ICFAI UNIVERSITY DEHRADUN

CLASS OF 2011, SEMESTER III

NAME: SONU T SEKHARAN

IUD NO: 0901202371
IBS NO: 09BS0002371
COURSE CODE: SLMM607
COURSE NAME: INTERNATIONAL MARKETING
FACULTY NAME: PROF. SUKESH KUMAR B R
DATE OF SUBMISSION: 09/11/2010
TOPIC OF ASSIGNMENT: WORLD MARKET
ENVIRONMENT.

STUDENT SIGNATURE FACULTY SIGNATURE

 WORLD MARKET ENVIRONMENT
GATT:

The General Agreement on Tariffs and Trade (typically abbreviated GATT) was the outcome of
the failure of negotiating governments to create the International Trade Organization (ITO). The
Bretton Woods Conference had introduced the idea for an organization to regulate trade as part
of a larger plan for economic recovery after World War II. As governments negotiated the ITO,
15 negotiating states began parallel negotiations for the GATT as a way to attain early tariff
reductions.

Why GATT:

Once the ITO failed in1950, only the GATT agreement was left. The GATT’s main objective
was the reduction of barriers to international trade. This was achieved through the reduction of
tariff barriers, quantitative restrictions and subsidies on trade through a series of agreements. The
GATT was a treaty, not an organization. The functions of the GATT were taken over by the
World Trade Organization which was established during the final round of negotiations in the
early 1990s.

The history of the GATT can be divided into three phases: the first, from1947 until the Torquay
Round, largely concerned with which commodities would be covered by the agreement and
freezing existing tariff levels. A second phase, encompassing three rounds, from 1959 to 1979,
focused on reducing tariffs. The third phase, consisting only of the Uruguay Round from 1986 to
1994, extended the agreement fully to new areas such as intellectual property, services, capital,
and agriculture. Out of this round the WTO was born.

In 1993 the GATT was updated (GATT 1994) to include new obligations upon its signatories.
One of the most significant changes was the creation of the World Trade Organization (WTO).
The 75 existing GATT members and the European Communities became the founding members
of the WTO on January 1, 1995. The other 52 GATT members rejoined the WTO in the
following two years (the last being Congo in 1997). Since the founding of the WTO, 21 new
non-GATT members have joined and 29 are currently negotiating membership. As of October
2007, there were a total of 151 member countries in the WTO.

Of the original GATT members, only the SFR Yugoslavia has not rejoined the WTO. Since FR
Yugoslavia, (renamed to Serbia and Montenegro and with membership negotiations later split in
two), is not recognized as a direct SFRY successor state; therefore, its application is considered a
new (non-GATT) one. The contracting parties who founded the WTO ended official agreement
of the "GATT 1947" terms on December 31, 1995.

Whereas GATT was a set of rules agreed upon by nations, the WTO is an institutional body. The
WTO expanded its scope from traded goods to trade within the service sector and intellectual
property rights. Although it was designed to serve multilateral agreements, during several rounds
of GATT negotiations (particularly the Tokyo Round) plurilateral agreements created selective
trading and caused fragmentation among members.WTO arrangements are generally a
multilateral agreement settlement mechanism of GATT.

WTO:

The World Trade Organization (WTO) is an international organization designed to supervise and
liberalize international trade. The WTO came into being on January 1, 1995, and is the successor
to the General Agreement on Tariffs and Trade (GATT), which was created in 1948, and
continued to operate for almost five decades as a de facto international organization.

The World Trade Organization deals with the rules of trade between nations at a near-global
level; it is responsible for negotiating and implementing new trade agreements, and is in charge
of policing member countries’ adherence to all the WTO agreements, signed by the bulk of the
world’s trading nations and ratified in their parliaments. Most of the WTO’s current work comes
from the 1986-94 negotiations called the Uruguay Round, and earlier negotiations under the
GATT. The organization is currently the host to new negotiations, under the Doha Development
Agenda (DDA) launched in 2001.

The WTO is governed by a Ministerial Conference, which meets every two years; a General
Council, which implements the conference’s policy decisions and is responsible for day-to-day
administration; and a director-general, who is appointed by the Ministerial Conference. The
WTO’s headquarters are in Geneva, Switzerland.

