WORLD TRADE ORGANISATION AND LIBERALISATION

GENERAL AGREEMENT ON TARIFFS AND TRADE(GATT)

Predecessor of WTO Born in January 1948 as result of the international desire to liberalize trade Breton woods conference of 1944 recommended the IMF, WORLD BANK and ITO. An interim agreement to fill the gap until the ITO charter was ratified.

Harry Dexter White & John Maynard Keynes at the Bretton Woods Conference

General Agreement on Tariffs and Trade

Treaty among nations to promote trade among members Its intention was to achieve a broad, multilateral and free worldwide systems Members 23 in 1948, 117 in 1994, 157 in 2012 2012 will see 4 new member countries to the World Trade Organisation bringing the number up to 157 members. The countries are:
1. Vanuatu - expected accession date 30th January 2012 2. Russia - expected accession date 22nd July 2012 3. Samoa - expected accession date 15th July 2012 4. Montenegro - expected accession date 1st May 2012

Its members account for some 90 % of world trade.

PRIMARY OBJECTIVE

The primary objective of GATT was to expand international trade by liberalizing trade so as to bring all-round economic prosperity.

OTHER OBJECTIVES
1.

Raising standard of living Ensuring full employment and a large and steadily growing volume of real income and effective demand Developing full use of the resources of the world Expansion of production and international trade

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Basic principles of GATT:

Member countries will consult each other concerning trade problems Agreement provides framework for negotiation and includes results of negotiation Countries should protect domestic industries, but also should have no restrictive devices like quotas to prohibit imports. Trade should be conducted on a nondiscriminatory basis.

Prohibition of QR According to GATT, the only valid reason for tariff in world business is for the protection of an infant industry. Global trade increased tremendously and there was a decline in trade tariff as compared to 3%(95) from 40%(45) In 1950, China withdrew from GATT In 1974, agreement regarding international trade in textiles(MFA), comes into force. MFA restrict export growth in clothing and textiles to 6% per year. This renegotiated in 77, 82 , 86 , 91 and 92. Replaced by World Trade Organization in 1995

GATT

GATT

GATT achieve considerable trade liberalization, with few exceptions Liberalization suffered a setback since 1974
Substantial increase in non tariff barriers Oil crises Relatively less gain in exports of developing countries

World Trade Organization (WTO)

WTO came into force from 1995 Initially GATT and WTO coexisted, but GATT ceased to exist after a one year period. WTO proved to be more permanent and legally secure. It has more authority to settle trade disputes and will serve along with the IMF and WB to monitor trade and resolve disputes. It provides a single coordinated mechanism to ensure full, effective implementation of the trading system.

WTO ( Contd)

Provides forum for trade-related negotiations among member countries 1)based in Geneva 2)serves as dispute mediators 3)empowered with ability to enforce rulings Fixed time limits for each stage of the dispute settlement process Automatic adoption of dispute settlement reports Automatic authority to retaliate on request if recommendations are not implemented Creation of new bodies to review panel interruptions of WTO agreements Directed by Ministerial Conference will meet at least once every two years

Geneva Headquarters

WTO ( Contd)

Improved procedural transparency and access to information in the dispute settlement process Trade disputes are heard by a panel of experts selected by the WTO from a list of trade experts provided by member countries WTO ensures that member countries agree to the obligations of all the agreements not just those they like.

DIFFERENCE BETWEEN GATT AND WTO

GATT was ad hoc and provisional. GATT had contracting parties. GATT system allowed existing domestic legislation to continue even if it violated a GATT agreement. It was less powerful, its ruling could be easily blocked..

WTO & its agreements are permanent. WTO has members. WTO does not permit this.

It is more powerful then GATT, very difficult to block the rulings.

WTO ( Contd)

For the first time member countries including developing countries are undertaking obligations to open their markets and to be bound by a common rule. Countries found in violation of WTO rules are expected to change policies or else face sanctions The number of countries who want to join has increased, which highlights the popularity of WTO

World Trade Organization (WTO)

It has more authority to settle trade disputes and will serve along with the IMF and WB to monitor trade and resolve disputes. It provides a single coordinated mechanism to ensure full, effective implementation of the trading system.

FUNCTIONS OF WTO

To supervise on a regular basis the operations of the revised agreements and ministerial declarations relating to goods, services and TRIPs. To act as a dispute settlement body. To serve as a trade review mechanism. To establish goods council services council and TRIPs council, as subsidiary bodies.

