LIBERALIZATION OF SERVICE INDUSTRIES

[WTO, TRIPS and TRIMS]

THE WTO In brief

The World Trade Organization (WTO) is the only international organization dealing 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 RESULT is assurance and compliance.

THE GOAL is to improve the welfare of the people of the member countries.
WTO IS TO PROMOTE TRADE WITHOUT DISCRIMINATION

WTO: What is its purpose?

WTO Objectives:
Raising standards of living
Ensuring full employment Ensuring growth of real income and

demand
Expanding production and trade Sustainable development Protection of the environment
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WTO: What is its purpose?

WTO Functions:
Administer and implement the WTO

agreements Forum for negotiations Administer Settlement of Disputes Administer Trade Policy Review Mechanism Technical Assistance to developing countries

THE WTOs THREE MAIN PURPOSES

1. Help trade flow as freely as possible Serve as a forum for trade negotiations

1. Set up an impartial means of settling disputes

World Trade Organization: Rounds

Rounds of GATT Multilateral Trade Negotiations
No. Years Name Accomplishments Reduced tariffs 1-5 1947-61

World Trade Organization: Rounds

Rounds of GATT Multilateral Trade Negotiations
No. 6 Years Name Accomplishments Reduced tariffs 1-5 1947-61

1964-67 Kennedy Tariffs + anti-dumping

World Trade Organization: Rounds

Rounds of GATT Multilateral Trade Negotiations
No. 6 7 Years Name Accomplishments Reduced tariffs Tokyo Tariffs + NTBs 1-5 1947-61 1973-79

1964-67 Kennedy Tariffs + anti-dumping

World Trade Organization: Rounds

Rounds of GATT Multilateral Trade Negotiations
No. 6
7

Years

Name

Accomplishments
Reduced tariffs

1-5 1947-61 1973-79 Tokyo

1964-67 Kennedy Tariffs + anti-dumping

Tariffs + NTBs

1986-94 Uruguay Tariffs, NTBs, Services, Intellectual Property, Textiles, Ag., Dispute Settlement, Created WTO

World Trade Organization: Rounds

Rounds of GATT Multilateral Trade Negotiations
No. 6
7

Years

Name

Accomplishments
Reduced tariffs

1-5 1947-61 1973-79 Tokyo

1964-67 Kennedy Tariffs + anti-dumping

Tariffs + NTBs

1986-94 Uruguay Tariffs, NTBs, Services, Intellectual Property, Textiles, Ag., Dispute Settlement, Created WTO
2001-? Doha ? (Doha Development Agenda)

WTO
WTO agreements are negotiated and signed by the trading nations and ratified in their parliaments. The goal is to help producers of goods and services, exporters, and importers conduct and grow their business.

The Goal
To improve the welfare of the peoples of the member countries.

Past, Present, Future

The WTO came into being in 1995. The WTO is the successor to the General Agreement on Tariffs and Trade (GATT), established in the wake of the Second World War.

WTO: How does it work?

Set of rules
The negotiated legal rules included in the various WTO agreements cover the following topics:

Trade in Goods Trade in Services Trade-related aspects of intellectual property rights Dispute Settlement Trade Policy Reviews
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WTO: How does it work?

WTO Structure
Ministerial Conference TPRB General Council DSB Appellate Body Dispute Settlement Panels

Goods Council Committees

Services Council Committees

TRIPS Council
Director-General Secretariat

Investment, competition, Government Procurement)

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CTD (Development) CTE (Environment) CRTA (Regionalism) BOP Budget WG (Accessions,

WTO: How does it work?

Secretariat
About 750 staff Headed by a Director-General (DG) Budget 2009: 190 millions Swiss

francs + extra-budgetary funds (about 24 millions Swiss francs)

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WTO: How does it work?

Decision making
Member-driven organisation Consensus (GATT practice), even if

voting procedures exist

Consensus when no Member formally

object to a decision
Negative consensus

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WTO: How does it work?

