WTO, NAMA, DOHA and ITA AETIC Trade Acqui 22 September 2008 by Hans Driessen Océ-Technologies B.V. Netherlands

2 Contents 1.WTO Section 1.1Mission 1.2History 1.3GATT 1.4 Uruguay Round 1.5 WTO 2.NAMA and NTB’s 2.1What is NAMA 2.2Definitions Tariff 2.3Swiss Formula 3.DOHA 4.ITA

3 AETIC Trade Acqui September 2008 “The 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 and freely as possible” Mission WTO WORLD TRADE ORGANIZATION

4 l Attempt to create an International Trade Organization shortly after WW II (Havana Charter) l Attempt failed, however, 23 countries agreed to reduce tariffs in a “General Agreement on Tariff and Trade” or GATT: 23 founding members, or so called “Contracting Parties” l GATT signed in 1947 l GATT is aiming on reduction of tariff barriers related to trade in goods only. l GATT still is base for all subsequent trade agreements History WTO WORLD TRADE ORGANIZATION AETIC Trade Acqui September 2008

5 l Article 1: Most-Favoured-Nation treatment: Conditions applied to the most favoured nation (the one with the least restrictions) apply to all nations. No discriminations between MFN’s MFN in EU EU: See B. General rules concerning duties 1. The customs duties applicable to imported goods originating in countries which are Contracting Parties to the General Agreement on Tariffs and Trade or with which the European Community has concluded agreements containing the most-favoured-nation tariff clause shall be the conventional duties shown in column 3 of the schedule of duties. Unless the context requires otherwise, these conventional duties are applicable to goods, other than those referred to above, imported from any third country. GATT WORLD TRADE ORGANIZATION AETIC Trade Acqui September 2008

6 l Article VI: Anti dumping (less than a normal value) and countervailing duties (to compensate export subsidies) l Article VII: Customs value (in those days “sold or offered for sale”) l Article IX: Marks of origin GATT - some important articles WORLD TRADE ORGANIZATION AETIC Trade Acqui September 2008

7 l Signatories agreed to further liberalize trade (tariffs) l Signatories agreed for special provisions for less developed countries as well l 8 rounds of negotiations completed. l During Tokyo round (end seventies) Non Tariff Measures for first time on agenda l Last one was Uruguay round which lasted 87 months l At present Doha round is held. Meanwhile also taking up 80 months (to August 2008) l Doha more or less failed in July 2008 GATT follow-up WORLD TRADE ORGANIZATION AETIC Trade Acqui September 2008

8 l Early 80’s economic recessions: l Resulting in a system of increased protection through subsidies on agricultural trade and bilateral market sharing agreements with competing countries l Increased importance of global trade l Increased importance of trade in services (no trade agreements for that in those days) l Deteriorating system of trade policy leading to: l Necessity to start a new round: Uruguay Round in 1986 Uruguay Round WORLD TRADE ORGANIZATION AETIC Trade Acqui September 2008

9 l Completed in 1993 (60 agreements in 550 pages!!) l Ambitious program: l Include services l Capital l Intellectual property l Reform Trade in sensitive areas such as Textiles and Agriculture (price-distorting farm subsidies and quota systems) l Original GATT updated and WTO was established and began as of 1 January 1995 (Marrakesh agreement) Uruguay Round WORLD TRADE ORGANIZATION AETIC Trade Acqui September 2008

10 l Uruguay round also gave a number of deadlines to be completed for pending issues, one of which: 1998: Rules of origin: Work program on harmonization of rules of origin to be completed (20 July 1998) This expired already a while ago. l The good news: It also led to a swiftly agreed deal for freer trade in Information Technology that was signed in December in Singapore during Ministerial Conference, called ITA (Information Technology Agreement) Uruguay Round WORLD TRADE ORGANIZATION AETIC Trade Acqui September 2008

