bilateral & commodity agreements

Bilateral & commodity agreements

REPORT

ON

BILATERAL & COMMODITY AGREEMENT

PREPARED BY:

KARISHMA DHANGADHARYA (11008)

DEVYANI GAMIT (11009)

NISHITA NAYAK (11019)

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Bilateral trade: The exchange of goods between two countries. Bilateral trade agreements give preference to certain countries in commercial relationships, facilitating trade and investment between the home country and the foreign country by reducing or eliminating tariffs, import quotas, export restraints and other trade barriers. Bilateral trade agreements can also help minimize trade deficits

Commodity trade: Commodities trading is a sophisticated form of investing. It is similar to stock trading but instead of buying and selling shares of companies, an investor buys and sells commodities. Like stocks, commodities are traded on exchanges where buyers and sellers can work together to either get the products they need or to make a profit from the fluctuating prices.

GATS (General Agreement on Trade in Services)

• The General Agreement on Trade in Services (GATS) is a treaty of the World Trade Organization (WTO) that entered into force in January 1995 as a result of the Uruguay Round negotiations. The treaty was created to extend the multilateral trading system to service sector, in the same way the General Agreement on Tariffs and Trade (GATT) provides such a system for merchandise trade.

• All members of the WTO are signatories to the GATS. The basic WTO principle of most favoured nation (MFN) applies to GATS as well. However, upon accession, Members may introduce temporary exemptions to this rule.

• Principles and Obligations :

The general principles and obligations of GATS are very similar to those for trade in goods. Examples include MFN treatment National treatment, as well as transparency obligations and commitments, like the tariff schedules under GATT, are an integral part of the agreement.

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• Scope:

The scope of the GATS agreements very broad and it covers all measures affecting internationally traded services. It is important in practical terms for negotiators to define what is meant by the term “trade in services”.

• Under GATS,”trade” includes all the different ways of providing an international services.

• GATS defined four methods of providing an international services-it calls them MODES OF DELIVERY, these all are defined in the table:

Modes Criteria Examples

Mode 1:cross border

Services supplied from one country to another

International telephone calls

Mode 2:consumption abroad

To make use of a service of one country in another member country

Tourism, movement of patients

Mode 3:Commercial presence

To set up subsidiaries or branches to provide services in another country

Banks operating in foreign countries,investment in foreign countrie’s firm

Mode 4:Presence of natural persons

Individuals traveling from their country to supply services in another country

Fashion models,CA,Doctors

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Key rules associated with GATS

• MFN treatment :

If you favour one, you favour them all.The MFN treatment means treating trading partners equally.

• National treatment :

An equal treatment or national treatment for foreigners and nationals.

• Transparency:

The government must setup enquiry points within their bureaucracy.

• Regulations:

The government should regulate the services reasonably, objectively and impartially.

Intellectual Property: Protection and Enforcement of Rights

• Importance of ideas :

Ideas and knowledge are an increasingly important part of trade. Most of the value of new medicines and other high technology products lies in the amount of invention, innovation, research, design and testing involved. Films, music recordings, books, computer software and on-line services are bought and sold because of the information and creativity they contain, not usually because of the plastic, metal or paper used to make them. Many products that used to be traded as low-technology goods or commodities now contain a higher proportion of invention and design in their value — for example brand named clothing or new varieties of plants. As usual greater importance is given to ideas, inventions, innovations, R & D.

• Values is in the Idea :

Creators have right to draw advantage from their inventions, designs and other creations. These rights are known as “intellectual property rights”. These inventions can be patented; and brand names and product logos can be

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registered as “trademarks”. They take a number of forms. For example books, paintings and films come under copyright; inventions can be patented; brand names and product logos can be registered as trademarks; and so on. Governments and parliaments have given creators these rights as an incentive to produce ideas that will benefit society as a whole.

• Different Levels of Protection:

In the past, the extent of protection and enforcement of these rights varied widely around the world. But as intellectual property became more important in trade, this difference became a source of tension in economic relations. New internationally agreed trade rules for intellectual property rights were seen as a way to introduce more order and predictability, and for disputes to be settled more systematically.

