The World
Trade Organisation (WTO)
The WTO exists since 1995 and superseded the General
Agreement on Tariffs and Trade (GATT), which was in force since 1948. The
Uruguay Round (1986-1994), the latest and largest round of GATT led to WTO’s creation.
The WTO covers 132 countries, including the leading industrial nations, and is
the only international body dealing with the rules of trade between nations.
Its goals are to help trade flow as freely as possible, to promote the rules of
free trade between the countries and to settle trade disputes. Whereas GATT had
mainly dealt with trade in goods, the WTO covers also trade in services,
creations and design: WTO brings the updated GATT, the new General Agreement on
Trade in Services (GATS) and the Trade-Related Aspects of Intellectual Property
Rights (TRIPS) together within a single organization.
All WTO members are not allowed to discriminate
between trading partners, i.e. if they grant a special favour to one country,
they have to do it to all WTO members. Nevertheless, some exceptions, like the
establishment of free trade areas (FTA’s), are allowed. Further principles of
the WTO trading system are removal of trade barriers, like customs duties and
restricted quantities, and more competition but also more beneficial for less
developed countries, by giving them more time to adjust and greater privileges.
Whether the WTO appreciates regional trade
agreements or not depends on the goal of the inter-regional arrangement: Some
promote closer economic integration and reduce tariff barriers but others hurt
the trade interest of outstanding countries due to protection.
Developed countries agreed to cut their tariffs on
industrial products by 40% until the year 2000. Then about 44% of all products
exported into developed countries will receive duty-free treatment. Besides
this, 40 industrial countries agreed to eliminate their import duties on
industrial products by the year 2000. All other WTO members also reduced their
tariffs and lowered their quotas and cut subsidies and protection for
agricultural products. Least developed countries do not have to cut their
tariffs.
Although governments agreed to cut the protection of
agricultural product measures with minimal impact on trade can be used freely.
They include governmental services like research, disease control,
infrastructure and food security. Direct income support to farmers and
environmental and regional assistance programs are also allowed. Except the
least developed countries, all WTO members agreed further to cut their export
subsidies for agricultural products.
Individuals and companies involved in trade have to
know as much as possible about the conditions of trade. Therefore trade regulations
and policies must be transparent and a reciprocal information exchange between
WTO and its member states is necessary.
As there is a close relationship between trade,
investment and competition policy WTO wants to facilitate trade, promotes foreign
investment and recognizes government’s right to act against anti-competitive
practice. Since 1996 three new working groups exist: on trade and investment,
on competition policy and on transparency in government procurement. The
working groups’ tasks are analytical and exploratory. They report to the
General Council, which will decide about new rules or commitments. Besides
this, the quality of public and intergovernmental debate shall be improved and
the countries shall be informed about each other trade policies. All members
come under scrutiny: The industrialized countries every four years and the
developing countries every six years. The results will be published.
The trade between WTO members has to deal with
various technical, bureaucratic or legal issues, which should be facilitated. Technical
regulations and standards vary from country to country the WTO encourages
its members to use international standards and helps to ensure that the members
establish national enquiry points for importers if they demand national
standards. The import licensing should be simple and transparent and
traders must be informed about the national requirements. Importers burden to
apply for licenses should be minimized.
Besides this, the WTO established a system that
gives greater precision to the provisions on the valuation of goods at
customs, agreed on preshipment inspection (check price, quantity and
quality of loaded goods) and promotes transparent rules of origin.
Moreover, the member states agreed that they would
not apply any measure that discriminates again foreigners or foreign products.
They also outlaw investment measures that lead to restrictions in
quantities, like measures, which limit a company’s imports.
The WTO agreement does not deal with any core labour
standards. But some industrial countries believe the issue should be studied by
the WTO as it provides a powerful incentive for members to improve workplace
conditions. But most of the developing nations think this issue has no place in
the WTO agenda, as this is only a measure for protection. Nevertheless, WTO
members agreed to recognize essential labour standards, which should not be
used for protectionism.
The GATS deals with international trade in services
and covers the following commitment: If a country allows foreign competition in
a sector, equal opportunities should be given to service providers from all
other WTO members. In order to reach transparency, governments have to publish
all relevant laws and regulations. Besides this, foreign companies and
governments have to be served with all required information about regulation in
any service sector on request.
