1. Agenda Nov. 6 and 8 Finish discussion of “political strategy”
Introduction to WTO
Contemporary Issues – WTO
Plan for next three weeks
Quiz
Consultations
Presentations

2. Next Quiz Re: global warming Re: energy “Political strategy” Re: WTO
IPCC, Kyoto Protocol
US position
Re: energy
An idea of the global picture on crude oil
Understanding the attractiveness of alternative sources (e.g. read Summary of OSU study)
“Political strategy”
Re: WTO
What it is? What does membership mean?
Some idea of how some of its rules work

3. Role of Activists In general call attention to an environmental issue.
Use political strategy to call attention. For example, against genetically modified seeds -
In Brazil, filed or caused law suit to be filed to ban the introduction of modified seeds
In Europe, lobbied parliament
In other countries, lobby congress or executive branch
Target key players as a way of attacking industry
Good use of the press – public relations
Need “good publicity” to survive

4. Other Examples of Political Strategy
Anti-Global Warming Campaign/
Intention was to illustrate how an industry lobby group conducted an effective “political strategy”
Note complex political process into which a political strategy can become an important tool
Campaign to raise awareness on unfair labor practices: NIKE
Campaign against Measure 50
Procurement and Tax Reform Legislation

5. Components of Political Strategy
Objectives: pre-empt, create or attack legislation or regulation
Proponents range from interest groups to NGOs, etc.
Can draw from a coalition of supportive individuals and organizations
Craft clear set of messages to be disseminated
Spin has to be effective, e.g. doubt on science of climate change
Attract attention to the message
Sometimes targets entities large or popular enough to attract press
Use or create events
Drama
Advertising
Effective use of the press
Talking heads, e.g. think tanks, prominent individuals
Press releases

6. Components of Political Strategy: More direct methods
Demonstrations, rallies, etc.
Door to door in the executive and legislative branches
Use the court system

7. Conclusions – implications on global businesses
Reality of world-wide movements
Climate change is supported by both public and private entities globally
Response to genetically modified seeds
Other environment-related movements
These have spawned “targetting”/legislation
Direct and indirect costs to global firms including legal costs, energy costs, etc.
Indirect costs in terms of negative publicity, etc.

8. An Introduction to the WTO

9. What is the WTO? The World Trade Organisation (WTO)
Established on 1st January 1995 by treaty
As a result of the Uruguay Round negotiations ( )
Located in Geneva, Switzerland
Members: 150 countries (as of January 2007)
At its simplest:
“A global organisation dealing with rules of trade between nations”. (source: WTO)
Membership- open to sovereign states and customs unions
Membership is diverse - developed, developing, least developed countries and economies in transition.

10. Evolution of the WTO Predecessor of the WTO – GATT ’47
The General Agreement on Tariffs and Trade (GATT) the first major effort to establish international rules governing trade in goods. Though initially conceived as a provisional legal instrument, it endured for almost 50 years.
The GATT functioned without a formal organisational framework to oversee its implementation as the proposed International Trade Organisation (ITO) never came into being and the ITO Charter (aka the Havana Charter) of which GATT was only to be a part, never came into effect.
GATT’s primary focus was the reciprocal reduction of tariffs which later expanded to other trade related areas. In the years leading up to the Uruguay Round, GATT expanded its competence through several rounds of trade negotiations which witnessed the formulation of complex legal instruments on specific aspects of trade, particularly disciplines on the use of non tariff barriers.

11. The Uruguay Round ( )
The results of the Uruguay Round (UR) were signed in Marrakech, Morocco on 15 April The WTO came into being on 1 January 1995 by virtue of the Agreement establishing the WTO.
The scope of the multilateral trading system was broadened from trade in goods (GATT) to encompass trade in services (GATS) and trade related aspects of intellectual property rights (TRIPS). It is a rule-based global trading system complete with its own dispute resolution procedures.
The “Single Undertaking” concept
The multilateral trade agreements under the WTO system are treated as a single undertaking which means that every member state of the WTO is a party to every one of these agreements and must implement them accordingly.
Exception: Plurilateral agreements are binding on Member states that have specifically agreed to be bound by them.

