History • Originally set up in 1947 as the General Agreement on Tariffs and Trade (GATT) • GATT was replaced by the WTO in 1995 • 128 signing members • Governed 90% of world trade • Currently, there are 153 member countries in the WTO
General Agreement on Tariffs and Trade (GATT) • Set of multilateral trade agreements aimed at the abolition of quotas and the reduction of tariffs among member countries. Established after WWII to promote world trade. • Created as an interim agency that would be replaced by a specialized agency of the United Nations to be called the International Trade Organization (ITO) • ITO was never created because the U.S. did not ratify the agreement
GATT (con’t) Signed on October 30, 1947, by 23 countries in Geneva (to take effect on January 1, 1948) Consisted of 8 Rounds – rounds of trade negotiations
GATT Rounds 1st - Geneva Tariff Conference, 1947 2nd - Annecy Tariff Conference, 1949 3rd - Torquay Tariff Conference, 1950-1951 4th - Geneva Tariff Conference, 1955-1956 5th - Dillon Round, 1960-1961 6th - Kennedy Round, 1963-1967 7th - Tokyo Round, 1973-1979 8th - Uruguay Round, 1986-1994
GATT Rounds - Issues • Rounds 1-6 • Reducing tariffs • Anti-dumping legislation • Round 7: Tokyo Round (1973-1979) • 1st major attempt to tackle trade barriers that did not take the form of tariffs • 1st attempt to reform the system • 102 participating countries • Resulted in an average 1/3 cut in custom duties in the world’s 9 major industrial markets
GATT Rounds – Issues (con’t) • Round 8: Uruguay Round (1986-1994) • 123 participating countries • Extended trading system to new areas – services and intellectual property, agriculture, and textiles • Established the WTO to replace GATT • GATT still exists as the WTO’s umbrella treaty for trade in goods
WTO Functions • Trade Negotiations • Cover goods, services, and intellectual property • Set procedures for settling disputes • Several trade agreements are currently being negotiated under the Daha Development Agenda
WTO Functions • Implementation and Monitoring • Require governments to make their trade policies transparent by notifying the WTO • WTO councils and committees ensure policies are being followed • WTO members are periodically scrutinized on their trade policies and practices
WTO Functions • Dispute Settlement • Resolves trade quarrels under the Dispute Settlement Understanding to ensure trading runs smoothly • Countries petition the WTO if they believe they believe their rights are being infringed
WTO Functions • Building Trade Capacity • WTO specifically tries to aid developing countries to build their trading capacity and try to help establish trading standards • Organizes technical cooperation missions, numerous courses for government officials, and the Aid for Trade tries to help develop a country’s skills and infrastructure to expand their trade capacity
WTO Functions • Outreach • WTO maintains dialogue with various organizations non-government related to enhance cooperation and increase awareness of WTO activities around the world
Principles of Trading System • 1. Without Discrimination: A country should not discriminate between its trading partners • Most-Favoured-Nation/MFN Status: The contracting nations binds itself to grant to the other in certain stipulated matters the same terms as are then, or may be thereafter, granted to the nation which receives from it the most favorable terms in respect of those matters • National Treatment: Treating foreigners and locals equally. • 2. Freer: Barriers coming down through negotiation • Progressive Liberalization
Principles of Trading System Continued 3. Predictable: Foreign companies, investors, and governments should be confident that trade barriers (including tariffs and non-tariff barriers) should not be raised arbitrarily; tariff rates and market-opening commitments are “bound” in the WTO 4. More Competitive: Discouraging “unfair” practices such as export subsidies and dumping products at below cost to gain market share 5. More Beneficial for Less Developed Countries: Giving them more time to adjust, greater flexibility, and special privileges. Ex: Uruguay Round
Organizational structure • Council for Trade in Goods • All members of the WTO participate in the committees • The body has its own chairman and only 10 members. • Council for Trade-Related Aspects of Intellectual Property Rights • Information on intellectual property in the WTO
Organizational Structure Cont. • Council for Trade in Services • operates under the guidance of the General Council • responsible for overseeing the functioning of GATS • Trade Negotiations Committee • deals with the current trade talks • The chair is WTO’s director-general • Doha Development Round
Voting • One Country One Vote • Decision making is generally by consensus WTO Agreement Four Specific Situations • An interpretation of any of the multilateral trade agreements can be adopted by a majority of three quarters of WTO members. • The Ministerial Conference can waive an obligation imposed on a particular member by a multilateral agreement, also through a three-quarters majority. • Decisions to amend provisions of the multilateral agreements can be adopted through approval either by all members or by a two-thirds majority depending on the nature of the provision concerned. But the amendments only take effect for those WTO members which accept them. • A decision to admit a new member is taken by a two-thirds majority in the Ministerial Conference, or the General Council in between conferences.
