What Are in Your View the Main Principles Governing International Trade Policy
Course: International Political Economy [GT27M/ GOVT 2049] ID Number: 620033630 Name: Matthew Thomas Lecturer: Sheldon Barnes Date of Submission: 7/9/2012 Question I: What are in your view the main principles governing international trade policy in the context of the WTO and which would be the main provisions in which you find these principles reflected in the WTO agreements? Please elaborate
Formed in 1995 to replace its predecessor the General Agreement on Tariffs and Trade (GATT), under the Treaty of Marrakech, The World Trade Organization (WTO) is the only international organization that deals and treats with the global rules of trade between nations. Its main function is to ensure that trade flows as smoothly, predictably and freely as possible. The goal of the WTO is to aid and facilitate producers of goods and services, exporters, and importers conduct their business.
At its core are the WTO agreements, negotiated and signed by a majority of the world’s trading nations and approved within their respective parliaments. These principles aid in the efficient government of international trade policy ensuring that all signatories adhere to the contract they are bind to, by this governments are now required to create national trade policies transparent by notifying the WTO about present laws in actions and measures implemented, and through regular reports by the secretariat on countries’ trade policies.
The WTO agreements cover goods, services and intellectual property. They explain the principles of liberalisation, as well as the allowed exceptions.
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They include individual countries’ commitments to lower customs tariffs and other trade barriers, and to open and maintain open services markets. The agreements set procedures for settling disputes; prescribe special treatment for developing countries.
The agreements of the WTO are detailed and intricate as they are legal texts that facilitate a wide range of activities such as: agriculture, clothing and textiles, banking and finance, telecommunications, government purchases, industrial standards and product safety, food sanitation regulations, intellectual property, among others. A number of simple, fundamental principles run throughout all of these documents. These principles exist as the foundation of the international multilateral trading system.
Given that the core of the WTO, especially leading out of the Doha Round of Trade Negotiations [2001- present], is to focus and adjust the concerns that are faced by developing nations; the main principles within the context of the WTO that validate international trade policy are: i) Trade without discrimination ii) Freer Trade iii) Promotion of fair competition v) Development and economic reform. These principles of international trade within the legislation of the WTO can be reflected in trade agreements drafted by the organisation.
The principle of “Trade without discrimination” has two key underlying principles: Most Favoured Nation [MFN] and National Treatment [NT]. The MFN, in essence is simply treating other people equally. As legislated by WTO agreements, countries are prohibited from discrimination between their trading partners. Wherein one country is restricted from granting a particular country a special favour e. g. such as a lower customs duty rate for one of their products and this favour is not extended to all the other members of the WTO. This principle is known as Most Favoured Nation (MFN) treatment.
The first article of the General Agreement on Tariffs and Trade (GATT) , which is the governing legislation for the trade in goods, this article speaks to prohibition of member nations to discriminate between “like” products originating from other member nations. In Article I of the GATT it states “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 parties. MFN is also a focus in Article II of General Agreement on Trade in Services (GATS), where it states “each Member shall accord immediately and unconditionally to services and service suppliers of any other Member treatment no less favourable than that it accords to like services and service suppliers of any other country. ” Likewise Article IV on the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) which states “With regard to the protection of intellectual property, any advantage, favour, privilege or mmunity granted by a Member to the nationals of any other country shall be accorded immediately and unconditionally to the nationals of all other Members. ” The agreements in essence cover all three main areas of trade handled by the WTO and gives guidelines as how to WTO member nations execute their trade policies. Though the essence of the MFN treatment is to permit some sense of equality among WTO signatories exceptions are permitted. For example, countries can set up a free trade agreement that applies only to goods traded within the group — discriminating against goods from outside.
Or they can give developing countries special access to their markets. Or a country can raise barriers against products that are considered to be traded unfairly from specific countries. And in services, countries are allowed, in limited circumstances, to discriminate. Though these exceptions exist, they are permitted under highly strict conditions. In essence, the MFN policy acts a facilitator to ensure that every time a country lowers a trade barrier or opens up a market, it has to do so for the same goods or services from all its trading partners – regardless of their economic development.
National Treatment eliminates discrimination between the products of national and foreign services or nationals, in this sense the protocol for national products are expected to be reciprocated to that of foreign entities. Once foreign goods enter a local market, the expectation exists that they should be treated equally as the locally-produced goods. This expectation extends pass produce; it should apply to foreign and domestic services, and also foreign and local trademarks, copyrights and patents.
