World Trade Organization Bartosz Jarocki Ryan Jacques Ryan Craven
Presentation Outline WTO Background WTO Structure WTO Functions Benefits/Misunderstandings Criticism and Protests (video) Case Studies Summary
In brief the World Trade Organization (WTO) is the only international organization dealing with the global rules of trade between nations. Its main function is to ensure that trade flows as smoothly, predictably and freely as possible. Source:WTO http://www.wto.org/english/thewto_e/whatis_e/inbrief_e/inbr00_e.htm
From GATT to WTO GATT was created in the wake of WWII 8 rounds of negotiations under GATT The WTO was created at the final round in Uruguay in 1995 GATT is now the WTO s principal rule-book
Difference between GATT and WTO GATT is a set of rules; WTO is a permanent institution, with a secretariat GATT was applied on a Provisional basis ; WTO commitments are full and permanent GATT covered trade in merchandise goods; WTO covers trade in merchandise, service and intellectual property WTO dispute method is smoother and faster.
WTO here to help An organization which, deals with the rules of trade Between nations at a global level - It is a negotiating forum - It is a set of rules - It helps to settle disputes
WTO Factoid Location: Geneva, Switzerland Established: 1 January 1995 Created by: Uruguay Round negotiations (1986-94) Membership: 149 countries (on 11 December 2005) Budget: 175 million Swiss francs for 2006 (CAD$157,309,484) Secretariat staff: 635 Head: Pascal Lamy (Director-General)
WTO Member Countries
WTO Structure Ministerial Conference - The topmost decision-making body, which has to meet at least every two years. It brings together all members of the WTO, all of which are countries or customs unions. The General Council has two main functions: 1) Dispute Settlement Body 2) Trade Policy Review Body
Structural flowchart of the WTO
Principles of the Trading System 1. Trade without discrimination 2. Freer Trade 3. Predictability 4. Promoting fair competition 5. Encouraging Development and Economic Reform
The Case for Open Trade The data show a definite statistical link between freer trade and economic growth. Liberal trade policies sharpen competition, motivate innovation and breed success. Comparative Advantage
Comparative advantage Countries prosper first by taking advantage of their assets in order to concentrate on what they can produce best, and then by trading these products for products that other countries produce best. Example: Country A - Automobile Country B - Bread
The 10 Benefits 1. The system helps promote peace 2. Disputes are handled constructively 3. Rules make life easier for all 4. Freer trade cuts the costs of living 5. It provides more choice of products and qualities 6. Trade raises incomes 7. Trade stimulates economic growth 8. The basic principles make life more efficient 9. Governments are shielded from lobbying 10. The system encourages good government
The 10 Misunderstandings 1. The WTO dictates policy 2. The WTO is for free trade at any cost 3. Commercial interests take priority over development 4. and over the environment 5. and over health and safety 6. The WTO destroys jobs, worsens poverty 7. Small countries are powerless in the WTO 8. The WTO is the tool of powerful lobbies 9. Weaker countries are forced to join the WTO 10. The WTO is undemocratic
Canada, playing the field - World s 5th largest exporter and importer - Trade = 70% of GDP - Exports account for 40% of economy - Trade linked to 1/4 of jobs - WTO provides framework for trade with the 148 member countries
Concepts of Canada s Trade Policy Multilateralism - Canada use WTO rules as the standard by which we measure all of our other institutional relationships with trading partners. Openness - In a trade policy context; means a liberal trade policy that complements our comparative advantages.
International Trade as a Percentage of Canada s GDP
Canada s Average Tariff Rate
Canada/USA Daily Trade > $1,250,000 per minute!
Canada/World Annual Trade
WTO great for business
Not everyone is Satisfied
Criticism The WTO is accused of ignoring an array of world struggles: Poverty, Inequality, Access, Unfair Trade Barriers, Trade and Development, Democracy
Democracy Top 100 transnational corporations increased Assets 697% between 1980 and 1995. At the same time employment in these corporations went down Source: gatt.org
Poverty The world s poorest countries share of world trade has declined by more than 40 per cent since 1980 to a mere 0.4 per cent. (UNCTAD, 1999) The numbers of people living on less than $2 per day has risen by almost 50% since 1980, to 2.8 billion almost half the world s population. And this is precisely the period that has been most heavily liberalized. (World Bank, 2000)
Inequality The richest fifth have 80% of the world s income and the poorest fifth have 1%; this gap has doubled between 1960 and 2000. (United Nations Human Development Report, 1999) The Gap between the rich and the poor is increasing. The rich countries continue to get richer.
Access Only 12 of the 29 LDC WTO members have offices in Geneva. 29 WTO members and observers are not able to afford an office in Geneva. The 50 scheduled meetings per week are well beyond the capacity of most developing countries to participate.
November 30, 1999 The World Trade Organization convened in Seattle, Washington, USA, for what was to be the launch of a new millennial round of trade negotiations. The negotiations were quickly overshadowed by massive and controversial street protests outside the hotels and convention center, in what became the coming-out of the anti-globalization movement in the United States.
WTO Disputes and Solutions Dispute Settlement: The central pillar of the multilateral trading system Supports rule of law Makes Trading systems secure and predictable.
Case Study 1: United States vs. Venezuela/Brazil: Regulations on Gasoline Cleanliness. 1993 US required cleaner gas in order to reduce pollution. Foreign refineries used the WTO to appeal the rule. WTO ruled the US rules to be discriminatory against other gasoline producing states under the National Treatment principle. Result: US has changed guidelines to allow dirtier gasoline.
Case Study 2: The Beef Hormone Case: Canada and U.S.A. vs. European Union The EU has had GE foods banned, thus not importing these products from North America. Canada and U.S.A. challenge the EU, which believes the beef hormone can cause cancer. WTO demanded scientific certainty that these hormones caused cancer. This ruling has frightening implications on a government s ability to set high standards to protect public health. Public opinion in Europe is demanding defiance of the WTO ruling. The US and Canada have fought back by saying luxury items which are important to Europe will face 100% tariffs if the EU fails to comply.
Summary - The WTO has increased global trade through liberalization. - Tariff reduction has lowered the cost of foreign products for Canadians allowing greater consumption. - However, the WTO s core principles fail to address issues such as Health, Environment, Safety and Poverty.
Is the WTO necessary?