Les 7: WTO & PTA Flashcards
The WTO: What?
- A set of liberalization commitments & rules
- A negotiation forum
- An institution for enforcement
Two collective action problems
(1) International cooperation
(2) Domestic commitment
- Liberalization commitments& Rules and principles
Market liberalism: the economic rationale for trade
- Wealth creation through comparative advantage trade: inter-industry trade
- Wealth creation through Economies of Scale: intra-industry trade
- Intern. division of labor: Global Value Chain integration
- A web of bilateral tariff commitments: bound tariff schedules
Non-discrimination: each member has the same opportunities as others
- Most Favored Nation (MFN): any privilege granted to one country is automatically extended to all others
- National Treatment: prohibition to use domestic regulation to provide advantage to domestic at the expense of foreign firms
- Liberalization commitments& Rules and principles: exceptions
- Antidumping & countervailing duties / Safeguards / ‘National security’
- Special and Differential Treatment for Developing Countries
- Regional / Preferential / ’Free’ Trade Agreements
WTO as a forum for intergovernmental bargaining
Decision-making by consensus
Negotiations in Rounds:
- Exchange of tariff concessions : ‘bound tariff’ schedules: yet, this is a bilateral interaction!
- A set of agreements = seperate international treaties
GATT
General Agreement on Tariffs and Trade 1994 (GATT)
very important
purpose was to promote international trade by reducing or eliminating trade barriers
Bound tariff schedules
each country is free to set tariffs and other taxes on trade how they want, but they engage with eachother in bilateral deal-making. This has brought down a whole series of tariffs.
The promises, these commitments of bilateral tariffs are the bound tariff schedules. This is the foundation of the WTO.
Most Favored Nation
any privilege granted to one country is automatically extended to all other countries
National treatment
is a clause that says you should treat foreign companies equal to domestic companies
Decision making: consensus versus unanimity
a weaker MS is unlikely to use a veto or vote against in a unanimity system. Consensus is better because it causes pressure
TBT
Agreement on Technical Barriers to Trade (TBT)
–> When is a technical barrier to trade legitimate and when do we consider it to be discriminatory/
SPS
Agreement on Sanitary and Phytosanitary Measures (SPS)
health standards
TRIPS
Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS)
Extends intellectual properties worldwide
(if you have a patent on something it is respected by all members of the WHO)
Agreement
on Subsidies
on Antidumping - sets out the rules how you should organize an investigation on antidumping
Single undertaking
In the WHO, agreements are agreed upon a full package.
For big states, it’s a way to let other members swallow things they otherwise wouldn’t allow; because if they don’t agree, they would be excluded from all the good things in the agreement.
Plurilaterals
Wikipedia: A plurilateral agreement implies that WTO member countries would be given the choice to agree to new rules on a voluntary basis. This contrasts with the multilateral WTO agreement, where all WTO members are party to the agreement. The Agreement on Government Procurement is typical plurilateral agreement.
slides
- on very strange and small sectors
- politically interesting because there are loopholes in it
- becoming more & more interesting
The WTO Dispute Settlement Mechanism
To ensure compliance with commitments and rules
- A member state can complain against another member
- They hold bilateral consultations
- Can resort to an independent, quasi-judicial tribunal issues ‘panel report’
- Appeal (used to be) possible at ‘Appellate Body’ (US blocked this, appellate body is now dead)
- Implementation
- -> If not: compensation or retaliation = trade sanctions
- -> Means enforcement is essentially bilateral
- -> There is no collective punishment in the form of exclusion
Shadow of enforcement
You hope that by having the enforcement system, you don’t have to use it.
It is the very existence that matters, not whether there are lots of cases: the shadow of enforcement.
it is one of the key characteristics of a functioning enforcement system like the WTO
Temptation not to participate
mercantilism: export a lot yourself, import little
