1. IMPORTANCE OF INTERNATIONAL TRADE
It allows each nation to specialise one way or the other in the production of goods and services.
It has the best advantage and thereby increase productivity. No nation would be able to produce each good and service with equal ability. By ranging the productivity of national economies international specialization increases the output of goods and services.
What is trade?

2. importance 2. Contributes in achieving sufficiency in countries.
Few countries could become self- sufficient even with the greatest effort without trade. For e.g., it is physically impossible for the U.K. or Japan to feed, clothe and house their present populations at their current levels without imports from other countries. The survival of these countries depends essentially on the export of manufactures that require little space to produce in exchange for foodstuffs and raw materials that require great space to produce or are found in only certain areas of the earth.

3. importance
3. Even if a country is able to supply her own people with the basic necessities of life out of domestic production, it will be faced with an unbearable decline in living standards if they were cut off from international trade.

4. importance
Though, a country may be able to produce some products to take the place of imports, its efforts in that direction could be limited by scarce supplies of labour, capital and industrial raw materials.
Without trade manufacturing industries would face many difficulties. Without imports many raw materials will no longer be available and inferior substitutes will replace them.

5. The Mercantilist Trade Thought – Trade regulation
The economic philosophy known as Mercantilism ( ) maintained that the most important way for a nation to become rich and powerful was to export more than it imported . They argued for the regulation of trade to secure a favourable balance of trade (surplus of export over import) That would bring in gold and silver in payment i.e the difference would be settled by an inflow of precious metals mostly gold.

6. Adam Smith: The theory of absolute advantage:
Smith indicated that with free trade each nation could specialised in the production of those commodities (A and B) in which it could produce more efficiently than other nations (or had an absolute advantage) and import those commodities in which it could produce less efficiently ( or had an absolute disadvantage)      

7. David Ricardo:The theory of Comparative Advantage
Even if a nation had an absolute advantage in the production of both commodities (A and B) with respect to the other nation, mutually advantageous trade could still take place.
He indicated that the less efficient nation should specialise in the production and export of the commodity (say B) in which its absolute disadvantage is less.

8. International Negotiations of Trade Policy
The average US tariff rate on dutiable imports has decreased substantially from 1920–1993.
Bilateral trade negotiations helped reduce the average duty on U.S. imports from 59% in 1932 to 25% shortly after WWII.
Since 1944, much of the reduction in tariffs and other trade restrictions came about through international negotiations.
The General Agreement of Tariffs and Trade was begun in 1947 as a provisional international agreement and was replaced by a more formal international institution called the World Trade Organization in 1995.
Economic integration
Tariffs: Value added, specific tax (per unit), non-discriminatory tariff, tariff preference
Non-Tariff: prohibitions, quotas, oppressive and dilatory documentation, regulations (GlobalGAP), Voluntary export restraint

9. International Negotiations of Trade Policy (cont.)
Multilateral negotiation mobilizes exporters to support free trade if they believe export markets will expand.
This support would be lacking in a unilateral push for free trade.
This support counteracts the support for restricted trade by import-competing groups.

10. International Negotiations of Trade Policy (cont.)
Multilateral negotiations also help avoid a trade war between countries, where each country enacts trade restrictions.
If each country has a political interest (due to political pressure) to protect domestic producers, regardless of what other countries do,
then all countries could enact trade restrictions, even if it is in the interest of all countries to have free trade.

11. Why Agricultural Protection so Notorious?
Special characters:
Protection happens in rich countries but not in poor ones.
It is hard to phase out.
Economic Rationale
The inelastic supply of agricultural goods.
The minority is easy to form a group to lobby the government.
Different Patterns:
Import restriction: Japan, Korea, and China
Export subsidy: US, CA, EU (supporting price )
Inelastic supply: with respect to perishables

12. The World Trade Organisation (WTO)

13. World Trade Organization
The World Trade Organization (WTO): the only global international organization dealing with the rules of trade between nations.
System developed through series of negotiations or “rounds” held under GATT (established after WWII).
Negotiations / Rounds
1st Round: Mainly dealt with Tariff reductions
Other Rounds: Antidumping and Non-tariff barriers
Last Round ( Uruguay Round): Led to creation of WTO in 1995
Uruguay Round included a major revision of the original GATT
WTO is thus the successor to GATT.
Wwii 1945

14. WTO
At its heart are the WTO agreements, negotiated and signed by the bulk of the world’s trading nations and ratified in their parliaments.
Goal of WTO: To help producers of goods and services, exporters, and importers conduct their business.
Overriding objective: To help trade flow smoothly, freely, fairly and predictably.

