Agenda February 19 and 21

1. Agenda February 19 and 21 • Introduction to WTO • Contemporary Issues – WTO • Plan for next three weeks • Consultations week before dead week • Presentations week of dead week

2. Next Quiz • Re: global warming • IPCC, Kyoto Protocol • US position • Re: energy • An idea of the global picture on crude oil • Understanding the attractiveness of alternative sources (e.g. read Summary of OSU study) • “Political strategy” • Re: WTO • What it is? What does membership mean? • Some idea of how some of its rules work

3. An Introduction to the WTO

4. What is the WTO? • The World Trade Organisation (WTO) Established on 1st January 1995 by treaty As a result of the Uruguay Round negotiations (1986-1994) Located in Geneva, Switzerland Members: 150 countries (as of January 2007) • At its simplest: “A global organisation dealing with rules of trade between nations”. (source: WTO) Membership- open to sovereign states and customs unions Membership is diverse - developed, developing, least developed countries and economies in transition.

5. Evolution of the WTO Predecessor of the WTO – GATT ’47 • The General Agreement on Tariffs and Trade (GATT) 1947 -the first major effort to establish international rules governing trade in goods. Though initially conceived as a provisional legal instrument, it endured for almost 50 years. • The GATT functioned without a formal organisational framework to oversee its implementation as the proposed International Trade Organisation (ITO) never came into being and the ITO Charter (aka the Havana Charter) of which GATT was only to be a part, never came into effect. • GATT’s primary focus was the reciprocal reduction of tariffs which later expanded to other trade related areas. In the years leading up to the Uruguay Round, GATT expanded its competence through several rounds of trade negotiations which witnessed the formulation of complex legal instruments on specific aspects of trade, particularly disciplines on the use of non tariff barriers.

6. The Uruguay Round (1986-1994) • The results of the Uruguay Round (UR) were signed in Marrakech, Morocco on 15 April 1994 .The WTO came into being on 1 January 1995 by virtue of the Agreement establishing the WTO. • The scope of the multilateral trading system was broadened from trade in goods (GATT) to encompass trade in services (GATS) and trade related aspects of intellectual property rights (TRIPS). It is a rule-based global trading system complete with its own dispute resolution procedures. • The “Single Undertaking” concept The multilateral trade agreements under the WTO system are treated as a single undertaking which means that every member state of the WTO is a party to every one of these agreements and must implement them accordingly. Exception: Plurilateral agreements are binding on Member states that have specifically agreed to be bound by them.

7. The Uruguay Round agreements • The Agreement establishing the WTO Annexes • Annex 1A - GATT 1994 (basically GATT ‘47), related agreements (e.g. Agreements on Agriculture, Subsidies etc.) and texts 1B- General Agreement on Trade in Services (GATS) and Annexes 1C- Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS) • Annex 2 Understanding on the Rules and Procedures Governing the Settlement of Disputes (aka Dispute Settlement Understanding /DSU) • Annex 3 Trade Policy Review Mechanism • Annex 4 Plurilateral Agreements (Agreements on Trade in Civil Aircraft and Government Procurement)

8. Principles of the world trading system under the WTO • Non discrimination- Most Favoured Nation (MFN) and National Treatment obligations • Freer trade – negotiations aimed at lowering trade barriers • Predictability and transparency – a rule based system, binding commitments, restrictions on the use of barriers to trade and transparent trade policies and regulatory frameworks (e.g. transparency obligations in the major trade agreements and the Trade Policy Review Mechanism) • The promotion of fair competition- MFN and national treatment obligations and rules against unfair trade practices (e.g. anti dumping) • Encouragement of development and economic reform

9. Four main principles of GATT • Most Favoured Nation (MFN)Art. 1 of GATT embodies the MFN rule. At its simplest, it requires any favourable treatment granted to a product originating in or destined for any other country, to be accorded immediately and unconditionally to the like productoriginating in or destined for the territories of all other member states. E.g. Spanish coffee case: Spain modified its tariff applied to imports of unroasted coffee, applying a higher tariff to certain types of unroasted coffee beans imported from Brazil (Arabica and Robusta) while granting duty free access to other types of “mild” unroasted coffee beans considered to be “like products”. The Panel considered this to be a breach of the GATT MFN obligation and concluded that the tariff regime was discriminatory in its treatment of unroasted coffee originating from Brazil. [The principle of MFN is also found in GATS(Art.2) and TRIPS (Art.4)]

10. MFN (cont.) • There are permitted exceptions to the MFN rule: Free trade areas (e.g. NAFTA) Customs unions (e.g. the EU) Preferential systems [e.g. Generalized System of Preferences (GSP) which grants preferential treatment for products from developing countries] Regional examples of FTAs: MERCOSUR (Southern Common Market), COMESA (Common Market for Eastern and Southern Africa), ASEAN.

11. Principles (Cont.) • National Treatment The national treatment rule in Art. 3 of GATT provides that internal taxes, charges, laws and regulations must not be applied to imported or domestic products so as to afford protection to domestic production. The imported product must not be subject directly or indirectly to internal taxes in excess of those applied directly or indirectly to the like domestic product. [The national treatment principle is also found in GATS (Art.17) and TRIPS (Art.3).] E.g. Japan- Alcoholic beverages case (1996) The dispute concerned imported vodka (and other imported alcoholic beverages) and domestically produced shochu (a distilled white spirit) and excessive Japanese taxes on the former.

