20 November 2011

WTO 1
I. Origin
(A) The birth of GATT
(B) Objectives of GATT
(C) GATT in the first 30 years
(D) Erosion of GATT
(E) New Round of GATT
II. Birth of WTO
(A) New Trade Regime
(B) Expected Benefits
(C) The Debate in India and Some broad assessment
III. Deepening and Broadening of WTO Agenda
(A) Singapore MinisteriaI Meeting
(B) Doha MinisteriaI Meeting
(C) Cancum MinisteriaI Meeting
IV. WTO and Dvg Countries: An Assessment
V.Some suggestions
VI. WTO and India
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WTO is a cIub that everyone wants to join more than
two dozen countries are in queue.
Countries that have appIied
AIbania Dec. 92
AIgeria Jan. 87
Armenia Dec. 93
BuIgaria Nov. 86
Cambodia Dec. 94
China Mar 87
Croatia Oct. 93
Estonia Mar 94
Jordan Jan 94
Latvia Dec. 93
Lithuania Feb. 94
China's accession compIeted at Doha MinisteriaI Meeting
Other countries who have acceded: AIbania, Croatia, Jordan,
Lithuania, and Oman.
MongoIia Oct. 91
NepaI Jan. 89
Panama Oct. 91
S. Arabia JuIy 93
Russia Jan. 93
Sudan Oct. 94
Taiwan Sept. 92
Ukraine Dec. 93
Uzbekistan Dec. 94
Vietnam Jan. 95
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IMF and IBRD were set up; but controversy over the setting up of ITO.
The US congress did not ratify.
As a stop gap arrangement, the government settIed on a compromise
agreement i.e. the General Agreement on Tariff and Trade (GATT)
The GATT was signed in 1947 at Geneva by 23 countries incIuding
India.
(B) Objectives of GATT: EstabIishment of a worId trading system in which
countries wouId graduaIIy IiberaIize trade among countries.
Was open to aII nations
I. ORIGIN
(A) Birth of GATT
Bretion woods confe.
in 1944:
Designed three grand
institutions:
InternationaI Monetary
Fund
for B.O.P
WorId Bank (IBRD) for deveIopment
InternationaI Trade
Organization (ITO)
for overseeing
commerciaI trade
poIicies of countries
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(C) GATT in the first 30 years of its history
Over the years, it served as the only instrument that laid
down a set of rules to govern international trade.
n a series of trade round, the governments cut average
tariff on manufactured goods from 40 percent in 1947 to
less than 10 per cent by the mid 70s, and since then the
average tariff has fallen to 5% or less.
Figure 1:
GATT Rounds and the Decline in ndustrial Countries'
Tariffs
0
5
10
15
20
25
30
35
40
1940 1950 1960 1970 1980 1990 2000
Year
A
v
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r
a
g
e

T
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(
%
)
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Figure 2: World Trade and Out put
0
1
2
3
4
5
6
7
8
50-55 56-65 66-75 76-85
Year
Trade Volume
Real GDP
As a result, trade grew remarkably.
Between 1950-75, the volume of trade expanded by 500
percent, as against an increase in global output by 220
percent.
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This spectacular change owes to three guiding principles of
GATT.
Reciprocity: f one country lowers its tariffs against
another's exports, it can expect the other country to lower
its tariff in return, i.e. exchange concessions against
concessions.
Nondiscrimination: Countries should not grant one
member or group of members preferential trade over
others. t is known as MFN status. Under GATT, all are
equal.
Transparency: Countries are urged to replace non-tariff
barriers with tariff, and then bind these tariffs.
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(D) GATT's Erosion:
Since the mid-seventies, the volume of world trade has tended
to grow at a slower pace in relation to global output.
The root cause: Proliferation of a new sort of protectionism.
VERs: f a powerful government is worried bout the harm that
imports are doing to its producers, then it does not approach
GATT. nstead, it requires another government on the pain of
retaliation, to restrict its exports. n 70's and 80's, the use of
VERs spread to textiles steel cars machinery, etc.
(b) Supr 301: t gives the American President the authority to
retaliate against unfair trade practices, i.e. practices by foreign
countries that discourage American Exports. Countries
accused under Super 301 must reach an agreement with
USTR within 12 to 18 months, or face retaliation.
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(c) Anti-dumping and countervaiIing duties: Between 1970
and 1985, the anti-dumping procedure amounted to 77 per cent of
all trade activities monitored by GATT.
(d) AgricuIturaI Trade: Agriculture was excluded from GATT. The
cost of agricultural protection was high. According to OECD
calculations, agricultural support cost them about $72 billion a
year.
(e) TextiIes: World trade in textiles is conducted through what
one would call "regulated market a web of bilateral quotas that
tell each exporting country how much they are allowed to each of
the importing countries. The system called MFA. The MFA set up
in 1974, again on temporary basis.
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Figure 3: ndustrial Country mports Subject to
"Hardcore" Non-tariff Measure
-1
1
3
5
7
9
11
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15
17
19
21
23
25
ndustrial
Countries
Developing
count ries
All countries
%

o
f
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o
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a
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1981
1986
Figure 4: Ef f ects on Trade of the Elimination of Non-tariff
Measures
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EC USA All ndustrial
Countries

m
p
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(E) The URUGUAY ROUND
The 8th Round launched in 1986 at PUNTA DEL ESTE,
URUGUAY
t is the most complex one as it included not only issues
relating to tariff and non-tariff barriers, but also issues such as
$115 bn
$55 bn
$260 bn
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TRIMs: Trade Related
nvestment Measures:
GATT had identified 12
policies that dvd
countries feel interfering
with their companies
wanting to invest abroad.
