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International Trade System
Table of Content
Slide
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References
1
Trade policy development
2
WTO as a cornerstone of modern ITS
3
Trade in Goods
4
Trade in Agriculture
5
Trade in Services
6
Intellectual property rights and trade
7
Trade and investments
8
Regional trade agreements (RTAs)
9
Trade and competition policy
10
Trade and environment
2
References
www.worldec.ru
•
•
•
•
•
•
Agriculture, Trade, and the WTO in South Asia. Ed. by Merlinda
D. Ingco, Washington, The World Bank, 2003.
Hoekman, Bernard; Aaditya Mattoo, and Philip English, eds.,
Development, Trade, and the WTO: A Handbook (Washington:
World Bank, 2002),
Kjeldsen-Kragh Sǿren (2001). International Trade policy.
Copenhagen.
The Results of the Uruguay Round of Multilateral Trade
Negotiations. The Legal Texts. World Trade Organisation.
Trebilcock Michael J. and Robert Howse. The Regulation of
International Trade. London and New York. 1999.
Economic development and multilateral trade cooperation /
edited by Simon J. Evenett and Bernard M. Hoekman.
Washington, DC : World Bank, cop. 2006
3
References: Internet resources
www.worldec.ru
Official site of World Trade Organisation www.wto.org
US — www.ustr.gov
Canada — www.dfait-maeci.gc.ca/tna-nac/menu-e.asp
EU — http://europa.eu.int/pol/comm/index_en.htm
Japan — www.meti.go.jp/english/index.html
Russia – www.wto.ru
4
www.worldec.ru
1. Trade policy development
1.1. Understanding of trade policy
1.2. Institutes of the international trade
system
5
www.worldec.ru
1.1. UNDERSTANDING OF TRADE POLICY
6
1.1. Understanding of trade policy
www.worldec.ru


Question:
What are the key players of international
trade and investments?
7
1.1. Understanding of trade policy
www.worldec.ru



Question:
Do you like
shopping?
Who do you do your
shopping?
8
1.1. Understanding of trade policy
www.worldec.ru


Answer:
You do your
shopping in order to
make decisions to
discriminate
9
1.1. Understanding of trade policy
www.worldec.ru
Questions of access, protection and
discrimination


Discrimination is the basis of choice, that
is, choosing one thing over another thing
for whatever reason.
Most trade policy involves decisions to
discriminate: to discriminate between
goods or groups domestically or between
services suppliers from different countries.
10
1.1. Understanding of trade policy
www.worldec.ru

Trade policy involves






values,
preferences,
priorities, and
an institutional setting and social context
that can vary from country to country.
Social context, in particular, can have an
important bearing on how national values,
preferences and priorities are pursued.
11
1.1. Understanding of trade policy
www.worldec.ru



Commercial Interests - Trade policy is
designed to meet a country's commercial
interests.
Question: what are country’s commercial
interest? Who decides?
Social Interests - An increasing reality
for trade officials is the need to respond to
broader societal interests.
12
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Japan 1978
Japan 2004
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Germany 1978
Germany 2004
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USA 1978
USA 2004
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Russia (USSR) 1978
Russia 2004
1.1. Understanding of trade policy
www.worldec.ru


Legal Norms and Ideas are critical to
putting trade policy into practice.
They involve the implementation of rules
and the practice of diplomacy.
17
1.1. Understanding of trade policy
www.worldec.ru

Trade policy



applies to the international movement of
goods, services, capital, technology and
people.
provides the framework for the conduct of
trade promotion and trade relations.
The practice of trade policy involves a
combination of analysis, consultation,
negotiation, implementation, and
diplomacy.
18
1.1. Understanding of trade policy
www.worldec.ru

Question:

What are the goals of consultation
process?
19
1.1. Understanding of trade policy
www.worldec.ru
stability and predictability in government policy
and trade and investment circumstances
20
1.1. Understanding of trade policy
www.worldec.ru

Institutional context


Government policy professionals operate
within an institutional setting that
influences,
constrains, and conditions how they
address and resolve issues that cross their
desk
21
1.1. Understanding of trade policy
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
Assignment:

compare political and institutional settings
within operate the governments of




United States,
Canada,
Germany, and
China
22
1.1. Understanding of trade policy
www.worldec.ru

The role of international organizations


International and national institutions
provide permanence and stability in
addressing differences and in pursuing
competing priorities.
Positions and approaches adopted by most
governments reflect not only their interests,
objectives, and preferences, but also the
political/institutional setting within which
governments operate
23
1.1. Understanding of trade policy
www.worldec.ru

Question:

1.
2.
3.
Why countries enter international trade
agreements/join international organizations?
to tell other countries what to do
because they have week governments and
cannot deal with many issues themselves
to promote economic growth and
development
24
1.1. Understanding of trade policy
www.worldec.ru

The role of international organizations


Different countries have different objectives —
e.g., Canada/US/Japan/EU/developing
countries/Caribbean countries/transitional
economies — all have various objectives,
approaches, and preferences that may require
negotiations to resolve.
The result is compromise between ideals and
reality and the imperfection that is part of
reality.
25
1.1. Understanding of trade policy
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The Role of International Organizations
 When countries enter into trade
agreements they agree to such broadlybased objectives as increased economic
welfare, and promotion of international
cooperation.
 However, countries also enter trade
agreements for a variety of specific,
subjective reasons that reflect a country's
particular political and economic profile.
26
Readings
www.worldec.ru
China
http://export.gov/china/country_information/tradepolicyandagreements.asp
European Union
http://www.eurunion.org/policyareas/trade.htm
Tothova, M. (2009), “The Trade and Trade Policy Implications of Different
Policy Responses to Societal Concerns”, OECD Food, Agriculture and
Fisheries Working Papers, No. 20, OECD Publishing.
Greene M., Dihel N., Kowalski P, and Lippoldt D. (2006)
CHINA'S TRADE AND GROWTH: IMPACT ON SELECTED OECD
COUNTRIES. OECD Trade Policy Working Paper No. 44
27
Questions and exercises
www.worldec.ru
Exercise
Describe where and how trade policy in
(country) is developed.
28
Questions and exercises
www.worldec.ru
Questions
1. Give examples of government
regulations that can affect trade.
2. Why is public ownership a trade issue?
3. Give examples of sectoral policies of
your government. How might they affect
international trade and investment?
29
www.worldec.ru
1.2. INSTITUTES OF INTERNATIONAL
TRADE SYSTEM
30
1.2. Institutes of international trade system
www.worldec.ru

Question:

What are the institutions of international
trade system?
31
1.2. Institutes of international trade system
www.worldec.ru


Institutions provide permanence and stability in a
changing world, as well as a forum for states to
discuss their concerns. Some of the ideas and
practices that support modern organizations for
international cooperation originated with the League
of Nations (which would later emerge as the United
Nations).
There are now some 300 intergovernmental
organizations devoted to economic issues alone.
32
1.2. Institutes of international trade system
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
At the core are the Bretton Woods
agreements laid the groundwork for the
establishment of:



World Bank
International Monetary Fund (IMF),
International Trade Organization (ITO).
33
1.2. Institutes of international trade system
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The United Nations has also created a number
of specialized and technically oriented
institutions to deal with a range of economic
issues:





Labour - International Labour Organization - ILO
Food - Food and Agriculture Organization -FAO
Aviation - International Civil Aviation Organization
- ICAO
Customs - World Customs Organization - WCO
Intellectual Property - World Intellectual Property
Organization - WIPO
34
1.2. Institutes of international trade system
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





The Quad
Some of the most difficult negotiations have
needed an initial breakthrough in talks among
the four largest members:
Canada
European Union
Japan
United States
35
1.2. Institutes of international trade system
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







European Communities
Association of South East Asian Nations
(ASEAN)
MERCOSUR, the Southern Common Market
North American Free Trade Agreement: NAFTA
African Group,
Least-developed countries,
African, Caribbean and Pacific Group (ACP)
Latin American Economic System (SELA).
36
1.2. Institutes of international trade system
www.worldec.ru



The multilateral trade regime is complemented by
dozens of regional and bilateral agreements and
arrangements. Two regional agreements and
arrangements are particularly important: the
European Union (EU) and the North American Free
Trade Agreement (NAFTA), in providing a basis for
assessing alternative approaches to integration and
liberalization.
Both of these agreements illustrate various
characteristics of regionalism. A wide range of other
regional arrangements are currently extant. The WTO
catalogs over 200 such arrangements
37
1.2. Institutes of international trade system
www.worldec.ru


Regionalism provides both positive and negative
dimension in the further evolution of the global trade
regime.
Trade policy practitioners need to be aware of the
dense network of specialized bilateral agreements
addressing, e.g., investment, export credits, and
double taxation.
38
1.2. Institutes of international trade system
www.worldec.ru









national governments and their related agencies,
private sector organizations (national and
international),
industry associations,
non-governmental organizations (NGOs),
labour unions,
universities and think tanks,
media organizations,
technical regulators and inspectors,
consumers, and many others
39
Exercise
www.worldec.ru


Discuss societal concerns with respect to
agricultural production. How could trade
policy deal with these concerns?
Discuss societal concerns of the
development of Chinese economy. How
does Chinese trade policy respond to
these concerns?
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2. The WTO as a cornerstone of the
modern ITS
2.1. The organization
2.2. Accession rules in the WTO
system
2.5. Dispute Settlement in the WTO
41
2.1. The organization
www.worldec.ru

The WTO




WTO vs GATT
WTO: The institution
Developing countries and the
WTO
WTO: The first years
42
2.1. The organization
www.worldec.ru

The World Trade Organization

International organization embodied in the
results of the Uruguay Round

Established: 1 January 1995

Membership – 153 countries (23.07.08)

The Secretariat: around 630 staff, headed by a
Director-General, based in Geneva

Budget is over 160 million Swiss francs
43
Observer governments
www.worldec.ru
Afghanistan
Equatorial Guinea
Libya
Algeria
Holy See (Vatican)
Samoa
Andorra
Iran
Sao Tomé and Principe
Azerbaijan
Iraq
Serbia
Bahamas
Kazakhstan
Seychelles
Belarus
Lao People's Democratic
Republic
Sudan
Bhutan
Lebanese Republic
Tajikistan
Bosnia and Herzegovina
Liberia, Republic of
Uzbekistan
Comoros
Montenegro
Vanuatu
Ethiopia
Russian Federation
44
2.1. The organization
www.worldec.ru
WTO: Objectives

To raise standards of living

To ensure full employment

Growing volume of real income and effective
demand

Expanding the production of and trade in goods
& services

Sustainable development and environmental
protection

Developing countries
45
2.1. The organization
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WTO: Main functions

Implementation, administration and operation
of the covered agreements

Forum for negotiations

Dispute settlement

Review of national trade policies

Coherence in global economic policy-making
46
2.1. The organization
www.worldec.ru



Cornerstone of the multilateral trading system

Trade in goods

Trade in services

Protection of intellectual property rights
The WTO contract

Rights and obligations

Dispute settlement
Successor to GATT
47
1.3.1. Understanding the WTO
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48
2.1. The organization
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WTO: Structure
 Ministerial Conference
 General Council
 Dispute Settlement Body
 Trade Policy Review Body
 Councils
 Council for Trade in Goods
 Council for Trade in Services
 Council for TRIPs
 Committees and other subsidiary bodies
 Decision-making
49
2.1. The organization
www.worldec.ru

Self-study: what are the main functions
of:



Ministerial conference
General Council
General Director of the WTO
50
2.1. The organization
www.worldec.ru

Decision-making procedures (1)



As a rule, decisions are reached by consensus
unless otherwise provided and necessary
one member, one vote
Most decisions can be decided by simple
majority.
51
2.1. The organization
www.worldec.ru

Decision-making procedures (2)


Matters of interpreting obligations require
three-quarter majority, by Ministerial
Conference and General Council only, but
based on advice of relevant council.
Waivers from obligations can be granted for a
year on a specific issue, but require
consensus or notice and three-quarters
majority.
52
2.1. The organization
www.worldec.ru

Decision-making procedures (3)



Budgetary decisions – a two-thirds majority.
General Council acting as DS Body operates
by consensus.
Decisions on accession require two-thirds
majority of Ministerial Conference, or
General Council acting on its behalf.
53
2.1. The organization
www.worldec.ru
Relations with other international
organizations

International Trade Centre
UNCTAD/WTO (ITC)

Cooperation with the Bretton Woods
Institutions

UNCTAD
54
www.worldec.ru
2.2. Accession rules
in the WTO system
2.2. Accession rules in the WTO system
www.worldec.ru

The accession process
1.
2.
3.
4.
“Tell us about yourself”.
“Work out with us individually what you
have to offer”.
“Let’s draft membership terms”.
“The decision”.
56
2.2. Accession rules in the WTO system
www.worldec.ru
Issues to be discussed
1.
2.
3.
4.
5.
6.
7.
The political economy of WTO accession
Benefits of WTO membership for new members
The GATT System’s accession process
Accession rules in the WTO system
Determinants of the length of the accession
process
Outstanding accession cases
Conclusions
57
2.2. Accession rules in the WTO system
www.worldec.ru
Acceding Governments:
 Africa - Algeria, Comoros, Equatorial Guinea, Ethiopia,
Liberia, Libya, STP, Seychelles, Sudan
 Asia/Pacific - Afghanistan, Bhutan, Laos, Samoa, Vanuatu
 Caribbean - Bahamas
 CEECAC - Afghanistan, Azerbaijan, Belarus, BosniaHerzegovina, Kazakhstan, Montenegro, Russian Federation,
Serbia, Tajikistan, Uzbekistan
 Europe - Andorra
 MENA - Algeria, Iran, Iraq, Lebanon, Libya, Sudan, Yemen
 LDCs - Afghanistan, Bhutan, Comoros, Laos, Liberia,
Equatorial Guinea, Ethiopia, Sao Tomé and Principe, Samoa,
Sudan, Vanuatu, Yemen
2.2. Accession rules in the WTO system
www.worldec.ru
Recently Acceded Members (RAMs)
 1995-1997: Ecuador, Bulgaria, Mongolia,
Panama
 1998-2001: Kyrgyz Republic, Latvia, Estonia,
Jordan, Georgia, Albania, Oman, Croatia,
Lithuania, Moldova
 Doha (2001)-2003: China, Chinese Taipei,
Armenia, FYROM
 Cancun (2003)-2004: Nepal, Cambodia
 2005 - 2008 : Saudi Arabia, Viet Nam, Tonga,
Ukraine, Cape Verde
2.2. Accession rules in the WTO system
www.worldec.ru
The political economy of WTO accession
1.
2.
3.
4.
5.
Value of new membership
Accession terms
Length of negotiations
Economic benefits
Value for the WTO members
60
2.2. Accession rules in the WTO system
www.worldec.ru
Benefits of WTO membership for new members
1. Rules-based organizational network
2. Multilateral bargaining network
3. Dispute resolution mechanism
4. Integration of national economies into global
markets
5. Development of legal and regulatory systems
61
2.2. Accession rules in the WTO system
www.worldec.ru
The GATT System’s accession process







Easier
More open
Limited agreement
Modest scope
Admission procedures: Article 33 and Article 26
Varying terms of accession
Various levels of participation
62
ARTICLE XII
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AGREEMENT ESTABLISHING THE
WORLD TRADE ORGANIZATION
.....
Article XII
Accession
1.
Any State or separate customs territory possessing full autonomy in the conduct of its external commercial
relations and of the other matters provided for in this Agreement and the Multilateral Trade Agreements may accede to
this Agreement, on terms to be agreed between it and the WTO. Such accession shall apply to this Agreement and the
Multilateral Trade Agreements annexed thereto.
2.
Decisions on accession shall be taken by the Ministerial Conference. The Ministerial Conference shall approve the
agreement on the terms of accession by a two-thirds majority of the Members of the WTO.
3.
Accession to a Plurilateral Trade Agreement shall be governed by the provisions of that Agreement.


