WTO

WTO

Introduction: -

Before WTO we had multilateral treaty signed by 23 countries on 30-10-1947, UN Building in Geneva. This building was known as Palais des Nations. This multilateral agreement was known as GATT – General agreement on Tariff and Trade. The GATT rules were formulated to settle trade dispute, through consultations, obligations or authorized retaliatory measures.

 

WTO: -

WTO is a permanent inter-governmental body governing and regulating, International trade in goods & services. Its HQ is in Geneva. WTO was formed with the objective of providing framework for implementation, administration, operation for enhancing multilateral agreements with the view to promote international trade.

WTO was formed after series of negotiations which started in Uruguay in 1986 known as Uruguay Round of Talks. These talks continue from 1986 to 1994.

WTO is a successor to GATT. On 1^st April 94, the GATT members signed an agreement in Marrakesh in Morocco to form WTO. From 1^st Jan 95, WTO became operational with 128 members. India is the founding member of both GATT & WTO. Presently, it is having 160 members.

 

142^nd member – Moldova                 26^th July 2001

143^rd China                                       11^th Dec 2001

144^th Taiwan                                    2^nd Jan 2002

145^th Armenia                                  15^th Feb 2003

146^th Republic of Serbia and

         Montenegro                             4^th April 2003

147^th Cambodia                                11^th Sept 2003

148^th Nepal                                       11 Sept 2003

149^th S. Arabia                                 11 Sept 2005

150^th Vietnam                                  11 Jan 2007    

151^st Tonga                                      27^th July 2007

152^nd Ukraine                                   16 May 2008

153^rd Cape Verde                             23 July 2008

154^th. Montenegro                            29, April 2012

155^th. Samoa                                                10 May 2012

156^th. Russia                                     22 Aug. 2012

157^th. Vanuatu                                 24, Aug. 2012

158^th Laos                                        2, Feb. 2013

159^th Tajikistan of W.T.O.               2 March 2013

160^th Yemen                                     26 June 2014  

 

Ministerial Conference of WTO: -

1^st ministerial conference -   Singapore 96              

2^nd                                         Geneva 98

3^rd                                         Seattle 99

4^th                                         Doha (Qatar) 01

5^th                                         Cancun (Mexico) 03

6^th                                         Hong Kong 05

7^th                                         Geneva (2009)

8^th                                         Geneva 15-17 Dec. 2011,

9^th                                         Bali 3-6 Dec. 2013.

 

The First director General of WTO was Peter Sutherland from Ireland in 1995, Renato Ruggiero 1995-99, Mike Moore 1999-2002 Supachai Panitchpakdi 2002-05.

 

The Director General of WTO–Supachai Panitchpakadi. (Foreign minister–Thailand). He was replaced by Pascal Lamy. Appointed for IInd Term from 1^st Sept. 2009-2013, he is from France. New Director General of WTO Roberto Azevedo from Brazil 2013 onwards.

 

Official Language of WTO: -

English, French & Spanish

Head Quarter Centre Willaim Rappard, Geneva

D. G. tenure is 4 year

Singapore Issues: -

There were 4 issues which were popularly known as Singapore Issue.

1.      Trade and Investment

2.      Trade and competition policy – competition act passed by India in 2002

3.      Transparency in the Government procurement.

4.      Trade facilitation – custom duties reduction

 

Seattle Issue: -

Seattle issue mainly deals with agricultural reforms. There was a deadlock between developed and developing countries with regard to agricultural reforms. Hence Seattle issue failed. In Seattle issue, the developed countries asked the developing countries to allow 3% of the total consumption of food grains to be imported from developed countries and it also asked to reduce agricultural subsidies. This issue was backed by CAIRNS groups of countries, Japan, EU. Cairns groups are those developed countries which have large surplus of agricultural production like Australia, NZ, and Canada. CAIRN is a name of city in Australia.

 

Impact on Agriculture: -

The WTO agreement on agriculture AOA is related to substantial progressive reduction in support and protection provided to the agricultural sector. The AOA is proved to be controversial because the developing countries consider this agreement as anti – developing & pro-developed countries. AOA contain 3 elements: -

1.      Market access

2.      Domestic support

3.      Export competition

 

1. Market access: -

Under this clause, all the WTO members are reqd to remove quantative restrictions (QR) (abolish quota system) & import licensing and also reduce tariff duties with a view to improving opportunities for export. The tariff duties have to be reduced by 36% by developed countries  & 24% by developing countries. This tariff is to be reduced over a period of 6 years by developed countries & over a period of 10 years by developing countries from 1^st Jan 95. Indian Government have liberalized their policies with regard to QR, but the Indian Government believed that reducing of tariff and import licensing should have  flexibility. . i.e. such policy should be governed by the prudence of the developing countries Government. The WTO should also provide safeguard measures like antidumping & countervailing duties, if subsidized imports are dumped in the countries.