The most restrictive of
these are rules about
local content, export
preferences and foreign
exchange restrictions.
Dvd countries want to
establish some
disciplines in the use of
nvestment Measures.
Dvg country position
Many dvg countries have been
opposed to the idea of dismantling
these restrictions for various
reasons.
The country prefers to channel
investments in accordance with
development needs and priorities.
Many of the prevailing
regulations are directed with an
aim to strengthen the domestic
capital goods sector, developing
indigeneous technology, and
diversifying their exports.
Govts in their countries loose the
autonomy in the choice of eco-
policies
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TRIPs: Trade Related ntellectual
Property Rights :
Many producers in Europe and
America complain that their patents,
trade marks and other intellectual
property rights are infringed in
foreign markets by dvg. countries.
Companies in rich countries allege
that all such disputes over
intellectual property are a straight
forward matter of piracy or theft.
The dvg countries
object that matching
rich country standards
of patent protection
would make such
goods a lot more
expensive.
AgricuIture and TextiIe:
Dvd countries want agri. Protection
to continue
MFA to continue
Dvg countries want
agriculture to be
brought under GATT
MFA to be dismantled
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Services
Traditionally trade implied trade in goods; and
services were categorized as non-tradable goods.
But now this definition is blurred, thanks to
technological development. The development in
telecommunications has led the way to a world with
no need for going to a bank, traveling to a business
meeting or from parting newspaper/periodicals.
Technological development has made it possible to
deliver to any point in the world any service product
that can be reduced to electronically coded bits of
information with great reliability and at less cost. As
a result trade in services has expanded fast.
Between 1970 and 1988, trade in services is
reported to have increased at the rate of 15 p.c. per
annum; and the service sector has been on ascent
in the industrialized countries. Nearly 70 percent of
America's GDP and of employment in services.
The US has been orchestrating for inclusion of
services
Dvg countries argue:
1.Their banking,
insurance,
telecommunication,
shipping etc. will be
exposed to fierce
competition from the
dvd world.
2.The dvg countries, as
a group, are already big
importers of services. A
liberal policy can affect
their b.o.p.
3.Affect domestikc
employment displace
worker.
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Figure 5: World Exports of Commercial Services*
0
100
200
300
400
500
600
78 79 80 81 82 83 84 85 86 87 88 89
$

b
n
Fi gure 6: Ledi ng Export ers of Commerci al Servi ces, 1988
0
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The Ministerial meeting held in Dec. 1990 at Brussels for
concluding negotiations failed to achieve its objective.
II. EstabIishment of WorId Trade Organization (WTO)
To break the impasse, Mr. Arthur Dunkel, submitted a
comprehensive document on 30th Dec. 1991.
This is called DUNKEL Draft. On April 15, 1994, 116
nations signed the draft.
t has created a lot of dissent and controversy.
The main legal instrument negotiated in the Uruguay
Round
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(a) MARRKESH Agreement estabIishing WTO
(b) MuItiIateraI Agreements.
1. GeneraI Agreement on Tariff and Trade, GATT 1994
Agreement on implementation of article V of GATT 1994
(custom valuation)
Agreement on pre-shipment inspection
Agreement on technical barriers to trade (TBT)
Agreement on Application of Sanitary and Phytosanitary
measures (SPS)
Agreement on import licencing procedures
Agreement on safeguards
Agreement on subsidies and countervailing measures
(SCM)
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Agreement on mplementation of Article V of GATT 1994
(Anti dumping)
Agreement on Trade Related nvestment Measures
(TRMs)
Agreement on Textiles and clothing
Agreement on Agriculture (AOA)
Agreement on Rules of origin (ROO)
2. GeneraI Agreement on Trade in Services (GATS)
3. Agreement on Trade ReIated Aspects of InteIIectuaI
Property Rights (TRIPs)
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(A) The New Trade Regime
A summary of important Uruguay Round Decision
1. AgricuIture:
2. Tariffication: One third of all lines for trade in
agriculture were previously 'unbound' and carried by non-
tariff measures. All these are now replaced by single
tariffs, which may be specific advalarem, and equivalent
to the level of protection in 1986-88.
Tariff Reduction: Tariffs resulting from 'tariffication'
process together with other tariffs are to be reduced by 36
percent over six years in the case of dvd countries; and
24 percent over ten years in the case of dvg countries.
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inimum Access commitment: To ensure that this
tariffication translates into changes in trading patterns,
countries have guaranteed minimum level of access 3
percent of domestic consumption initially, and going upto
5 percent in 6 years to their markets.
Reduction in Domestic Support: Domestic support
programmes in the industrial countries are to be reduced
by 20 per cent in a six year period and 13 per cent over
ten years in the case of dvg countries.
(First calculate aggregate Measure of support. The AMS
is a measure quantifying the aggregate value of
domestic support or subsidy given to each category of
agricultural product. Domestic policies to be
included/excluded in AMS calculation.
