CHAPTER XXV CHAPTER XXV INTERNATIONAL INTERNATIONAL ORGANIZATIONSORGANIZATIONS

General Agreement on Tariffs and Trade (GATT)

World Trade Organization (WTO) International Chamber of Commerce (ICC) Organization for Economic Cooperation

and Development (OECD) Wassenaar Arrangement on Export

Controls G-7 G-20

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General Agreement on Tariffs & General Agreement on Tariffs & Trade (GATT)Trade (GATT)

Signed by 23 nations after World War II on October 30, 1947 and took effect on June 30,1948

An interim measure to form Int’l Trade Organization (ITO)

Final leg of a triad after IMF & IBRD (World Bank)

U.S. failed to ratify in 1950 & effectively killed ITO

To promote economic growth and development by liberalizing world trade through elimination or reduction of import tariffs and non-tariff barriers

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General Agreement on General Agreement on Tariffs & Trade (GATT)Tariffs & Trade (GATT)

In order to belong to GATT

(1) Members were required to reduce tariffs and drop barriers

(2) Had to adhere to Most Favored Nation (MFN) clause:

• If a country gives a tariff reduction to another country, it should grant the same concession to all other member nations on a non-discriminatory basis

Provided basic set of rules by which trade negotiations took place and a mechanism for monitoring the implementation of these rules

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General Agreement on Tariffs & General Agreement on Tariffs & Trade (GATT)Trade (GATT)

GATT-sponsored trade rounds (or simply rounds): Multilateral Trade Negotiations 1st , 1947, Tariffs, 23 countries 2nd, 1949, Tariffs, 13 countries 3rd, 1951, Tariffs, 38 countries 4th, 1956, Tariffs, 26 countries 5th, 1960-61, Dillon Round, Tariffs, 26

countries. First time used ‘Round” 6th, 1964-67, Kennedy Round, Tariffs &

Anti-dumping measures, 62 countries

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General Agreement on General Agreement on Tariffs & Trade (GATT)Tariffs & Trade (GATT)

7th, 1973-1977, Tokyo Round, Tariffs & Non-tariffs measures, 102 countries• Reduced the average tariff on industrial

products by one-third to 4.7% • 8th, 1986-1994, Uruguay Round, 123

countries• Launched in September 1986, in Punta del

Este, Uruguay & concluded on Dec.15,1993. But a few more weeks for final touches on market access. Took 7 and a half years

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General Agreement on Tariffs & General Agreement on Tariffs & Trade (GATT)Trade (GATT)

Uruguay Round (continued): • Signed by 123 nations on April 15, 1994 in

Marrakesh, Morocco • Created Word Trade Organization

(WTO)• Key new areas of agreement

a.Services b.Government procurement policies c. Intellectual property rights-Patents,

Trademarks, Copyrights d.Textiles e.Agriculture

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World Trade Organization World Trade Organization

WTO began its operation on January 1, 1995 as a result of the Uruguay Round and replaced the old GATT (GATT 1947).

GATT became one of many WTO Agreements (GATT 1994)

China joined WTO on 12/11/2001 and Taiwan (Chinese Taipei) on 1/1/2002.

Russia joined on Aug. 22, 2012 159 members as of Mar. 2, 2013 with Tajikistan Governing body of multilateral trading system Platform for trade dispute settlements

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World Trade Organization World Trade Organization

Objectives To help world trade flow as smoothly, freely,

fairly, and predictably as possible by • Reduction of tariffs • Reduction of non-tariff barriers • Elimination of discriminatory treatment

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WTO Agreements

Final Act of the 1986-1994 Uruguay Round of trade negotiations

Agreement on Goods: General Agreement on Tariffs and Trade (GATT)

Agreement on Services: General Agreement on Trade in Services (GATS)

Agreement on Intellectual Property: Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS)

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WTO Agreements

Agreement on Investment: Agreement on Trade-Related Investment Measures (TRIMS)

Agreement on Textiles and Clothing Agreement on Agriculture Agreement on Government Procurement Agreement on Trade Policy Review

Mechanism Agreement on Dispute Settlement

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Agreement on Goods

GATT (GA on Tariffs & Trade) WTO’s principal rule-book for trade in goods Council for Trade in Goods (Goods Council):

• Consists of all member countries• Committees on

– Agriculture– Market Access for Goods– Sanitary and Phytosanitary Measures– Subsidies & Countervailing Measures– Anti-Dumping Practices– Customs Valuation

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Agreement on Goods

GATT (GA on Tariffs & Trade) (cont.)

• Committees on (continued)– Rules of Origin– Import Licensing– Investment– Safeguards– Information Technology Agreement

• Working Group (Party) on– State-Trading Enterprises

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General Agreement on Services

GATS (GA on Trade in Services)• Banking, Insurance, Telecommunications,

Tourism, Hotel, Car Rental, Transportation, Etc.

