LIBERALIZATION OF SERVICE INDUSTRIES

[WTO, TRIPS and TRIMS]

THE WTO …… In briefThe World Trade Organization (WTO) is the only international organization dealing with the global rules of trade between nations. Its main function is to ensure that trade flows as smoothly, predictably and freely as possible.

THE RESULT is assurance and compliance.

THE GOAL is to improve the welfare of the people of the member countries.

WTO IS TO PROMOTE TRADE WITHOUT DISCRIMINATION

3

WTO Objectives: Raising standards of living Ensuring full employment Ensuring growth of real income and

demand Expanding production and trade Sustainable development Protection of the environment

WTO: What is its purpose?

4

WTO Functions: Administer and implement the WTO

agreements Forum for negotiations Administer Settlement of Disputes Administer Trade Policy Review Mechanism Technical Assistance to developing countries

WTO: What is its purpose?

THE WTO’sTHREE MAIN PURPOSES

1. Help trade flow as freely as possible

• Serve as a forum for trade negotiations

1. Set up an impartial means of settling disputes

World Trade Organization: Rounds

Rounds of GATTMultilateral Trade Negotiations

No. Years Name Accomplishments1-5 1947-61 Reduced tariffs

World Trade Organization: RoundsRounds of GATT

Multilateral Trade NegotiationsNo. Years Name Accomplishments1-5 1947-61 Reduced tariffs6 1964-67 Kennedy Tariffs + anti-dumping

World Trade Organization: RoundsRounds of GATT

Multilateral Trade NegotiationsNo. Years Name Accomplishments1-5 1947-61 Reduced tariffs6 1964-67 Kennedy Tariffs + anti-dumping7 1973-79 Tokyo Tariffs + NTBs

World Trade Organization: RoundsRounds of GATT

Multilateral Trade NegotiationsNo. Years Name Accomplishments1-5 1947-61 Reduced tariffs6 1964-67 Kennedy Tariffs + anti-dumping7 1973-79 Tokyo Tariffs + NTBs8 1986-94 Uruguay Tariffs, NTBs, Services, Intellectual Property,

Textiles, Ag., Dispute Settlement, Created WTO

World Trade Organization: RoundsRounds of GATT

Multilateral Trade NegotiationsNo. Years Name Accomplishments1-5 1947-61 Reduced tariffs6 1964-67 Kennedy Tariffs + anti-dumping7 1973-79 Tokyo Tariffs + NTBs8 1986-94 Uruguay Tariffs, NTBs, Services, Intellectual Property,

Textiles, Ag., Dispute Settlement, Created WTO

9 2001-? Doha ? (Doha Development Agenda)

WTO WTO agreements are

negotiated and signed by the trading nations and ratified in their parliaments.

The goal is to help producers of goods and services, exporters, and importers conduct and grow their business.

The Goal To improve the

welfare of the peoples of the member countries.

Past, Present, FutureThe WTO came into being in 1995.

The WTO is the successor to the General Agreement on Tariffs and Trade (GATT), established in the wake of the Second World War.

15

Set of rulesThe negotiated legal rules included in the various WTO agreements cover the following topics:

Trade in Goods Trade in Services Trade-related aspects of intellectual

property rights Dispute Settlement Trade Policy Reviews

WTO: How does it work?

16

Ministerial Conference

Secretariat

Appellate Body

Dispute Settlement

Panels

Committees Committees

Goods Council Services Council

TRIPS Council

CTD (Development)CTE (Environment)CRTA (Regionalism)

BOPBudget

WG (Accessions, Investment, competition,

Government Procurement)

General CouncilTPRB DSB

Director-General

WTO: How does it work?WTO Structure

17

Secretariat

About 750 staff Headed by a Director-General (DG) Budget 2009: 190 millions Swiss

francs + extra-budgetary funds (about 24 millions Swiss francs)

WTO: How does it work?

19

Decision making Member-driven organisation Consensus (GATT practice), even if

voting procedures exist Consensus when no Member formally

object to a decision “Negative” consensus

WTO: How does it work?

20

Meetings

Type of meetings (formal, informal, special sessions, consultations, multi- /pluri- /bilateral)

All WTO Bodies open to all Members (specificities for panels and Appellate Body)

WTO: How does it work?