NINE ROUNDS

For reduction in tariff and trade restrictions eight rounds of trade negotiations were held First round Havana in 1947, 23 members Second round France in 49 Third round Britain in 51 Fourth round Geneva in 56 Fifth round - Geneva in 62 Sixth round Kennedy round Geneva in 64-67 Seventh round Tokyo round in 73-79 Eighth round Uruguay round in 86-93 Ninth round Doha round in 2008 - 2011

The first six rounds of MTN (Multilateral Trade Negotiations) concentrated almost exclusively on reducing tariffs, while the seventh round moved on to tackle non-tariff barriers. The Uruguay sought to broaden the scope of MTNs far wider by including new areas like Trade in services Trade related aspects of intellectual property (TRIPS) Trade related investment measures (TRIMS)

Salient features of UR agreement

Liberalization of trade in manufactures
Trade barriers

Expansion of tariff bindings Reduction in tariff rates Expansion of duty free access

Non- tariff barriers

To abolish voluntary export restraints To phase out the MFA

Liberalisation of agriculture trade

Tariffication and tariff cuts Subsidies and domestic support policies Non- agricultural exports subsides

Salient features of UR agreement(cont)

GATS It extends the multilateral rules and discipline to services It imply supply of a service from the territory of one member country to any other member It covers
Cross border supply Commercial presence Consumption abroad Movement of personnel

Salient features of UR agreement(cont)

TRIMS No conditions or restrictions imposed in respect of foreign investment in the country Local content requirement Trade balancing requirement Trade and foreign exchange balancing requirements Domestic sales requirements

The WTO Doha Trade RoundUnlocking the Negotiations and Beyond The Doha Development Agenda (DDA) was launched in November 2001 in the wake of 9/11 with an explicit aim to conclude a broad deal to facilitate development through trade and thereby better integrate the more disadvantaged into the global economy. The breadth of issues covered by Doha, however, has made it difficult to assemble a package agreeable to all 153 WTO members. Since 2008, talks have stalled mainly over tariff reduction initiatives for specific industrial goods sectors. Advanced market countries (AMs) have insisted to unlock higher gains in actual market access for these sectors than implied by the planned broad-based cuts. But agreement has not been reached with key emerging market countries (EMs). Even if this issue were resolved, various other contentious divisions would have to be bridged to bring conclusion within reach.

Gainers from WTO

Banks will be allowed to compete freely in South Korea and other places where they are restricted. Insurance companies will be able to sell policies in India, one of the Worlds most tightly closed markets. Movies will have better protection from Thai film counterfeiters. Pharmaceuticals will have better protection from Argentine imitators. Computer software makers will have better protection from Brazilians who rip off copyrighted programs.

Losers from WTO

Glassware tariffs as high as 30 percent on inexpensive drinking glasses will be reduced, threatening some 40,000 jobs.

Textiles will gradually lose quotas and tariffs that protect 1.1 million U.S. workers - and add 50 percent to wholesale prices of clothing.(end 2004 MFA) Peanuts will lose quotas that limit imports to a handful and that protect 19,000 American farmers. Dairy imports of foreign cheese, now limited to 19,000 tons a year, will go up, hurting 240,000 U.S. farmers. Sugar import ceilings, now 25 percent of the nine million tons the United States uses each year, will go, threatening 11,000 sugar beet and cane growers.

The 10 benefits

1. The system helps promote peace 2. Disputes are handled constructively 3. Rules make life easier for all 4. Freer trade cuts the costs of living 5. It provides more choice of products and qualities 6. Trade raises incomes 7. Trade stimulates economic growth 8. The basic principles make life more efficient 9. Governments are shielded from lobbying 10. The system encourages good government

Why WTO leads to liberalization?

Free trading activities WTO helps the countries to open up its economy Liberalization of rules of FDI WTO supported all its member countries to achieve liberalization Encourages relaxations in laws for FDI Encourages opportunities for employment Encourages healthy competition through liberalization Encourages liberalization by making FOP in correct area

Structure of WTO

Principles

Most favored nation Freer trade: gradually, through negotiations Predictability: through binding & transparency Promoting fair competition Encouraging development & economic reforms

Whose WTO is it anyway?

