World Trade Organization (WTO)
- 2. Basics of GATT & WTO Structure of WTO Agreements Agreement on Agriculture Domestic Support Sanitary and Phyto sanitary measures(SPS)
- 3. FACT of WTO: - Headquarter: Geneva, Switzerland - Purpose: Regulated International trade - Founded: 1st Jan. 1995. - Membership: 164 member state - Leader: Roberts Azeved - After world War II( after 1945) , some countries will decides that, to established the organization for Trade.
- 4. - A draft Agreement was prepared at Hawana conference in 1948 for the establishment of „International Trade Organization‟. This was Hawana Charter. It was participated in 53 countries & signed in 56 countries. - In order to get implemented. Havana Charter was required to get ratified by American Congress. - In 1950 America made it clear that it will not ratify the agreement. So ITO could not be implemented. - And there was failed attempts to create an “International Trade Organization” proposed by „BRETTENWOODS‟
- 5. GATT: - Temporary Agreement on multilateral tariff reductions until the ITO was framed. - Temporary agreement provided the basis for the international trading system for 47 year. - It was not an Organization but an agreement. Participating countries were not celled members but “CONTRACTING PARITIES” - GATT was created in 30th Oct.1947 signed by 23 Nations. - Between 1946 and 1994, the GATT provided a framework multilateral trade negotiation.
- 6. - Then there was Uruguay round of conference lasted between 1986 to 1994 (8 Year). It was the biggest negotiating mandate on trade ever agree and thereby ending with the birth of WTO. - From 1947 to 1994, the GATT CONTRACTING PARTIES organized „8‟ rounds of negotiations.
- 7. Year Place/Name Subjects Covered Parties 1947 Geneva Round Tariffs 23 1949 Annecy Round Tariffs 13 1951 Torquay Round Tariffs 38 1956 Geneva Round Tariffs 26 1960- 1961 Geneva, Dillon Round Tariffs 26 GATT Trade Round
- 8. Year Place/Name Subjects Covered Parties 1964 -1967 Geneva, Kennedy Round Tariffs and anti- dumping measures 62 1973 -1979 Geneva, Tokyo Round Tariffs, non-tariff measures, "framework" agreements: 102 1986 -1994 Geneva, Uruguay Round Tariffs, non-tariff measures, rules, services, TRIPS, dispute settlement, textiles, agriculture, Creation of WTO, etc. 123
- 9. General Agreement on Trade and Tariff Protocol for Provision Application: Applicable for Part II of the Agreement. Countries were free to implement only those provisions of the agreement which did no violate any existing law of the land.
- 10. What led to replacement of GATT with WTO GATT dealt with only Tariff barriers but by 1970s Non Tariff Barriers has also started increasing. GATT dealt with trade in Goods . But by 1980‟s Developed countries started having comparative exchange in trade in Services. By 1980s Developing Countries started Pursing Export- Oriented Growth. With these new demands, it was clear that agenda of the GATT was going to expand well beyond the traditional issues areas of tariffs on goods.
- 11. - The final Act concluding the Uruguay round officially established the WTO regime was signed 15th April 1994 during the ministerial meeting at Marrakesh, Morocco and hence is known as the Marrakesh Agreement. - Since 1995, the WTO has performed the role of an international organization for trade rules.
- 13. Formation of WTO: Grand Bargain -------------------------------------------------------------- Developed countries Developing countries Agreed to include Trade allowed Inclusion of In Agriculture & Service & Intellectual Textile under Property Right under WTO with some WTO. Exception.
- 14. Drawbacks of GATT: Basically GATT is provisional agreement not an organization. Less developed countries could get only little benefits from GATT. Trade liberalization was confined mostly to the developed countries. The textile and clothing industries were exempted from GATT. GATT followed the principle of commodity based negotiations. Developing countries mainly exporting primary product could not effectively bargain with developed countries.
- 16. What is WTO? WTO is the only Global International Organization dealing with the rules of the trade between nations. At it‟s heart are the WTO agreement, negotiated & signed by the bulk of the worlds trading nations & rectified in their parliaments. The goals is to help producer of goods and services, exporters & importers conduct their business. The WTO official commenced on 1st Jan. 1995, under the Marrakesh Agreement signed by 123 nations on 15th April 1994, replacing the GATT, which commenced in 1948.