15. WTO negotiations address trade restrictions in at least 3 ways:
Reduction of tariff rates through multilateral negotiations.
Binding: a tariff is “bound” by having the imposing country agree not to raise it in the future.

16. WTO
Prevention of non-tariff barriers: quotas and export subsidies are changed to tariffs because the costs of tariff protection are more apparent.
Subsidies for agricultural exports are an exception.
Exceptions are also allowed for “market disruptions” caused by a surge in imports.

17. WTO WTO was founded in 1995 on Three (3) main agreements:
General Agreement on Tariffs and Trade (GATT): covers trade in goods
General Agreement on Tariffs in Services (GATS): covers trade in services (e.g., insurance, consulting, legal services, banking).
Agreement on Trade-Related Aspects of Intellectual Property (TRIPS): covers international property rights (e.g., patents and copyrights).

18. WTO
The dispute settlement procedure: a formal procedure where countries in a trade dispute can bring their case to a panel of WTO experts to rule upon.
The cases are settled fairly quickly: even with appeals the procedure is not supposed to last more than 15 months.
The panel uses previous agreements by member countries to decide which ones are breaking their agreements.

19. WTO
A country that refuses to adhere to the panel’s decision may be punished by allowing other countries to impose trade restrictions on its exports.
Example: U.S.—Venezuela
New U.S. air pollution standard makes the imported gasoline producers unhappy.
In 1995, Venezuela argued that the rules violated the principle of “national treatment”
The panel appointed by the WTO ruled in Venezuela’s favor.
U.S. appealed but rejected, therefore, revised its rules.

20. ITO AND GATT
GATT was born as a result of the abortive negotiations to create the International Trade Organization (ITO) following World War II.
Though negotiations were successfully concluded in Havana in 1948, ITO was not established because the US congress refused to rectify the agreement.
GATT was negotiated in 1947 by 23 countries (12 industrial and 11 developing countries) – before the ITO negotiations were concluded.

21. ITO AND GATT
GATT has been major focal point for industrial country government’s seeking to lower trade barriers.
GATT was initially limited to tariff agreement.
Overtime, the average tariff levels fell.
GATT came to increasingly concentrate on nontariff trade policies and domestic policies having an impact on trade.

22. ITO AND GATT
GATTs success was reflected in a steady expansion in the number of contracting parties.
By the end of the Uruguay Round (1994), 128 countries had joined the GATT.
WTO membership has grown to:
139 on 16th April 2012.
159 on 2nd March 2013
Ghana joined: 1st January 1995
14th July, th country joined. Afghanistan

23. GATT VRS WTO The WTO differs in a number of ways from the GATT.
GATT was a flexible institution; bargaining and deal-making lay at its core, with significant opportunities for countries to ‘opt out’ of specific disciplines.
WTO rules apply to all members , who are subject to binding dispute settlement procedures.

24. GATT VRS WTO
This is attractive to groups seeking to introduce multilateral discipline on a variety of subjects:
Ranging from environment and labour standards to
Competition and investment policies to
Animal rights.
It is source of concern for groups that perceive the multilateral rules to be inappropriate; or
Worry that the adoption of specific rules may affect detrimentally the ability of governments to regulate domestic activities and deal with market failures.

25. GATT VRS WTO
The main function of the WTO is as a forum for international cooperation on trade-related policies – the creation of codes of conduct for members government.
The codes emerge from the exchange of trade policy commitments in periodic negotiations.
It is ‘market’ in the sense that countries come together to exchange market access commitments on a reciprocal basis.