Why WTO:

The WTO’s stated goal is to improve the welfare of the peoples of its member countries,
specifically by lowering trade barriers and providing platform for negotiation of trade. Its main
mission is "to ensure that trade flows as smoothly, predictably and freely as possible". This main
mission is further specified in certain core functions serving and safeguarding five fundamental
principles, which are the foundation of the multilateral trading system.

Functions of WTO:

• Among the various functions of the WTO, these are regarded by analysts as the most
important:

• It facilitates the implementation, administration and operation of the objectives of the

Agreement and of the Multilateral Trade Agreements.

• It provides the framework for the implementation, administration and operation of the
Plurilateral Trade Agreements relating to trade in civil aircraft, government procurement,
trade in diary products and bovine meat.
 • It provides the forum for negotiations among its members concerning their multilateral
trade relations in matters relating to the agreements and a framework for the
implementation of the result of such negotiations, as decided by the Ministerial
Conference.

• It administers the Understanding on Rules and Procedures governing the Settlement of

Disputes of the Agreement.

• It cooperates with the IMF and the World Bank and its affiliated agencies with a view to
achieving greater coherence in global economic policy-making.

Additionally, it is the WTO’s duty to review the national trade policies, and to ensure the
coherence and transparency of trade policies through surveillance in global economic policy-
making. Another priority of the WTO is the assistance of developing, least-developed and low-
income countries in transition to adjust to WTO rules and disciplines through technical
cooperation and training. The WTO is also a center of economic research and analysis: regular
assessments of the global trade picture in its annual publications and research reports on specific
topics are produced by the organization. Finally, the WTO cooperates closely with the two other
components of the Bretton Woods system, the IMF and the World

Members and Non Members:

Members and observers:

The WTO has 153 members (almost all of the 123 nations participating in the Uruguay Round
signed on at its foundation, and the rest had to get membership). The 27 states of the European
Unionare represented also as the European Communities. WTO members do not have to be
full sovereign nation-members. Instead, they must be a customs territory with full autonomy in
the conduct of their external commercial relations. Thus Hong Kong (as "Hong Kong, China"
since 1997) became a GATT contracting party, and the Republic of China (ROC) (commonly
known as Taiwan, whose sovereignty has been disputed by the People's Republic of China
or PRC) acceded to the WTO in 2002 under the name of "Separate Customs Territory of Taiwan,
Penghu, Kinmen and Matsu" (Chinese Taipei).

A number of non-members (30) are observers at WTO proceedings and are currently
negotiating their membership. As observers, Iran, Iraq and Russia are not yet members. Russia is
the biggest economy outside WTO and after the completion of Russia's accession; Iran would be
the biggest economy outside the WTO. With the exception of the Holy See, observers must start
accession negotiations within five years of becoming observers. Some international
intergovernmental organizations are also granted observer status to WTO bodies. 14 states and 2
territories so far have no official interaction with the WTO.
Recent Round of Discussions:

The Doha Development Round or Doha Development Agenda (DDA) is the current trade-
negotiation round of the World Trade Organization (WTO) which commenced in November
2001. Its objective is to lower trade barriers around the world, which allows countries to increase
trade globally. As of 2008, talks have stalled over a divide on major issues, such as agriculture,
industrial tariffs and non-tariff barriers, services, and trade remedies. The most significant
differences are between developed nations led by the European Union (EU), the United States
(USA), and Japan and the major developing countries led and represented mainly by China,
Brazil, India, and South Africa. There is also considerable contention against and between the
EU and the USA over their maintenance of agricultural subsidies—seen to operate effectively as
trade barriers.

The Doha Round began with a ministerial-level meeting in Doha, Qatar in 2001. Subsequent
ministerial meetings took place in Cancun, Mexico (2003), and Hong Kong (2005). Related
negotiations took place in Geneva, Switzerland (2004, 2006, 2008); Paris, France (2005); and
Potsdam, Germany (2007).

The most recent round of negotiations, 23–29 July 2008, broke down after failing to reach a
compromise on agricultural import rules. After the breakdown, major negotiations were not
expected to resume until 2009. Nevertheless, intense negotiations, mostly between the USA,
China, and India, were held in the end of 2008 in order to agree on negotiation modalities.
However, these negotiations did not result in any progress. Doha Round talks are overseen by
the Trade Negotiations Committee (TNC), whose chair is the WTO’s director-general, currently
Pascal Lamy. The negotiations are being held in five working groups and in other existing
bodies of the WTO.