 

2. Domestic Support: -

Under AOA, WTO had a clause known as Aggregate Measure of Support (AMS). AMS for the developed countries is to be cut by 20% over a period of 6 years & for developing countries AMS is to be cut by 13.3% over a period of 10 years and if the country AMS is within 10% then such country do not require to cut their AMS. For India, where AMS is below (8%) 10%, hence India is under no obligation to reduce their domestic support level. But India product fertilizer, seed, specific and non-product electricity, water specific AMS is work out to be 22.5% of the total value of agricultural output.

The provision of agreement on domestic support to the farmer seeks to discipline trade distortion support to the farmer. The developed countries are providing massive subsidies to their farming communities. E.g. Japan provide 72% subsidy, EU – 37% subsidy, USA – 26%. The domestic support is distorted through diff types of boxes.

Eg. Amber Box: -

For agriculture, all domestic support measure considers to distort production and trade with some exception falls in the amber box. The total value of these measures must be reduced under WTO clause of AOA. Hence, in WTO ministerial conference various proposals were put forward to deal with subsidies reduction. Questions were also raised whether the limit should be set for specific product rather than having overall aggregate limit. 30 WTO member countries agreed to reduce AMS in their countries, but bulk of the developing countries  are still suspicious of AOA. The domestic support is divided into 2 categories: -

i)                    Support with no or min distortive effects on trade – often referred as Green box.

ii)                  Trade with distorting support – often referred as Amber box

iii)                Trade with some distortion   - Blue Box

Green Box: -

In order to qualify for green box a subsidy must not distort trade or if there is any distortion then it should be minimal. These subsidies is to be government funded and not accumulated by charging consumer higher prices or levying surcharge, and must not involve price support (The min price support as used by Indian government to safeguard the interest of farming community). The subsidies shall not be directed to a particular product or to support the income of farming community. Green box subsidy is therefore allowed without limits to the programmes related to farming community regarding environment protection or regional development. Canada has proposed to set limits of subsidies for all the boxes, whether green, blue or amber. Developing countries India, Brazil, China (G – 21 is a group of developing countries) have blamed developed countries for using GB because the subsidies under GB influence production or the prices of the crops.

 

Blue Box: -

There is certain group of countries like EU, Norway, Japan. These countries state that they provide subsidies so as to encourage their farming communities to produce so much which their respective domestic market can absorb. They do not pay subsidies for those products which their domestic market can not absorb. Hence such mode of concession provided the government of these countries does not fall under the clause of subsidies.

 

3. Export Competition: -

Under this clause the develop countries have to cut the value of direct export subsidies by 36% and the volume of subsidized export by 21% over a period of 6 years. The developing countries have to reduce by reducing prod. charge direct export subsidies by 24% quantity of subsidies export or volume or volume of subsidized export by 14% over a period of 10 years.

As regard to the commitment on export subsidies. India is under no obligations as we are not providing expor subsidies to agricultural commodities. The only subsidies available to exporter of agricultural items are in form of–

1.      Exemption of IT on profit from export sale.

2.      Subsidies on the cost of freight (Transportation) on the export shipment of certain products like fruits, vegetables, floriculture. Since under WTO clause developing countries are exempted from reducing subsidies on above-mentioned items.

 

NAMA: Negotiating Group on Market Access for Non-Agricultural products. Non agricultural Market Access.

 

Trade related intellectual property rights – (Trips)

Under this declaration the member countries have to cater the patent rights of the respective member countries. Under WTO, now the member countries have to follow product Patent. Now the countries where such products are in use have to pay royalties. The developing countries led by India, strongly protested this royalty regime. India says it will hamper developing countries health pg because in these countries epidemic diseases often occurs and if TRIPS clause implemented it will affect the Government health pg because of their high cost. Hence during Doha Summit it was agreed that the developing countries during the spread of epidemics can waiver royalty.

Under TRIPS agreement there is a clause of providing protection for geographical indicator or indications. This right has been initially given to 2 countries – France for champagne, but now many countries are enjoying the right. wine productions. Scotland for scotch whisky. Government of India is demanding Basmati rices under GI. India and other developing countries are also demanding patent right over their traditional knowledge and folklore medicine. Apart from Basmati, India patented for Darjeeling tea, Varanasi sarees, Kanchipuram saree, Kundan jewellery work.

