WTO Intro Bretton Wood Agreements 1945 IBRD IMF

WTO Intro

Bretton Wood Agreements 1945 § § § IBRD IMF GATT 1947

GATT § Trade Rounds § Reduction of Trade barriers Strengthening of rules.

Uruguay Rounds § § § Nov 1982 Geveva Sept 1986 Punta del Este Dec 1988 Montreal Dec 1990 Brussels Dec 1993 Geneva April 1994 Marrakesh- Signature – WTO

GATT VS WTO § § § § Multilateral GATT No Rules Includes Trade in Services Includes Intellectual Property Rights Dispute Settlement GATT 01 -01 -48 to 31 -12 -95 GATT 94

The WTO § § § § Location: Geneva, Switzerland Established: 1 January 1995 Created by: Uruguay Round negotiations (1986 -94) Membership: 148 countries Budget: 155 million Swiss francs Secretariat staff: 560 Head: Director-General, Pascal Lamay Functions: • Administering WTO trade agreements • Forum for trade negotiations • Handling trade disputes • Monitoring national trade policies • Technical assistance and training for developing countries • Cooperation with other international organizations

Members Total members 152 Countries § Developed Countries § Developing Countries § Transition economies § Least Developed countries. § Small economies

Pakistan’s Membership § § § 1947 One of the 23 founding members Signatory to almost all of the WTO Agreements

Main Areas of WTO § § § GOODS SERVICES INTELLECTUAL PROPERTY DISPUTE SETTLEMENT POLICY REVIEW

Functions § § Implementation of Agreement Forum for negotiations Dispute Settlement Review of trade policies § Technical assistance and training for developing countries § Cooperation with other international organizations

Basic Principles § Trade wo Discrimintaiton – MFN – National Treatment – Transperancy Access to Markets Trade in Goods Binding of Tariff Prohibitaion of Qty Restrictions Tariff Negotiations Emergency Import Measures Trade in Services

FUNCTIONS OF THE WTO • Facilitating implementation, administration and operation of various WTO agreements • Permanent Forum for negotiations among concerning their multilateral trade relations Members • Administration of dispute settlement understanding • Administration of trade policy review mechanism • Co-operation with IMF and World Bank for achieving greater coherence in global economic policy making

Decision making bodies Top level Ministerial Conference ( Meets after every Two years 5 th Cancun, 6 th Hongkong) § General Council (normally ambassadors and heads of delegation in § Geneva, but sometimes officials sent from members’ capitals) which meets several times a year in the Geneva headquarters. The General Council also meets as the Trade Policy. Review Body and the Dispute Settlement Body. § At the next level, Council the Goods Council, Services Council and Intellectual Property(TRIPS) Council report to the General Council. § Numerous specialized committees, working groups and working parties deal with the individual agreements and other areas such as the environment, development, membership applications and regional trade agreements. § Commiites

Ministerial Conference § § § Singapore 1996 Geneva 1998 Seattle 1999 Doha 2001 Cancun 2003 Hong Kong 2005

Slide 5 -14 WTO: Early Experience § WTO as a global policeman – Up to 1995 -1999: 160 ± cases brought for decision – 30 ± withdrawn after direct discussions between countries in dispute – 100 + undergoing direct discussion – 20 ± in final stage of solution implementation – 4 have been settled – 7 closed with no need for action § GATT dealt with 196 cases from 1947 -1995! § WTO telecommunications agreement 1998 (effect) § WTO Financial Services agreement 1999 (effect)

HOW DID WTO COME INTO BEING? (contd. ) Uruguay Round negotiations launched in 1986 and concluded in 1993 Key features : § Specific agreements relating to Agriculture and Textiles § Many new disciplines to eliminate measures like VERs etc. § An agreement on Services, an area not covered by the old GATT

HOW DID WTO COME INTO BEING? (contd. ) § An agreement on TRIPS, providing for minimum standards relating to different kinds of Intellectual Property Rights § A fast, automatic Dispute Settlement System with provisions for retaliatory actions § Based on the concept of single undertaking § Establishment of an organisation, that is, WTO

WTO AGREEMENT PREAMBLE I § To conduct relations in the field of trade and economic endeavour with a view to: – Raising standards of living – Ensuring full employment – Ensuring growth of real income – Expanding production and trade in goods and services – Protecting and preserving environment

