WTO_Presentation

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WTO- An Over View:

26 May 2012 1 WTO- An Over View Neena Sinha

Coverage:

26 May 2012 2 Coverage Effect of Trade Trade Regulation-GATT/WTO WTO-Purpose, Scope, and Functions Structure Basic principles Gains Core Issues of Current Negotiations Conclusion

How Free trade benefits economy?:

26 May 2012 3 How Free trade benefits economy? Specialization leads to increased productivity. Bigger market leads to Economies of Scale- Static &Dynamic It offers more choices to the consumers. Increased competition brings down the prices & increases social welfare.

How Free trade benefits economy? - cont.:

26 May 2012 4 How Free trade benefits economy? - cont. Increase in the rate of technological innovation Stimulus to capital investment in modernizing the existing plant and machinary so that more output can be derived from the same amount of capital (Capital Deepening)

Distributional impact of free trade:

26 May 2012 5 Distributional impact of free trade Paul Samuelson’s Factor Price Equalisation theorm : Although Free Trade leads to overall increase in welfare, it may have distributional impact. Inter-Industry specialization brings equalization of factor price .Price of scarce resources will fall and price of abundant factor will rise.

Distributional impact of free trade-Cont.:

26 May 2012 6 Distributional impact of free trade-Cont. Many will gain but some will lose. Labour and capital in areas of comparative advantage will win whereas in others they will lose. It is difficult and slow to retrain the labour and divert them in winning sectors. Adjustment Cost-G. Banks & J. Tumlir

Impact of free trade in India (theoretical):

26 May 2012 7 Impact of free trade in India (theoretical) Labour is abundant whereas capital is scarce. Therefore, as a thumb rule, we have comparative advantage in labour oriented activities. So agri, textile, gems and jewelleries etc should win whereas home grown Automobile, fertilizer etc. will suffer. Normally per head gain to the winners is low whereas per head loss in losing sector is large. Losers are more organized, therefore offer resistance. Comparative advantage may change with passage of time.

TRADE DISPUTE & WTO:

26 May 2012 8 TRADE DISPUTE & WTO Trade- an effective tool of economic prosperity. Need to regulate the trade. Need of peaceful settlement of trade dispute. WTO to work as trade regulator & dispute settlement forum. Core Issues of current negotiations.

Trade Regulation- GATT and the Uruguay Round:

26 May 2012 9 Trade Regulation- GATT and the Uruguay Round (General Agreement on Tariffs and Trade) Signed in 1947, India an original signatory of 23 Aimed at market access by Reducing/ removing Tariff. Thereafter several rounds of negotiations took place, from time to time to reduce tariffs. Uruguay round started in 1986, ended in 1993, much more ambitious-117 countries. Changed the face of intl. Trade, included several new areas like services, Intellectual properties etc. and set up a new body called WTO to administer them.

World Trade Organization (WTO):

26 May 2012 10 World Trade Organization (WTO) Marrakesh Agreement Established WTO on 1 January,1995 Agreements and Instruments included in Annexes are integral parts of the WTO WTO is open for acceptance as a whole-A Single Undertaking

Basic Principles:

26 May 2012 11 Basic Principles Most Favoured Nation (MFN)-Except under article xxiv-FTA National Treatment (NT) Transparency Peace full dispute settlement Special and Differential Treatment Negotiation

Most Favoured Nation:

26 May 2012 12 Most Favoured Nation Any advantage, favour,privilege or immunity granted by any contracting party to any product originating In or destined for any other country shall be accorded immediately and unconditionally to the like product originating in or destined for the territories of all other contracting party.

National Treatment (NT):

26 May 2012 13 National Treatment (NT) To treat foreign producer of a particular good identically to domestic producers of the same goods.

PowerPoint Presentation:

26 May 2012 14 Special and Differential Treatment Support to LDCs with a certain degree of flexibility and assistance in implementing the WTO Agreements, To provide the LDCs with predictability and security through duty and quota free market access. Need to address the outstanding issues, including the cross-cutting issues, the monitoring mechanism and the incorporation of S&D treatment into the architecture of WTO rules. Members to convert their commitment towards solving the problems faced by developing and least-developed countries into tangible and meaningful results.

