Introduction to the WTO Will Martin World Bank 10 May 2006 1
Issues What is the WTO and how does it work? Implications of being a member of the WTO multilateral trading system 2
WTO as an international organization Members are States or customs territories Unlike the UN, which is for countries only Accessions on terms to be agreed A Member-driven organization Very different from World Bank, UN Members decide directly on all issues One member, one vote No delegation to a representative board Decisions based primarily on consensus Most work actually done by officials of members 3
Background Builds on the GATT a treaty, not an organization-- established in 1947 WTO established in 1994, in the Uruguay Round Includes trade in goods, trade in services, and traderelated intellectual property rights GATT Contracting Parties became members New members join through accession process 4
WTO Agreement & Six annexes 1. General Agreement on Tariffs and Trade (GATT) 2. General Agreement on Trade in Services (GATS) 3. Trade-Related Intellectual Property Rights (TRIPS) 4. Dispute Settlement Mechanism (DSM) 5. Trade Policy Review Mechanism (TPRM) 6. Plurilateral Agreements 5
Functions of WTO Implement the trade agreements Provide a framework for negotiations Administer dispute settlement Administer Trade Policy Review Mechanism Cooperate with the IMF and World Bank on coherence in global economic policy 6
Ministerial Conference General Council meeting as Trade Policy Review Body General Council General Council meeting as Dispute Settlement Body Committees on Trade and Environment Trade and Development Subcommittee on Least- Developed Countries Regional Trade Agreements Balance of Payments Budget, Finance, Administration Working parties on Accession Working groups on Trade and Investment Trade and Competition Transparency in Govt Procurement Council for Trade in Goods Council for TRIPS Committees on Market Access; Agriculture Sanitary and Phytosanitary Technical Barriers to Trade Subsidies and Countervailing Anti-Dumping; Customs Valuation Rules of Origin; Import Licensing Trade-Related Investment Measures Safeguards Textiles Monitoring Body Working parties on State-Trading Enterprises Preshipment Inspection Council for Trade in Services Committees on Trade in Financial Services Specific Commitments WPs on Professional Services GATS Rules Plurilaterals Civil Aircraft Government Procurement 7
Decision Making Most decisions taken by consensus Provision for voting by members on specific issues 2/3 majority for accessions ¾ for interpretations of rules and for waivers Drafting frequently involves subsets of members (Green room process) 8
Secretariat Director-General appointed by Ministerial Conference Director General appoints the staff Staff must be international Cannot judge a country s compliance Cannot initiate actions against a country s policies 9
Some key disciplines Border protection to be restrained (bound) and progressively reduced Prohibition of quantitative restrictions No discrimination between sources of supply (MFN) National (equal) treatment for imported & domestic goods & services Protection of intellectual property rights 10
Limits responses to foreign policies Unilateral protective measures allowed only against: Injurious dumping (antidumping) Injurious subsidization (countervailing) Surge in imports affecting a given industry (safeguards) Rules out discriminatory measures like current US quotas against Viet Nam s apparel exports Otherwise must use dispute resolution procedures 11
Provides information Information is hugely important for good policy Lobby groups seek distorting, non-transparent policies Members need to know WTO rules Agreements published And available on the WTO web site Training courses conducted by WTO Secretariat Four levels of transparency: Requirements to publish trade rules Provision of inquiry points for traders Requirements to notify policies to the WTO Trade policy review mechanism 12
Forum for Negotiations Multilateral negotiations usually organized in large Rounds Helps get the balance needed for all to gain France, for example, is concerned about agriculture but clearly gains in services Single-issue negotiations like the Information Technology Agreement sometimes succeed The Doha Agenda negotiations are the 9 th since foundation of the GATT 13
Content of Negotiations Negotiations usually involve both: Negotiations about rules Negotiations about reducing trade barriers Uruguay Round was primarily about rules Introduction of TRIPS, (re)introduction of agriculture Strengthening dispute settlement Abolition of quotas on textiles & clothing 14
Doha Agenda Negotiations DDA is primarily about negotiating reductions in trade barriers Agricultural tariffs and subsidies Non-agricultural market access (NAMA) Services Some negotiations on rules Curb abuses of anti-dumping Improve dispute settlement 15
Dispute settlement DSB seeks to preserve rights and to clarify rights and obligations Perhaps the most effective international disputesettlement body Major achievement members are sovereign Disputes regarding WTO Agreements must go to the Dispute Settlement Body Members cannot take unilateral action!! Only governments can bring a case 16
Dispute Settlement Dispute Settlement Body establishes a panel Provides opportunity to resolve by negotiation If unsuccessful, establish a panel May appeal to Appellate Body Report must be adopted unless there is consensus against Member found at fault must: withdraw the measure, compensate, or face potential retaliation 17
Trade Policy Reviews Established in Uruguay Round to increase transparency Small group within the Secretariat Reports on policies 4 largest traders (US, EU, China, Japan) every 2 years Next 16 every 4 years Others every 6 years Describes policies--does not rule on compliance 18
What s in WTO for members? Protection of Members rights The most-favored-nation clause Market access in goods and services Provides customs rules Protection from abuse of subsidies & QRs Such as measures like US quotas on apparel Protection of intellectual property Disciplines technical & sanitary barriers Opportunity to seek goals in negotiations 19
Reduce uncertainty about own policies Policy makers can t increase protection above bound levels Most effective if policies bound at low levels Inputs can t generally be subjected to quantitative restrictions 20
Higher costs than GATT Many agreements require much more positive integration than the GATT GATT relied mostly on negative integration eg no QRs, only MFN tariffs But TRIPS, customs valuation etc require establishment/reinforcement of institutions A larger agenda & much heavier workload for delegations 21
Conclusions WTO is an organization of governments Strongly member-driven Provides a set of rules for international trade Provides a forum for negotiations Increases transparency & provides a forum for dispute settlement Provides a more open & predictable environment 22