Meetings
Type of meetings (formal, informal,

special sessions, consultations, multi/pluri- /bilateral)

All WTO Bodies open to all Members

(specificities for panels and Appellate Body)

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WTO Coverage
GATT 1994 Multilateral Agreements on Trade GATT 1947 Rectifications, amendments and modifications which entered into force before 1.1.1995 (Protocols, Decisions of the CONTRACTING PARTIES). Protocols of Accession (to GATT) Understandings on (Art. II:1b, XVII, XXIV, XXVIII, BOP provisions, Waivers) Marrakesh Protocol Schedules of Tariff Concessions Agreements on Agriculture Textiles and Clothing TRIMs Antidumping Subsidies and Countervailing Measures

in Goods

PSI Rules of Origin Safeguards Import Licensing Customs Valuation TBT SPS Decisions, Declarations
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WTO Coverage
General Agreement on Trade in Services
GATS PART I (Scope and Definitions) PART II (General Obligations and Disciplines) PART III (Specific Commitments) Schedules on Specific Commitments PART IV (Progressive Liberalization) PART V (Institutional Provisions) ANNEXES Annex on Article II (MFN) exemptions) Lists of Art. II (MFN) Exemptions Annex on Movement of Natural Persons Supplying Services under the GATS 3rd Protocol (1995) Annex on Air Transport Services Annex on Financial Services 2nd, 5th Protocol (1995, 1997) Second Annex on Financial Services Annex on Negotiations on Maritime Transport Services Annex on Telecommunications Annex on Negotiations on Basic Telecommunications 4th Protocol (1997) Decisions, Declarations
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WTO Coverage
Trade-Related Aspects of Intellectual Property Rights (TRIPS)
TRIPS PART I (General Provisions and Basic Principles) PART II (Standards concerning the availability, scope and use of IPR) Section 1: Copyright and Related Rights Section 2: Trademarks Section 3: Geographical Indications Section 4: Industrial Designs Section 5: Patents Section 6: Layout-designs (Topographies) of Integrated Circuits Section 7: Protection of Undisclosed Information (Trade Secrets) Section 8: Control of Anti-competitive Practices in Contractual Licenses PART III (Enforcement of IPR) PART IV (Acquisition and Maintenance of IPR and related Inter Partes Procedures) PART V (Dispute Prevention and Settlement) PART VI (Transitional Arrangements) PART VII (Institutional arrangements: Final Provisions) Decisions, Declarations
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The Past 50 Years: Exceptional Growth in World Trade

Merchandise exports grew on average 6% annually Total trade in 1997 was 14 times the level of 1950 In 1997, 40 governments concluded negotiations for tariff free trade.

THE ORGANIZATION
If the WTOs overriding objective is to help trade flow smoothly, freely, fairly and predictably, how? It does this by:

Acting as a forum for trade negotiations Reviewing national trade policies Administering trade agreements Settling trade disputes Assisting developing countries in trade policy issues, through technical assistance and training programs Cooperating with other international organizations

The Organization
Ministerial Conference GC: Trade Policy Review Body
Council for Trade in Goods

General Council Council for Intellectual Property Rights in Trade

GC: Dispute Settlement Body

Council for Trade In Servfices

Committees

Committees
Committees on Trade and Environment Trade and Development Working parties on Accessions

Textiles Monitoring Body

Working parties on

Working groups

The Organization Chart

10 Benefits of the WTO

The system helps promote peace Disputes are handled constructively Rules make life easier for all Freer trade cuts the costs of living It provides more choices of products and qualities Trade raises incomes Trade stimulates economic growth The basic principles make life more efficient Governments are shielded from lobbying The system encourages good government

The WTO must teach the world the benefits of trade

Ricardo had to said about comparative advantage, and the strong consensus among those who seriously consider trade issues. Trade provides nearly 100% of an economys jobs. Global trade provides a large and growing share of these jobs.
.

