveness of GATT

History WTO
Uruguay Round ended in 1994 with the formation of the World Trade Organization
Jan. 1, 1995 WTO was born
GATT, GATS and TRIPS still exist as the framework for the WTOs operations

History
Current Round Doha
Began November 2001

Ambitious agenda to make globalization more inclusive of the worlds poor Talks have been contentious
No agreements have been reached July 2006 talks were suspended by Director General, Pacel Lamy, but may go forward at anytime

Principles of the Trading System

1. 2. 3. 4. Nondiscrimination Reciprocity Meant to prevent Free-riders Binding and Enforceable Commitments Ensures predictability Transparency Member nations are required to publish trade regulations and report changes Safety Valves Governments can prevent trade for, say, health reasons

5.

Formal Structure Highest Level -Ministerial Conference

Meets at least every two years Brings together all members of WTO Can make decisions on all matters under any multilateral trade agreement

Formal Structure Second Level -General Council

Meets regularly Made up of representatives from all member nations Has the authority to act on behalf of the Ministerial Conference Also acts as:
Dispute Settlement Body Trade Policy Review Body

Formal Structure Third Level -Councils for Trade

Works under the General Council Made up of three councils

1. GATT Council 2. TRIPS Council 3. GATS Council

These councils are charged with overseeing the functioning of their various trade agreements

Formal Structure Fourth Level -Subsidiary Bodies

These are sub-councils under the three councils for trade Examples include:
Textiles Monitoring Body, under the GATT Council Information Technology Agreement Committee, under the TRIPS Council The Services Council, under the GATS Council

Benefits from the WTO

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. The system promotes peace Disputes are handled constructively Rules make life easier for all Freer trade cuts the costs of living It provides more choices of products Trade raises incomes Trade stimulates economic growth The basic principals make life more efficient Governments are shielded from lobbying The system encourages good government
Source: www.wto.org

Dispute Settlement
- A Unique Contribution
It is the central pillar of the multilateral trading system It is a unique contribution to the stability of the global economy It makes the trading system more secure and predictable

Principle of Dispute Settlement

Equitable Fast Effective Mutually acceptable

Stages of Dispute Settlement

Consultation- talk to each other Panel- If consultations fail, the complaining country can ask for a panel to be appointed. Appeal-Each side can appeal.

Case Decided, then?

If a country has done something wrong, It has to swiftly correct its fault. if it continues to break an agreement, It must offer compensation or suffer a suitable penalty. It must follow the recommendations of the panel report or the appeals report. It must state its intention to do so at a Dispute Settlement Body meeting held within 30 days of the reports adoption. If after 20 days, no satisfactory compensation is agreed, the complaining side may ask the Dispute Settlement Body for permission to impose limited trade sanctions against the other side. In any case, the Dispute Settlement Body monitors how adopted rulings are implemented.

How Long to Settle a Dispute?

60 days-Consultations, mediation, etc 45 days-Panel set up and panelists appointed 6 months-Final panel report to parties 3 weeks-Final panel report to WTO members 60 days-Dispute Settlement Body adopts report (if no appeal) Total = 1 year (without appeal) 60-90 days-Appeals report 30 days-Dispute Settlement Body adopts appeals report Total = 1y 3m(with appeal)

Case of Venezuela
On 23 January 1995, Venezuela complained to the Dispute Settlement Body that the United States was applying rules that discriminated against gasoline imports, and formally requested consultations with the United States. Just over a year later the dispute panel completed its final report. The United States appealed. The Appellate Body completed its report, and the Dispute Settlement Body adopted the report on 20 May 1996, one year and four months after the complaint was first lodged. The United States agreed with Venezuela that it would amend its regulations within 15 months and on 26 August 1997 it reported to the Dispute Settlement Body that a new regulation had been signed on 19 August.

Effectiveness of Dispute Settlement

By July 2005, only about 130 of the nearly 332 cases had reached the full panel process. Most of the rest have either been notified as settled out of court or remain in a prolonged consultation phase some since 1995.

