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The WTO Gateway to the World Trade Organization

The WTO Gateway to the World Trade Organization. Serafino Marchese, Susan Hainsworth, Samer Seif El Yazal WTO Institute for Training and Technical Cooperation. Content of the Presentation. Introduction to the WTO Overview of the Basic Principles of the WTO

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The WTO Gateway to the World Trade Organization

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  1. The WTO Gateway to the World Trade Organization Serafino Marchese, Susan Hainsworth, Samer Seif El Yazal WTO Institute for Training and Technical Cooperation

  2. Content of the Presentation • Introduction to the WTO • Overview of the Basic Principles of the WTO • Transparency / Notification Obligations

  3. WTO: What is it? (1) • International organization embodied in the results of the Uruguay Round • Established: 1 January 1995 • Membership: 157 ---> all countries ? • The Secretariat: around 700 staff, headed by a Director-General, based in Geneva • Budget (2012): 200+ million Swiss francs www.wto.org

  4. WTO: What is it? (2) • Cornerstone of the multilateral trading system • Trade in goods: GATT • Trade in services: GATS • Protection of intellectual property rights: TRIPS • The WTO contract • Rights and obligations • Dispute settlement • Successor to GATT

  5. WTO vs GATT: Main differences • Nature • GATT: applied on a provisional basis with no institutional framework • WTO: permanent framework with a permanent organization • Scope • GATT: trade in goods • WTO: trade in goods and services and TRIPS • Approach • GATT: à la carte (many agreements selective) • WTO: single undertaking • Dispute settlement

  6. Preamble WTO Agr. WTO: Objectives • to raise standards of living • to ensure full employment • growing volume of real income and effective demand • expanding the production of and trade in goods and services • seeking both to protect and preserve the environment • to secure for developing countries, and especially for LDCs, a share in the growth in international trade commensurate with the needs of their economic development

  7. Art. III WTO Agr. WTO: Main functions • Administering and implementing the multilateral and plurilateral trade agreements • Forum for multilateral trade negotiations • Dispute settlement • Overseeing national trade policy • Co-operation with the IMF and the World Bank (coherence in global economic policy-making)

  8. Art. IV WTO Agr. WTO: Structure • Ministerial Conference • General Council • Dispute Settlement Body • Trade Policy Review Body • Councils • Council for Trade in Goods • Council for Trade in Services • Council for TRIPS • Committees and other subsidiary bodies

  9. WTO: How are decisions taken? Art. IX WTO Agr. • As far as possible, by consensus …. • Otherwise, decisions are taken by a majority of the votes cast and on the basis of “one Member, one vote”, but … • amendments to the provisions of the agreements only take effect for those Members who accept them.

  10. WTO: Dispute Settlement • Coverage: goods, services and intellectual property rights • Procedures: strict time-limits • Panel reports automatically adopted … unless consensus against adoption • Parties can appeal to the Appellate Body • In case of non application of recommendations • compensation negotiated • obligations suspended

  11. WTO: Developing Countries • Part IV • “Enabling” Clause • S&DT • Technical Cooperation and Training • UNCTAD/WTO International Trade Center (ITC) • Least Developed Countries (Ministerial Decision)

  12. WTO: Other provisions • Original Membership (Art. XI) • Accession (Art. XII) • Non-application (Art. XIII) • Withdrawal (Art. XV) • Miscellaneous Provisions (Art. XVI) • ensure conformity of national laws, regulations and administrative procedures

  13. WTO: First years • Ministerial Conferences • Singapore (1996) • Geneva (1998) • Seattle (1999) • Doha, Qatar (2001) • Other developments • Post-Uruguay Round agreements: ITA, basic telecoms, financial services • Accessions • Dispute settlement

  14. DDA: Doha Ministerial Declaration • Adopted by all WTO Members • Overview of the MTS (Preamble, paras 1 - 11) • “Broad and balanced” Work Programme launched (paras 12 - 44) • Implementation issues and concerns • Negotiations • Singapore issues • Establishment of Working Groups • Development dimension