WTO Functions
Functional Outline of the World Trade Organization
Communication Constraints Exceptions Dispute Settlement

WTO Functions
Communications Ministerials Negotiating Rounds Working Groups Trade Policy Review Mechanism Councils and Committees

WTO Functions
Constraints Tariff Bindings Customs Valuation Product Regulations Quantitative Restrictions Subsidies Foreign Direct Investment (TRIMS) Services (GATS) Intellectual Property (TRIPs)

WTO Functions
Exceptions Anti-Dumping Countervailing Duties Safeguards Balance of Payments Protection Preferential Trade Agreements

WTO Functions
Dispute Settlement Consultation Panel Recommendation Appellate Body Remedy Implementation Compensation Retaliation

Bottom Line
WTO extends the Rule of Law to international commercial policies. As such, it protects small and weak countries from abuse by larger, more powerful ones.

The Quad
Some of the most difficult negotiations have needed an initial breakthrough in talks among the four largest members Canada European union Japan United States

How to Join the WTO: the Accession Process

First, tell us about yourself. Second, work out with us individually what you have to offer. (Country to country negotiations bilaterally.) Third, lets draft membership terms. Finally, the decision.

DEVELOPING COUNTRIES
Over three-quarters of WTO members are developing or leastdeveloped countries. Special provisions for these members are included in all the WTO agreements. The special provisions include: longer time periods for implementing agreements and comments, measures to increase trading opportunities for these countries, provisions requiring all WTO members to safeguard the trade interests of developing countries, and support to help developing countries build the infrastructure for WTO work, handle disputes, and implement technical standards.

Criticisms of the WTO

The WTO undermines state sovereignty It undermines representative democracy Member nations are prevented from protecting the environment Members are unable to uphold laws guaranteeing workers rights The WTO is controlled by the larger nations The WTO represents the interests of large corporations and wealthy citizens

Evolution of WTO framework

Decisions and Declarations

(few examples)

1996 Singapore ministerial conference

Singapore Topics

Trade Facilitation, Investments, Competition, Transparency in Government Procurement

Information Technology Initiative 1998 Geneva ministerial conference

Electronic Commerce

1999 Seattle ministerial conference 2001 Doha ministerial conference

Doha Development Agenda

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THE WTO ROUND

Seattle a rough start (1999)
Doha what happened? (2001) Cancun what happened? (2003)

The Doha, Qatar Initiatives

A new trade round was launched November, 2001 For the first time, developing countries demanded capacitybuilding and technical assistance to take part meaningfully.

The Doha, Qatar Initiatives

The Pledging Conference was convened in accordance with the December 2001 decision of the WTO General Council.

In that decision, the General Council set a target for core funding of CHF 15 million plus support in kind, including training courses for trade officials.

What happened at Seattle?

Most of the worlds citizens first heard about the WTO at the Seattle Millennium Round (popularly known as the Battle of Seattle), when talks ended in failure amid massive street demonstrations The agenda for Seattle was ambitious: agriculture, services, intellectual property rights, government procurement (contracts), and competition rules, to name a few.

THE WTO ROUND

This round is known as the Millennium Round, the Doha Round, and the Development Round Political environment there are now 148 WTO members about twice the GATT round Progress on regional agreements Countries negotiate only what they would do anyway

What happened at DOHA? (Development Round)

The attempts to expand the coverage of the WTO agreements became more apparent with the launching of the Doha Development Agenda (DDA) at the WTOs 4th Ministerial Conference in Doha, Qatar in 2001. In a nutshell, the DDA seeks to start negotiations on non-agricultural tariffs, trade and environment, WTO rules like anti-dumping and subsidies, investment, competition policy, trade facilitation, transparency in government procurement, and intellectual property. The deadline for negotiations was on Jan. 1, 2005.