MFN:

In international economic relations and international politics, most favored nation (MFN) is a
status or level treatment accorded by one state to another in international trade. The term means
the country which is the recipient of this treatment must, nominally, receive equal trade
advantages as the "most favored nation" by the country granting such treatment. (Trade
advantages include low tariffs or high import quotas.) In effect, a country that has been accorded
MFN status may not be treated less advantageously than any other country with MFN status by
the promising country.

The members of the World Trade Organization (WTO) agree to accord MFN status to each
other. Exceptions allow for preferential treatment of developing countries, regional free trade
areas and customs unions. Together with the principle of national treatment, MFN is one of the
cornerstones of WTO trade law.
Most favored nation relationships extend reciprocal bilateral relationships following both GATT
and WTO norms of reciprocity and non-discrimination. In bilateral reciprocal relationships a
particular privilege granted by one party only extends to other parties who reciprocate that
privilege, while in a multilateral reciprocal relationship the same privilege would be extended to
the group that negotiated a particular privilege. The non-discriminatory component of the
GATT/WTO applies a reciprocally negotiated privilege to all members of the GATT/WTO
without respect to their status in negotiating the privilege.

Trade experts consider MFN clauses to have the following benefits:

• A country that grants MFN on imports will have its imports provided by the most
efficient supplier. This may not be the case if tariffs differ by country.
• MFN allows smaller countries, in particular, to participate in the advantages that larger
countries often grant to each other, whereas on their own, smaller countries would often
not be powerful enough to negotiate such advantages by themselves.
• Granting MFN has domestic benefits: having one set of tariffs for all countries simplifies
the rules and makes them more transparent. It also lessens the frustrating problem of
having to establish rules of origin to determine which country a product (that may
contain parts from all over the world) must be attributed to for customs purposes.
• MFN restrains domestic special interests from obtaining protectionist measures. For
example, butter producers in country A may not be able to lobby for high tariffs on butter
to prevent cheap imports from developing country B, because, as the higher tariffs would
apply to every country, the interests of A's principal ally C might get impaired.

As MFN clauses promote non-discrimination among countries, they also tend to promote the
objective of free trade in general.

GSP:

The Generalized System of Preferences, or GSP, is a formal system of exemption from the
more general rules of the World Trade Organization (WTO), (formerly, the General Agreement
on Tariffs and Trade or GATT). Specifically, it's a system of exemption from the most favored
nation principle (MFN) that obligates WTO member countries to treat the imports of all other
WTO member countries no worse than they treat the imports of their "most favored" trading
partner. In essence, MFN requires WTO member countries to treat imports coming from all
other WTO member countries equally, that is, by imposing equal tariffs on them, etc.

GSP exempts WTO member countries from MFN for the purpose of lowering tariffs for the least
developed countries (without also doing so for rich countries). The idea of tariff preferences for
developing countries was the subject of considerable discussion within UNCTAD in the 1960s.
Among other concerns, developing countries claimed that MFN was creating a disincentive for
richer countries to reduce and eliminate tariffs and other trade restrictions with enough speed to
benefit developing countries.

Under GSP schemes of preference-giving counties, selected products originating in developing

countries are granted reduced or zero tariff rates over the MFN rates. The least developed
countries (LDCs) receive special and preferential treatment for a wider coverage of products and
deeper tariff cuts.

The idea of granting developing countries preferential tariff rates in the markets of industrialized
countries was originally presented by Raul Prebisch, the first Secretary-General of UNCTAD, at
the first UNCTAD conference in 1964. The GSP was adopted at UNCTAD II in New Delhi in
1968.

In 1971, the GATT Contracting Parties approved a waiver to Article I of the General Agreement
for 10 years in order to authorize the GSP scheme. Later, the Contracting Parties decided to
adopt the 1979 Enabling Clause, Decision of the Contracting Parties of 28 November 1979
(26S/203) entitled "Differential and more favorable treatment, reciprocity and fuller
participation of eveloping countries", creating a permanent waiver to the most-favored-nation
clause to allow preference-giving countries to grant preferential tariff treatment under their
respective GSP schemes.

