D. Scott Wiley

&

Yan Jin

What is the WTO?

• Well…what is it???– A place?

• “Today at the WTO…”

– A law?• “Based on the WTO Regulation…”

– A group of people?• “Members of the WTO agreed…”

– A meeting?• “The WTO meeting was held in…”

• The idea of the WTO can seem a bit abstract

What is the WTO?

• The WTO is an organization that deals with rules of trade between nations

• Functions include acting as:– An organization for liberalizing trade– A forum for trade negotiations– A set of rules– A system to settle disputes

An Organization for Liberalizing Trade

• Liberalism in economics refers to an ideology that supports the individual rights of property and free contract

– In the context of the WTO it means the removal of trade barriers

• Goes with the idea that the hands-off approach to markets is the most efficient in the long-run

• WTO’s Stated Aim:– Promote Free Trade– Stimulate Economic Growth

A Forum for Trade Negotiations

• A place where member governments go to try to sort out trade problems

– Members start by talking it out– WTO acts as a mediating body

The WTO as a Set of Rules

• WTO Agreements– Signed by most of the world’s trading nations– The legal framework for international commerce– Contracts for governments to maintain certain

trading policies

• Purpose is to help exporters and importers, while making sure governments meet social objectives

• The WTO oversees the implementation, administration and operation of the covered agreements

A System to Settle Disputes

• Conflict of interests exists in trade relations– Trade agreements need interpreting

• WTO is meant to be a neutral party to help settle trade disputes

History

• After World War II many nations had adopted a protectionist stance on trade

• Many felt closed-protectionist positions was a cause of WWII

• Victor nations set up economic institutions to prevent this from happening again

History

• Bretton Woods System of 1946– International Monetary Fund (IMF)– World Bank– International Trade Organization (ITO)

• The General Agreement on Trade and Tariffs (GATT) was signed into place in 1947

• The ITO did not fly– The US said it was unfair

• GATT took the place of the ITO

History

• GATT: main purpose was to reduce barriers to international trade

– GATT was an agreement, not an organization– Became the de facto organization for

international trade

History - GATT

• Trade Rounds – negotiation meetings– First 6 rounds reduced tariffs from ~50% to

~12%– 7th, the Tokyo Round of the early 70’s was first

major effort at trade reform• Mainly about non-tariff barriers to trade, such as:

– Subsidies– Quotas– Foreign exchange controls– Import bans– Restrictive licensing

History – GATT

• The 1986 Uruguay Rounds of trade negotiations covered new trade topics

– Trade in services and intellectual property– Sensitive subjects, like textiles and agriculture

• GATT was expanded by adding:– General Agreement on Trade in Services

(GATS)– Agreement on Trade Related Aspects of

Intellectual Property (TRIPS)

• Complexities of globalization strained the effectiveness of GATT

History – WTO

• Uruguay Round ended in 1994 with the formation of the World Trade Organization

• Jan. 1, 1995 – WTO was born– GATT, GATS and TRIPS still exist as the

framework for the WTO’s operations

History

• Current Round – Doha– Began November 2001

• Ambitious agenda to make globalization more inclusive of the world’s poor

• Talks have been contentious – No agreements have been reached– July 2006 talks were suspended by Director

General, Pacel Lamy, but may go forward at anytime

Principles of the Trading System

1. Nondiscrimination

2. Reciprocity• Meant to prevent Free-riders

3. Binding and Enforceable Commitments• Ensures predictability

4. Transparency• Member nations are required to publish trade

regulations and report changes

5. Safety Valves• Governments can prevent trade for, say, health

reasons

Formal Structure – Highest Level-Ministerial Conference

• Meets at least every two years

• Brings together all members of WTO

• Can make decisions on all matters under any multilateral trade agreement

Formal Structure – Second Level-General Council

• Meets regularly

• Made up of representatives from all member nations

• Has the authority to act on behalf of the Ministerial Conference

• Also acts as:– Dispute Settlement Body– Trade Policy Review Body

Formal Structure – Third Level-Councils for Trade

• Works under the General Council

• Made up of three councils1. GATT Council

2. TRIPS Council

3. GATS Council

– These councils are charged with overseeing the functioning of their various trade agreements

Formal Structure – Fourth Level-Subsidiary Bodies

• These are sub-councils under the three councils for trade

• Examples include:– Textiles Monitoring Body, under the GATT

Council– Information Technology Agreement Committee,

under the TRIPS Council– The Services Council, under the GATS Council

Benefits from the WTO

1. The system promotes 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 choices of products

6. Trade raises incomes

7. Trade stimulates economic growth

8. The basic principals make life more efficient

9. Governments are shielded from lobbying

10. The system encourages good government

Source: www.wto.org

•It is the central pillar of the multilateral trading system

•It is a unique contribution to the stability of the global economy

•It makes the trading system more secure and predictable

Dispute Settlement

- A Unique Contribution

Principle of Dispute Settlement

• Equitable

• Fast

• Effective

• Mutually acceptable

Stages of Dispute Settlement

• Consultation- talk to each other • Panel- If consultations fail, the complaining country can ask for a panel to be appointed.