 

GATS – General Agreement on Trade in Services: -

Under this clause the member countries are required to open their service sectors for people of other countries. Like, banking (26%), Insurance (49%), tele-communication (74%), Tour operations, hotel chains, transport companies. This is in favour of developing countries.

 

TRIM – Trade Related Investment Measures: -

Under this clause the member countries have to open their economy for foreign investments. GDR have opened up no. of sectors for foreign investors. Even Indians can make investment abroad and Indian companies can also bring investments from abroad in the forms of ADR – American Depository Receipts & GDR – Global Depository Receipts. (First company to get ADR is Infosys). The GOI has allowed the Indians companies to invest in foreign mutual funds upto 1 billion $, the Indian listed companies can invest upto 25% of their net worth in overseas. An individual Indian can also invest in overseas companies upto 1 million US Dollars. The government has also announced the removal of existing limit of 20000 US dollars for remittance under the employees stock option scheme (ESOS).

 

Multi Fibre Agreement: -

Under MFA clause, it deals with export of textile and clothes. As per this clause, all the member countries have to remove their trade barriers or quota system by 2005 in order to have free flow of textile & clothes export. India will be benefited by this clause because developed countries like USA have restricted flow of textile export by use of quota system or trade barriers.

 

Doha Summit: -

During this summit, for the first time, issue of trade or environment was put on the negotiating agenda of WTO. India & developing countries oppose this issue. They stated that the developed countries are responsible for the pollution & degradation of environment because they have exploited the developing & under developing countries. So they should provide environment friendly technology at low cost or subsidized rate. Doha agenda require clarification and improvement of disciplines on antidumping, subsidies and countervailing duties, fisheries and the existing WTO provision on regional trade agreement. Virtually, all subjects which are mentioned above were either pushed forward or back by developing countries but the developed Nation do not agree with developing Nations.

India has successfully kept the issue of labour standard, off the agenda. They were successful in keeping the issue of environment away from negotiation and also the Singapore issue. India victory can be seen with regard to separate declaration on TRIPS Agreement.  i.e. the member countries have the right to waiver the royalty rights in case if that country faces any epidemic. The ground to decide whether the disease is epidemic or not is given to the Government of respective member countries.

 

Dispute settlement body of WTO – (DSB)

DSB was formed to settles disputes arising with regard to WTO clauses and negotiations. It consists of all the member country Government usually represented by their ambassadors or person in such capacity. The member country elect their own chairman. Present chairman is – Shotaro Oshima (Japanese). In DSB the country lodge their complaints in the form of appeal which is heard by 3 members of the permanent 7 members appellate body set up by DSB. The term of 7 permanent members is 4 years. Such members are individuals who are well recognized in the field of law international trade and they are not affiliated to any Government.

DSB has to accept or reject the appeal within a period of 30 days. Purpose of DSB is to resolve disputes by rule base system rather than unilateral retaliatory actions by those complaining.

 

Cancun summit: -

Held on 10 Sept – 14 Sept 03, Cancun in Mexico.

Presided by – Mexico foreign minister – Louis Ernesto Derbis

 

Issues: -

1.      Agreement on agriculture-required by developed & developing countries support (subsidies) to farmers, export subsidies and tariff by prescribed % in a phased manner. Some of the developed countries have not fully implemented subsidy reduction requirements.

2.      WTO permits non-trade distortion subsidies like Green/Blue box, but the developing countries blamed developed countries for trade distortions in these boxes. The developed countries are increasing  subsidies under the cover of these boxes.

3.      The developing countries have been asked to reduce their import duties so as to provide greater market access, however, India and other developing countries has protested against this issue because they say majority of their population depends upon agriculture & agriculture contribute large stake of their GDP (India 13.5%), so they don't want exposure to volatile international agricultural market it would effect the domestic price of the goods as well as income of the persons dependent upon agricultural sector

 

The Bali Ministerial Declaration and accompanying ministerial decisions — known informally as the Bali Package — were adopted at the Bali Ministerial Conference on 7 December 2013. Subsequent decisions related to the Bali ministerial outcomes were adopted by the General Council on 27 November 2014.