Any State or separate customs territory
On “terms to be agreed”...
2.2. Accession rules in the WTO system
www.worldec.ru
1.
2.
3.
4.
Building a large network for trade-offs: single
undertaking
More formal accession process
Decisions driven by the members
Doha declaration:


attach great importance of to concluding accession
as quickly as possible
facilitation and accelerating accession for LDCs
(art. 9, art. 46)
64
2.2. Accession rules in the WTO system
www.worldec.ru
Determinants of the length of the accession process
1. More than 100 month
2. “Price of admission”



3.
4.
lengthy,
complicated,
costly
Imbalance in concessions
WTO-plus terms of accession
65
2.2. Accession rules in the WTO system
www.worldec.ru
Determinants of the length of the accession process (cont)
1. GDP (GDP per capita)
2. Real exports, especially to key WTO members
3. Real imports
4.
5.
6.
7.
8.
Bargaining experience of the incumbent WTO members
Governmental effectiveness
Political stability
Lobbies: who is interested
Pre- vs Post-Marrakesh application
66
Accession rules in the WTO system
www.worldec.ru
A few numbers
 25 governments have acceded since 1995
 29 are in the process of accession
 1 request for accession pending approval from
the General Council
Outstanding accession cases
www.worldec.ru
No accession
related docs
Application
(year)
Accessio
n
(year)
Accession
process
(no of years)
Albania
27
1992
2000
8
Armenia
12
1993
2003
10
Croatia
19
1993
2000
7
Georgia
9
1996
2000
4
Kyrgyz Republic
19
1996
1998
2
Macedonia
12
1994
2003
9
Moldova
21
1993
2003
10
Ukraine
15
1993
2008
15
Outstanding accession cases
Belarus
Kazakstan
Montenegro
Russia
Serbia
Tajikistan
Uzbekistan
Application
1997
1993
1999
1996
2004
1993
2004
2001
1994
Working party
1997
1993
1999
1996
2005
1993
2005
2001
1994
Memorandum
1999
1996
2002
1996
2005
19941997
2005
2003
1998
Q&A
2000
1997
2003
1997
2005
1995
2005
2003
19992001
Period
20022008
19972005
20032009
19972008
20052008
19952006
20052008
20042006
20022005
No
7
6
6
9
7
30
6
3
3
Issue
d
20052008
20042006
20032009
19972008
20062009
20052008
20062008
20042008
20042006
No
7
6
8
10
10
7
7
7
7
WP
Rec.
docu
ments
Bosnia and
Herzegovi
Azerbaijan
www.worldec.ru
Outstanding accession cases
Belarus
Kazakstan
Montenegro
Russia
Serbia
Tajikistan
Uzbekistan
Application
1997
1993
1999
1996
2004
1993
2004
2001
1994
Market access
negotiations
20052008
19982006
20042007
19972004
2008
19972001
20062008
20042009
2005
Summary
/
20042007
2007
19972004
2007
/
2007
20052006
/
Draft WP
Report
2008
/
2009
20052008
20082009
2002
2004
20072008
/
/
No of non
restricted
documents
18
56
6
176
/
190
/
6
39
Duration of
procedure so
far
12
16
10
13
5
16
5
8
15
Bosnia and
Herzegovi
Azerbaijan
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Working Party (years)
Accession rules in the WTO system
www.worldec.ru
Length of accesion process
16
14
12
10
8
6
4
2
0
Average: 8 years, 6 months
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Time since submission of
Memorandum (years)
Accession rules in the WTO system
www.worldec.ru
Length of accession negotiations
16
14
12
10
8
6
4
2
0
Average: 6 years, 4 months
Tariff commitments of RAMs: nonagricultural products
www.worldec.ru
(average tariff bindings)
25
23,6
23,7
22,9
21,1
20
17,7
17,3
17,3
15,3
15
11,6
9,4
10
8,4
6,7
5
10,5
10,3
9,1
7,3
6,5 6,6
5,5
7,5
6
6,2
4,8
5
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Jor ia
da
Ge n
org
Al ia
ban
Cr i a
oat
ia
Om
Lit an
hu
Mo ania
ldo
va
Ch
Ch
i
n. na
Ta
i
Ar pei
me
FY nia
R
Ca O M
mb
od
ia
Ne
S. pal
Ar
Vi abia
et
Na
m
To
n
Uk ga
Ca rain
pe
Ve e
rde
PER CENT
15,2
Recently Aceeded Members
(by date of membership, 1995-2008)
Tariff commitments of RAMs: agricultural
products
www.worldec.ru
(Average tariff bindings)
45
41,4
40
35,5
34,6
28,1
30
27,7
25,5
23,7
25
20
28
19,2
18,5
18,9
17,5
15,8
15,314,7
12,2
11,3
19,3
15,2
15
10
12,3
11,7
9,4 9,4
12,4
10,7
5
Ec
ua
Mo dor
ng
o
Bu lia
lga
Pa r ia
Ky nam
rgy
a
zR
ep
La .
tv
Es i a
ton
Jor ia
d
Ge an
org
Al ia
ban
Cr i a
oat
ia
Om
Lit an
hu
Mo ania
l do
va
C
Ch hin
a
n.
Ta
i
Ar pei
m
FY enia
R
Ca O M
mb
od
ia
Ne
S. pal
Ar
Vi abia
et
Na
m
To
n
Uk ga
Ca rain
pe
Ve e
rde
PER CENT
35
Recently Acceded Members
(by date of membership, 1995-2008)
Ec
uad
or
Bu
lga
Mo ria
ngo
l
Pan ia
a
Ky
rgy ma
zR
ep.
La
tvi
Est a
oni
a
Jor
dan
Ge
org
i
Alb a
ani
a
Om
an
Cr
oa
Lit ti a
hua
n
Mo ia
ldo
va
Ch
i
Ch
n. T na
ai p
ei
Ar
me
n
FY ia
RO
M
Ca
mb
odi
a
Ne
p al
S.
Ar
a
Vie bia
tN
am
To
ng
Uk a
Ca raine
pe
Ve
rde
No. of service sub-sectors
Services Commitments of new WTO
Members
www.worldec.ru
160
80
40
147
140
138
121
120
100
66
125
136
110
103
126
110
100
98
119
93
115
106
80
70
New Members
(by date of membership, 1995-2008)
120
94
105
90
93
77
60
37
20
0
Accession rules in the WTO system
www.worldec.ru
Conclusion




Length
Demanding concessions
Severe terms of accession
Ambiguity of difficult accessions


for the acceding countries
for the multilateral trading system and the
WTO
76
www.worldec.ru
2.3. The Agreements
2.3. The Agreements
www.worldec.ru
The WTO Agreement (1994) encompasses the
following agreements:
 (I) The Multilateral Agreements on Trade in
Goods which consists of:




(i) GATT 1994, which includes:
GATT 1947 (the original GATT and its
amendments)
Decisions taken under GATT 1947 by
contracting parties
Tariff Schedules and their implementation
78
2.3. The Agreements
www.worldec.ru
Uruguay Round Understandings in six areas
dealt with in GATT 1947:
 other duties and charges
 state trading enterprises
 balance of payments provisions
 customs unions and free trade areas
 waivers of obligations
 tariff modification
79
2.3. The Agreements
www.worldec.ru

(ii) Other Agreements in the Area of Goods
including:
Agriculture
 Textiles and Clothing (no longer in
force)
 Anti-Dumping
 Customs Valuations
 Rules of Origin
 Subsidies and Safeguards

80
2.3. The Agreements
www.worldec.ru

(ii) Other Agreements in the Area of Goods
including:
Sanitary and Phytosanitary
Measures
 Technical Barriers to Trade
 Trade-Related Investment Measures
(TRIMs)
 Pre-shipment Inspection
 Import Licensing

81
2.3. The Agreements
www.worldec.ru




(II) Agreement on Trade in Services (GATS)
(III) Agreement on Trade-Related Aspects of
Intellectual Property Rights (TRIPs)
(IV) Trade Policy Review Mechanism
(V) Understanding on the Settlement of
Disputes

(I) – (V) the Multilateral Trade Agreements
82
2.3. The Agreements
www.worldec.ru

(VI) Plurilateral Agreements (among less
than all WTO Members):



Civil Aircraft
Government Procurement
New initiatives

Agreement on IT
83
www.worldec.ru
2.4. WTO versus GATT
2.4. WTO versus GATT
www.worldec.ru

The General Agreement on Tariffs and Trade

A provisional set of rules

Originally 23 contracting parties

Entered into force: 1 January 1948

Terminated on 31 December 1994
85
2.4. WTO versus GATT
www.worldec.ru

Eight trade "rounds" (multilateral trade
negotiations)

Reduction of trade barriers and strengthening of
rules for the conduct of international trade

Growth of world trade consistently outpaced
growth in world industrial production
86
2.4. WTO versus GATT
www.worldec.ru
Год
Place, round
Issues
Countries
1947
1949
1951
1956
Geneva
Annecy
Torquay
Geneva
Tariffs
Tariffs
Tariffs
1960 1961
1964 1967
1973 1979
1986 1994
Geneva (Dillon)
Tariffs
23
13
38
26
26
Geneva
(Kennedy)
Geneva (Tokyo)
Tariffs, anti-dumping measures
62
Tariffs, non-tariff measures,
structural agreements
Tariffs, non-tariff measures,
services, intellectual property,
textiles, agriculture, WTO
agreement
102
Geneva
(Uruguay)
Tariffs
123
87
2.4. WTO versus GATT
www.worldec.ru

Main features of GATT 1947 (1)





Non-discrimination (MFN, NT)
Multilateralism and joint decisionmaking
tariffs only permissible form of standing
protection
progressive liberalization
rules-based
88
2.4. WTO versus GATT
www.worldec.ru

Main features of GATT 1947 (2)




code of conduct — largely based on negative
prescriptions: agreement not to do certain things
balance of mutually beneficial concessions
among contracting parties resulting from process
of reciprocal (mercantilist) bargaining
transparency and
due process
89
2.4. WTO versus GATT
www.worldec.ru

Lessons from GATT (1)



broad respect for its core principles vs pragmatic
application with room for exceptions and
exemptions
broad geopolitical benefits to USA provided
basis for US generally benign, hegemonic
leadership: economic, political, and social —
cumulative effect based on incrementalism.
broadly beneficial impact on other players —
Canada, EEC/EC/EU other OECD, developing
countries.
90
2.4. WTO versus GATT
www.worldec.ru

Lessons from GATT (2)



Mercantilist bargaining — basis for progressive
deepening and broadening of concessions and
commitments
‘Balance of advantage’ ideology.
Institutions matter — both the broadly accepted
rules, conventions, and assumptions that provide
much of the basis for international cooperation
and coordination of policies, but also
91
2.4. WTO versus GATT
www.worldec.ru
WTO vs GATT: Main differences
1.
2.
3.
4.
Formal rather than informal
The WTO has Members rather than signatories
The WTO Agreement is a single undertaking
rather than a collection of agreements
Dispute settlements are binding
92
2.4. WTO versus GATT
www.worldec.ru
WTO ministerial conferences
Doha Round: issues for discussion
93
www.worldec.ru
2.5. DISPUTE SETTLEMENT IN
THE WTO
94
2.5. Dispute Settlement in the WTO
www.worldec.ru
A rules-based regime is one of the key
benefits of the WTO especially from the
perspective of smaller trading economies
attempting to compete against larger
players.
The binding dispute settlement systems
helps to answer that disputes are resolved
in accordance with legal rules of the
WTO, rather than political and economic
power.
95
2.5. Dispute Settlement in the WTO
www.worldec.ru
Dispute settlement plays a crucial role in the
international trading system.
It is an important way to ensure that the
members of the WTO abide by
commitments made during trade
negotiations.
96
2.5. Dispute Settlement in the WTO
www.worldec.ru
Dispute settlement under the GATT was
strengthened during the Uruguay Round
and the rats are set out in the 1994
Dispute Settlement Understanding (DSU).
97
2.5. Dispute Settlement in the WTO
www.worldec.ru
The dispute settlement of the WTO is a central
element in providing security and
predictability to the multilateral trading
system.
It serves


to preserve the rights and obligations of
Members under the covered agreements, and
to clarify the existing provisions of those
agreements in accordance with customary
rules of interpretation of public international
law.
98
2.5. Dispute Settlement in the WTO
www.worldec.ru
The concept of an impartial referee is a key
element in the settlement of international
trade disputes under the WTO.
It is very important to the WTO that all
member nations, large or small, be treated
as equals in the settlement of disputes.
The DSU system is commonly said to
embody approach that is based on rules
and not power.
99
2.5. Dispute Settlement in the WTO
www.worldec.ru
The exporting industry that faces a protectionist
measure which in its view denies market access in
a manner contrary to the WTO may decide to
lobby its government to do something about it.
If the government decides that the complaint of its
industry is worth pursuing, it can resort to WTO
dispute settlement in order to convince the
importing country to remove its measure.
100
2.5. Dispute Settlement in the WTO
www.worldec.ru
Once a government has decided to challenge the
measure under the WTO, the process to be
followed is set out in the Dispute Settlement
Understanding.



Consultations - The parties try to resolve the
dispute through discussions
Adjudication - The dispute is referred to a
specialized panel for a legal determination
Implementation - The legal decision is put into
effect in the WTO system
101
2. Central elements of dispute settlement
www.worldec.ru
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
102
Consultations
Panel Request
Panel Composition
Terms of Reference
Procedure Before the Panel
Report of the Panel
Adoption of the Panel Reports
Appeal of a Panel Reports
Implementation
Utilization of the Panel Process
Consultations
www.worldec.ru







A request for the panel must be preceded by
consultations
Should be responded within 10 days
Consultations must be entered within 30
days
Requests are notified to the DSB
Other states with “a substantial trade
interests” may participate
Confidential
60 days (20 days for perishable goods)
Panel Request
www.worldec.ru




The request is made to DSB
The responding party can object to the
creation of a panel (once)
The panel might be established at the next
meeting of DSB unless the DSB decides
by consensus not to do so (reverse
consensus)
Complaining party is a part of “reverse
consensus”
Readings and exercises
www.worldec.ru
1.
The Post-Uruguay Round Tariff
Environment for developing country
exports
105
Readings and exercises
www.worldec.ru
1.
Describe the main functions of



Ministerial conference
General Council
General Director of the WTO
106
www.worldec.ru
3. Trade in Goods
3.1. Trade in goods: key principles
3.2. Rules of origin
www.worldec.ru
3.1. TRADE IN GOODS: KEY PRINCIPLES
108
3.1. Trade in goods: key principles
www.worldec.ru
1.
Trade without discrimination


Most-favoured-nation clause (MFN)
National treatment
2.
Reciprocity
3.
Market access




Transparency
Equilibrium of rights and obligations,
Remedies for nullification or impairment of benefits,
Commitments of trading partners to progressively
reduce tariffs.
109
3.1. Trade in goods: key principles
www.worldec.ru


Most-Favoured Nation (MFN)
Treatment
means that the best treatment given to any
country must be given to all countries.
In other words, any benefit given to a
product of a most-favoured nation
(whether GATT Member or not) has to be
given to the like products of all Members.
110
3.1. Trade in goods: key principles
www.worldec.ru
According to GATT Article I.1
MFN treatment in relation to goods is:…
any advantage, favour, privilege or
immunity granted by any contracting
party to any product originating in or
destined for any other country shall be
accorded immediately and
unconditionally to the like product
originating in or destined for the
territories of all other contracting parties.

111
3.1. Trade in goods: key principles
www.worldec.ru
Tariff Schedules and the GATT/WTO
 The preamble of the GATT 1947 advises that
member countries should enter into "reciprocal
and mutually advantageous arrangements directed
to the substantial reduction of tariffs and other
barriers to trade and to the elimination of
discriminatory treatment in international
commerce.“
112
3.1. Trade in goods: key principles
www.worldec.ru

Each schedule consists of four parts (1):

Part I : Most-favoured-nation or MFN
concessions, maximum tariffs to goods from
other WTO members. Part I is further divided
into:



Section 1A — tariffs on agricultural products
Section 1B — tariff quotas on agricultural
products
Section II — Other products
113
3.1. Trade in goods: key principles
www.worldec.ru

Each schedule consists of four parts (2):



Part II: Preferential concessions (tariffs
relating to trade arrangements listed in
GATT Article I)
Part III: Concessions on non-tariff
measures (NTMs)
Part IV: Specific commitments on
domestic support and export subsidies on
agricultural products
114
3.1. Trade in goods: key principles
www.worldec.ru

Each schedule contains the following information:









Tariff item number
Description of the product
Rate of duty
Present concession established
Initial Negotiation Rights (or INR, such as main
suppliers of product)
Concession first incorporated in a GATT Schedule
INR on earlier occasions
Other duties and charges
For agricultural products special safeguards may also
115
be defined
3.1. Trade in goods: key principles
www.worldec.ru

Bound and applied rates: a difference

bound rates (tariff binding): commitment not
to increase a rate of duty beyond an agreed
level. Once a rate of duty is bound, it may not
be raised without compensating the affected
parties
applied rates: duties that are actually charged
on imports.
Applied can be below the bound rates


116
3.1. Trade in goods: key principles
www.worldec.ru

Bound and applied rates: a difference

MFN (most-favoured-nation) tariff:
normal non-discriminatory tariff charged on
imports (excludes preferential tariffs under
free trade agreements and other schemes or
tariffs charged inside quotas)
117
3.1. Trade in goods: key principles
www.worldec.ru
National Treatment
 National Treatment (NT) prohibits
discrimination between foreign and national
products, services, and service suppliers, as
well as between foreign and national
intellectual property rights holders.
 For example, once a foreign product has
been cleared through customs, it cannot be
treated any differently from a like product
produced domestically.
118
3.1. Trade in goods: key principles
www.worldec.ru
According to GATT Article III.1 and 4,
national measures in relation to goods ...
should not be applied to imported or
domestic products so as to afford protection
to domestic production. … The products of
the territory of any contracting party
imported into the territory of any other
contracting party shall be accorded
treatment no less favourable than that
accorded to like products of national origin
…
119
3.1. Trade in goods: key principles
www.worldec.ru
Question
Does National Treatment mean identical
treatment for domestic and imported
products?
Answer:
The same or better
120
3.1. Trade in goods: key principles
www.worldec.ru
Reciprocity
The WTO agreement serves as a type of binding
contract under which members voluntarily
accept a "negotiated equilibrium" of rights and
obligations that they see as being in their mutual
interest.
This negotiated equilibrium exemplifies the
principle of reciprocity.
Concessions negotiated in this way are then
multilateralized under the most-favoured nation
rule.
121
3.1. Trade in goods: key principles
www.worldec.ru

Market Access

Binding of tariffs

Prohibition of quantitative restrictions

Tariff negotiations: progressive reduction
in protection

Emergency import measures: safeguards

Tariff renegotiations: compensation
122
3.1. Trade in goods: key principles
www.worldec.ru
Some Exceptions to Non-Discrimination


One factor contributing to the success of the
GATT/WTO trading regime is the recognition of
the need to balance multilateral disciplines with
national policy objectives.
For this reason, a number of exceptions were
drafted by the framers of the GATT, some of
which have been altered (limited or expanded)
by the WTO Agreement that serves as the
umbrella for the GATT text.
123
3.1. Trade in goods: key principles
www.worldec.ru
Most-Favoured Nation treatment is derogated by the
following:



exceptions for customs unions and free trade areas such
as the European Union or North American Free Trade
Agreement (covered in Article XXIV);
acceptance (grandfathering) of pre-existing preferential
arrangements (covered in Article I);
waivers in "exceptional circumstances" (covered in
Article XXV);
124
3.1. Trade in goods: key principles
www.worldec.ru
Most-Favoured Nation treatment is derogated by
the following:


exceptions allowing for "special and differential
treatment" for developing countries (covered in Part IV
of the GATT, Articles XVIII and XXXVI to XXXVIII,
and
non-application or "opt-out" procedures that permit
WTO Members to withhold MFN from other Members
in particular circumstances (covered in Articles
XXXV).
125
3.1. Trade in goods: key principles
www.worldec.ru
National treatment does not apply to:
 government procurement; or
 subsidies paid exclusively to
domestic producers.
126
3.1 Trade in goods: key principles
www.worldec.ru
Both MFN and National treatment are
derogated by the following exceptions:





exceptions for unanticipated market disruptions (see
the emergency action/safeguard provisions in Article
XIX, trade remedies);
general exceptions (Article XX);
national security exceptions (Article XXI);
exceptions to the commitment to eliminate
quantitative restrictions (Article XI); and
exceptions for countries experiencing temporary
balance of payments difficulties (Articles XII to XV)
127
3.1 Trade in goods: key principles
www.worldec.ru
Reading:


