Wto

PGDM-B / Group 3 1SIMSR

Submitted By:Maithilee Deshmukh [123]Siddhesh Hegde [151]Swapnil Wagh [153]PGDM-B / Group 3

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World Trade Organization• International organization dealing with the global rules of trade

between nations

• Assurance to producers and consumers of secure supplies and greater choice of finished products, raw materials and services

• At heart of the system: Trade Agreements, negotiated and signed by a large majority of world’s trading nations

• The goal: To ensure that trade flows as smoothly, predictably and freely as possible in turn improving welfare of the peoples of the member countries

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Fact File

• Location: Geneva, Switzerland• Established: 1 January 1995• Created by: Uruguay Round negotiations (1986-94)

under GATT• Membership: 153 countries as on 23 July 2008• Budget: 196 million Swiss francs(approx. 209

million USD) in 2011.• Secretariat staff: 629• Head: Director-General, Pascal Lamy

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Basic Principles

1. Non-discrimination: 2 major componentso Most-favoured-nation (MFN) rule:

• Product made in one member country be treated no less favourably than a “like” (very similar) good that originates in any other country

• Exceptions are made for the formation of free trade areas or customs unions and for preferential treatment of developing countries

• Guarantee to smaller countries against exploitation by larger countries by raising tariffs in bad times

o The National Treatment Principle: • Foreign goods, once they have satisfied whatever border measures are

applied, be treated no less favourably, in terms of internal (indirect) taxation than like or directly competitive domestically produced goods

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Basic Principles (Contd.)

• Ensures that liberalization commitments are not offset through the imposition of domestic taxes and similar measures

• It is irrelevant whether a policy hurts an exporter. What matters is the existence of discrimination, not its effects

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Basic Principles (Contd.)

2. Reciprocity: fundamental element of negotiating process• Reflects both a desire to limit the scope for free-riding

that may arise because of the MFN rule and a desire to obtain “payment” for trade liberalization in the form of better access to foreign markets

• Reciprocal concessions ensure that gains from negotiations will materialize and will be greater than gain through unilateral liberalization

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Basic Principles (Contd.)

3. Enforceable Commitments:• The non-discrimination principle of the GATT, is

important in ensuring that market access commitments are implemented and maintained

• The tariff commitments made by WTO members in a multilateral trade negotiation and on accession establish “ceiling bindings”

• It is made sure that the value of the tariff concession is not nullified or impaired

• If they are compromised, complaining country may invoke WTO dispute settlement procedures

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Basic Principles (Contd.)

4. Transparency: • Need of access to information on the trade regimes that are

maintained by members for enforcement of commitments• Routine meets of specialized committees, working parties,

working groups, and councils for exchange of information and views and efficient diffusion of potential conflicts

• Trade policy reviews• Help reduce uncertainty related to trade policy from

economic perspective

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Basic Principles (Contd.)

5. Safety Valves: Ability of the government to restrict trade in specific circumstances3 types of provisions:a) Use of trade measures to attain noneconomic objectives

i. Protect public healthii. National securityiii. Protect seriously injured industries

b) Ensuring “fair competition”:i. Right to impose countervailing dutiesii. Antidumping duties

c) Intervention for economic reasons:i. Serious balance of payment difficultiesii. Desire to support infant industry

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Functions

• Administering WTO trade agreements• Forum for trade negotiations• Handling trade disputes• Monitoring national trade policies• Technical assistance and training for developing

countries• Cooperation with other international organizations• Support trade barriers• IPR Compliance(TRIPS)SIMSR

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WTO Organization Structure

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Historical Development of WTO• 1944: Bretton Woods Conference(New Hampshire, U.S.) recognized

the need for a comparable international institution for trade to complement theInternational Monetary Fund and the World Bank(the later proposed International Trade Organization)

• 1947: Agreement was reached on General Agreement on Tariffs and Trade (GATT) in Geneva during the UN Conference on Trade and Employment with 23 countries participating in negotiation

• January 1, 1948 : The agreement of GATT enters into force mostly dealing with tariff concessions and reductions

• 1948: Negotiations were completed on ITO, but It never came into force due to internal economic issues

• 1955: Modification to numerous provisions of the GATT.US granted a waiver for certain agricultural policies

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Historical Development of WTO (Contd.)

• 1965: Establishing new guidelines for trade policies of and toward developing countries

• 1974: MFA (MultiFibre Arrangement) enters into force. restricts export growth in clothing and textiles to 6 percent per year

• 1986: The Uruguay Round is launched in Punta del Este, Uruguay• 15 April1994: Ministers sign the final act establishing the WTO in

Marrakech• January 1,1995: WTO came into force• GATT held a total of 8 rounds, since its foundation in 1947 till 1994,

including Uruguay round• A new round of trade talks (the Doha Development Agenda) has

started in Doha, Qatar in 2001

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Uruguay round(1986-1994)• September 1986: Launched in Punta del Este, Uruguay, followed by

negotiations in Montreal, Geneva, Brussels, Washington, D.C., and Tokyo

• April 1994: 20 trade agreements finally signed in Marrakesh• 8th round of Multilateral trade negotiations (MTN) conducted within

the framework of General Agreement on Tariffs and Trade (GATT)• Brought agricultural trade more fully under the GATT through

agreement• The main objectives

o to reduce agricultural subsidieso to put restrictions on foreign investmento to begin the process of opening trade in services

like banking and insurance

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Uruguay round(1986-1994) (Contd.)