Accession process Any state or customs territory having full autonomy in the conduct of its trade policies may become a member (“accede to”) the WTO, but all WTO members must agree on the terms. This is done through the establishment of a working party of WTO members and through a process of negotiations.
The Steps, one by one: First, a country wishing to accede to the WTO submits an application to the General Council, and has to describe all aspects of its trade and economic policies that have a bearing on WTO agreements. The application is submitted to the WTO in a memorandum which is examined by a working party open to all interested WTO Members.
Second, after all necessary background information has been acquired, the working party focuses on issues of discrepancy between the WTO rules and the applicant's international and domestic trade policies and laws. The working party determines the terms and conditions of entry into the WTO for the applicant nation, and may consider transitional periods to allow countries some leeway in complying with the WTO rules
The final phase of accession involves bilateral negotiations between the applicant nation and other working party members regarding the concessions and commitments on tariff levels and market access for goods and services. The new member's commitments are to apply equally to all WTO members under normal non-discrimination rules, even though they are negotiated bilaterally.
When the bilateral talks conclude, the working party sends to the general council or ministerial conference an accession package, which includes a summary of all the working party meetings, the Protocol of Accession (a draft membership treaty), and lists ("schedules") of the member-to-be's commitments. Once the general council or ministerial conference approves of the terms of accession, the applicant's parliament must ratify the Protocol of Accession before it can become a member.
Members • The World Trade Organization is composed of 153 countries • Of these, 123 were signed during the Uruguay round • WTO members do not have to be full-sovereign nation members • Instead, they must be a custom territory with full autonomy in their external relations • Example: Hong Kong, China is considered a member
Some members • United States • United Kingdom • France • Italy • China • Brazil • Germany • Japan • Canada • Mexico
Members • There are 30 countries that are not members known as observers • These countries are currently negotiating membership • The biggest of these non-members is currently Russia, however, they are in the process of accession • Accession negotiations must begin within 5 years of becoming an observer
Algeria, • Andorra • Armenia • Azerbaijan • Bahamas • Belarus • Bhutan • Bosnia and Herzegovina • Cambodia • Cape Verde • People's Republic of China • Croatia • Ethiopia • Former Yugoslav • Tonga • Ukraine • Uzbekistan • Vanuatu • Vatican (Holy See) • Vietnam • Yemen Republic of Macedonia Kazakstan Lao Lebanon Lithuania Moldova Nepal Russian Federation Samoa Saudi Arabia Seychelles Sudan Taiwan (known as "Chinese Taipei")
Current Director General Pascal Lamy • French political advisor, a businessman, and a former European Commissioner for Trade. • Lamy is Honorary President of Paris-based think tank Notre Europe
Cons • Currently the WTO is under criticism • Commonly viewed as irrelevant • Lack of Transparency • WTO is sometimes viewed as a rushed reaction to international trade due to WWII • drastic wealth inequalities between members • Trying to make the developing countries catch up to the developed
Pros Globalization!! The alternative would be chaos For the most part the WTO is unbiased The power of Sanctions
The WTO and Finance “The financial services sector plays a critical role in any modern economy. The bundle of institutions that make up an economy’s financial system can be seen as “the brain of the economy”, providing the bulk of the economy’s need for many functions” -WTO website
Specific Financial Services The WTO defines a financial service as: “any service of a financial nature offered by a financial service supplier of a Member” Examples: banks, trust and loan companies, credit unions, life and health insurance companies, property and casualty insurance companies, securities traders and exchanges, investment fund companies, pension funds, finance and leasing companies, insurance agents and brokers, and a myriad of auxiliary service providers, such as independent financial advisors, actuaries, and intermediaries. Apart from its participation in GDP, the financial services sector is usually a significant contributor to employment.
The big 5 • Facilitating transactions (exchange of goods and services) in the economy. • Mobilizing savings (for which the outlets would otherwise be much more limited). 3. Allocating capital funds (notably to finance productive investment). 4.Monitoring managers (so that the funds allocated will be spent as envisaged). 5.Transforming risk (reducing it through aggregation and enabling it to be carried by those more willing to bear it).