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Amber box Green Box BIue box
Those policies
which do have
a substantial
impact on the
pattern and
flow of trade;
and are
therefore
included in
AMS
calculation
Policies that are not
deemed to have a major
effect on production and
trade and exempted from
AMS calculation
O Research programmes
O Pest and disease
control measures
O Training facilities
O Extension and advisory
services
O nspection services
O Public stockholding for
food security purposes
ODomestic food aid
Policies that fall into neither of
these categories, but are
perhaps somewhere in
between. Also exempted from
AMS calculation
Complementary payments
for land set aside program of
EU's common Agricultural
Policy
US deficiency payments all
such direct payments under
production limiting program
exempt.
Export subsidies cut: Dvd countries 36 p.c. . 6 yrs
Dvg countries 24 p.c. . 10 yrs
Plant varieties including seeds must be protected either by a patent or by
a 'Sui-generic' system or by a combination of both.
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SPS Agreement The SPS Agreement concerns
with the application of measures to protect animal,
plant and human life and health; and is integrated
with the Agreement on Agriculture.
SPS is a set of rules, principles and benchmarks
for WTO members to protect themselves from
trade related risks to human, animal and plant
health; but the same time warranting that these
measures are not misused for protection purposes.
To achieve its proximate goal, the agreement lays
down the following guideposts:
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1. Risk assessment The agreement encourages
the use of systematic risk analysis.
2. Rules on setting protection levels: Measures to
ensure food safety and to protect the health of
animals and plants should be based on
analyses of accurate and scientific data
3. Harmonization: n order to harmonize SPS on
as wide a basis as possible, the agreement
encourages members to base their measures
on international standards, guidelines
wherever they exist
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4. Equivalence: The agreement encourages countries to
grant equivalence to SPS measures of other countries,
which may differ from the importing countries'
measures, if the exporting countries demonstrate that
their standards achieve the same or equal level of
sanitary and phytosanitary protection as that of
importing countries' standards.
5. Transparency: Lays down elaborate rules to ensure
that there is complete transparency in SPS measures
of member countries.
6. Special and Differential treatment to Dvg countries:
The agreement recognises the problems of dvg
countries in employing with SPS measures of
importing countries; and hence calls for providing (i)
technical and financial assistance, and (ii) longer live
frame for compliance.
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2. TextiIes & AppareI: For the last two decades, trade in
textiles has been controlled by a network of bilateral quotas
MFA set up in 1974 to provide temporary protection to dvd
country producers, whose business was threatened by a
surge of cheap imports.
Under the UR, this will be integrated
n the first year, 16 p.c. of textile imports of base year
value to be integrated
n the fourth year, 17 per cent
n the seventh year, 18 per cent
n the tenth year, remaining 49 per cent
3. IndustriaI goods:
Dvd countries to cut import duties on industrial goods by an
average of 5 per cent over the next five years, besides
exempting about 40 percent of other goods, including items
like steel, pharmaceuticals.
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4. Services:
The term services cover a wide range of economic
activities. The secretariat of WTO has divided these
divergent activities into the following 12 sections:
Business services, Communication services, Construction
and engineering services, Distribution services, Financial
services, Health services, Tourism & Travel services,
Recreational services and other services.
*GATS provides for secure and more open market in
services in a similar manner as the GATT have done for
trade in goods. But unlike in GATT, services are an area
where the process of liberalization has just begun. The
agreement contain a set of mutually agreed and legally
enforceable rules to cover international trade in services
such as MFN treatment, transparency of laws, natural
treatment, and arrangement for dispute settlement.
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Broad agreement reached in Engineering, computer related
services and travel services.
t was decided to continue negotiations for liberalization in
Financial services
Movement of National Persons
Telecommunications
Maritime transport
Air transport
Considerable progress in Financial Services
Liberalisations.
What are financial services?
nsurance and Related Services
Banking and Other Financial Services
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How important are Financial Services?
The sector is estimated to involve $1.2 trillion per day in
foreign exchange transaction.
nternational financing extended by banks around the world
is estimated to be $6.4 trillion. The world banking assets
are put at more than $ 20 trillion. Stock market
capitalization at over $ 10 trillion. The market listed bonds
of $ 10 trillion.
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5. Trade
ReIated
InteIIectuaI
Property
Rights
(TRIPs)
OA new area brought into the scope of
GATT. So far, the international system for
the protection of intellectual property has
been embodied in the legal and
international framework provided by the
World ntellectual Property Organization
(WPO).
Developed countries, not happy with WPO,
wanted a stronger and tougher rule.
Accordingly, the Uruguay Round
Agreement, expands he scope of PR:
OEstablishes standards for the acquisition
and protection of intellectual property rights,
provisions for their national enforcement,
and for multilateral dispute settlement.
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5. (contd.) ONational treatment and most favoured
nation treatment are to apply in respect of
all intellectual property rights covered by
the agreement.
OMinimum standards of protection for PR
provided in respect of copyright,
trademark, industrial designs, patents,
layouts, designs of integrated circuits etc.
On the patent area, minimum standards
provided for patent protection in all areas
of technology, including pharmaceuticals,
for 20 years.
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6. TRIMs OAll restrictions affecting the entry of FD or their
entry into certain sectors is to be removed. This
includes the following measures taken routinely :
1.Local content requirement (which requires that
foreign companies use a specified quantity of local
material in production)
2.Export requirement (where foreign investors are
required to export a certain percentage of their
production).
