WORLD TRADE
ORGANIZATION(WTO)
REFERENCES
WTO
1. Carnegie Endowment for International Peace
Sandra Polaski. What Future for the WTO?
www.carnegieendowment.org
2. The International Forum on
Globalalization(IFG)
Invisible Government- The WTO: Global
Government for the new Millennium.
www.ifg.org
3. World Economic Forum. The Global Trade
Enabling Report, 2009
WTO
4. ADB/DFiD/ILO(2009).
Country Diagnostic Studies
Nepal: Critical Development Constraints.
5. UNDP. Enhancing Nepal’s Trade Related
Capacity
www.entrec.org.np
6. Annapurna, Mangsir 29, 2066(Dec. 14, 2009)
Monday.
7. Kantipur, 24 Poush, 2066, Friday.
GATT Founding Members
Australia, Belgium, Brazil, Burma, Canada,
Ceylon, Chile, China, Cuba, the
Czechoslovak
Republic, France, India, Lebanon,
Luxembourg,
Netherlands, New Zealand, Norway,
Pakistan,
Southern Rhodesia, Syria, South Africa, the
United Kingdom, and the United States.
General Agreement on Tariffs
and Trade.
(GATT)
Definition
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GATT
• General Agreement on Tariffs and Trade.
• Treaty organization affiliated with the
United Nations
whose purpose was to facilitate
international trade.
• The primary actions of the organization
were to freeze and reduce tariff levels on
various commodities.
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GATT
• GATT was created in 1947, and was
originally intended to become a part of the
International Trade Organization (ITO);
• however, the ITO failed to be created,
• so the GATT was left as an independent
organization.
• In 1994, GATT was superseded by the
WTO.
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World Trade Organization (WTO)
Is one of the world's most important and
influential International Organization
The role of WTO is:
•
•
•
•
•
To administer the multilateral trade
Agreements adopted during the Uruguay
Round of trade negotiations
To review national policies
To serve as framework for further trade
negotiations
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• WTO has Power:
• To issue bindings legal rulings on disputes
• To enforce these rules by allowing imposition
of trade sanctions
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WTO Covers:
1. Trade in goods
2. Trade in services
3. Intellectual Property Rights
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WTO SYSTEM ACCOUNT FOR MORE THAN 97
PERCENT OF THE WORLD TRADE
THE WTO AGREEMENT TOOK 7 YEARS TO
NEGOTIATE AND THE RESULT IS BROAD AND
COMPLICATED
IS EXTREMELY BROAD AND COMPLEX – PROBABLY
ONLY A HANDFUL OF SPECIALIST REALLY
UNDERSTAND ITS FULL IMPLICATIONS.
WTO IS A MEMBER DRIVEN ORGANIZATION
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POLICY DECISIONS CONSTITUTE
THREE DIMENSIONS:
•
•
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ALL MEMBERS CAN
PARTICIPATE IN THE
MINISTERIAL CONFERENCE
GENERAL COUNCIL
OTHER COUNCILS AND
COMMITTEES
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• DOES NOT DELEGATE POWER TO SMALLER
SUB-GROUPS OF MEMBERS SUCH AS THE
EXECUTIVE BOARD.
• WTO IS DESCRIBED AS "COLLEGIATE OF
DELEGATIONS SERVICED BY THE
SECRETARIATE"
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THE ACCESSION PROCESS
1. COUNTRYPREPARES MEMORANDUM
DESCRIBING ITS TRADE AND ECONOMIC
POLICIES
2. THIS IS EXAMINED BY 'WORKING PARTY'
3. WORKING PARTY ARE OPEN TO ALL, BUT ONLY
ABOUT 35 MEMBERS PARTICIPATE IN EACH,
USUALLY INCLUDING THE APPLICANT'S MOST
ACTIVE TRADING PARTENER AND POWERFUL
ECONOMIES LIKE THE USA, EC, CANADA AND
JAPAN
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EXAMPLES
1.
