GATT WTO

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GATT / WTO
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GATT

• General Agreement on Tariffs and Trade (GATT) was
  established in Geneva in 1947.
• The objective was to create a framework that
  would regulate international trade and stimulate
  international commerce.

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Objectives of GATT

• The objectives of the 1947 Agreement were to
  establish an orderly and transparent framework
  within which barriers to trade could be gradually
  reduced, and international trade thereby
  expanded.

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Objectives of GATT

• The most important elements of the Agreement
  included those of
• non-discrimination the Most Favored Nation
  (MFN) principle
• reciprocity
• transparency
• tariff reduction.

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Exception and Waivers

• developing countries were given special status.
• countries that offer each other more favorable
  treatment within a custom's union were allowed to
  waive full adherence to the MFN clause.
• agricultural trade was given special treatment,
  especially with regard to non-tariff barriers.

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The GATT Negotiating Rounds
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Reasons For Exclusion of Agriculture from
Earlier Rounds of GATT

• The general consensus of opinion was that
  agriculture was a unique sector of the economy,
  that, for reasons of national food security,
  could not be treated like other sectors.
• With the expansion of the manufacturing economy,
  agriculture was in relative decline. Political
  and social pressures demanded, however, that the
  decline be halted or slowed down, and that
  agriculture be protected from the full rigors of
  the international market.

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Special Treatment for Agricultural Trade

• Quantitative import restrictions, banned for all
  other commodities, could be used in the case of
  agricultural commodities
• The use of agricultural export subsidies was
  explicitly permitted
• Other mechanisms for protecting agriculture, such
  as variable import levies and domestic subsidies,
  were not explicitly covered by the GATT, and
  provided additional loopholes for agricultural
  policy makers wishing to protect the agricultural
  sector.

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The Latest GATT Round

• Uruguay Round
• Place Uruguay.
• Date 1986-93
• Doha Round just started in November 2001

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Uruguay Round

• The Uruguay round was launched at a meeting of
  trade ministers in Punte del Este, Uruguay, in
  October 1986.
• It was expected to last for four to five years
  and instead took around eight years (until
  December 1993).
• What made the Uruguay round so contentious?

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Reasons for inclusion of agriculture within the
GATT framework

• comparative advantage
• world market instability
• The effects of protectionism

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Agriculture in the Uruguay round negotiations

• The objectives with regard to agriculture were
  described as follows To achieve greater
  liberalization of trade in agriculture and bring
  all measures affecting import access and export
  competition under strengthened and more
  operationally effective GATT rules and disciplines

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The Main Players in the Agricultural Negotiations

• The USA was enthusiastic about promoting greater
  liberalization in agricultural trade, and was
  keen to reduce the protection and support enjoyed
  by producers in the EC under the CAP.
• The EC was much less amenable to far reaching
• liberalization, but was keen to reach a workable
  compromise, that could be enshrined in the GATT,
  in order to minimize future trade friction
  between itself and the USA.
• The Cairns Group

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Other Players in the Agricultural Negotiations

• For the large group of developing countries
  which were net importers of food, the main
  concern was over the impact of the Round on the
  cost of food imports.
• Two other countries with a major interest in the
  outcome of the round were Japan and the Republic
  of Korea. These countries had highly protected
  domestic rice markets, and a strong domestic
  opposition to reform of the sector.

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Initial Positions of US in the Uruguay Round

• USA opened the negotiation with an unrealistic
  demand for the zero-zero option.
• All agricultural subsidies and all quantitative
  restrictions on agricultural imports be phased
  out over a period of ten years, and that world
  health and safety measures be harmonized.
• This proposal found support among Cairn groups
  but the EC totally opposed it.

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Positions of Other Players

• The EC's demands focused primarily on the concept
  of "rebalancing.
• Japan, like the EC was keen to protect its
  farmers from international competition.
• The demands of developing countries were focused
  on their need for special and differential
  treatment within the negotiations.

