O Sistema Multilateral de Comércio e a Organização Mundial do Comércio

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O Sistema Multilateral de Comércio e a Organização Mundial do Comércio. Ricardo Camargo Mendes. rmendes@prospectivaconsultoria.com.br. São Paulo, 10 de janeiro 2010. Introduction. Economic theory – free trade (comparative advantage) In practice – state intervention (protectionism): - PowerPoint PPT Presentation

Text of O Sistema Multilateral de Comércio e a Organização Mundial do Comércio

  • O Sistema Multilateral de Comrcio e a OrganizaoMundial do ComrcioSo Paulo, 10 de janeiro 2010Ricardo Camargo Mendesrmendes@prospectivaconsultoria.com.br

  • Economic theory free trade (comparative advantage)In practice state intervention (protectionism):Source of income (important for small countries)Mercantilist reasons (surplus)Agriculture and industrial developmentInfluence of pressure groups lobbiesTrade agreements trade-offs

    Introduction

  • End of WWIIMotivation to create a system different from the end of WWINeed to establish mechanisms to avoid devaluation of productivity and trade barriersSupport from the US to create an International Trade Organization the GATT (General Agreement on Trade and Tariff)Stable economy with market access, non-discrimination (suppliers and investors) avoid new wars

    Introduction

  • HistoryGATT results from negotiations to create an International Trade Organization (Bretton Woods)Bretton Woods Institutions World Bank (BIRD) and International Monetary Fund (IMF)Havana Chart not ratified by the US CongressGATT 1947 negotiated among 23 countries (12 developed and 11 developing Brazil was one of them)Meant to be temporary (no institutional structure)Expansion of the number of countries through the years (Rounds)System well lubricated when the WTO was created (1994)

    Introduction

  • Functions of the multilateral trading system1. Negotiation forumBargain and negotiation main instruments to reduce trade barriers and establish rules of behavior (market of concessions) Condition liberalization to more market access in foreign markets more politically viableProblem of political economy losers of free trade are more organized than the beneficiaries

    Basic Principles and Functioning

  • Functions of the multilateral trading system1. Negotiation forum (cont.)ResultsComplex net of interests losers and beneficiaries confronted (lobby x lobby)Reciprocal liberalization end of prisoner's dilemma

    Basic Principles and Functioning

  • Functions of the multilateral trading system2. Code of conductWTO rules for the countries trade policiesRestricts the freedom of countries to adopt protectionist policiesMore difficult for protectionist lobbies to act with countries

    Basic Principles and Functioning

  • Five principles (before and after the creation of the WTO) 1. Non-discriminationMost Favorite NationNational Treatment

    2. ReciprocityImportant negotiating instrument (Brazils agriculture offer has to match its demands in the area)

    3. Enforcement of commitmentsBound tariffs cannot be nullified by other forms of protectionism (non-tariff barriers)

    Basic Principles and Functioning

  • Five principles (before and after the creation of the WTO)

    4. TransparencyAccess to information about the trade regimesCountries obliged to publish informationTrade policy reviews

    5. Security clausesGovernments can restrict free trade in some cases:a) Non-trade objectives (public health, national security, protection of sectors highly damaged by imports) CFIUS (growing restrictions to FDI in critical sectors for national security)b) Subsidies and dumpingc) Balance of payments problems

    Basic Principles and Functioning

  • Basic Principles and Functioning

    SimilaritiesBasic principles still the same:ConsensusMember drivenChangesMore member countries (148 in 2005)Single undertakingMore transparencyNegative consensus for the Dispute Settlement UnitDifferences and similarities between GATT (1947) and the WTO

  • WTO Institutional Framework 4 Annexes

    1. GATT 1994, GATS, TRIPS2. Dispute Settlement Unit (DSU)3. Trade Policy Review Mechanism (TPRM)4. Plurilateral AgreementsAgreement on Government ProcurementAgreement on Trade in Civil Aviation (aircrafts and parts)

    Basic Principles and Functioning

  • Basic Principles and Functioning

    PoliticalFormulation of rules and commitmentsNegotiations (trade-offs)RoundsLegalEnforcement of rules and commitments previously agreedRules (International Economic Law)Dispute Settlement UnitTwo Aspects of the WTO

  • Dispute Settlement Unit (DSU)

    DSU can be initiated whenever a member country feels that:There is a violation of rules or commitments by another member countryAnother member country is enforcing measures that nullify the commitments bound in the WTOOther types of complaints against unfair trade practicesFour phases: consultations, panels, appeal and enforcementBrazil: important user of DSU (technical qualification)

    Basic Principles and Functioning

  • Non-agriculture manufactures (NAMA) trade facilitationAgricultureServicesIntellectual PropertyAntidumping and SafeguardsInvestmentsGovernment ProcurementCompetition PolicyEnvironment and labor standardsSubsidies and countervailing measuresRegional Trade Agreements