There are currently 13 national GSP schemes notified to the UNCTAD secretariat. The
following countries grant GSP preferences: Australia, Belarus, Bulgaria, Canada, Estonia, the
European Union, Japan, New Zealand, Norway, the Russian Federation, Switzerland, Turkey
and the United States of America.

Current Issues: The following are the current issues of world market environment:

(i) AGRICULTURE: There is a wide impasse in the agriculture negotiations. Many developing
countries believe the major countries (EU and US) are not able or willing to fulfill the Doha
mandate on agriculture that obliges the developed countries to reduce and phase out export
subsidies, substantially reduce domestic support and substantially improve market access.

(ii) NON AGRICULTURE MARKET ACCESS (NAMA): The Derbez Text is being used as
the main reference point in the present negotiations on industrial products, known as NAMA.
However there are many problems in the Derbez text for developing countries, many of which
have expressed their strong reservations or objections.

(iii) THE SINGAPORE ISSUES: Some developed countries have for years been championing
the introduction of new issues as subjects of new agreements in the WTO. These are known as
the Singapore Issues (investment, competition, transparency in government procurement and
trade facilitation) as they were first introduced at the Singapore Ministerial in 1996. Most
developing countries have never been comfortable with these issues, even as subjects of
discussions. The developed countries however wanted these issues upgraded from discussion
issues to negotiation issues towards legally binding agreements. This upgrading was resisted by
many developing countries.

(iv) SPECIAL AND DIFFERENTIAL TREATMENT (SDT) AND IMPLEMENTATION

ISSUES: SDT and Implementation are currently known as the “development issues” in the
WTO. Developing countries negotiated hard and successfully to give these two issues high
priority status as negotiating issues (and as part of the single undertaking) in Doha Declaration
and the Doha work programme.

(v) DECISION-MAKING PROCESS: The failure of the Cancun meeting to get a decision was
significantly due to the WTO's flawed processes of decision-making at three levels: generally, in
preparations for Ministerial Conferences and at the Ministerial Conferences themselves. The
WTO has not yet made the journey from being an exclusive club of GATT where decisions are
made by a few and mostly in informal ways, to a multilateral and democratic system of 130 over
members, most of which are developing countries.

(vi) TRADE ISSUES IN BRETTON WOODS INSTITUTIONS: Trade policy at the

international level is also being made through the Bretton Woods institutions. They provide
advice through their research papers covering trade issues. More importantly, trade issues are
also part of loan conditionality. Some studies (for example by the FAO) have shown that many
developing countries have reduced their applied tariffs to levels far below their bound rates, and
that this has led to import surges which in some cases had adverse effects on the local products
in agriculture and industry.

(vii) TRADE-FINANCE COHERANCE: There are increasing concerns that there should be
better coherence between trade and finance policies and between institutions dealing with trade
and finance issues. Indeed, such coherence is important, so that gains in one field are not
cancelled out by policies in another field.

Grouping of Members and WTO:

African, Caribbean and Pacific Group of States (ACP): The ACP is a group of African,
Caribbean and Pacific countries, former colonies of EU countries which acquired a “special
relationship” with the European Community countries. Through the Lomé Conventions they
maintained relations in the areas of trade (particularly through non-reciprocal preferences) and
development finance. Since 1 January 2008 trading arrangements between the EU and ACP are
no longer under the Cotonou Partnership Agreement (the successor to the Lomé Agreements) but
under WTO-compatible trading arrangements which are either Economic Partnership
Agreements, or Everything-but-Arms for LDCs not signing an EPA, or GSP for non-LDCs not
signing an EPA. As at 1 January 2008 the only region to have signed a “full EPA” was the
Caribbean. Countries in other regions signing an EPA have limited the provisions to trade in
goods, but will continue to negotiate a full EPA in 2008 and beyond.