WTO AGREEMENT PREAMBLE II § Need for positive efforts to ensure that developing countries secure a share in growth in international trade

PHILOSOPHY OF WTO • Trade contributes to growth and employment • Trade liberalisation is to be achieved through reduction of tariff and non-tariff barriers • Predictability and security of trade through binding commitments increases trade • Well-defined rules relating to all matters impacting on trade will have a positive impact on trade

Basic Legal Principles of GATT/WTO

Content Basic legal principles: Tariff bindings / commitments Prohibition on quotas Most-favoured-nation MFN treatment National treatment

Content Rights of Members: General exceptions Safeguards Regional Trade Agreements Security exception Waivers Antidumping / Countervailing measures

Content Procedural aspects: Transparency Dispute Settlement mechanism 1

WTO: Trade Rules and Disciplines 12 Annex 1 A Multilateral agreements on trade in Goods GATT 1994 (General Agreement on Tariffs and Trade) Understandings 1 A Multilateral trade agreement on trade in goods Goods Marrakech Protocol Agreements on: Agriculture Antidumping Sanitary and phytosanitary measures Customs valuation Textiles and clothing Rules of origin Technical barriers to trade Import licensing Trade-related investment measures (TRIMS) Preshipment inspection Subsidies and countervailing measures Safeguards

The 10 benefits § § § § § 1. The system helps promote 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 choice of products & qualities 6. Trade raises incomes 7. Trade stimulates economic growth 8. The basic principles make life more efficient 9. Governments are shielded from lobbying 10. The system encourages good government

The 10 misunderstandings § 1. The WTO dictates policy § 2. The WTO is for free trade at any cost § 3. Commercial interests take priority over development … § 4. … and over the environment § 5. … and over health and safety § 6. The WTO destroys jobs, worsens poverty § 7. Small countries are powerless in the WTO § 8. The WTO is the tool of powerful lobbies § 9. Weaker countries are forced to join the WTO § 10. The WTO is undemocratic

GLOBALIZATION ICT- shrinking world Increased flow of goods, services & capital among countries: Challenges & opportunities Growing disparity[Seattle-Genoa-Doha-Madrid - Johannesburg-Cancun-Mombay] Why ? Global trends

Trade Liberalization- dismantling tariffs: Benignly protects markets in North and denies legitimate space to markets in South Restructuring [MNCs/TNCs]-downsizing 2 Mergers & Acquisitions -speedy v Global Giants- emerging cartels è Changing Production Systems j Cyberspace-IT, E-business $Lay off-unemployment [In Pakistan from 5. 9% in 1999 to 7. 8% in 2004, and is growing] Û Expanding Service Sector [Real % change from 5 -5. 5% 1999 -2004 in Pakistan] Global Trends Û FDI-80 % directed at mergers & acquisition: In Pakistan [net FDI] 0. 51 billion $ in 1999 -0. 81 billion$ in 2004. ò Dominating Economies-financial& capital markets

Globalization- an unequal World § Globalization could and should benefit DCS but unlike a rising tide that lifts all boats, large & Small, Globalization is unequal Ever widening gap- rich and the poor. § 4. 5 billion people live in DCs § 1. 2 billion confront ravage of poverty daily § 2. 8 billions people- on less than 2$/day; and 1. 2 billion have less than 1$/day. § Richest 10% of USA[25 million] income= as lowest 43% of Globe[2 billion]. § No of hungry people in DCs has increased by 18 million in 2 nd half of 90 s. § Globally 842 million people undernourished, 1999 -2001[798 million in DCs]. § 170 million people under 5 are malnourished. § In 17 countries, including Pakistan, undernourishment is on increase[FAO -2003]

Globalization: Biased & lopsided § OECD[19%]: spent-1998, 520 billion$ on R&D, directed to their own needs. § OECD: acquired 91% of all patents. § 70 billion$: spent on health[R]-300 million-tropical problems. §IACs spend >300 billion$ on subsidies-6 times < than development assistance. § Divergent interests: unsafe biotech [GMOs]-chemicals. § Environ. Vs food security-socio-economic stability?

