GATT/WTO and Global Liberalization

Dr. S.Venkata Seshaiah

I do not know much about the tariff, but I know this much: when we buy the manufactured goods abroad we get the goods and foreigners gets money. When we buy at home we get goods as well as money. Abraham Lincoln Abraham Lincoln argument has no merits, the only sensible words in it are the first eight words. The fact that imports are ultimately paid for exports keeping money at home and protection has no sense. Beveridge

Contents
1. International trading system
2. 3. 4. 5. 6. 7. 8. 9. History : GATT(General Agreement on Trade and Tariffs WORLD TRADE ORGANISATION Doha round History and Developmental Round KEY ISSUES AT DOHA Principles of the trading system Conference meetings Types of Impasses of relevance at DOHA round Weakness Of World Trade Organization

International trading system

Trading strategies:

1. 2.

Outward oriented strategy Inward oriented strategy

Outward oriented strategy

Free trade Advantages (Outward oriented strategy) : 1. Leads to economic Utilization 2. Division of labor occurs 3. Efficiency improves because of competition 4. Benefits consumers in different ways 5. Not much scope for corruption

Inward oriented strategy

Advantages of protectionism (Inward oriented strategy) Infant industry survives well Diversified industrial structure Improving balance of payments Improving The terms of trade Anti-dumping Bargaining Employment protection Curbs conspicuous consumption

Inward oriented strategy

Advantages of protectionism (Inward oriented strategy) : National defense Key Industries Keeping money at home ( falsely attributed to Abraham Lincoln) Size of the home market Equalization of cost of production

History : GATT(General Agreement on Trade and Tariffs)

Was born 1947and lasted until 1994, when it was replaced by the WTO in 1995. Purpose : 1. Reduction of tariffs and other trade barriers and the elimination of preferences. 2. negotiate multilateral extensions of tariff reductions through the application of the Most Favored Nation (MFN) clause. Who Formed it ? - It was negotiated during the UN conference on Trade and Employment. It was the outcome of the failure of negotiating governments to create the International Trade Organization (ITO).

History : GATT(General Agreement on Trade and Tariffs)

Objectives and Principles: 1. Raising living standards
2. Ensuring full employment and a large and steadily volume of real income 3. Developing full use of resources of the world 4. Expansion of production and international trade

History : GATT(General Agreement on Trade and Tariffs

Principles: Non Discrimination Prohibition of Quantitative restrictions Consultation

Disintegration of GATT
Members 128 countries signed GATT by 1994. INDIA became the member of GATT on 8th July, 1948. Other members were UK, USA, France, Germany, Pakistan etc. ITO - GATT was originally intended to become a part of ITO; however, the ITO failed to be created, so the GATT was left as an independent organization.

Rounds under GATT

Year 1947 1949 1951 Round Geneva Annecy, France Torquay, England Subject Tariffs Tariffs Tariffs Achievement Signing of GATT, 45,000 tariff concessions affecting $10 billion of trade Countries exchanged some 5,000 tariff concessions Countries exchanged some 8,700 tariff concessions, cutting the 1948 tariff levels by 25%

1955-56

Geneva

Tariffs, admission of Japan Tariffs Tariffs, AntiDumping

$2.5 billion in tariff reductions

1960-62 1964-67

Dillon Round Kennedy Round

Tariff concessions worth $4.9 billion of world trade Tariff concessions worth $40 billion of world trade

Rounds under GATT Continued

Year 1973-79 Round Tokyo Round Subject Tariffs, non-tariff measures, "framework" agreements Tariffs, non-tariff measures, rules, services, intellectual property, dispute settlement, textiles, Achievement Tariff reductions worth more than $300 billion dollars achieved

1986-93

Uruguay

AGRICULTURE,
creation of WTO, etc.

The round led to the creation of WTO, and extended the range of trade negotiations, leading to major reductions in tariffs (about 40%) and agricultural subsidies, an agreement to allow full access for textiles and clothing from developing countries, and an extension of intellectual property rights.

WORLD TRADE ORGANISATION

History:

Why replaced by WTO 3 Reasons

1. 2. GATT rules applied to trade only in merchandise goods. while GATT was a multilateral instrument, by 1980s many new agreements of a pluri-lateral, and therefore selective nature had been added. Inefficient dispute settlement system.

3.

Officially commenced on 1st January 1995. Replaced the GATT with 153 member countries. Represents 97 % of World trade. Headquartered in Geneva, Switzerland. Governed by a ministerial conference, meeting every two years, a General Council and a Director-General Note: India is one of the founder members of the IMF, World Bank, GATT and WTO

WORLD TRADE ORGANISATION

Objective: Supervise and Liberalize International Trade. Provides a framework for negotiating and formalizing trade agreements. Dispute resolution process aimed at enforcing participants' adherence

DOHA ROUND : History

Battle in Seattle- In 1999 activists tried to shut down the meeting that was supposed to launch the WTO's new round of trade talks. The activists succeeded, and the WTO was forced to relocate the meeting to the capital of Qatar. The activists feared the talks would let big corporations plunder the economies of the developing world, restrict poor countries' access to affordable drugs and prevent developing nations from protecting their domestic economic interests.

DOHA DEVELOPMENTAL ROUND

History:

Launched at the fourth ministerial conference in Doha, Qatar in

November 2001. Succeeded the Uruguay round and the three ministerial conferences at Singapore (1996), Geneva (1998) and Seattle (1999).