2.
3.
4.
OVER 60 MEMBERS ON CHINA
OVER 65 MEMBERS ON RUSSIA
OVER 25 MEMBERS ON NEPAL
OVER 15 MEMBER ON CAMBODIA
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EXAMPLES
1. IT TOOK 15 YEARS FOR CHINA TO BE THE
MEMBER
2. RUSSIA APPLIED IN 1993' IS STILL
NEGOTIATING
3. IT TOOK 14 YEARS FOR NEPAL TO BE THE
MEMBER
4. IT TOOK ONLY 34 MONTHS FOR
KYRGUSTAN TO BE THE MEMBER
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NOTE
•
ACCEDING COUNTRIES ARE ASKED TO AGREE TO
COMMITMENTS THAT GO WELL BEYOND WHAT
WTO LAW ACTUALLY REQUIRES, AND THAT
OFTEN EVEN EXCEED THOS OF EXISTING WTO
MEMBERS.
•
ROMAN GRYUBERG ROY MICKEY POINT OUT
THAT WHILE IT IS ONE OF THE '... ENDURING
CONVENIENT CLICHES OF THE MULTILATERAL
TRADING SYSTEM THAT THE WTO IS A 'RULESBASED SYSTEM', THE ACTUALITY IS THAT
ACCESSION IS INHERENTLY POWER BASED AND
THE VERY ANTITHESIS OF THE WTO'S CREDO'.
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World Trade Organization
Stages of development:
1. 1947: 23 countries formed an association called The
General Agreement on Tariffs and Trade (GATT) to
negotiate reductions on trade restrictions and work towards
common procedures for handling imports and exports.
2. 1986-93: Uruguay round of international trade negotiation
agreed to establish World Trade Organization.
3. April 1994: Approved by the Trade Ministers in
Marrakech, Morocco.
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4. January 1, 1995: Established WTO and replaced the
old GATT which had acted as "interim" World
Trade watchdog and negotiating forum since 1948.
5. Ministerial meeting (highest decision making
body):
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December 1996: First meeting in Singapore
May 1998: Second meeting in Geneva
December 1999: Third meeting in Seattle
November 2001: Fourth meeting in Doha
September 2003: Fifth meeting in Cancun
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6. As of September 2003: 148 countries are members.
Nepal became the member in September 2003
meeting.
7. Special benefits – WTO has special provisions to
help least developed countries
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•
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Special provisions to provide technical assistance to food
importing countries to remove negative effect with regard
to food supplied.
Small tariff reduction commitments and longer timeframe
to implement market access measures.
Can benefit from technical assistance of International
Trade Center.
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WTO is defined as
• "The legal and institutional foundation of the multilateral trading
system" – a term that encompasses its role as the forum for
negations and settlement of disputes and the guardian of trade
rules.
• It is a permanent organization created by international treaty
ratified by the government and legislatures of members' states
(unlike thee GATT).
• It has similar status to that of the international Monetary Fund
(IMF), The World Bank etc, but it is not a United Nations
Agency.
• A member driven organization and all decisions on any subject
have to be taken by consensus, i.e., without objection from any
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members.
Secretariat
Headed by a Director-General. The current one is from France
General Council
• WTO's main standing decision-making body
• Each member country sends representatives normally led
by the head of its permanent mission in Geneva.
• The council appoints the Deputy Director General after
consultation among member countries.
• They would each serve three years each.
• the General council appoints a Chairman from among the
Ambassadors and serves for one year.
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• Voting can in principle take place but would
have to be a consensus to allow it.
• Binds all members to give equal treatment to
the products and services of WTO members.
• Members can suspend this obligation in
defense of national security or public health
(USA and CUBA for example)
• Critics say it "as a cabal of faceless
bureaucrats dictating trade policy to the world,
is an administrative and research structure with
no decision-making role on policy.
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Documentation
1. General Agreement, a 38 – article code aimed at
ensuring open, non-discriminatory trade in
goods, services, agricultural produce and textiles.