Entry of TRIPS Agreement

The WTO’s TRIPS Agreement is an attempt to narrow the gaps in the way these rights are protected around the world, and to bring them under common international rules. It establishes minimum levels of protection that each government has to give to the intellectual property of fellow WTO members. In doing so, it strikes a balance between the long term benefits and possible short term costs to society. Society benefits in the long term when intellectual property protection encourages creation and invention, especially when the period of protection expires and the creations and inventions enter the public domain. Governments are allowed to reduce any short term costs through various exceptions, for example to tackle public health problems. And, when there are trade disputes over intellectual property rights, the WTO’s dispute settlement system is now available.

• The TRIPS Agreement was construed as an attempt to narrow the gaps in the way intellectual property rights are protected around the world, and to bring them under common international rules. This agreements covers five areas as follows:

1. How basic principles of the trading system and other international, intellectual property agreements should be applied,

2. How to give adequate protection to intellectual property rights,

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http://www.wto.org/english/docs_e/legal_e/legal_e.htm#TRIPs


3. How countries should enforce those rights,

4. How to settle disputes on intellectual property among members of the WTO,

5. Special transitional agreements during the period when the new system is being introduced.

Basic principles of intellectual property agreement

As in GATT and GATS, the starting point of the intellectual property agreements is its basic principles and as in the other two agreements non-discrimination features prominently: national treatment & MFN treatment.

• Protecting intellectual property : The TRIPS Agreement ensures that adequate standards of protection exist in all member countries. In addition, TRIPS Agreements adds a significant number of new or higher standards.

• Enforcement: Intellectual property laws should be enforced properly. According to the agreement, the government has to ensure that these rights can be enforced under their national laws, and that the penalties for infringement are tough enough to deter further violation. The procedures must be fair and equitable, and not unnecessarily complicated or costly.

Liberalizing trade in Goods

1. Industrial goods: Tariffs

WTO negotiations produce general rules that apply to all members and specific commitments made by the individual member government. The specific commitments are listed in “schedules of concessions”.

2. Tariffs and developed countries :

With the implementations of the Uruguay Round results, the tariffs on industrial products imported by the developed countries were reduced by 40 % on an average, from 6.3 to 3.8%, and this tariff reductions are now fully implemented. The proportion of industrial products which enter the markets of developed countries and face zero MFN duties more than doubled from 20 per cent to 44 per cent of the industrial imports. The share of industrial imports facing duties of 15 per cent or more decreased from 7 per cent before the Uruguay

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round to 5 per cent after the full implementation. Tariff picks, that is, high tariffs on individual items, continue to be of concern mainly in textiles, clothing, leather, rubber, footwear, and travelled goods.

3. Tariffs and developing countries:

As far as the developing countries are concerned, the tariff levels and the continuing process of negotiated reductions varies considerably. For an ex.

India have reduced its average tariff on industrial goods from 71% to 32%

Korea has reduced its average tariff from 18% to 8%.

4. Binding of tariffs:

Market access schedules are not simply announcement of reduced tariff rates but they are also commitments of not to increase tariffs above the listed bound rates. For DEVELOPED COUNTRIES, the bound rates are generally the rates which are actually charged and for DEVELOPING COUNTRIES, the bound rates are somewhat higher than the actual rates.

Countries can break the commitment of not to raise a tariff above the bound rate but only in the situation of difficulty. To do so they have to negotiate with the countr most affected.

What is the Multi Fibre Arrangement?

Since 1974, world trade in textiles and apparel has been governed by the Multi Fibre Arrangement (MFA) which provided the basis on which industrialized countries restricted imports from developing countries. Every year quotas-the quantities of specified items which can be traded between trading partners-have been negotiated on a country by country basis. The MFA does not apply to trade between rich industrialized countries themselves.

Why was the MFA introduced?

The MFA was designed to be a short-term measure primarily to give industrialized countries time to adjust to competition from imports from developing countries. Producers from the industrialized world have been protected against competition from producers in the developing countries.

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How has the MFA impacted developing countries?

Although negotiations to determine yearly quota for a developing country have favored the industrialized countries, apparel factories have located in countries to take advantage of the quota. This is one of the reasons apparel and textile supplier factories have located in certain countries (along with low wage costs, supply of materials, infrastructure for transport and marketing and nearness to market) For example, Bangladesh has benefited from MFA because of its sizable quotas. The apparel and textile sector has expanded and it has become a major supplier to both the US market and European markets.

The MFA has not prevented a massive shift in production of textiles and apparel to developing countries. Asia has become the world's foremost exporter. However the shift would likely have been greater without the restrictions of MFA. It is estimated that some developing countries have lost billions of dollars of foreign exchange due to the imposition of MFA trade restrictions.