11 l Main activities: l Organization for liberalizing Trade (and permitted exceptions) l Forum for Governments to negotiate Trade agreements l Body to settle Trade disputes l It operates a system of Trade rules l while l protect consumers l prevent the spread of diseases l Possibly leading to trade barriers WTO WORLD TRADE ORGANIZATION AETIC Trade Acqui September 2008

12 l Focus on three major areas of Trade: l Trade in Goods l Trade in Services l Trade related aspects of IPR (Intellectual Property Rights) l Principle of “National Treatment”, giving others the same treatment as the national ones. l System of gradually introduced changes through progressive liberalization. Developing countries usually have more time to introduce new agreements. l System promotes predictability, stability and transparency through official publications. WTO WORLD TRADE ORGANIZATION AETIC Trade Acqui September 2008

13 l WTO nothing more than set of rules. l Principles of Trading System: l Without discrimination l MFN principle (not discriminate as well between domestic and foreign products) l As freely as possible (also NTB’s included): open, fair and undistorted l Predictable (bound commitments) l More competitive l More beneficial for Less Developed Countries WTO WORLD TRADE ORGANIZATION AETIC Trade Acqui September 2008

14 l Decision making process through consensus l Top is the Ministerial Conference which meets once every two years. l Below that is the General Council and working groups reporting to the GC. WTO WORLD TRADE ORGANIZATION AETIC Trade Acqui September 2008

15 Questions WTO? WORLD TRADE ORGANIZATION AETIC Trade Acqui September 2008

16 l NAMA: Non-Agriculture Market Access l Scope: Simply everything, except Agriculture. l Large part of worldwide trade l NAMA negotiations successful in Uruguay Round: l some 50% cut in tariffs to the developed countries l new tariff bindings (maximum duties or “ceiling level”) l leading to: Sharply increased predictability for Trade What is NAMA WORLD TRADE ORGANIZATION AETIC Trade Acqui September 2008

17 l Also referred to as Industrial products or manufactured goods l Major step ahead in Uruguay Round for market access to developed countries What is NAMA WORLD TRADE ORGANIZATION AETIC Trade Acqui September 2008

18 l Tariffication: l Used in Agriculture to convert quotas etc into tariffs so to have better coverage and more transparency l Tariff Peaks: l Relatively high duties on sensitive products: For industrialized countries tariffs of 15% and above l Tariff escalation l Higher tariffs on semi finished products and higher on finished products. Protects domestic processing industries, but discourages the developments thereof l Tariff Binding (or Bound rates) l Ceiling level for maximum level for levying duties Definitions tariffs WORLD TRADE ORGANIZATION AETIC Trade Acqui September 2008

19 l Countervailing duties: l Additional duties to counter export subsidies l Anti Dumping duties: l Additional duties for products sold at unfairly low prices (usually lower than sales price in home market) Definitions tariffs WORLD TRADE ORGANIZATION AETIC Trade Acqui September 2008

20 l As of Tokyo Round formulas as alternative to product cuts l Mathematical Formula to calculate the effect if tariff rates will be cut in Trade negotiations is Swiss formula. l System to harmonize existing high and low tariffs to reach a maximum allowed tariff in a certain period of time (high tariffs are degressively reduced faster than lower tariffs). l Alternative to linear tariff cuttings (fix percentage) proposed by Switzerland during the Tokyo Round. Reduction in tariffs WORLD TRADE ORGANIZATION AETIC Trade Acqui September 2008

21 l Swiss Formula: Z = AX / (A+X) l X = Initial Tariff Rate l A = maximum final tariff rate and the coefficient (agreed to represent the level of tariff cutting) l Z = final tariff rate that result. l Example: l Coefficient = 30 (final tariff of 30% of existing one) = A l Initial tariff: 100 % l Z = 30x100 / (30+100) l Z = 3000 / 130 = 23% = final tariff rate that results. l or l Same cut on an initial tariff of 15% (= A) l Z = 30x15 / 45 = 10% = final rate that results. Swiss Formula WORLD TRADE ORGANIZATION AETIC Trade Acqui September 2008