3.Trade balancing requirement (which puts limit on
imports)
4.Local equity requirement (to ensure that a certain
percentage of the company's equity be held by
local investors).
5.Foreign exchange restrictions and limitations on
remittances of profits.
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7 Dispute
SettIement
Dispute to be settled under the integrated
dispute settlement body. Firm time limits
over the stages of the dispute settlement
process.
8. WorId Trade
Organization
(WTO)
New world trade body established from
1
st
January 1995 to implement, administer
and operate GATT 1994. Two features
are :
(i)countries acceding to WTO must accept
all decisions in the round as a package.
(ii)Acceding countries agree to be bound
by an integrated dispute settlement
process that enables "cross-retaliation,
i.e. a country found not to comply in one
area can be retaliated against in another
area where it can really hurt.
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(B) Expected Benefits:
The new GATT Agreement is expected to boost
global trade by around $200-300 billion a year.
EEC : $ 61 billion
US : 36 billion
Former Soviet Block : 37 billion
Japan : 27 billion
Dvg countries : 16 billion
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(C) The Debate in India and Some Broad Assessment
Are we under obligation to reduce agricultural subsidies?
Concerns about PDS and the minimum access to imports.
The question of PRs in areas like pharmaceuticals :
concern that prices of drugs will increase manifold.
mplication of TRMs : Does it mean complete freedom to
MNCs and TNCs to operate freely in the country.
Concern over the opening of critical areas like the financial
service.
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(i) AgricuIture: This is one area where government has
been jubilant of resting major benefits. Success in reducing
agricultural support measures in the EU, US and Japan is
expected to render major benefits to ndia's exports because
ndian agriculture has comparative advantage. Does this
portray reality?
* The US, EU and Japan maintain high tariff levels on a wide
range of agricultural goods.
USA : Sugar: 244 p.c.; ground 168 pc; milk 83 pc
EU : Wheat: 352 p.c. Oats: 361 p.c.
Japan : Wheat : 388 p.c. Wheat products: 352 p.c.
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The 36 per cent tariff reduction required under WTO will still
leave production in these countries with high tariffs. n
contrast, ndia has to reduce tariffs and eliminate all non-tariff
barriers. Apart from this SPS measures.
The WTO allows certain kinds of subsides to continue,
particularly exp. Credits and direct income provisions to
farmers. The continued use of exp. Subsidies allows massive
dumping of agril. Products by the US and EU.
The Sanitary and Phytosanitary Measures (SPS) has
become a non-tariff protection.
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(ii) TextiIes: Progress in unraveling MFA is expected to
bring major benefits to ndia. Here again there are
causes for concern:
* The phasing of MFA is accompanied by a system of
temporary "transitional selective safeguards whose
operational details are still not defined. That would
have the effect of thwarting spectacular growth of
exports for textile exporting countries like ndia if such
imports are conceived to cause serious damage to
industries in the importing countries.
* There are antidumping laws the most powerful
weapon in the hands of US and EU.
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Industry: The prospect of faster reduction in ind. tariffs
represents yet another source of potential benefit. But
there are again uncertainties:
* The mechanism through which elimination of VERs
would be achieved is yet not clear.
* Again the impact of faster cuts in import duties are
likely to be small because tariff in ind. Countries are
already low.
Services: The impacts are difficult to predict
(a) This is an area where there are large sectoral
exceptions and the liberalization of services is still on.
(b) the commitment on the movement of natural
persons is still in the initial stages of negotiations.
Nevertheless, the prospect of substantial gains may
still be a wishful thinking.
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IPR: This is one area where the new and tougher rules
can put us to greater disadvantages.
For ndia, it will mean virtually repealing the
ndian Patent Act of 1970 because ndian Patent
Law provides only process patents, not product
patents.
The TRPs agreement requires product and
process patent to be given in all branches of
technology for 20 years.
What do we risk by amending our patent act in
accordance with WTO requirements.
The flipside is that the bulk of registered patents
are held by industrialized countries; and the
domestic production of these patented products
will become costly.
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IPR: (contd.)
The most deleterious effect of this is expected in
chemical and pharmaceutical products.
However, it applies only to patented drugs. Those
drugs which have come out of the patent, prices
will not increase. Of the 270 drugs listed by WTO
as essential life saving, only 10 to 15 percent are
on patent.
For ndia, 28 major patented drugs constitute 80
percent of ndia's drug production.
Of these, 22 will be out of patent by 2005. Only 7
drugs will be under patent.
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TRIMs: This is yet another unfortunate trait for ndia.
* This will severely jeopardize our ability to regulate
the objectives and priorities, weaken domestic capital
goods sector, arrest the growth of indigenous
technological capability.
* t will also become a drain on foreign exchange
reserves negatively affect our b.o.p. and increase
external debts.
*When linked to be threat of cross retaliation, removal
of all investment measures can become a major
social and economic threat.
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Some Broad Assessment:
(1) The new regime forecloses the development
alternatives for developing countries. An "Eco.
Monoculture with only one model dominating the
world.
(2) The way WTO skews the treatment of matter in favour
of dvd countries.
TRIPS: Rights are protected, but no obligation laid on
the holder of PR.
TRIMS: Same as above. Observe the asymmetry in
the treatment of capital and labour.