Moreover, WTO members agreed to recognize other
countries’ qualifications without discrimination, to grant each other access to
their markets, to accept commitments concerning the opening of any market as
bounded and to recognize the importance of a stable financial system.
Nevertheless, an exemption list of the principle of
non-discrimination exists: This concerns preferential agreements in service on
that some countries have been agreed before the WTO entered into force.
Continue negotiations will effect in four areas: basic telecommunications,
maritime transport, movement of natural persons and financial services. Also
the rules dealing with subsidies, government procurement, safeguard measures
and technical and qualified standard of products are areas that will be
discussed in future negotiations.
Intellectual property rights (IPR) give creators the
right to prevent others from using their inventions, designs or other
creations. Copyright and related rights, trademarks (including service marks),
geographical indications (place names), industrial designs, patens,
layout-designs and undisclosed information (including trade secrets) are the
areas covered by the TRIPS agreement. The TRIPS agreement will protect these
rights and bring them under common international rules. Industrial designs and
layout designs will be protected for at least 10 years, patents for products
and processes for at least 20 years.
The owner of any form of IPR can issue a license for
someone else to produce or copy his trademark, work, design etc. Under certain
conditions, governments have the right to take action to prevent
anti-competitive licensing that abuses IPR’s. Besides this, the government
should make sure that the owner of IPR receives assistance to prevent imports
of pirated goods. When there are trade disputes over intellectual property
rights, the WTO will settle them between its members.
Developing countries like Namibia have time until
the year 2000 to ensure that their laws and practices conform with the TRIPS
agreement. If a developing country did not provide product patent protection in
a particular area of technology it has time until the year 2005 introduce the
protection. Pharmaceutical, agricultural and chemical products are exempted
from this regulation.
Binding tariffs, and applying them equally to all
trading partners are the main principle of the WTO. Nevertheless, the WTO take
actions against selling at an unfairly low price (dumping) and it allows
special subsidies as well as emergency measures in order to limit imports
temporarily.
If a company exports a product at a price lower than
the price it charges on its own market, it is said to be “dumping” the product
and an import duty can be charged as an anti-dumping measure. But this
is only allowed if a detailed investigation shows that dumping is taking place
and a domestic industry is being hurt.
The WTO distinguishes between prohibited
subsidies, that support exports of companies and distort international
trade, actionable subsidies, which help domestic industries and are
allowed as long as they do not hurt the importing party and non-actionable
subsidies, which are only used for industrial research or other assistance
and development activities.
Least developed countries and developed countries
with less than US $ 1,000 per capita GNP are exempted from the regulation of
prohibited subsidies. Other developed countries have to stop their export
subsidies until 2003.
A WTO member may restrict imports of product temporarily
if its domestic industry is injured or threatened with injury caused by a surge
in imports. These safeguard measures should not last more than four
years, although it can be extended to eight years. When a country restricts
imports in order to safeguard its main producers, the exporting country can
seek compensation through consultations or take equivalent protective actions.
WTO members have agreed that if they believe
fellow-members are violating trade rules, they will use the multilateral system
of settling disputes instead of taking action unilaterally. In 1997, 19 of 71
cases had been settled out of court just through consultations, without going
through the full panel process, which takes 15 months.
The first stage is consultations between the
governments concerned in order to settle their differences by themselves. If
that fails the complaining country can ask for a panel to be appointed. The
panel is like a tribunal, consisting of three experts from different countries
who examine the evidence and decide which party is right. Either side can
appellate a panel’s ruling but it has to be based on point of law. If the
country that is the target of the complaints does not follow the
recommendations of the panel report it has to enter into negotiations with the
complaining country. If the contracting parties do not agree within 20 days,
sanctions should be imposed.