22 Questions NAMA? WORLD TRADE ORGANIZATION AETIC Trade Acqui September 2008

23 TBT WORLD TRADE ORGANIZATION l TBT: Technical Barriers to Trade Agreement l Aiming on elimination of different regulations, standards, testing and certification procedures l Agreement on code of practice for standards by central governments, but also local ones l Countries should recognize each other’s standards AETIC Trade Acqui September 2008

24 NTB WORLD TRADE ORGANIZATION l Definition: Any measure other than tariff that protects domestic industry through import restrictions. l No official WTO definition exists l Most important Non-tariff barriers: l Import licensing l Rules for the customs valuation of goods l Pre-shipment inspection (Veritas etc.) l Rules of origin: made in, where and how to determine? l Investment l Others AETIC Trade Acqui September 2008

25 NTB WORLD TRADE ORGANIZATION l How to resolve NTB’s: l Identify, categorize and examine NTB’s within negotiation group. l Resolve through bilaterals, on sectoral bases or multilateral NTB Agreements AETIC Trade Acqui September 2008

26 l Ministerial Conference in Doha (Qatar) launched new negotiations with 21 subjects in November 2001 l Known as DDA (Doha Development Agenda) l Deadline: l January 2005missed! l New deadline end of 2006missed! l Latest deadline 2008 missed again! l Finally failed during the July session in Geneva 2008 l One on the subjects (again): Rules of Origin Doha round WORLD TRADE ORGANIZATION AETIC Trade Acqui September 2008

27 l Negotiations in the TNC (Trade Negotiations Committee) l Issues: l Implementation of current WTO Agreements (Uruguay) mainly at developing countries l 21 subjects in total. l For this lecture 2 main ones: 1. February 2002 the Chairman of General Council decided in the first TNC that negotiations on NAMA would take place in a Negotiating Group on Market Access (NGMA) linked to TNC 2. Completing harmonization of NPRoO Doha round WORLD TRADE ORGANIZATION AETIC Trade Acqui September 2008

28 l DOHA Declaration par 16: “reduce, or as appropriate eliminate tariffs, including the reduction or elimination of tariff peaks, high tariffs, and tariff escalation, as well as non-tariff barriers, in particular on products of export interest to developing countries” on all non-agriculture products l How? l Through mathematical formula (Tokyo round) or product by product (Uruguay Round)? l Decision made to work on “modalities” but missed the deadline of 1 August l Members agreed on new target date of December 2005 (Ministerial Conference at Hong Kong) Doha round and NAMA WORLD TRADE ORGANIZATION AETIC Trade Acqui September 2008

29 l DDA General Council decision on 1 Aug 2004 (July package), adopts the framework set out in Annex B. (called “NAMA Framework”) l Framework to determine modalities in Market Access for Non- Agricultural products l Simply put: Which non-agricultural products are in scope? l Future work amongst others : l The formula l Flexibility for developing countries l Non-ad valorum duties shall be converted to ad valorum l (Simply put: what to work on) l Reaffirmed again on reducing or eliminating tariffs Doha round WORLD TRADE ORGANIZATION AETIC Trade Acqui September 2008

30 l NAMA Framework reaffirmed at Hong Kong Ministerial Declaration in 2005 in Paragraph l Status as per July 2008, by Ambassador Don Stephenson*: l July 2008 Package to settle range of questions l Series of meetings held in Geneva July 2008 l Scope to be defined * Don Stephenson: Ambassador of Canada and Chairman of the Negotiating Group on Market Access Doha round WORLD TRADE ORGANIZATION AETIC Trade Acqui September 2008