12. Principles (Cont.) • “Tarrification” - Protection of the domestic industry by tariffs only. - Reinforced through rules which prohibit use of quantitative restrictions. (Art 11 GATT). Limited exceptions are allowed e.g. for BOP reasons (Art 12 GATT). • Tariff Concessions- negotiations shall be aimed at reducing tariffs (Preamble and Art. 28bis GATT). Tariffs shall also be bound against further increases [Art 2.1(b) GATT]. (The tariff concessions of each Member are recorded in schedules of concessions that are annexed to GATT. Schedules of concessions are an integral part of GATT.)

13. The WTO as a dispute settlement forum • Settlement of disputes under the DSU 1. Bilateral consultations, use of good offices, availability of conciliation and mediation 2. Panel proceedings 3. Appellate review [appeal to Appellate Body (AB) on a point of law] 4. Consideration and adoption of Panel/AB reports by the DSB. If the report concludes that a measure is inconsistent with a covered agreement, the Panel (/AB) must recommend that the Member concerned bring the measure into conformity with that agreement. Panel (or AB) reports are adopted automatically by the DSB unless there is consensus against such adoption. 5. Implementation of recommendations by a losing party: - Emphasis is on full compliance. - Negotiation of compensation (must be voluntary and mutually acceptable) if there is a delay in implementation beyond a reasonable time. - Failure to implement may result in DSB authorization of retaliatory action (i.e. suspension of concessions/obligations).

14. Services and the WTO • The WTO regulates trade in services through the General Agreement on Trade in Services (GATS). The GATS is “broadly comparable” to the GATT but there are significant differences in its approach to liberalization. • Services cover a wide range of activities. Under the GATS, the term “services” include any service in any sector except services supplied in the exercise of governmental authority. • The GATS applies to all measures by Members affecting trade in services. Measures can be laws, regulations, procedures, decisions, administrative action etc., of Member governments. • Trade in services under the GATS is defined in terms of four modes of supply.

15. GATS obligations Two main categories of obligations • General obligations which apply to all service sectors of all Members. E.g. MFN, Transparency obligations • Specific obligations which apply only to service sectors specified in the Member’s “Schedule of specific commitments”. E.g. Market access and national treatment obligations.

16. Extract from a Schedule of specific commitments

17. The Doha Round • Ambitious round of negotiations launched in 2001, by the 4th Ministerial Conference of the WTO in Doha, Qatar. The Doha Round covers a wide area of subjects and includes negotiations in agriculture, industrial goods and services. It also covers a number of implementation issues. • Dead lock in trade talks in 2003 but break through in Geneva the following year (August, 2004 ). • Success in the area of public health and access to essential medicines for developing countries through an amendment to TRIPS. • Targets set at the 6th Ministerial Meeting in Hong Kong (December 2005). Talks suspended in July 2006 and resumed again in February 2007. • Leadership of the US and EU in agriculture talks is necessary if the round is to succeed. • Is the failure of the WTO’s first round of talks imminent? • Issue - U.S. President’s Trade Promotion Authority expires end June, 2007. http://www.wto.org/english/tratop_e/dda_e/dda_e.htm

18. Agriculture – Modalities for negotiations to be established. Elimination date for export subsidies in agriculture(2013) and substantial reductions by 2010; disciplines to be established on export measures of equivalent effect; reductions in trade distorting domestic subsidies, with the EU, US and Japan undertaking the biggest cuts; special flexibilities for developing countries. Developed countries to end export subsidies for cotton and undertake deeper cuts for domestic support for cotton than for agriculture in general. Duty free/quota free access to cotton exports from LDCs. Industrial products Modalities for negotiations to be established. Interests of developing countries to be taken into account when negotiating reductions in tariffs. Possibility of duty free/quota free access to products from LDCs, to be implemented over time. Services – possibility of plurilateral negotiations to speed up negotiations in the services sector. Aid for trade particularly for LDCs. Agreement on key details still needed - specific formula for cutting tariffs and subsidies in agriculture; flexibilities for ‘sensitive products’. - details of the final agreement on special products , special safeguard mechanisms and food aid in agriculture. - modalities for reducing tariffs in industrial goods. Main Areas of focus in the Doha Round

19. International Trade Complaints- so where do you go? • Lodge complaint with Trade Compliance Centre (TCC) of the International Trade Administration, Department of Commerce. If voluntary compliance cannot be secured the TCC will utilize the USTR Enforcement Office, which will consider use of the WTO dispute settlement procedures. http://tcc.export.gov/ • For complaints on dumping or unfair subsidies - the Import Administration http://www.trade.gov/ia/ and - the International Trade Commission http://www.usitc.gov/

20. Refer websites for detailed information • The WTO Website : www.wto.org • United States Trade Representative www.ustr.gov/ Some related websites of interest • OECD www.oecd.org • ITC www.intracen.org • World Bank www.worldbank.org