- 17. It is forum for Government to negotiate trade agreements. It is a place for them to settle trade disputes. WTO is place where member governments try to sort out the trade problems they face with each other.
- 18. Structure: Today, the WTO has nearly 164 members accounting for over 97% of world trade.
- 19. Objectives of WTO: - To set & enforce rules for International trade. - To provide forum for negotiating and monitoring further trade liberalization. - To increase the transparency of decision making process. - To Co-operate with other major international economic institution involved in global economic management. - To help developing countries benefit fully from the global trading system.
- 20. - To improve the standard of living of people in the member countries. - To ensure full employment and broad increase in effective demand. - To enlarge production and trade of goods. - To increase the trade of services. - To ensure optimum utilization of world resources. - To protect the environment. - To accept the concept of sustainable development.
- 21. Functions of WTO: 1. To implement rules and provisions related to trade policy review mechanism. 2. To provide a platform to member countries to decide future strategies related to trade and tariff. 3. To provide facilities for implementation, administration and operation of multilateral and bilateral agreements of the world trade.
- 22. 4. To administer the rules and processes related to dispute settlement. 5. To ensure the optimum use of world resources. 6. To assist international organizations such as, IMF and IBRD for establishing coherence in Universal Economic Policy determination.
- 23. The Fundamental Principles WTO. Reciprocity: Mutual lowering of trade barriers, thus countries that lowered their tariffs could expect their trading partners to do the same. Most Favored Nation(MFN) The MFN principle holds that the tariff preference granted to one state must be granted to all others in other words there could be no “favored nation” among members.
- 24. Continue………………… National Treatment: National treatment means that foreign goods are treated equally with domestic goods, and that countries are not able to enact such policies that give their domestic product any advantage over foreign product. eg. Mobile phone 1. Apple: Foreign goods(Import product) 2. Micromax: National goods(domestically produce) Equal taxes was given in both mobile Company. It was treated as same.
- 25. Conference Year Place I 9-13 Dec., 1996 Singapore II 18-20 May 1998 Geneva (Switzerland) III 30 Nov.-З Dec., 1999 Seattle (USA) IV 9-14 Nov., 2001 Doha (Qatar) V 10-14 Sep., 2003 Cancun (Mexico) VI 13-18 Dec.. 2005 Hong Kong VII 30 Nov-2Dec., 2009 Geneva (Switzerland) Table: WTO Ministerial Conference:
- 26. Three divisions of WTO: 1. Ministerial level conference: Meet once in two years to take principal policy decisions. 2. General council : Consists of all members, handles day to day work of WTO. 3. Bodies : (a) Dispute settlement Body, (DSB). (b) Trade policy Review Body (TPRB).
- 27. WTO Agreements: Uruguay Round negotiations which included a major revision of the original General Agreement on Tariffs and Trade (GATT). The Uruguay Round also created new rules for dealing with trade in services, relevant aspects of intellectual property, dispute settlement and trade policy reviews. The complete set runs to some 30,000 pages consisting of about 30 agreements and separate commitments (called schedules) made by individual members in specific areas such as, lower customs duty rates and services market-opening.
- 28. Each country receives guarantees that its exports will be treated fairly and consistently in other countries‟ markets. Each country promises to do the same for imports into its own market. The system also gives developing countries some flexibility in implementing their commitments.
- 29. Issues with India: India has been member of GATT since 1948 hence it was party to Uruguay round and a found member of WTO. China joined WTO only in 2001 and Russia had to wait till 2012.
- 30. Matter of food stockpile developing countries is of particular interest to India, which has, through its poorly conceived public distribution system created a vast stockpile of food grain. Actions to add to or trade parts of this stockpile have big effect on world prices and thus can severally distort the market. Developed countries such as the US, meanwhile, are unwilling to cede India and other developing nations the right to create a food stockpile through domestic procurement in perpetuity.
