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WTO rounds of negotations, GATT rounds
Transcript of WTO rounds of negotations, GATT rounds
Keshika Devi SEWOCK
Divesh Sinha RAMKOOMAR
Back In History
Herbert Hoover – protection of Foreign Competition to US Farmers
Legislators from farming states voluntarily sponsored a farming protection bill but the bill did not pass.
Modification of the Bill!
For Example: Reduce competition for car makers, furniture producers & textile manufacturers
Up to 20000 US products : Smoot-Hawley bill
Favorable to US but not to other countries (Restrictions)
After world War II (1939-45) countries decided to conclude an agreement that would reciprocally scale back tariff restrictions
War time allies met at Bretton Woods Conference to establish an international institution for monetary policy
Need: International institution for trade but no agreement was passed
Reason: representatives of TRADE ministries did not attend the conference
imposed their own protectionist legislations E.g CANADA
Abstain from buying products from US
1929: Smoot-Hawley became LAW causing disruptions in global trade
Contributor to the Great depression
1946: A conference was called to draft a charter for an International Trade Organisation (ITO).
Negotiations were successful yet ITO never entered into force
Reason: Not approved by the US congress
Due to the failure of negotiating governments to create the ITO, the allies joined hands and formed the;
General Agreement on Tariffs and Trade (GATT)
GATT provides a basic set of rules under which trade negotiations take place
Multilateral agreement negotiated during UN Conference on Trade & Employment
Regulates international trade among 153 countries
Signed in 1947, purpose of GATT was to reduce tariffs and other trade barriers on a reciprocal basis so as to promote trade between nations
Eliminate preferences to gain mutual advantages which in the end would lead to a global environment of free trade
Handles problems & Issues concerning trade between countries
Resolves international trade disputes peacefully & constructively
It also observes closely the implementation of these rules of conduct
Considered as an advisory body
(no legal powers)
Therefore it cannot enforce the decisions or resolutions attained during negotiations
Principles of GATT
Protect against corruption when different tariffs were being applied for different countries.
Most Favored Nation (MFN) Treatment
Imposes equal treatment to all GATT members
Ensures that if one member is given a preferential treatment, all other members are to be granted with the same treatment.
Members from other territories are not subject to internal or additional taxes
Hence, there is no favoritism between domestic and imported products
The objective of national treatment is to make all products around the world compete on a level plain field
Essence of this principle:
If country A reduces barriers to trade with country B, then country B should reciprocally reduce its barriers for country A so as both benefit simultaneously.
Reciprocity principle implies offering equivalent exchange for benefits gained in trade.
1) Government seeking “balance of concessions” during rounds of trade liberalisation
2) Governments “withdrawing substantially equivalent concessions”
When a contracting party increases previously removed tariffs,then the authorities can withdraw previous benefits allowed, such that the tariffs increase reciprocally.
Government may withdraw previous concessions
Criticism of the Principle:
Reciprocity is possible only if negotiating parties have equal economic relationships which in reality is very rare.
Principles of GATT
Clear information about new or changes in existing rules and regulations are to be notified both internally and externally.
Transparency allows other members of the GATT to examine the compatibility of the rules to the objectives set by the GATT.
The GATT regulates trade negotiations through a number of specific articles.
Countries focus their national protective measures into the form of tariffs- principle of tariffication
Tariffication means to replace existing NTB by tariffs.
The tariffs are then to be applied according to the principle of non-discrimination
These tariffs can change according to the principle of reciprocity:
either withdraw tariffs to allow equal benefits to all members
Or levy tariffs back if the member withdraws its previous benefits
Major Exception Of the GATT
GATT; Part II, Article XVIII - Government Assistance to Economic Development
Developing countries are granted with special and differential treatment.
That is; Under certain conditions they are allowed to take protective measures which affect imports for instance: levying quantitative restrictions
In doing so they :
implement policies better
promote their living standards
promote economic development.
able to address their problems regarding foreign exchange
Moreover, LDCs are permitted to ignore the tariff binding and reduction principle of the GATT so as to protect infant industries
Tariff binding and reduction
Geneva II Round
Doha Development Agenda
GATT / WTO ROUNDS OF NEGOTIATIONS
Geneva Round (1947)
GATT was signed by 23 nations at the Palais des Nations in Geneva, Switzerland
The agreement contained tariff concessions agreed
to during the first multilateral trade negotiations and a set of rules designed to prevent these concessions from being frustrated by restrictive trade measures.