Perspectives on Globalization Cultural Political Trade & Economic: Markets and economics the denominators of success

[More] Challenges [less] Opportunities ü ü ü Globalization forces countries to adapt to changes that it presents. Changes in general economic & political environment: alter the direction on international economic flows and affect human development. Rules of Globalization personified in the multilateral trading system- WTO, affect not only markets but peoples lives. Pakistan undertook deep & wide ranging reforms, to cope with challenge, related to: Fiscal & monetary instruments Banking System Trade & tariff measures [again being reviewed in the budget [2004 -5] Agricultural sector policies Government role in regulating markets Political/Governance front These [globally] binding rules restrict policy options a DC might choose for socioeconomic development of its people.

Pakistan most globalized nation in SA § Foreign Trade Policy Magazine, based on Globalization Index [GI], ranks Pakistan at 46 out of 62 world economies that contribute 96% of total world GDP and are home to 96% of total global population § § § . GI Ranking[2004]: Pakistan: 46 Sri Lanka: 51 Bangladesh : 56 India: 61 -4 points down the ranking it achieved in 2003

Does WTO bring prosperity to developing countries based on a just system ?

Membership in WTO Global Trade increased by 30 to 35%, the LDCs representing 20% of the world population generate only 0. 03% of global trade flows

Is [global] free trade a key to affluence? Classic Economic Theorist support the argument. They believe GATT/WTO have contributed towards [trade] liberalization & prodigious growth of [world] trade over the last 50 years. Freed trade apologists see the GATT/WTO as key international institutions. According to research [regression] study conducted by Andrew K. Rose [University California, Sep. 2002] on 175 countries, however”---Countries joining the GATT/WTO neither have significantly different trade from non-members, nor do they experience increases in trade, holding other factors constant”

Rules of the game are clear……. . They bring with them [less] opportunities and [more] threats……. How well prepared are we ?

Doha Development Round [DDA] has every thing bar Development: When the current Round was launched in 2001 IACS promised to overhaul trade rules and reform their policies: Fine words that follow business 9 th: Doha Round Comprehensive Negotiations-DDA The TRs of IACs spoke volubly about a development round @ Doh a rhetoric that proved hollow@ Cancun. Distortions continue: $ 318 billion subsidies[$235 direct support to the farmers in OE countries: 90% of subsidies reported to WTO-2002] WTO didn't pursue development agenda [S/G UNCTAD] Ø Crucial link between trade, poverty & food security don't figure prominently on WTO agenda, and "There was lack of good governance and a coherent policy in international organization such as WTO- as in Cancun 'perverse conditions' for cotton on the world market, 10 million producers in DCs were prevented from benefiting from globalization and escaping poverty becau 25, 000 cotton farmers in Texas & other southern US states pocketed billion in subsidies. [Ms. Hei demire Wieczorek Zeul, German Development Minister]

Business [not Development] Round? § "It has been a mistake in Doha to proclaim a 'Development Round' and thereby arouse expectations which couldn't be fulfilled. Whoever was engaged in trade took a hard - nosed business attitude and didn't think about the development of their business partner. " [Rubens Ricupero, S/G UNCTAD] § US & EU in-fights: steel tariff/tax break for exports § Disagreement between Ag superpowers-USA & EU, led to familiar pattern of recrimination and deadlock@ WTO. § Neither protagonist has demonstrated any inclination to cut Ag subsidies at home as promised before DDA was launched- Are they serious working for multilateral trading system? . § IACs systematically use subsidies to skew the benefits of Ag trade in their favor.

Restriction impacting Access of DCs to IACs markets ü Un [weighted]Fair Tariff Reduction[OECD]-Reduction requirement-36%[15%/item]: low reduction on sensitive products[high tariffs], higher reduction on low tariffs. ü Complexity [OECD]: Multiple tariff lines-Seasonal tariffs, in/above quota, brand-schemes, non-ad valorem[OECD tariff lines expressed on ad valorem basis: Canada 22%, Japan 42 %, EU/USA 90%]. ü TRQs/SPS/TBT: -non-transparent quota dispensation, stringent SPS measures-DMEs[DCs-infrastructure, technical assistance][standards]sameness vs. equivalence.