Given that NT covers various areas of trade it is highlighted in three main WTO agreements. In Article III of the GATT it is stated that “The products of the territory of any contracting party imported into the territory of any other contracting party shall be accorded treatment no less favourable than that accorded to like products of national origin in respect of all laws, regulations and requirements affecting their internal sale, offering for sale, purchase, transportation, distribution or use. Article XVII of GATS states that “…each Member shall accord to services and service suppliers of any other Member, in respect of all measures affecting the supply of services, treatment no less favourable than that it accords to its own like services and service suppliers. ” Article III of TRIPS, speaks to the issue of Intellectual Property [IP] by stating that “Each Member shall ccord to the nationals of other Members treatment no less favourable than that it accords to its own nationals with regard to the protection (3) of intellectual property…” The three treaties highlights the areas of trade the WTO governs, from that of goods exchange, services exchange and the importance of ensuring the proper utilisation of Intellectual Property rights such as copyrighting and patenting. According to the WTO “National treatment only applies once a product, service or item of intellectual property has entered the market.
Therefore, charging customs duty on an import is not a violation of national treatment even if locally-produced products are not charged an equivalent tax. ” In conclusion, the “Trade without Discrimination” principle with its two underlying principles of Most Favoured Nation [MFN] and National Treatment [NT] policies The National Treatment principle constitute the two pillars of the non-discrimination principle that is widely seen as the foundation of the GATT/WTO multilateral trading regime. The concept of “Freer Trade” assists in the decrease of trade barriers which acts as an excellent facilitator for encouraging trade.
Such barriers include: customs duties (or tariffs) and measures such as import bans or quotas that restrict quantities selectively; it can also span to include the decrease of other administrative barriers such as red tape- including policies of exchange rate. The WTO’s global system lowers trade barriers by means of negotiation and applies the principle of non-discrimination [MFN and NT]. This brings about a result of a reduction in the costs of production, as imports used in production are far cheaper; a reduction in the prices of finished goods and services, which in essence can contribute to a lower cost of living.
Since the GATT’s creation in 1947, there have been eight rounds of trade negotiations. The ninth round, under the Doha Development Agenda, is still in negotiations for the past eleven years. The initial focus was geared towards lowering tariffs on imported goods; however the 1980s, the negotiations had expanded to cover non-tariff barriers on goods, with the inclusion of areas such as services and intellectual property. As a result of the negotiations, the tariffs on industrial goods declined to less than 4%, during the mid-1990s. Opening markets can be beneficial, but it also requires adjustment.
The WTO agreements allow countries to introduce changes gradually, through “progressive liberalization”. Article XIX of the GATS states “…with a view to achieving a progressively higher level of liberalization. Such negotiations shall be directed to the reduction or elimination of the adverse effects on trade in services of measures as a means of providing effective market access. This process shall take place with a view to promoting the interests of all participants on a mutually advantageous basis and to securing an overall balance of rights and obligations.
The process of liberalization shall take place with due respect for national policy objectives and the level of development of individual Members, both overall and in individual sectors. There shall be appropriate flexibility for individual developing country Members for opening fewer sectors, liberalizing fewer types of transactions, progressively extending market access in line with their development situation and, when making access to their markets available to foreign service suppliers, attaching to such access conditions aimed at achieving the objectives referred to in Article IV. The article clearly addresses developing countries which are usually given longer to fulfil their obligations. The principle of “Promoting fair competition” portrays The WTO as an instrument of not just extending mechanisms of free trade but is also a system of rules dedicated to open, fair and undistorted competition. By this, the system of the WTO permits tariffs and, in limited circumstances, other forms of protection. More accurately, it is based on the rules on non-discrimination [MFN and NT] which are designed to secure fair conditions of trade.
So too are those on dumping (exporting at below cost to gain market share) and subsidies. The issues are complex, and the rules try to establish what is fair or unfair, and how governments can respond, in particular by charging additional import duties calculated to compensate for damage caused by unfair trade. By removing some market barriers The WTO has promoted competition in the global trading market extending it beyond the borders of WTO membership; the trading principles set by the WTO are meant to allow fair and undisturbed market competition.