What is the Agreement on Textiles and Clothing (ATC)?

During the Uruguay Round negotiations related to the World Trade Organization, an agreement was reached to phase out the MFA through the implementation of the Agreement on Textiles and Clothing (ATC). The ATC is an attempt to put an end to the constant extensions of the MFA by agreeing to a phase out plan after which the textiles an apparel sectors will no longer be subject to quotas. The ATC set a timetable for phasing out the MFA in four stages beginning in January 1995, with full phase out in January 2005. There are two aspects of the process: 1) the integration of products into the world trading system and 2) the progressive raising of quotas. The ATC has been viewed as operating in the interests of developing countries, since it is supposed to increase their access to the previously protected markets of industrialized countries.

Impact of Multi Fiber Arrangement:

The Overseas Development Institute has estimated that developing countries stand to gain around $40 to $50 billion from the abolition of restrictions on textile and apparel imports. However, there is strong criticism of the manner in which

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the ATC is being interpreted. The US and European countries are seen as deliberately holding back on the process in order to protect their own industries.

It is difficult to predict what the effects of the MFA phase-out will be once completed. But is clear that the removal of quotas will mean changes in the location of the textile and apparel industry factories. Some observers predict that by 2005-2006 major textile and clothing buyers will reduce by half the number of countries they source from and by another third by 2010. A recent survey by the US Commerce Department, based on talks with firms that currently source from 40 to 50 countries, reveals that these companies are likely to consolidate sourcing in 12 to 15 countries.

The MFA has had the effect of guaranteeing a Northern market to a wide range of poor countries. Without the MFA there will be a more open market and the overall result is likely to be a concentration of the industry in a smaller number of low cost locations. The biggest changes are expected in the distribution of production in Asia.

Bangladesh is expected to lose. It developed a apparel industry as a direct result of the MFA and other trade agreements. Once quotas are removed, Bangladesh is expected to suffer from its lack of textile industry and poorly developed infrastructure. Thailand, Sri Lanka and the Philippines may also lose since all three depend on imported fabric and on marketing/buying groups over which they have little control. Some predict that they will be unable to compete with even lower cost producers like Vietnam.

China is expected to be a big winner with supplier factories relocating from other countries to China. China has a large low cost labor force, its own textile industry and the financial and marketing expertise of firms from Hong Kong. China has already emerged as a dominant supplier in spite of high quota restrictions. According to Women's Wear Daily, "China accounted for 96 percent of the textile and apparel import growth [to the US market] during July, with Vietnam posting the second-largest growth of 22.4 percent…"

WTO AGREEMENT ON AGRICULTURE:

The WTO’s Agriculture Agreement was negotiated in the 1986–94 Uruguay Round and is a significant first step towards fairer competition and a less distorted

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sector. WTO member governments agreed to improve market access and reduce trade-distorting subsidies in agriculture. In general, these commitments were phased in over a six years from 1995 (10 years for developing countries). The agriculture committee oversees the agreement’s implementation.

Meanwhile, members also agreed to continue the reform. Further talks, which are separate from the committee’s regular work, began in 2000. They were included in the broader negotiating agenda set at the 2001 Ministerial Conference in Doha, Qatar.

After over 7 years of negotiations the Uruguay Round multilateral trade negotiations were concluded on December 15, 1993 and were formally ratified in April 1994 at Marrakesh, Morocco. The WTO Agreement on Agriculture was one of the many agreements which were negotiated during the Uruguay Round.

The implementation of the Agreement on Agriculture started with effect from January 1, 1995. As per the provisions of the Agreement, the developed countries would complete their reduction commitments within 6 years, i.e., by the year 2000, whereas the commitments of the developing countries would be completed within 10 years, i.e., by the year 2004. The least developed countries are not required to make any reductions.

The products, which are included within the purview of this agreement, are what are normally considered as part of agriculture except that it excludes fishery and forestry products as well as rubber, jute, sisal, abaca and coir.

The WTO Agreement on Agriculture contains provisions in 3 broad areas of agriculture and trade policy: market access, domestic support and export subsidies.