 

9TH WTO MINISTERIAL CONFERENCE, BALI, 2013 Traders from both developing and developed countries have long pointed to the vast amount of "red tape" that still exists in moving goods across borders. Documentation requirements often lack transparency and are vastly duplicated in many places, a problem often compounded by a lack of cooperation between traders and official agencies. Despite advances in information technology, automatic data submission is still not commonplace. The United Nations Conference on Trade and Development (UNCTAD) estimates that the average customs transaction involves 20–30 different parties, 40 documents, 200 data elements (30 of which are repeated at least 30 times) and the re-keying of 60–70 per cent of all data at least once. With the lowering of tariffs across the globe, the cost of complying with customs formalities has been reported to exceed in many instances the cost of duties to be paid. In the modern business environment of just-in-time production and delivery, traders need fast and predictable release of goods. A study by Asia-Pacific Economic Cooperation (APEC) estimated that trade facilitation programmes would generate gains to APEC of about 0.26 per cent of real GDP, almost double the expected gains from tariff reductions, and that the savings in import prices would be between 1–2 per cent of import prices for developing countries in the region. Analysts point out that the reason why many small and medium-sized enterprises — which, as a whole, account in many economies for up to 60 per cent of GDP creation — are not active players in international trade has more to do with red tape rather than tariff barriers. The administrative barriers for enterprises that do not regularly ship large quantities are often simply too high to make foreign markets appear attractive. For developing-country economies, inefficiencies in areas such as customs and transport can be roadblocks to their integration into the global economy and may severely impair export competitiveness or inflow of foreign direct investment. This is one of the reasons why developing-country exporters are increasingly interested in removing administrative barriers, particularly in other developing countries, which today account for 40 per cent of their trade in manufactured goods.  WTO provisions The WTO has always dealt with issues related to the facilitation of trade, and WTO rules include a variety of provisions that aim to enhance transparency and set minimum procedural standards. Among them are Articles 5, 8 and 10 of the General Agreement on Tariffs and Trade (GATT) which deal with freedom of transit for goods, fees and formalities connected with importing and exporting, and the publication and administration of trade regulations. However, the WTO legal framework lacks specific provisions in some areas, particularly on customs procedures and documentation, and on transparency. The spectacular increase in the amount of goods traded worldwide in the last few years and the advances in technology and the computerization of business transactions have added a sense of urgency to the need to make the rules more uniform, user-friendly and efficient.  The mandate and the negotiations As a separate topic, trade facilitation is a relatively new issue for the WTO. It was added to the organization's agenda only when the Singapore Ministerial Conference in December 1996 directed the Goods Council "to undertake exploratory and analytical work … on the simplification of trade procedures in order to assess the scope for WTO rules in this area". At the Fourth Ministerial Conference in Doha, in November 2001, ministers agreed that negotiations on trade facilitation would take place after the Fifth Ministerial Conference in Cancún in September 2003. This mandate was renewed on 1 August 2004 when the General Council decided by explicit consensus to commence negotiations on the basis of modalities agreed by WTO members. These modalities established the basis for the work plan adopted at the first meeting of the Negotiating Group on 15 November 2004. Detailed negotiations took place regularly after this and the negotiating text was been streamlined, clarified and improved until the final text was agreed by consensus at the 9th Ministerial Conference, in Bali (Indonesia). According to paragraph 1 of the Modalities, the negotiations had to clarify and improve relevant aspects of Article 5 (Freedom of Transit), Article 8 (Fees and Formalities connected with Importation and Exportation) and Article 10 (Publication and Administration of Trade Regulations) of the GATT 1994, with a view to further expediting the movement, release and clearance of goods, including goods in transit. Negotiations dealt with the provision of technical assistance and support for capacity building in this area. The negotiations also aimed at provisions for effective cooperation between customs or any other appropriate authorities on trade facilitation and customs compliance issues. The Negotiating Group, at its first meeting, agreed to invite the International Monetary Fund (IMF), the Organisation for Economic Cooperation and Development (OECD), UNCTAD, the World Customs Organization and the World Bank to attend on an ad hoc basis. Two clear areas were established in the organization of the negotiations. Section I deals with technical aspects of the deal and explains in detail the necessary improvements for an efficient and effective agreement. Section II provides the basis for special and differential treatment and for technical assistance and capacity building needed for the implementation of the agreement, in some instances with specific deadlines and timetables. The World Customs Organization and the World Bank also made written contributions to the negotiations, and identified areas in which assistance can be provided to developing country members. According to OECD, which is also involved in the negotiations as an observer and which provides technical reports on the current problems and the benefits of a good agreement for all members, the measures that would make the biggest impact in terms of reducing costs are: harmonization of documents streamlining of customs procedures (such as pre-arrival clearance) predictability in customs regulations (such as advance rulings on what tariffs apply to specific products or clear rules of procedure and availability of trade-related information)