The granting of a concession only had to be considered if the country supplying the largest part of the product made a request for a tariff reduction.
APRIL TO OCTOBER 1947
The participants completed some 123 negotiations and established 20 schedules - covering some 45,000 tariff concessions and about $10 billion in trade- which became an integral part of GATT
GATT was further conceived as an interim measure
that put into effect the commercial-policy provisions of the ITO.
FEBRUARY TO MARCH 1948
Delegations from 56 countries met in Havana,
Cuba to consider the ITO draft as a whole
Only 53 countries agreed to create the ITO,
which is to have similar authority as the IMF and the World Bank
U.S. Congress hesitates at approving it and
the temporary GATT became in effect a permanent organisation
AUGUST TO SEPTEMBER 1948
Secretariat of the Interim Commission
for the ITO, which served as the ad hoc secretariat of GATT, moved from Lake Placid, New York, to Geneva
INTERNATIONAL TRADE ORGANISATION (ITO)
Address trade barriers and other economic components which would be linked to trade such as unemployment, development investment, commodity agreements and restrictive business practices.
Foundations of the ITO
Generalised most-favoured nation treatment, with exceptions only for long-standing preferences
No increases in existing preferences
A commitment to negotiate reductions in existing trade barriers
A ban on using quantitative restrictions on exports and imports, except under exceptional conditions
Failure of ITO
It was expected that ratifications by other signatories would start after the ratification by the US Congress of the ITO Charter.
However this did not happen because of the protectionist and isolationist position of the Republican Party that took over the Congress in 1947
American citizens were apathetic about ITO initiative and saw no link between ITO adoption and the potential to increase living standards, whereas the US trade policymakers did little to educate the American public about the issue. The result was a gradual disappearance of the ITO initiative from the US political agenda.
GATT was viewed as an
intermediate measure to implement the commercial policy clauses of the ITO and accelerate the reduction of tariffs on world trade.
Annecy Round (1949)
The second round of multilateral trade negotiations was held at Annecy, France, from April to August 1949
Established The Annecy Protocol of Terms of Accession to the General Agreement on Tariffs and Trade
Its provisions concerned the accession of the first ten new countries to the GATT, which had not participated in the 1947 Geneva tariff negotiations.
This resulted in about 5000 tariff concessions offered.
Furthermore, U.S negotiated tariff concessions on raw and refined sugar, and guaranteed it in GATT through its schedule of tariff concessions.
Torquay Round (1950)
GATT then moved to Torquay, England, for its third round of trade negotiations conducted from September 1950 to April 1951
Original contracting parties were again exchanging tariff concessions among themselves along with several new members acceding to the GATT, most importantly the Federal Republic of Germany
The results were not as broad or as extensive, with only 144 agreements reached out of an expected 400
The round was not considered a success
The agreements were not of such scope and magnitude to represent a sufficient contribution to the reduction of existing disparities in the level of European tariffs
Two problems accounting for this failure:
I) Dispute between the United States and the United Kingdom
II) The growing disparity of tariff levels within Europe
Positive result from Torquay Round:
All tariff reductions from the Geneva and Annecy rounds were renewed and extended until 1954
In September 1951, several countries proposed to drop the bilateral, product-by-product method of GATT in favour of a broader approach to liberalisation. The GATT Plan called for a 30 % weighted-average reduction in tariffs to be phased in over three years
Tariffs were divided into product categories — raw materials, food, semi-processed goods and industrial goods
The GATT plan as a multilateral approach lay dormant through the 1950s, although it became the method to eliminate tariffs within the European Economic Community
Widespread pessimism and frustration with the GATT process marked the end of the Torquay round
Geneva Round II (1956)
In order to undertake review of the GATT, 22 of the Contracting Parties met in Geneva for a fourth round of multilateral trade negotiations in 1954
About two-fifths of international trade was now bound against tariff increases
Some distresses concerning the position of developing countries in the system. As a result, a panel of experts was assigned to analyse the challenges faced by the developing countries in trying to integrate into the world trading system. The experts’ findings were published in October 1958 in the Haberler Report
Since the beginning of the 1950s, six European countries-Belgium, Luxembourg, France, Federal Republic of Germany, Italy and the Netherlands- had worked very hard in achieving deeper economic integration
The Treaty of Rome adopted in 1957 established the European Economic Community (EEC).