Examine the Legal text of the GATT47 (see
reading materials)
Discover main exceptions from nondiscrimination
128
3.1. Trade in goods: key principles
www.worldec.ru
Measures in WTO agreements

Provisions aimed at increasing trade opportunities

Provisions which require WTO Members to
safeguard the interests of developing country
Members

Provisions allowing flexibility to developing
countries in the use of economic and commercial
policy instruments

Provisions allowing longer transitional periods to
developing countries

Provision of technical assistance to developing
country Members
129
Basic framework for negotiating tariff concessions
www.worldec.ru
Modalities




Postmodalities

Defining the rules of the game
GATT Article XXVIII bis
Tariff reduction: which option?
 Request/Offer?
 Sectoral?
 Formula? If so, which one?
New bindings: how many? at what level?
Implementation period
S&D / Flexibility provisions

Members prepare and submit offers
Multilateral verification

Final Schedules of concessions

GATT/WTO – 60 years of tariff reductions
(Estimated MFN tariff reduction of industrial countries for industrial products (excl. petroleum))
www.worldec.ru
Implem.
Period
Round Covered
Weighted
tariff
reduction
Weights based on
MFN imports
(year)
1948
Geneva (1947)
-26
1939
1959
Annecy (1949)
-3
1947
1952
Torquay (1959-51)
-4
1949
1956-58
Geneva (1955-56)
-3
1954
1962-64
Dillon Round (1961-62)
-4
1960
1968-72
Kennedy Round (196467)
-38
1964
1980-87
Tokyo Round (1973-79)
-33
1977 (or 1976)
1995-99
Uruguay Round (198694)
-38
1988 (or 1989)
Previous Rounds
www.worldec.ru
Round
Developed
GATT ~ Dillon request / offer
Developing
request/offer
(1947 ~ 1961)
Kennedy Round Linear cut formula (50%
(1964-1967)
Tokyo Round
(1973-1979)
cut), with exceptions.
“Swiss formula” w/ coef.
of 14 and 16 was used,
with exceptions
Uruguay Round Targeted simple average
(1986-1994)
request/offer
reduction (33.3% AVG),
plus some sectoral
agreements (zero for zero
and harmonization)
request/offer
request/offer
ceiling bindings
www.worldec.ru
The simple Swiss formula
c*T0
T1 =
c + T0
T1 – final rate of the tariff
T0 – initial rate of the tariff
c – coefficient
DDA (NAMA): Sequence of main events
www.worldec.ru
2001 -> Doha Ministerial Declaration (Paragraph 16)
July 2002 -> Work program is adopted
(deadline for modalities = 31 May 2003)
May 2003 -> Chairman’s Draft Elements for Modalities (TN/MA/W/35 i.e.
“Girard Text”)
September 2003 -> Cancun Ministerial fails to adopt a “framework” on
NAMA (JOB(03)152/Rev.2)
July 2004 -> “July Package” adopts the NAMA Framework with initial
elements (Annex B of WT/L/579)
December 2005 -> Hong Kong Ministerial clarified add. elements
2007 First draft modalities (JOB(07)/126)
2008 Third revision of draft modalities (TN/MA/W/103/Rev.2)
July Mini-ministerial
Fourth revision of draft modalities (TN/MA/W/103/Rev.3)
The formula
www.worldec.ru

Ministers had previously agreed:
 A Swiss formula
 Reduce or as appropriate eliminate tariffs, including
the reduction or elimination of tariff peaks, high
tariffs and tariff escalation, in particular on
products of interest to developing countries
 Special & Differential Treatment, including through
less than full reciprocity in reduction commitments
The formula
www.worldec.ru

Fourth revision said:
 Simple Swiss formula with four coefficients
 Coefficient for developed countries: 8
 Coefficient for developing countries: “sliding scale”
with 3 options: “X” = 20, “Y” = 22, “Z” = 25
depending on flexibilities chosen
(a or (x, y or z))*T0
T1 =
(a or (x, y or z)) + T0
The mark-up for unbound tariffs
www.worldec.ru

Ministers had previously agreed :
 A non-linear mark-up to establish the base rate
for commencing tariff reductions
 i.e. 2001 MFN applied rate + mark-up = base
rate
 Then apply Swiss formula on that base rate

Fourth revision said:
 A mark-up of 25 percentage points
Formula flexibilities (Paragraph 7)
www.worldec.ru



“Sliding scale”: Set of 3 options for an increased number of tariff lines for
flexibilities in exchange of a lower coefficient:
 Swiss-20 = 14% lines with half-cut and 16% import cap; or
6.5% lines with no-cut and 7.5% import cap
 Swiss-22 = 10% lines with half-cut and 10% import cap; or
5% lines with no-cut and 5% import cap
 Swiss-25 = no flexibilities
“Anti-concentration”: Formula needs to be applied on a minimum of 20%
of lines or 9% of value in each HS Chapter
Specific situations:
 Mercosur, Oman, South Africa (SACU), [Argentina?], [Venezuela?]


Fourth revision said:
Implementation period of 5 years (6 equal cuts) for developed countries
and 10 years (11 equal cuts) for developing countries
Setting the base rate
www.worldec.ru
Bound rates
Unbound rates
2001 MFN applied
Mark-up
(+25 pts)
Base rates
Formula
New Bound rates
3.1 Trade in goods: key principles
www.worldec.ru


Questions and exercises
Describe main exceptions from the nondiscrimination principles
www.worldec.ru
3.2. RULES OF ORIGIN
141
3.2. Rules of origin
www.worldec.ru
Rules of origin are rules for determining
from which country or group of countries
a product originates. In other words, they
determine the nationality of a product.
142
3.2. Rules of origin
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Once the origin of a good is known, the
importing country can apply any regionspecific trade preferences or restrictions
to the imported goods
Information about product origin also made
it easier for countries to compile
economic statistics, and provide
consumers with important product
information.
143
3.2. Rules of origin
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The original GATT (1947) contained no
provisions on rules of origin.
In 1974, the Kyoto Convention on the
Harmonization and Simplification of
Customs Procedures was signed by
members of the Customs Cooperation
Council.
This convention stipulated that the origin of
a product should be its last place of
substantial transformation.
144
3.2. Rules of origin
www.worldec.ru
It also permitted alternative indicators of a
substantial transformation of a product
such as a change in the tariff classification
as a result of further processing of the
product that added value to it.
The Kyoto Convention was not an
enforceable agreement and did not
provide for dispute settlement.
145
3.2. Rules of origin
www.worldec.ru
The WTO Agreement on Rules of Origin
Since its adoption in 1994, the main objective of
the Agreement on Rules of Origin has been to
harmonize non-preferential rules of origin and
to ensure that such rules do not themselves
create unnecessary obstacles to trade.
The Agreement established interim disciplines
for the use of non-preferential rules of origin,
pending agreement on harmonized procedures
to be developed through a work programme at
146
the WTO.
3.2. Rules of origin
www.worldec.ru
The WTO Agreement on Rules of Origin
recognizes three methodologies for
administering rules of origin (also described
in the previous page):

Change of tariff classification

Ad valorem percentage criterion

Manufacturing or processing operation
The WTO requires that each system be
administered with clarity and precision.
147
3.2. Rules of origin
www.worldec.ru
WTO Members must ensure that (1):




their rules of origin are transparent;
rules of origin are not used as instruments to pursue
trade objectives directly or indirectly;
they do not have restrictive, distorting or disruptive
effects on international trade;
they are administered in a consistent, uniform,
impartial and reasonable manner;
148
3.2. Rules of origin
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WTO Members must ensure that (2):





they are administered in a consistent, uniform,
impartial and reasonable manner;
regulations and procedures regarding rules of
origin are published and available to the public;
rules of origin are based on a positive standard (in
other words, they should state what confers origin,
rather than what does not.)
assessments of rule of origin should take no more
than 150 days; and
changes in rules of origin should not be applied
retroactively
149
www.worldec.ru
4. Standards and technical
barriers to trade
4.1. Standards and technical barriers
4.2. Sanitary and phytosanitary
measures
www.worldec.ru
4.1. STANDARDS AND TECHNICAL
BARRIERS
151
4.1. Standards and technical barriers
www.worldec.ru

Technical standards range from those
designed to ensure compliance with
health and safety norms to product
packaging and labelling requirements for
tradable goods.
152
4.1. Standards and technical barriers
www.worldec.ru


The Uruguay Round ushered in both the
Agreement on Technical Barriers to Trade
and the Agreement on Sanitary and
Phytosanitary Measures.
The intention of these agreements is to
reduce the impact of standards as a trade
barrier.
153
4.1. Standards and technical barriers
www.worldec.ru

The WTO ensures that


states retain the rights to set their own
standards but subjects them to certain
requirements regarding the basis for the
standards they choose and the process used
for creating and imposing standards,
countries have a right to adopt and apply
standards-related measures as long as these
do not restrict international trade more than is
necessary.
154
4.1. Standards and technical barriers
www.worldec.ru
Technical barriers to trade are obstacles to trade
that may result from standards and conformity
assessment systems designed to ensure uniform
specifications or attributes of a product or a
service.
Technical regulations and standards set out specific
characteristics of a product - such as its size,
shape, design, functions and performance, or the
way it is labelled or packaged - before it is put on
sale.
155
4.1. Standards and technical barriers
www.worldec.ru
Voluntary versus mandatory
Technical
regulations
Standards
Obligatory
Voluntary
156
4.1. Standards and technical barriers
www.worldec.ru
Product
standards
Process
standards
157
4.1. Standards and technical barriers
www.worldec.ru
Among the leading voluntary
standardization bodies are:
 International Electrotechnical
Commission (IEC);
 International Organization for
Standardization (ISO) both based in
Geneva, Switzerland.
158
4.1. Standards and technical barriers
www.worldec.ru
Technical standards deal with:





Labelling of food, drink and drugs
Quality requirements for fresh food
Packaging requirements for fresh food
Packaging and labelling for dangerous chemicals
and toxic substances
Regulations for electrical appliances
159
4.1. Standards and technical barriers
www.worldec.ru
Technical standards deal with (2):





Regulations for wireless telephones, radio
equipment, etc.
Textiles and garment labelling
Testing vehicles and accessories
Regulations for ships and ship equipment
Safety regulations for toys, etc.
160
www.worldec.ru
4.4. SANITARY AND PHITOSANITARY
MEASURES
161
4.2. Sanitary and phytosanitary measures
www.worldec.ru
Sanitary and phytosanitary measures deal
with measures taken to protect human,
animal, or plant health and have the
greatest relevance to the agriculture
sector.
Sanitary measures are those having to do
with animal products while phytosanitary
measures have to do with plant products.
162
4.2. Sanitary and phytosanitary measures
www.worldec.ru
Sanitary and phytosanitary measures usually deal with (1):






Additives in food or drink
Contaminants in food
Poisonous substances in food or drink
Residues of veterinary drugs or pesticides in food
or drink
Certification: food safety, animal or plant health
Processing methods with implications for food
safety
163
4.2. Sanitary and phytosanitary measures
www.worldec.ru
Sanitary and phytosanitary measures usually deal with (2):





Labeling requirements directly related to food
safety
Plant/animal quarantine
Declaring areas free from pests or disease
Preventing disease or pests from spreading to a
country
Other sanitary requirements for imports (e.g.
imported pallets used to transport animals)
164
4.2. Sanitary and phytosanitary
measures
www.worldec.ru
The major elements of the SPS Agreement are:






Members’ Sovereignty Over Domestic Standards
A Balance Between Environmental Protection and
Trade Liberalization
Mutual Recognition Versus Harmonization
Transparency and SPS Measures
Respect for Subnational Measures
Dispute Settlement
165
4.2. Sanitary and phytosanitary
measures
www.worldec.ru




FAO/WHO Codex Alimentarius
Commission
World Health Organization
Office International des Epizooties (OIE)
FAO International Plant Protection
Convention IPPC
166
www.worldec.ru
5. Trade Remedies
5.1. Safeguards
5.2. Anti-dumping
5.3. Subsidy/Countervail
167
5. Trade remedies
www.worldec.ru
Conditions under which trade
remedies measures can be applied
Unfair competition
Anti-dumping
duties
Countervailing
duties
“Normal” market
conditions
Safeguards
Additional duties,
exceeding bound rates
Quantitative restrictions
5.1. Safeguards
www.worldec.ru
A safeguard is
an emergency action taken by a government
to provide temporary protection to domestic
producers
against unanticipated surges in imports caused by
changes in competitive circumstances due to
the reduction or removal of tariffs or other trade
concessions.
169
5.1. Safeguards
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When certain import surge's cause or
threatens to cause serious injuries to
domestic industry, safeguard measures
may be used to give time to domestic
producers to adjust to the new conditions.
170
5.1. Safeguards
www.worldec.ru
Domestic industry is defined as the
producers as a whole of the like or
directly competitive products operating
within the territory of a Member,
or producers who collectively account for a
major proportion of the total domestic
production of those products
171
5.1. Safeguards
www.worldec.ru


Safeguards are permitted under GATT Article
XIX on certain terms.
The WTO Agreement on Safeguards establishes
the rules for the application of safeguard
measures provided for in GATT Article XIX,
and a Committee on Safeguards to oversee their
application.
172
5.1. Safeguards
www.worldec.ru

Such measures, which take the form of
suspension of concessions or obligations,
can consist
of quantitative import restrictions or
 of duty increases to higher than bound rates
However, the WTO encourages trading nations to
move away from quantitative restrictions.


173
5.1. Safeguards
www.worldec.ru
Serious injury as: “a significant overall
impairment in the position of the domestic
industry” taking into account such factors as:



the rate and amount of the increase in imports;
the share of domestic market taken by increased
imports and;
the changes in the level of sales, production,
productivity, capacity utilization, profits, and
employment in the importing country.
If a causal link between the surges in imports and
the serious injury is established, then safeguard
measures may be applied.
174
5.1. Safeguards
www.worldec.ru




A WTO member proposing to take a safeguard action
must offer to consult with those members whose
exports will be substantially affected by it.
Under the Agreement on Safeguards, the member
must endeavour to maintain the benefits of its trade
concession to affected exporting countries.
To achieve this it may agree with the exporting
countries on compensation sufficient to offset the
adverse effects of the safeguard measure.
If no agreement is reached, the exporting members
may suspend concessions they had agreed to for the
benefit of the member applying to safeguards.
175
5.1. Safeguards
www.worldec.ru

Questions:

What kind of compensations member
countries could offer?
Who gets these compensations?

176
5.1. Safeguards
www.worldec.ru

Competent authorities might apply safeguard
measures after





following an investigation conducted by
pursuant to previously published procedures.
reasonable public notice of the investigation, and that
interested parties be given the opportunity to present
their views
publishing a report presenting and explaining their
findings on all pertinent issues
Confidentiality!
177
5.1. Safeguards
www.worldec.ru




Maximum protection – 8 (10) years
Progressive liberalization
Review of the measures (if longer than 3
years)
De minimis import exemption

A safeguard measure shall not be applied to
low volume from developing country
Members (3% for individual Member and 9%
from all developing countries).
178
5.1. Safeguards
www.worldec.ru

Forbidden grey area measures include such
protective devices as

voluntary export restraints,
orderly marketing arrangements, and

discretionary impact on export licensing schemes.



Although they have been used as an alternative
to safeguards to deal with similar economic
phenomenon, they are quite distinct from
safeguards.
However, they are dealt with (and prohibited) in
the WTO Safeguards Agreement.
179
5.1. Safeguards
www.worldec.ru
Safeguards must be:


temporary
applied on an MFN basis*
States applying safeguards have notification
and consultation obligations.
Developing countries are accorded special
rights regarding the application of safeguard
provisions.
Disputes arising under the WTO Agreement
on Safeguards may be referred to the WTO
Dispute Settlement Mechanism.
180
5.1. Safeguards
www.worldec.ru


Question:
Why do you think safeguards are used less
than anti-dumping and subsidycountervail?
181
5.1. Safeguards
www.worldec.ru


