The WTO and the Doha Development Round Erik van der Marel Groupe d Economie Mondiale European Centre for International Political Economy
History 19 th century marked by Pax Britannica Unilateral liberalisation / Repeal of Corn Laws 1848 1873 1896 World Depression Rising protectionism followed, except UK 1930 famous Smoot Hawley Tariff Act 1934 RTAA to lower US tariffs reciprocally 20 th century marked by Pax Americana Multilateral liberalisation / Groundwork for GATT
The WTO
The WTO Introduction Post war idea was to set up International Trade Organisation (ITO) as part of Bretton Woods The so called Havana Charter in 1948 American Congress did not ratify > domestic economic interference or involvement GATT advanced and was signed. Developed as a de facto international organisation Now WTO since 1995 WTO is relatively small
The WTO Introduction Successor of GATT in 1995 (No UN body) Enlarged scope: from tariffs to regulation etc. Seven Rounds of negotiation (Tokyo, Kennedy..) All agreements fall under six main parts: Agreement establishing WTO Goods (GATT 94) and Investment (Trade Related Investment Measures) Services (GATS) Intellectual Property Rights (TRIPS) Dispute Settlement Unit (working reasonably well) Reviews of Governments Trade Policy (TPRM)
WTO Organisation
1) Non discrimination (i) (ii) GATT Agreement Principles Most Favoured Nation (MFN) National Treatment Two main exemptions to Non discrimination: Free Trade Areas and Customs Unions Developing countries (1965) (GSP) 2) Reciprocity (equivalent concession) 3) Prohibitation on trade restrictions other than tariffs
MFN Principle (Art. I) This Article requires GATT signatories to extend the benefits of an agreement reached with any other country (the most favorednation ) to all other GATT contracting parties. The MFN principle was a major step towards the elimination of discriminatory tariff rates and hence towards a unified multilateral trading system.
National Treatment Principle (Art. III) MFN principle ensures non discrimination at the border level, GATT Article III ensures non discrimination at the domestic level. Article III, known as national treatment, requires contracting partners to treat foreign products, once imported, no differently than similar domestic products. A government cannot charge additional taxes, administrative burdens or specific requirements on foreign products that have been imported according to the prevailing tariff and non tariff border conditions.
Trade Rounds 60 Remaining tariff as % of 1930 tariff 50 40 30 20 10 0 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995
Trade Rounds GATT/ WTO Trade Rounds Doha Round (2001) Uruguay Round (1986) Tokyo Round (1973) Kennedy Round (1964) Dillon Round (1960) Geneva (1956) Torquay (1951) Annecy (1949) No of months No of Countries Geneva (1947) 0 20 40 60 80 100 120 140 160
Trade Rounds Round What s at stake? Geneva (1947) Tariffs Annecy (1949) Tariffs Torquay (1951) Tariffs Geneva (1956) Tariffs Dillon Round (1960) Tariffs Kennedy Round (1964) Tariffs and anti dumping measures (EU) Tokyo Round (1973) Tariffs, NTB s, framework agreements Uruguay Round (1986) Tariffs, NTB s, Services, TRIPS, DSU, textiles, agriculture, creation of WTO etc. / Single Und.