• Principles of freer and fairer trade in services • Members made individual commitments

(schedules) for marketing opening for service sectors

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General Agreement on Services

GATS (GA on Trade in Services) (cont.) Council for Trade in Services (Services

Council)• Committees on

• Trade in Financial Services• Specific Commitments

• Working Groups (Parties)• Domestic Regulations• GATS Rules

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Agreement on Intellectual Property

TRIPs (Trade-Related Intellectual Property Rights) Rules for trade in ideas & creativity Applies to only trade-related intellectual

properties Protection of Intellectual Properties:

• Copyrights, Trademarks, Geographical names used to identify products, Industrial designs, integrated circuit layout designs, trade secrets

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Agreement on Investment TRIMs (Trade-Related Investment Measures)

Applies only to investment measures that affect trade in goods.

No discrimination against foreigners or foreign products (violates “national treatment” principles of GATT).

No restrictions in quantities (violates “prohibition of quantitative restrictions” of the GATT)

No requirement for particular levels of local procurement by an enterprise (“local content requirements”).

No measures which limit a company’s imports or set targets for the company to export (“trade balancing requirements”)

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Agreement on Textiles & Clothing(ATC)

From 1974 to 1994: Under Multifiber Agreement (MFA). Textile quota

From 1995, Fully integrated into normal GATT rules of WTO in 10 years

January 1, 2005, ATC no longer exists. No quota.

Only WTO agreement that has self-destruction built-in

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Agreement on Agriculture New Rules and Commitments: Requires

members to make more market-oriented policies

Market Access: Tariffs only or Tariffication which is converting quota & other restrictions to tariff

Domestic Support: Domestic support that has a direct effect on production and trade must be cut back.

Export Subsidies: Prohibits export subsidies unless specified in a member’s lists of commitment. Must cut both the amount of subsidies and quantities that receive subsidies.

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Agreement on Agriculture

Regulations for Animal and Plant Products:• A separate agreement on food safety and

animal & plant health standards• Allows countries to set their own standards• Must be based on science (scientific

justification) • Should not arbitrarily or unjustifiably

discriminate between countries• Encouraged to use international standards,

guidelines and recommendations.

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Agreement on Government Procurement

To open up government procurements to international competition.

– A "plurilateral" agreement, which applies only WTO Members who have acceded to the Agreement, but not all Members.

– Currently 40 WTO Members Members make laws, regulations, procedures

and practices regarding government procurement more transparent

Members do not protect domestic products or suppliers, or discriminate against foreign products or suppliers.

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Agreement on Government Procurement

Extends international competition to procurement of national and local government entities.

Extends coverage to services (including construction services), procurement at the sub-central level (for example, states, provinces, departments and prefectures), and procurement by public utilities.

Members required to put in place domestic procedures by which aggrieved private bidders can challenge procurement decisions and obtain redress

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Agreement on Government Procurement

Applies to contracts worth more than specified threshold values. In the USA,

• Central (Federal) government: 130,000 SDRs for supplies & services

• Sub-central government (State): 355,000 SDRs for supplies & services

• All other entities: 400,000 SDRs for supplies & services

• For construction contracts: 5 million SDRs• Some services excluded: Transportation,

dredging, R & D, military support, etc.• 1 SDR=US$1.58 as of May 23, 2011

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Agreement on Trade Policy Review Mechanism (TPRM)

To improve transparency To create a greater understanding

members’ trade policies To asses their impact Members must undergo periodic

scrutiny & review of their trade policy

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Agreement on Dispute Settlement

Procedures for resolving trade disputes To enforce rules and ensure that trade flows

smoothly Dispute settlement is the central pillar of the

multilateral trading system. Based on clearly-defined rules with timetables

for completing a case Priority is to settle disputes through

consultations, if possible. About one-third of cases have been settled at consultation stage or still in consultations

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Agreement on Dispute Settlement

Understanding on Rules and Procedures Governing on the Settlement of Disputes Called Dispute Settlement Understanding

(DSU) Member should not take unilateral action

against perceived violations of trade rules, but seek resolution thru Multilateral dispute settlement system, and abide by its rulings and findings

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Agreement on Dispute Settlement

Timetable: Target figures. Flexible 60 days Consultations, mediations 45 days Panel setup and panelists appointed 6 mos. Final panel report to dispute parties 3 weeks Final panel report to WTO members 60 days Dispute Settlement Body adopts report

(if not appealed) Total 1 year without appeal 60-90 days Appeals report 30 days Dispute Settlement Body adopts appeals

report Total 1 year 3 months with appeals

In case of urgency like perishable goods, the panel report deadline is shortened to 3 months from 6 months.

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Agreement on Dispute Settlement Dispute Settlement Body (DSB)

General Council consisting of all WTO members Settling disputes is the responsibility of the DSB. If consultations among parties in dispute by

WTO Director-General fails, complaining country can ask for a panel to be appointed.

Panel is composed of 3 panelists unless parties specially agree to have 5 panelists.

Director-General suggests potential panelists to disputing parties

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Agreement on Dispute Settlement

Dispute Settlement Body If parties do not agree on panelists, Director-

General appoints panelists. Panel’s final report can only be rejected by

consensus in the Dispute Settlement Body (DSB). Almost always adopted unless appealed.

Therefore, panel’s final report becomes the DSB’s ruling and recommendation unless consensus rejects it.