- 31. Agreement Establishing WTO (Near about total 60 Agreements are there.) ---------------------------------------------------------- Annex 1 Annex 2 Annex 3 Annex 4 1. Annex 1a Dispute Trade policy Plurilateral 2. Annex 1b Settlement Review Agreement 3. Annex 1c
- 32. Agreement Establishing WTO ---------------------------------------------------------- Annex 1 1. Annex 1a - General Agreement on Tariff and Trade - GATT 1994 2. Annex 1b - General Agreement on Trade in Service GATs 3. Annex 1c - Trade Related Intellectual Property TRIPs Right
- 33. Included Provision of GATT 1947 but expanded its scope to Non Tariff Barriers General Agreement on Tariff and Trade- 1994 Asked All member State to submit Individual Tariff Schedules (Tariff schedule –In any Country list submit goods – Write max Tariff (It means decide fixed Tariff eg. 30 % or 40 %)) Tariff Binding Developed Countries Developing Countries Before WTO 78 % 22 % After WTO 99 % 72 %
- 34. For Example: India – 04 Goods are Imported i.e. A, B, C & D. B Included C Tariff - Tariff Bound D Schedule (Tariff is fixed) A - Not included - Tariff is not fixed Schedule (It depends on India. Tariff is to be increases or decreases)
- 35. Agreement on Agriculture(AOA) Agreement on Application of Sanitary and Phyto sanitary measures(SPS) Agreement on Textiles & Clothing(ATC) Trade Related Investment Measures(TRIMs) Agreement on Technical Barriers to Trade(TBT) General Agreement on Trade and Tariff 1994
- 36. Liberalize Agriculture Trade in 3 significant Respects Agreement of Agriculture(AOA): Three Pillers of Agricultural Trade Policy Market Access Domestic Support Mechanism Export subsidies Conversion of All non tariff imports restriction into Tariffs ------ Tariffication All Tariff were required to be bound After binding the Tariffs it should be gradually reduced over a period of several years Market Access
- 37. Tariffication: For Example : - In AOA, any country is to be signed, this country is removed in Non Tariff barriers. - It is converted to Non-Tariff to Tariff barriers. India Imports to America AOA Signed in America Tariff is to be decided fixed
- 38. Domestic Support Mechanism Domestic Supports(Subsidies) -------------------------------------------------------- Direct Support Directly stimulate Production & Trade of Agril. Product Indirect Support Trade Distorting – Amber box subsidy – Highly Restricted Green box & Blue box subsidy – Non Restricted Don‟t Affect production and Trade directly
- 39. Direct Support: Government gives the subsidies directly to farmers. For example: Government has Lowering the prices of seed, fertilizers, insecticide etc. for the main motive, for increasing farmers production.
- 40. Meaning of Indirect Support: Purchase Inputs in Market price i.e. Diesel, petrol, fertilizer, Insecticide & Government has to pay the subsides in direct farmers account . 1. Farmers has to decide/depends, spends money. For eg. Irrigation or petrol or purchase vehicle or Electricity etc. 2. Government gives the Training to Farmers for increasing production.
- 41. In Indirect subsidies divided in two groups 1. Green box 2. Blue box No any interference & restriction in WTO
- 42. Direct Supports(Subsidies):- Ambar Box subsidy: Most trade distorting These subsides have to go away. For eg. MSP – By developing Nations Cost of cultivation Selling price falls 1000/- 900/- Govt. has announce MSP 1200/- Rs. 300 subsidy
- 43. Country Ambar box subsidy allowed Developed countries 5 % of total value of Agricultural Production in 1986-88(base year) Developing countries 10 % of total value of Agricultural Production in 1986-88(base year) For eg. 1986 – 88 Average price Todays price Rs. 500 Rs. 1200 per qtl Because India‟s Production cost is very low in base year. India demanded that, to consider the base year 1999 – 2000.
- 44. Developing Nations 10 % : 10 % subsidy Total production 10 Tonnes - 1 Tonnes Developed Nation 5 % : 5 % subsidy Total production 500 Tonnes - 25 Tonnes Subsidy must be calculated on 100 % produce and not on quantity bought by the government at MSP. Conclusion: It is Illogical it meanse not logically. MSP should be added in Green box subsidy.