26. This market allows exchange of apples with oranges; e. g
This market allows exchange of apples with oranges; e.g. Tariff reduction on processed cocoa for foreign market access commitment regarding cars.
This makes the trade policy market less efficient than one in which money can be used, and it is one of the reasons that WTO negotiations are a tortuous process.

27. One result of the market exchange is the development of codes of conduct.
The WTO contains a set of specific legal obligations regulating trade policies of member nations and these are embodied in the GATT, the GATS and the TRIPS agreement.

28. WTO BASIC PRINCIPLES
Establishes a framework for trade policies, but does not define or specify outcomes.
It is concerned with setting the rules of trade policy game, but not the result of the game
The rules follow five principles:
Non-discrimination,
Reciprocity,
Enforceable commitments,
Transparency, and
Safety valves.
These five are the foundation of the multilateral trading system

29. A. NON-DISCRIMINATION Non-discrimination has two components:
The most favoured nation (MFN) rule, and
The national treatment principle.
The rule requires that a product made in one member country be treated no less favourably than ‘a like’ (very similar) good that originates in any other country. all countries will pay tariffs no higher than the nation that pays the lowest.
National treatment principle requires that foreign goods, once they have satisfied whatever border measures are applied, be treated no less favourably, in terms of internal (indirect) taxation than like or directly competitive domestically produced goods (Art III, GATT).

30. A. NON-DISCRIMINATION The MFN rule applies unconditionally.
There are exceptions though:
The formation of Free Trade Areas or Customs Unions and
For Preferential Treatment of developing countries.
MFN is a pillar of WTO because if policy does not discriminate between foreign suppliers, importers and consumers will have an incentive to use the lowest-cost foreign supplier.
Why is this rule important?

31. A. NON-DISCRIMINATION
MFN reduces negotiating costs: once negotiation has been concluded with a country, the results extend to all.
Other countries do not need to negotiate to obtain similar treatment; instead, negotiations can be limited to principal suppliers.
National treatment ensures that liberalization commitments are not offset through the imposition of domestic taxes and similar measures.

32. A. NON-DISCRIMINATION
It is a widely-ranging rule: the obligation applies whether or not a specific tariff commitment was made , and it covers taxes and other policies, which must be applied in a non-discriminatory fashion to like domestic and foreign products.
It is irrelevant whether a policy hurts an exporter.
What matters is the existence of discrimination, not its effects.

33. B. RECIPROCITY It is a fundamental element of the negotiation process.
It reflects both a desire to limit the scope for free-riding that may arise because:
Of the MFN rule, and;
A desire to obtain ‘payment’ for trade liberalization in the form of better access to foreign markets.
Being able to point to reciprocal, sector-specific export gains may help to sell the liberalization politically.

34. B. RECIPROCITY
Obtaining a reduction in foreign import barriers as a quid pro quo (i.e. Trade-off, agreement, exchange) for a reduction in domestic trade restrictions gives specific export-oriented domestic interests that will gain from liberalization an incentive to support it in domestic political markets.
For a nation to negotiate reciprocal terms, it is necessary that the gain from doing so be greater than the gain available from unilateral liberalization.

35. C. BINDING AND ENFORCEABLE COMMITMENTS
Liberalization commitments and agreements to abide by certain rules of the game have little value if they cannot be enforced.
The non-discrimination principle; Article I (on MFN) and III (on national treatment) of the GATT, is important in ensuring that market access commitments are implemented and maintained.
Other supporting articles include Article II (on schedules of concession).

36. C. BINDING AND ENFORCEABLE COMMITMENTS
Tariff commitments made by the WTO members in a multilateral trade negotiation and accession are enumerated in schedules (lists) of accessions.
These schedules establish ‘ceiling bindings’:
the member concerned cannot raise tariffs above bound levels without negotiation compensation with the principal suppliers of the products concerned.
The MFN rule ensures that such compensation –usually, reductions in other tariffs – extends to all WTO members, raising the cost of reneging.

37. C. BINDING AND ENFORCEABLE COMMITMENTS
Once tariff commitments are bound, it is important that there be no resort to other, nontariff, measures that have the effect of nullifying or impairing the value of the tariff concession.