Doha Round Agenda

Agricultural subsidies Conflicts between trade liberalization and environmental protection Competition policy Foreign investment protection Trade remedy laws (subsidies and dumping)

Doha Negotiations:
Structure
Negotiating groups meet during special sessions of existing WTO bodies, at the exception of (*) for which new Negotiating Groups have been created. General Council

Trade Negotiations Committee Chairman: WTO DG (ex officio)

Goods - Agriculture - NAMA (*) - Trade Facilitation (*) - Cotton

Services - Services

TRIPS - Geographical Indications

Other Issues

- Dispute Settlement
- Development - Environment

July Decision

- Rules (*)
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What Happened at Cancun?

Based on a draft ministerial declaration that was submitted by the WTO director general to ministers last ug. 31, 2003, moves by industrialized countries to include other non-trade issues at the Cancun Conference are facing stiff opposition from selected underdeveloped countries. The call of third world governments to the monopolycapitalist governments, especially those of the United States and the European Union, to made good their promise to remove domestic and export subsidies enjoyed by their homeland agriculture; and the drive of the monopoly-capitalist powers to push for even further liberalization in areas such as foreign investment

Agreements of the WTO

There are 28 agreements that had been signed in the Uruguay Round of the GATT, 1994. The details of these agreements are given below: A. Trade in Goods General Agreement on Tariffs and Trade 1994 (GATT, 1994) Associate Agreements 1) Agreement on Implementation of Article VII of GATT 1994 (Customs Valuation) 2) Agreement on Pre-shipment Inspection (PSI) 3) Agreement on Technical Barriers to Trade (TBT) 4) Agreement on the Application of Sanitary and Phytosanitary Measures (SPS) 5) Agreement on Import Licensing Procedures 6) Agreement on Safeguards

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Agreements of the WTO

7) Agreement on Subsidies and Countervailing Measures (SCM) 8) Agreement on Implementation of Article VI of GATT 1994 (Ami-dumping) (ADP) 9) Agreement on Trade-Related Investment Measures (TRIMS) 10) Agreement on Textiles and Clothing (ATC) 11) Agreement on Agriculture 12) Agreement on Rules of Origin

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Agreements of the WTO

Understanding and Decisions 1) Understanding on Balance of Payments Provisions of GATT 1994 2) Decisions Regarding Cases where Customs Administrations have Reasons to Doubt the Truth or Accuracy of the Declared Value (Decision on Shifting the Burden of Proof) 3) Understanding on the Interpretation of Article XVII of GATT 1994 (State trading enterprises) 4) Understanding on Rules and Procedures Governing the Settlement of Disputes 5) Understanding on the Interpretation of Article II: l(b) of GATT 1994 (Binding of Tariff Concessions) 6) Decision on Trade and Environment 7) Trade Policy Review Mechanism
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Agreements of the WTO

B. Trade in Services
General Agreement on Trade in Services (GATS) C. Intellectual Property Rights (IPRs)
Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) Plurilateral Trade Agreements Agreement on Trade in Civil Aircraft Agreement on Government Procurement International Dairy Agreement International Bovine Meat Agreement

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Trade-Related Aspects of Intellectual Property Rights (TRIPS)

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What is Intellectual Property?

books, CDs, video games, paintings, staplers, bags, fabrics, planes, food/drinks, pharmaceuticals, plant varieties, computer chips, cars, music, broadcasts, sound recordings, etc an IP right provide the right holder with an exclusive right to stop others ..IP right holder may provide licenses IP rights are territorial in nature

Forms of Intellectual property Rights

Patents Trade Marks Designs Copyrights Geographical Indications Industrial Designs Trade Secrets Utility Models Traditional Knowledge (?)