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(3) Widening and deepening of WTO's list of regulatory
barriers by simply prefixing "Trade-Related to any
issue which it thinks. The new issues are:
A link between labour standards and World Trade
A link between Environment and World Trade
Moves towards a new Multinational Agreement on
nvestment (MA)
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III. WIDENING AND DEEPENING WTO'S AGENDA
(A) Singapore Issues
At the first ever ministerial conference of WTO, held in
Singapore in 1996, they demanded the negotiation mandate
of WTO to be broadened to include:
Trade and investment
Trade and competition policy
Transparency in Government procurement
Trade Facilitation
Labour Standards
Environment Standards
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Trade and Investment:
The TRMs agreement prevents countries from imposing
conditions on investors: such as local content requirements,
exp., obligation etc.
Having got the foot of investment in the WTO door, the dvd
countries are now trying to get the main body in through the
foreign investment treaty.
The EU with support from other dvd has been lobbying to
introduce a 'Multilateral nvestment Agreement' (MA) in the
WTO.
The treaty would give rights to foreign companies to
establish themselves with 100 percent equity in all sectors in
any WTO country, without any restrictions, and to be given
'national treatment'.
n promoting it, the dvd countries say the foreign investment
treaty would lead to greater foreign investment in the south.
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Trade and Investment: (contd.)
However, concern for the interest of the south is only a
pretext. The real motive of the proponents is to increase the
access of their companies to resources and markets of dvg
countries, as well as to have another powerful instrument to
block the development of potential rivals.
An international agreement on investment of this type is
designed to maximize foreign investors' rights while
minimizing the authority, rights and policy space of
governments of dvg countries. This has serious
consequences in terms of policy making in economic, social
and political spheres. t would weaken the dvg countries'
bargaining position.
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Trade and competition probIem: EU proposaI
* Proponents of this agenda wants to bring multilateral rules
that discipline members to establish national competition law
and policy. These laws/policies should incorporate the core
principles of WTO defined as transparency,
nondiscrimination (MFN and national treatment). Most
importantly the core WTO principles would be applied to
competition.
* Competition law and policy in appropriate form, are
beneficial to dvg countries. However, each country must
have full flexibility to choose a model which is suitable, and
which can also change through time to suit the changing
conditions.
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Trade and competition probIem: EU proposaI (contd.)
* The proposed model for competition policy to provide
'effective opportunity for competition' in the local market for
foreign firms, and thus apply WTO core principles to
competition law/policy would only affect the needed
flexibility.
* The abuse of antidumping actions in the dvd countries is
anti-competitive against dvg country products. The restrictive
business practices of large firms also hinder competition.
However, these are not the issues desired by rich countries.
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WTO 47
Transparency in Government Procurement:
* This agenda initiated by the US. The US outlaws overseas
bribery by its firms. The US feel other countries firms do
bribe; and that hurts American companies in obtaining
overseas contacts.
* The proponents want the government procurement to be
fully integrated in the WTO.
* f this takes place, the governments in future will not be
allowed to give preferences to local companies for the
supply of goods and services. The effects on dvg countries
would be severe.
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WTO 48
Trade FaciIitation:
* Here its proponents wants to bring the same set of rules
and procedures similar to that in dvd countries. For example,
it proposes the physical examination of goods by the
customs authorities should only be in a small number of
cases selected on a random basis to improve the flow of
goods through customs barrier. But this ignores the wide
differences in the administrative, financial and human
resources between the dvd and dvg countries. Here, in this
case, it increases the risk of avoidance of payment of
adequate customs duties.
* mprovement in trade facilitation should be a subject of
international cooperation and routed through institution such
as World Customs Organization (WCO).
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Labour standards: Some dvd countries US and France
were making great attempts to get the issue of trade and
international labour standards accepted in the ministerial
meeting as an important agenda of WTO. They allege that lower
labour standards in dvg countries are an unfair trade advantage,
and dvg countries are guilty of social dumping. These countries
advocate that goods exported from such countries should be
subject to trade penalties such as countervailing duties.
* An objective analysis would reveal that the push by dvd
countries to include labour standards in the agenda of WTO is
not by feeling of goodwill or solidarity with the third world
workers, but protectionist motives aimed at against competitive
imports from dvg countries. The dvd countries are facing serious
problems of unemployment. They are pointing to southern
countries as 'culprits' that exploit workers with low wages and
poor labour conditions in order to attempt TNCs to move their
production away from the high wage norm.
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Environment standards: f a country which has lower
environmental standards in an industry, and where the cost of
that country's product is not internalized and the price is too
low, and is exporting that product to another country, then the
farmer is practicing economic dumping, and the latter
importing country, has the right to impose trade penalties
such as countervailing duties.
What happened at the Singapore meeting?
At the ministerial conference in Singapore, no agreement
reached. The issue of labour standards shifted to LO.
Similarly, the issue of Environment postponed.
For others, working groups were set up on investment,
competition policy and transparency in government
procurement to conduct study process without any
negotiating mandate.
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(B) Doha MinisteriaI Meeting:
The same, Singapore issues investment, competition
policy, government procurement and trade facilitation, have
been the most contentious ones at the Doha ministerial level.
Even though working groups were set up on these issues by
WTO at Singapore Ministerial level, the groups have not
completed their work. Even then, Dvd countries wanted to
launch negotiations right away. Dvg countries resisted a
negotiating mandate, and wanted the working groups to
complete their work prior to negotiations. After much
deliberations, dvg countries succeeded in postponing the
decision on the launch of negotiations on these issues.