2. 500 pages specific accords shaped in Uruguay
Round.
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Functions
1. To administer and implement the multilateral and
plurilateral trade agreement which together make
up WTO
2. To act as a forum of multilateral trade
negotiations.
3. To seek to resolve trade disputes.
4. To oversee national trade policies.
5. To cooperate with international institutions
involved global economic policy-making.
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Helping Least Developed and Food Importing
Countries
1. Appropriate mechanism related to the availability
of food and the provision of basic foodstuffs in full
grant form and for agricultural development.
2. Possibility of assistance from the IMF and the
World Bank with respect to the short-term
financing of commercial food imports.
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PRINCIPLES
1. Promote trade without discrimination.
2. National treatment-Once goods have been
entered a market, they must be treated no less
favorably that the equivalent.
3. Domestically produced goods.
4. Intellectual property protection by WTO
member countries provides for Most Favored
Nations (MFN) and national treatment.
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5. Agreement requires members to offer MFN
treatment to services and service supplies of other
members.
6. Non-discrimination provisions include those on:
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Rules of origin
Pre-shipment inspection
Trade related investment measures
Application of sanitary and phytosanitory
measures
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Major Provisions
Agriculture
1. Reform trade and provide the basis for marketoriented policies, thereby improving economic
cooperation for importing and exporting
countries alike.
2. Established new rules and commitments in:
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Market access
Domestic support
Export competition
Encourage the use of less trade-distorting domestic
support
• Policies to maintain the rural economy.
Specific concerns for developing countries are
addressed including those of net-food importing
developing countries and less developed economies.
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Health and Safety Measures
1. Application of Food safety and animal and pl
health regulations
2. Government's rights to take sanitary and
phytosanitory measures but stipulates that they
must be based on science, should be applied only
to the extent necessary to protect human, animal
or plant life or health and should be arbitrarily or
unjustifiably discriminate among members where
identical or similar conditions prevail.
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Textile and Clothing
To secure the integration of the textiles and clothing
sector-where much of the trade is currently subject to
bilateral quota negotiations under the Multi-fiber
Agreement (MFA) into the main stream of WTO.
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Anti-dumping Measures
1. Imposed on imports, if such dumped imports
cause injury to the domestic industry in the
territory of the importing member.
2. Additional criteria for determining the injury
caused to a domestic industry by the dumped
product.
3. Procedure to be followed in initiating and
conducting anti-dumping investigations.
4. The role of dispute settlement panels in disputes
relating to anti-dumping actions taken by WTO
members.
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TRIPS (Trade Related Aspects of Intellectual
Property Rights)
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Protection and enforcement of intellectual
property rights.
Effective enforcement measures for those
rights.
Multilateral dispute settlement.
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GATS (The General Agreement on Trade and
Services)
The agreement contains three elements:
1. A framework of general rules and disciples
2. Special conditions relating individual sectors
(movement of natural persons, financial services,
telecommunication and air transport services)
3. A council of trade in services overseas the
operation of the agreement.
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Some of the important steps undertaken by Nepal
during the WTO accession and negotiation
• Applied under GATT on 16 May 1989
• Working party was established on 21-22 May 1989
• Memorandum of foreign trade regime of Nepal was
submitted on 26 February 1990
• Nepal communicated interest on 5 December 1995
• General council decided to give continuity the
working group on 31 January 1996
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• Memorandum of foreign trade regime of Nepal submitted on 10
August 1998
• First formal meeting of working party held on 22 May 2000
• Schedules on goods and services in July 2002
• Second formal meeting of working party held on 12 September 2002
• Protocol of accession submitted on 15 August 2003
• Working party concluded Nepal's membership on 15 August 2003
• Fifth ministerial conference held in Cancun, approved for accession
on Nepal's membership.
• Nepal ratified on March 2004 and has become full fledge member of
WTO.