  15. Agriculture Market Access (non-Ag) Services TRIPS Rules (AD, SCM, fisheries, RTAs) DSU Trade & Environment S&D Trade Facilitation Special Sessions of CoA Neg. Group on MA Special Sessions of CTS Special Sessions of TRIPS Council TRIPS Council Neg. Group on Rules Special Sessions of DSB Special Sessions of CTE Special Sessions of CTD Neg. Group on Trade Facilitation Issue Negotiating Body

  16. DDA: Recent developments • Cancun (Sept. 2003) • July Package (WT/L/579) • Hong Kong (WT/MIN(05)/DEC) • Least Developed Countries (LDCs) • Aid for Trade • MC8, Geneva, 15-17 December 2011 • MC9, Bali, December 2013

  17. WTO/DDA: A Summary Multilateral Framework of Rules • Rules negotiated and accepted by all Members under the consensus decision-making process • Maintaining a basic balance/equilibrium, between • open and expanding markets; and • needs and requirements of domestic economic policy: making domestic industries more competitive; protecting environment and consumers; operating an efficient economy; contribute to economic development and growth

  18. 18 18 Overview of Basic Principles 2. Trade Liberalization 3. Specific Disciplines 4. “Horizontal” Exceptions 5. Transparency 1. Non-discrimination

  19. 1. Non-discrimination 19 A country may not discriminate between like products originating in or destined for different countries. Each WTO Member gets immediately and unconditionally the best treatment given to any other trading partner. Most-Favoured-Nation (MFN) GATT Art. I:1 Principle

  20. 1. Non-discrimination 20 GATT Art. I:1 Most-Favoured-Nation (MFN) • Customs Duties and charges of any kind • imposed in connection with importation or exportation • imposed on the international transfer of payments for imports or exports; The method of levying such duties and charges; and Matters referred to in paragraphs 2 and 4 of Article III (National Treatment) Coverage Very wide coverage: fiscal and regulatory measures; internal and applied at the border; bound and unbound tariffs, etc.

  21. 1. Non-discrimination 21 Most-Favoured-Nation (MFN) GATT Article I:1 “… any advantage, favour, privilege or immunity granted by any Member to any product originating in or destined for any other country shall be accordedimmediately and unconditionallyto the like product originating in or destined for the territories of all other Member.” Obligation • Like Product: defined in jurisprudence • - physical characteristics of product • - end use of product • - consumer preferences • - tariff classification

  22. Exercises: MFN 22 Alba, Vanin, and Tristat are WTO Members, but Ruritania is not. ► Can Alba impose a tariff of 5% on watches imported from Ruritania, and 10% on watches imported from Vanin, and Tristat? Exercise I Exercise II Vanin has an import tariff for cattle of 20 per cent. Following trade negotiations with Tristat (a European country in the Alpine region), Vanin introduces an import tariff of 5 per cent for"cattle reared at a spot at least 300 metres above sea level and having at least one month's grazing each year at a spot at least 800 metres above sea level". ► Is this tariff WTO-consistent?

  23. Exceptions to MFN - “Enabling Clause” 23 “Enabling Clause” (1979 Decision) – now part of GATT 1994 • Tariff Preferences from developed to developing countries (Generalised System of Preferences) • More favourable treatment with respect to Non Tariff Measures (NTMs) • Regional or global arrangements between “less-developed countries” (reduction / elimination of tariffs and NTMs) • Special treatment for Least developed countries (LDCs) Certain conditions must be fulfilled in order to grant preferences – e.g., non-discriminatory.

  24. 1. Non-discrimination 24 A country may not apply less favourable treatment to “like products” of foreign origin once they have entered its territory. National Treatment GATT Article III Principle GATT Art. III:1, 2, 4 Article III:1 – General Principle Article III:2 – Internal Taxation Article III:4 – Internal Regulation

  25. 1. Non-discrimination 25 National Treatment GATT Art. III:1 “Members recognize that internal taxes and other internal charges, and laws, regulations and requirements affecting the internal sale, offering for sale, purchase, transportation, distribution or use of Products, and internal quantitative regulations requiring the mixture, processing or use of products in specified amounts or proportions, should not be applied to imported or domestic products so as to afford protection to domestic production.” General Rule No discrimination against imports in the internal market.

