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The Course – Contents, Sources and Facts. The grading: Closed-book examination after the course Mixture of multiple choice questions and essays The Textbook:

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Presentation on theme: "The Course – Contents, Sources and Facts. The grading: Closed-book examination after the course Mixture of multiple choice questions and essays The Textbook:"— Presentation transcript:

1 The Course – Contents, Sources and Facts

2 The grading: Closed-book examination after the course Mixture of multiple choice questions and essays The Textbook: van den Bossche, P, The law and policy of the World Trade Organization : text, cases and materials (2. ed., 2008). The venue: Tuesday, 14:00 – 15:30 and Wednesday 13:00 -14:30 in the lecture hall of the Europa-Institut (3 rd floor)

3 WTO Law Int. Business Transactions WTO GATT GATS TRIPS Dispute Settlement TBT / SPS Trade Remedies Trade & Environment Antidumping SubsidiesCMA Intellectual and in- dustrial property

4 Introduction, History Legal Order (1-74) Institution (75-167) Dispute Settlement (DS) (168 – 319) Market Access (401 – 506) Non-Discrimination (320 – 400) Trade Remedies ((507 – 613) Exceptions (615 – 739) GATS, TRIPS Harmonization (740 – 891)

5 Jackson, J.H. et al., Legal problems of international economic relations : cases, materials, and text on the national and international regulation of transnational economic relations (5th. Aufl., 2008) Matsushita, M. et al., The world trade organization : law, practice, and policy (2nd. Aufl., 2006) Cottier, T. et al., International trade regulation : law and policy in the WTO, the European Union, and Switzerland : cases, materials, and comments (2005) Hilf, M./Oeter, S., WTO-Recht, Rechtsordnung des Welthandels (1. Aufl. Aufl., 2005) Stoll, P.-T./Schorkopf, F., WTO - Welthandelsordnung und Welthandelsrecht (2002) Guzman, A./ Pauwelyn, J., International Trade Law (2009=

6 The WTO Website Legal Texts m m Information on key substantive issues by the WTO What is the WTO ? tm tm WTO in brief nbr00_e.htm nbr00_e.htm Understanding the WTO htm htm

7 Decisions htm htm One-page summaries mmary06_e.pdf mmary06_e.pdf After that with every case in its web presentation Newest book edition hardcopy (http://onlinebookshop.wto.org/shop/article_details.a sp?Id_Article=721&lang=EN )http://onlinebookshop.wto.org/shop/article_details.a sp?Id_Article=721&lang=EN Abridged selected decisions s/reports.html s/reports.html

8 Most valuable secondary sources &id=88&autologin=n &id=88&autologin=n Teaching Materials in the Internet J.H.H. Weiler, S. Cho and I. Feichtner 2007, The Law of the World Trade Organization Through the Cases ex.html ex.html Weekly information Bridges etc (ICTSD)

9 WTO Training Package Researching international and foreign Law IIEL Research websites Research guide from GATT to WTO

10 One of the pillars of an international economic order Monetary: IMF and World Bank Trade: WTO Investment? No MAI. No inclusion in the WTO Law Particularly developed legal order Mandatory and exclusive dispute settlement with two levels (instances) of jurisprudence But: no lawmaking power Zone of reduced barriers to trade No common market structures But second best: reduction of the Trade

11 Institutional features Member driven consensus driven Legal order and institution common to big and small, rich and poor states Influence Green room talks Formation of interest groups Capacity problems Representation Sophistication of a legal order Diversification of the developing world

12 Economic Advantage of Foreign / International Trade Historical Development Particular features of International Trade Law / WTO Law

13 Opening of larger markets Economies of scale Division of Labor (Adam Smith!) Better supply Better allocation of resources Comparative Advantage (David Riccardo)

14 It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest....by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this...led by an invisible hand to promote an end which was no part of his intention. View: Wealth of Nations, chapter IV.2

15 David Ricardo ( ), On the principles of political economy and taxation (1817) See: the text: (http://socserv2.socsci.mcmaster.ca/~econ/ugcm/3ll3/ri cardo/Principles.pdf)http://socserv2.socsci.mcmaster.ca/~econ/ugcm/3ll3/ri cardo/Principles.pdf a brief summary: (http://www.systemics.com/docs/ricardo/david.html )http://www.systemics.com/docs/ricardo/david.html CountryWineWheat Cost Per Unit In Man Hours England1530 Portugal10 (33 % -)15 (50 % -)