Market Access

This includes tariffication, tariff reduction and access opportunities. Tariffication means that all non-tariff barriers such as quotas, variable levies, minimum import prices, discretionary licensing, state trading measures, voluntary restraint agreements etc. need to be abolished and converted into an equivalent tariff. Ordinary tariffs including those resulting from their tariffication are to be reduced by an average of 36% with minimum rate of reduction of 15% for each tariff item

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over a 6 year period. Developing countries are required to reduce tariffs by 24% in 10 years. Developing countries as were maintaining Quantitative Restrictions due to balance of payment problems, were allowed to offer ceiling bindings instead of tariffication.

Special safeguard provision allows the imposition of additional duties when there are either import surges above a particular level or particularly low import prices as compared to 1986-88 levels.

It has also been stipulated that minimum access equal to 3% of domestic consumption in 1986-88 will have to be established for the year 1995 rising to 5% at end of the implementation period.

Domestic support

For domestic support policies, subject to reduction commitments, the total support given in 1986-88,measured by the total Aggregate Measurement of Support (AMS) should be reduced by 20% in developed countries (13.3% in developing countries). Reduction commitments refer to total levels of support and not to individual commodities. Policies which amount to domestic support both under the product specific and non-product specific categories at less than 5% of the value of production for developed countries and less than 10% for developing countries are also excluded from any reduction commitments. Polices which have no or at most minimal trade distorting effects on production are excluded from any reduction commitments (Green Box-Annex 2 of the Agreement on Agriculture - http://www.wto.org). The list of exempted green box policies includes such policies which provide services or benefits to agriculture or the rural community, public stock holding for food security purposes, domestic food aid and certain de-coupled payments to producers including direct payments to production limiting programmes, provided certain conditions are met.

Special and Differential Treatment provisions are also available for developing country members. These include purchases for and sales from food security stocks at administered prices provided that the subsidy to producers is included in calculation of AMS. Developing countries are permitted untargeted subsidised food distribution to meet requirements of the urban and rural poor. Also excluded for developing countries are investment subsidies that are generally

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available to agriculture and agricultural input subsidies generally available to low income and resource poor farmers in these countries.

Export Subsidies

The Agreement contains provisions regarding member's commitment to reduce Export Subsidies. Developed countries are required to reduce their export subsidy expenditure by 36% and volume by 21% in 6 years, in equal instalment (from 1986-1990 levels). For developing countries the percentage cuts are 24% and 14% respectively in equal annual installment over 10 years. The Agreement also specifies that for products not subject to export subsidy reduction commitments, no such subsidies can be granted in the future.

TRADE REMEDIES:

Under the WTO Agreements, members have the right to apply trade remedies in the form of anti-dumping, countervailing or safeguard measures subject to specific rules.

The rules, under certain conditions, permit members to take trade remedy measures when it is established that foreign producers are resorting to unfair practices by charging low prices in the importing markets. Such low prices may be the result of: dumping by foreign firms, permitting countries to levy anti-dumping duties; or, subsidization by governments allowing the importing countries to levy countervailing duties to offset the element of subsidy in the price.

Furthermore, safeguard actions may be taken when the domestic industry faces problems due to its inability to meet increased import competition following the reduction of tariffs or removal of other restrictions.

In the Doha Ministerial Conference, Ministers agreed to launch negotiations aimed at clarifying and improving disciplines under the Agreements on Implementation of Article VI of the GATT 1994 (Anti-Dumping) and on Subsidies and Countervailing Measures, while preserving the basic concepts, principles and effectiveness of these Agreements and their instruments and objectives, and taking into account the needs of developing and least-developed participants.

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http://www.intracen.org/btp/dda/dda_doc/doha_english.pdf


In the context of these negotiations, participants shall also aim to clarify and improve WTO disciplines on fisheries subsidies, taking into account the importance of this sector to developing countries.

Anti dumping actions:

If a company exports a product at a price lower than the price it normally charges on its own home market, it is said to be “dumping” the product. Is this unfair competition? Opinions differ, but many governments take action against dumping in order to defend their domestic industries. The WTO agreement does not pass judgement. Its focus is on how governments can or cannot react to dumping — it disciplines anti-dumping actions, and it is often called the “Anti-Dumping Agreement”. (This focus only on the reaction to dumping contrasts with the approach of the Subsidies and Countervailing Measures Agreement.)