WTO in perspective Underlying problems WTO has moved to law governed system over the years; GATT more power (diplomacy) governed But more complex underlying trends visible: Standard harm. Legislation Politicisation Regionalisation TRIPS/ Labour/ Food safetey/ etc. DSU, but constructive ambiguity Cross cutting issues and UN isation Discriminatory RTA/ Spaghetti bowl Not necessarily back to yesterday as these are reality
WTO in perspective It s raison d être No real consensus among members Possible scenarios based on above (Sally, 2008): 1) Traditionalist removal of barriers, but covers wider issues that goes deeper into domestic regulation (Market Access) 2) EU style future with new issues : labour / environment standards and Singapore issues (Regulatory agency) 3) UN style future with one member one vote, STD, TRIPS, public health, technical assistance and capacity building
Share of total tariff reduction, by type of liberalization (1983 2003) Share of Total Tariff Reduction, by Type of Liberalisation (1983-2003) Autonomous Liberalisation; 66% Multilateral Agreements; 25% Regional Agreements; 10% Source: World Bank: http://siteresources.worldbank.org/intgep2005/resources/gep107053_ch02.pdf
Doha
Doha Development Round Short history Started in November 2001 in Doha, Quatar / March 2009 False start Seattle US Millennium Round (never started) Before Doha ongoing negotiations on Agri and Services Some wanted to expand to allow trade offs and greater liberalisation Singapore issues: EU, Japan, Korea vs. developing countries No agreement in Cancun and collapse followed, but other issues such as agri showed large disagreements too. Since then Round has not move on any further
DDA Failure Generally Member cannot agree on broad headline cuts in Agriculture and industrial goods EU Not further on Agri unless others (developing) move on services Japan Not agree on Agri unless anti dumping rules are strengthened Services Developing countries Ask for Mode 4 Services opening vs. Mode 3 Agricultures US/ EU Market access vs. disciplines on domestic support and food aid NAMA Coefficients disagreements between developed and developing countries in the so called new Swiss formula
Swiss Formula In Kennedy round linear tariff reductions Target was to achieve 50 % reduction Achievement was a 35 % reduction Why? Primary because countries with already low tariff in absolute terms were not willing to apply the same percentage reduction as countries with high tariff in absolute terms Therefore Swiss formula introduced: NT= A*Old tariff / A+Old tariff
Swiss Formula 25 20 A=14 A=25 Swiss formula for tariff reduction Emerging countries NAMA New tariff 15 10 A=10 5 0 0 25 50 75 100 Old tariff
DDA Failure 21 30 July 2008 From stand offs to negative trade offs This was still OK for broad modalities Exceptions and special treatments diminished liberalising potential in Agriculture and NAMA Agriculture NAMA Sensitive products, special products, special safeguards Limited flexibilities with tariff coefficients, weakened commitments to sectoral liberalisation, long transition in textiles and clothing etc. Although positive signals from services sectors, it was not touched
DDA Failure Underlying issues Doha Collapse 08 reflect perhaps deeper malaise Not only about market access anymore Membership hugely increased But also other specific interest groups raised along Relative decrease of economic influence US Moderated multilateral commitment from US Political leadership problem? Political will? Ever thinner majorities / short political cycles Meanwhile PTA have increased rapidly
Regional Trade Agreements Notified to the GATT/WTO and in Force 100 400 90 350 80 300 70 60 250 No of RTAs 50 200 40 150 30 20 100 10 50 0 0 1948 1951 1954 1957 1960 1963 1966 1969 1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 Notiefied RTAs (goods, services and accessions) Cummulative active RTA Inactive RTA Cummulative RTA notifications
No of RTAs 2001 Geographical Distribution No of RTA 2001 Geographical Distribution Americas FTAs Under Negotiation Cus Under Negotiation Asia Pacific FTAs in Force Cus in Force Eastern Europe & central Asia Euro Mediterranean Sub Saharan Cross Regional Source: WTO 0 20 40 60 80 100 120 * Free trade areas ** Customs unions
Regional Trade Agreements RTAs Signed, Under Negotiation & Proposed by Type as of 2006 in % RTAs Signed, Under Negotiation & Proposed by Type of Agreement as of 2005 in % Partial Scope 7% Custom Union 1% FTA 92% Source: Fiorentino, Verdeja and Toqueboeuf (2005) The Changing Landscape or Regional Trade Agreements: Updata 2006, WTO Discussion Paper No 12
DDA Failure What Now? US & India new election; New EC in Brussels US fast track authority (TPA) not granted yet Will increased PTAs call for multilateralism? Reform of the WTO? Go back to Market Access issues Less ambitious and incremental (Sally, 2006) Big rounds thing of the past? Flexiplinning Market access/ formulas & bind tariffs, plurilaterals, loosening single undertaking (Messerlin, 2007)