The Complaint of U.S.A. against China

On 10 April 2007, the United States requested consultations with China concerning certain measures pertaining to the protection and enforcement of intellectual property rights in China.

The Four Matters on which the United States Requests Consultations

The thresholds that must be met in order for certain acts of trademark counterfeiting and copyright piracy to be subject to criminal procedures and penalties; Goods that infringe intellectual property rights that are confiscated by Chinese customs authorities, in particular the disposal of such goods following removal of their infringing features; The scope of coverage of criminal procedures and penalties for unauthorized reproduction or unauthorized distribution of copyrighted works; The denial of copyright and related rights protection and enforcement to creative works of authorship, sound recordings and performances that have not been authorized for publication or distribution within China.

Summary of Chinese intellectual property violations

Nearly 90 percent of all American software is pirated at an annual cost of more than $2 billion to the US economy. Total copyright losses reach nearly $3 billion per year. The U.S. automobile industry loses $12 billion each year due to counterfeit automotive parts production, of which China is a leading violator.

Response from China

"The United States Trade Representative, the USTR, has totally ignored the massive strides China has made," Premier Wu told an intellectual property forum in Beijing.

"The Chinese government is extremely dissatisfied about this, but we will proactively respond according to the related WTO rules and see it through to the end, Wu added.

Source: www.reuters.com

Reasons to Oppose the WTO

1. The WTO Is fundamentally undemocratic 2. The WTO will not make us safer 3. The WTO tramples labor and human rights 4. The WTO would privatize essential services 5. The WTO is destroying the environment 6. The WTO is killing people

Reasons to Oppose the WTO

7. The WTO is increasing inequality 8. The WTO is increasing hunger 9. The WTO hurts poor, small countries in favor of rich powerful nations 10. The WTO undermines local level decision-making and national sovereignty 11. There are alternatives to the WTO 12. The tide is turning against free trade and the WTO!
Source: www.globalexchange.org

Trade Related Intellectual Property Rights (TRIPS)

INTELLECTUAL PROPERTY RIGHTS & TRIPS

Intellectual property is economically valuable information Intellectual Property Right is the legally enforceable power to exclude others from using the information created, or to set the terms on which it can be used TRIPS prescribes minimum standards of protection to different intellectual property rights Members are free to have higher standards at the national level

THE SEVEN IPRs IN THE TRIPS UNIVERSE

Patents (for plant varieties, the protection can be given either through patents or a sui generis system or a combination of both); Copyright and related rights; Trademarks; Industrial designs; Layout-designs of integrated circuits; Undisclosed information, including trade secrets Geographical indications, including appellation

PATENTS
Subject matter any invention, whether of products or processes, in all fields of technology, provided they are new, non-obvious and useful. Exceptions to subject matter (1)Medical Use (2) Plants and animals other than micro-organisms (but not plant varieties). (3) Essentially biological processes for the production of plants and animals. Rights conferred Patents give owners exclusive property rights Assignment allowed. (Compulsory Licensing allowed subject to conditions) Term of protection Twenty years counted from filing date.

Plant Variety Protection

TRIPS mandates that protection of plant varieties shall be provided either by patents or by an effective sui generis system or by any combination thereof PVP Bill, passed by Parliament in August, 2001 Provides 15/18 years protection for plant varieties provisions for Farmers Rights, Benefit Sharing, Community Rights Farmers right to save, exchange, use and sell farms saved seeds has been preserved

GEOGRAPHICAL INDICATIONS
Subject matter - Indications which identify a good as originating in the territory of a Member, or a region or locality in that territory, where a given quality, reputation or any other characteristic of the good is essentially attributable to its geographical origin Rights conferred prevention of the use of any means which mislead the public or an act of unfair competition. Additional protection for wines and spirits Prohibition on use even where the true origin of the goods is indicated or the GI is used in translation or accompanied by expressions such as land, type, style, initiation or the like

GI Protection for other products

India along with many other countries has proposed that the higher level of protection as available to wines and spirits should made available to other products also. Doha Declaration mandates TRIPS Council to examine this issue and report by end of 2002 for appropriate action