Therefore, GATT needed to manage trade relations between the members of this upcoming customs union and the other Contracting Parties
They were confronted with the fear that any unsatisfactory adjustment would weaken the multilateral trading system.
Dillon Round (1960)
The 5th round of multilateral trade negotiations occurred once more in Geneva and lasted from 1960 to 1962
Named in honor of the US under Secretary of State, Douglas Dillon who proposed the negotiations
It was divided into two phases:
Until the Dillon Round, trade negotiations dealt almost exclusively with industrial products
1) The negotiations with EEC member states for the creation of a single schedule of concessions for the Community based on its Common External Tariff.
2) Further general round of tariff negotiations
In the Dillon Round negotiations, the EEC did not want to agree to new bindings on several agricultural products and argued that they needed underdetermined rates for the design of the future Common Agricultural Policy (CAP)
Due to the sensitivity of the issue, the six EEC members could not reach an agreement among themselves upon a common external tariff for these products.
Finally, the United States decided that advanced integration of the European market should be prioritized over certain US agricultural export interests.
Kennedy Round (1964)
The Kennedy Round was the first GATT trade negotiation that explicitly addressed the concerns of developing countries.
A major objective for developing countries was that commitments made were not required to be fully reciprocal with those of developed countries.
Negotiating parties agreed to aim at a 50% linear tariff cut across-the-board, but confirmed that exceptions to the 50% cut were possible.
It was expected that other European countries would join the Common Market.
The liberalization of trade between Western Europe and the United States would help in combatting the expansion of communism and also lead to greater sharing of economic and political interests
The Kennedy Round was launched at a GATT Ministerial meeting in May 1963, but negotiations started officially only one year later.
New Topics Created:
After the relatively modest outcome of the Dillon Round, developing countries were eager to shape the trading system in a way that would open up new export opportunities for them.
Another outcome of these negotiations
was a separate protocol agreement representing several non-tariff measures.
These negotiations were complicated by the fact that several European countries maintained and expanded preferential trade arrangements with former colonies which were also given substantial financial aid.
Thus, at the first UNCTAD conference in 1964, it was proposed that developed countries grant all developing countries preferential market access.
This suggestion became known as the Generalized System of Preferences
However, some criticism was voiced against the adoption of the principle of non-reciprocity which was nevertheless adopted and found its final formal expression in part IV of the GATT.
Tokyo Round (1973)
The seventh round was launched at a ministerial meeting in Tokyo in
September 1973 and was then regarded as the most comprehensive and wide-ranging of all rounds since the inception of GATT.
Soon after the launch of the negotiations a number of political and economic factors emerged that brought negotiations almost to a standstill
The Tokyo round went beyond tariff cuts and went on to negotiate rules on non-tariff barriers
For developing countries one of the most important issues was the so-called Voluntary Export Restraints which dominated the cotton sector and several other important products.
The committee charged to examine quota restrictions, in order to restrict their use, produced two reports:
- It called for the gradual liberalization and elimination of quota restrictions.
- It made a distinction between legal and illegal restrictions
Hence, the multilateral approach to the negotiations on quota restrictions was abandoned in favor of a bilateral request and offer approach
The United States and the EEC negotiated
a mutually acceptable outcome and then included other members of the Quad, that is, Japan and Canada. The rest of the membership of GATT were thus faced with the fact that developing countries lacked the political and economic bargaining power to determine the outcome.
Apart from this lack of negotiating power, developing countries did make concessions in the Tokyo Round. The Tokyo Round Schedules includes concession bindings from several developing countries and was amended in November 1979
Uruguay Round (1968)
Package of cut in import duties
Regular reports on member's trade policies were required to promote transparency.
Rules for settling disputes reviewed
Technical work leading to the first draft of "final act"
Fundamental part missing: Countries' list of commitments for cutting import duties &opening their service market
US and EU had some differences in agriculture around that period. Most of them were settled in a deal informally known as the "Blair House accord"
US, EU, Japan & Canada announced significant progress in negotiations on tariffs and other subjects relating to market access
On 15 April 1994, the deal was signed by ministers from most of the 123 participating governments at the meeting in Marrakesh
It is to be noted that the delay for signing the agreement had some merits since it allowed some negotiations to progress much further than it would have been possible in 1990.