    Topics of Negotiation

  • Topics of Negotiation - NAMA

    International Trade of Goods by Region (2008)

    Source: WTO World Trade Report 2009

  • Topics of Negotiation - NAMA

    International Trade of Goods by Region (2008)

    Source: WTO World Trade Report 2009

  • TariffsTax charged when a merchandise crosses a national borderDifferent types:

    1. Ad valorem percentage of the value of the merchandise2. Specific amount of money per unit (ex. US$ 1.5 per liter of wine)3. Combination of bothGATT does not establish which one should be adopted (advantages and disadvantages)

    Topics of Negotiation - NAMA

  • TariffsIn theory the only types of protectionism allowedReduced after several roundsKennedy Round (1964-1967) first time that a general reduction for industrial goods was attempted through the adoption of a formulaMost Favorite Nation Principle (except in cases of regional integration)Countries cannot raise bound tariffs

    Topics of Negotiation - NAMA

  • Difference between applied and bound tariffs

    Especially in developing countriesTwo reasons:

    1. Bargain token2. Possibility of increasing applied tariffs (protection against exchange rate variations)

    Topics of Negotiation - NAMA

  • Topics of Negotiation - NAMA

    Profile of TariffsSource: WTO World Tariff Profiles 2008

  • Topics of Negotiation - NAMA

    Profile of TariffsSource: WTO World Tariff Profiles 2008

  • Topics of Negotiation - NAMA

    Profile of Tariffs (cont.)Source: WTO World Tariffs Profile 2008

  • Topics of Negotiation - NAMA

    Profile of Tariffs (cont.)Source: WTO World Tariffs Profile 2008

  • Topics of Negotiation - NAMA

    Profile of Tariffs (cont.)Source: WTO World Tariffs Profile 2008

  • Topics of Negotiation - NAMA

    Profile of Tariffs (cont.)Source: WTO World Tariffs Profile 2008

  • Topics of Negotiation - NAMA

    Profile of Tariffs (cont.)Source: WTO World Tariffs Profile 2008

  • Topics of Negotiation - NAMA

    Profile of Tariffs (cont.)Source: WTO World Tariffs Profile 2008

  • Topics of Negotiation - NAMA

    Profile of Tariffs (cont.)Source: WTO World Tariffs Profile 2008

  • Topics of Negotiation - NAMA

    Profile of Tariffs (cont.)Source: WTO World Tariffs Profile 2008

  • Topics of Negotiation - NAMA

    Profile of Tariffs (cont.)Source: WTO World Tariffs Profile 2008

  • Topics of Negotiation - NAMA

    Profile of Tariffs (cont.)Source: WTO World Tariffs Profile 2008

  • Topics of Negotiation - NAMA

    Profile of Tariffs (cont.)Source: WTO World Tariffs Profile 2008

  • Topics of Negotiation - NAMA

    Profile of Tariffs (cont.)Source: WTO World Tariffs Profile 2008

  • How to reduce tariffs?Application of a non-linear formula and applied to each positionLinear reduce all tariffs in an equivalent manner (Kennedy Round)- Significant reduction of high tariffs, but does nit ensure reduction or elimination of tariff peaks and tariff escalationNon-linear reduce proportionally highest tariffs than lower ones Harmonization between tariffs of a single country, and among countries (as long as a similar coefficient is used for the countries involved)

    Topics of Negotiation - NAMA

  • Topics of Negotiation - NAMA

    Harmonizing effect of the non-linear formula

    Source: Thorstensen, V. e Jank, M. (2005)

  • Topics of Negotiation - NAMA

    Issues discussed in the Market Access GroupStill on the agenda for the revised Doha RoundAdditional element to the trade-offs

    Trade Facilitation

  • Topics of Negotiation - Agriculture

    Source: OMC World Trade Report 2004Historical backgroundGATT (1947) several exceptions left agriculture on side of multilateral rulesUruguay Round beginning of discussions about effective inclusion of more strict rules for agricultureJanuary 1995 Agriculture Agreement entered into force8 years to be concluded!Peace ClauseUntil end of 2003

  • The Agriculture Agreement: Main Aspects

    Definition of what is an agriculture product chapters 1 to 24 of the Harmonized System (excluding fishery)Consolidation and later reduction of export subsidies and domestic support to the producersTarifficationBinding and average reduction of tariffsMinimum access to highly protected products (tariff quotas)

    Topics of Negotiation - Agriculture

  • Main issues affecting multilateral trade of agriculture productsTariff and non-tariff barriersDomestic subsidies (domestic support)Export subsidies and credits

    Geographic indicators

    Topics of Negotiation - Agriculture

    Three pilars of agriculture negotiations

  • Topics of Negotiation - Agriculture

    Market Access: Agriculture Tariff in Se