12. Principles of the world trading system under the WTO
Non discrimination- Most Favoured Nation (MFN) and National Treatment obligations
Freer trade – negotiations aimed at lowering trade barriers
Predictability and transparency – a rule based system, binding commitments, restrictions on the use of barriers to trade and transparent trade policies and regulatory frameworks (e.g. transparency obligations in the major trade agreements and the Trade Policy Review Mechanism)
The promotion of fair competition- MFN and national treatment obligations and rules against unfair trade practices (e.g. anti dumping)
Encouragement of development and economic reform

13. Organisational structure of the WTO Member driven –consensus based
Ministerial Conference- The apex body for decision making (meets every 2 years). Composition:-ministerial representatives.
General Council- performs the functions of the Conference between meetings and has specific duties assigned to it by the WTO agreements. Composition:- governmental representatives.
The General Council also meets as the Dispute Settlement Body and the Trade Policy Review Body.
Councils for Trade in Goods (oversees GATT), Trade in Services (oversees GATS) and TRIPS which report to and assist the General Council.
Committees on special subjects, Committees functioning under the Councils and Committees for the Plurilateral Agreements.
Decision making is by consensus. If consensus is not
possible, decisions are taken by a majority vote.
(Refer hand out for details)

14. The Uruguay Round agreements
The Agreement establishing the WTO
Annexes
Annex
1A - GATT 1994 (basically GATT ‘47), related agreements (e.g. Agreements on Agriculture, Subsidies etc.) and texts
1B- General Agreement on Trade in Services (GATS) and Annexes
1C- Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS)
Annex 2 Understanding on the Rules and Procedures Governing the Settlement of Disputes (aka Dispute Settlement Understanding /DSU)
Annex 3 Trade Policy Review Mechanism
Annex 4 Plurilateral Agreements
(Agreements on Trade in Civil Aircraft and Government Procurement)

15. Four main principles of GATT
Most Favoured Nation (MFN) Art. 1 of GATT embodies the MFN rule. At its simplest, it requires any favourable treatment granted to a product originating in or destined for any other country, to be accorded immediately and unconditionally to the like product originating in or destined for the territories of all other member states.
E.g. Spanish coffee case: Spain modified its tariff applied to imports of unroasted coffee, applying a higher tariff to certain types of unroasted coffee beans imported from Brazil (Arabica and Robusta) while granting duty free access to other types of “mild” unroasted coffee beans considered to be “like products”. The Panel considered this to be a breach of the GATT MFN obligation and concluded that the tariff regime was discriminatory in its treatment of unroasted coffee originating from Brazil.
[The principle of MFN is also found in GATS(Art.2) and TRIPS (Art.4)]

16. MFN (cont.) There are permitted exceptions to the MFN rule:
Free trade areas (e.g. NAFTA)
Customs unions (e.g. the EU)
Preferential systems [e.g. Generalized System of Preferences (GSP) which grants preferential treatment for products from developing countries]
Regional examples of FTAs: MERCOSUR (Southern Common Market), COMESA (Common Market for Eastern and Southern Africa), ASEAN.

17. Principles (Cont.) National Treatment
The national treatment rule in Art. 3 of GATT provides that internal taxes, charges, laws and regulations must not be applied to imported or domestic products so as to afford protection to domestic production.
The imported product must not be subject directly or indirectly to internal taxes in excess of those applied directly or indirectly to the like domestic product.
[The national treatment principle is also found in GATS (Art.17) and TRIPS (Art.3).]
E.g. Japan- Alcoholic beverages case (1996)
The dispute concerned imported vodka (and other imported alcoholic beverages) and domestically produced shochu (a distilled white spirit) and excessive Japanese taxes on the former.

18. Principles (Cont.)
“Tarrification”
- Protection of the domestic industry by tariffs only.
- Reinforced through rules which prohibit use of quantitative restrictions.
(Art 11 GATT).
Limited exceptions are allowed e.g. for BOP reasons (Art 12 GATT).
Tariff Concessions- negotiations shall be aimed at reducing tariffs (Preamble and Art. 28bis GATT). Tariffs shall also be bound against further increases [Art 2.1(b) GATT].
(The tariff concessions of each Member are recorded in schedules of concessions that are annexed to GATT. Schedules of concessions are an integral part of GATT.)