Distortions in global markets [also] increase § Us & EU have invented a category of support-GB/BB in WTO talks, and thereby have shifted support channels through an elaborate repackaging exercise WTO parlance Supports US[GB]: de-linked [not trade distorting]. § WTO parlance Supports US[GB]: de-linked [not trade distorting]. § § § Yet, it increases the income and lessen the risk of producers, hence encourages more production. CAP shifts subsidies from BB to GB. Mechanism of export becoming less transparent. . Competitively priced Ag products from US/EU will flood the markets

Distortions in global markets [also] increase • • US thus raised spending on Ag by $ 73. 5 billion [US Farm Bill, May 2000]-8 crops-direct payment_ Us producers receive 75% in subsidies. US provided support of 3. 4 billion to cotton producers that exceeds the amount it Sub Saharan Africa, and this. Artificially lowered the world prices of cotton by 1/4 th in 2001. [Intl. Cotton Advisory Committee] US provided$ 5. 7 billion in officially supported export credit under. US FARM Bill, 2000. She sells corn 25% & wheat 46% below the cost of production, and cotton prices in US have also been slashed by 66% since 1996 to 50% a pound in order to undercut the 3 rd world’s producers. EU gave 2102 million Euro[1992 -1999 EU Wheat producers receive a direct payment equivalent to$ 60/MT of the export price.

More Trade does not necessarily mean less poverty § Mexico exports have tripled but poverty has increased at the same time, because § There was often a big divide between the need of the people and the export business, and it is at this point that LICs have priority conflict with HICs, for § "Every trade policy measure must be examined to see if it suited the millennium goal of halving world poverty by 2015" [German Development Minister]

The globalisation of production § Classic “dependency theory” assumes an international division of labour: § core countries producing manufactured goods for domestic consumption and export § peripheral economies trading in primary productions from the extractive industries and agriculture

The [ Food insecurity] trends Exacerbated DCs are becoming more dependent on food imports- especially in staple food. Food imports of NFIDCs increased in 1995 -97 by 40% since 1980. [ from $9. 3 to $13 billon] Cereal’s- that make ½ of caloric intake ] production moving towards OECD & handful of Latin American Countries [where same [MNCs] giant controlling the trade in US operate. The EU production increased by 25%[1992 -99] with 35% increase in total subsidies. Food deficit of DCs is on increase. Sky rocketing import bill of DCs- Bo. P DCs share in world’s imports increased from 28%[1970] to 37%[1997] But their Ag exports remained the same as of 1980 s-1/3 rd of their total exports.

Low production efficiency & poor quality constrains § Price & Quality Competitiveness A@ home Tariff-Applied[25%]lower than bound[100%] Domestic Support-AMS negative [bound 10% de minimis] Export Subsidy-Nil Efficiency? Infrastructure Regulations HRD Input Cost- electricity, fertilizer, pesticide, water

SAARC: Regional Profile [1986 -98]

Importance of trade blocs and regionalisation of trade? ?

Intra-Regional Trade % of Exports

Trade Liberalization: The losers & winners § Annual Exports : Pakistan : Approx: 14 billion $ § Singapore: 100 billion$ § Korea: 150$ Impossible to close borders to high quality+ low price products impossible to sell low quality +price uncompetitive products

Doables * Improve efficiency-input, NRM, IPM * * * * Diversify-No to mono culture Value- addition Contain Residue-IPM, RVT Infrastructure- Accredited Labs. Packaging/Labeling Early Warning System Storage capacity/capability

E K p y o J J * * Tech-Based Economic Development Science-Industry-[Socio-]Economics interface Economic indexing IPO profiling Tech. communities Capitalize on low tech agriculture Add value- quality Enhance efficiency- cost effectiveness Sustainable Technologies-socio-economics Trade & economic analysis * For integration of economies with trade starting point would be integration of S &T with national economic development plans

WTO & Pakistan’s Industry

Trade Liberalization -Theory of comparative advantage-Market Economy DCs & Market Economy: -SAPs [1980 s]20 years -WTO[1995]: Imbalances lead to inequity -Expanded Work Agenda: Talks & talks -Food Security [NTC]- Nothing beyond lip service -Neo-protectionism: Standards & Regulations -Trade War: EU vs USA-Economic weight/ endowment Final Deal: EU &USA [Brussels-Washington] DCs: Not part of negotiation process