Membership: 79

Angola, Antigua & Barbuda, Bahamas, Barbados, Belize, Benin, Botswana, Burkina Faso,
Burundi, Cameroon, Cape Verde, Central African Rep, Chad Comoros, Congo, Dem. Rep. of
The Congo, Rep. of the Cook Islands, Côte d’Ivoire, Cuba, Djibouti, Dominica Dominican Rep.
Equatorial Guinea, Eritrea, Ethiopia, Fiji, Gabon, Gambia, Ghana, Grenada, Guinea Guinea-
Bissau,Guyana,Haiti,Jamaica,Kenya,Kiribati,Lesotho,Liberia,Madagascar,Malawi,Mali,Marshall
Islands,Mauritania,Mauritius,Micronesia,Fed.States of ozambique, Namibia, Nauru, Niger,
Nigeria, Niue, Palau, Papua New Guinea, Samoa Sao Tome & Principe, Senegal, Seychelles,
Sierra Leone, Solomon Islands, Somalia, South Africa, St Kitts & Nevis, St Lucia, St Vincent &
the Grenadines, Sudan, Suriname, Swaziland, Tanzania, United Rep of Timor-Leste, Togo,
Tonga, Trinidad &Tobago, Tuvalu, Uganda, Vanuatu, Zambia, Zimbabwe

Cairns Group: The Cairns Group is an 18-country grouping of small-and medium-sized

agricultural exporting countries pursuing common interests in achieving improved trading
conditions for the export of products that their agricultural sectors rely on for growth. The Cairns
Group seems to have lost some of its influence with the rise of the influence of the G-20.

Membership: 18

Argentina, Australia, Bolivia, Brazil, Canada, Chile, Colombia, Costa Rica, Guatemala,
Malaysia, New Zealand, Pakistan, Paraguay, Philippines, South Africa, Thailand, Uruguay

Cotton Four (C-4) : The C-4 is an informal group of cotton-producing sub-Saharan African
countries (Benin, Burkina Faso, Chad and Mali) that launched the Sectoral Initiative on Cotton
at the WTO in 2003. The original objectives of the C-4 were: extension of the concept of special
products to cotton; the total elimination of border measures, domestic support and all export.

European Community (EC): The European Community is the successor of the European
Economic Community (EEC). The EEC was mainly aimed at establishing a common market
based on the freedom of movement of goods, persons, capital and services in order to create a
greater unity among the European countries. After the signature of the Treaty of Maastricht in
February 1992, the EEC became the European Community, which is the main pillar of the
European Union. The EC has a common trade policy (“Common Commercial Policy”) and acts
as one single actor. The legal basis for the EU’s trade policy is Article 133 of the European
Community Treaty. On this basis, the Commission negotiates on behalf of the Member States, in
consultation with a special committee, “the Article 133 Committee”.
Membership: 27

Austria, Belgium, Bulgaria, Cyprus, Czech Rep., Estonia, Denmark, Finland, France, Germany,
Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland,
Portugal, Romania, Slovak Rep., Slovenia, Spain, Sweden, United Kingdom

G-6: An informal group in the negotiations on agriculture, it consists of the group of the Five
Interested Parties (FIPs) plus Japan. Its objectives are to advance the Doha Work Programme
negotiations through informal discussions of their respective conflicting interests.

Members: 6

Australia, Brazil, European Union, India, Japan, United States

G-7 (G-8): The G-7 (include Russia to make G-8) was established in 1975 and is an informal
group of developed countries that work together with the aim of coordinating members’
economic policies in order to promote economic and monetary growth. It was established in
November, 1975

Membership: 8

Canada, France, Germany, Italy, Japan, Russian Fed., United Kingdom, United States

G-10: The G-10 countries tend to be net importing countries that provide significant domestic
support and often have comparatively high tariffs. These countries are seeking recognition of
sensitive tariffs for market access so as to protect their domestic markets from imports.

Membership: 9

Chinese Taipei, Iceland, Israel, Japan, Korea, Rep. of Liechtenstein, Mauritius, Norway,
Switzerland

G-20: The G-20 (which came into prominence in the build-up to the Cancun Ministerial held in
September 2003), is a Group of developing countries with exporting interests as well as
defensive interests in agriculture. The Group has a strong position on market access and wants to
obtain significant improvements in market access through progressive tariff reductions (highest
reductions to the highest tariffs).
Membership: 23 Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania,
Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovak Rep., Slovenia, Spain,
Sweden, United Kingdom, European Union, India, , Japan, United States, Italy, Japan, Russian
Fed., United Kingdom, United States, Japan, Korea, Rep. of Liechtenstein, Mauritius, Norway,
Switzerland,

G-33: The G-33 formed just before Cancun and advocates that developing countries be granted
flexibility to self-designate a number of 'Special Products' on which they would not have to
make any tariff reduction or tariff rate quota (TRQ) commitments. They also seek a new
safeguard mechanism (SSM) for developing countries to enable them to counter market
volatility and sudden import surges. The countries have defensive interests in agriculture.