19. The WTO’s functions
Administers the WTO Agreements and facilitates their operation and implementation
Provides a forum for trade negotiations among member states on matters covered by the Agreements and for further liberalisation of trade amongst members
Responsible for the settlement of differences and disputes between members
Responsible for periodic reviews of the trade policies of members
Also provides technical assistance and training for developing countries
Co-operates with other international organisations on subjects of mutual interest

20. The WTO as a dispute settlement forum
Settlement of disputes under the DSU
1. Bilateral consultations, use of good offices, availability of conciliation and mediation
2. Panel proceedings
3. Appellate review [appeal to Appellate Body (AB) on a point of law]
4. Consideration and adoption of Panel/AB reports by the DSB.
If the report concludes that a measure is inconsistent with a covered agreement, the Panel (/AB) must recommend that the Member concerned bring the measure into conformity with that agreement.
Panel (or AB) reports are adopted automatically by the DSB unless there is consensus against such adoption.
5. Implementation of recommendations by a losing party:
- Emphasis is on full compliance.
- Negotiation of compensation (must be voluntary and mutually acceptable) if there is a delay in implementation beyond a reasonable time.
- Failure to implement may result in DSB authorization of retaliatory action (i.e. suspension of concessions/obligations).

21. WTO as a monitoring body
Trade Policy Review Mechanism-
Periodic review of the trade policies of member states.
Monitors compliance with WTO disciplines and commitments.
Provides greater transparency and understanding of the trade policies and practices of member states.
The TPRM is not used as a basis for enforcement or dispute settlement.
Frequency of review depends on share of world trade E.g. the trade policies of the US, EC, Japan and Canada are reviewed every 2 years.

22. Services and the WTO
The WTO regulates trade in services through the General Agreement on Trade in Services (GATS). The GATS is “broadly comparable” to the GATT but there are significant differences in its approach to liberalization.
Services cover a wide range of activities. Under the GATS, the term “services” include any service in any sector except services supplied in the exercise of governmental authority.
The GATS applies to all measures by Members affecting trade in services.
Measures can be laws, regulations, procedures, decisions, administrative action etc., of Member governments.
Trade in services under the GATS is defined in terms of four modes of supply.

23. The four modes of supply under GATS
Trade in services under the GATS is defined in terms of four modes of supply. They are :-
(1) from the territory of one Member into the territory of any other Member (aka cross border supply of services/ Mode 1)
(2) in the territory of one Member to the service consumer of any other Member (aka consumption abroad/ Mode 2)
(3) by a service supplier of one Member, through commercial presence in the territory of any other Member; (aka commercial presence/ Mode 3)
(4) by a service supplier of one Member, through presence of natural persons of a Member in the territory of any other Member (aka presence of natural persons/ Mode 4)
(Art.1 GATS)

24. GATS obligations Two main categories of obligations
General obligations which apply to all service sectors of all Members.
E.g. MFN, Transparency obligations
Specific obligations which apply only to service sectors specified in the Member’s “Schedule of specific commitments”.
E.g. Market access and national treatment obligations.

25. General Obligations MFN (Art.2) Transparency (Art.3)
“With respect to any measure covered by this Agreement, each Member
shall accord immediately and unconditionally to services and service
suppliers of any other Member treatment no less favorable than that it
accords to like services and service suppliers of any other country.”
Note qualifications to the MFN rule via Art. 2 exemptions and
exemptions for regional/free trade arrangements (Art.5).
Transparency (Art.3)
Art. 3 is mainly concerned with the provision of information. The rule
requires the “prompt” publication of general measures, notification of
changes to/introduction of measures that affect sectors covered by
specific commitments to the Services Council and requires the
establishment of national enquiry points by Members.

26. Specific obligations Market Access Art. 16
“With respect to market access through the modes of supply
identified in Article 1, each Member shall accord services and
service suppliers of any other Member treatment no less favorable
than that provided for under the terms, limitations and conditions
agreed and specified in its Schedule.”
Art. 16 contains a list of measures (which are quantitative or
quantitative type measures) that Members cannot maintain unless
they specify them in their Schedules as limitations on market
access. These measures include for example:
- limitations on the number of suppliers (e.g. quotas)
- limitations on the quantity of service out put (e.g. limited broadcasting time for foreign films)
- limitations on the participation of foreign capital or restrictions on the type of legal entity (e.g. joint venture)

27. Cont. National Treatment Art. 17
“In the sectors inscribed in its Schedule, and subject to any
conditions and qualifications set out therein, each Member shall
accord to services and service suppliers of any other Member, in
respect of all measures affecting the supply of services, treatment no
less favorable than that it accords to its own like services and service
suppliers.”
Example : The availability of tax incentives only to companies
controlled by nationals of the country in the retail services sector.
Art. 17 covers both de jure and de facto discrimination.