31 l Scope to define modalities presented on 10 July 2008 (3 rd revision): l Product coverage: Fish, Oils, Silk, Cotton and the like. Nothing of chapters High-Tech (already in ITA) l Coverage based upon HTS chapters (2002 version) l No High-Tech, no Automotive and the like l Of course: there is no High-Tech exports of developing countries Doha round WORLD TRADE ORGANIZATION AETIC Trade Acqui September 2008

32 l Final text of the NAMA modalities (July 2008) l Tariff reductions through “Simple Swiss” Formula with separate coefficients for developed and developing countries l One option for developed countries, three for developing countries (rule based) l Anti concentration mechanism (preventing entire sectors from tariff cuts) l Overall the approximately 40 members applying the Swiss formula (others have special provisions), account for 90% of NAMA trade l Non-tariff barrier proposals (for many sectors!) Doha round WORLD TRADE ORGANIZATION AETIC Trade Acqui September 2008

33 l Why it failed: l Almost agreed on everything except a SSM: Special Safeguard Mechanism: The extent to which developing countries would be able to raise tariffs to protect local farmers from import surges (often caused by export subsidies: unfair competition) Doha round WORLD TRADE ORGANIZATION AETIC Trade Acqui September 2008

34 l Next steps? l Elections in the US, elections India, Lost of momentum will all influence ongoing talks. Developing countries are suffering most l Result: More focus on increased number of bilateral agreements l EU-Korea, EU-Asean, EU-India, EU liberalizing trade with Japan in non tariff talks l US-Korea, US-Malaysia, many many more l Undermining the importance of WTO, critics say. Doha round WORLD TRADE ORGANIZATION AETIC Trade Acqui September 2008

35 Questions Doha? WORLD TRADE ORGANIZATION AETIC Trade Acqui September 2008

36 ITA Declaration WORLD TRADE ORGANIZATION AETIC Trade Acqui September 2008 l Agreement made during Ministerial Conference in Singapore 1996, implemented in l Started with 29 participants, covering 80% of world trade in IT products; now to 70 signatories, covering 97% of world trade l Product coverage specified in 2 annexes: l Annex A: HS Headings l Annex B: Positive list of specific products

37 ITA Declaration WORLD TRADE ORGANIZATION 18. Taking note that a number of Members have agreed on a Declaration on Trade in Information Technology Products, we welcome the initiative taken by a number of WTO Members and other States or separate customs territories which have applied to accede to the WTO, who have agreed to tariff elimination for trade in information technology products on an MFN basis as well as the addition by a number of Members of over 400 products to their lists of tariff-free products in pharmaceuticals AETIC Trade Acqui September 2008

38 ITA Declaration WORLD TRADE ORGANIZATION AETIC Trade Acqui September 2008 l Most important articles (total just 10 articles): l Art. 3: Periodic meetings for product review to modify annexes A and B, due to technological developments l Art. 5: Frequent meetings to consider any divergence among members in classifying IT products. Participants agree on a common objective of achieving a common classification, based on HS nomenclature

39 The Dispute 2008 WORLD TRADE ORGANIZATION AETIC Trade Acqui September 2008 l US and Taiwan and Japan brought case to WTO dispute settlement body. l US is blaming EU to classify IT products incorrectly (in headings out of ITA scope) as well as ignoring technological developments (convergence) by classifying these out of ITA headings l EU argues that US c.s. does not want to negotiate, according ITA agreement and already pushing for months to start reviewing the goods concerned l EU also counters issue that products were not in scope in original Agreement (printers as example)

40 The Dispute 2008 WORLD TRADE ORGANIZATION AETIC Trade Acqui September 2008 l State of Affaires: l 60 days consultation period (informal negotiation to reach consensus) failed l WTO forced to take a legally binding decision l Outcome difficult to predict l Very important issue to follow for IT and CE Industry l Also crucial for possible new signatories, such as Brazil, Mexico or South Africa

41 Questions ITA AETIC Trade Acqui September 2008 WORLD TRADE ORGANIZATION