• Achievementso An umbrella agreement (the Agreement Establishing the

WTO)o Agreements for each of the three broad areas of trade that

the WTO covers: o Trade Related Investment Measures (TRIMS)o General Agreement on Trade in Services (GATS)o Agreement on Trade-Related Aspects of Intellectual Property

Rights (TRIPS)o Dispute settlement (DSU)o Agreement on Customs Valuation o Reviews of governments' trade policies (TPRM)

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WTO members and observers

• Members: 153 on 23 July 2008• Membership for Russia was approved in Dec

2011• Observers: must start accession negotiations

within five years of becoming observers• 31 LDCs are WTO members• Twelve additional LDCs are in the process of

accession to the WTO

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Candidates to WTO membershipCountry Application date

Algeria 1987

Belarus 1993

Sudan 1994

Uzbekistan 1994

Seychelles 1995

Kazakhstan 1996

Azerbaijan 1997

Lao People's Democratic Republic 1997

Andorra 1999

Lebanese Republic 1999

Bosnia Herzegovina 1999

Bhutan 1999

Yemen 2000

Bahamas 2001

Tajikistan 2001

Syria (WP established on 4 May 2010) 2001

Ethiopia 2003

Libya 2004

Iraq 2004

Afghanistan 2004

Republic of Serbia 2004

Iran 2005

Sao Tomé and Principe 2005

Union of the Comoros 2007

Equatorial Guinea 2007

Republic of Liberia 2007

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Recent Accessions to WTO

• Viet Nam on 11 January 2007• Tonga on 27 July 2007• Ukraine on 16 May 2008• Cape Verde on 23 July 2008

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How to join the WTO

• “Tell us about yourself”• “Work out with us individually what you have

to offer”• “Let’s draft membership terms”• “The decision”

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Transformation of Accession Process

• The practice under GATT was to invoke non-application

• This limited the negotiating leverage of the GATT members

• This also prevented bilateral negotiations on market access

• This practice has changed with WTO

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Groups and alliances

• G-20• C-4• European Union• ASEAN• MERCOSUR• NAFTA• Cairns Group

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Ministerial Conferences

• The topmost decision-making body of the WTOGeneva, 15-17 December 2011Geneva, 30 November - 2 December 2009 Hong Kong, 13-18 December 2005 Cancún, 10-14 September 2003Doha, 9-13 November 2001Seattle, November 30 – December 3, 1999Geneva, 18-20 May 1998Singapore, 9-13 December 1996SIMSR

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What is Dumping?

“Dumping is a situation of international price discrimination, where the price of a product when sold to the importing country is less

than the price of the same product when sold in the market of the exporting country.”

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Why does dumping take place?

• As a short-term predatory pricing strategy to drive competitors out of the market

• As a result of market intervention or state subsidies that enable companies to artificially lower their prices

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Adverse effects of Dumping

• Imperfect competition in the domestic market of the host country.– Actual or potential decline in sales– Loss of profits– Market share– Capacity utilization– Employment– Wages– Lost contracts

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Terminologies

• Export price: The price at which it is exported to the importing country (host country).

• Normal Price: Price of the product when destined for consumption in the exporting country (home country)

• Dumping Margin: The margin of dumping is the difference between the Normal value and the Export price of the goods under complaint. It is generally expressed as a percentage of the export price.

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Exporters Price Normal Value

Compare Exporter Price to Normal Value

Normal Value $110.00

Exporter Price $90.00

Difference Attributable to Dumping

$20.00

Difference Attributable to Dumping/exporter price

$20.00 / $90.00=22.22%DumpingMargin =

Dumping Margin Calculation

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Essentials for initiating an anti-dumping investigation

• Sufficient evidence to the effect that – there is dumping

• there is injury to the domestic industry• there is a causal link between the dumping and the

injury, that is to say, that the dumped imports have caused the alleged injury (material injury).

– The domestic producers expressly supporting the anti dumping application must account for not less than 25% of the total production of the like article by the domestic industry.

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Actions That Can Be Taken

• Anti-dumping or Countervailing Duty

• Exceptional Circumstances

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Countervailing Duty

• Provisional Measure - takes the form of a provisional duty in the form of a cash bond on the allegedly subsidized products.

• Definitive Duty - final countervailing duty imposed following an affirmative final decision.

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Countervailing Duty (Contd.)

• Lifetime:Provisional countervailing duty – not

exceeding 6 months, extendable up to 9 months Definitive countervailing duty – 5 years from

imposition

• Sunset Review• Interim Review

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Anti-dumping duty v/s Customs duty

Antidumping Duty

To guard against unfair trade practices

Trade remedial measures.

Not necessary in the nature

Levied against exporter / country in as much as they are country specific and exporter specific.

Normal Customs Duty

Means of raising revenue and for overall development of the economy.

Trade and fiscal policies of the Government

Necessary in nature

Universally applicable to all imports as per the country of origin and the exporter.

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Implementation and Monitoring by WTO

• Monitor the implementation of the trade agreements

• Increase Transparency at Multilateral and National Level

• Trade Policy Review Mechanism (TPRM)

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Trade Policy Review Mechanism

• Established during the Uruguay Round• Agreement for regular and systematic review• Objectives:

– Impact of Members’ trade policies– Improved adherence to WTO rules– Achieve greater transparency– Enhance communication to strengthen

multilateral trading system

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Trade Policy Reviews

• Fundamental activity of WTO• Performed by Trade Policy Review Body• Surveillance of national trade policies• Done for all WTO Members• Frequency for each WTO Member depends on

its share of world tradeEuropean Union, the United States, Japan, and

Canada – Every 2 years

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Global Monitoring Reports

• Annual report by the Director-General of the WTO

• Overview of developments in the international trading environment and recent trade developments

• These further supplement the Trade Policy Reviews.

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THANK YOU

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