More than 75% of the WTO members are developing
countries. Actually, the developing countries’ share of world trade is less
than 20%. To the opinion of the WTO low-income countries gain economic and
political independence through a membership of the WTO because of the introduction
of domestic reforms, special provisions for developing countries and a
strengthened multilateral trading system. The WTO agreement contains special
provisions for developing countries, e.g. non-reciprocity in trade negotiations
between developed and developing countries and the WTO Secretariat provides
technical assistance. Besides this, the developing countries have extra time to
fulfill the WTO commitments, greater market access is granted and they get
assistance in order to achieve the international standards required. Special
technical cooperation, that should help to build the necessary institutions on
training the people, is also offered.
Moreover, a plan of action for least-developed
countries has been established in order to help them to improve their ability
to participate in the multilateral system. Developed countries will examine how
the least-developed countries could improve access to their markets. The World
Bank, the International Monetary Fund (IMF) and the UN Development Programme
support this plan. The WTO Committee on Trade and Development, which helps to
implement this structure, assists developing countries further with technical
cooperation and supports preferential arrangements such as the Common Market
for Eastern and Southern Africa (COMESA). The goal is to increase their
economic growth due to a raise in exports of manufactured goods so that they
become less dependent on exports of primary goods.
Although the industrial countries agreed to grant
developing countries access to their markets, e.g. through reduced tariffs,
selected products like fish and textiles will continue to have high tariffs.
Another issue that worries developing countries is the erosion of preferences:
special tariff concessions granted by developed countries on imports from
certain developing countries become less meaningful if the normal tariff rates
are cut so that the difference between the normal and the preferential rate is
reduced. That implicates income losses for whole Africa.
Besides this, least developed countries fear that
agricultural reforms will lead to increases in world prices what will be bad
for poor food-importing countries. On the other hand, an increase in world
prices for primary products will help developing countries to increase their
export proceeds.
Another concern of developing and least developed
countries is that the TRIPS agreement protects mainly the intellectual property
of large multinational firms and worsens inequalities. Nevertheless, they
accepted the agreement. Some developing countries, like Namibia, introduced
already intellectual property protection regimes in inter-regional trade
agreements.
Favored tariff treatment under WTO covers over 90%
of Africa’s exports but unfortunately not fish, which is an important Namibian
export product. Nevertheless, due to product diversification Namibia can
exploit the new export opportunities. The agreement on textiles and clothing
for example will lead to a progressive liberalisation of existing quotas.
Market access opportunities are also available for exports of services and for
consumption of service abroad (e.g. banking and financial services). Besides
this, commitments on the supply of services in all potential markets have been
made so that Namibia will benefit from the combination of technology and
services offered.
Namibia is not forced to use international standards
of non-tariff measures, like rules of origin, import licensing and sanitary
measures, as long as its measures are transparent and predictable.
The WTO believes in the “free market effect” where
the “invisible hand” (Adam Smith) navigates offer and demand and creates a
balance. Therefore free trade, free investment and an independent National Bank
that guarantees a stable currency are necessary. But as the world economic
crisis 1929 and the break down of the Far East market 1998 show free trade
without regulations does not work. Developing countries and transition
economies are not strong enough to stand the international competition and will
lose economic independence if its exchange rates decline. Of course it is
important for developing countries, like Namibia, to participate in
interregional and international trade but due to their low productivity they
need preferential access to international markets, which should not be granted
to industrial countries exporting to them.
Positive voices like “The Namibian Trade Digest” see
a more secure and open market for African exports due to the WTO agreement,
which includes the agricultural sector, as a single new tariff will replace
protective measures. To my opinion it seems very naiv to believe in better
export opportunities for primary products because of a single tariff: Most of
the agricultural exports need subsidies in order to offer competitive prices on
the world market. Moreover, international agricultural markets, like the EU,
produce much more than they need and pay subsidies for lower production; they
are not interested in African agricultural products. Therefore, African
countries should concentrate on interregional trade under rules, which
correspond to their requirements.
The African WTO members (excluding the least
developed countries) agreed further on ceilings for tariffs on all agricultural
products and certain industrial products. The problem is that countries will
lose benefits of import duties on which they rely often heavily. Missing import
duties can also lead to increasing exports in developed countries, which are
able to offer their surplus of agricultural products to dumping prices and push
the local goods away.
Fact is that the developing countries must make sure
that they participate actively in the WTO in order to strengthen their
influence and to defend their interests.