21

Multilateral Agreements on Trade in GoodsMultilateral Agreements on Trade in GoodsGATT 1994GATT 1947Rectifications, amendments and modifications which entered into force before 1.1.1995 (Protocols, Decisions of the CONTRACTING PARTIES). Protocols of Accession (to GATT)Understandings on (Art. II:1b, XVII, XXIV, XXVIII, BOP provisions, Waivers)Marrakesh Protocol Schedules of Tariff Concessions

Agreements onAgriculture

SPS

Textiles and ClothingTRIMs Antidumping

Customs Valuation

PSIRules of Origin

Import Licensing

Subsidies and Countervailing Measures

Safeguards

Decisions, Declarations

TBT

WTO Coverage

22

General Agreement on Trade in ServicesGeneral Agreement on Trade in ServicesGATS

PART I (Scope and Definitions)PART II (General Obligations and Disciplines)PART III (Specific Commitments) Schedules on Specific Commitments PART IV (Progressive Liberalization)PART V (Institutional Provisions)ANNEXES

Annex on Article II (MFN) exemptions) Lists of Art. II (MFN) ExemptionsAnnex on Movement of Natural Persons Supplying Services under the GATS

Annex on Air Transport ServicesAnnex on Financial ServicesSecond Annex on Financial ServicesAnnex on Negotiations on Maritime Transport ServicesAnnex on TelecommunicationsAnnex on Negotiations on Basic Telecommunications

3rd Protocol (1995)

Decisions, Declarations

2nd, 5th Protocol (1995, 1997)

4th Protocol (1997)

WTO Coverage

23

Trade-Related Aspects of Intellectual Property Rights (TRIPS)Trade-Related Aspects of Intellectual Property Rights (TRIPS)TRIPS

Section 1: Copyright and Related Rights

Decisions, Declarations

PART I (General Provisions and Basic Principles) PART II (Standards concerning the availability, scope and use of IPR)

Section 2: TrademarksSection 3: Geographical IndicationsSection 4: Industrial DesignsSection 5: PatentsSection 6: Layout-designs (Topographies) of Integrated CircuitsSection 7: Protection of Undisclosed Information (Trade Secrets)Section 8: Control of Anti-competitive Practices in Contractual Licenses

PART III (Enforcement of IPR) PART IV (Acquisition and Maintenance of IPR and related Inter Partes Procedures) PART V (Dispute Prevention and Settlement) PART VI (Transitional Arrangements) PART VII (Institutional arrangements: Final Provisions)

WTO Coverage

The Past 50 Years: Exceptional Growth in World Trade

Merchandise exports grew on average 6% annually

Total trade in 1997 was 14 times the level of 1950

In 1997, 40 governments concluded negotiations for tariff free trade.

THE ORGANIZATIONIf the WTO’s overriding objective is to help trade flow smoothly, freely, fairly and predictably, how?

It does this by:

Acting as a forum for trade negotiations Reviewing national trade policies Administering trade agreements Settling trade disputes Assisting developing countries in trade policy issues, through technical assistance and training programs Cooperating with other international organizations

The Organization

General Council

Council for Tradein Goods

Council for Intellectual Property Rights in Trade

Council for TradeIn Servfices

GC: DisputeSettlement Body

GC: Trade Policy Review Body

Ministerial Conference

Committees onTrade and EnvironmentTrade and Development…

Working parties on AccessionsWorking groups

Committees CommitteesTextiles Monitoring Body

Working parties on

The Organization Chart

10 Benefits of the WTO The system helps

promote peace Disputes are

handled constructively

Rules make life easier for all

Freer trade cuts the costs of living

It provides more choices of products and qualities

Trade raises incomes

Trade stimulates economic growth

The basic principles make life more efficient

Governments are shielded from lobbying

The system encourages good government

The WTO must teach the world the benefits of trade

Ricardo had to said about comparative advantage, and the strong consensus among those who seriously consider trade issues.

Trade provides nearly 100% of an economy’s jobs. Global trade provides a large and growing share of these jobs..

WTO FunctionsFunctional Outline of the World Trade Organization

Communication

Constraints

Exceptions

Dispute Settlement

WTO FunctionsCommunications Ministerials

Negotiating RoundsWorking GroupsTrade Policy Review MechanismCouncils and Committees

Trade

Ministers

(USTR, etc.)

Meet Every

Two Years

Tariff Reductions;

Changes in Rules

WTO FunctionsConstraints Tariff Bindings

Customs ValuationProduct RegulationsQuantitative RestrictionsSubsidiesForeign Direct Investment (TRIMS)Services (GATS)Intellectual Property (TRIPs)

Countries

negotiate and

commit to

maximum

tariffs

National Treatment for

Service Firms

Enforce Patents, Copyrights, Trademarks

WTO FunctionsExceptions Anti-Dumping

Countervailing DutiesSafeguardsBalance of Payments ProtectionPreferential Trade Agreements

Allows NAFTA,

EU, etc.