COMPLIANCE WITH TRIPS

The Patents (Second Amendment) Bill, 1999 has now been passed by Parliament The Protection of Plant Varieties and Farmers Rights Bill, 1999 was passed by Parliament in August 2001

DIFFICULTIES IN COMPLIANCE
The most important concerns related to patents and plant variety protection. It was felt that - our pharmaceutical industry will be adversely affected, - drug prices will go up, - our biological materials will be pirated, - our farmers will no longer be

DIFFICULTIES IN COMPLIANCE
The Government has taken account of all these fears in the proposed Bills on the subjects. Some of the preventive measures in the Bills are - Farmers right to save, exchange and use farm saved seeds has been preserved - Wide range of inventions that are not patentable have been kept (Section 3) - Strong Government use, R&D, revocation provisions have been introduced ( Chapter XVII and Sections 47, 66) - Strong compulsory licensing provisions have been retained (Chapter XVI) - Vast powers retained for the Security of

DOHA MANDATE ON TRIPS

Negotiations to establish a multilateral system of notification and registration for GI for wines and spirits; Extension of higher order of protection to items like Basmati rice will be addressed by the Council for TRIPS; and TRIPS Council to examine relationship between TRIPS and CBD, the protection of traditional knowledge and folklore

What are Quotas?

A government policy that limits imports of a product to a certain number of units. It is banned by the WTO but it still exists.

How common is quota?

In 1955 Ireland suspended its import quota on fertilizers. China's Grain and sugar import quotas remain unchanged in 2008 In 2002 the European Commission announced plans to impose a wheat import quota of 2.3 million tones a year In 2005 the European Union decided to increase quotas for Chinese textiles In 1989 we learned that the sugar import restrictions and the quota regime for imports, maintained by the United States since 1982, has been held by a three-member GATT panel to be illegal in terms of U.S. obligations in GATT.

Facts
1. Not all countries are members of the WTO 2. Members of WTO are allowed to maintain quotas for a specified period of time.
Transition period Some countries implement quotas defying WTO rules.

3. How much power does WTO have?

What are Multifibre Arrangements?

Quota on textile Uruguay Round negotiations of GATT have led to phasing out of the MFA.

Other Nontariff Distortions

1. Industrial Policy Domestic regulations can distort international trade. Regulations sometimes have the intent of directly impacting trade. Regulation effects difficult to quantify.
Examples:
Guaranteed low interest government loans for domestic producers Tax advantage to exporting industries

Other Nontariff Distortions

2. Government Procurement Laws that direct a government to buy domestically-made products unless comparable foreign products are substantially cheaper. Spending of public funds places restrictions on funds. Justification that buying domestic is better for the country.
Similar to Mercantilists view

Other Nontariff Distortions

In countries where government owns industry and has government procurement, trade is severely restricted.

Other Nontariff Distortions

3. Technical Barriers to Trade
Laws that apply technical standards to goods or services that may distort trade.
Domestic countrys national standards for safety, health, and product labeling

They may require firms to produce two different goods or packages to allow exports. Some goods must meet technical standards like cars from the U.S. to the Ireland.

Other Nontariff Distortions

4. Subsidies
Governments subsidies distort trade flows.
Such subsidies can be directly tied to exports, or more commonly they are domestic subsidies that indirectly influence trade.

Other Nontariff Distortions

5. Labor and Environmental Standards Countries differ in regulations for workers with respect to safety and work conditions. Developed countries argue they cannot compete with wages in countries with less strict labor laws. Empirical evidence has not shown significant effects on trade.

Other Nontariff Distortions

Labor standards
Laws that apply labor standards to manufactured products that may restrict imports.

Pollution intensive industry feels disadvantaged in countries with high pollution regulations. Little of no empirical evidence of effects WTO ruled countries cannot impose standards by limiting imports.

Transportation Costs and Trade

Transportation costs tend to reduce the quantity of trade between countries by raising the price of imported goods.
A good will be traded internationally if transportation costs are low enough so that it is profitable to international trade the goods between countries.