The TRIPS Agreement sets minimum standards is part of a package deal WTO Agreement is signed by 153 parties is subjected to dispute settlement body ...contains enforcement mechanisms ...is subjected to National Treatment and Most-favoured-Nation Treatment (MFN) Principles

The Public Interest

Promotion of innovation Public health and access to medicines Nutrition and Food security Technology transfer Competition policy Human rights Development Fight against poverty Environmental protection Education
Whenever there is a conflict between human rights and property rights, the former must prevail Abraham Lincoln

Rationale behind IPRs

To stimulate innovation/encourage investment the inventor receives an exclusive right to his invention in exchange for disclosure of the invention in such a way that it allows replication, the inventor receives a limited amount of time to recoup his investment Protection of goodwill and reputation Protection of creativity

Patents

Trademarks Copyright

Why are IPRs important?

IPRs allow control over technology, signs and creations Original Purpose: to stimulate innovation and creativity by compensating the creator/innovator for their intellectual efforts Lately: incentive to investment / change in market players --big multinationals

TRADE-RELATED INVESTMENT MEASURES(TRIMS)

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Investment and Trade

The issue is whether or not a policy with a particular target - in this case an investment measure - can affect trade. Are there different degrees of trade effects? Export performance requirements, local content schemes and foreign exchange balancing - ok

Examples of TRIMS
Market access
Ownership or

Performance Requirements
Local content

equity restrictions Joint venture requirements

schemes Export performance requirements Foreign Exchange balancing

TRADE RELATED INVESTMENT MEASURES [TRIMs]

In the late 1980s Agreed upon by all members of the World Trade Organization Are rules that restrict preference of domestic firms and thereby enable international firms to operate more easily within foreign markets.

Legal Framework
The TRIMs agreement does not provide any new language It focusses on two Articles that were identified in a previous case under the GATT
Article III (National Treatment) Article XI (Quantitative Restrictions)

Aims of the Agreement

Desiring
to promote the expansion and progressive

liberalisaiton of world trade and to facilitate investment, while ensuring competition

Take into account

trade, development and financial needs of

developing countries, particularly least developed countries

Recognising
certain investment measures can cause

trade-restrictive and distorting effects

Structure
Nine Articles and an Annex Art I - clarifies that the agreement applies

only to trade in goods Art 2 - applies Articles III or XI and refers to the Annex list Art 3-4 deal with general exceptions and Art XVIIIb Art 5 Notification and transition periods Art 9 - Review

GATT Articles
Article III (GATT)

National treatment of imported product, unless specified in other agreements Subjects the purchase or use by an enterprise of imported products to less favourable conditions than the purchase or use of domestic products

Article XI (GATT)

Prohibition of quantitative restrictions on imports and exports Part of the general trend in textiles and agriculture to phase out the use of quantitative restrictions

Illustrative list - Para 1

Para 1 (a) covers local content TRIMs which require the purchase or use by an enterprise of products of domestic origin or domestic source. Para 1(b) covers trade balancing TRIMs which limit the purchase or use of imported products by an enterprise to an amount related to the volume or value of local products that it exports.

Ilustrative list- Para 2

2(a) deals with border measures that deal with trade balancing. 2(b) restrictions to trade that arise from foreign exchange access restrictions such as balancing requirements 2 (c) deals with measures that restrict exports.

Notification
Governments of WTO members, or countries entitled to be members within 2 years after 1 January, 1995 shouold make notifications within 90 days after the date of their acceptance of the WTO agreement.

Transition periods
Members are obliged to eliminate TRIMs which have been notified. Such elimination is to take place within two years after the date of entry into force of the agreement for developed countries
five years for developing seven years for LDC

Standstill
TRIMS introduced less than 180 days before the agreement do not benefit from transition period. Members are also not allowed to change measures that have been notified if these changes are inconsistent with the agreement. The same TRIM can be applied to a new investment.

Development Dimension of the TRIMS agreement

Only developing countries notified TRIMS Most frequent sector was the automotive industry The most frequent policy was local content schemes

Where to from here?

Developing countries are serious about not moving ahead on TRIMS until the agreement has been implemented The focus is on how to proceed with the review.