The legal definitions are more precise, but broadly speaking the WTO agreement allows governments to act against dumping where there is genuine (“material”) injury to the competing domestic industry. In order to do that the government has to be able to show that dumping is taking place, calculate the extent of dumping (how much lower the export price is compared to the exporter’s home market price), and show that the dumping is causing injury or threatening to do so.

GATT (Article 6) allows countries to take action against dumping. The Anti-Dumping Agreement clarifies and expands Article 6, 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.

There are many different ways of calculating whether a particular product is being dumped heavily or only lightly. The agreement narrows down the range of possible options. It provides three methods to calculate a product’s “normal value”. The main one is based on the price in the exporter’s domestic market. When this cannot be used, two alternatives are available — the price charged by the exporter in another country, or a calculation based on the combination of the exporter’s production costs, other expenses and normal profit margins. And the

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agreement also specifies how a fair comparison can be made between the export price and what would be a normal price.

Calculating the extent of dumping on a product is not enough. Anti-dumping measures can only be applied if the dumping is hurting the industry in the importing country.

Anti-dumping investigations are to end immediately in cases where the authorities determine that the margin of dumping is insignificantly small (defined as less than 2% of the export price of the product). Other conditions are also set. For example, the investigations also have to end if the volume of dumped imports is negligible (i.e. if the volume from one country is less than 3% of total imports of that product — although investigations can proceed if several countries, each supplying less than 3% of the imports, together account for 7% or more of total imports).

The agreement says member countries must inform the Committee on Anti-Dumping Practices about all preliminary and final anti-dumping actions, promptly and in detail. They must also report on all investigations twice a year. When differences arise, members are encouraged to consult each other. They can also use the WTO’s dispute settlement procedure.

Subsidies and countervailing measures:

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.

In the agreement Part I provides that the SCM Agreement applies only to subsidies that are specifically provided to an enterprise or industry or group of enterprises or industries, and defines both the term “subsidy” and the concept of “specificity.” Parts II and III divide all specific subsidies into one of two categories: prohibited and actionable and establish certain rules and procedures with respect to each category. Part V establishes the substantive

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and procedural requirements that must be fulfilled before a Member may apply a countervailing measure against subsidized imports. Parts VI and VII establish the institutional structure and notification/surveillance modalities for implementation of the SCM Agreement. Part VIII contains special and differential treatment rules for various categories of developing country Members. Part IX contains transition rules for developed country and former centrally-planned economy Members. Parts X and XI contain dispute settlement and final provisions.

Safe guarding producers:

The Agreement on Safeguards (“SG Agreement”) sets forth the rules for application of safeguard measures pursuant to Article XIX of GATT 1994. Safeguard measures are defined as “emergency” actions with respect to increased imports of particular products, where such imports have caused or threaten to cause serious injury to the importing Member's domestic industry. Such measures, which in broad terms take the form of suspension of concessions or obligations, can consist of quantitative import restrictions or of duty increases to higher than bound rates.

The SG Agreement was negotiated in large part because GATT Contracting Parties increasingly had been applying a variety of so-called “grey area” measures (bilateral voluntary export restraints, orderly marketing agreements, and similar measures) to limit imports of certain products. These measures were not imposed pursuant to Article XIX, and thus were not subject to multilateral discipline through the GATT, and the legality of such measures under the GATT was doubtful. The Agreement now clearly prohibits such measures, and has specific provisions for eliminating those that were in place at the time the WTO Agreement entered into force.

In its own words, the SG Agreement, which explicitly applies equally to all Members, aims to: (1) clarify and reinforce GATT disciplines, particularly those of Article XIX;

(2) re-establish multilateral control over safeguards and eliminate measures that escape such control; and

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(3) encourage structural adjustment on the part of industries adversely affected by increased imports, thereby enhancing competition in international markets.

Commodity Agreements

Add the enclosed file here

India has bilateral trade agreements with the following countries and regional blocs:

1. SAFTA (Bangladesh, Bhutan, the Maldives, Nepal, Pakistan, Sri Lanka and Afghanistan)

2. ASEAN (ASEAN- India Free Trade Area)

3. European Union

4. Sri Lanka

5. Singapore

6. Thailand (separate from FTA agreement with ASEAN)

7. Malaysia (separate from FTA agreement with ASEAN)

8. Japan

9. European Free Trade Association (EFTA) (negotiation ongoing)

10.Canada (negotiation ongoing)

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11.South Korea (India – Korea CEPA)

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bilateral & commodity agreements

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