Member driven Decision taken by consensus among the member government Meet atleast once in 2 years Generally takes decision which is accepted by all members consists of BOD

Authority level
o o o

o
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Highest level: Ministerial level conference Second level: General council in 3 guises The general council The dispute council The trade council Third level: Council for each broad area Goods council Service council Trips council Fourth level: down to the nitty-gritty Other bodies of WTO

Dispute settlement

Principles: equitable, fast, effective, mutually acceptable. Time duration(how long it will take) Way of dispute settlement Main stages of dispute settlement Appeals

Case Study-1
The Indian Shrimp Industry Organizes to Fight the Threat of Anti-Dumping Action

The case history

31 December 2003 the Ad Hoc Shrimp Trade Action Committee (ASTAC) filed an anti-dumping petition against six countries Brazil, China, Ecuador, India, Thailand and Vietnam. alleged that these countries had dumped their shrimps in the US market Products: warm water shrimp, whether frozen or canned, wild caught (ocean harvested) or farm-raised (produced by aqua-culture), head-on or head-off, shell-on or peeled, tail-on or tail-off, deveined or not deveined, cooked or raw, or otherwise processed in frozen or canned form.

The national and international context

26 February 2002, Reggie Dupree, a Louisiana state senator tainted farm-raised Asian shrimp was being diverted from Europe and dumped on the US market. Investigation into food safety and unfair pricing, as local fishermen voiced concern that imports had depressed the prices they got for the locally harvested shrimp September 2002- shrimp industry representativeseight southern states- fight the case against imported shrimp from certain countries

The national and international context-2

to fight unfair competition from imported farmraised shrimp from certain countries. cost more than US$3 million in terms of legal expenses to go for an anti-dumping petition. Vietnam-1st protest- never dumped its shrimpsold at market prices Thailand-2nd protest- condemned anti-dumping action against it Indian government- Indian shrimp industry- In 2003, the SSA- process of raising the required resources- trimmings against dumping countries

The Indian shrimp industry and its response

Indian shrimp imports- initiated during bilateral talks Indias shrimp exports to the United Statesprevious three years, from $255.93 million during 2000-1 to $299.05 million during 2002-3. Indias marine products industry-success- export base of just Rs. 450 million in 1971-2, it increased to Rs. 68,810 million in 2002-3. Shrimp was main of it Japan- biggest export market for Indias marine products- shrimp- imports in huge volumegradual decline in the intake from Japan

The Indian shrimp industry and its response-2

Marine Products Export Development Authority (MPEDA) enterprise of small and medium farmers-direct employment of about 300, 000 people and indirect employment to over 700, 000. Sea foods Exporters Association of India (SEAI)-nodal body of the exporters community

SEAI-July 2003-United Statesimposed anti-dumping duty ranging from 44% to 63% on catfish filletVietnam-for five years

WTO-related issues

Indias shrimp export- WTO ruled against the United States Trade lobbyists in the United States, such as the Consuming Industries Trade Action Coalition (CITAC), the Seafood Distributors Association and others which were against the imposition of antidumping duties on imported shrimp, have raised the issue of the Continued Dumping or Subsidy Offset Act 2000, popularly known as the Byrd Amendment.

Lessons learnt-1

Crisis caused by the anti-dumping petition of the Ad Hoc Group has been so far handled competently. MPEDA & SEAI-Several visits by the representatives of those two bodies to Washington-helped to bring an understanding of the nature of the problem and how to face it speedy resolution of the issue of financing-bear more than 50% of the total costs from its internal resources and the rest from the contribution of members

Lessons learnt-2

Unaddressed--dumping cases take a long time to be finally decided-trade is affected because importers are risk-avoiders anti-dumping case was initiated against Indian leather goods in South Africa two years ago shrimp industry in India had always focused on one or two major markets for growth-1st Japan then U.S. by diversification

Indian & WTO-1

Founder member of the General Agreement on Tariffs and Trade (GATT) 1947 Joined WTO on 1st January,2008 Earns faster prosperity among the members countries Considered as MFN 1st Ministerial Conference in Singapore in 1996 Agreements on Investment, Competition Policy, Transparency in Government Procurement and Trade Facilitation Concept of labour law was introduced Base was taken as Uruguay Round Agreements Linkage of trade-labour

Indian & WTO-2

2nd Ministerial Conference of WTO, held at Geneva in May 1998 Processing of 3rd Ministerial Conference at Seattle. Working for future base

Impact of WTO on Indian economy

Effects on Indian industry Import of Chinese goods SSI limits Double Standards Child labour Agreements on agriculture

India at Geneva conference

Speech by Kamalnath (minister of trade & commerce Tells about 3 crores people having less than 1 dollar a day, 7 crores people having less than 2 $ a day Negotiated commerce not livelihood security Commercial interest was totally differently

G-33, ACP, African countries, poor countries Developed countries have safe guard for their economy Special safe guard mechanism is contingency Ask why this happen Proposal is not good on safe guard mechanism Subsidized product Even develop countries have power to make safe guard mechanism He was not happy with decision taken in Geneva conference Benefits must be given to African & Ldcs