The Uruguay Round agreements contain timetables for new negotiations on a number of topics. The Marrakesh agreement did already include commitments to reopen negotiations on agriculture and services at the turn of the century.
WHAT HAPPENED TO GATT?
GATT was a multilateral agreement regulating international trade whose purpose was to reduce tariffs and other trade barriers and the elimination of preferences, on a reciprocal and mutually advantageous basis.
GATT was signed in 1947 took effect in 1948 and lasted until 1994 where it was replaced by World Trade Organisation.
However, as a result of the Uruguay round, GATT still exists as the WTO’s umbrella treaty for trade in goods. The GATT 1947 still remains at the heart of the new updated GATT 1994 even though there is a distinction between the two.
WHY WAS THERE A NEED TO REPLACE GATT?
Despite having fundamental objectives, no legal powers were vested in the GATT to enforce the resolutions that were passed.
Moreover, agricultural trade had largely eluded liberalization.
The spread of preferential trade arrangements had reintroduced discriminatory trade practices.
Hence, by the late 1980s there were calls for a stronger multilateral organization to monitor trade and resolve trade disputes.
1. Establishment OF WTO
Sluggish growth and painful structural adjustments (late 1970s and early 1980s) led many countries to ignore the GATT rules altogether.
(i) Non discrimination (MFN principle + National Treatment)
(ii) Transparency (Internal & External)
(iii) Binding and Enforceable commitments (Abide by the tariffs commitments)
(iv) Single undertaking (All agreements form a single package that member states must join on an all or nothing basis)
(v) Safety valves (E.g. Agreement on Safeguards)
2. The Multilateral Agreements on Trade in Goods including GATT 1994 &Trade Related Investment Measures (TRIMS)
GATT 1994 is concerned with aspects relating to trade in goods. It is a system for merchandise trade.
TRIMS is concerned with rules that apply to the domestic regulations that a country applies to foreign investors as part of an industrial policy.
3. General Agreement on Trade in Services (GATS)
GATS was created to extend the multilateral trading system to the service sector. It applies to all services with 2 exceptions. Services supplied in the exercise of governmental authority and Air Transport Services.
4. Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS)
It sets down minimum standards for many forms of intellectual property regulation as applied to nationals of other WTO members.
The TRIPS agreement introduced intellectual property law into the international trading system for the first time and remains the most comprehensive international agreement on intellectual property to date.
5. Dispute Settlement Understanding
The WTO’s procedure for resolving trade disagreements under the Dispute Settlement Understanding is viral for enforcing the rules and therefore ensuring that trade flows smoothly.
6. Reviews of governments' trade policies (TPRM)
It is important that regulations and policies are transparent. This can be achieved by two ways; firstly governments have to inform the WTO and fellow-members of specific measures, policies or laws through frequent ‘notifications’ and secondly the WTO should conduct regular reviews of individual countries’ trade policies.
As to now, WTO remains the most powerful legislative and judicial body in the world of trade. However, while the WTO might be promoting free trade worldwide, we cannot disregard the inefficient practices that it is also responsible of. We shall now look at some of the advantages and disadvantages of the WTO.
The Final Act concluding the Uruguay Round and formally establishing the WTO regime was signed in Marrakesh and is known as the Marrakesh Agreement. The principles of the WTO are as follows:
ADVANTAGES & DRAWBACKS OF
Disputes are handled constructively
Rules make life easier for all
WTO will not make us safer
WTO tramples Labour and Human rights
WTO is fundamentally undemocratic
Discussions during that round predominantly emphasised the importance of reducing trade barriers to achieve trade expansion on a non-discriminatory basis
OUTCOMES OF THE URUGUAY ROUND
The topmost decision-making body of the WTO which usually meets every two years
brings together all members of the WTO, all of which are countries or customs unions.
can take decisions on all matters under any of the multilateral trade agreements.
The day-to-day work in between the ministerial conferences is handled by three bodies:
The General Council
The Dispute Settlement Body
The Trade Policy Review Body
As at today, 9 ministerial conferences have been held. Below is a brief description of each conference
Seattle, 30 November-3 December 1999
The third conference was convened in Seattle, Washington.
Doha, 9-13 November 2001
The fourth ministerial conference was held in Doha in the Persian Gulf nation of Qatar.
