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

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

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

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

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

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

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.

An Introduction to the WTO

What is the WTO? The World Trade Organisation (WTO) Established on 1st January 1995 by treaty As a result of the Uruguay Round negotiations (1986-1994) 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.

Evolution of the WTO Predecessor of the WTO – GATT ’47 The General Agreement on Tariffs and Trade (GATT) 1947 -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.

The Uruguay Round (1986-1994) The results of the Uruguay Round (UR) were signed in Marrakech, Morocco on 15 April 1994 .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.

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

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)

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)

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)]

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.

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.

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.)

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

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).

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.

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.

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)

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.

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.

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)

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.

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.

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

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. http://www.wto.org/english/tratop_e/dda_e/dda_e.htm

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.

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. http://tcc.export.gov/ For complaints on dumping or unfair subsidies - the Import Administration http://www.trade.gov/ia/ and - the International Trade Commission http://www.usitc.gov/

Refer websites for detailed information The WTO Website : www.wto.org United States Trade Representative www.ustr.gov/ Some related websites of interest OECD www.oecd.org ITC www.intracen.org World Bank www.worldbank.org