Indias achievement in world trade

Leading exporter of goods and services from 2000-2007 & still going on Ranked 26th in terms of merchandise trade share is 1% with annual change @ 20%, value is 145.3 US billion $ Ranked 9th in commercial services n 2007

Case study-2
Rock n Roll in Bangladesh: Protecting Intellectual Property Rights in Music

Problem in context

Problem of piracy done by Indian musician Anu Malik in film murder Song copied was Phiriye Dao Amar Prem (Give me back my love) Pirated song:' Jana Jane Jana Originally prepared by Bangladeshi rock band name MILES Violation by copying & reproducing without any permission & earning on it Violation of non payment of loyalty Violation of intellectual property rights

The players involved

Band decide to seek a legal suit for this violation Case filed in WTO under intellectual property rights Meeting with lawyers Commerce ministry of India took keen interest in this case Redress miles to drag violators to court After approaching to WTO, Band ask claim under TRIPS(Trade-Related Aspects of Intellectual Property Rights)

The players involved-2

Main idea was of TRIPS which contained: computer programs and databases; rental rights to computer programs, sound recordings and films; rights of performers and producers of phonograms; and rights of broadcasting organizations.

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Preparations for a legal suit

Sinha and Company, a Calcutta law firm, was contacted on behalf of Miles for filing suit against the violators of copyright Names against suit was filed against Producer Mahesh Bhatt and the Music Director Anu Malik of the film Murder, the singer of the song, Amir Jamal, the Recording Firm Saregama (India) Ltd and the Audio Company RPG Global Music (London). Compensation of 50 millions was demanded

The outcome and challenges

Judge: Hon. Justice S. K. Mukherjee Interim order date: 19th may 2004 Order the respondents to remove the song from the tracks of film

Victory of Miles

triumph of the rule-based international trade regime. intellectual property right (IPR) laws were applicable mainly within national boundaries

Benefits given by the Indian govt.

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The Indian Copyright Act empowered the government to benefit as follows: If India bilateral treaty with that country if India and the country concerned had been parties to a common international convention guaranteeing protection to IPR if the Indian government was satisfied that the country concerned had adopted measures to reciprocate similar protection to the works of Indian nationals

Lessons to others-1

the violators of copyright have also learned that they cannot get away scot-free after perpetrating such infringement of others copyright. expected to be more cautious in future this case upholds the fact that intellectual property rights, like other property rights, are inviolable. serve as a warning to would-be violators of intellectual property rights

Lessons to others-2

an encouragement to creative people all over the world by reassuring them that their creative works will not be pirated. the TRIPS Agreement one of the three major instruments that constitute the legal rights and obligations of the WTO.

Case study-5
Protecting the Geographical Indication for Darjeeling Tea

The problem in context-1

India is the worlds largest producer of tea a total production of 846 million kg in the year 2002 supplying about 31 per cent of the worlds favorite hot drink in India, Darjeeling tea offers distinctive characteristics of quality and flavor, and also a global reputation for more than a century two factors-geographical origin and processing industry in India lies in the private sector but controlled by ministry of commerce since 1933

The problem in context-2

Tea Act in 1953. Major exporting of Tea is to Japan, Russia, the United States, and the United Kingdom and other European Union (EU) countries such as France, Germany and the Netherlands. Efforts made by the Tea Board to ensure the supply of genuine Darjeeling tea dealers in Darjeeling tea to enter into a license agreement with the Tea Board of India on payment of an annual license fee.

Legal protection at domestic level

CTM Registration GI registration Status of registration of GI Advantages of GI protection at domestic level and export markets GI Act in India- under Agreement on TradeRelated Aspects of Intellectual Property Rights (TRIPS)

Steps taken at international level

Registration of Darjeeling tea and logo The appointment of the International Watch Agency The assistance of overseas buyers

Local and external players and their roles

Darjeeling Planters Association (DPA) Involved at various levels in protecting and defending the Darjeeling tea and Darjeeling logo With their objectives Legal measures by central govt.

Challenges faced and the outcome

Unauthorized use and registration of Darjeeling Tea and logo in Japan Other instances of defending GI against developed countries Costs of protection and enforcement for the industry and the government

Lessons to others

Unsatisfied tea board of India Issues created by Japan & France Other members of WTO supported India for registration of GI products also includes wines, spirit, etc Tea board got unsuccessful in this case against big powerful countries

Conclusion

WTOs work is to diversify the trade in various regions for the world But it has been misused by many developed economy like US, UK so that main idea behind establishing this organization has somewhat lost

Bibliography

http://www.wto.org http://www.wikipedia.com http://www.trade to world.com http://www.youtube.com Business environment India today