the world trading system: trade liberalization between the multilateral system and the regional...
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The World Trading System:The World Trading System:Trade Liberalization between the Trade Liberalization between the
Multilateral System and the Regional Multilateral System and the Regional Trade AgreementsTrade Agreements
(prepared for CDS. 05, Jaipur 16-19 July, 2008)(prepared for CDS. 05, Jaipur 16-19 July, 2008)
Ahmed F. GhoneimCairo University
Email address: [email protected]
What is meant by Trade What is meant by Trade Liberalization? Liberalization?
Trade liberalization is not any more confined only to reduction of tariffs, but has now been extended to dealing with domestic rules and regulations, standards, services, intellectual property rights, labor and environmental issues.
The World Trading System:The World Trading System:
1) World Trade Organization (GATT, GATS, TRIPS)
2) Regional Trade Agreements
3) Other systems
World Trade Organization World Trade Organization
Bretton Wood’s Institutions in 1947: (World Bank, International Monetary Fund, and International Trade Organization)
US Failed to ratify the Havana Charter to create ITO
Protocol of Provisional Application of GATT instead of ITO
Eight Successful Rounds of Multilateral Negotiations for Trade Liberalization under GATT
Original 23 Contracting Parties included 11 Developing Countries (DCs)
Many DCs did not join No effective participation of DCs until the
Tokyo Round, 1974-1979 Import substitution the dominant dogma
The Uruguay Round – 1986-The Uruguay Round – 1986-19941994
Torturous Negotiations Over 7 Years Single Undertaking Establishment of the WTO Agreement on Agriculture and GATS TRIMS and TRIPS Dispute Settlement System
GATT aims at liberalization of trade through reduction of tariffs and elimination of non-tariff barriers. Its two main principles are Most Favored Nation (MFN) and National Treatment.
WTO is based on the same rules of GATT but is extended as well to services and intellectual property rights.
There are 153 members of the WTO.
What is the World What is the World Trade Organization (WTO)?Trade Organization (WTO)?
Institutional framework for – Negotiation of global trade agreements– Implementing global trade agreements– Settling disputes under the global trade
agreements– Reviewing trade policies– Admitting new members
Who Governs the WTO?Who Governs the WTO?
The Member Countries (one country one vote rule). There are 152 member countries
Decision is based on consensus Contrast to World Bank and IMF
(controlling their boards by U.S. and EU)
Ministerial ConferenceMinisterial Conference
General CouncilGeneral Council
Council for Trade in Services
Council for TRIPS
Council for Trade
in Goods
DSBTrade Policy Review Mechanism
Legal Components of WTOLegal Components of WTO
GATT (Agreement on Trade in Goods), now called WTO agreements
GATS (Agreement on Trade in Services) TRIPS (Intellectual Property Agreement) WTO Institutional Arrangement (Dispute
Settlement Mechanism and Trade Policy Review)
Plurilateral Agreements
Fundamental WTO PrinciplesFundamental WTO Principles Transparency
MFN
National treatment
Due process
Reciprocity – balance of concessions – balance of rights and obligations
Least trade distorting standard
Basic GATT FrameworkBasic GATT Framework
Barriers should be at the border
Barriers should be in the form of tariffs
No internal barriers in domestic laws
No discrimination among members
Legal binding of maximum tariffs in national schedules
Certain enumerated exceptions permitted
GATSGATS Trade defined in different modes of supply including 1)
cross-border movement, 2) consumption abroad, 3) commercial presence, 4) temporary movement of natural persons GATS contains
Rules– Rules that apply to all services - transparency of laws, regulations,
decisions, and MFN– Rules covering sectors in which products are listed in national
schedules schedules– Rules covering products listed in schedules
National commitments on– National treatment – Market access (government regulations that limit decisions by
producers and suppliers of services.)
Intellectual Property - TRIPSIntellectual Property - TRIPS● General Provisions & Principles
● Standards of Protection– copyrights, patents– trade marks, trade secrets, industrial design– marks of geographic origin
● Enforcement
Dispute Settlement ProcessDispute Settlement Process
● Country must first seek to resolve dispute through bilateral consultations
● For unresolved disputes, DSB establishes panel, terms of reference
● Meetings with parties, third parties, experts
● DSB adopts Panel Report
● Request for review by Appellate Body
● Compliance, compensation or retaliation
How Are Negotiations How Are Negotiations Organized in the WTO?Organized in the WTO?
● National commitments on trade measures– Request & offer procedures– Use of formulas, agreed targets, objectives
● Agreements on trade rules– Issue studied by Study and/or Working Group– Creation of negotiation committee
It is the ministers who decide to launch a new round in their ministerial meetings
Current Status of Doha RoundCurrent Status of Doha Round
● Negotiations are at an impasse, largely as a result of a disagreement over agriculture
● Disputes over agriculture have hampered negotiations over tariffs and services
● There is also a major disagreement over what makes the Doha Round a Development Round
● U.S. needs an extension of congressional authority to negotiate
● Delays in the conclusion of multilateral trade rounds are quite common, and do not signify end of WTO
Scheme Free intra-
scheme trade
Common Commercial Policy
Free Factor
Mobility
Common monetary & fiscal policy
One government
Free Trade Areas
Yes No No No No
Customs Union
Yes Yes No No No
Common Market
Yes Yes Yes No No
Economic Union
Yes Yes Yes Yes No
Reasons for Increased Number of Reasons for Increased Number of RTAs:RTAs:
US Policy towards signing more RTAs
Slowness in WTO negotiations
Domino effect.
385 RTAs have been notified to the GATT/WTO
up to July 2007. This number has increased four times since the beginning of the 1990s.
India has a number of RTAs including Sri Lanka, Thailand, Bhutan, Singapore, ASEAN, SAFTA, talks on FTA with EU, China, Brazil, South Africa, etc.
RTAs in the context of World Trade Organization (WTO)RTAs in the context of World Trade Organization (WTO)
• There are two types of RTAs: Shallow and Deep RTAs
- The shallow RTAs deal with border issues only and are more confined to manufactured products (proliferated in the 1960s)
- The deep RTAs deal with border and non border issues and cover manufactured goods, services as well as rules and regulations (started to proliferate mid 1980s)
• With the stumbling of World Trade Organization talks, there is a great diversion to RTAs, whether this is good or bad for the welfare of the world economy is debatable
Potential Effects of Regional Trade Agreements on Developing CountriesPotential Effects of Regional Trade Agreements on Developing Countries
ProsPros Promotion of Foreign Direct Investment Security of Market Access Exploitation of Economies of Scale Trade Creation
ConsCons
Tariff revenue lossTrade DiversionReduces Preferential treatment for other countries’ exports
Potential effects of Regional Trade Agreements on Developing Potential effects of Regional Trade Agreements on Developing CountriesCountries
Other Effects (can be +ve or -ve)
Harmonization issues. Political economy aspects. Articles concerning Labor Laws (child labor)
especially in sectors as cotton and related industries.
Articles concerning government procurement. Articles concerning Environment and related
strict clauses.
Examples of RTAs in the Examples of RTAs in the WorldWorld
•North America Free Trade Area North America Free Trade Area (NAFTA):(NAFTA): The largest FTA in the world
•European Union:European Union: The largest customs union in the world
Conditions for effective Conditions for effective liberalizationliberalization
Domestic institutions need to be ready before any embarking on liberalization (including intelligent negotiations and effective commercial diplomacy)
Ways to overcome costs of liberalization should be put in place.