Permitted, not

required

WTO FunctionsDispute Settlement Consultation

Panel RecommendationAppellate BodyRemedy Implementation

CompensationRetaliation

3-person Panel

Decides Case

The Ultimate

Remedy:

Permit Tariffs

Bottom Line

WTO extends the Rule of Law to international commercial policies.

As such, it protects small and weak countries from abuse by larger, more powerful ones.

The Quad Some of the most difficult negotiations have needed an initial breakthrough in talks among the four largest members

Canada  European union

 Japan  United States

How to Join the WTO: the Accession Process

First, “tell us about yourself”. Second, “work out with us individually

what you have to offer.” (Country to country negotiations bilaterally.)

Third, “let’s draft membership terms.” Finally, “the decision.”

DEVELOPING COUNTRIESOver three-quarters of WTO members are developing or least-developed countries. Special provisions for these members are included in all the WTO agreements.

The special provisions include:

• longer time periods for implementing agreements and comments,

• measures to increase trading opportunities for these countries,

• provisions requiring all WTO members to safeguard the trade interests of developing countries,

• and support to help developing countries build the infrastructure for WTO work, handle disputes, and implement technical standards.

Criticisms of the WTO The WTO undermines state sovereignty It undermines representative democracy Member nations are prevented from protecting

the environment Members are unable to uphold laws

guaranteeing workers’ rights The WTO is controlled by the larger nations The WTO represents the interests of large

corporations and wealthy citizens

40

Evolution of WTO frameworkDecisions and Declarations (few examples)

1996 Singapore ministerial conference Singapore Topics

Trade Facilitation, Investments, Competition, Transparency in Government Procurement

« Information Technology » Initiative 1998 Geneva ministerial conference

Electronic Commerce 1999 Seattle ministerial conference 2001 Doha ministerial conference

Doha Development Agenda

THE WTO ROUND Seattle – a rough start (1999)

Doha – what happened? (2001)

Cancun – what happened? (2003)

The Doha, Qatar InitiativesA new trade round was launched November, 2001

For the first time, developing countries demanded capacity-building and technical assistance to take part meaningfully.

The Doha, Qatar InitiativesThe Pledging Conference was convened in accordance with the December 2001 decision of the WTO General Council.

In that decision, the General Council set a target for core funding of CHF 15 million plus support in kind, including training courses for trade officials.

What happened at Seattle? Most of the world’s citizens first heard about the WTO

at the Seattle “Millennium Round” (popularly known as the “Battle of Seattle”), when talks ended in failure amid massive street demonstrations

The agenda for Seattle was ambitious: agriculture, services, intellectual property rights, government procurement (contracts), and competition rules, to name a few.

THE WTO ROUND This round is known as the Millennium

Round, the Doha Round, and the Development Round

Political environment – there are now 148 WTO members – about twice the GATT round

Progress on regional agreements

Countries negotiate only what they would do anyway

What happened at DOHA? (Development Round)

The attempts to expand the coverage of the WTO agreements became more apparent with the launching of the Doha Development Agenda (DDA) at the WTO’s 4th Ministerial Conference in Doha, Qatar in 2001.

In a nutshell, the DDA seeks to start negotiations on non-agricultural tariffs, trade and environment, WTO rules like anti-dumping and subsidies, investment, competition policy, trade facilitation, transparency in government procurement, and intellectual property. The deadline for negotiations was on Jan. 1, 2005.

Doha Round Agenda Agricultural subsidies Conflicts between trade liberalization and

environmental protection Competition policy Foreign investment protection Trade remedy laws (subsidies and dumping)

48

Doha Negotiations:Structure

General Council

Trade Negotiations CommitteeChairman: WTO DG (ex officio)

Goods Services TRIPS Other Issues

- Agriculture

- NAMA (*)

- Services - Geographical Indications

- Dispute Settlement

- Development- Environment- Rules (*)

Negotiating groups meet during special sessions of existing WTO bodies, at the exception of (*) for which new Negotiating Groups have been created.

- Trade Facilitation (*)

- Cotton July Decision

What Happened at Cancun? Based on a draft ministerial declaration that was

submitted by the WTO director general to ministers last ug. 31, 2003, moves by industrialized countries to include other non-trade issues at the Cancun Conference are facing stiff opposition from selected underdeveloped countries.