16 Protection of young and still weak industries through tariffs or NTBs Practised in the US in the first half of the 19th century as well as in Europe New example: Airbus Problem: Dangers of retaliation No urge for the protected industries to face the steering forces of the market Dangers of perpetuation beyond need Dangers of abuse

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20 1948: world exports of goods 48 million USD, of services only a minor figure 2006: Goods 12 trillion USD, services 2,7 trillions Shares: North and South America decreasing, Europe and Asia increasing Foreign Direct Investment (FDI) 1982: 59 mio USD 2006: 1,3 trillion USD Developed countries have a higher share than DCs LLDCs: less than 1 % of incoming investment on the global scale

21 Factors: Transport and communication Free movement of capital: investment where it is most profitable But also Social problems by losses on the markets Winners and Loosers Job losses to cheaper countries Restraints of competition Loss of regulatory leverage of the states Public services? Power of multinational companies (MNCs) vs. developing states

22 International Trade is improving international welfare But does it also increase the welfare in all the participating states? There are winners and loosers Loosers may be compensated by additional demand from the winners So that may be a positive sum game But the addressees of the demand will not be the same than the loosers in the compensated state Necessity for a social policy in market economy?

23 A milennium goal: reducing poverty in the world by 50 % until 2015 Real poverty: people live on less than 1 $ a day There are improvements, but still almost 1 billion people are really poor Increase of the income gap btw. the 20% richest and the 20 % poorest of the world states: 1820: 3:1 1913: 11:1 1970: 30:1 1990: 60:1 1999: 86:1 94 % of world income -> 40% of the population 6 % -> 60% Half of them live on 2 $ a day, about a billion on less than 1 $ Even if world trade is increasing (with some stagnations in newer times), it does not increase the wealth of the majority of people Thus: there would be a need for social policy In the states as well as on an international level More than transfer of charitable funds

24 World Bank No trade barriers Increase global income by 2.8 trillion USD Lift 320 million people out of poverty by 2015 From the billion poor people in 2001 DCs share is rising (20-30 %) South-South trade amounts to more than 10 % with inceasing tendency LLDCs (48) share has decreased (0.5 %) LDCs / LDCs – qualification? Need to protect feeble agriculture and small business?

25 If free trade is an advantage to every national economy, why is protectionism then so attractive? Market failures (competition, information etc.) Opportunism of agents: catering for rent seekers who are better organised Industrial policy Infant industry protection Safeguards Overriding public concerns: environment, nature, health, culture etc. Protection of national interests: security, supply

26 Market failures require institutions. The law is one of the possible institutions. Government (policy) failures also require legal control Competition needs regulation because of market imperfections Lowering prices by lowering security or health standards Insufficient information of the customers

27 Markets do not function as theory would like them to do E.g.: no unlimited and totally transparent information about prices and qualities Distortions of competition by private actors as well as by state intervention See also J.M. Keynes

28 Because of asymmetric information Rational ignorance Pressure potential of the loosers in competition opportunism of the agents Politicians seeking re-election

29 Change in public opinion about open international trade Even in export-dependent states: critical majority fearing the loss of jobs and their export to other states The consumers do not realize their advantage Many consumers are also workers that may be threatened Particularly NGOs are hinting at The absence of a serious development policy in the international economy The relative losses of shares of the poorer DCs and the LLDCs The lack of protection for infant industries and small farmers

30 Trade Barriers Tariffs Non-tariff barriers (NTBs) Distorting aid to trade or competitors Subsidies Payments Tax breaks etc.