The WTO extends and clarifies previous GATT rules that laid down the basis on which governments could impose compensating duties on two forms of “unfair” competition: dumping and subsidies. WTO agreements are geared towards the support and maintenance of fair competition in the sectors of: agriculture, intellectual property, services. The WTO Agreement on agriculture is designed to provide increased fairness n farm trade, the agreement on intellectual property will improve conditions of competition where ideas and inventions are involved, and another will do the same thing for trade in services. The construct of the WTO contributes to development and as it encourages development and economic reform geared towards to the developmental process of developing nations. Given that notion, developing countries require an urgent sense of flexibility to effectively implement the agreements drafted by the organisation.
The current agreements inherit the earlier provisions of GATT that allow for special assistance and trade concessions for developing countries. The WTO cannot claim to make all countries equal however it aids in the reduction of some inequalities; by doing this it gives smaller countries more voice, and at the same time freeing the major powers from the complexity of having to negotiate trade agreements with each of their numerous trading partners.
A majority of over three quarters of the WTO membership comprise of developing countries and countries in transition to market economies. The 1986-1994 Uruguay Round saw over 60 of these countries implementing trade liberalisation programmes unconventionally. At the same time, developing countries and transition economies were much more active and influential in the Uruguay Round negotiations than in any previous round, this activeness has also transpired to the current Doha Development Agenda.
Developing countries were prepared to take on most of the obligations that are required of developed countries by the end of the Uruguay Round. The agreements did grant developing nations transition periods to adjust themselves to the more stringent and arduous provisions of the WTO. The GATT has a special section on Trade and Development which speaks to provisions on the concept of non-reciprocity in trade negotiations between developed and developing countries. Both GATT and the GATS allow developing countries some measure of preferential treatment.
A ministerial decision adopted at the end of the Uruguay Round says more developed countries should accelerate the implementation of market access commitments on goods exported by the least-developed countries, while increasing technical assistance for them. More recently, developed countries have started to allow duty-free and quota-free imports for almost all products from least-developed countries. The current Doha Development Agenda includes developing countries’ concerns about the difficulties they face in implementing the Uruguay Round agreements. ——————————————– 1 ]. The Marrakech Agreement developed out of the General Agreement on Tariffs and Trade, which it includes; but it supplemented it with several other agreements, on such issues as trade in services, sanitary and phytosanitary (plant health) measures, trade-related aspects of intellectual property and technical barriers to trade. It also established a new, more efficient and legally binding means of dispute resolution. [ 2 ]. The Secretariat has a particular responsibility to provide technical support to developing countries, and especially the least-developed countries. 3 ]. As a result of the Uruguay Round negotiations the treaty was created to extend the multilateral trading system to service sector. [ 4 ]. (NAFTA)North American Free Trade Agreement is an example of one of the most successful trade agreements in history; it has contributed to significant increases in agricultural trade and investment between the United States, Canada and Mexico and has benefited farmers, ranchers and consumers throughout North America. The Mexican-Canadian agreement eliminated most tariffs either immediately or over 5, 10, or 15 years. 5 ]. Page 248 the proliferation of rules and regulations prescribing the conduct of decision making in bureaucratic affairs (Politics Economic Welfare) [ 6 ]. The removal or reduction of restrictions or barriers on the free exchange of goods between nations. This includes the removal or reduction of both tariff (duties and surcharges) and non-tariff obstacles (like licensing rules, quotas and other requirements). The easing or eradication of these restrictions is often referred to as promoting “free trade. ” [ 7 ].
GATT (Article VI) allows countries to take action against dumping. The Anti-Dumping Agreement clarifies and expands Article VI, and the two operate together. They allow countries to act in a way that would normally break the GATT principles of binding a tariff and not discriminating between trading partners — typically anti-dumping action means charging extra import duty on the particular product from the particular exporting country in order to bring its price closer to the “normal value” or to remove the injury to domestic industry in the importing country. 8 ]. The WTO Agreement on Subsidies and Countervailing Measures disciplines the use of subsidies, and it regulates the actions countries can take to counter the effects of subsidies. Under the agreement, a country can use the WTO’s dispute-settlement procedure to seek the withdrawal of the subsidy or the removal of its adverse effects. Or the country can launch its own investigation and ultimately charge extra duty (“countervailing duty”) on subsidized imports that are found to be hurting domestic producers. 9 ]. This is a procedure when developed countries grant trade concessions to developing countries they should not expect the developing countries to make matching offers in return. [ 10 ]. The URUGUAY ROUND AGREEMENT: “Decision on Measures Concerning the Possible Negative Effects of the Reform Programme on Least-Developed and Net Food-Importing Developing Countries”