Indias Approach to the Negotiations

1. Comprehensive negotiating proposal submitted to WTO on 15.1.2001 covering Food Security, Market Access, Domestic Support, and Export Competition 2. Non paper on Special and Differential Treatment to Developing Countries

India Seeks
Protecting our food and livelihood security by having sufficient flexibility for domestic policy measures. Protecting domestic producers from the surge in imports or significant decline in import prices. Substantial reduction in export subsidies and domestic support to agriculture in the developed countries for greater market access to products of developing countries. Finally, a more equitable & fair trading framework for agricultural commodities

Issues of Export Competitiveness of Select Agro-products

Rice: The rice export is projected to increase to 2.7 million tonnes in 2005 from current level of 1.8 million tonnes. In spite of much favourable domestic resource cost, the nominal protection coefficient is marginal which is due to volatile international prices. The domestic supply gap, quality, processing, marketing, transportation etc., are going to be key factors for sustaining Indias rice export potential. Spices: Owing to expanding global demand of spices, there is potential for accelerating Indian spice export but the rising competition would require concerted efforts. The problem of aflotoxin, pesticide residue and low yields are to be tackled.

Issues of Export Competitiveness of Select Agro-products

Tea: The Indian tea export is projected to increase marginally from 159 thousand tonnes during 1993-95 to 165 thousand tonnes in 2005. Indias export competitiveness as well as share in export of tea is declining. The strategies include promotional measures, joint ventures for tea blending and marketing and support for importing machinery and packaging materials. Coffee: The coffee export is projected to reach to 180 thousand tonnes in 2005 from the level of 160 thousand tonnes in 90s. There is emergence of new markets in Asia and Eastern Europe and hence India has to focus on this aspect as well. The quality, R&D and post-harvest methods are important to sustain the growth.

Progress in the Doha Round

Push for an agreement on modalities in Hong Kong next week WTO talks very shaky right now US-EU influence on trade agenda now superseded by developing countries Tough political decisions still needed to reach a substantive agreement Focus is on the 3 pillars of Market Access, Export Competition and Domestic Subsidies But other issues important too like GIs, GMOs, etc.

Context of the WTO Negotiations

Brazil, China and India taking a more active role in trade discussions (G20) WTO litigation may impact domestic policy: key cases (cotton and sugar) and GI case: GMO report due in January US talks on regional FTAs continues with Andean Pact and Thailand We are in a critical time period for US agricultural trade policy

The Rise of Agriculture in Brazil

Emerging Markets becoming More Feisty in Economic Terms too

Brazilian Agri-food Exports

US$ Billion
0 Soy Complex Sugar / Ethanol Chicken Beef Coffee Tobacco Orange Juice Pork Meat Maize Fruits Cotton 1 2 3 4 5 6 7 8 9 10

Mean 1993-1994 Mean 2003-2004

Market Access is Key

Ambitious tariff cutting formula proposed with tariff caps (latest US proposal has a maximum tariff of 75%) But exceptions for Sensitive Products (EU & G-10 balk; US & G-20 on a similar page) Because of tariff peaks in agriculture, research shows that 2% of tariff lines as Sensitive Products eviscerates most gains from trade liberalization Also have the problem of water in the tariffs
Applied tariffs < bound tariffs Tariff import quotas binding

Other Issues in Market Access

Tariff escalation Erosion of preferences Specific tariffs Tariff rate import quotas (expand to compensate for Sensitive Products?) Special Safeguards, countervailing and anti-dumping, and other contingent measures Rationalizing product regulations (SPS, labeling etc.) S&DT for developing countries to protect against instability and food

What for the Future?

We are in a period of significant change in agricultural trade relations Developing countries are overriding the traditional gladiatorial contest between the EU and US Yet developing countries may resist trade liberalization in other sectors if no significant progress made in agriculture Regional/bilateral trade deals may be the major source of trade liberalization Litigation under the WTO may put pressure on domestic support programs Other issues are also becoming important like IPRs (GIs etc.), SPS and TBT relating to standards and health restrictions, biotech such as GMOs, invasive species, etc.