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The Doha development agenda focused on the
development dimension of agriculture by bringing on issues
of food security and rural development. t also emphasized
the need to take up the non-trade concerns in the
negotiations as provided for in the WTO Agreement on
Agriculture (AOA). Emphasis was on phasing out of domestic
support to agriculture and elimination of export subsidies from
the dvd countries.
The Doha Development Agenda also expressed concerns
about the possible negative effects of reforms on the least
developed, and net food importing countries. n this regard, it
was proposed to give special consideration to the needs of
these countries especially in the context of food aid, technical
and financial assurance for improving agricultural products,
infrastructure and finance normal level of commercial imports
of basic foodstuff and also review of the follow up.
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The DDA identified Special and Different Treatment (S&DT)
as an integral part of all elements of agricultural negotiations
in a bid to bring development to the centre stage of the WTO
process.
A major concern of dvg countries with the process of trade
liberalization for non-agricultural products, in the UR has
been the persistence of high and peak tariffs, specific duties,
tariff escalation, and NTBs in dvd countries. t has also been
shown that the process of trade liberalization has been
asymmetric with dvg countries, taking deeper cuts than dvd
countries. The Doha ministerial conference sought to address
this asymmetry by proposing negotiations on the market
access for non-agricultural goods. Subsequently, a
negotiating group on market access (NGMA) has been set up
at the WTO and different countries have presented proposals
or modalities for trade liberalization.
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WTO 54
The implementation of TRPs has raised three sets of
negotiating concerns in recent time.
(a) ts impact on prices and availability of essential
medicines in the context of HV ADS drugs controversy in
south Africa. t led the Doha Ministerial Conference to adopt
a declaration on TRPs and public health, recognizing the
supremacy of public health concerns over TRPs and
allowing members some flexibility. However, the US under
pressure from its pharma industry is dragging its feet for
signing agreement.
20 November 2011
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(b) TRPS agreement created an anomalous situation
knowledge created from traditional community innovations
system is left free for commercial exploitation without any
compensation, while intellectual property resulting from
formal innovations system is protected from unauthorized
commercial exploitation. This resulted in private enterprises
obtaining patents on traditional knowledge of particular
communities without prior informed consent of the owners
of knowledge. Dvg countries have been seeking a redressal
of this. n recognition of this, the Doha Ministerial instructed
the council on TRPs to examine the relationship between
the TRPs agreement and the convention on Biological
Diversity.
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(c) Another concern of dvg countries has been the stringent
food safety standards and other environmental standards
imposed by the dvd countries. The WTO agreement on SPS
aims to ensure that these standards and regulations are not
used for protectionist purposes; and do not cause adverse
impacts on trade. However, there is considerable discretion
available to importing countries to impose their own rules and
standards such as inspection of imported products, specific
treatment or processing of products, fixing of minimum
allowable levels of pesticide residue, labeling and packaging
requirements, good manufacturing processes etc. There is
evidence that this flexibility has been exploited by using very
minute risk assessments, sometimes in non-transparent
manner.
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(C) Cancum Meeting:
Most important question: whether to launch negotiations on the
"new issues or "Singapore issues, i.e. MA, competition policy,
transparency in govt. procurement, trade facilitation, Ministers have
choice between two options:
(1)Launch negotiations now and complete the agreements of
superspeed by Jan 2005s or
(2) continue discussing and clarifying the issues back in Geneva.
The EU, Japan and other dvd countries try to push hard option 1.
Dvg countries, option 2. The final draft declaration implies that
negotiations on the four Singapore issues would begin after the fifth
Ministerial meeting on the basis of explicit consensus on
"modalities of negotiation. So far no consensus. Countries are
split. Another conflict over the meaning of modalities. Dvd countries
define it to mean procedural matters and a mere listing of principle/
issues. But dvg countries argue: modalities mean scope and
definition, the issues to be covered, the obligations. They point to
the current negotiations on agri. And non-agri. Products where
'modalities' take on this substantive meaning.
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IV. WTO and DeveIoping Countries: An assessment:
Multilateral trade negotiations have failed to liberalise the trade
and industrial policy regimes in the worlds richest and most dvd
countries. The dvd countries while preaching the virtues of free
trade to dvg countries have been resistant to bring down peak
tariffs, high specific duties, and tariff escalation that affect imports
for dvg countries.
There are also clear signs of protectionist backlash in the dvd
world in different sectors with market access for the developing
world becoming ever elusive. While developing countries are
constantly being pushed to undertake increasing liberalization
commitments, dvd countries finds new ways to protect their
industries, agriculture, and services. This situation is in sharp
contrast to the avowed goals of the WTO as set out in the
preamble to the MARRAKESH agreement recognizing the need
for positive efforts designed to ensure that dvg countries secure a
share in the growth in international trade commensurate with the
need of their economic development.