By contrast anti-dumping and
subsidy/countervail actions are taken on
the basis of quasi-judicial procedures,
and no compensation is required for
"dumpers" or "subsidizers" as they are
deemed to be acting in contravention of
"fair trade" principles.
182
www.worldec.ru
5.2. Anti-Dumping
5.2. Anti-dumping
www.worldec.ru
Dumping occurs when goods are sold into
an importing market at prices below those
prevailing in the home market or at prices
below their cost of production (including
reasonable amounts for administration,
marketing costs, and profits).
An anti-dumping action is taken by a state
as a remedy for dumping
184
5.2. Anti-dumping
www.worldec.ru
Question: How ho calculate an AD duty?
Answer: key beginning point is to calculate
a normal value of the product
185
5.2. Anti-dumping
www.worldec.ru
The mechanics of anti-dumping
Dumping occurs when the products of one country are introduced
into the commerce of another country at less than the normal
value of the products
(a) is less than the comparable price, in the ordinary course of
trade, for the like product when destined for consumption in the
exporting country, or,
(b) in the absence of such domestic price, is less than either
(i) the highest comparable price for the like product for export to
any third country in the ordinary course of trade, or
(ii) the cost of production of the product in the country of origin
plus a reasonable addition for selling cost and profit.
186
5.2. Anti-dumping
www.worldec.ru
The usual remedy for dumping is an antidumping duty that is applied to incoming
shipments of "dumped" goods.
Since the purpose of the duty is to offset the
effects of dumping, the amount of the duty
should be equivalent to the difference
between the "dumped" price and the
"home market" price.
This difference is called the margin of
dumping.
187
5.2. Anti-dumping
www.worldec.ru
Anti-dumping investigations are to end immediately
in cases:
 where the authorities determine that the margin of
dumping is insignificantly small (defined as less
than 2% of the export price of the product).
 if the volume of dumped imports is negligible
(i.e. if the volume from one country is less than
3% of total imports from one country of that
product and 7% or more of total imports from
several countries)
188
5.2. Anti-dumping
www.worldec.ru
The mechanics of anti-dumping (1)
1.A complaint is initiated on behalf of the industry
affected (the complaining business must account for a
"major proportion" of total domestic production of
like products). If the relevant authorities find the
complaint presents a sufficient basis for formal
procedures, an investigation is begun.
2.The relevant authority may make a preliminary finding
of dumping.
3.The relevant authority may make a preliminary finding
of material injury.
189
5.2. Anti-dumping
www.worldec.ru
The mechanics of anti-dumping (2)
4.On the basis of these two preliminary findings,
provisional duties may be imposed.
5.If neither preliminary finding is made, the case is
terminated.
6.The relevant authorities continue their investigations
leading to final determinations with respect to the
existence of dumping margins and injury.
7. The investigation may be terminated on the basis of
voluntary price undertakings from dumping exporters
to increase their prices to eliminate the dumping. 190
5.2. Anti-dumping
www.worldec.ru
The mechanics of anti-dumping (3)
8. If suitable voluntary price undertakings are not
agreed to, dumping margins are calculated for each
exporter found to be dumping.
9. Final dumping duties, the amounts of which are not
to exceed the margins of dumping, may be applied.
10. Dumping duties are to remain in force "only so long
as and to the extent necessary to counteract dumping
which is causing injury." An injury determination
expires after five years. Dumping duties may be
extended beyond five years only on the basis of a
new investigation that confirms continued threat of
injury.
191
5.2. Anti-dumping
www.worldec.ru
The mechanics of anti-dumping (4)
Each member's anti-dumping regime must
include provision for independent judicial
review of administrative actions relating
to final determinations of dumping and
injury and of the final determination.
192
5.2. Anti-dumping
www.worldec.ru
The mechanics of anti-dumping
Under Article VI of GATT 1994, and the AntiDumping Agreement, WTO Members can impose
anti-dumping measures, if, after investigation in
accordance with the Agreement, a determination is
made
(a) that dumping is occurring,
(b) that the domestic industry producing the like
product in the importing country is suffering
material injury, and
(c) that there is a causal link between the two
193
5.1. Safeguards
www.worldec.ru
For an anti-dumping action to be used, two
conditions must be met.
 There must be dumping.
 The dumping must have:



caused material injury to an established
industry in the importing country
threatened to cause such industry or
if it materially retarded the establishment of
a domestic industry.
194
5.2. Anti-dumping
www.worldec.ru

Refund or reimbursement


Duties have to be collected on a nondiscriminatory basis on imports from all
sources found to be dumped and causing
injury, except with respect to sources from
which a price undertaking has been accepted
The amount of the duty collected may not
exceed the dumping margin, although it may
be a lesser amount
195
5.2. Anti-dumping
www.worldec.ru


Refund or reimbursement
Individual exporter dumping margins

The Agreement requires that, when antidumping duties are imposed, a dumping
margin be calculated for each exporter.
196
5.2. Anti-dumping
www.worldec.ru


Refund or reimbursement
New shippers


The investigating authorities are required to
conduct an expedited review to determine a
specific margin of dumping attributable to the
exports of such a “new shipper”.
While that review is in progress, the authorities
may request guarantees or withhold
appraisement on imports, but may not actually
collect anti-dumping duties on those imports.
197
5.2. Anti-dumping
www.worldec.ru
A WTO Committee on Anti-Dumping Practices
oversees anti-dumping actions.
Statistics on Anti-dumping: reporting countries
198
5.2. Anti-dumping
www.worldec.ru
Number of AD measures, by reporting country
400
Number of measures
350
300
250
200
150
100
50
0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Year
Totals for 01/01/95 - 31/12/08 - 3427
199
www.worldec.ru
5.3. Subsidies
5.3. Subsidy/Countervail
www.worldec.ru
Subsidies are a common instrument of state
policy used by all countries for a range of
purposes.
There is nothing inherently wrong with
subsidies but, in some cases, they may
have trade-distorting effects.
The GATT, and now the WTO, have sought
to restrict the use of subsidies which have
such effects while allowing states to
subsidize for other purposes (research
and development for example).
201
5.3. Subsidy/Countervail
www.worldec.ru
Subsidies
Export subsidies:
to compete with
producers
on the target market
Subsidies to compete
on domestic market
with imported products
Export subsidies:
to compete with producers
on the third markets
202
5.3. Subsidy/Countervail
www.worldec.ru
A subsidy is defined by the WTO as a financial
contribution made by a government or any
public body that confers a benefit on the
recipient.
Subsidies can be in any form of direct funds
transfers, grants, low interest loans, or price
supports.
Subsidies also can be offered in the form of
government revenue forgone or not collected.
203
5.3. Subsidy/Countervail
www.worldec.ru

The agreement defines two categories of
subsidies:



prohibited
and actionable.
Non-actionable subsidies (end on 31
December 1999)
5.3. Subsidy/Countervail
www.worldec.ru


Prohibited subsidies: subsidies that
require recipients to meet certain export
targets, or to use domestic goods instead
of imported goods.
They are prohibited because they are
specifically designed to distort
international trade, and are therefore
likely to hurt other countries’ trade.
5.3. Subsidy/Countervail
www.worldec.ru

Actionable subsidies:


in this category the complaining country
has to show that the subsidy has an
adverse effect on its interests
otherwise the subsidy is permitted.
5.3. Subsidy/Countervail
www.worldec.ru




Actionable subsidies: three types of damage
they can cause.
One country’s subsidies can hurt a domestic
industry in an importing country.
They can hurt rival exporters from another
country when the two compete in third markets
Domestic subsidies in one country can hurt
exporters trying to compete in the subsidizing
country’s domestic market.
5.3. Subsidy/Countervail
www.worldec.ru
Countervailing duties are special duties
imposed on imports to offset the
benefits of government subsidies to
producers or exporters in the exporting
country.
208
5.3. Subsidy/Countervail
www.worldec.ru
Conditions to CV:



formal investigation
there is a subsidy
imports of subsidized products are
causing injury to domestic industry
Period for protection – 5 years
Voluntary raise of prices – removal of CV
209
5.3. Subsidy/Countervail
www.worldec.ru
Number of CVs
Number of CV duties, by reporting economy
50
40
30
20
10
0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Jan.June
2009
Year
Total for 01/01/95 - 30/06/09 - 226
rg
e
A ntin
us a
tra
B lia
C raz
an il
a
C C da
hi h
na i l
E
C
,P e
ur
o
s
op
ta .R
ea
R .
n
i
C E ca
om gy
m pt
un
i
In ty
d
Is ia
r
Ja ael
p
La an
N M tvi
ew e a
Ze xic
al o
a
S
ou P nd
t h er
A u
f
U
ni Tu rica
te r
d ke
V Sta y
en t
ez es
ue
la
A
5.3. Subsidy/Countervail
www.worldec.ru
Number of CV measures, by reporting member
100
20
10
94
90
80
70
60
48
50
40
30
23
10
3
3
6
13
1 1
4
1 2
Year
1
1
2
6
4
1
0
2
en
tin
a
Br
a
Ca zil
na
da
Ch C
Eu C
i h
ro hin na, ile
pe es P
an e .R.
Co Tai
m pei
m
un
Fr ity
a
G nc
er e
m
an
y
In In d
do ia
ne
sia
Ko
re
a, Ita
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p
M .o
a
So la f
ut ys
i
h
Af a
ri c
Sp a
Un Tha ain
ite ila
d nd
St
at
es
Ar
g
5.3. Subsidy/Countervail
www.worldec.ru
Number of CV measures, by exporting member
50
45
40
35
30
25
20
15
10
5
0
46
29
7 7 8
3
7
10
7
11 13
3
Year
17
4 6
9 8
3
4.2. Questions and exercises
www.worldec.ru
Questions
1. What aspect of the GATT deals with
subsidies?
2. What does serious injury mean?
3. What is the mechanics of AD?
213
4.2. Questions and exercises
www.worldec.ru
Readings
1. Readings for lecture 4
214
www.worldec.ru
6. Trade in agriculture
6.1. Trade in agriculture: approaches to
the regulation
6.2. Market access
6.3. Domestic support
6.4. Export competition/subsidies
6.1. Trade in agriculture: approaches
to the regulation
www.worldec.ru

Agriculture: a sensitive issue
Question:
 Multilateral negotiations on agriculture
started much later than on other goods.
Why?
216
6.1. Trade in agriculture: approaches
to the regulation
www.worldec.ru

Agriculture has traditionally been treated as an
exceptional or sensitive sector in the global
trading regime


Agriculture is an important part of overall
economic activity and continues to play a major
role in domestic agricultural production and
employment.
The trading system plays also a fundamentally
important role in global food security.
217
Leading exporters of agricultural
products, 2006
Share in world
exports/imports
Value
2006
1980
1990
2000
2006
405,25
-
-
41,5
42,9
95,31
-
-
10,1
10,1
United States
92,66
17,0
14,3
12,9
9,8
Canada
44,23
5,0
5,4
6,3
4,7
Brazil
39,53
3,4
2,4
2,8
4,2
China
32,54
1,5
2,4
3,0
3,4
Australia
22,18
3,3
2,9
3,0
2,3
Thailand
21,58
1,2
1,9
2,2
2,3
Argentina
21,33
1,9
1,8
2,2
2,3
Indonesia
18,32
1,6
1,0
1,4
1,9
Russian Federation a
17,06
-
-
1,4
1,8
Malaysia
15,57
2,0
1,8
1,5
1,6
Mexico
14,69
0,8
0,8
1,6
1,6
India a, b
14,41
1,0
0,8
1,2
1,5
New Zealand
13,24
1,3
1,4
1,4
1,4
Chile
11,49
0,4
0,7
1,2
1,2
784,09
-
-
83,5
83,0
www.worldec.ru
Exporters
European Union (25)
extra-EU (25) exports
Above 15
Leading importers of agricultural
products, 2006
Value,
USD bn
Share in world /imports
2006
1980
1990
2000
2006
433,66
-
-
42,3
43,3
123,72
-
-
13,3
12,4
103,65
8,7
9,0
11,6
10,3
Japan
65,62
9,6
11,5
10,4
6,6
China
51,65
2,1
1,8
3,3
5,2
Canada d
23,95
1,8
2,0
2,6
2,4
Russian Federation a, d
23,38
-
-
1,6
2,3
Korea, Republic of
18,58
1,5
2,2
2,2
1,9
Mexico d
18,46
1,2
1,2
1,8
1,8
Hong Kong, China
11,90
1,2
1,9
2,0
1,2
7,79
1,0
1,0
1,1
0,8
Taipei, Chinese
9,67
1,1
1,4
1,3
1,0
Switzerland
8,85
1,2
1,3
1,0
0,9
United Arab Emirates a, c
8,81
0,3
0,4
0,6
0,9
Saudi Arabia a
8,56
1,5
0,8
0,9
0,9
Malaysia
8,50
0,5
0,5
0,8
0,8
India a, b
7,84
0,5
0,4
0,7
0,8
Above 15
798,99
-
-
82,1
79,8
www.worldec.ru
European Union (25)
extra-EU (25) imports
United States
retained imports
Export of agricultural products US dollar at
current prices (Millions)
www.worldec.ru
Reporter
World
2005
2006
2007
2008
Share in
2008
847148
942353
1128734
1341564
100,00
Argentina
19182
21351
28806
37502
2,80
Brazil
35052
39528
48287
61400
4,58
China
28711
32542
38858
42291
3,15
Finland
4559
5647
6409
6027
0,45
France
52336
56448
65975
76057
5,67
Germany
53728
60161
74151
88034
6,56
4139
4736
5102
5854
0,44
14063
17907
23805
32857
2,45
1725
1799
2253
2114
0,16
27339
29887
35371
40426
3,01
6007
6482
7565
8351
0,62
14485
17192
23565
25021
1,87
Sweden
9973
11237
13306
14232
1,06
Switzerland
4000
4693
5993
7634
0,57
Greece
Indonesia
Israel
Italy
Japan
Russian
Federation
Export of agricultural products US dollar at
current prices (Millions)
Reporter
www.worldec.ru
World
2005
2006
2007
2008
Share in 2008
908757
1002228
1192167
1413383
Argentina
1247
1396
2225
3242
0,23
Brazil
4341
5487
7266
9690
0,69
China
45189
51653
65368
86830
6,14
Finland
4760
5165
6442
7708
0,55
France
44402
47147
55960
65623
4,64
Germany
69340
77883
93298
108251
7,66
Greece
6810
7583
9305
10401
0,74
Indonesia
7316
7487
10473
13312
0,94
Israel
2930
3253
4018
5059
0,36
Italy
44981
49101
55765
59809
4,23
Japan
65947
65594
68817
80627
5,70
Russia
19154
23377
26884
34266
2,42
Sweden
10272
11561
13875
15969
1,13
8248
8854
10387
12325
0,87
Switzerland
100,00
6.1. Trade in agriculture: approaches to the regulation
Export of agriculture, 2006
World - 944,5 USD billion
www.worldec.ru
South and Central
America
12%
Africa
4%
CIS
3%
Middle East
2%
Europe
40%
North America
18%
Asia
21%
6.2. Market access
www.worldec.ru

Uruguay Round included negotiations on
disciplines with regard to all measures
affecting



trade in agriculture,
domestic agricultural policies and
the subsidization of agricultural exports
223
6.2. Market access
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

The Agreement on Agriculture and the Agreement
on the Application of Sanitary and Phytosanitary
Measures were negotiated in parallel
Decision on Measures Concerning the Possible
Negative Effects of the Reform Programme on
Least-developed and Net Food-importing
Developing Countries also formed part of the
overall outcome
224
6.2. Market access
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


The Agreement on Agriculture came into force
on 1 January 1995.
Agreed long-term objective of the reform process
initiated by the Uruguay Round reform
programme is to establish a fair and marketoriented agricultural trading system.
The reform programme comprises specific
commitments to reduce support and protection in
the areas of domestic support, export subsidies
and market access
225
6.2. Market access
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
The Agreement takes into account non-trade
concerns, including



food security and
need to protect the environment, and
provides special and differential treatment for
developing countries, including an
improvement in the opportunities and terms
of access for agricultural products of
particular export interest to these Members.
226
6.2. Market access
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Product coverage
 Agricultural products by reference to the harmonised
system of product classification
 agricultural products




wheat,
milk
live animals
products derived from them



bread,
butter and meat,
all processed agricultural products such as chocolate and
sausages.
227
6.2. Market access
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Product coverage
 The coverage also includes




wines, spirits and tobacco products,
fibers such as cotton, wool and silk, and
raw animal skins destined for leather production.
Fish and fish products are not included, nor are forestry
products
228
6.2. Market access
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Committee on Agriculture
 The Agreement established a Committee
on Agriculture.
 The Committee oversees the
implementation of the Agreement on
Agriculture and affords Members the
opportunity of consulting on any matter
relating to the implementation of
commitments, including rule-based
commitments.
229
6.2. Market access
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





Reduction methods
Single rate
Flat-rate percentage reductions
Uruguay Round approach
Harmonizing reductions
Other methods
230
6.2. Market access
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

Reduction methods
Single rate:



Tariffs are cut to a single rate for all products.
Theoretically, this is the simplest outcome.
In practice it is mainly used in regional free
trade agreements where the final tariff rate is
zero, or a low tariff, for trade within the
group.
231
6.2. Market access
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

Reduction methods
Flat-rate percentage reductions:


the same percentage reduction for all
products, no matter whether the starting tariff
is high or low.
For example, all tariffs cut by 25% in equal
steps over five years.
232
6.2. Market access
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

Reduction methods
Uruguay Round approach:

The 1986-94 Uruguay Round negotiations in
agriculture produced an agreement for
developed countries to cut tariffs on
agricultural products by an average of 36%
over six years (6% per year) with a minimum
of 15% on each product for the period.
233
6.2. Market access
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6% per year cuts
Ta riff
160
Start
Start
Start
Start
Start
Start
Start
140
120
100
150%
125%
100%
75%
50%
25%
10%
80
60
40
20
0
Year 0
Year 1
Year 2
Year 3
Year 4
Yea r 5
Year 6
THE ‘URUGUAY ROUND APPROACH’
234
6.2. Market access
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

Reduction methods
Harmonizing reductions. These are designed principally to
make steeper cuts on higher tariffs, bringing the final tariffs
closer together (to “harmonize” the rates):
 Different percentages for different tariff bands. For example, no
cuts for tariffs between 0 and 10%, 25% cuts for tariffs between
11% and 50%, 50% cuts for tariffs above that, etc. A variation
could include scrapping all tariffs below 5% which are
sometimes seen as a nuisance with little benefit. These could be
simple or average reductions within each band.
 Mathematical formulas designed to make steeper cuts (i.e.
higher percentage cuts) on higher tariffs. One example is the socalled Swiss formula.
235
6.2. Market access
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
The “Swiss formula” uses a single mathematical
formula to produce:

a narrow range of final tariff rates from a wide set of
initial tariffs
a maximum final rate, no matter how high the original
tariff was.

