WTO Flashcards
general development/description trade regime
- very legalised
- many different agreements
- separate negotiations (-> members always involved)
objectives of the WTO
regulating international trade with the intention to decrease trade limiting practices as much as possible
+
avoiding protectionism (and with that economic crises)
underlying macro-economic logic: trade benefits all trading partners (specialization -> cheaper production = more money)
Importance of the WTO
rule setting authority
means of transparency
court-like dispute settlement procedures for complaints
97% of all trade takes place between WTO members
99% of import tarrifs of developed countries are under WTO rule
history
Bretton Woods Conference 1944
- goal = prevent system crashes by installing the International Trade Organization (failed)
- in the negotiations US pushed for trade liberations, EU was more careful (empire system influenced their behavior), developing countries wanted to protect exporting countries
1947 GATT: implied a number of new negotiating rounds about tariffs and international rules (first focused solely on tariffs, later on on more)
1995 establishment of WTO to implement agreements predating the WTO
series of WTO negotiating round, most recent = Doha Round 2001
main agreements the WTO implements
5
- GATT: General Agreement on Tariffs and Trade (1947)
- GATS: General Agreement on Trade in Services
- TRIPS: Agreement on Trade Related Aspects of Intellectual Property Rights (patents)
- Rules on agricultural trade and subsidies (agriculture is not part of the GATT)
- Trade dispute resolution processes (important for avoiding/solving trade wars)
Doha Round + Geneva package
2001
failure to reach an agreement to continue negotiations -> 2008 breakdown
- increasing bilateral trade agreements
- developing countries found they were disadvantaged in past rounds (Uruguay Round), wanted more influence (formed organized coalitions to resist proposals of the US and EU)
most recent agreement = 2022 Geneva package
- environmental sustainability (fishing)
- waiver for covid vaccines (manufacturing should be spread)
- WTO reform (not specific)
- making the dispute settlement system functional
organs WTO
Ministerial Conference
- highest decisionmaking organ with annual meetings of trade-ministers
General Council: trade officials, meet in various setting to discuss trade in goods, services, agriculture, intellectual property etc.
- meet more often than the Ministerial Conference
Small secretariat (~600 members): supports negotiations among member states
members WTO
164
not all members are states:
‘‘contracting parties’’: states but also political entities that control the economic policy of a territory
- e.g. EU, ‘Hong Kong China’, and ‘Chinese Taipei’
headquarters WTO (and ILO)
Geneva
decision-making WTO
based on consensus
making the WTO intergovernmental: member states have a big influence, have to agree on/with everything
obligations
spelled out by the original GATT agreement
spelled out specifically for different products and ‘‘like products’’
three main obligations/principles
- bound tarrifs: documented in the ‘‘schedule’’ (decided upon in big review conferences of the WTO: in periodic rounds of WTO conferences)
- most-favored nation (GATT article 1): best agreement made with another country serves as the standard for agreements with other countries
- national treatment: requires that WTO members don’t discriminate between domestic goods and imported goods once they are imported
tarrif
the tax that an importer must pay to the government for importing that specific product
highly political matter
'’like products’’
determined by the World Customs Organization in Brussel
Rajesh Pillai found that ‘‘likeness’’ is determined mostly by the Working Party of the Border Tax Adjustments in 1970
exceptions to WTO obligations
6
- general exceptions (to protect human, animal or plant life/health)
- security exceptions
- balance-of payments (safeguard external financial situation)
- temporary waivers
- cultural exceptions
- regional trade agreements
regional trade agreements
allowed to make tariff agreements without having to apply them to other WTO members
requires: limited within a region + agreement must cover substantially all of the trade among those regional partners
US regional trade agreements with Israel and Jordan aren’t really regional, but it is tolerated: no one complains as no one is harmed
why should WTO compliance be automatic or not?
it should be automatic:
- trade produces gains for both partners
- trade increases efficiency by allowing countries to specialize and by encouraging production on larger scale
- prices and diversity should increase in a market that is opened to imports and exports
in practice: trade advantages some and disadvantages others
two sources of noncompliance to the WTO
- political opportunism: to cater/protect domestic interests (costs and benefits are unevenly distributed across domestic industries and between trading partners)
- # free-riding through unilateral non-tariff barriersWTO obligations are reciprocal (each member is supposed to see increased access to others’ markets in exchange for allowing them in their market)
incentive to cheat this bargain by creating nontariff barriers to trade
WTO enforcement / dispute settlement
limited to identifying violations and authorizing members to punish the violator (emphasis that the WTO is mainly about the commitments states make to each other, not to the WTO)
- member complains to the WTO that it believes another member has failed to meet its obligations AND that they have suffered from it
- can only be brought to the WTO if a bilateral solution has failed - creation of a panel of 3 trade experts
- report distributed to the parties who may appeal to a separate Appellate Body
- Report goes to the Dispute Settlement Body: approves or rejects the report (rejection never happened)
- Reports recommendations become legally binding
- If the WTO member doesn’t comply, economic sanctions are allowed: violated members can execute sanctions as harmful as the ones they suffered, should be in the same line of products (is often not the case: e.g. EU once targeted sanctions that would impact Florida and Carolina, which had an important role in the US elections in 2004
! step 6 works for powerful states, but not for smaller states: it may cost them more than that it gains them
problems with enforcement
debate if the Dispute Settlement Management is dead:
- US blocks election of judges in the Appellate Body (once 3 were left it didn’t function anymore)
Appellate Body suspended since December 2019
temporary alternative mechanism for the dispute settlement
2020
Multi Party Interim Appeal Arbitration Arrangement (MPIA)
can only decide between disputes among countries that are part of this alternative mechanism
criticism WTO
Seattle Protests 1999: anti-globalization movement: WTO contributes to the growing inequality
WTO fails to address agricultural subsidies (richer countries subsidize, less developed countries can’t compete)
WTO rules mostly ignore environment and labor-related issues
lack of transparency in ‘‘green room negotiations’’
consensus structure (O’Hara)
two substantively important problems for future of international trade and law
- tangled relationship between trade policy and environmental consequences
- puzzle over the relationship between how things are made and how they are traded (does the production play a role in the likeness of products)?
how does the WTO mainly favor rich countries?
- dispute settlement: imposing sanctions is often costs poor countries more than that they gain
- WTO’s rules standardize trade and reduce tariffs mainly for those goods in which the industrialized countries are already highly productive + exclude those goods of greatest export interests to poorest countries (e.g. agriculture)
*WTO argues that the fault of subsidizing countries and that it isn’t the responsibility of the WTO
case: shrimp-turtle
US ratified a law in 1989 that banned imports on shrimps caught with nets that aren’t turtle-friendly
India, Malaysia, Pakistan and Thailand filed a complaint:
- US wasn’t treating all sources of shrimp equally: some trade partners got longer transition periods and more financial and technical assistance)
- US was attempting to force other countries to adopt domestic policies modeled on American law = extraterritorial application of US law is unacceptable foreign domination
- raised the question if the protection of ‘‘exhaustible natural resources’’ should be interpreted broadly (including species e.g. turtles) ore should it conclude only minerals and similarly inanimate materials?
WTO dispute settlement found the US guilty of violating the most favored nation principle (the first part of the complaint), it didn’t mention the other points