  26. 1. Non-discrimination 26 National Treatment GATT Ad. Art. III “Any internal tax or other internal charge, or any law, regulation or requirement of the kind referred to in paragraph 1 which applies to an imported product and to the like domestic product and is collected or enforced in the case of the imported product at the time or point of importation, is nevertheless to be regarded as an internal tax or other internal charge, or a law, regulation or requirement of the kind referred to in paragraph 1, and is accordingly subject to the provisions of Article III.” Taxes or charges collected at the border may be covered by Article III

  27. 1. Non-discrimination 27 National Treatment GATT Art. III:2 - Tax discrimination First sentence: No taxation of imported products in excess of taxation applied, directly or indirectly, to like domestic products. - no amount “in excess” is allowed - 4 characteristics of likeness Second sentence and Ad Article III:2: Taxation of imported products must not be dissimilar to taxation of domestic directly competitive or substitutable productsso as to afford protection. - 4 characteristics of likeness plus competitive conditions Domestic taxation must not discriminate against foreign products

  28. 1. Non-discrimination 28 National Treatment GATT Art. III:4- Other measures “The products of the territory of any Member imported into the territory of any other Member shall be accorded treatment no less favourable than that accorded to like products of national origin in respect of all laws, regulations, and requirements affecting their internal sale, offering for sale, purchase, transportation, distribution or use. …” Domestic regulation must not discriminate against foreign like products

  29. Exercises: National Treatment 29 Alba, Vanin, and Tristat are WTO Members. ► Can Alba apply a 5% sales tax on locally produced watches and a 6% sales tax on watches imported from Vanin and Tristat? Exercise I If Alba only produces pocket watches and not wrist watches: ► can it apply a 5% tax on pocket watches and a 6% tax on wrist watches? Exercise II Alba requires that imported watches be sold at certain department stores. ►Is such a requirement consistent with the GATT1994? Exercise III

  30. Overview of Basic Principles 30 1. Non-discrimination 3. Specific Disciplines 4. “Horizontal” Exceptions 5. Transparency 2. Trade Liberalization

  31. 2. Trade Liberalization 31 A country commits itself to ensure an agreed level of access to its market, on an MFN basis, for supplying countries. Principle Goods GATT Art. II Schedules of concessions containing maximum tariff levels Bindings of concessions and commitments For imported products identified in the Schedule of a Member, that Member can not apply a tariff rate higher than the “Bound Rate” indicated in the Schedule. Renegotiation Possible • GATT Art. XXVIII (Modifications of Concessions)

  32. 2. Trade Liberalization 32 Bindings of concessions and commitments Certain taxes and charges may be applied in addition to ordinary customs duties • GATT Art. II:1(b): existing “other duties and charges” • E.g., statistical taxes; foreign exchange fee • Recorded in the schedule at the end of Uruguay Round (Understanding on Article II:1(b)) • GATT Art. II:2 • Equivalence of Internal Tax (i.e., border tax adjustment) • Anti-Dumping or Countervailing Duties • Fees “Commensurate” with the Costs of Services Rendered

  33. Exercises: Trade Liberalization 33 Exercise Tristat, a WTO Member, has bound all its tariffs at the rate of 20 per cent. Although it does not produce cars, Tristat decides to levy a value-added tax of 33 per cent on cars and instructs its customs services to collect the tax. ► Is the tax consistent with the GATT1994? ►Would your response differ if Tristat also produces cars and imposes an internal value-added tax on cars?

  34. 2. Trade Liberalization 34 General Prohibition of Quantitative Restrictions (QR) The use of QRs (Quantitative Restrictions) is prohibited Principle GATT Art. XI:1 provides: • “No prohibitions or restrictions other than duties, taxes or other charges, whether made effective through quotas, import or export licences or other measures, shall be instituted or maintained by any Member on the importation of any product of the territory of any other Member or on the exportation or sale for export of any product destined for the territory of any other Member.” • Wide scope – could cover measures other than quotas

  35. 2. Trade Liberalization 35 General Prohibition of Quantitative Restrictions (QR) Exceptions Specific to Prohibition on QRs • GATT Art. XI:2(a) (Critical Shortage of Foodstuffs or Other Essential Products) • GATT Art. XI:2(c) (Agricultural Products and Fish) - Agreement on Agriculture (Tariffication) • GATT Art. XII (BOP Measures) • Agreement on Textiles and Clothing (Progressive Integration)