- 45. But India provided the farmers, more than 10 % subsidy. Then Developed country says that, India has to get violation on agreement. India has to be demanded to change the base year & create pressure of WTO. And not to be signed in any new agreement. Till date, India has not signed in “Trade facilitation of Agreement” (TFA) (This agreement is more benefited in Developed country).
- 46. Green Box subsidy: Not trade distorting. No limitation (Can gives as much as you can). Generally cash payment. Government spending on, Research, Disease control & Indirect Impact Infrastructure ( Increasing Production) No direct effect on production. Govt. support given, to farmers during the crop failure. eg. Flood, natural calamities
- 47. Government has to provide incentive for environment protection. For eg. Delhi pollution: In the state of Punjab & Haryana farmers, after harvesting of crops, residual are there. And farmers is burn this residual. But Govt. has to encourage point of view, the farmers, gives the training for preparing Biogas or manure, obviously production is enhanced. And hence the Indirect effect in Delhi Pollution. Government main motive is to be Environment Protection.
- 48. Green Box subsidy used in two ways i.e. Public Service & Direct payment. Public Service Direct Payment R & D Income Guarantee & Security programmes Marketing Crop Insurance(From Govt.) Training Natural Calamities Domestic Food Aid Environment Protection
- 49. Who spends and How much spends in Green box Subsidy Developed Nations Developing Nations Strong financially Lack of financial resources Developing nations demanded the, these subsidy are brought under reducible categories Not effective eg. Horse is not to be walk. It is not possible the running But in case of Horse is to be walk, it is possible to the running. And hence indirectly Green box subsidy is distorting the trade
- 50. Blue Box Subsidy: Less trade Distorting: Basically Ambar box subsidy but they tend to limit the production. For eg. Subsidies that don‟t increase with production. Subsidies linked with acreage/No. of animal. This type of subsidies given by the Norway, Iceland, Solvania. Total land: 50 % crop cultivation 50 % Livestock
- 51. Export Subsidies Developed countries to reduce Export subsidy by 36 % over 6 years based on the 1986 to 1990 base period. Developing countries to reduce Export subside by 36 % over 10 years based on the 1986 to 2004 base period. For example: America Export India Cost of Corn Rs. 500/- Sold in India Rs. 300/- American Govt. paid in Rs. 200/- Subsidy by farmers. Hence, America corn available in cheap rate in India. This is not fair deal.
- 52. Agreement on Application of Sanitary and Phyto sanitary measures(SPS) Article 20 of the General Agreement on Tariffs and Trade (GATT) allows governments to act on trade in order to protect human, animal or plant life or health, provided they do not discriminate or use this as disguised protectionism. In addition, there are two specific WTO agreements dealing with food safety and animal and plant health and safety and with product standards in general.
- 53. Key features of SPS measures Agreement SPS measures to be based on scientific risk assessment. Countries should base their SPS measures on International standards. Countries may have higher level of SPS measures but shall be based on scientific risk assessment. Transparency: All proposed, new and changed measures are to be notified by members to the SPS Committee of WTO Secretariat.
- 54. Problem faced by India in Implementing the SPS provisions Lack of adequate time to adapt to SPS measures and adequate advance warning about the new measures. High cost of adoption. Unwillingness on the part of the developed countries to accept equivalent measures of developing countries. Lack of adequate technical assistance to developing countries particularly for creating infrastructure necessary for ensuring quality testing standards. Ineffective participation in the activities of the international standardizing bodies leading to standards getting fixed by default.
- 55. Strategy Recommended for Future Upgradation of standard within India. Building-up scientific evidence to counter unreasonable SPS measures. Exporters should examine WTO-compatibility of health and sanitary regulations/product standards. Close-co-ordination between Government and Exporters regarding specific cases. Need for framing of standards for manufacture, production units/processes, monitoring contaminants, sampling procedures and additives.
- 56. Thank you Dr. Devyanee K. Nemade Assistant Professor Department of Agricultural Economics & Statistics Dr. PDKV, Akola