The fifth ministerial conference aimed at forging agreement on the Doha round.
Hong Kong, 13-18 December 2005
The sixth WTO ministerial conference
Singapore, 9-13 December 1996
Geneva, 18-20 May 1998
The second ministerial conference was held in Geneva in Switzerland.
(i) transparency in government procurement,
(ii) trade facilitation (customs issues),
(iii) trade and investment and
(iv) trade and competition.
Geneva, 30 November - 2 December 2009
According to chairman Amb. Mario Matus the "scaled-down" meeting was to be a negotiating session, and "emphasis would be on transparency and open discussion rather than on small group processes and informal negotiating structures".
Geneva, 15-17 December 2011
The WTO eighth WTO ministerial conference
Bali, 3-6 December 2013
The Ninth World Trade Organisation Ministerial Conference
Global trade collapsed in the global crisis of 2008-2009, recovery remains unfinished and uneven ;
Having initially rebounded, growth in international trade is still well below its pre-crisis growth trajectory with the dimming global prospects
The global crisis has also brought the long-run trend of rising global integration through trade to a halt, at least temporarily;
The global crisis and uneven trade recovery have reinforced the ongoing shift in balance in the world economy, featuring the relative decline of developed countries;
The shifting global balance is also visible in the changing distribution of exports by destination, featuring the rising importance of trade among developing countries; more precisely the emergence of the BRICS countries
While developing countries as a whole have become the key driving force behind global trade dynamics in the 2000s, and especially so since the recovery from the global trade collapse in 2008-2009, contributing 54 per cent to the overall rebound from it, performance, however, varies considerably between regions and countries within the aggregate.
The Doha Development Round was launched at the conference. The conference also approved the joining of China, which became the 143rd member to join.
An alliance of 22 southern states, the G20 developing nations (led by India, China, Brazil, ASEAN led by the Philippines), resisted demands from the North for agreements on the so-called "Singapore issues" and called for an end to agricultural subsidies within the EU and the US.
The talks broke down without progress.
where countries agreed to phase out all their agricultural export subsidies by the end of 2013 and terminate any cotton export subsidies by the end of 2006.
agreement to introduce duty-free, tariff-free access for goods from the Least Developed Countries, following the Everything but Arms initiative of the European Union
Other major issues were left for further negotiation to be completed by the end of 2010.
159 members of World Trade Organization agreed to the Bali Package which aims to ease barriers to international trade.
was held in Bali, Indonesia from 3 to 7 December 2013.
The consent of Russia`s membership was seen as important, since the country had been the largest major economy outside the organization since the accession of China in 2001.
Membership agreement where made for Russia, Samoa, and Montenegro, dependent on the ratification of those countries.
Collectively these issues were called the Singapore issues.
The inaugural meeting for the WTO since its formation.
Disagreements between largely developed and developing economies emerged during this conference over four issues namely:
It also marked the fiftieth anniversary of the multilateral trading system.
Developing country representatives became resentful and uncooperative on being excluded from talks as the United States and the European Union attempted to cement a mutual deal on agriculture.
the negotiations were marred by poor organization and controversial management of large street protests.
Ended in failure, with massive demonstrations and police and National Guard crowd-control efforts drawing worldwide.
The WTO , seventh WTO ministerial conference
The general theme for discussion was "The WTO, the Multilateral Trading System and the Current Global Economic Environment”.
The prime purpose was to remedy a breach of protocol requiring two-yearly "regular" meetings, which had lapsed with the Doha Round failure in 2005,
WTO being effective in fulfilling successfully its functions is debatable.
Its main criticism being, despite it operating a multilateral organisation, many of its members favour bilateral discussions with partners or competitors.
Thanks You for your Presence
The failure of the most recent round of WTO negotiations, the Doha round, is widely regarded as evidence of the inherent problems of multilateral discussions.
Conclusion - Cont'd
Trade liberalisation clearly brings many economic and political benefits
In the 1930s, average tariff percentage was approximately 70%. With the first full round of negotiation of the GATT, tariff level were reduced to forty percent and were reduced further with each subsequent round.
Trade has a vital role to play in harnessing development, but can only do so in the presence of effective policies in areas other than trade.
Notwithstanding continuing and future challenges, the shared international experience of sixty years of the GATT/WTO can be considered as a positive story.
This is because bilateral negotiations can be fully focused and relatively quick to complete