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Product description EU Japan USA Canada
Agricultural products Milk (~3 pc Iat) 113 220 66 241
Milk in power with or without sugar 55-66 160-280 55-85 243-243
Yoghurt and butter 69 300-620 30-80 238-300
Cereals & preparation 32-84 70-900 0-20 1-77
Groundnuts, shelled 0 470 132 0
Cane sugar 71-73 85-100 77-90 7
Grape juice 215 30 14 10
CoIIee preparations 8 130 27 0
Tea preparations 0 100 91 0
Smoking tobacco 52 30 310 5
Post UR Tariffs in Quad Countries on SeIect items of
Exports from Dvg countries: AgriI. Product
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EU Japan USA Canada
Woven fabrics of
> 80 percent combed wool
12 8 25 14
Babies garments, knitted or
croch synthetic fibre
11 22 16 18
Women's blouses or
trousers knitted
11 9-11 32 18
Men's shirts, woven of
cotton and man made fibres
11 7 20-28 17-18
Waterproof footwear 13 27 38 20
Footwear with leather
uppers
6 140 10 18
Ceramic tableware,
kitchenware etc.
8-9 0 28-29 0
Post UR Tariffs in Quad Countries on SeIect items of
Export from Dvg countries: IndustriaI Products
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Country Per capita
GDP
2001 exports
to US in billion
Tariff paid
in million
Rate
Nepal $240 $0.20 $25 12.3%
reland $22660 $18.60 $29 0.2%
Bangladesh $370 $2.35 $331 14.1%
France $24170 $30.02 $330 1.1%
Cambodia $260 $0.96 $152 15.8%
Singapore $30170 $14.90 $96 0.6%
Post UR Tariffs in Quad Countries on SeIect items of
Exports from Dvg countries: The poor pay more
As table above notes, the US now collects more tariff revenue from
Bangladeshi goods than from French goods, even though
Bangladesh exports only $2 billion in goods to the US and France
$30 billion.
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Dvg countries were lured into accepting liberalization of trade
in services by the prospect of increased market access in the
dvd countries for their skilled professionals. However, an
overview of the commitments made by industrialized
countries in services suggest that most of the commitments
made by industrialized countries simply maintain the existing
status quo without providing meaningful market access. No
much commitments in regards to movement of national
persons.
There has been proliferation of environmental and health
requirements imposed on trade especially in dvd countries.
These requirements not only include product standards and
regulations, but also voluntary measures, standards set by
the private sector, buyers' requirement and supply chain
management. These regulations have often been applied in
such a manner that they act as non-tariff barriers.
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While dvd counties have sought to phase out all subsidies
under the agreement on subsidies and countervailing
measures (SCM), R&D subsidies upto 75 percent of the costs
of ind. Research are non-actionable under article 8.2 of the
agreement. n order to retain the technological edge,
government of dvd countries have been supporting
technological activities of national enterprises through a wide
variety of government ind. Complexes.
Yet another asymmetry in the subsidies and countervailing
measures is its failure to discipline the investment incentives
given by host governments to attract FD inflows.
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An iIIustrative Iist of investment incentives given by
industriaIized countries governments.
Site MNE and year Subsidy Jobs
created
Subsidy per
job
Kentucky, US Toyota, 1985 $150 million 3,000 $50,000
S. Caralina US BMW, 1992 $150 million 1900 $79,000
Albama, US Mercedez Banz,
1996
$300 million 1500 $200,000
New Mexico, US Intel, 1993 $289 million 2400 $120,000
Setubal, Portugal Ford, 1991 $484 million 1900 $254,000
Germany Dow 1996 $6.8 billion 2000 $34,00,000
UK Samsung 1994 $89 million 3000 $30,000
UK Siemens, 1995 $177 million 1500 $51,000
UK Lucha Gold Star
1996
$320 million 6100 $48,000
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n 2001 the OECD countries subsidized their agr sector to
the tune of $311 billion. These subsidies added upto as much
as 31 pc of the gross value of agricultural output in OECD
countries. n Japan, the subsidies amounted to as high as 59
percent of the gross value of agricultural output.
A number of other WTO agreements such as TRPs and
TRMs are resulting in significant increase losses for dvg
countries.
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Income transfers resuIting from TRIPs in SeIect Countries
Country Net income transIers Iollowing TRIPs agreement
(millions oI 1995 as 200 dollars)
Major Net gainers
US 19083
Germany 6768
Japan 5673
France 3326
UK 2968
Switzerland 2968
Australia 1097
Major Net losers
Rep. oI Korea -15333
China -1521
Israel -3879
Mexico -2550
India -903
Brazil -530
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BaIance of commitments:
The Uruguay Round Scorecard
The outcome of the Uruguay Round was a good one for
the North. Not only did the industrial countries gain from
the concessions they received; the economics of the
concessions they gave was also positive, through the
opening up of their own agriculture and textile sectors. And
for the South? On the gain dimension market
accessdeveloping countries did not achieve a
mercantilist surplus (see the table below). Their tariff
reduction covered as large a share of their imports as did
those of the industrial countries, and their tariff cuts,
measured by how these reduction will affect importers'
costs, were deeper than those of the industrial countries.
This is true even when we take into account the tariff
equivalent of the Multifibre Arrangement (MFA) quotas that
the industrial countries have committed themselves to
remove.
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IndustriaI
Economies
DeveIoping
Economies
Percent
age of
imports
Depth
of
cut
*
Percentage
of imports
Depth
of cut
IncIudes tariffication and
bound reductions on
agricuIturaI products
30 1.0 29 2.3
IncIudes the above pIus the
tariff equivaIent of
eIimination of the MuItifibre
Arrangement
30 1.6 29 2.3
Tariff Concessions, AII Merchandise
*Depth of cut, dt/(1+T), is a weighted average across all products, including those on which no
reduction was made.