Membership: 42

Antigua & Barbuda, Barbados. Belize, Benin, Botswana, China, Congo, Rep. of the, Côte 'Ivoire
, Cuba, Dominican Rep, Grenada, Guyana, Haiti, Honduras, India, Indonesia, Jamaica, Kenya,
Korea, Rep. of, Madagascar, Mauritius, Mongolia, , Mozambique, Nicaragua, Nigeria, Pakistan,
Panama, Peru, Philippines, Saint Kitts & Nevis, St Lucia, St Vincent &, Grenadines, , Senegal,
Sri Lanka, Suriname, Tanzania, United Rep of Trinidad & Tobago, Turkey, Uganda,
Venezuela, , Zambia, Zimbabwe

G90: The group of countries that are members of the ACP and/or the African Union and/or are
LDCs, who came together in an alliance during the WTO Ministerial Conference in Cancún.
LDCs: Least Developed Countries are the poorest countries in the world, characterised by low
gross domestic product, poverty amongst their inhabitants, and a low level of economic
diversification. In the latest triennial review of the list of LDCs issued by the Economic and
social Council of the UN, the criteria for determining the new list include:

• low income (per capita GDP under US$ 900 for inclusion, above US$ 1035 for
graduation);

• weak human resources, determined by an index based on nutrition, health, education and
adult literacy indicators;

• economic vulnerability determined by an index based on indicators of: instability of

agricultural production, export instability, economic importance of non-traditional
activites; merchandise export concentration and economic smallness;

• population under 75 million.

A country must fulfil these four criteria to be added to the list of LDCs.
Dominica, Dominican Rep., Equatorial Guinea, Eritrea, Ethiopia, Fiji, Gabon, Gambia, Ghana,
Grenada, Guinea, Guinea-Bissau, Guyana, Haiti, Jamaica, Kenya, Kiribati, Lesotho, Liberia,
Madagascar, , Malawi, , Mali, Marshall Islands, Mauritania, Mauritius, Micronesia, Fed. States
of Mozambique, Namibia, Nauru, Niger, Nigeria, Niue, Palau, Papua New Guinea, Rwanda,
Samoa, Sao Tome & Principe, Senegal, Seychelles, Sierra Leone, Solomon Islands, Somalia,
South Africa, St Kitts & Nevis, St Lucia, St Vincent & the Grenadines, Sudan, Suriname,
Swaziland, Tanzania, United Rep. of Timor-Leste, Togo, Tonga, Trinidad & Tobago, Tuvalu,
Uganda, Vanuatu, Zambia, Zimbabwe, Chile, Colombia, Costa Rica, Guatemala, Indonesia,
Malaysia, New Zealand, Pakistan, Paraguay, Philippines, South Africa, Thailand, Uruguay.

NAMA-11: Emerged in the aftermath of the Hong Kong Ministerial Conference in December
2005, and seeks less than full reciprocity for developing country members in the NAMA
negotiations, i.e. lower tariff reductions in their industrial tariffs than developed countries.

Members: 10

Argentina, Brazil, Egypt, , India, Indonesia, Namibia, Philippines, South Africa, Tunisia,
Venezuela

Bibliography:

1. http://www.wto.org/english/docs_e/legal_e/06-gatt_e.htm

2. http://www.freetrade.org/node/608

3. http://www.pbs.org/newshour/bb/international/wto/

4. http://en.wikipedia.org/wiki/Most_favoured_nation

5. http://www.unctad.org/Templates/Page.asp?intItemID=2309&lang=1

6. http://en.wikipedia.org/wiki/Generalized_System_of_Preferences

7. http://www.southasiaanalysis.org/%5Cpapers19%5Cpaper1879.html

8. http://www.un-ngls.org/orf/cso/cso2/002%200304-Hearings-CS-MKhor.pdf