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• IMPACT OF WTO ON NEPAL'S ECONOMY
• Positive Impact
• Trade Expansion
• Trade Diversification
• Freedom of Transit – will provide legal and secure transit
rights to Nepal through India and China
• Dispute Settlement – will ensure a stronger, faster, impartial
and binding mechanism for settlement of disputes related to
trade
• End of Bilateralism – Bilateral agreement with 17 countries.
Trade and Transit Treaty with India – will do away with the
need for bilateral trade agreement
• Image and Power – Almost ¾ of WTO members are
developing countries. This will empower Nepal.
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NEGATIVE IMPACT
1. Erosion of Preference (enjoyed under bilateral
agreement and treaties)
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Tariff Rates Concession
Removal of concession
Removal of subsidies in agriculture
Opening up of trade and services etc.
Prohibition of quota restrictions
Affect domestic industries
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2. Price—Hike Food, Drugs, Agricultural Inputs and
other items of imports—foreign exchange outflow
3. Accession Commitment —Accept stringent
commitments by existing members
4. Reduce flexibility in policy and strategy
formulation relating to trade
5. Institutional Requirements
6. Burden of WTO may be too heavy as there is no
level playing field in practice.
7. Lacks knowledge, information, experience,
capacity, resources, institutional infrastructure,
competent personnel
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8. Dependence on foreign firms will increase for
technology and resources
9. Difficult to enforce its intellectual property rights
10. Patents taken by US Companies of traditional
generic commodities like Basmati Rice, Neem
leaves, Turmeric etc.
11. Gaps in Theory and Practice
12. European Union and Japan are unwillingness to
reduce subsidies on agricultural products
13. Trade harassment is high for LDCs and Nepal
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CHALLENGES
1. MAXIMIZE THE BENEFITS
2. MINIMIZE ITS RIGHTS AND DOWNSIDE
EFFECTS
3. EQUIP OURSELVES WITH THE CAPACITY
NECESSARY TO PARTICIPATE
EFFICIENTLY IN GLOBAL MARKETS
4. ABILITY TO ADJUST OUR ECONOMIC
STRUCTURES TO A CHANGING
EXTERNAL ENVIRONMENT
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5.
6.
7.
8.
STABLE MACROECONOMY
PRUDENT FINANCIAL MANAGEMENT
SOUND REGULATORY PRACTICES
NECESSARY STRUCTURAL AND
INSTITUTIONAL REFORMS IN THE
FINANCIAL AND CORPORATE SECTORS
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The World Bank (2003)
Diagnostic Trade Integration
Study (DTIS) or Trade Competitiveness Study
The study appraised Nepal's constraints to effective
integration into the global trading system. It has made policy
level recommendations to capacity building.
Conclusion
1. Improve production capacity, productivity and
competitive strength through quality improvement,
reduction of costs and wastages, remove supply
constraints.
2. Export of products in which is has sustainable
comparative advantage tourism, hydropower, hers,
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flowers, silver jewellery, handicrafts.
3. Product profile should be enhanced
4. Strengthen SAARC, SAPTA and SAFTA to
SAFTA to improve negotiating power, strengthen
institutional mechanism.
5. Educate people
6. Create legal safeguard for bio-diversity, genetics,
protection of domestic industries and females'
rights.
7. Amend laws to make them WTO friendly.
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Nepal's contribution to the world
trade is 0.02%
The study recommends
1.
2.
3.
4.
Relaxation in custom barrier
Allowing easy exit to foreign companies
Reforming labor market
Strengthening the government – private sector
coordination
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Comparative and competitive advantage areas:
•Dried leguminous
•Spices
•Seeds (Niger Seeds)
•Leather and leather products
•Fibers (hand knotted wool carpets)
•Yarn and textile garments
The study has shown that it costs us US$ 130 million (NRs.
10 Billions over 10% of estimated budget for fiscal year
2002/2003) to implement just three of the WTO agreements
namely TRIPS, SPS and custom valuations.
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