Source: Finger and Winters 2002 Reciprocity in the WTO, in Hoekman, B. et al. (eds.) Development,
Trade, and WTO: A Handbook, The World Bank
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WTO 69
WTO, Trade LiberaIization and Trade Growth: Lessons
from Quantitative Studies
Recent empirical studies conducted by Professor Andrew
Rose of the University of California at Berkeley, a seat of
higher learning well known for its orthodox views, and
brought out by the London based Centre for Economic
Policy Research (CEPR) does not find any evidence of
effectiveness of WTO in trade promotion.
WTO has No Effect on Trade LiberaIization
The research included a rigorous analysis using a large
panel data set covering 175 countries with observations over
50 years and 67 measures of trade policy and trade
liberalization conducted in the framework of 'gravity' model
of international trade. The study does not find membership
of GATT/WTO to be related with any of the measures of the
trade policy or liberalization.
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WTO has No Effect on Trade Growth Either
Then the question Professor Rose asked was whether
GATT/WTO membership has promoted trade? The research
is unable to find a positive effect of GATT/WTO membership
on trade. "Despite an extensive search, he is unable to find
a "compelling evidence showing that the GATT/WTO has
actually encouraged trade.
GSP has Ied to DoubIing of Trade
Unlike GATT/WTO membership's effect on trade, the GSP
(Generalized System of Trade preferences) that developed
countries give to developing countries "does seem to have a
strong effect on trade, and is associated with an
approximate doubling of trade.
Source: RS Based on Rose (2002a, 2002b, 2003)
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V. SOME RECOMMENDATIONS
1. An independent commission to make a Development
Review of the Multilateral Trading System: Given the key
importance of the emerging world trading system for the
development and sustainability of the world economy, it is
important to undertake a thorough review of the type of
asymmetries that have crept in; the Cancun conference
provides an opportunity to the WTO membership to seek a
redressal of the emerging asymmetries in the world trading
system before moving forward to expand its agenda. The
dvg countries should call for appointment of an
independent commission to review the development
consequences of Uruguay and Doha Rounds before
moving forward. This commission should identify
asymmetries that have crept into system and recommend
ways for reform for giving a real meaning to development
on the trade agenda.
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2. Dvg countries should seek full implementation of all
outstanding issues before a negotiating mandate on any
other issues could even be discussed.
3. Given the reluctance of dvd countries to make meaningful
commitments on the movement of natural persons, dvg
countries should seek a framework agreement to provide
for movement of natural persons.
4. n the agreement of Agri (AOA), some key issues for
negotiations are:
Facilitating dvd country market access to dvg countries
Tariff rationalization of dvd countries a ceiling on tariff
peaks of dvd countries in a necessity.
Enhanced tariff rate quota (TRQ)
Special safeguard Measure (SS) for special products
Complete elimination of green and blue box subsidies
of dvd countries.
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5. An nternational Framework for protection of trading
knowledge under TRPs agreement: The member states
should establish "sui-generic system for protection of
traditional knowledge and genetic resources. The protection
of traditional knowledge at national level will not be
complete until there is an internal framework for use of TK
outside the country of origin. The framework should
establish a procedure that requires patent or other PR
applications to disclose the source of origin of TK or genetic
resource used and enclose a certificate from a competent
authority in the source country of prior informed consent
and benefit sharing conditions. This would require an
amendment in the TRPs agreement.
6. Expanding geographical indication coverage to other
products: steps should betaken to implement extension and
scale of protection of GS beyond wines and sprits, which is
an outstanding implementation issue from the Doha
Ministerial.
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WTO 74
Moratorium on further strengthening PR regime.
Agreement on SPS linking implementation with effective
technical assistance. The SPS agreement in WTO contains
provisions for technical assistance to be provided by the
importing countries to assist the exporters in their compliance
with the new standards imposed by them. Furthermore, the
SPS agreement provides that where subsidized investment
are required in order for an exporting dvg country member to
fulfill the sanitary and phyto-sanitary requirements of an
importing country member, the latter shall consider providing
such technical assistance as well permit the dvg country
member to maintain and export its market access
opportunities for the products involved.
However, available evidence suggests that promised
technical assistance is not delivered in an adequate as timely
manner.
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WTO 75
VI. WTO and India: What has been happening?
n the tariff liberalization process, each country has submitted
official rates. This includes:
"BASE RATEand"OFFER RATEGAlso called as Bound
Raten the negotiation, ndia had agreed to bind tariff for 3373
commodity/ commodity groups. This accounted for 65 per
cent of ndia's total tariff lines.
For agricultural commodities, ndia has committed three
bound rates:
Raw materials 100 p.c.
Processed Agricultural Commodities 150 p.c.
Edible oils 300 p.c.
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However, the binding rates for a number of agricultural
commodities are very low; and in a few cases, it is zero. The
range of bound rates for most of the items is 0-55 percent.
These are owing to commitments made by ndia in earlier
round of negotiations.
Apart from tariff, ndia has to remove all QRs. Though ndia
should have removed all the QRs, ndia maintained under
the pretext of B.O.P. consideration.
Australia, Canada, Japan, EU, New Zealand, Switzerland
and the US had objections.
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WTO 77