Z = AX/(A+X)
where
X = initial tariff rate
A = coefficient and maximum final tariff rate
Z= resulting lower tariff rate (end of period)

236
6.2. Market access
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Swiss formula. Coefficient=25
Tariff
160
Start
Start
Start
Start
Start
Start
Start
140
120
100
150%
125%
100%
75%
50%
25%
10%
80
60
40
20
0
Year 0
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
237
6.2. Market access
www.worldec.ru




Reduction methods
Other methods. There are a number of
possibilities:
Different rates for different categories of products.
For example steeper cuts on processed products
than on raw materials. This is an attempt to deal
with “tariff escalation”, where countries protect
their processing industries by making imported raw
materials cheap and imported processed products
expensive.
Combinations of any of these.
238
6.2. Market access
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



Market access
Under the reform programme, members
have converted their non-tariff measures
to equivalent bound tariffs.
Some additional market access is
provided through tariff rate quotas, and
the tariffs are being reduced.
Contingency protection is provided
through special safeguards, and
transparency works through notifications.
239
6.2. Market access
www.worldec.ru
Schedule of tariff concessions




Developed country Members have agreed to reduce,
over a six-year period beginning in 1995, their tariffs by
36 per cent on average of all agricultural products, with
a minimum cut of 15 per cent for any product.
For developing countries, the cuts are 24 and 10 per
cent, respectively, to be implemented over ten years.
Those developing country Members which bound tariffs
at ceiling levels did not, in many cases, undertake
reduction commitments.
Least-developed country Members were required to
bind all agricultural tariffs, but not to undertake tariff
reductions.
240
6.2. Market access
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Tariff quota commitments
 As part of the tariffication package, WTO Members
were required to maintain, for tariffied products, current
import access opportunities at levels corresponding to
those existing during the 1986-88 base period.
 Where such “current” access had been less than 5 per
cent of domestic consumption of the product in question
in the base period, an (additional) minimum access
opportunity had to be opened on a most-favoured-nation
basis.
241
6.2. Market access
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Tariff quota commitments
 The current and minimum access opportunities are
generally implemented in the form of tariff quotas. In
case of minimum access, the applicable duty was
required to be low or minimal, low that is either in
absolute terms or, at least, in relation to the “normal”
ordinary customs duty that applies to any imports
outside the tariff quota.
 These tariff quotas, including the applicable tariff rates
and any other conditions related to the tariff quotas, are
specified in the schedules of the WTO Members
concerned.
242
43 WTO members apply 1,425 tariff quotas
www.worldec.ru














Australia (2)

Barbados (36)

Brazil (2)

Bulgaria (73)

Canada (21)

Chile (1)

China (10)

Chinese Taipei (22) 
Colombia (67)

Costa Rica (27)

Croatia (9)

Czech Rep (24)

Dominican Rep (8) 
Ecuador (14)

El Salvador (11)
EU (87)
Guatemala (22)
Hungary (70)
Iceland (90)
Indonesia (2)
Israel (12)
Japan (20)
Korea (67)
Latvia (4)
Lithuania (4)
Malaysia (19)
Mexico (11)
Morocco (16)














New Zealand (3)
Nicaragua (9)
Norway (232)
Panama (19)
Philippines (14)
Poland (109)
Romania (12)
Slovak Rep (24)
Slovenia (20)
South Africa (53)
Switzerland (28)
Thailand (23)
Tunisia (13)
United States243(54)
6.2. Market access
www.worldec.ru
The prohibition of non-tariff border measures (1)
 Article 3.2 of the Agreement on Agriculture prohibits
the use of agriculture-specific non-tariff measures.
 Such measures include quantitative import restrictions,
variable import levies, minimum import prices,
discretionary import licensing procedures, voluntary
export restraint agreements and non-tariff measures
maintained through state-trading enterprises.
 All similar border measures other than “normal customs
duties” are also no longer permitted.
244
6.2. Market access
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The prohibition of non-tariff border measures (2)
 However, Article 3.2 of the Agreement on
Agriculture does not prevent the use of non-tariff
import restrictions consistent with the provisions of
the GATT or other WTO agreements which are
applicable to traded goods generally (industrial or
agricultural).
 Such measures include those maintained under
balance-of-payments provisions (Articles XII and
XVIII of GATT), general safeguard provisions
(Article XIX of GATT and the related WTO
agreement), general exceptions (Article XX of
GATT), the Agreement on the Application of
Sanitary and Phytosanitary Measures, the
Agreement on Technical Barriers to Trade or other
general, non-agriculture-specific WTO provisions.
245
6.2. Market access
www.worldec.ru
Special treatment
 The Agreement on Agriculture contains a “special treatment”
clause (Annex 5), under which four countries were
permitted, subject to strictly circumscribed conditions, to
maintain non-tariff border measures on certain products
during the period of tariff reductions (with the possibility of
extending the special treatment, subject to further
negotiations).
 As one of the conditions, market access in the form of
progressively increasing import quotas has to be provided
for the products concerned.
 The products and countries concerned are: rice in the case of
Japan, Korea and the Philippines; and cheese and sheepmeat
in the case of Israel.
246
6.2. Market access
www.worldec.ru
The special safeguard provisions (1)
 As a third element of the tariffication package,
Members have the right to invoke for tariffied
products the special safeguard provisions of the
Agreement on Agriculture (Article 5), provided
that a reservation to this effect (“SSG”) appears
beside the products concerned in the relevant
Member’s schedule.
 The right to make use of the special safeguard
provisions has been reserved by 38 Members,
and for a limited number of products in each
case.
247
6.2. Market access
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The special safeguard provisions (2)
 The special safeguard provisions allow the imposition of an
additional tariff where certain criteria are met.
 The criteria involve either a specified surge in imports
(volume trigger), or, on a shipment by shipment basis, a fall
of the import price below a specified reference price (price
trigger).
 In case of the volume trigger, the higher duties only apply
until the end of the year in question.
 In case of the price trigger, any additional duty can only be
imposed on the shipment concerned. The additional duties
cannot be applied to imports taking place within tariff
quotas
248
39 WTO members use 6,156 SSG
www.worldec.ru














Indonesia (13)
Romania (175)
Israel (41)
Slovak Republic
Japan (121)
(114)
Korea (111)
South Africa (166)
Malaysia (72)
Swaziland (166)
Mexico (293)
SwitzerlandMorocco (374) Liechtenstein (961)
Namibia (166)
Chinese Taipei (84)
New Zealand (4)
Thailand (52)
Nicaragua (21)
Tunisia (32)
Norway (581)
United States (189)
Panama (6)
Philippines (118) Uruguay (2)
Venezuela (76)
Poland (144)













Australia (10)
Barbados (37)
Botswana (161)
Bulgaria (21)
Canada (150)
Colombia (56)
Costa Rica (87)
Czech Republic
(236)
Ecuador (7)
El Salvador (84)
EU (539)
Guatemala (107)
Hungary (117)
249
6.3. Domestic support
www.worldec.ru
The main conceptual consideration is that
there are basically two categories of
domestic support:
 support with no, or minimal, distortive
effect on trade on the one hand (often
referred to as “Green Box” measures);
 trade-distorting support on the other hand
(often referred to as “Amber Box”
measures).
250
6.3. Domestic support
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

Domestic support in agriculture
THE BOXES
In WTO terminology, subsidies in general
are identified by “boxes” which are given
the colours of traffic lights:




green (permitted),
amber (slow down — i.e. be reduced),
red (forbidden).
Blue box measures?
251
6.3. Domestic support
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


AMBER BOX
All domestic support measures considered to
distort production and trade (with some
exceptions) fall into the amber box, which is
defined in Article 6 of the Agriculture
Agreement as all domestic supports except
those in the blue and green boxes.
These include measures to support prices, or
subsidies directly related to production
quantities.
252
6.3. Domestic support
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


BLUE BOX
This is the “amber box with conditions”
— conditions designed to reduce
distortion.
Any support that would normally be in
the amber box, is placed in the blue box if
the support also requires farmers to limit
production (details set out in Paragraph 5
of Article 6 of the Agriculture
Agreement).
253
6.3. Domestic support
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Blue box measures are those that are directly linked to
production, for example payments tied to the size of the
acreage or the number of animals, but are part of
production limiting schemes that set ceilings on
production volume or require farms to set aside part of
their land as follow.
Blue box measures are exempted from the general rule
that all subsidies linked to production must be reduced
or kept at de minimis levels.
254
6.3. Domestic support
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Countries that use these sorts of arrangements argue that
they are less trade distorting than amber box
alternatives.
Whether or not the blue box provisions will remain in the
agreement is subject to debate.
255
6.3. Domestic support
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
GREEN BOX

The green box is defined in Annex 2 of the Agriculture
Agreement.
Green box subsidies must not distort trade, or at most
cause minimal distortion (paragraph 1).
They have to be government-funded (not by charging
consumers higher prices) and must not involve price
support.


256
6.3. Domestic support
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
GREEN BOX

They tend to be programmes that are not targeted at
particular products, and include direct income supports
for farmers that are not related to (are “decoupled”
from) current production levels or prices.
Include environmental protection and regional
development programmes.
Allowed without limits, provided they comply with the
policy-specific criteria set out in Annex 2.


257
6.3. Domestic support
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Green box measures are permissible because they
have minimal effects on trade, do not involve
transfers from consumers (in the form of price hikes
to offset subsidies), and do not have the effect of
providing price support to producers. Measure that
may be eligible for green box status include:



general government services such as agricultural
research, pest and disease control;
measures necessary for food security purposes; and
a few specific forms of direct payments to producers
for such things as crop insurance, disaster relief, and
income support which is not tied to commodity
pricing or production levels.
258
6.3. Domestic support
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Reduction commitments (1)
 The reduction commitments are expressed in terms of a
“Total Aggregate Measurement of Support” (Total AMS)
which includes all product-specific support and nonproduct-specific support in one single figure.
 In any year of the implementation period, the Current
Total AMS value of non-exempt measures must not
exceed the scheduled Total AMS limit as specified in the
schedule for that year. In other words, the maximum
levels of such support are bound in the WTO.
259
6.3. Domestic support
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Reduction commitments (2)
 Twenty-eight Members (counting the EC as one)
had non-exempt domestic support during the base
period and hence reduction commitments
specified in their schedules.
 In the case of Members with no scheduled
reduction commitments, any domestic support not
covered by one or another of the exception
categories outlined above, must be maintained
within the relevant “product-specific” and “nonproduct-specific” de minimis levels.
260
6.3. Domestic support
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Aggregate Measurement of Support (1)
 For the purpose of Current Total AMS
calculations, price support is generally
measured by multiplying the gap between
the applied administered price and a
specified fixed external reference price
(“world market price”) by the quantity of
production eligible to receive the
administered price.
261
6.3. Domestic support
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Aggregate Measurement of Support (2)
 For each product, the implicit subsidy of price
support measures is added to other productspecific subsidies – a product-specific
fertiliser subsidy, for example – to arrive at a
product-specific AMS which is then evaluated
against the applicable de minimis threshold.
 Non-product-specific subsidies are calculated
separately and, as in the former case, are
included in the Current Total AMS only if they
exceed the relevant de minimis level.
262
6.3. Domestic support
Countries that apply amber box measures
www.worldec.ru
Argentina
Australia
Brazil
Bulgaria
Canada
Colombia
Costa Rica
Croatia
Cyprus
Czech Republic
EU
Hungary
Iceland
Israel
Japan
Jordan
Korea
Lithuania
Mexico
Moldova
Morocco
New Zealand
Norway
Papua New
Guinea
Poland
Slovak Republic
Slovenia
South Africa
SwitzerlandLiechtenstein
Chinese Taipei
Thailand
Tunisia
United States
Venezuela 263
6.3. Domestic support
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Example: Calculation of the current total AMS
Member X (developed country), year Y
Wheat:
Intervention price for wheat = $255 per tonne
Fixed external reference price (world market
price) = $110 per tonne
Domestic production of wheat = 2,000,000 tonnes
Value of wheat production = $510,000,000
Wheat AMS (AMS 1)
($255–$110) x 2,000,000 tonnes = $290,000,000
(de minimis level=$25,500,000)
264
6.3. Domestic support
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

Barley
> Deficiency payments for barley = $3,000,000
> Value of barley production = $100,000,000
> Barley AMS (AMS 2) = $3,000,000
(de minimis level=$5,000,000)
Oilseeds:
> Deficiency payments for oilseeds = $13,000,000
> Fertilizer subsidy = $1,000,000
> Value of oilseeds production = $250,000,000
> Oilseeds AMS (AMS 3) = $14,000,000
(de minimis level=$12,500,000)
265
6.3. Domestic support
www.worldec.ru


Support not specific to products
> Generally available interest rate subsidy = $
4,000,000
Value of total agricultural production =
$860,000,000
> Non-product-specific AMS (AMS 4) =
$4,000,000
de minimis level=$43,000,000
Current total AMS (AMS 1 + AMS 3) =
$304,000,000
266
6.3. Domestic support
www.worldec.ru
Equivalent Measurement of Support
 Where it is not practicable to calculate a
product-specific AMS as set out in the
Agreement, provisions are made of an
“Equivalent Measurement of Support” (EMS).
 The EMS is generally calculated on the basis of
budgetary outlays – the money spent by
governments to support a product, for example,
rather than market price support calculated with
respect to a fixed external reference price.
267
6.4. Export competition/subsidies
www.worldec.ru
Developed
countries
6 years:
1995–2000
Developing
countries
10 years:
1995–2004
average cut for all
agricultural products
minimum cut per product
Domestic support
–36%
–24%
–15%
–10%
cuts in total (“AMS”)
support for the sector
Exports
–20%
–13%
value of subsidies
(outlays)
subsidized quantities
–36%
–24%
–21%
–14%
268
The reductions in agricultural subsidies
and protection
agreed in the Uruguay Round
Tariffs
6.4. Export competition/subsidies
www.worldec.ru
The proliferation of export subsidies in the
years leading to the Uruguay Round was one
of the key issues that were addressed in the
agricultural negotiations.
While under the GATT 1947 export subsidies
for industrial products have been prohibited
all along, in the case of agricultural primary
products such subsidies were only subject to
limited disciplines (Article XVI of GATT)
which moreover did not prove to be
operational.
269
6.4. Export competition/subsidies
www.worldec.ru
The right to use export subsidies is now limited to
four situations:
(i) export subsidies subject to product-specific
reduction commitments within the limits
specified in the schedule of the WTO Member
concerned;
(ii) any excess of budgetary outlays for export
subsidies or subsidized export volume over the
limits specified in the schedule which is covered
by the “downstream flexibility” provision of
270
Article 8.2(b) of the Agreement on Agriculture;
6.4. Export competition/subsidies
www.worldec.ru
The right to use export subsidies is now limited to four
situations:
iii. export subsidies consistent with the special and
differential treatment provision for developing
country Members (Article 9.4 of the Agreement);
and
iv. export subsidies other than those subject to
reduction commitments provided that they are in
conformity with the anti-circumvention disciplines
of Article 10 of the Agreement on Agriculture.
271
6.4. Export competition/subsidies
www.worldec.ru
Reduction commitments
Under the Agreement on Agriculture export
subsidies are defined as referring to “subsidies
contingent on export performance, including
the export subsidies listed in detail in Article 9
of the Agreement”. This list covers most of the
export subsidy practices which are prevalent in
the agricultural sector
272
6.5. Other issues
www.worldec.ru






Export restrictions
Pease clause
Resolving disputes
Continuation clause
Net food-importing developing countries
Future agenda
273
Questions and assignment
www.worldec.ru
Assignment
Find out what kind of measures of support
in agriculture are used in Russia/your
country.
274
www.worldec.ru
7. Trade in Textiles and Clothing
7.1. Textiles and clothing: sensitive
sectors
7.2. Trade in textiles and clothing within
the framework of the WTO
7.1. Textiles and clothing: sensitive
sectors
www.worldec.ru


The textile and clothing industries are
very important to both developing and
developed countries for basic economic
and political reasons—thousands of
people are employed in them and the
skills needed are fairly low-level.
They are even more significant to some
developing countries because they
comprise a significant percentage of total
export earnings.
276
7.1. Textiles and clothing: sensitive
sectors
www.worldec.ru


Most governments in developed countries
have restricted and controlled the
international trade in textiles and clothing
for many years.
Trade in textiles and clothing products has
not been subject to normal GATT rules
since the United Kingdom introduced
voluntary restraints on exports of cotton
textiles from Hong Kong, India, and
Pakistan in 1960.
277
World merchandise exports by major product group, 2007
Billion dollars and perentage
Agricul
tu
re
www.worldec.ru
Fuels and
mining
products
Manufactures
Clothing
Textiles
Automotive
product
s
Fuels
1128
2659
2038
9500
474
1483
1514
1183
238
345
8,3
19,5
15,0
69,8
3,5
10,9
11,1
8,7
1,7
2,5
1980-85
-2
-5
-5
2
-2
1
9
5
-1
4
1985-90
9
3
0
15
9
14
18
14
15
18
1990-95
7
2
1
9
8
10
15
8
8
8
1995-00
-1
10
12
5
-2
4
10
5
0
5
2000-07
13
21
20
12
22
17
8
13
7
10
2005
8
38
43
10
17
12
11
7
4
6
2006
11
28
23
13
18
13
14
11
8
12
2007
19
15
13
15
27
19
4
16
9
12
Value
Share in world
merchandise
trade
Total
Office and
telecom
equipm
ent
Chemicals
Iron
and steel
Total
Annual percentage change
Share of textiles in trade in total merchandise and in
manufactures by region, 2007
www.worldec.ru
Exports
Imports
Share in total merchandise
Exports
Imports
Share in manufactures
World
1,7
1,7
2,5
2,5
North America
0,9
1,3
1,3
1,8
South and Central America
0,7
2,7
2,2
3,9
Europe
1,6
1,6
2,0
2,2
CIS
0,4
2,2
1,6
2,8
Africa
0,5
4,0
2,8
5,9
Middle East
0,9
2,7
4,4
3,5
Asia
3,0
1,8
3,7
2,8
Australia, Japan and New Zealand
0,9
1,3
1,2
2,3
Other Asia
3,6
2,0
4,4
3,0
Share of clothing in trade in total merchandise and in
manufactures by region, 2007
www.worldec.ru
Exports
Imports
Share in total merchandise
Exports
Imports
Share in manufactures
World
2,5
2,5
3,6
3,6
North America
0,6
3,5
0,8
4,8
South and Central America
2,5
1,7
8,1
2,5
Europe
2,1
2,8
2,7
3,8
CIS
0,3
5,3
1,4
6,9
Africa
2,7
2,1
14,3
3,1
Middle East
0,7
2,3
3,3
3,1
Asia
4,8
1,4
5,8
2,1
Australia, Japan and New Zealand
0,1
3,5
0,1
6,2
Other Asia
6,2
0,7
7,4
1,1
7.1. Textiles and clothing: sensitive
sectors
www.worldec.ru
Multifibre Arrangement (MFA)
The MFA was a plurilateral agreement that
"managed" international trade in textiles and
clothing through a wide array of bilateral
agreements that restrained exports according to
certain categories of textiles and clothing
products.
281
7.1. Textiles and clothing: sensitive
sectors
www.worldec.ru
The MFA set out rules for:



determining categories and quotas;
establishing restraint levels; and
for other provisions such as annual growth rates
for quotas, carry-over of unutilized quotas from
the previous year and carry-forward of portions of
current year quotas into the next year.
282
7.2. Trade in textiles and clothing within
the framework of the WTO
www.worldec.ru
The WTO Agreement on Textiles and Clothing
(ATC) (1)
Article 6 of the Agreement on Textiles and
Clothing allows for special selective transitional
safeguards to be taken against any product listed
in the ATC prior to its integration into GATT
1994.
283
7.2. Trade in textiles and clothing within the
framework of the WTO
The WTO Agreement on Textiles and Clothing (ATC) (2)
The ATC safeguards are to be applied on a country-bycountry basis. Before imposing a transitional safeguard on
a textile or clothing product, an importing country must
determine that:
www.worldec.ru


