International Economic Integration• Economic integration is a new reality

in the international business market.

• Business and governments have created a range of institutions, treaties, and agreements that help to– Overcome trade differences– Boost the free movement of trade,

investment, and services across national boundaries

Development of the World Trading System• Intellectual arguments for free trade:

– Adam Smith and David Ricardo.

• Free trade as government policy: – Britain’s (1846) repeal of the Corn

Laws.

• Britain continued free trade policy.– Fear of trade war.

World War I to World War II1918 - 1939

• Great Depression – US stock market collapse– Smoot-Hawley Act (1930)

• US had positive trade balance with world

• Act imposes tariffs to protect U.S. firms.

• Foreign response was to impose own barriers

• US exports tumbled

The General Agreement on Tariffs and Trade remained in existence for a period of 46 years it came into force on 1 Jan 1948, as a result of Bretton Woods Conference 1944. GATT started as a agreement for trade concessions among 23 nations, including India. Its membership increased to 117 countries as on 31st Dec 1994 - the day it ceased to exist. GATT was a multilateral treaty which provided a forum to discuss trade problems faced by member countries known as contacting parties.

GATT

Ever since the beginning of 1980, the economy has been passing through a new phase of transition. The essential feature of this transition has been the opening up of their economies by developed and developing countries. Over the past 50 years ever since formation of GATT in 1948, trade has been powerful engine for growth. The policy of trade liberalization was underlined by multi-lateral trading system governed by GATT till 31st Dec 1994 and now by WTO since 1st Jan 1995.

S.No

Round

Place Year Features

1. First Geneva (Switzerland

)

1947 Tariff cuts for 45000 products worth $10 billion of trade on an annual basis .

2. Second

Annecy (France)

1949 Custom duty were reduced for another 5000 items of goods.

3. Third Torquay (Britain)

1950-51

Adopted 8700 tariff reduction.

4. Fourth

Geneva(Switzerland

)

1955-56

To further cut duties for goods worth $2.5 billion.

5. Fifth Geneva(Switzerland

)

1960-62

It was known as Dillon Round. Custom duties charged for 4000 items worth $5

billion.6. Sixth Geneva

(Switzerland)

1964-67

It was known as Kennedy Round. Cut tariffs for industrial goods upto 50.

7. Seventh

Tokyo (Japan)

1973-79

Ended at Geneva. Participants cut custom duties by 20-30 for goods

traded.8. Eight Uruguay

 1986-

93This was known as Uruguay Round. Lead

to the formation of WTO.

.

The World Trade Organization (WTO) Multilateral negotiations under GATT

9.0 8.5 8.0 7.5 7.0 6.5 6.0 5.5 5.0 4.5 4.0

World TradeWorld Income

1953-63 1963-73

Annual Growth Under GATT%

DIFFERENCE BETWEEN GATT AND WTO

WTO is more global in its membership than GATT.

GATT was adhoc and provisional, WTO and its agreements are permanent.

WTO has members , GATT had contracting parties.

GATT dealt in trade in goods, WTO also includes services and intellectual property

WTO dispute settlement system is faster, than the old GATT system based on consensus of all members.

Principles Of The Trading System

Without Discrimination – (MFN and National treatment to all)

Freer – With barriers coming down through negotiation;

Predictable – Bound tariffs

More Competitive – By discouraging “unfair” practices such as export subsidies and dumping products at below cost to gain market share;

More Beneficial for Less Developed Countries – By giving them more time to adjust, greater flexibility, and special privileges.

Voting Principles in WTO

Voting

Principle One member, one vote

Primary aim Consensus

No consensus Majority vote

Interpretation of agreements

¾ in favor

Amendment to agreements

2/3 in favor

Propose amendments Countries and Councils

FORMAL STRUCTURE

Highest Level: Ministerial ConferenceSecond level: General Council Third level: Councils for TradeFourth level: Subsidiary Bodies

Functions of W.T.O.

• Institutional Characteristic

• Ministerial Conference

• Taking Decisions

• Settling Dispute

Principles of Trading

• Non-discrimination

• MFN

• National Treatment

• Free Trade

• Predictable and transparent

Textiles

• Fighting a good fight

• End of Multi Fibre Arrangements

( M.F.A.)

• Back in main stream

Agriculture

• Improving Market access

• Reducing domestic support in the form of trade-distorting subsidies

Trade Remedies

• Anti-dumping actions

• Subsidies and countervailing measures

• Safegaurding precedure

Technical Barriers to Trade

• Standard and Technical regulation

• Right to adopt standards

• Sanitary and Phytosanitary Measures

Sanitary and Phyto-Sanitary (SPS) Agreement Under the SPS agreement, the WTO sets

constraints on member-states policies relating to food safety (bacterial contaminants, pesticides, inspection and labelling) as well as animal and plant health (imported pests and diseases).

SPS agreement was negotiated during the Uruguay Round of the General Agreement on Tariffs and Trade, and entered into force with the establishment of the WTO at the beginning of 1995.

TRIP’s

• Patent

• Copyright & Trademark

• Industrial Design

• Geographical indication

• Trade Secrets

TRIM’s

• Local content Requirements

• Trade-balancing requirement

• Foreign exchange balancing requirements

• Exchange restrictions

• Export performance requirements

WTO provisions explicitly prohibits the following Trade restrictive and Trade distortive measure:

Other Committees

Trade and Environment Trade and Development

(Subcommittee on Least-Developed Countries)

Regional Trade Agreements Balance of Payments Restrictions Budget, Finance and Administration Working parties on Accession

Sixth Ministerial Conference

• The sixth WTO Conference Ministerial was held in Hong Kong from December 13 - December 18, 2005.

ISSUES

• The main issues discussed included reduction of domestic support and elimination of export subsidies by developed countries, development package for Least Developed Countries (LCDs).

CONTD….

In this meeting, countries agreed to phase out all their agricultural export subsidies by the end of 2013, and terminate any cotton export subsidies by the end of 2006.

concessions to developing countries included an agreement to introduce duty free, tariff free access for goods from the Least Developed Countries

OUTCOME

• Resolved to complete the Doha Work Programme fully and conclude negotiations in 2006

• Amendment to WTO TRIPS Agreement reaffirmed to address public health concerns of developing countries

• Establish modalities in agriculture and non-agriculture market access (NAMA).

WTO experience for developing countries

Tariff Peaks (high import duties on certain products) remain

No gains yet from the supposed phasing-out of textiles quotas.

Increase in non-tariff barriers (AD, SPS, TBT)

Continued high protection in Agriculture (USA- Sugar 244%, Peanuts 174%; Japan- Wheat 353%) up to 36% reduction?

Implementation Problems faced by developing countries

q