The World Trading System

1. The World Trading System Contemporary issues

2. Contemporary issues • The Doha Round of trade negotiations • Use of non tariff barriers • Regionalism • New issues for the WTO • Linkages with non trade issues • Developing country participation

3. The Doha Round • Ambitious round of negotiations launched in 2001, by the 4th Ministerial Conference of the WTO in Doha, Qatar. The Doha Round covers a wide area of subjects and includes negotiations in agriculture, industrial goods and services and a number of implementation issues. • Dead lock at the 5th Ministerial Conference (Cancun) in 2003 but break through at the General Council meeting in August, 2004 (Geneva). • Success in the area of public health and access to essential medicines for poor countries through an amendment to TRIPS. • Limited success at the 6th Ministerial Meeting in Hong Kong in December 2005 but differences narrowed and closer to consensus. http://news.bbc.co.uk/1/shared/spl/hi/picture_gallery/05/business_battle_joined_at_last_ditch_trade_talks/html/10.stm

4. Main areas of progress at the 6th Ministerial Conference Agriculture - Elimination date for export subsidies in agriculture(2013) and substantial reductions by 2010; reductions in trade distorting domestic subsidies with EU, US and Japan undertaking the biggest cuts; special flexibilities for developing countries. Developed countries to end export subsidies for cotton in 2006 and undertake deeper cuts for domestic support for cotton than for agriculture in general. Duty free/quota free access to cotton exports from LDCs. Industrial products – affirmation of the objective to reduce tariffs in industrial products with the interests of developing countries to be taken into account. Possibility of duty free/quota free access to products from LDCs, to be implemented over time. Services – possibility of plurilateral negotiations to speed up negotiations in the services sector. Aid for trade particularly for LDCs. • Agreement on key details still needed - specific formula for cutting tariffs and subsidies in agriculture - details of the final agreement on special products , special safeguard mechanisms and food aid in agriculture. - modalities for reducing tariffs in industrial goods.

5. Non tariff barriers • Non tariff barriers (NTBs) • Recall the preference for tariffs under the GATT e.g. Art. 11 prohibits the use of quantitative restrictions. • The most common NTBs used to be border type measures (quotas, import licensing, prohibitions, subsidies, state trading, customs procedures) which GATT regulates to some extent. • As tariffs have been progressively reduced through successive rounds of trade negotiations, the use of NTBs are on the rise. NTBs tend to be in the form of domestic regulations (e.g. technical regulations, sanitary/phytosanitary regulations) and other less obvious domestic policies affecting the import/export of goods. • The key question is whether these NTBs are an unnecessary or arbitrary restriction on international trade. • GATT exceptions: Art.10 which permits the use of trade restrictions based on legitimate objectives (e.g. national security, protection of public morals). These operate as exceptions to GATT obligations. (Equivalent in GATS is Art.14)

6. Standards • Agreement on Technical Barriers to Trade (TBT) Covers mandatory regulations and voluntary standards for products, adopted for the protection of health and safety of the population. Requirements: - Adherence to MFN and NT principles. - Technical standards must not cause unnecessary obstacles to international trade (presumption in favor of international standards) and must not be more trade restrictive than necessary to fulfill a legitimate objective. - Where relevant, these standards should be based on scientific and technical information. Encourages the use of international standards. Contains obligations on the procedures by which product standards are developed.

7. Standards • Agreement on the application of Sanitary & Phytosanitary Measures Covers sanitary and phytosanitary (SPS) regulations which aim at protecting human, animal or plant life or health by ensuring food safety and preventing animal and plant borne disease from entering a country. Requirements - Application of SPS measures only to the extent necessary to protect human, animal or plant life or health - SPS measures to be based on scientific principles. They must not be maintained without sufficient scientific evidence. - Flexible application of MFN for measures preventing animal/plant borne disease from entering the county BUT Members shall ensure that their sanitary and phytosanitary measures do not arbitrarily or unjustifiably discriminate between Members where identical or similar conditions prevail. - Encourages the use of international standards

8. Regionalism Help or a hindrance? • Increased participation in regional trading arrangements (RTAs). By July 2005, only one WTO member, Mongolia was not a party to a RTA. To date, a total of 330 such arrangements have been notified to the WTO. • In principle a violation of MFN. They erode trade concessions for WTO members that are not parties to the RTA. • Problems : cause trade diversion; distortion in resource allocation; multiple sets of rules ; complex rules of origin ; increased costs. • RTAs authorized through GATT Art.24 & GATS Art.5 But must satisfy criteria: substantial coverage; free flow of trade between members; mustn’t raise barriers with non members etc. • Examples of RTAs: NAFTA, ASEAN FTA, SAFTA, COMESA FTA, CAFTA. Customs Unions: European Community and the Southern Common Market (MERCOSUR) In the pipeline: Free Trade Area for the Americas (FTAA) and South American FTA (SAFTA leading to South American Community of Nations)

9. New Issues • Attempts to bring in “trade related issues” like competition, investment, transparency in government procurement, trade facilitation into the WTO Agenda. • Certain aspects already dealt with in the GATT or GATS. For example: Investment: TRIMS & GATS (Mode 3 commercial presence) Competition: Provisions on monopolies and trade restrictive practices in GATT/GATS/TRIPS Government procurement : Government Procurement Agreement Trade facilitation : GATT provisions and related Agreements (e.g. Customs Valuation, Pre shipment Inspection, Import Licensing) • Negotiating problems : Opposition from developing country Members. • As per General Council Decision of August 2004 and 6th Ministerial Conference: negotiations on trade facilitation only. • Possibility of reintroduction in the future?

10. Links with non trade issues • Labor standards While the focus of extensive discussion, it is not a “subject” in the WTO. The 1996 Singapore Ministerial Declaration states inter alia “the ILO is the competent body to set and deal with these standards and we (the WTO) affirm our support for its work in promoting them”. The WTO Declaration goes on to state that the WTO rejects the use of labor standards for protectionist purposes and agrees that the comparative advantage of countries, particularly low wage developing countries must in no way be put into question. • The debate - Trade action as a means of enforcing labor standards • Low labor standards, an unfair advantage? • Is the WTO the proper place to discuss labor standards? http://www.ilo.org/public/english/standards/index.htm

11. Developing country participation • Active participants in the WTO? - in negotiations on trade concessions - in negotiations on rule making - in the dispute settlement system • Emergence of new powers : India, Brazil & China. • Emergence of new and reorganization of old alliances • South-South e.g. G20(includes Brazil, China, India and South Africa), G33, the ACP/LDC Group • North-South e.g. The Cairns Group includes Argentina, Australia, Canada, South Africa, Thailand, Uruguay.