Purpose of the WTO:

26 May 2012 15 Purpose of the WTO Raising Standard of Living,full employment and large and steady growing volume of real income and effective demand, Expanding production of goods and services, Optimal use of world resources with the objective of sustainable development, Protection of environment, Help Member State as per their economic need and level of economic development.

Scope of the WTO:

26 May 2012 16 Scope of the WTO Common Institutional Frame Work for conducting Trade Relations among Members in matters related to agreements and associated legal instruments. The agreements and associated Instruments are integral parts of this agreement and binding on all Members. Plurilateral Trade Agreements are binding on those who accept them.

Functions of the WTO:

26 May 2012 17 Functions of the WTO To Facilitate- implementation, administration and operation of the Agreement. Forum for negotiation. Dispute Settlement. Administration of Trade Policy, & Review Mechanism. Cooperation With IMF/World Bank.

Structure of the WTO:

26 May 2012 18 Structure of the WTO Ministerial Conference General Council Council for Trade in Goods Council for Trade in Services Council for Trade- Related Aspects of Intellectual Property Rights (TRIPS) Dispute Settlement Body (DSB) Committees on Balance of payment Restrictions, Budget, Finance and Administration

Structure of the WTO (continue):

26 May 2012 19 Structure of the WTO (continue) Secretariat Director-General Decision making- by consensus or by voting if decision cannot be taken by the consensus

WTO-Annex:

26 May 2012 20 WTO-Annex Annex1A : Multilateral Agreement on Trade in Goods GATT 1994 Agreement on Agriculture Agreement on SPM Agreement on Textile and Clothing Agreement Technical Barriers to Trade Agreement on Subsidies &Countervailing Measures Agreement on Trade Related Investment Measures Agreement on Safeguards

WTO-Annex:

26 May 2012 21 WTO-Annex Annex 1B: GATS Annex 1C: TRIPS Annex 2: Understanding on Rules and Procedures Governing the Settlement of Disputes Annex 3: Trade Policy Review Mechanism Annex 4: Plurilateral Trade Agreements Ministerial Decisions and Declarations

Gains from the WTO:

26 May 2012 22 Gains from the WTO Now World is one economic unit, Elimination/Reduction of Tariffs, Restriction on non-tariff barriers, Transparency,Security and Predictability, Peaceful settlement of trade disputes, Multilateral Forum for Trade Negotiation.

Who are members of WTO?:

26 May 2012 23 Who are members of WTO? All contracting Parties of the GATT 1947. WTO is a privileged club of nations, so it is not a fundamental right to get membership. They have to apply and all members have to agree (called accession procedure). It took 14 years to China to become a member. Russia and several other countries are still waiting in queue.

Gains to India:

26 May 2012 24 Gains to India Revolution in - a )Telecommunication b) Information Technology c) Consumer goods- better options Expansion of Service Sector a) Banking b) Insurance c) Telecommunication

Core Issues of Current Negotiation (Doha Development Agenda-DDA):

26 May 2012 25 Core Issues of Current Negotiation (Doha Development Agenda-DDA) The areas which Chairman set out in February05, were: Modalities in Agriculture, Modalities in NAMA, A critical mass of market opening offers in Services, Rules and Trade Facilitation, Development Dimension.

Agriculture:

26 May 2012 26 Agriculture Market Access: The urgent need is for convergence on key elements of the structure of the tiered formula for tariff reductions . Progress here would unlock the negotiation on so many other issues of vital concern to the Members related to market access.

Agriculture (continue):

26 May 2012 27 Agriculture (continue) Internal Support: Here the pressing need is for convergence on key elements of the structure of the tiered formula for cutting trade-distorting support, particularly with respect to the Final Bound Total AMS . The issue of Blue Box criteria and the review and clarification of the Green Box criteria to make it more development friendly .