28. Domestic regulations Domestic regulations Art. 6
Article 6 addresses domestic regulations as these may act as barriers
to trade even if they are non-discriminatory. Domestic regulations
include professional qualifications, licensing procedures and technical
regulations.
Certain Art. 6 obligations apply only to service sectors in which
commitments have been undertaken; for example the obligation to
ensure that general measures are administered in “a reasonable,
objective and impartial manner”.
Article 6 also contains obligations aimed at preventing licensing and
qualification requirements and technical standards from being
unnecessary barriers to trade.

29. Extract from a Schedule of specific commitments
Modes of supply(1) Cross border supply (2) Consumptions abroad (3) Commercial presence (4) Presence of natural persons
Sector or sub-sector
Limitations on market access
Limitations on national treatment
Additional commitments
(h) Medical and dental services (CPC 9312)
(1) None
(2) None
(3) Foreign service suppliers are permitted to establish joint venture hospitals or clinics with Arcadian partners with quantitative limitations in line with Arcadian needs with foreign majority ownership permitted.
(4) Unbound except as indicated in horizontal commitments and as follows:
Foreign doctors with professional licenses issued by their home country are permitted to provide short term medical services after obtaining licenses from the Arcadia Ministry of Health. Term of service limited to one year.
None
Majority of doctors and medical personnel of the joint venture hospital and clinics shall be of Arcadian nationality.
Unbound, except as indicated in horizontal commitments

30. The Doha Round
Ambitious round of negotiations launched in 2001, by the 4th Ministerial Conference of the WTO in Doha, Qatar.
The Doha Round covers a wide area of subjects and includes negotiations in agriculture, industrial goods and services. It also covers a number of implementation issues.
Dead lock in trade talks in 2003 but break through in Geneva the following year (August, 2004 ).
Success in the area of public health and access to essential medicines for developing countries through an amendment to TRIPS.
Targets set at the 6th Ministerial Meeting in Hong Kong (December 2005). Talks suspended in July 2006 and resumed again in February 2007.
Leadership of the US and EU in agriculture talks is necessary if the round is to succeed.
Is the failure of the WTO’s first round of talks imminent?
Issue - U.S. President’s Trade Promotion Authority expires end June, 2007.

31. Main Areas of focus in the Doha Round
Agriculture –
Modalities for negotiations to be established.
Elimination date for export subsidies in agriculture(2013) and substantial reductions by 2010; disciplines to be established on export measures of equivalent effect; reductions in trade distorting domestic subsidies, with the EU, US and Japan undertaking the biggest cuts; special flexibilities for developing countries.
Developed countries to end export subsidies for cotton and undertake deeper cuts for domestic support for cotton than for agriculture in general.
Duty free/quota free access to cotton exports from LDCs.
Industrial products
Interests of developing countries to be taken into account when negotiating reductions in tariffs.
Possibility of duty free/quota free access to products from LDCs, to be implemented over time.
Services – possibility of plurilateral negotiations to speed up negotiations in the services sector.
Aid for trade particularly for LDCs.
Agreement on key details still needed
- specific formula for cutting tariffs and subsidies in agriculture; flexibilities for ‘sensitive products’.
- details of the final agreement on special products , special safeguard mechanisms and food aid in agriculture.
- modalities for reducing tariffs in industrial goods.

32. International Trade Complaints- so where do you go?
Lodge complaint with Trade Compliance Centre (TCC) of the International Trade Administration, Department of Commerce.
If voluntary compliance cannot be secured the TCC will utilize the USTR Enforcement Office, which will consider use of the WTO dispute settlement procedures.
For complaints on dumping or unfair subsidies
- the Import Administration and
- the International Trade Commission

33. Refer websites for detailed information
The WTO Website :
United States Trade Representative
Some related websites of interest
OECD
ITC
World Bank