The product is being imported in such increased quantities
as to cause serious damage or actual threat thereof to the
domestic industry producing the like product and/or a
directly competitive product.
There is a direct causal link between such serious injury to
the domestic injury and a sharp and substantial increase in
imports from the specific originating country or countries
rather than other factors such as changes in technology or
284
consumer preference.
7.2. Trade in textiles and clothing within
the framework of the WTO
www.worldec.ru
The WTO Agreement on Textiles and Clothing (ATC)
(3)
 The safeguards will restrain exports from the
targeted country at levels agreed between the
exporting and importing member or, failing
agreement, as recommended by the Textile
Monitoring Body (TMB).
 When this safeguard mechanism is invoked, more
favourable treatment must be given to least
developed countries, small suppliers, new entrants
to the market and to re-imports from outward
processing zones.
285
7.2. Trade in textiles and clothing within
the framework of the WTO
www.worldec.ru
The WTO Agreement on Textiles and Clothing (ATC)
(4)



A transitional safeguard measure will have a
maximum term of three years, or until the product is
integrated into GATT 1994, whichever comes first.
If a measure is in place for more than one year,
levels of permissible imports must increase by no
less than 6 % per annum, unless otherwise justified
to the TMB.
The measure must also allow certain amounts of
carry-over and carry-forward
286
7.2. Trade in textiles and clothing within
the framework of the WTO
www.worldec.ru
1st of January, 2005 – termination of the agreement
Consequences for
developed countries
developing countries
287
Questions and exercises
www.worldec.ru
1.
2.
3.
4.
How important is trade in textiles and clothing for
developed and developing countries? Please,
analyse: production, employment, imports,
exports, etc.
Analyse the position of Russian producers of
textile and clothing.
Analyse the rules and practice of market access for
textile and clothing to Russian/your country
market.
Are there any difference in applying safeguard
measures under ATC agreement and nowadays?
288
www.worldec.ru
8. Trade in Services
8.1. Trade in Services – key issues
8.2. The GATS
8.1. Trade in Services – key issues
www.worldec.ru
The International Services Economy


High and growing importance for
income, employment and production
Increasing share in world trade
290
8.1. Trade in Services – key issues
European Union
www.worldec.ru
COMMERCIAL SERVICES
TRADE
Value
Annual percentage change
2007
20002007
Commercial services exports
(million US$)
667 163
...
13
22
Commercial services imports
(million US$)
544 899
...
9
19
2007
Share in world total exports
27.70
200
6
2007
2007
Share in world total
24.01
imports
291
8.1. Trade in Services – key issues
Germany
www.worldec.ru
COMMERCIAL
SERVICES TRADE
Value
Annual percentage
change
2007
20002007
Commercial services
exports (million US$)
205 786
15
15
15
Commercial services
imports (million US$)
250 471
10
8
15
2006
2007
Share in world total exports
6.25
2007
2007
Share in world
total imports
8.12
292
8.1. Trade in Services – key issues
USA
www.worldec.ru
COMMERCIAL
SERVICES TRADE
Value
Annual percentage
change
2007
20002007
Commercial services
exports (million US$)
456 363
7
10
15
Commercial services
imports (million US$)
335 851
7
9
9
2006 2007
2007
Share in world total
exports
13.86
2007
Share in world
total imports
10.9
293
8.1. Trade in Services – key issues
Switzerland
www.worldec.ru
COMMERCIAL SERVICES
TRADE
Value
Annual percentage
change
2007
20002007
Commercial services exports
(million US$)
61 496
12
10
21
Commercial services imports
(million US$)
33 860
13
5
18
200
6
2007
Share in world total exports
1.87
2007
2007
Share in world
total imports
1.10
294
8.1. Trade in Services – key issues
China
www.worldec.ru
COMMERCIAL
SERVICES TRADE
Value
Annual percentage
change
2007
20002007
Commercial services
exports (million US$)
121 655
22
24
33
Commercial services
imports (million US$)
129 254
20
21
29
2006 2007
2007
Share in world total exports
3.70
2007
Share in world
total imports
4.19
295
8.1. Trade in Services – key issues
Russian Federation
www.worldec.ru
COMMERCIAL SERVICES
TRADE
Value
Annual percentage
change
2007
20002007
Commercial services exports
(million US$)
39
050
22
25
27
Commercial services imports
(million US$)
57
805
20
16
32
2006
2007
Share in world total exports
1.19
2007
2007
Share in world
total imports
1.87
296
8.1. Trade in Services – key issues
www.worldec.ru
Definition (1)
 While trade policy traditionally dealt
with trade in goods – generally physical
products – an increasing amount of
international trade today is in invisible,
non-physical products or "services."
297
8.1. Trade in Services – key issues
www.worldec.ru
Definition (2)
 The term "trade in services" applies to
international transactions involving such
diverse fields as retail sales, tourism,
banking, insurance, transport,
telecommunications, education,
construction, and consulting engineering,
among others.
298
8.1. Trade in Services – key issues
www.worldec.ru
Definition (3)
 The delivery of services may involve the
international movement of people,
particularly highly skilled individuals
who provide services that are intellectual
output, such as advice to clients.
299
8.1. Trade in Services – key issues
www.worldec.ru
Some Services Agreements (1)
Articles on services could be found in…




NAFTA,
Treaty of Rome,
OECD Code on transactions in current invisibles,
and
various sector specific arrangements like the
Chicago Convention dealing with air traffic and
various agreements relating to financial services
and telecommunications)
300
8.1. Trade in Services – key issues
www.worldec.ru
Some Services Agreements (2)
 As well, some services are commonly
incorporated in goods which are
themselves subject to border regulation
under the GATT



exposed photographic film,
audio recordings,
blue prints and legal documents.
301
8.1. Trade in Services – key issues
www.worldec.ru
Question:
What are the barriers to cross-border trade in
services?


Barriers to trade in services are quite
varied and depend on numerous local
regulations.
Crafting a services agreement was also
complicated by the different ways in
which services may be supplied
internationally.
302
5.1. Trade in Services – Background
www.worldec.ru
Question:
What are the barriers to cross-border trade in services?
 In some industries, it may be necessary for a company to
set up a local office to supply some services (such as
banking, or restaurants). So, market access in such cases
is affected by restrictions on foreign direct investment.
 In other instances, specialized services, such as
entertainment, may only be supplied by artists or
musicians who must travel to another country for short
periods of time to perform in concerts. Immigration laws
or restrictions on work permits would be a barrier to the
export of such services.
303
5.1. Trade in Services – Background
Market Access (Article XVI)
www.worldec.ru

The following six policy measures inhibit services trade.
They must be stated in their schedules in order to be
permitted:






limits on the number of service providers;
limits on the total value of service transactions;
limits on the total number of service operations or the
amount of services supplied;
limits on the number of persons employed in a particular
service sector;
restrictions on the type of legal entity through which a
foreign service company may deliver its service (e.g.,
branches, joint-ventures, subsidiaries)
304
restrictions on foreign investment.
8.2. The GATS
www.worldec.ru
GATS: Objectives

Progressive liberalization of trade in
services

Promoting economic growth and
development

Increasing participation of developing
countries
305
8.2. The GATS
www.worldec.ru
GATS: Main Characteristics

Liberalization not deregulation

New definition of trade

Relationship to domestic regulation
306
8.2. The GATS
www.worldec.ru
GATS: Scope and Definition (1)

Part I: Article 1 (Scope and Definition)

Scope of application of the Agreement

Definition of "trade in services"




Cross-border supply
Consumption abroad
Supply through commercial presence
Supply through the presence of natural persons

Regulatory implications

Sectoral coverage: all services
307
8.2. The GATS
Coverage of the GATS (Article I)
 The GATS covers all internationally traded services except
services supplied in the exercise of government authority
(i.e., those supplied on a non-commercial basis and not in
competition with the private sector —police, customs,
etc.).
 The GATS negotiators identified a list of 12 service sectors
and 49 broad categories with many sub-categories or
activities (e.g., Business Services as a sector and
"Computer and Related Services" as a category).
 The list of about 160 services used in the negotiations was
based on a list developed by the United Nations called the
Central Products Classification.
308
www.worldec.ru
8.2. The GATS
The main service sectors included are:
www.worldec.ru












Business Services
Communication Services
Construction and Related Engineering Services
Distribution Services
Educational Services
Environmental Services
Financial Services
Health Related and Social Services
Tourism and Travel Related Services
Recreational, Cultural and Sporting Services
Transport Services
Other Services - Services Not Included Elsewhere
309
8.2. The GATS
www.worldec.ru
Coverage of the GATS (Article I)
 GATS rules apply to all levels of government
(national, sub-national and municipal) as well as
non-governmental bodies that operate through
powers delegated by these three levels of
government – e.g., independent agencies and
commissions and self-regulatory bodies.
 In many countries, state and local governments
are quite important in regulating many service
industries so it was necessary to ensure that the
disciplines that national governments assumed in
an international treaty would apply to all levels
310
8.2. The GATS
www.worldec.ru
The commitment in relation to subnational
governments formally is not so different
from the commitment in the GATT.

Article XXIV.12 of the GATT uses language
that is very similar to Article I.3 of the GATS,
except that only GATS refers to nongovernmental bodies and specifically defines
the measures to which the obligations apply as
including all levels of government and their
delegates.
311
8.2. The GATS
www.worldec.ru
Modes of Supply
Mode 1. Cross-border Supply
 Services are supplied by firms in one
country to firms or consumers in another
country and neither the services supplier nor
the firm or person consuming the service
travels to the other's country (e.g.,
consultancy services supplied through
international telephone calls, cargo
transportation).
312
8.2. The GATS
www.worldec.ru
Modes of Supply
Mode 2. Consumption Abroad
 Consumers or firms in one country travel
to another country to purchase or make
use of services (e.g., tourism, education).
313
8.2. The GATS
www.worldec.ru
Modes of Supply
Mode 3. Commercial Presence



Services are supplied through the presence of a
commercial entity of one WTO member in the
territory of any other member (e.g., banking,
restaurants).
In other words, a firm from one country sets up
a business establishment in another country in
order to supply services.
Establishment can take various forms, including
incorporation, branch, and joint-venture.
314
8.2. The GATS
www.worldec.ru
Modes of Supply
Mode 4. Presence of Natural Persons


Services are supplied through temporary cross-border
movement of persons (e.g., consultants, musicians or
performers) from one country to another.
This is also referred to as temporary entry. Temporary
entry may be important for managers and specialized
personnel to work at a commercial presence in a
foreign jurisdiction.
315
8.2. The GATS
www.worldec.ru
GATS: Most-Favoured-Nation
Treatment


The Principle
The Exemptions
316
8.2. The GATS
www.worldec.ru
National Treatment (Article XVII)
 The national treatment obligation of the
GATS only applies to services activities
listed in a member's national schedules of
commitments.
 It is also conditional; a country can
maintain specific exceptions to national
treatment for any service sector or subsector listed in its schedule.
317
8.2. The GATS
www.worldec.ru
National Treatment (Article XVII)
 If a sector or service activity is included
in a country’s schedule, and there is no
exception stated for it, the government is
obliged to treat foreign services and
service companies no less favourably than
similar service suppliers.
318
8.2. The GATS
www.worldec.ru
Market Access (Article XVI)

Like national treatment, the market
access obligation only applies to
services that a country lists in its
schedule, subject to the terms,
limitations and conditions that it
specifies in that schedule.
319
8.2. The GATS
Progressive Liberalization (Article XIX)
 A fundamental aspect of the GATS is the principle of
progressive liberalization.
 The GATS calls for further negotiations in five years that
are expected to lead to increased market access.
 Future rounds of negotiations will try to improve the
level of commitments undertaken by each WTO member
and to increase and deepen the coverage of the service
sectors and activities in each national schedule.
 The GATS is an important first step in liberalizing world
services trade but few members agreed to improve access
to their markets. Most members simply committed not to
make their existing regimes more restrictive.
www.worldec.ru
320
8.2. The GATS
www.worldec.ru
Monopolies and Exclusive Service Providers (Article VIII,
IX)
 Governments are obligated under Article VIII to ensure
that monopoly service suppliers (such as
telecommunications and other utilities in many countries)
do not act in a manner that works against the mostfavoured nation principle.
 The obligation is intended to prevent monopolists or
exclusive service suppliers (whose exclusive rights are
authorized, established or otherwise protected) from
abusing their power in the market where they are
dominant when (and if) they compete in a market for
another service (i.e. not the market in which they are321
8.2. The GATS
www.worldec.ru
Financial Services


This Annex defines financial services as including
insurance and banking and financial services related to
the issuing and trading of securities. It excludes central
bank activities and these relating to social security and
public retirement plans.
It says that governments have the right to take measures
such as those for the protection of investors, depositors
and insurance policy holders, and to ensure the integrity
and stability of their national financial system. The
Annex itself imposes no obligations.
322
8.2. The GATS
www.worldec.ru
Financial Services
 The negotiations on financial services resulted in market
access commitments by 70 countries which came into
effect in June 1999 as the Fifth Protocol of the GATS.
 Many members accepted new commitments including
reduced limitations on foreign ownership of local banks
and on the expansion of existing operations and
commercial presence.
 Some developed countries also allowed greater access to
their securities markets. However, most developing
countries did not allow significant new market access in
financial services
323
8.2. The GATS
www.worldec.ru
Telecommunications
 The Annex recognizes the roles of telecommunications as
a distinct sector of economic activity as well as its vital
importance to the delivery of many other services.
 Its core obligations concern access to and use of “public
telecommunications transport networks and services”.
 It requires governments to ensure that all service
suppliers (in sectors in which a member has made
specific commitments) are allowed access to, and use of
public basic telecommunications, both networks and
services, on a reasonable and non-discriminatory basis.
 Developing countries are allowed to place “reasonable
conditions” on access to and use of telecommunications
networks and services in order to strengthen their local
capacity with the aim of increasing their trade in this
324
industry.
8.2. The GATS
www.worldec.ru
Telecommunications
 The negotiations on basic telecommunications covered a
broad range of services from telephone calls to mobile
data services and teleconferencing. When the
negotiations finished in 1997, countries that provided
increased market access for various telecommunications
services indicated so in their schedules.
 In addition, many members agreed to the disciplines in
the Reference Paper on Regulatory Principles, in whole
or in part, which sets specific standards for
interconnection to networks, fair competition, transparent
government regulation, among other obligations.
325
8.2. The GATS
www.worldec.ru
GATS: Transparency

Introduction

Publication of all relevant laws and
regulations

Enquiry points

Notification obligations

Protection of confidential information
326
8.2. The GATS
www.worldec.ru
Transparency (Article III)

WTO members are obligated



publish all relevant laws and regulation affecting
trade in services, including those made by
regional or local authorities,
notify changes in their laws which significantly
affect trade in services in a listed sector to the
WTO (Council on Trade in Services)
establish and maintain enquiry points within
their bureaucracies to enable governments of
member states to obtain information about
regulations of general application, and
international commitments related to trade in
services as well as changes in measures which327
8.2. The GATS
www.worldec.ru
Transparency (Article III)
Governments are exempted from
providing confidential information
that could undermine or jeopardise
law enforcement or legitimate
commercial interests.
328
8.2. The GATS
www.worldec.ru
GATS: Participation of developing
countries

Significance of developing countries

Liberalization supports development

Contact points

Least developed countries
329
8.2. The GATS
www.worldec.ru
GATS: Domestic regulation

Appeals procedure

Reasonable, objective and impartial administration of
regulations

Licensing, qualifications and technical standards

Taking account of international standards

Procedures to verify competence of professionals

Development of new disciplines on domestic regulation
330
8.2. The GATS
www.worldec.ru
GATS: Recognition

Adequate opportunity to negotiate

Obligation to notify

Use of internationally recognized
standards
331
8.2. The GATS
www.worldec.ru
GATS: Monopolies and business
practices

Conformity with obligations and
commitments

New monopoly rights

Consultations on business practices
332
8.2. The GATS
www.worldec.ru
GATS: Safeguards, Government
Procurement and Subsidies

Emergency Safeguard Measures

Government Procurement

Subsidies
333
8.2. The GATS
www.worldec.ru
GATS: Payments and transfers

Current account transfers

Capital account transfers
334
8.2. The GATS
www.worldec.ru
GATS: Restrictions to safeguard the
balance-of-payments


Parameters for types of restrictions
Notification and Consultation
335
8.2. The GATS
www.worldec.ru
GATS: Exceptions


General exceptions
Security exceptions
336
8.2. The GATS
www.worldec.ru
General and Security Exceptions (Article XIII,
XIV, XIVbis) (1)
 The GATS provisions on general and security
exceptions allowing governments to pursue their
national interests are perhaps the closest of all to
their GATT equivalents.
 The general exceptions must not be applied as a
means of arbitrary or unjustifiable
discrimination between countries or as a
disguised restriction on trade in services.
337
8.2. The GATS
www.worldec.ru
General and Security Exceptions (Article XIII,
XIV, XIVbis) (2)
 The allowable list of exceptions includes, among
others, the protection of public morals and
human, animal or plant life or health.
 It also contains provisions particular to services
such as the prevention of deceptive and fraudulent
practices, the protection of individual privacy in
the handling of personal data, and equitable and
effective taxation.
338
8.2. The GATS
www.worldec.ru
General and Security Exceptions (Article XIII,
XIV, XIVbis) (3)
 The security exceptions state that nothing in the
GATS requires a government to give information,
or take action, against its essential security
interests or to prevent it from carrying out its
obligations under the United Nations Charter for
peace and security.
339
8.2. The GATS
www.worldec.ru
Services Schedules
What is the significance of the services schedule?
 A country’s obligations – even in such fundamental
respects as treating a foreign service supplier on the same
basis as a national supplier – depend largely on the
specific commitments it has made in its national
schedule.
 As with other trade sectors, an individual country’s
commitment to open markets in specific service sectors
and the extent of such opening are the result of
negotiations.
 The market access commitments of each country appear
340
in its Schedule of Specific Commitments.
8.2. The GATS
www.worldec.ru
What is contained in a service schedule?
 The services schedules are complex, and very
different from GATT schedules, which consist of
little more than long lists of numbers identifying
different products and specifying a maximum
import duty for each.
341
8.2. The GATS
www.worldec.ru
What is contained in a service schedule?
 A member’s GATS schedule is a document that
lists:



the services sectors, subsectors or activities
subject to specific commitments, notably national
treatment and market access ("listed sectors"),
the extent of market access allowed for listed
sectors (e.g., whether there are restrictions on
foreign ownership), and
any limitations on national treatment (whether
some privileges granted to local companies will
not be given to foreign companies) relating to
342
listed sectors.
8.2. The GATS
www.worldec.ru
GATS: Specific commitments

