Wto principles
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Transcript of Wto principles
Understanding Multilateral
trading
Understanding Multilateral
tradingWorld trade organization (wto)World trade organization (wto)
Justin WilliamsJustin Williams
Global PartnershipsGlobal PartnershipsThe WTO consists of fundamental principles that are the foundation of the multilateral trading system
principles include:
trade without discrimination
Freer trade: through negotiation
predictability: through binding and transparency
promoting fair competition
encouraging development and economic reform
Trade without discriminationTrade without discrimination1.Most-Favored-Nation Treatment
under WTO agreements countries cannot discriminate between trading partners
if someone is granted a special favor (lowering custom duty rates) then this must be done for all other WTO members
Exceptions:
1. countries can set up free trade agreement that only applies to goods traded within group (trading partners) and discriminates against goods from outside
2. countries can grant developing countries access to their markets
3. countries can raise barriers against products that are considered to be traded unfairly from specific countries.
Trade without discriminationTrade without discrimination
2. Treating Foreigners and locals Equally
imported (foreign) and locally-produced goods should be treated equally [at least after foreign goods have entered market]
should also be treated equally: foreign and domestic services, local trademarks, copyrights and patents
this is the principal of “national treatment”: treating foreign goods as you would treat your own nation’s
“National treatment” is only applied once a product has entered the market
thus, a country is allowed to charge customs duty on an import (not in the market) and not charge customs on a locally-produced product.
Freer Trade: Gradually Through negotiation
Freer Trade: Gradually Through negotiationEncouraging Trade
lowering trade barriers; customs duties, quotas that restrict specific quantities and import bans (most obvious)
changing exchange rate policies (have been discussed)
General Agreement on Tariffs and Trade (GATT) 1947
(1947-1994) 8 rounds of trade negotiations which discussed: tariffs, tariffs & anti-dumping measures, tariffs & non-tariffs measures “framework” agreements, tariffs & non-tariff rule
result: by mid-1990s industrial countries’ tariffs rates on industrial goods fell to less than 4%
Doha Development Agenda: currently hosts 9th round of trade negotiation
Opening markets (beneficial but requires adjustment) thus WTO allows gradual changes through “progressive liberalization”
Predictability: Binding & TransparencyPredictability: Binding & Transparencycertain promises from countries promote future opportunities
ex/ promise to not raise trade barrier gives businesses a clearer view of their future opportunities therefore with stability and predictability, investment is encouraged (therefore jobs are created and consumers can enjoy benefits of competition)
When countries agree to open their markets for goods/services they “bind” their agreement (through set tariffs, tax import rates, etc)
a country can change it’s binding agreements by negotiating with trading partners
bounding of products promotes a higher degree of market security for traders and investors & therefore predicability (why predictability is important)
improve predictability: transparency
making countries’ trade rules as clear and public as possible to not cause confusion
Promoting Fair CompetitionPromoting Fair Competition
the rules of the WTO try to establish what is fair and unfair and how governments can respond caused by unfair trade
Most-Favored-Nation (MFN)
National Treatment
Partly a “free trade” institution because:
allows tariffs and other limited forms of protection
BUT NOT ENTIRELY FREE TRADE because of aforementioned rules
encouraging development and economic reform
encouraging development and economic reform
WTO system contributes to development
WTO understands that over 3/4s of members are developing countries, they sometimes need special assistance and flexibility in time to implement WTO agreements
Uruguay Round (negotiation talks) helped to increase bindings in developed countries
and the end of Round; developing countries were more prepared to take on most obligations required of developed countries
their are still concerns about obligation which are currently being discussed in Doha Development Agenda
http://www.wto.org/english/thewto_e/whatis_e/tif_e/fact2_e.htm
http://www.wto.org/english/thewto_e/whatis_e/tif_e/fact4_e.htm#rounds