Both sides can appeal the panel’s final report.

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Agreement on Dispute Settlement

Appeals– Any appeal must be limited to issues of law

covered in the panel report and the legal interpretation by the panel

– Each appeal is heard by 3 members of a permanent 7-member Appellate Body set up by the DSB. Members have 4-year terms.

– Appellate Body’s appeal reports are unconditionally accepted by DSB unless rejected with consensus including the complainant country

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Agreement on Dispute Settlement Implementation of Rulings &

Recommendations of DSB Losing country is required to

– bring its policy into line with the rulings and recommendations.

– enter into negotiations with complaining country to determine mutually acceptable compensation such as tariff reduction

If not agreed, DSB must grant winning country permission to apply limited trade sanctions such as suspending concessions or imposing punitive high tariffs

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Agreement on Dispute Settlement

Filings of Dispute Settlements– From Jan 1995 to June 2011: 424 cases– 1st filing by Singapore against Malaysia on

Prohibition of Imports of Polyethylene and Polypropylene on January 10, 1995 (Case DS1).

– 25 cases in 1995– Highest 50 cases in 1997– Lowest 12 cases in 2005– Trend is the less dispute filings as years pass,

thanks to better compliance by the WTO member countries.

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Agreement on Dispute Settlement Filings of Dispute Settlements (Cont.) The United States was involved in 210 cases: 50%

disputes; 97 cases as Complainant and 113 cases as Respondent (Defendant).

The 1st complaint filed by the United States was against South Korea’s Measures Concerning the Testing and Inspection of Agricultural Products on April 4, 1995 (Case No. DS3).

The 1st complaint filed against the United States was by Venezuela on Standards for Reformulated and Conventional Gasoline on January 24, 1995 (Case No. DS2).

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WTO Key PrinciplesWTO Key Principles

Trade without discrimination: Most Favored Nation (MFN) National treatment

Predictable and growing access to markets Tariff reductions on goods Binding national schedule for opening services

Promotion of fair competition Sets rules on compensating duties against

dumping and foreign government subsidies

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WTO Key Principles WTO Key Principles

Encouraging development & economic reform of developing countries Industrial countries assist trade of developing

countries by conferring tariff preference programs such as GSP

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WTO Main FunctionsWTO Main Functions Administering and implementing

multilateral trade agreements Forum for multilateral trade negotiations Resolving trade disputes Monitoring national trade policies of

members Providing technical assistance and training

to developing countries Cooperating with other international

institutes

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WTO StructureWTO Structure Ministerial Conference: Highest authority. Meet

every two years General Council: Ambassadors or heads of

delegation in Geneva. Meets as Trade Policy Review Body Dispute Settlement Body

Goods Council, Service Council and Intellectual Property Council, and so on

Numerous specialized committees and working groups

Secretariat: Day-to-day operations by Director-General, Four Deputy D.G.s, and 500 staff

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International Chamber of International Chamber of Commerce (ICC)Commerce (ICC)

Over 100 member nations International Trade Rules issued by ICC

Incoterms 2010 Uniform Customs and Practices (UCP) for

Documentary Credit (2007 Revision), ICC Publication No. 600

Uniform Rules for Collections (ICC Publication No. 522)

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Organization for Economic Organization for Economic Cooperation & Development Cooperation & Development

(OECD)(OECD) Most members are developed

countries: 34 Nations OECD’s member countries share a

commitment to the democratic government and the market economy

Best known for its publications and its statistics.

OECD’s work covers economic and social issues from macroeconomics to trade, education, development, science, and innovation.

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Wassenaar Arrangement on Wassenaar Arrangement on Export Controls for Conventional Export Controls for Conventional

Arms and Dual-Use Goods and Arms and Dual-Use Goods and TechnologyTechnology

Adopted by 33 countries in 1996. Replaced the Coordinating Committee on Multilateral Export Control (COCOM) which was suspended March 31, 1994

To restrict the export of conventional weapons and sensitive dual-use goods and technology to hostile nations

Current membership: 40 countries

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G-7/G-8 G-7/G-8

Not an international organization, but a gathering or a forum of the most developed countries

In 1975: G-6 consisting of France, Germany (West) , Italy, Japan, the U.K. and the U.S.A. after oil crisis in 1970s

In 1976, Canada joined & made it G-7 Finance ministers meet two or three times a year Summit meeting of heads of government: Once a

year Also called G-8 by adding Russia

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G-20 (Group of 20)G-20 (Group of 20) Group of 20 Finance Ministers & Central

Bank Governors. Established in 1999 in the wake of 1997 Asian Financial crisis

Recently summit meetings of heads of states have been introduced.

90% of world GDP, 80% of world trade, and two-thirds of the world population

No secretariat or staff. Chair rotates annually, 2010 Korea, 2011 France

Agreed to replace the G-8 at the 2009 summits meeting in Pittsburg

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G-20G-20 (Group of 20)(Group of 20)

– Argentina– Australia– Brazil– Canada– China– France– Germany– India– Indonesia– Italy

– Japan– Mexico– Russia– Saudi Arabia– South Africa– South Korea– Turkey– United Kingdom– United States– European Union

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