Schedules of
Commitments

Horizontal
Commitments

Commitments
relating to Sectors
and/or SubSectors


Market Access
National
Treatment
343
8.2. The GATS
www.worldec.ru
GATS: Part IV - Progressive
liberalization

Negotiation of specific commitments

Schedules of specific commitments

Modification of Schedules
344
8.2. The GATS
www.worldec.ru
GATS: Part IV - The process of progressive
liberalization in services
 Listing a services sector activities in a services
schedule is a specific commitment to provide
market access and national treatment for the
service activity in question on the terms and
conditions specified in the schedule.
345
8.2. The GATS
www.worldec.ru
GATS: Part V - Institutional provisions

Consultations

Dispute settlement and enforcement

Institutional provisions
346
8.2. The GATS
www.worldec.ru
GATS: Part VI - Final provisions

Denial of benefits

Definitions

Annexes
347
8.2. The GATS
GATS: Annexes
 Introduction
 Permanent validity
www.worldec.ru







Air Transport
Movement of Natural Persons
Article II Exemptions
Telecommunications
Financial Services
Temporary annexes
Related instruments


Decision on professional services
Understanding on commitments in financial services348
8.2. The GATS
www.worldec.ru
GATS: Financial services

Background

Activities covered

Insurance and insurance-related services

Banking and other financial services

Interim agreement concluded by 28 July 1995

New negotiations concluded on 12 December
1997
349
8.2. The GATS
www.worldec.ru
GATS: Basic Telecommunications


Overview
How basic telecommunications were
defined

How the negotiations evolved
350
8.2. The GATS
www.worldec.ru
GATS: Telecom commitments (1)

Market access

Regulatory disciplines

MFN treatment
351
8.2. The GATS
www.worldec.ru
GATS: Telecom commitments (2) – Basic Services
352
8.2. The GATS
GATS: Telecom commitments (3) – Enhanced or
value-added services
www.worldec.ru
353
8.2. The GATS
www.worldec.ru
GATS: Movement of natural persons

Background

Concluded by 28 July 1995

Level of commitments
354
8.2. The GATS
www.worldec.ru
GATS: Professional services (1)

Activities covered

Working Party on Professional Services


Work programme: accountancy sector
first ...
... then sector-by sector or horizontally?
355
8.2. The GATS
www.worldec.ru
GATS: Professional services (2)

Working Party: mandate

Disciplines relating to market access

Use of international standards

Recognition of qualifications

Fact-finding
356
8.2. The GATS
www.worldec.ru
GATS: Rules

Working Party on GATS Rules

Emergency safeguard

Government procurement in services

Subsidies
357
8.2. The GATS
www.worldec.ru
GATS: Maritime transport

Background

Activities covered

Questionnaire

Draft model schedule of commitments

To be concluded by 30 June 1996 ...
suspended
358
8.2. The GATS
www.worldec.ru



Having looked briefly at the GATS one must
remember that Uruguay Round services package is
only a beginning.
The GATS rules are incomplete and are untested
and they will develop over time.
If we compare the achievement of the GATS to the
rules on goods, it is only a starting point as in 1947
when the original GATT agreement was signed, not
the current GATT commitments by WTO members.
359
Questions and exercises
www.worldec.ru
1.
2.
3.
Why multilateral negotiations on trade in services
were launched much later than negotiations on
goods
Pick up any sector or a sub-sector of services.
Analyze the current stage of regulation of chosen
sector in Russia (your country)
Analyse modern trends of international trade in
services. Take into consideration the following
figures (volume, leading exporters, main
importers, etc.).
360
6. Intellectual property rights
and trade
www.worldec.ru
6.1. The nature of IPRs
6.2. The TRIPs Agreement
361
6.1. The nature of IPRs
www.worldec.ru
Overview



What are intellectual property rights (IPRs)?
The economics of IPRs protection
The pharmaceutical debate
362
6.1. The nature of IPRs
www.worldec.ru


What is Intellectual Property?
Intellectual property may be described as
rights to intellectual creations that allow
the owner of those rights to prevent others
from gaining economic and other benefits
from the creation. These rights can be
thought of as a form of limited monopoly.
The form of intellectual property
protection varies depending on the type of
intellectual property
363
6.1. What are IPRs
www.worldec.ru
Intellectual property is not like other goods.
A piece of knowledge, whether the blueprint
for a new machine or a new variety of
wheat – unlike a physical object - can be
used by one person without limiting its
use by others. The widest possible
dissemination of new knowledge or
technology leads to the greatest
efficiency.
364
6.1. The nature of IPRs
www.worldec.ru

Intellectual property rights (IPRs)
consist of two main branches


Industrial property — This consists
mainly of inventions, trademarks,
industrial designs, and geographical
indications;
Copyright and related rights — This
consists mainly of literary, musical,
artistic, photographic, and audiovisual
works.
365
6.1. The nature of IPRs
www.worldec.ru
Two categories of IPRs
IPRs that stimulate inventive and creative
activities


Patents, copyright, industrial designs, plant
breeders’ rights, layout designs for integrated
circuits, utility models, trade secrets
IPRs that resolve information asymmetries


Trademarks, geographic indications
366
6.1. The nature of IPRs
www.worldec.ru
Patents
Protect inventions that are new, non-obvious, and
commercially useful

Protection for 20 years, after which the invention
moves into public domain

Main users:

All manufacturing industries

Since the early 1980s: agricultural biotechnology,
computer software, business methods
367
6.1. The nature of IPRs
www.worldec.ru
Copyright and neighboring rights
Protects the expression of an intellectual creation

Protection lasts for the life of author plus 50-70
years

Main users:

Authors in literary, artistic, and scientific fields

Performers and broadcasting organizations

Producers of computer software
368
6.1. The nature of IPRs
www.worldec.ru
Trademarks

Words, signs, or symbols that identify a certain
product of company
Protection can endure virtually indefinitely provided
they remain in use
Main users


All goods and service industries

Of high importance for certain consumer goods

Recent economic significance: Internet domain
names
369
6.1. The nature of IPRs
www.worldec.ru
Plant breeders’ rights
Protect new plant varieties that are distinct from
existing varieties, uniform, and stable. Exclusive
sale and distribution rights for 15 years. But



Research exemption
Farmers’ privilege to reuse harvested seeds
Main users:

Plant breeders
370
6.1. The nature of IPRs
www.worldec.ru
Components of an IPRs system
Intellectual property laws

National registries for patents, trademarks,
and plant breeders’ rights

Judicial system responsible for enforcing IPRs

Treaties to promote international cooperation
and facilitate registration of IPRs in more than
one jurisdiction

Control of anti-competitive practices
371
6.1. The nature of IPRs
www.worldec.ru

Resolution of market failure

Information (and knowledge) possess characteristics
of public goods

Non-rival in consumption

Creators (typically) cannot appropriate new
information
372
6.1. The nature of IPRs
www.worldec.ru

Resolution of market failure

If left to the market, there would be few resources
devoted to the production of information, as
competitors could take a free ride
373
6.1. The nature of IPRs
www.worldec.ru
IPR protection – two polar views:

Proponents: more R&D, more FDI, more rapid
economic growth

Opponents: forestalled access to new technologies,
higher prices and rent transfers

High implementation costs?

WTO+ commitments in the accession process?
374
6.1. The nature of IPRs
www.worldec.ru
Patents: a second best solution
Through time-bound exclusivity, creators of knowledge
can charge prices above marginal costs and thereby
recoup initial investment in generating information
 Second-best: because static market distortion
 But: decision-making decentralized and driven by
profit motive
 Government can, in principle, fix the length of
protection, such as to maximize social benefits and
minimize associated economic costs
375
6.1. The nature of IPRs
www.worldec.ru
Practical complications



Lack of information on parameters needed to
optimize scope of protection
Optimal scope of protection differs across economic
sectors, depending on the availability of other means
to appropriate knowledge-generating activities (e.g.,
technology, first mover advantage, etc.)
Patents and the diffusion of knowledge:

Restrict imitation

Disclosure of knowledge; tool for licensing
376
6.1. The nature of IPRs
www.worldec.ru
“If we did not have a patent system, it would be
irresponsible, on the basis of our present knowledge of its
economic consequences, to recommend instituting one.
But since we have had a patent system for a long time, it
would be irresponsible, on the basis of our present
knowledge, to recommend abolishing it.”
—Fritz Machlup (1958)
377
6.1. The nature of IPRs
www.worldec.ru
Trademarks are different


Market failure of asymmetric information
Trademarks assure consumers that they purchase what
they intend to purchase

Trademarks thus offer an incentive to invest in reputation
and superior quality

Trademark protection can co-exist with competitive
markets

Protection is not time-bound
378
6.1. The nature of IPRs
www.worldec.ru
Practical complications


Special case: status goods, which confer prestige on
their owners (apart from any utility derived from their
function and physical characteristic)

Brand ownership can confer substantial market
power to producers
Should trademark protection also be considered as a
tool to stimulate inventive and creative activities?
379
6.1. The nature of IPRs
www.worldec.ru
IPRs in open economies
Basic asymmetry:

Northern countries are both producers and consumers of
intellectual assets

Southern countries are mostly consumers of these assets
380
6.2. The TRIPs Agreement
www.worldec.ru
Transitional arrangements

1 January 1995: entry into force

1 January 1996: developed countries +
non-discrimination (all Members)

1 January 2000: developing countries &
economies in transformation

1 January 2006: least-developed countries (exceeded till
2016)
381
6.2.The TRIPS Agreement
www.worldec.ru
TRIPS Overview





Multilateral WTO Agreement, applicable to all
existing and newly acceding Members
General obligations: national treatment and mostfavored nation treatment
Minimum standards of protection for all types of
IPRs
Obligations on the enforcement of IPRs
Members can invoke the WTO’s inter-governmental
dispute settlement system
382
6.2.The TRIPS Agreement
www.worldec.ru
TRIPS: flexibility



Definition of novelty, non-obviousness, and
usefulness of patentable inventions
Fair use exemptions in the area of copyright
No obligation on the permissibility of parallel trade
383
6.2.The TRIPS Agreement
www.worldec.ru
TRIPS: flexibility





TRIPS allows the use of compulsory licenses
In case of emergencies, compulsory licenses can be
granted without an attempt to obtain voluntary
license from patent holder
TRIPS permits “use exception” to allow generic
producers to obtain market authorization prior to
patent expiry
No obligation on legality of parallel imports
Members are free to impose price regulations
384
6.2.The TRIPS Agreement
www.worldec.ru
TRIPS: obligations
Article 27:

Patents to be awarded without discrimination among fields
of technology

Patents to cover both processes and products

Patents to be protected for 20 years from the date of filing
385
6.2.The TRIPS Agreement
www.worldec.ru
TRIPS: obligations
Article 39:


Protection of undisclosed test data against unfair
commercial use, where such data is submitted to
regulatory authorities
386
6.2.The TRIPS Agreement
www.worldec.ru
TRIPS: obligations


Developing countries without product patent laws
have until January 1, 2005 to comply, but must,
nonetheless, grant market exclusivity to
pharmaceutical products
Least developed countries were given until January 1,
2006 to comply. The Doha Declaration extended the
deadline to January 1, 2016 for least developed
countries
387
6.2.The TRIPS Agreement
www.worldec.ru
Doha declaration
Background:

Spreading HIV/AIDS pandemic in large parts of the
developing world

General concern that there may be conflicts between
TRIPS and public health objectives
Content:

Confirms TRIPS flexibilities (political endorsement)

Extension of implementation deadlines for LDCs

Unresolved issue: compulsory licensing when
manufacturing capacity is insufficient
388
6.2.The TRIPS Agreement
www.worldec.ru
IPRs in bilateral/regional FTAs
New wave of US FTAs include IPRs provision that go beyond
TRIPS:


Concluded agreements: Jordan, Singapore, Chile, Central
America, Morocco, Australia

Currently under negotiations: Thailand, Dominican Republic,
SACU, Bahrain
389
6.2. The TRIPs Agreement
www.worldec.ru
TRIPS: Council for TRIPS

Monitoring the operation of the
Agreement

Review of national laws and
regulations

Consultations

Technical cooperation

Forum for further negotiation
390
6.2. The TRIPs Agreement
www.worldec.ru

TRIPS: Cooperation with WIPO

Agreement between WIPO and the WTO

Notification of, access to and translation of
national laws and regulations

National emblems

Technical cooperation
391
Questions and exercises
www.worldec.ru
1.
What is intellectual property? How is it addressed in the
WTO?
2.
Were intellectual property rights covered under GATT
1947?
3.
What is the place of the TRIPS Agreement in the
multilateral trading system?
4.
What is the relationship between the TRIPS Agreement and
the pre-existing international conventions referred to in the
Agreement?
5.
Does the TRIPS Agreement apply to all Members?
6.
Do Members have any obligations under the TRIPS
agreement during the transition period?
392
Questions and Exercises
www.worldec.ru
7.
8.
9.
10.
11.
Discuss the consequences of stronger
intellectual property rights protection.
What are the international conventions in the
field of IPR protection?
What is the role of WIPO in IPR protection?
Does the TRIPS Agreement require all
Member's rules on protection of intellectual
property to be identical?
Does the Agreement allow compulsory
licensing of patents?
393
7. Trade and investments
www.worldec.ru
7.1. National Regulation of FDI
7.2. International Rules on Investment
7.3. Rules on Investment and the WTO
394
7.1. National Regulation of FDI
www.worldec.ru
Investment is a significant form of
international economic activity but is not
yet the subject of comprehensive
international rules.
National regulation may take many forms
ranging from prohibitions on FDI in some
sectors to differential treatment of foreign
investors.
395
7.1. National Regulation of FDI
www.worldec.ru
States may impose limits on ownership by foreigners or
require approval of foreign investment.
Approval may be required in all cases, for investments
exceeding certain monetary thresholds or in certain
sectors which are strategically important or
economically or politically sensitive.
Often national rules impose "performance
requirements" as a condition of approving the
investment.
396
7.1. National Regulation of FDI
www.worldec.ru
Types of Host State Performance Requirements:
 regarding the form of investment (e.g. only in a joint
venture with a national firm);
 for local content in goods manufactured by the foreign
investor;
 for local employment in the foreign investor's
operations;
 limiting a foreign investor's right to import goods to
the value of its goods exports ("trade balancing
requirements");
397
7.1. National Regulation of FDI
www.worldec.ru
Types of Host State Performance Requirements:
 to meet targets for export sales ("export performance
requirements");
 to produce certain products or sell in certain regions of
the host country or elsewhere ("product mandating
requirements"); and
 to transfer technology
398
7.2. International Rules on Investment
www.worldec.ru



More recently, developed countries, especially the
United States and the European Union, have been
actively negotiating bilateral investment treaties
(BIT's).
There have also been significant commitments entered
into regionally such as in the North American Free
Trade Agreement (NAFTA) and ongoing efforts to
negotiate multilateral rules such as in the current
negotiations to create a Free Trade Agreement for the
Americas (FTAA) .
In the WTO, commitments have been much more
limited.
399
7.2. International Rules on Investment
www.worldec.ru
The OECD has long worked to strengthen
international rules regarding investment.
The 1961 Code on the Liberalization of
Current Investment Transactions and the
Code on the Liberalization of Capital
Movements are binding instruments
which limit the ability of OECD members
to put in place measures interfering with
the flow of FDI.
Both codes are based on the principle of
non-discrimination between domestic and
400
foreign investors.
7.2. International Rules on Investment
www.worldec.ru