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Slow Initial Progress in the Negotiations

• At the mid-term review in Montreal at the end of
  1988, the negotiating parties in the agricultural
  group were as far apart as ever.
• In April 1989, U.S. negotiators dropped their
  demand for zero-zero option.
• In 1991, finally arrived at a consensus, whereby
  countries agreed to make concessions in each of
  the following three areas
• import access
• domestic support
• export subsidies.

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Dunkel Draft Act

• At the end of 1991, the director-general of the
  GATT presented a comprehensive Draft Final Act,
  known as the Dunkel Draft.
• It included the first complete text on
  agriculture, in which quantitative proposals were
  presented with respect to concessions in each of
  the three major disciplines

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The Blair House Accord

• the 24 percent cut in the volume of subsidized
  exports that was originally proposed, was reduced
  to 21 percent.
• direct payments made under production limiting
  programs, such as those made under the EC's CAP
  reform, and the USA's policy of deficiency
  payments and land set-aside, were made exempt
  from domestic support reduction commitments
• commitments to reduce domestic support on a
  product by product basis were replaced by a
  commitment to reduce overall support to the
  agricultural sector.

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Major Areas of GATT Disciplines
Market Access
Domestic Support
Export Subsidies
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Market Access Commitments

• Tariffication, Tariff Binding and Reduction.
• Non Tariff Barriers to be converted to Tariff
  Equivalent.
• All Tariffs to be bound.
• Reduce existing and new tariffs by 36 percent, on
  a simple average basis, in equal installments in
  six years.
• Reduce tariffs for each commodity by a minimum of
  15 percent .

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Market Access (cont.)

• Minimum and Current Access Commitment
• Minimum access import opportunities to be
  provided for products with import below 5 percent
  of domestic consumption
• Increase minimum access quotas from 3 percent of
  domestic consumption to 5 percent over the
  implementation period.

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Japanese Minimum Access Commitment for Rice
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Domestic Support Commitments
Amber Box Policies
Blue Box Policies
Green Box Policies
Largest effect on production and trade
Least effect on production and trade
Compromise between these two
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AMS Support Level for 24 Countries (1986-88 vs
1995)
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Export Subsidies Commitment

• Under GATT agreement, both United States and the
  European Union agreed to reduce the quantity and
  budgetary outlay ceilings for subsidized exports
  wheat, durum, wheat flour and semolina by 21
  percent and 36 percent respectively.
• The final year (2000) commitments are the
  required 21 and 36 below the 1986-90 base for
  the quantitative and budgetary commitments,
  respectively

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U.S. GATT Commitments on Subsidized Exports
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EU GATT Commitments for Subsidized Exports

• The European Union will reduce the quantity and
  budgetary outlay for export subsidies from the
  current level. In the year 2000, the EU's maximum
  allowable quantity of subsidized wheat and wheat
  flour exports will be 13.4 MMT, 6.8 MMT less than
  the quantity of subsidized exports in 1991-92.

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Uruguay round GATT Negotiations vs Old GATT

• The old GATT was often criticized because it
  lacked an enforcement mechanism
• One of the most sustentative achievement of the
  Uruguay round was the creation of a new
  international institutions, the WTO.
• The WTO is responsible for enforcing existing
  international trade agreements and serve as a
  host for new talks to liberalize trade.

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The WTO

• As of 1999, 135 countries had become members of
  WTO. Another 30 countries are in the process of
  applying for membership.
• As of 1999, the WTO dispute settlement system had
  been remarkably active and successful.
• Between 1995 to 2000, more than 190 cases has
  been notified to the dispute settlement process

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The Conduct of U.S. Commercial Policy

• Since 1934, Congress has authorized systematic
  reduction in trade barriers. On the other hand,
  Congress has provided American business with
  alternative mechanisms for seeking and obtaining
  relief from foreign competition.
• In this section, we will discuss some of these
  measures.

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Dumping

• It is defined as selling a product in a foreign
  country at a price that is lower than the price
  charged by the same firm in the home country.

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Economic Impacts of Dumping
PW
P1
P2
Predatory dumping
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Antidumping Law

• Current antidumping law provides that under
  certain conditions, a special tariff be imposed
  on foreign goods if it is found to be sold less
  than fair value.

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Antidumping Cases Initiated Worldwide, 1999