• Appeal-Each side can appeal.

Case Decided, then?

• If a country has done something wrong, It has to swiftly correct its fault.

• if it continues to break an agreement, It must offer compensation or suffer a suitable penalty.

• It must follow the recommendations of the panel report or the appeals report.

• It must state its intention to do so at a Dispute Settlement Body meeting held within 30 days of the report’s adoption.

• If after 20 days, no satisfactory compensation is agreed, the complaining side may ask the Dispute Settlement Body for permission to impose limited trade sanctions against the other side.

• In any case, the Dispute Settlement Body monitors how adopted rulings are implemented.

How Long to Settle a Dispute?

60 days-Consultations, mediation, etc45 days-Panel set up and panelists appointed6 months-Final panel report to parties3 weeks-Final panel report to WTO members60 days-Dispute Settlement Body adopts report

(if no appeal)Total = 1 year (without appeal)60-90 days-Appeals report30 days-Dispute Settlement Body adopts

appeals reportTotal = 1y 3m(with appeal)

Case of Venezuela

• On 23 January 1995, Venezuela complained to the Dispute Settlement Body that the United States was applying rules that discriminated against gasoline imports, and formally requested consultations with the United States.

• Just over a year later the dispute panel completed its final report.

• The United States appealed. The Appellate Body completed its report, and the Dispute Settlement Body adopted the report on 20 May 1996, one year and four months after the complaint was first lodged.

• The United States agreed with Venezuela that it would amend its regulations within 15 months and on 26 August 1997 it reported to the Dispute Settlement Body that a new regulation had been signed on 19 August.

Effectiveness of Dispute Settlement

• By July 2005, only about 130  of the nearly 332 cases had reached the full panel process. Most of the rest have either been notified as settled “out of court” or remain in a prolonged consultation phase — some since 1995.

The Complaint of U.S.A. against China

On 10 April 2007, the United Statesrequested consultations with Chinaconcerning certain measures pertaining tothe protection and enforcement ofintellectual property rights in China.

The Four Matters on which the United States Requests Consultations

• The thresholds that must be met in order for certain acts of trademark counterfeiting and copyright piracy to be subject to criminal procedures and penalties;  

• Goods that infringe intellectual property rights that are confiscated by Chinese customs authorities, in particular the disposal of such goods following removal of their infringing features;  

• The scope of coverage of criminal procedures and penalties for unauthorized reproduction or unauthorized distribution of copyrighted works;   

• The denial of copyright and related rights protection and enforcement to creative works of authorship, sound recordings and performances that have not been authorized for publication or distribution within China.

Summary of Chinese intellectual property violations

• Nearly 90 percent of all American software is pirated at an annual cost of more than $2 billion to the US economy.

• Total copyright losses reach nearly $3 billion per year.

• The U.S. automobile industry loses $12 billion each year due to counterfeit automotive parts production, of which China is a leading violator. 

Response from China

• "The United States Trade Representative, the USTR, has totally ignored the massive strides China has made," Premier Wu told an intellectual property forum in Beijing.

• "The Chinese government is extremely dissatisfied about this, but we will proactively respond according to the related WTO rules and see it through to the end,“ Wu added.

Source: www.reuters.com

Reasons to Oppose the WTO

1. The WTO Is fundamentally undemocratic 2. The WTO will not make us safer 3. The WTO tramples labor and human rights 4. The WTO would privatize essential services 5. The WTO is destroying the environment 6. The WTO is killing people

Source: www.globalexchange.org

Reasons to Oppose the WTO

7. The WTO is increasing inequality

8. The WTO is increasing hunger

9. The WTO hurts poor, small countries in favor of rich powerful nations

10. The WTO undermines local level decision-making and national sovereignty

11. There are alternatives to the WTO

12. The tide is turning against free trade and the WTO!

Source: www.globalexchange.org

Q & A?