Objectives:
Lower trade barriers around the world.
Committing all countries to negotiations opening agricultural and manufacturing markets, as well as trade-in-services (GATS) negotiations and expanded intellectual property regulation (TRIPS). Make trade rules fairer for developing countries

KEY ISSUES AT DOHA

Agriculture has become the linchpin of the agenda for both developing and developed countries Compulsory licensing of medicines and patent protection A review of provisions giving special and differential treatment to developing countries. Resolve problems that developing countries are having in implementing current trade obligations. Key Interests for ASEAN countries Greater market access for industrial goods. Trade facilitation. Anti dumping and subsidies. Technical Co-operation. Effective dispute settlement mechanism

Principles of the trading system

Non-Discrimination Most favored nation Reciprocity Binding and enforceable commitments Transparency Safety valves

Agreements Agreement on Agriculture (AoA)

General Agreement on Trade in Services (GATS)

Trade-Related Aspects of Intellectual Property Rights Agreement (TRIPs)

Conference meetings
Cancun Conference 2003
The conference was aimed at forging agreement on the DDA. Called for an end to agricultural subsidies within the EU and the US.

Hong Kong Conference 2005

Countries agreed to phase out all their agricultural export subsidies by the end of 2013. Agreement to introduce duty free, tariff free access for goods.

Geneva Conference 2008

Negotiation over the special safeguard mechanism. The negotiations collapsed on July 29 over issues of agricultural trade between the United States, India, and China.

Geneva Conference 2009

On 26 May 2009, agreed to hold a seventh WTO ministerial conference session in Geneva from 30 November3 December 2009. "The WTO, the Multilateral Trading System and the Current Global Economic Environment"

Types of Impasses of relevance at DOHA round

Parties could not agree to launch a negotiation. (Impasse on initiation.) Parties could not agree on the subjects for the negotiation (Impasse on contents.) After agreeing to start a negotiation the parties take a long time to come to a mutually agreeable outcome. (Impasse as delay.) Having agreed to start a negotiation, subsequently the parties appear unable to conclude the negotiation with an agreement. (Impasse as high expected failure to agree.) Having agreed to start a negotiation, subsequently the parties can only agree to conclude the activity of negotiation without an agreement. (Impasse as actual failure to agreefortunately the DDA has not reached this point.)

Indian Case

INTERESTS OF INDIA Accelerating integration with world economy (Globalization). Foster more rapid growth and poverty reduction. Expand access to World Markets. Voice in formulation of rules and Decision Making in the WTO. Guarding against the intrusion of non-traded matters in WTO.

BENEFITS TO INDIA Increase in Indias textile & clothing exports due to the phasing out of MFA (in 2005). The reduction in agricultural subsidies & barriers to export of agriculture products, agricultural exports from India also increased. Market access to a number of developing countries without trade discrimination increased.

Disadvantages for India

TRIPs (Trade related aspects of intellectual Property Rights) agreement went against the Indian Patents Act (1970) Introduction of product patents in India lead to hike in drug prices by the MNCs. Hence the poor were left with no generic option Extension of intellectual property right to agriculture has negative effects on India and Indian research institutions Application of Trade related Investment measures (TRIMs) agreement undermines any plan or strategy of self reliant growth based on local technology. Service sectors in India are backward compared to the service sectors in developed countries. Hence inclusion of trade in services is detrimental to the interest of India. The MFN clause proved to be detrimental to Indias interest & provided grounds for Chinese invasion in Indian market through dumping.

Unaddressed Issues
In order not to discredit itself, globalization would have to squarely address sustainable development and poverty reduction . There must be an attempt to link the strategies of development to something more fundamental, the ends of economic and social development . The international trade rules are underpinned by an insufficient appreciation of the adverse impact of rapid liberalization, if it does not pay adequate attention to the need to reduce asset and income inequalities. Without substantial investment in the capacity to supply and, equally important, a guaranteed safety net against falling prices and import surges, sudden liberalization would expose the constituents to unbearable risk.

Agriculture Issues in Developing Nations

One of the key issues is the Agreement on Agriculture (AoA). Areas related to Agriculture-Market Access, Domestic Support, export Competition, Trade Related Intellectual Property Rights . 40 to 50 % of support to the farmers in the form of Green Box subsidies.

Developed countries allowed to retain 80% of their subsidies while developing countries can subsidize their farmers not more than 10%.
Increasing dependency on imports for food grains could bring strain on external payment position of these countries.

Textile Industry
What is MFA all about ? What is ATC ? he Multi Fibre Arrangement (MFA, also known as the Agreement on Textile and Clothing (ATC)) governed the world trade in textiles and... What is TMB ? Textiles Monitoring Body Impact of ATC termination Textile industry merged into GATT under WTO..

Weakness Of World Trade Organization

WTO is fundamentally undemocratic.

WTO causes trampling of labor and human rights. Privatization of Essential services. Fuel issues. Food issues. Forest issues. Creating a Rich mans world.

Glance on Tariffs
Tariffs of Developed countries continue to be very highly loaded against developing countries.

e.g.: Although most tariffs in developed countries are low, those on several categories are prohibitively high esp those on many consumer, agricultural and labour-intensive products ( 10-20 times higher)

Glance on Tariffs
1. EU applies 236% tariff on meat; 180% on cereals; but its tariffs on raw materials and electronics are only 5%! 2. The US collected duties on imports of $2.4 billion from Bangladesh (a major clothing exporter) of $400million in 2011, which was a little more than the $330 million it collected on the $30 billion imports from France during the same period. 3. US tariff on imported shirt is only 1.9 % while it is 20% on cotton shirts and 32.5% on synthetic fibre shirts. ( regressive rates!)

Thank you