the regulation of international trade spha 511, john ries
TRANSCRIPT
Topics • The General Agreement on Tariffs and Trade
(GATT)• WTO dispute resolution• Health and technical standards• The General Agreement of Trade in Services
(GATS)• Trade-Related Intellectual Property (TRIPs)
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Globalization
• International trade and investment has been growing over time. Of course, world output (GDP) has grown over time as well.
• Globalization occurs when international transactions increase more rapidly than GDP
• The WTO is given much credit (and blame) for trade expansion
Growth of trade and GDP (1975=100)
100
300
500
700
900
1100
1300
1500
1700
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
Goods
GDP
Services
The World Trade Organization (WTO) • An international institution, the WTO came into
being in 1995. • 153 members as of July, 2008• Least developed countries and developing
countries are given special consideration (e.g., extra time to adhere to WTO rules).
• AfghanistanAlgeriaAndorraAzerbaijanBahamasBelarusBhutanBosnia and HerzegovinaComorosEquatorial GuineaEthiopiaIranIraqKazakhstanLao People's Democratic RepublicLebanese RepublicLiberia, Republic ofLibyaMontenegroRussian FederationSamoaSao Tomé and PrincipeSerbiaSeychellesSudanTajikistanUzbekistanVanuatuYemen
Non-members
Regional Trade Agreements (RTAs)
• WTO’s Dictionary of Trade Policy Terms: “actions by governments to liberalize or facilitate trade on a regional basis, sometimes through free-trade areas or customs unions”.– Free trade areas: tariffs eliminated on goods
produced within the region– Customs unions: common outside tariff established
• RTAs can cover goods and/or services. They include dispute resolution mechanisms and may establish regional rules on investment, competition, environment and labour.
RTAs in ForceRTAs in force by date of entry into force
0
50
100
150
200
1948
1952
1956
1960
1964
1968
1972
1976
1980
1984
1988
1992
1996
2000
2004
Year
No
. o
f R
TA
s
Trade Diversion
• RTAs provide preferential treatment to insider countries (i.e., Mexico in the NAFTA) and can divert trade from outsiders (China).– Example: China and Mexico export toys to the US subject to a
50% tariff. China's per-unit cost is $100 (price after tariff $150) and Mexico's is $120 ($180). US consumers buy from China and consumers pay $150.
– Now Mexico and the US enter into a free trade agreement. Now US consumers buy from Mexico for $120. Trade is diverted from China to Mexico. Consumers are $30 better off but the government has lost $50 in tariff revenues.
WTO agreements
• The WTO oversees three important agreements—GATT, GATS, and TRIPs
• The 1994 Uruguay Round also generated the– Agreement on Agriculture, – Agreement on Clothing and Textiles, – Agreement on Technical Barriers to Trade,– Agreement on Sanitary and Phytosanitary
Standards.
The General Agreement on Tariffs and Trade (GATT)
• The rules of international trade have been developed principally in the context of the General Agreement on Tariffs and Trade (GATT).
• Three primary functions of GATT– Establish standards: provides for a common set of
rules for the conduct of international trade policy.– Settlement of disputes. GATT provides an impartial
forum for trade disputes.– Sponsor tariff reductions (8 rounds so far).
Tariffs
• Each country has their own tariff schedule
• Tariffs vary by importing country and by product
• Because of RTAs and other preferential tariff treatments, they also depend on the exporting country
Canadian tariffs by tariff treatmentCUSTOMS TARIFF-SCHEDULE 95-5
Tariff Item SS Description of Goods Unit of MFN Applicable Meas. Tariff Preferential Tariffs
95.06 Articles and equipment for general physical exercise, gymnastics, athletics, other sports (including table tennis) oroutdoor games, not specified or included elsewhere in this chapter; swimming pools and paddling pools.
- Snow -skis and other snow ski equipment:-- Skis--- Downhill PAR Free UST, CCCT, LDCT,
GPT, MUST, CIAT,CT:Free
--- Other 7.5% UST, CCCT, LDCT,MT, MUST, CIAT,
----- Cross Country............PAR CT: Free GPT:5%----- Snowboards..……….NMB----- Other ...........................PAR
9506.11
9506.11.10 00
9506.11.90
10 20
90
Rules of origin (ROOs)
• ROOs are tariff-treatment and product specific and can be extremely complicated.
• For non-RTA treatments, a certain percentage of the ex-factory price of the good must originate in beneficiary countries. Additionally, the good must be directly shipped from a beneficiary country. The critical value content varies by treatment: 50% for MFN treatment, 60% for GPT, and 40% for the LDCT.