Textile § MFA-ATC § Textile Integration[2004] § Lowering of Tariffs § TRIMS & GATS § FTAs, Trade Preferences, RTAs § Singapore Issues § Standards-TBT, ISOs, SA 8000

USA e Textile Imports I Country Change% [2001 -2002] World Total 15. 59% China 101. 24% Mexico -9. 93 Canada 2. 81 Pakistan 5. 55 2. 15 South Korea India 16. 48

29[Textile] Integrated Categories 29 Avg. Price Sq/M [Pre-Post quota removal] CHINA Rest of the World -44% -2%

Distortions in global markets [also] increase Us raised spending on Ag by $ 73. 5 billion [US Farm Bill, May 2000]-8 crops-direct payment_ Us producers receive 75% in subsidies. She sells corn 25% & wheat 46% below the cost of production, and cotton prices in US have also been slashed by 66% since 1996 to 50% a pound in order to undercut the 3 rd world’s producers. EU gave 2102 million Euro[1992 -1999]

Regulations & Responsibility § Price & Quality Competetiveness Tariff-Applied tariffs lower than bound Domestic Support-AMS negative Export Subsidy-Nil A@ home Efficiency? Infrastructure Regulations HRD Input Cost Effluent Treatment

Doables: interfacing NARS * * * * Improve efficiency-input, NRM, IPM Diversify-No to mono culture Value addition Contain Residue-IPM, RVT Infrastructure- Accredited Labs. Packaging/Labeling Early Warning System Storage capacity/capability

Social Audit § § § Social Compliance What does it mean? It is a form of Social Audit or Social Accountability, which emphasizes managing business activities in way that respects and promotes the human rights of work force

Social Accountability: a threat or an opportunity § Investment in human capital has net pay off in terms of: § Quality § Productivity § Loyalty of Human Resource § It helps develop: § Social Capital- a strategic weapon § Financial muscles and § Capacity to invest in modern infrastructure

Lack of investment in human capital-low-cast strategy: nominally paid labors with no investment on HRD, safety & work environment the fallouts § Workers have become a liability than an asset § Un/Semiskilled labor force § Can produce only basic products § Thus quality, productivity and competitiveness are compromised

SA 8000 : Social Accountability 8000 651 st auditable standard developed by CEPAA-USA The Council on Economic Priorities Accreditation Agency, and aims at : Promotion of socially acceptable working practices for employees -ILO 77+Universal Declaration of Human Rights It sets specific provisions regarding: ü Child Labor UN Convention on Right of Child ü Forced Labor. ILO 20& 105 -Forced & Bonded Labor ü Health & safety ü Freedom of Association bargaining ILO 87 -Freedom of Association & ILO 9 -Right to Collective ü Discrimination Ilo 100 &111 -Equal ü Disciplinary Practices ü Working Hours & compensation Remuneration for male & female workers Also Pakistan is signatory to ILO Conventions 135 -Workers Representative Convention, 138 -Minimum Age, 59 -Vocational Representation &Employment of Disabled Persons.

W Way Forward F § Proactive engagement in Social Accountability standard setting & compliance § Capacity building in Social Audit § Incentives for Compliance § Investment in Social Capital § Awareness of respect for human rights & protection of environment

Compliance Requirements No and/Forced Child Labor Safe & health work place compliant to the law Freedom to organize for collective bargaining Non-discrimination-personal/belief No corporate punishment: mental/physical coercion Compensation for overtime and at least one day off/week Compensation: Minimum Wages+ some discretionary income & Management System: to dispense SA 8000 -annual review, corrective action on non-conformity

Why? § Age of awareness- Consumers expect industry to respect human rights and protect environment § WTO Agreement on Technical Barriers [TBT] § Neo-protectionism § EU-US base buyers have already started asking for Social Audit § Recent Audit of Textile Settings in Punjab § Warning on health & hygiene

E Tech-Based Economic Development K p y o J J * Science-Industry-[Socio-]Economics interface Economic indexing IPO profiling Tech. communities Capitalize on low tech agriculture Add value- quality Enhance efficiency- cost effectiveness Sustainable Technologies-socio- economics