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    Origins of WTO: Chapter 5 Knutson, Penn and Flinchbaugh

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    ravikantthakur2009
    The General Agreement on Tariffs and Trade (GATT) established in 1947 was replaced by the World Trade Organization (WTO) in 1995 as the foundation for multilateral trade relations. The WTO strengthened trade rules and dispute resolution. Negotiations occur in rounds, with the most recent being the Uruguay Round which established market access, domestic support, and export subsidy limits. However, there are loopholes and the current Doha Round aims to further reduce trade barriers but negotiations have stalled.

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    Origins of WTO: Chapter 5 Knutson, Penn and Flinchbaugh

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    ravikantthakur2009
    34 views13 pages
    The General Agreement on Tariffs and Trade (GATT) established in 1947 was replaced by the World Trade Organization (WTO) in 1995 as the foundation for multilateral trade relations. The WTO strengthened trade rules and dispute resolution. Negotiations occur in rounds, with the most recent being the Uruguay Round which established market access, domestic support, and export subsidy limits. However, there are loopholes and the current Doha Round aims to further reduce trade barriers but negotiations have stalled.

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    Sp 05 lecture 21 WTO GATT

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    The General Agreement on Tariffs and Trade (GATT) established in 1947 was replaced by the World Trade Organization (WTO) in 1995 as the foundation for multilateral trade relations. The WTO strengthened trade rules and dispute resolution. Negotiations occur in rounds, with the most recent being the Uruguay Round which established market access, domestic support, and export subsidy limits. However, there are loopholes and the current Doha Round aims to further reduce trade barriers but negotiations have stalled.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    34 views13 pages

    Origins of WTO: Chapter 5 Knutson, Penn and Flinchbaugh

    Uploaded by

    ravikantthakur2009
    The General Agreement on Tariffs and Trade (GATT) established in 1947 was replaced by the World Trade Organization (WTO) in 1995 as the foundation for multilateral trade relations. The WTO strengthened trade rules and dispute resolution. Negotiations occur in rounds, with the most recent being the Uruguay Round which established market access, domestic support, and export subsidy limits. However, there are loopholes and the current Doha Round aims to further reduce trade barriers but negotiations have stalled.

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    Download as ppt, pdf, or txt
    of 13

    Origins of WTO

    • General Agreement on Tariffs and Trade (GATT)


    – Established in 1947 as a forum to reduce trade barriers
    • WTO replaced GATT in 1995 as legal and institutional
    foundation of multilateral trade relations
    – Designed to strengthen the trade rules by providing a
    stronger set of institutions for resolving disputes and
    enforcing agreements
    • Negotiations take place in “rounds”
    – There have been 9 to date
    – Begins with an agreement among members on agenda
    – Most recent completed round was Uruguay Round
    – Currently on Doha Round

    Chapter 5 Knutson, Penn and Flinchbaugh


    21
    Three Basic Principles
    • Once a tariff concession is agreed to, it
    cannot be raised
    • MFN, any advantage given to one country
    must be given to all
    • Imported goods treated the same as
    domestic goods in terms of regulation and
    taxes
    Three Pillars of URAA
    • Market access: Convert
    import quotas to tariff or
    TRQ and reduce over time
    • Domestic support: Reduce
    domestic support by 20%
    from 1986-89 level
    – AMS = Aggregate measure of
    support = total of red and
    amber box (trade distorting
    subsidies)
    • Limits on value and volume
    of export subsidies from
    1986-89 level
    Loop Holes in URAA
    • Precautionary principle: WTO requires that S&PS decisions
    be based on science. This principle allows restrictions when
    scientific evidence is deemed to be insufficient. Requires
    seeking evidence over reasonable time period.

    • TRQ evading on individual products so that no imports


    occurred

    • Safeguards permit imposition of higher tariffs if there is a


    surge in imports above specified levels

    • Multi functionality: Green box justification for subsidies


    based on contributions to the environment
    4 Pillars of Doha Round
    (Reflects broader US goals in trade policy)

    • Market access: Substantially reduce tariffs


    and increase quantities in TRQs
    • Export competition: Eliminate export
    subsidies, variable export taxes, and exclusive
    import rights by state trading importers
    • Domestic support: Substantially reduce amber
    box subsidies and simplify into exempt and
    nonexempt
    • Developing countries: Enhance input into
    WTO and their benefits from international
    trading
    Boxes of WTO
    • Green box: Not trade distorting
    • Blue box: Minimally distorting because
    production is controlled
    • Amber box: Trade distorting, subsidies
    tied to either price and production
    • Red Box: Subsidies that must be stopped
    (empty box)
    Amber Box Limits for U.S. and E.U.

    67.1
    70
    60
    50
    40
    30
    19.1
    20
    10
    0
    U.S. Bill $ E.U. Bill $
    WTO Classification

    • These classifications are based on recent US notifications


    to the WTO
    • The fixed payments and conservation programs have been
    classified as green box
    −Direct payments on a fixed payment base are
    considered as income support
    −Conservation program payments are considered
    exempt as long as the payments do not exceed the
    actual cost of implying conservation efforts or the
    opportunity cost from idling land or producing under
    conservation production practices
    WTO Classification
    • The marketing loan benefits, dairy programs, and sugar
    price support have been classified as commodity-specific
    amber box.
    − All of these programs require production of the
    commodity to receive a payment and the size of the
    payment is contingent on the amount of production.
    − Price support programs (such as dairy) are also placed
    here. Even though no payments flow out because of
    the program, the amount of price protection is charged
    against the WTO limit (calculated as the product of
    production eligible for price support and the price gap
    between the price support level and a reference price).
    WTO Classification
    • The countercyclical and crop insurance programs have
    been classified as non-commodity-specific amber box.
    − The countercyclical program falls into the amber box
    because payments depend on current prices and into
    the non-commodity-specific box because production is
    not required to receive payments.
    − Crop insurance has been placed here and reported in
    aggregate (net indemnities across all crops). Given the
    nature of crop insurance, it probably should be
    classified as commodity-specific. Insurance at or under
    70% coverage could be reported as green box, while
    higher coverage could be reported as commodity-
    specific amber.
    De Minimis Rule
    • The de minimis rule exempts “small” domestic support
    payments
    • Whether payments are “small” or not is defined by the
    product covered by the payment
    • For the U.S., a five percent rule is applied for de minimis
    • For commodity-specific support, payments are compared
    to 5% of the value of production for the commodity
    • For non-commodity-specific support, payments are
    compared to 5% of the total value of U.S. agricultural
    production
    Why Classification Matters
    • The classification of the new countercyclical program in the
    non-commodity-specific amber box helps the U.S. in
    meeting the domestic support limits
    • Expenditures from programs in the non-commodity-specific
    category are compared against the value of all agricultural
    production in the country (as opposed to crop value for
    commodity-specific programs)
    • Given U.S. agricultural production values of $200 billion,
    the non-commodity-specific amber box can hold up to $10
    billion in support before reaching the de minimis mark and
    counting against the domestic support limit
    Where We Are in Doha Round?

    • Most recent Ministerial in Cancun – failed


    • Open rift when developed and developing
    countries
    • Meetings came to abrupt end on Sept. 14th when
    four African countries submitted a proposal to
    eliminate the U.S. cotton program
    • G-21 (group of 21 countries) unwilling to open
    their markets in return
    • Peace clause expires end of 2003
    – Can’t challenge other members export and domestic
    subsidies on agriculture

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