Principles of the Trading System:
Principles of the Trading System The WTO agreements lengthy complex legal texts covering wide range of activities
Principles of the Trading System:
Trade without discrimination Most-favoured-nation (MFN) : treating other people equally Principles of the Trading System Under the WTO agreements: countries cannot normally discriminate between their trading partners Grant someone a special favour lower customs duty rate DO THE SAME FOR ALL Why ‘most-favoured ’? means non-discrimination — treating virtually everyone equally. Some exceptions are allowed: free trade agreement applying only to goods traded within the group. give developing countries special access to their markets. raise barriers against products that are considered to be traded unfairly. Services countries are allowed to discriminate . l imited circumstances National treatment: Treating foreigners and locals equally Under the WTO agreements : Imported and locally-produced goods should be treated equally at least after the foreign goods entered the market The same should apply to: foreign and domestic services foreign and local trademarks copyrights and patents Application: Once a product, service or item of intellectual property has entered the market -> charging customs duty on an import is not a violation even if locally-produced products are not charged an equivalent tax. Freer trade: gradually, through negotiation Lowering trade barriers obvious means of encouraging trade: customs duties (tariffs) and measures import bans quotas restricting quantities selectively. red tape exchange rate policies Progress since GATT’s creation (1947-48) 8 rounds of trade negotiations. 9thround - the Doha Development Agenda focused on lowering tariffs (customs duties) on imports. Results (mid-1990s) industrial countries’ tariff rates on industrial goods steadily fell to less than 4%. 1980s Expanded to NTBs Services and IP Opening markets Beneficial requires adjustment. “progressive liberalization” introduce changes gradually Predictability: through binding and transparency promising not to raise a trade barrier is as good as lowering one. gives businesses a clearer view of their future opportunities. stability and predictability investment is encouraged jobs are created consumers can fully enjoy the benefits of competition — choice and lower prices. the multilateral trading system an attempt by governments to make the business environment stable and predictable. The increased bindings of the Uruguay Round Percentages of tariffs bound before and after the 1986-94 talks Before After Developed Countries 78 99 Developing Countries 21 73 Transition Economies 73 98 source: http://www.wto.org/english/thewto_e/whatis_e/tif_e/fact2_e.htm when countries agree to open their markets. goods/services “bind” their commitments. ceilings on customs tariff rates. developing countries tax imports at rates that are lower than the bound rates. developed countries charged and the bound rates tend to be the same. change bindings only after negotiating with its trading partners compensating them for loss of trade. agriculture 100% of products now have bound tariffs. substantially higher degree of market security for traders and investors. improving predictability and stability discourage the use of quotas other measures sets limits on quantities of imports administering quotas leads to more red-tape accusations of unfair play. trade rules clear and public (“transparent”) as possible . Most WTO agreements disclose their policies and practices publicly within the country notify the WTO Trade Policy Review Mechanism provides further means of encouraging transparency domestically and multilateral levels Promoting fair competition The WTO described as a “free trade” institution not entirely accurate. The system does allow tariffs Protection system of rules dedicated to open, fair and undistorted competition. The rules on non-discrimination MFN and national treatment designed to secure fair conditions of trade. dumping (exporting below cost for market share) subsidies Complex Issues what is fair or unfair? how can governments respond? charging additional import duties calculated to compensate for damage caused by unfair trade. Encouraging development and economic reform ¾ of WTO developing countries. transitory to market economies. 7 ½ years of the Uruguay Round 60 autonomously implemented trade liberalization programmes. more active and influential in the Uruguay Round negotiations than in any previous round. even more so in the current Doha Development Agenda. ministerial decision better-off countries should accelerate implementing market access commitments on goods exported by the least-developed countries seeks increased technical assistance developed countries started to allow duty-free and quota-free imports for almost all products from least-developed countries.