Blue Box & Green Box :

26 May 2012 28 Blue Box & Green Box Direct Payment to the farmers when they are required o limit production-BB Measures such as research ,disease control and infrastructure and food security that have minimum impact on free trade-GB

Agriculture (continue):

26 May 2012 29 Agriculture (continue) Export Competition- the trade distorting subsidies to be eliminated. Parallel commitments in Exporting State Trading Enterprises and Food Aid in particular. Additional progress on Export Credits is, of course, also important.

Agriculture (continue):

26 May 2012 30 Agriculture (continue) Cotton . The trade aspects of this issue are to be addressed ambitiously, expeditiously, and specifically, within the agriculture negotiations. Given the fall in world prices, urgent development assistance is required in cotton-dependent countries – particularly in the proponent countries where such a huge proportion of their output is sold in world markets and thus fully exposed to such price variations.

Non-Agricultural Market Access (NAMA). :

26 May 2012 31 Non-Agricultural Market Access (NAMA). Members concern about unbound tariffs at low applied rates, Other Members’ sensitivities concerning their unbound tariffs at high applied rates. Modalities for the reduction or, as appropriate, the elimination of tariffs, including the reduction or elimination of tariff peaks, high tariffs and tariff escalation, on non-agricultural products. Product coverage and the calculation of ad valorem equivalents.

Services:

26 May 2012 32 Services Number of offer has increased but few, if any, provide new business opportunities to service suppliers. Most Members feel that the negotiations are not progressing as well as they should. Rule-making in Services, some progress has been on Domestic Regulation. Given the nature of the request/offer process, the overall expectation should be that the final outcome of the market access negotiations on services will include commitments by a critical mass of Members in each of the sectors and modes of supply identified.

Rules:

26 May 2012 33 Rules The area of anti-dumping, Subsidy disciplines including fisheries subsidies- specific changes to Agreement text, and Regional trade agreements-to improve RTAs transparency –Jacob Viner &Trade Diversion vs Trade Creation

Trade Diversion vs. Trade Creation :

26 May 2012 34 Trade Diversion vs. Trade Creation Lower cost imports displace in efficient domestic production –improved allocation of Global Resources However for outside members low cost imports from them will be displaced by high cost imports from inside

Trade Facilitation :

26 May 2012 35 Trade Facilitation To strike the right political balance between the level of ambition and the degree of political commitment to policy reform, Special and differential treatment and support for capacity building is an important factor in this regard.

Development Dimension:

26 May 2012 36 Development Dimension Market Access-removal of barrier to trade of the interest of developing countries, Balanced rules, together with adequate technical assistance and capacity building to help developing countries implement the new agreements. Address supply-side constraints which have prevented developing countries from increasing and diversifying their exports. Work Programmes on Small Economies, Trade Debt and Finance and Trade and Transfer of Technology, are element of Doha Development Agenda though outside the Single Undertaking of the negotiations.

Special and Differential Treatment :

26 May 2012 37 Special and Differential Treatment Support to LDCs with a certain degree of flexibility and assistance in implementing the WTO Agreements, To provide the LDCs with predictability and security through duty and quota free market access. Need to address the outstanding issues, including the cross-cutting issues, the monitoring mechanism and the incorporation of S&D treatment into the architecture of WTO rules. Members to convert their commitment towards solving the problems faced by developing and least-developed countries into tangible and meaningful results.

Implementation-Related Issues:

26 May 2012 38 Implementation-Related Issues Need to explore not only procedural solutions, but also substantive ones, in line with the agreement by Ministers in Doha on appropriate action, I n the areas of Balance of Payments, Safeguards, Technical Barriers to Trade and TRIPS. Issue – extension of geographical indications (GIs).

Other Issues:

26 May 2012 39 Other Issues Environmental Issues -overall approach on whether to pursue a "list-based approach", a "project approach", or a combination of the two. T o identify environmental goods that are in the export interest of developing-country Members, whilst bearing in mind the potential for these negotiations to deliver "environmental" as well as "trade" gains.

Conclusion:

26 May 2012 40 Conclusion WTO is an engine for growth. It is a member driven body to regulate conduct of Member States in regard to International Trade in Goods and Services. In this forum nothing is agreed till every thing is agreed.

Thanks for your attention ? PLEASE:

26 May 2012 41 Thanks for your attention ? PLEASE

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