WORLD TRADE ORGANIZATION & FREE TRADE AGREEMENTS

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WORLD TRADE ORGANIZATION (WTO)

WTO has its roots in the failed negotiations to create an International Trade Organization (ITO) in 1946. These negotiations brought together 50 countries, but only 23 of them decided to forge ahead with a plan to reduce and bind customs tariffs between each other.

These negotiations package entered force on 1 January 1948 as General Agreement on Tariffs and Trade (GATT) but as it was adopted provisionally and US proved difficult in the ratification, the agreement became an instrument for trade only for the second half of the 20th century.

A total of eight ‘trade rounds’ took place since the inception in 1947 until the latest completed trade round in 1994.

WTO Structure: 

wto_organigram_e

WTO Agreement: replaced GATT as the international agreement for trade. Now it provides the overall framework for the organisation.

GATT: defines the rules in trade goods. its aim is to reduce customs tariffs and non-tariff barriers that negatively impact trade in goods.

GATS: defines the rules in trade services. it’s primary goal is to contribute to global economic growth and development objectives covering measures affecting both the product and supplier.

TRIPS: calls on members to enact legislation and enforce its provisions and protect the IPR of the nationals of its members.

Dispute Settlement: ensures common interpretation of the agreements and guarantees compliance with the rules by providing a system of enforcement.

Trade Policy Reviews: WTO drafts a report on the trade practices of member countries indicating whether the policies adhere to international rules or not.

WTO Membership

Round                            Members

Geneva (1947)                              23
Annecy (1949)                              13
Torquay (1951)                             38
Geneva (1956)                              26
Dillon (1960-1961)                      26
Kennedy (1964-1967)                 62
Tokyo (1973-1979)                    102
Uruguay (1986-1994)               123
Doha (2001 – )                          148

 

Uruguay Round Table: The original timeframe to conclude discussions was four years but with 15 items on the agenda and erratic negotiations, it concluded in 8 years.

Agenda items were:

  • Tariffs
  • Non-tariffs barriers
  • Natural resource products
  • Textiles and clothing
  • Agriculture
  • Tropical products
  • GATT articles
  • Tokyo Round Agreements
  • Anti-dumping
  • Subsides
  • Intellectual property
  • Investment measures
  • Dispute settlement
  • GATT system & Services

The final results of the Uruguay Round and the establishment of the World Trade Organisation marked the biggest reform in international trade policy since GATT was first established.

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TRANSATLANTIC TRADE AND INVESTMENT PARTNERSHIP (TTIP)

Currently, the EU and US are negotiating one of the most ambitious trade agreement in history, the Transatlantic Trade and Investment Partnership (TTIP). TTIP presents a historic opportunity for the EU and US to remove regulatory divergence – today’s most prominent obstacle to trade exchanges –, thereby increasing economic growth for the citizens of both policies.

TTIP is an ambitious, comprehensive, and high-standard trade and investment agreement that will help unlock opportunity for American families, workers, businesses, farmers and ranchers through increased access to European markets for Made-in-America goods and services and vice-versa.

The U.S. and EU economies are two of the most modern, most developed, and most committed to high standards of consumer protection in the world.  TTIP aims to bolster that already strong relationship in a way that will help boost economic growth and add to the more than 13 million American and EU jobs already supported by transatlantic trade and investment. TTIP will be a cutting edge agreement aimed at providing greater compatibility and transparency in trade and investment regulation, while maintaining high levels of health, safety, and environmental protection. TTIP presents an extraordinary opportunity to strengthen the bond between vital strategic and economic partners.

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NON-TARIFF BARRIERS TO TRADE (NTBS)

Why Non-tariff Barriers to Trade?

The term “nontariff barriers” encompasses a variety of government actions affecting trade. NTBs may be overtly protectionist, at the expense of traders from other countries; they may aim to support domestic industries, with no direct intent to undermine international competition; or they may be non-protectionist but still deliberately restrictive of certain trade.

With respect to agriculture, NTBs include quotas, health and environmental regulations, licensing requirements, and mandatory product inspections. Certain of these measures—particularly food standards—help protect consumers and preserve the environment. But when NTBs are imposed primarily to protect domestic industry they may be disputed through the WTO and the imposing country will likely lose.

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SANITARY AND PHYTOSANITARY MEASURES

How do you ensure that your country’s consumers are being supplied with food that is safe to eat — “safe” by the standards you consider appropriate? And at the same time, how can you ensure that strict health and safety regulations are not being used as an excuse for protecting domestic producers?

An agreement on how governments can apply food safety and animal and plant health measures (sanitary and phytosanitary or SPS measures) sets out the basic rules in the WTO.

It allows countries to set their own standards. But it also says regulations must be based on science. They should be applied only to the extent necessary to protect human, animal or plant life or health. And they should not arbitrarily or unjustifiably discriminate between countries where identical or similar conditions prevail.

Member countries are encouraged to use international standards, guidelines and recommendations where they exist. When they do, they are unlikely to be challenged legally in a WTO dispute. However, members may use measures which result in higher standards if there is scientific justification. They can also set higher standards based on appropriate assessment of risks so long as the approach is consistent, not arbitrary. And they can to some extent apply the “precautionary principle”, a kind of “safety first” approach to deal with scientific uncertainty. Article 5.7 of the SPS Agreement allows temporary “precautionary” measures.

The agreement still allows countries to use different standards and different methods of inspecting products. So how can an exporting country be sure the practices it applies to its products are acceptable in an importing country? If an exporting country can demonstrate that the measures it applies to its exports achieve the same level of health protection as in the importing country, then the importing country is expected to accept the exporting country’s standards and methods.

The agreement includes provisions on control, inspection and approval procedures. Governments must provide advance notice of new or changed sanitary and phytosanitary regulations, and establish a national enquiry point to provide information. The agreement complements that on technical barriers to trade.

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