The call of third world governments to the monopoly-capitalist governments, especially those of the United States and the European Union, to made good their promise to remove domestic and export subsidies enjoyed by their homeland agriculture; and the drive of the monopoly-capitalist powers to push for even further liberalization in areas such as foreign investment

Agreements of the WTOThere are 28 agreements that had been signed in the Uruguay Round

of the GATT, 1994. The details of these agreements are given below:

A. Trade in Goods General Agreement on Tariffs and Trade 1994 (GATT, 1994) Associate Agreements 1) Agreement on Implementation of Article VII of GATT 1994 (Customs Valuation) 2) Agreement on Pre-shipment Inspection (PSI) 3) Agreement on Technical Barriers to Trade (TBT) 4) Agreement on the Application of Sanitary and Phytosanitary Measures (SPS) 5) Agreement on Import Licensing Procedures 6) Agreement on Safeguards

50

Agreements of the WTO7) Agreement on Subsidies and Countervailing

Measures (SCM) 8) Agreement on Implementation of Article VI of

GATT 1994 (Ami-dumping) (ADP) 9) Agreement on Trade-Related Investment

Measures (TRIMS) 10) Agreement on Textiles and Clothing (ATC) 11) Agreement on Agriculture 12) Agreement on Rules of Origin

51

Agreements of the WTO Understanding and Decisions

1) Understanding on Balance of Payments Provisions of GATT 1994 2) Decisions Regarding Cases where Customs Administrations have Reasons to Doubt the Truth or Accuracy of the Declared Value (Decision on Shifting the Burden of Proof) 3) Understanding on the Interpretation of Article XVII of GATT 1994 (State trading enterprises) 4) Understanding on Rules and Procedures Governing the Settlement of Disputes 5) Understanding on the Interpretation of Article II: l(b) of GATT 1994 (Binding of Tariff Concessions) 6) Decision on Trade and Environment 7) Trade Policy Review Mechanism

52

Agreements of the WTOB. Trade in Services General Agreement on Trade in Services (GATS) C. Intellectual Property Rights (IPRs) Agreement on Trade-Related Aspects of Intellectual Property

Rights (TRIPS) Plurilateral Trade Agreements Agreement on Trade in Civil Aircraft Agreement on Government Procurement International Dairy Agreement International Bovine Meat Agreement

53

Trade-Related Aspects of Intellectual Property Rights (TRIPS)

54

What is Intellectual What is Intellectual Property?Property?

• …… books, CDbooks, CD’’s, video games, s, video games, paintings, staplers, bags, paintings, staplers, bags, fabrics, planes, food/drinks, fabrics, planes, food/drinks, pharmaceuticals, plant varieties, pharmaceuticals, plant varieties, computer chips, cars, music, computer chips, cars, music, broadcasts, sound recordings, broadcasts, sound recordings, etcetc……

• ……an IP right provide the right an IP right provide the right holder with an exclusive right to holder with an exclusive right to stop othersstop others

• ..IP right holder may provide ..IP right holder may provide licenseslicenses

• ……IP rights are territorial in IP rights are territorial in naturenature

Forms of Intellectual Forms of Intellectual property Rightsproperty Rights

• PatentsPatents• Trade MarksTrade Marks• DesignsDesigns• CopyrightsCopyrights• Geographical IndicationsGeographical Indications• Industrial DesignsIndustrial Designs• Trade SecretsTrade Secrets• Utility ModelsUtility Models• Traditional Knowledge (?)Traditional Knowledge (?)

The TRIPS AgreementThe TRIPS Agreement……sets minimum standardssets minimum standards……is part of a package deal is part of a package deal ––

WTO AgreementWTO Agreement……is signed by 153 partiesis signed by 153 parties…… is is

subjected to dispute subjected to dispute settlement bodysettlement body

...contains enforcement ...contains enforcement mechanismsmechanisms

...is subjected to National ...is subjected to National Treatment and Most-Treatment and Most-favoured-Nation Treatment favoured-Nation Treatment (MFN) Principles(MFN) Principles

The Public InterestThe Public Interest Promotion of Promotion of

innovationinnovation Public health Public health

and access to and access to medicinesmedicines

Nutrition and Nutrition and Food security Food security

Technology Technology transfertransfer

Competition Competition policypolicy

Human rightsHuman rights Development Development Fight against Fight against

povertypoverty Environmental Environmental

protectionprotection EducationEducation

““Whenever there is a Whenever there is a conflict between human conflict between human rights and property rights and property rights, the former must rights, the former must prevail”prevail”

