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World Trade Organization

World Trade Organization. Econ 490 Flora Lugo & Carlos Rivas. Formation. WTO replaced GATT in 1995 - one nation, one vote (like GATT) GATT-General Agreement on Tariffs and Trade Formed in 1947 Came out of the Bretton Woods conference

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World Trade Organization

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  1. World Trade Organization Econ 490 Flora Lugo & Carlos Rivas

  2. Formation • WTO replaced GATT in 1995 - one nation, one vote (like GATT) • GATT-General Agreement on Tariffs and Trade • Formed in 1947 • Came out of the Bretton Woods conference • Part of three organizations that became part of framework to help manage the postwar global economy (along with IMF, World Bank) • An informal trade organization

  3. GATT A. Principles • Trade Liberalization • Liberalization 1. liberal view - free market - limited government - more optimistic about state cooperation - trade is a positive sum game • Increase trade - reduce tariffs • Nondiscrimination • Most Favored Nation - A trade advantage given to one GATT member must be extended to every other GATT member • National Treatment - A member must treat foreign products at least as favorably as domestic products (i.e. taxes, regulations) • Reciprocity • A state benefiting from another state’s trade concessions should provide roughly equal benefits in return • Safeguards and Contingent Measures • Limit of imports that may cause harm to a state’s industry or economy

  4. Safeguards and Contingent Trade Measures

  5. Rounds of GATT and WTO Negotiations

  6. GATT in Jeopardy • Non-Tariff Barriers -not covered in GATT rules • Agriculture had been an exception to restrictions on import quotas and export subsidies • Agriculture and Textiles mostly excluded from regulations • Easy to circumvent regulations (VER) • Dispute Settlement procedures weak • U.S. and other Developed Countries (DCs) wanted scope to go beyond trade in goods to trade in services, intellectual property and investment • Most Less Developed Countries (LDCs) did not agree to negotiations in the Tokyo Round

  7. WTO Replaces GATT • Formal, legally constituted organization • Oversees trade treaties negotiated in the Uruguay Round: GATS, TRIPS, TRIMS along with GATT • Meets at least every 2 years • Dispute settlements (DS) more binding and timely: member states use DS process more then with GATT • Greater effort to integrate LDCs and transition economies • More involvement with Non governmental Organizations and civil society groups 1995

  8. Disputes • What causes a dispute? • When a member country of the WTO believes another member country is violating an agreement or a commitment that has been set within the WTO. • Agreements are those negotiated under the Rounds of GATT/ WTO • How is it resolved? • The Dispute Settlement Body composed of member governments (all WTO members) work together to set an agreement.

  9. Dispute Settlement Process

  10. Steps (& Lengths) of Settlement • Consultation (60 days) • The Panel (45 days / 6 months) • Final Report (3 weeks) • Report becomes a Ruling (60 days) Either side can appeal a panel’s ruling. 5. Appeals Report (60-90 days) 6. Appeals Report becomes a Ruling (30 days)

  11. Disputes (Examples) • Valenzuela – Import Licensing Measures on Certain Agricultural Products • Complainant: United States • Respondent: Valenzuela • Mexico – Tax Measures on Soft Drinks and Other Beverages • Complainant: United States • Respondent: Mexico

  12. Disputes (cont…) • The dispute settlement agreement stresses that “prompt compliance with recommendations or rulings of the Dispute Settlement Body is essential in order to ensure effective resolution of disputes to the benefit of all Members”. • Outstanding cases: Some cases have remained in the consultation phase since 1995.

  13. Doha Round UnResolved • LDCs: - want Special and Differentiated Treatment monitored and enforced - G-20 of LDCs (Brazil, China, India) call for end of EU and U.S. agricultural export subsidies - North promised technical assistance not enough • DCs: - want LDCs reduce barriers to nonagricultural imports - strengthen and extend agreements for services trade and intellectual property trade -Major DCs ( ex.EU and Japan) want to expand WTO to new areas: government procurement, trade facilitation, competition policy • Fast Track Authority expired 2007

  14. WTOs Future • G-7: even with one nation one vote system LDcs have less influence • Increase in Regional Trade Agreements • Doha Round unresolved • Global Recession and Protectionism

  15. References • www.wto.org • Cohn, A. (2008). Global Political Economy. (pp. 195-227). Pearson Education, Inc. • http://www.wto.org/english/thewto_e/whatis_e/whatis_e.htm • http://www.wto.org/english/tratop_e/dispu_e/dispu_e.htm • http://events.streamlogics.com/wto/2004/html/001.html

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