Ministerial Conferences• Every two years, high ranking representatives
from each member meet to set new agendas.• The most recent meeting was in Hong Kong in
December 2005. Previous meetings were located in Cancun, Doha, and Seattle.– Recent meetings are considered failures as
the members could not agree on pushing forward agricultural reforms proposed in the Doha meetings.
Fundamental GATT Articles
• Article I. Most-favoured-nation (MFN) (non-discrimination) principle. All WTO members should grant to the products of member countries treatment no less favourable than that accorded to products of any other country. This implies all members treated equally.– Regional trade agreements are given
exemption.
Fundamental GATT Articles (cont)
• Article II: Tariff bindings: nations agree to keep tariff levels at or below bindings (ceilings).
• Article III. National treatment: imports treated the same as (like) domestic goods once tariffs have been paid. Nations cannot use taxes of other methods to impede imports.
WTO dispute resolution
• The WTO offers dispute resolution when on member believes another member is violating an agreement. A WTO panel is formed and issues a ruling based on interpretation of WTO rules.
• Panels: The Director General of the WTO proposes 3 (sometimes 5) panelists from different countries from a roster of panelist put forward by the members.
• Appeals are possible (to a WTO Appellate Body).• Non-compliance with a panel ruling can result in
compensatory (retaliatory) tariffs levied against the violating country.
Non-tariff barriers: Violations of national treatment
• Article III requires that "once goods have entered a market (i.e. after applicable duties have been paid), they must be treated no less favourably than “like” domestically produced goods.”
• This means that governments are not allowed to adopt regulations or set taxes in such as way as to "afford protection" to the domestic industry.
• Cases– Canadian tax on (foreign) split-run magazines– Japanese low tax on shochu and high tax on
vodka/whiskey
Agreement on Technical Barriers to Trade (TBT)
• Rules established to prevent governments from adopting standards whose purpose is to protect domestic producers– Standards should address essential performance
criteria (i.e., safety) and not written to match the design features of domestic products
– Imports must have equal access to testing and certification systems
– Nations should accept tests performed by competent foreign organizations
– Regulations should be transparent
TBT Agreement
• Unnecessary obstacles to trade can result when (i) a regulation is more restrictive than necessary to achieve a given policy objective, or (ii) when it does not fulfill a legitimate objective. – Article 2.2 of the Agreement specifies that legitimate
objectives include inter alia: national security requirements, prevention of deceptive practices, protection of human health or safety, protection of animal and plant life or health or the environment.
» www.wto.org/english/tratop_e/tbt_e/tbt_info_e.htm
Stockwell Day toughens stance on meat dispute
• What is the US law that Day objects to?
• Why was the law enacted?
• Why is the law a problem for Canadian livestock producers?
• What are the estimates of the harm that the law will cause Canadian producers?
• What are Canada’s options?
Agreement on Sanitary and Phytosanitary Standards
• Nations set food safety standards to protect consumers. The SPS Agreement requires:– Members must base their SPS measures on
“international standards, guidelines, or recommendations… However, members may use measures which result in higher standards if there is scientific justification.”
– All measures must be based on risk assessments that take into account “risk assessment techniques developed by relevant international organizations.” What is the allowable level of risk? The Agreement requires economic cost-benefit analysis.
• Major battles:– Hormone treated beef, GM food
Biotechnology in Agriculture Confronts Agreements in the WTO
• What are GMOs? What are the primary GMO crops and what country is the leading producer?
• What countries require labeling of GMOs?• How does EU regulation of GMOs differ from
that of the U.S.? What is the relevance of product versus process regulation?
• Why does the U.S. object to labeling requirements?
• What are the complaints against the EU regulatory process?
General Agreement of Trade in Services
• The GATS is a rather weak document. Many sectors are excluded and there is considerable variation in the sectors that individual countries were willing to commit to liberalizing. However, GATS is a starting point and subsequent negotiations are aimed at generating more comprehensive liberalization of services. Subsequent to the GATS, further agreements liberalizing services have be signed (e.g., the 1997 Telecommunications Agreement).
• “GATS excludes ‘services supplied in the exercise of governmental authority’. These are services that are supplied neither on a commercial basis nor in competition with other suppliers. Cases in point are social security schemes and any other public service, such as health or education, that is provided at non-market conditions.” (WTO website)
NAFTA and health care
• Social Services• Type of Reservation: National Treatment (Articles
1102, 1202) Most-Favored-Nation Treatment (Article 1203) Local Presence (Article 1205) Senior Management and Boards of Directors (Article 1107)
• Description:Cross-Border Services and Investment• Canada reserves the right to adopt or maintain any
measure with respect to the provision of public law enforcement and correctional services, and the following services to the extent that they are social services established or maintained for a public purpose: income security or insurance, social security or insurance, social welfare, public education, public training, health, and child care.