Abraham LincolnAbraham Lincoln

Rationale behind IPRsRationale behind IPRsPatentsPatents

To stimulate To stimulate innovation/encourage innovation/encourage investmentinvestment the inventor receives an the inventor receives an exclusive right to his inventionexclusive right to his inventionin exchange for in exchange for disclosure of the disclosure of the inventioninvention in such a way that it allows in such a way that it allows replication, the inventor receives a replication, the inventor receives a limited amount of timelimited amount of time to recoup his to recoup his investmentinvestment

TrademarksTrademarksProtection of Protection of goodwill and reputationgoodwill and reputation

CopyrightCopyrightProtection of Protection of creativitycreativity

Why are IPRs important?Why are IPRs important?

IPRs allow control over technology, IPRs allow control over technology, signs and creationssigns and creations

Original Purpose: to Original Purpose: to stimulate stimulate innovation and creativityinnovation and creativity by by compensating the creator/innovator for compensating the creator/innovator for their intellectual effortstheir intellectual efforts

Lately: Lately: incentive to investment / incentive to investment / change change in market players in market players --big multinationals--big multinationals

TRADE-RELATED INVESTMENT MEASURES(TRIMS)

61

Investment and Trade The issue is whether or not a policy

with a particular target - in this case an investment measure - can affect trade.

Are there different degrees of trade effects?

Export performance requirements, local content schemes and foreign exchange balancing - ok

Examples of TRIMS Market access

Ownership or equity restrictions

Joint venture requirements

Performance Requirements Local content

schemes Export

performance requirements

Foreign Exchange balancing

TRADE RELATED INVESTMENT MEASURES [TRIMs]

In the late 1980s Agreed upon by all members of the

World Trade Organization Are rules that restrict preference of

domestic firms and thereby enable international firms to operate more easily within foreign markets.

Legal Framework The TRIMs agreement does not provide any

new language It focusses on two Articles that were

identified in a previous case under the GATT Article III (National Treatment) Article XI (Quantitative Restrictions)

Aims of the Agreement Desiring

to promote the expansion and progressive liberalisaiton of world trade and to facilitate investment, while ensuring competition

Take into account trade, development and financial needs of

developing countries, particularly least developed countries

Recognising certain investment measures can cause

trade-restrictive and distorting effects

Structure Nine Articles and an Annex Art I - clarifies that the agreement applies

only to trade in goods Art 2 - applies Articles III or XI and refers to

the Annex list Art 3-4 deal with general exceptions and Art

XVIIIb Art 5 Notification and transition periods Art 9 - Review

GATT Articles Article III (GATT)

National treatment of imported product, unless specified in other agreements

Subjects the purchase or use by an enterprise of imported products to less favourable conditions than the purchase or use of domestic products

Article XI (GATT) Prohibition of quantitative restrictions on

imports and exports Part of the general trend in textiles and

agriculture to phase out the use of quantitative restrictions

Illustrative list - Para 1 Para 1 (a) covers local content TRIMs

which require the purchase or use by an enterprise of products of domestic origin or domestic source.

Para 1(b) covers trade balancing TRIMs which limit the purchase or use of imported products by an enterprise to an amount related to the volume or value of local products that it exports.

Ilustrative list- Para 2 2(a) deals with border measures that deal

with trade balancing. 2(b) restrictions to trade that arise from

foreign exchange access restrictions such as balancing requirements

2 (c) deals with measures that restrict exports.

Notification Governments of WTO members, or countries

entitled to be members within 2 years after 1 January, 1995 shouold make notifications within 90 days after the date of their acceptance of the WTO agreement.

Transition periods Members are obliged to eliminate TRIMs

which have been notified. Such elimination is to take place within two years after the date of entry into force of the agreement for developed countries five years for developing seven years for LDC

Standstill TRIMS introduced less than 180 days before

the agreement do not benefit from transition period.

Members are also not allowed to change measures that have been notified if these changes are inconsistent with the agreement.

The same TRIM can be applied to a new investment.

Development Dimension of the TRIMS agreement

Only developing countries notified TRIMS Most frequent sector was the automotive

industry The most frequent policy was local content

schemes

Where to from here? Developing countries are serious about not

moving ahead on TRIMS until the agreement has been implemented

The focus is on how to proceed with the review.