38. C. BINDING AND ENFORCEABLE COMMITMENTS
A number of GATT articles attempt to ensure non-use of other measures:
Article VII (customs valuation),
Article XI (which prohibits quantitative restrictions on imports and exports), and
The Agreement on Subsidies and Countervailing Measures, which outlaws export subsidies for manufacturing and allows for the countervailing production subsidies on imports that materially injure domestic competitors.

39. C. BINDING AND ENFORCEABLE COMMITMENTS
If a country perceives an illegal act nullifying or impairing negotiated market access commitment or the principle of WTO,
It may bring such situation to the attention of the government involved, and
Ask that the policy be changed.
If satisfaction is not obtained, the complaining country may:
Invoke WTO dispute settlement procedure, which involves the establishment of panels of impartial experts charged with determining whether a contested measure violates the WTO.

40. C. BINDING AND ENFORCEABLE COMMITMENTS
Because the WTO is an intergovernmental agreement, private parties do not have legal standing before the WTO’s dispute settlement body.
The existence of dispute settlement procedures precludes/prevents the use of unilateral retaliation.
Small countries have a greater stake in a rule-based international system, which reduces the likelihood of being confronted with bilateral pressure from large trading powers to change policies that are not to their liking.

41. C. BINDING AND ENFORCEABLE COMMITMENTS
MFN provides smaller countries with a guarantee that:
Large countries will not exploit their market power by raising tariffs against them in periods when times are bad and domestic industries are clamouring for protection, or
Alternately, give specific countries preferential treatment for foreign policy reasons.

42. C. BINDING AND ENFORCEABLE COMMITMENTS
MFN helps enforce multilateral rules by raising the costs to a country of defecting from the trade regime to which it had committed itself in an earlier multilateral trade negotiations.
If the country desires to raise trade barriers, it must apply the changed regime to all WTO members.
This increases the political cost of backsliding on trade policy because importers will object.

43. D. TRANSPARENCY
Enforcement of commitments require access to information on the trade regime that are maintained by members.
That is achieved through specialized committees, working groups, councils that meet regularly.
Transparency is a basic pillar of the WTO and it is a legal obligation, embedded in Article X of the GATT and Article III of the GATS.

44. D. TRANSPARENCY WTO members are required to:
Publish their trade regulations,
To establish and maintain institutions allowing for the review of administrative decisions affecting trade,
To respond to requests for information by other members, and
To notify the WTO of changes in trade policies.
Internal transparency requirements are:
Supplemented by multilateral surveillance of trade policies by WTO members,
Facilitated by periodic country-specific reports (trade policy review) that are prepared by the secretariat and discussed by the WTO General Council.

45. D. TRANSPARENCY
The external mechanism foster transparency, both for the citizens of the countries concerned and for trading partners.
Transparency has a number of benefits. It reduces the pressure on the dispute settlement system, as measures can be discussed in the appropriate WTO body.
Transparency is also vital for ensuring ‘ownership’ of the WTO as an institution – if citizens do not know what the organization does, its legitimacy will be eroded.

46. D. TRANSPARENCY
The trade policy reviews are a unique source of information that can be used by civil society to assess the implications of overall trade policies that are pursued by their government.
From an economic perspective, transparency can also help reduce uncertainty related to trade policy.
Uncertainty is associated with lower investment and growth rates and with a shift in resources towards non-tradeable.
Mechanisms to improve transparency can help lower perception of risk by reducing uncertainty.
Download and review the Ghana trade policy document.

47. E. SAFTETY VALVES
The safety valves principle is to allow governments in specific circumstances to be able to restrict trade.
There are three types of provisions;
Articles allowing for the use of trade measures to attain non-economic objectives
Articles aimed at ensuring ‘fair competition’ and
Provisions permitting intervention in trade for economic reasons.

48. E. SAFTETY VALVES
Category (a) includes provisions allowing for policies to protect:
Public health or national security and to
Protect industries that are seriously injured by competition from imports.
The underlying idea in the latter case is that governments should have the right to step in when competition becomes so vigorous as to injure domestic competitors.