31 Tariffs Income for state budgets Additional cost for imports

32 The main conceptual focus of GATT and now the WTO is trade liberalization better allocation of economic resources integration of the developing countries management of the risks of globalization securing peace

33 Preserve the beneficial effect of comparative advantage by choosing a second best solution, i.e. the tariffication of NTBs and the reduction of tariffs Withstand the lobbyism of protectionist rent seekers Reducing transaction costs Restrain and reduce trade barriers Abolish all discrimination between domestic and foreign goods and services between goods and services from different foreign countries Reducing distortions of competition and policy failures Controlling free-riding and principal-agent- problems

34 Preamble of the WTO Agreement entering into reciprocal and mutually advantageous arrangements directed to the substantial reduction of tariffs and other barriers to trade and to the elimination of discriminatory treatment in international trade relations develop an integrated, more viable and durable multilateral trading system encompassing the General Agreement on Tariffs and Trade the results of past trade liberalization efforts, and all of the results of the Uruguay Round of Multilateral Trade Negotiations

35 Post-war International Economic Order Avoiding the fatal errors of the 1920s Devaluation race Loss of the gold standard Improving the competitiveness of national goods by devaluating the currency Beggar-thy-neighbour trade policy Protectionism race Discouraging international trade Reducing world welfare

36 Bretton Woods Conference (1944): Ministers of Finance Monetary Order IMF IBRD Fixed exchange rates Mentioning trade, but leaving it to the next conference in Havana

37 Geneva (1947)/ Havana Conference (1948): Trade Order Comprehensive: trade, competition, tariffs, NTBs ITO (Int. trade organization) GATT: Tariff Reduction Treaty – Part IV of the ITO Charter, but also independently meaningful Set in force earlier for 23 Member States

38 By a "Protocol of Provisional Application" Speeding up the tariff reduction Without parliamentary procedure (administrative agreement) Therefore formally no international establishment of working bodies But therefore with a "grandfather clause" And withdrawal with only 60 days notice Relation to the Havana Charter: cf. Art. XXIX GATT

39 GATT remained provisional for > 45 years Protocol of provisional application was the basis of accession for most new MS. 1951: Truman ends the unsuccessful attempt to get approval of Congress 1955: OTC attempt unsuccessful

40 GATT with ICITO (transferred from Lake Placid) remained in Geneva (av. de Lausanne) International Gouvernemental Organization which could not be called so, although it was: Founded by states To work for common goals With common bodies ICITO became the GATT Secretariat CONTRACTING PARTIES as plenary body

41 Result of the enlarged membership after decolonization More difficulties to change the rules of GATT (Art. XXV) 1960s: independence of DCs 1965 Part IV last change of the GATT text But still successful tariff reductions rounds From about 47 % to 3.6 % Arts. II, XXVIII bis GATT Beginning with Kennedy Round (1960): Side agreements with varying membership

42 Several Rounds for Tariff Reduction (Art. XXVIII bis GATT/XIII WTO) Reduction of bound tariffs New commitments concerning bindings Side agreements (Dumping, Subsidies etc.) Rift in the structure: scattered obligation structure A la carte principle Free rider behaviour Particularly in the Tokyo Round ( )

43 Year/Place/Name Subjects covered Countries 1947 Geneva Tariffs Annecy Tariffs Torquay Tariffs Geneva Tariffs Geneva Tariffs 26 (Dillon Round) Geneva Tariffs and antidumping measures 62 (Kennedy Round) Geneva Tariffs, non-tariff measures, 102 (Tokyo Round) framework agreements Geneva tariffs, non-tariff measures, (Uruguay Round) rules, services, intellectual property, dispute settlement, textiles, agriculture, creation of WTO, etc Doha – Round

44 Major Reform by the Uruguay Round ( ) WTO Single undertaking (unitary structure) Dispute settlement Tariffication in the agricultural sector Ending the "grey area agreements" (11 Safeguards Agreement) Clarifying and intensifying the open, unclear and incomplete rules

45 Seattle (1999): unfinished and tumultuous The Doha working program (2001) Cancun 2003: interruption The 2004 July program – resumption of negotiations 2005 Hongkong – some achievements The stop-and-go in with unclear finality? 2008: unsuccessful attempt to finalize the negotiations 2009: another resumption Major stumbling stones: agriculture and development

46 Problem of further rounds Consensus rule Implementation problem Capacity problems Scope of the legal order (competition, trade, environment, investment) Complexity of the norms Representation in the WTO bodies Dispute settlement, but see the Advisory Centre on WTO – Law Agriculture Developing countries


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