  36. Overview of Basic Principles 36 1. Non-discrimination 2. Trade Liberalization 4. “Horizontal” Exceptions 5. Transparency 3. Specific Disciplines

  37. 3. Specific DisciplinesExamples 37 GATT Art. XVI (Subsidies) Agreement on Subsidies (Countervailing Measures) GATT Art. XIX (Safeguards) GATT Arts. XI, XVI Agreement on Safeguards Agreement on Agriculture Uruguay Round GATT Art. XX Agreement on Sanitary and Phytosanitary Measures GATT Art. VI (Anti-Dumping) Agreement on GATT Art. VI

  38. Overview of Basic Principles 38 1. Non-discrimination 2. Trade Liberalization 3. Specific Disciplines 5. Transparency 4. “Horizontal” Exceptions

  39. 4. “Horizontal” Exceptions 39 GATT Art. XX: General Exceptions “Subject to the requirement that such measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail, or a disguised restriction on international trade, nothing in this Agreement shall be construed to prevent the adoption or enforcement by any Member of measures:” “Chapeau”

  40. 4. “Horizontal” Exceptions 40 GATT Art. XX Sample Exceptions (a)necessary to protect public morals (b)necessary to protect human, animal or plant life or health (d)necessary to secure compliance with laws or regulations which are not inconsistent with the provisions of this Agreement ... (f)imposed for the protection of national treasures or artistic, historic or archaeological value (g)relating to the conservation of exhaustible natural resources (if such measures are made effective in conjunction with restrictions on domestic production or consumption)

  41. 4. “Horizontal” Exceptions 41 GATT Art. XX • Does the measure fall within one of the exceptions listed in Article XX? • E.g. XX(b) – measures “necessary to protect human and animal life”: several elements to be examined: • importance of the societal value pursued • the measure’s contribution to achieving the value • trade-restrictive impact of the measure, and • reasonably-available alternatives Two-tier Analysis 2. If yes, does it satisfy the “chapeau”? => arbitrary discrimination? => unjustifiable discrimination? => disguised restriction on trade?

  42. 4. “Horizontal” Exceptions 42 GATT Art. XXI • Nothing in this Agreement shall be construed • to require any Member to furnish any information the disclosure of which it considers contrary to its essential security interests; or • to prevent any Member from taking any action which it considers necessary for the protection of its essential security interests… • (c) to prevent any contracting party from taking any action in pursuance of its obligations under the United Nations Charter for the maintenance of international peace and security. Security Exception GATT/WTO “judicial review” of a measure taken for security reasons – so far, none.e.g., US – Helms-Burton

  43. “Horizontal” Exceptions 43 GATT Art. XXIV: Regional Integration The rules and obligations shall not prevent Members from taking certain measures which would otherwise be illegal, in order to enter into certain forms of economic integration compatible with the WTO “regional trade” provisions. Principle

  44. “Horizontal” Exceptions 44 Types GATT Art. XXIV – Regional Integration Conditions Free-Trade Areas / Customs Unions 1. “Substantially all trade” among partners (internal) 2. Not on the whole more trade-restrictive (external) 3. Limited transition period

  45. Overview of Basic Principles 45 1. Non-discrimination 2. Trade Liberalization 3. Specific Disciplines 4. “Horizontal” Exceptions 5. Transparency

  46. 5. Transparency 46 Trade Policy Review Mechanism (TPRM) Commercial legislation / Measures (Laws, Regulations, etc.) Publication of commercial legislation (GATT Art. X) Notification Obligations Inquiry / Information Points Information

  47. NOTIF:Why? • Advantages • Transparency • Collective surveillance • Disadvantages • Should Members notify everything? • Costs: production, circulation, analysis • The outcome • tailor-made • reverse notifications

  48. NOT: Where? • Final Act • Old obligations …. actual • New decisions • Quantitative restrictions (QRs) • Non-tariff measures (NTMs) • Integrated Data Base (IDB)

  49. NOTIF: What? • Legislation • Changes in legislation • Stock: measures in place • Changes: Measures taken in a given period • Step by step: individual actions

  50. NOTIF: When? • Ad-hoc: if … then notify • One-off: “snap-shot” • Regular • every 6 months: semi-annual • annual • other periodicities

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