49. E. SAFTETY VALVES Measures in category (b) include:
The right to impose countervailing duties on imports that have been subsidised and
Antidumping duties on imports that have been dumped (sold at a price below that charged in the home market).
Under category (c) there are provisions allowing actions to be taken in case of:
Serious balance of payments difficulties or
If a government desires to support an infant industry.

50. WTO Agreement on Agriculture(AoA)
The AoA is one of the two main sectoral agreements in the Uruguay round Agreements that provides the specific rules in the liberalization of agricultural products
It has three main elements: Market access, domestic support and export subsidy.
The other is the Agreement on Textiles

51. WTO-AoA: Market Access
All countries are obliged to eliminate all non-tariff barriers and convert them to tariffs, “tariffication”
All countries have to bind tariffs on agric products and reduce them as time goes on.
The average reduction for developed countries is 36% within 6years and for developing countries, 24% in 10years.
Non-tariff barriers: import ban,

52. WTO-AoA: Domestic Support
This pertains to government support to domestic producers. There are three types of domestic support.
Amber box: These are measures considered as trade distorting. These are support that have effect on production like price support and input subsidies
What are the trade effects of price support and input subsidies

53. Domestic Support
Green Box: These are assumed not to have effects on production and therefore considered not trade-distorting. They are acceptable under AoA and not subject to reductions. Eg. Support for research, marketing assistance, infrastructure services, domestic food aid etc.

54. Domestic Support
Blue Box: These are measures such as direct payments to farmers that are intended to limit production. These are considered acceptable and are not subject to reduction.

55. WTO-AoA: Export Subsidy
Export Subsidy: Countries providing direct export subsidies are obliged to reduce these subsidies. 36% in value and 21% in volume for developed countries over 6years and by 24% in value and 14% in volume for developing countries over 10years

56. Why is the AoA highly Skewed?
Under free trade countries should produce only the goods they can produce cheaply or have comparative advantage and import those they produce domestically from others who produce them cheaper.
The principle of free trade which underpins trade liberalization in the AoA makes developing countries dependent on imports. This drains their scarce foreign reserves, stunts growth and reduce capacity to feed themselves.
The implication of the free trade is that developed countries have huge subsidies and can dump food on the international market

57. Why is AoA highly Skewed?
AoA merely further liberalizes markets of poorer countries even as it continues protecting the subsidies and other trade barriers of rich countries.
By this, the principle of reciprocity is rendered meaningless.
Developing countries are not allowed to use the same tools that enable developed countries to pursue their devt and food security goals in the past.

58. Why is AoA highly Skewed?
AoA worsens the inequalities existing between the highly industrial agriculture of the North and the predominantly subsistence and backwards agric. In the south.
Small-scale farmers are not in a position to compete in a clearly unfair competition with the industrial countries in the international markets

59. Why is AoA highly Skewed?
The dismantling of protection and support to agriculture in developing countries creates not only disincentives against domestic food production but also wipes out its viability and sustainability.

60. Suggestions for achieving food security
At the international level:
Expose the WTO-AoA flaws and inequalities.
Demand for an immediate end to dumping of agric. Products by developed countries.
Demand for the elimination of domestic support and all forms of export subsidies that result in the dumping activities.
Demand for the abolition of these agreements and work for a just and sustainable trade btn nations

61. Suggestions for achieving food security
At the National Level
Demand for immediate halt to massive food and agric imports by installing protective measures such as higher tariffs, import quotas.
Develop national policies on agric and trade that would protect farmers rights and livelihoods.

62. Suggestions…
Demand for increase support and subsidies in agric. To address hunger and improve incomes of small farmers.

63. THANK YOU

64. Questions
What are the basic principle governing the operations of the WTO as a forum for multilateral trading negotiations?
Discuss briefly three of the basic WTO principles.
What are the critical differences between the GATT and the WTO?

65. QUIZ QUESTIONS How many countries constitute the African Union (AU)?
How many Member States constitute the Economic Community of West African States (ECOWAS)?
What do you understand by the term “Most Favoured Nation”?
State the basic principles governing the operation of the World Trade Organisation?