Subject to certain exclusions and national
reservations, the codes create a right for foreign
investors to establish themselves in the member
states of the OECD.
As well, the 1976 Declaration on International
Investment and Multinational Enterprises creates
a national treatment obligation though it is not a
binding commitment.
Decisions of the OECD Council, which are
binding, require that members give notice of any
national measures inconsistent with national
treatment.
401
7.2. International Rules on Investment
www.worldec.ru
The 1976 Guidelines for Multinational Enterprises, part
of the 1976 Declaration, adopt a different approach
to international rules on investment, focussing on the
concerns of host states with the behaviour of foreign
investors regarding, for example, corruption,
avoidance of domestic regulation, anti-competitive
conduct and labour practices.
402
7.2. International Rules on Investment
www.worldec.ru
Beginning in 1995, the OECD sponsored negotiations on a
Multilateral Agreement on Investment (MAI) which
would be binding on the 30 members of the
organization and open for any other country to join. In
draft form it contained a comprehensive set of
investment rules, more elaborate and stronger than the
rules in the standard BIT's and the NAFTA investment
chapter discussed below.
403
7.3. Rules on Investment and the WTO
www.worldec.ru
While there is no comprehensive set of rules dealing
with investment under the WTO, the General
Agreement on Trade in Services (GATS) applies to
services delivered through a commercial presence,
meaning through FDI.
The obligations under the GATS have not meant much
improvement in market access for foreign investors.
The main obligations applying to all services sectors
are limited to MFN and a modest transparency
commitment and even the MFN commitment is
subject to a list of MFN exemptions for most
404
countries.
7.3. Rules on Investment and the WTO
www.worldec.ru
Members have committed to give foreign investors
higher levels of market access and national
treatment in certain sectors by listing these
sectors in their national schedules.
Even in these sectors, however, most commitments
undertaken reflect only the degree of access
permitted under existing national regimes at the
time the commitments were entered into.
To the extent that the ongoing negotiations on
services in the WTO result in stronger
commitments on commercial presence the GATS
may become more important as an investment
agreement.
405
7.3. Rules on Investment and the WTO
www.worldec.ru
Some rules in the WTO relating to trade in goods
restrict the kinds of performance requirements
that may be imposed by national governments in
connection with their schemes of investment
regulation.
406
7.3. Rules on Investment and the WTO
www.worldec.ru
Other types of measures relating to investment are
inconsistent with GATT Article III or with
Article XI, the prohibition on quantitative
restrictions, such as:



trade balancing requirements,
restricting imports by a foreign investor of
products to be used in, or related to, its local
production by restricting the investor's access to
foreign exchange to an amount related to the
foreign exchange inflows attributable to the
business ("foreign exchange balancing"), and
restrictions on the export of products in terms of
the volume or value of products produced locally.
407
7.3. Rules on Investment and the WTO
www.worldec.ru
The Trade Related Investment Measures (TRIMS)
agreement negotiated as part of the Uruguay Round
makes clear that these sorts of investment measures are
contrary to the obligations of GATT 1994 and are
prohibited.
Notwithstanding that the TRIMS agreement only states an
already existing obligation, however, members are not
required to eliminate non-conforming measures
immediately.
Each member has an obligation to notify such measures to
the Committee on TRIMS, which was established under
the agreement to monitor the implementation of
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agreement, and to eliminate them over specified time
Questions and assignment
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1.
2.
3.
4.
Describe the how foreign investment is
regulated in your country
What countries are the main investors and
recipients of FDI
What is the influence of FDI on the economy
of the exporting and importing country
What kind of measures related to FDI that
inconsistent with the WTO rules uses Russia
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8. Regional trade agreements (RTAs)
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8.1. Scope of RTAs
8.2. The WTO rules on RTAs
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8.1. Scope of RTAs
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The vast majority of WTO members are party to
one or more regional trade agreements.
The surge in RTAs has continued unabated since
the early 1990s. Some 250 RTAs have been
notified to the GATT/WTO up to December 2002,
of which 130 were notified after January 1995.
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8.1. Scope of RTAs
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

Over 170 RTAs are currently in force; an
additional 70 are estimated to be operational
although not yet notified.
By the end of 2005, if RTAs reportedly planned or
already under negotiation are concluded, the total
number of RTAs in force might well
approach 300.
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8.1. Scope of RTAs
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

Negotiations are taking place within the
Negotiating Group on Rules (NGR)
which reports to the Trade Negotiations
Committee (TNC).
The negotiating group is pursuing a twotrack approach: identifying issues for
negotiation in formal meetings and;
holding open-ended informal
consultations on more procedural issues
related to transparency of RTAs.
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8.1. Scope of RTAs
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Regionalism is described in the Dictionary of Trade
Policy Terms, as “actions by governments to
liberalize or facilitate trade on a regional basis,
sometimes through free-trade areas or customs
unions”.
In the WTO context, regional trade agreements (RTAs)
have both a more general and a more specific
meaning: more general, because RTAs may be
agreements concluded between countries not
necessarily belonging to the same geographical
region; more specific, because the WTO provisions
which relate specifically to conditions of
preferential trade liberalization with RTAs. 414
8.1. Scope of RTAs
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RTAs can complement the multilateral trading system,
help to build and strengthen it.
RTAs are discriminatory: they are a departure from the
MFN principle, a cornerstone of the multilateral
trading system. Their effects on global trade
liberalization and economic growth are not clear.
Though RTAs are designed to the advantage of
signatory countries, expected benefits may be
undercut if distortions in resource allocation, as
well as trade and investment diversion, potentially
present in any RTA process, are not minimized, if
not eliminated altogether.
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8.2. The WTO rules on RTAs
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When a WTO member enters into a regional
integration arrangement through which it
grants more favourable conditions to its
trade with other parties to that
arrangement than to other WTO members’
trade, it departs from the guiding principle
of non-discrimination defined in Article I
of GATT, Article II of GATS, and
elsewhere.
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8.2. The WTO rules on RTAs
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WTO Members are however permitted to enter into
such arrangements under specific conditions
which are spelled out in three sets of rules:
 Paragraphs 4 to 10 of Article XXIV of GATT (as
clarified in the Understanding on the
Interpretation of Article XXIV of the GATT
1994) provide for the formation and operation of
customs unions and free-trade areas covering
trade in goods ;
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8.2. The WTO rules on RTAs
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Continued
 the so-called Enabling Clause (i.e., the 1979
Decision on Differential and More Favorable
Treatment, Reciprocity and Fuller Participation of
Developing Countries) refers to preferential trade
arrangements in trade in goods between developing
country Members; and
 Article V of GATS governs the conclusion of RTAs
in the area of trade in services, for both developed
and developing countries.
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8.2. The WTO rules on RTAs
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Other non-generalized preferential schemes, for
example non-reciprocal preferential agreements
involving developing and developed countries,
require Members to seek a waiver from WTO rules.
Such waivers require the approval of three quarters of
WTO Members.
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8.2. The WTO rules on RTAs
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Differential and more favourable treatment
reciprocity and fuller participation of developing
countries
This decision by signatories to the General
Agreement on Tariffs and Trade (GATT
“CONTRACTING PARTIES”) in 1979 allows
derogations to the most-favored nation (nondiscrimination) treatment in favor of developing
countries.
In particular, its paragraph 2(c) permits preferential
arrangements among developing countries in
goods trade.
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Questions and exercises
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1.
2.
3.
Analyze trade and investment flows between
the leading regional organizations.
What are trade creating and trade distorting
effects?
Case study: Mullavia
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9. Trade and competition policy
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9.1. Understanding of competition policy
9.2. Competition policy and the WTO rules
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9.1. Understanding of competition policy
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Subjects of Competition Policy
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Horizontal agreements to fix prices or
otherwise limit competition
Abuse of dominant or monopoly position
in the market
Predatory pricing
Vertical competition-restricting
agreements
Mergers
Marketing practices which interfere with
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9.1. Understanding of competition policy
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

Competition policy and rules promoting
trade and investment liberalization share a
common objective: both are intended to
promote competition, economic efficiency
and consumer welfare.
But trade rules also authorize certain types
of government measures which will limit
competition from foreign businesses in a
domestic market, such as tariffs and duties
imposed as a result of trade remedies
actions, for example anti-dumping.
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9.1. Understanding of competition policy
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Despite having a common objective, competition
and trade rules have a different focus: trade and
investment rules constrain government
measures, while most competition rules
constrain private behaviour.
More generally, trade rules deal with the
protection of producer interests, whereas
competition policy is not concerned with the
protection of producers to the exclusion of
other market participants.
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9.1. Understanding of competition policy
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Competition policy seeks to protect the
competitive process itself in order to
ensure that markets function efficiently
which means taking into account
consumer interests as well.
This can result in conflicts between trade
and competition policy.
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9.1. Understanding of competition policy
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Question:
Give the examples of the conflicts between
trade and competition policy.
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9.2. Competition policy and the WTO rules
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Main WTO provisions dealing with Competition Policy
 Agreement on Trade Related Aspects of Intellectual
Property (TRIPS)
-Article 40 (Members' ability to take action against
anti-competitive abuse of intellectual property rights)
 General Agreement on Trade in Services (GATS)
-Article VIII (Monopoly and exclusive services
providers not to abuse market power) and -Article IX
(State to state consultation on restrictive business
practices)
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9.2. Competition policy and the WTO rules
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Main WTO provisions dealing with Competition
Policy
 Trade Related Investment Measures Agreement
(TRIMS) -Article 9 (Council on Trade in Goods
to consider need for provisions relating to
competition policy)
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9.2. Competition policy and the WTO rules
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Regional and bilateral agreements on competition policy
 Canada, the United States, the European Union and a few
other developed countries have entered into agreements
relating to investigation and enforcement in competition
law matters.
 Typically such agreements require notification and
consultation by the national competition authority of one
state upon or prior to its initiation of a competition case
affecting the interests of the other state in order to avoid
conflicts and provide for cooperation.
 These arrangements are based on the principle of comity,
meaning that in enforcing national competition laws each
national competition authority will seek to take into
account the important interests of other states.
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9.2. Competition policy and the WTO rules
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Question: Why would a multilateral agreement on competition
policy be desirable?
Trade policy arguments
 One of the concerns raised by trade policy experts in
support of international rules on competition policy is the
risk that as barriers to trade and investment created by
government measures are diminished though the
implementation of international agreements like the WTO
they will be replaced with private barriers in the form of
anti-competitive conduct.
 Competition rules are seen as a key complement to the
privatization and regulatory reform occurring in many
countries. In the absence of such rules, state monopolies
may be replaced with private ones.
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9.2. Competition policy and the WTO rules
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Question:
Why would a multilateral agreement on
competition policy be desirable?
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9.2. Competition policy and the WTO rules
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Competition policy arguments
 The internationalization of commercial activity means
that competition issues are increasingly international in
character.
 Enforcing competition law rules against international
cartels and other anti-competitive activities involving
actors in multiple states requires cooperation and
coordination among national competition agencies.
 Where anti-competitive activity takes place outside the
national jurisdiction in which the effects are felt, the
competition authority in that jurisdiction may need the
assistance of the competition authority for the country in
which the activity did take place, both to investigate the
activity and to take enforcement action.
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9.2. Competition policy and the WTO rules
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


Differences in approaches to competition
policy
Compatibility with existing trade rules
Challenges related to setting minimum
enforcement
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11. Trade and environment
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10. Trade and environment
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GDP per capita
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10. Trade and environment
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The WTO Committee on Trade and
Environment (CTE) is the major forum
for discussion of environmental issues,
although they are also discussed in other
WTO bodies such as the Ministerial
Conference, the General Council, and
sectoral negotiating group.
The WTO Secretariat organizes information
programs on trade and the environment
for developing countries.
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10. Trade and environment
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How does the WTO deal with the
environment in broad terms?
 The WTO has approached environmental
issues within the context of two main
themes:
1) the general relationship between trade
liberalization and the environment; and
2) how specific trade rules relate to
international environmental agreements
together with the environmental protection
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policies held by individual member
10. Trade and environment
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Many of the WTO agreements and official
documents contain provisions relevant to the
environment. These include:
 The Preamble to the Marrakesh Agreement
Establishing the World Trade Organization (the
"WTO Agreement")
 The GATT Provisions on Non-Discrimination
 The GATT General Exceptions
 The GATS General Exceptions
 The SPS Agreement (Sanitary and Phytosanitary
Measures)
 The TBT Agreement (Technical Barriers to
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Trade)
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Environmental Implications of NonDiscrimination
 Non-discrimination helps to prevent the
misuse of environmental policies as
disguised barriers to trade. National
environmental policies can be as strong as
governments wish but they must not
arbitrarily discriminate between foreign
and domestically made products, or
between products imported from different
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trading partners.
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Like Products
 MFN prohibits discrimination between
like products imported from different
trading partners. National treatment
prohibits the discrimination between like
products produced domestically and those
produced abroad.
 The WTO defines "like products" as
products that are the same or equivalent.
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10. Trade and environment
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
The test of equivalency has traditionally
been based on the composition and
characteristics of the end product.
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10. Trade and environment
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

The WTO has not accepted processing
methods and standards as a basis for
discrimination even if the two processes
result in products which are identical.
They argue that governments should be
able to discriminate against products
produced using environmentally harmful
processes in a number of cases brought to
dispute settlement because of
discrimination on the basis of
environmentally harmful processes. 443
10. Trade and environment
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The GATT General Exceptions
 The general exceptions, set out in Article XX, allow
WTO members to adopt policies that would
normally be inconsistent with GATT but which are
necessary to protect human, animal or plant life or
health, or if such measures are related to the
conservation of exhaustible natural resources. Some
environmental measures which would otherwise be
inconsistent with the GATT may be permitted under
these provisions.
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10. Trade and environment
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

The Committee on Trade and the
Environment (CTE) is responsible for
studying the relationship between trade
and the environment across all WTO
agreements including commitments on
goods, services and intellectual property.
The CTE makes recommendations about
changes that might be needed in trade
agreements.
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10. Trade and environment
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The CTE has adopted two broad principles in its
approach to environmental issues:
1) The WTO is only competent to deal with
trade matters. Because it is not an
environmental agency, the CTE only deals with
issues that appear when environmental policies
have a significant impact on trade. The WTO
believes that other organizations with greater
environmental expertise are better equipped to
deal with specialized environmental questions.
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10. Trade and environment
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The CTE has adopted two broad principles in its
approach to environmental issues:
2) Where problems are found, the solutions
must be compatible with the principles of the
WTO trading system. These principles are
based on commitments to non-discrimination,
transparency and progressive reduction of
barriers to trade.
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10. Trade and environment
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The relationship between the WTO and
international environmental agreements
(1)
 In approaching potential conflict between
trade and environment and, in fact, most
issues, the WTO has a clearly stated
preference for international cooperation on
issues that are more than just national in
scope.
 Consequently, the organization has thrown its
support behind multilateral environmental
agreements as a way to deal with regional 448
and global environmental problems.
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The relationship between the WTO and
international environmental agreements (2)
 The WTO attempts to discourage unilateralism, i.e.
where a state takes independent action to deal with
a problem that may reach well beyond its borders.
 First, because the GATT/WTO system is
commitment to the view shared problems are best
dealt with through international cooperation.
 Secondly, unilateral environmental policies may be
implemented in ways that clash with WTO's
collective principles on trade.
 Unilateral action by a state may result in
discrimination that violates existing trade
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principles.
10. Trade and environment
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The WTO Committee on Trade and the
Environment says that international
environmental agreements are the best way
to deal with environmental problems.
 Among the agreements are



the Montreal Protocol for the Protection of
the Ozone Layer,
the Basel Convention on the trade or
transportation of hazardous waste across
international borders, and
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the Convention on International Trade in
10. Trade and environment
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What does the principle of "lex specialis" mean
to environmental protection?
 The CTE has speculated that the trade-related
measures of an environmental agreement to
which WTO members are signatories could be
regarded as lex specialis, meaning that such
measures would prevail over WTO provisions in
the event of a conflict.
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2) How should disputes be handled?
If a WTO member has taken an action on trade
under the provisions of a Multilateral
Environmental Agreement and another WTO
member complains about it, where should the
dispute be heard?
 The CTE suggests that if both countries are
signatories to the MEA, then they should try to
settle the dispute within the framework provided by
the MEA. Special difficulties arise when MEA trade
measures are applied to WTO members who are not
signatories to that particular MEA.
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3) Eco-labeling
 Eco-labels provide consumers with information
about the environmental impact of the product in
terms of its production, processing, packaging or
transportation as well as information regarding its
consumer and post-consumer use (also called the
product life-cycle).
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3) Eco-labeling
 Eco-labels serve a number of purposes.


They reward producers and suppliers for using
environmentally friendly production practices and
they give consumers an opportunity to express their
environmental and social values in their purchasing
decisions.
As well, they may help to push producers toward
better environmental stewardship.
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4) Transparency
 One tool used by the WTO to improve
transparency is the requirement that
members notify the WTO about any new
trade laws, actions, or decisions.
 The CTE is working together with the
WTO Secretariat to compile information
on trade-related environmental measures
from its Central Registry of Notifications.
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5) Exporting domestically prohibited goods
 The issue of domestically prohibited goods
has been on the GATT/WTO agenda since
the early 1980s.
 Essentially the problem is an ethical one
involving the decision by some countries to
export goods that cannot be sold in their
home markets for health or environmental
reasons.
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6) The relationship between trade liberalization and
sustainable development
 The 1987 Brundtland Report, produced by the
World Commission on Environment and
Development coined the term sustainable
development as a way to describe the interlinkage
between human development and the environment.
 It is "development seeking to meet the need of the
present generation without compromising the
ability of future generations to meet their own
needs. It aims at assuring the on-going productivity
of exploitable natural resources and conserving all
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species of fauna and flora."
10. Trade and environment
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Trade:
· Causes pollution;
· Encourages the rapid depletion of nonrenewable resources such as fossil fuels and
minerals; and
· Exploits renewable resources such as water,
air, and forests beyond their replenishment
levels.
At the same time, the free trader has an equally
skewed perspective on the effect of
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environmental measures.
Questions and assignment
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Assignment
Describe negative and positive effects of
international trade on the environment in
Russia/your country
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Questions and exercises
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Exercise
Discuss the pluses and minuses of the WTO
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Glossary
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tariff line (TL in the tables): a product,
as defined by a system of code
numbers for tariffs
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www.worldec.ru
1.2. PRINCIPLES OF INTERNATIONAL
TRADE SYSTEM
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1.2. Principles of international trade system
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Basic concepts underpinning modern trade
agreements
 Non-discrimination:
 Most favoured nation (MFN)
 national treatment (NT)
 Transparency
 Due process
 Joint decision making
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1.2. Principles of international trade system
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Non-Discrimination and Market
Efficiency
 Non-discrimination helps to provide
consumers with access to higher quality
goods at better prices by improving the
competitive conditions in domestic
markets and improving the
competitiveness of domestic firms.
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1.2. Principles of international trade system
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Transparency means visibility and clarity
of laws and regulations.
 In the GATT/WTO system transparency
obligations require that all trade law and
related decisions be made public and
administered in a reasonable and impartial
manner.
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1.2. Principles of international trade system
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Why is transparency so important?



For producers - transparency means secure, predictable
rules for governing national markets for goods and
services and helps to ensure equality of competitive
conditions.
For consumers - transparency ensures that all essential
information is available to make informed decisions
about quality, safety, and price.
For investors - transparency contributes to a stable legal
framework and a market environment that is secure
enough to facilitate long-range investment planning.
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1.2. Institutes of international trade
system
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
Due process — all aggrieved parties
should have the right to have their
grievances addressed on the basis of an
open, rules based process.
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1.2. Principles of international trade
system
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
Joint decision making and resolution of
disputes — problems, conflicts, new
rules, and other developments should be
addressed jointly and cooperatively.
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