2.

1 – WTO Agreement , WTO and tariff restrictions , WTO and non-tariff restrictions
The World Trade Organization (WTO) is an organization that intends to supervise and liberalize
international trade. The organization officially commenced on January 1, 1995 under the Marrakech
Agreement, replacing the General Agreement on Tariffs and Trade (GATT), which commenced in
1948. The organization deals with regulation of trade between participating countries; it provides a
framework for negotiating and formalizing trade agreements, and a dispute resolution process aimed
at enforcing participants' adherence to WTO agreements, which are signed by representatives of
member governments and ratified by their parliaments. Most of the issues that the WTO focuses on
derive from previous trade negotiations, especially from the Uruguay Round (1986 1994).The WTO's
predecessor, the General Agreement on Tariffs and Trade (GATT), was established after World War II
in the wake of other new multilateral institutions dedicated to international economic cooperation —
notably the Breton Woods institutions known as the World Bank and the International Monetary
Fund. A comparable international institution for trade, named the International Trade Organization
was successfully negotiated. The ITO was to be a United Nations specialized agency and would
address not only trade barriers but other issues indirectly related to trade, including employment,
investment, restrictive business practices, and commodity agreements. But the ITO treaty was not
approved by the U.S. and a few other signatories and never went into effect. In the absence of an
international organization for trade, the GATT would over the years "transform itself" into a de facto
international organization.

GATT Rounds of Negotiations :

The GATT was the only multilateral instrument governing international trade from 1946 until the
WTO was established on January 1, 1995. Despite attempts in the mid-1950s and 1960s to create
some form of institutional mechanism for international trade, the GATT continued to operate for
almost half a century as a semi-institutionalized multilateral treaty regime on a provisional basis.
From Geneva to Tokyo - > Seven rounds of negotiations occurred under GATT. The first real GATT
trade rounds concentrated on further reducing tariffs. Then, the Kennedy Round in the mid-sixties
brought about a GATT anti-dumping Agreement and a section on development. The Tokyo Round
during the seventies was the first major attempt to tackle trade barriers that do not take the form of
tariffs, and to improve the system, adopting a series of agreements on non-tariff barriers, which in
some cases interpreted existing GATT rules, and in others broke entirely new ground. Because these
plurilateral agreements were not accepted by the full GATT membership, they were often informally
called "codes". Uruguay Round -> in September 1986, in Punta del Este, Uruguay. It was the biggest
negotiating mandate on trade ever agreed: the talks were going to extend the trading system into
several new areas, notably trade in services and intellectual property, and to reform trade in the
sensitive sectors of agriculture and textiles; all the original GATT articles were up for review.

Accession and Membership -> The process of becoming a WTO member is unique to each applicant
country, and the terms of accession are dependent upon the country's stage of economic
development and current trade regime. The process takes about five years, on average, but it can last
more if the country is less than fully committed to the process or if political issues interfere.
Members and observers -> The WTO has 159 members and 25 observer governments. In addition to
states, the European Union is a member. WTO members do not have to be full sovereign nation-
members. Instead, they must be a customs territory with full autonomy in the conduct of their
external commercial relations. Thus Hong Kong Special Administrative region (as "Hong Kong, China"
since 1997) became a GATT contracting party, follow by was the "China" (Mainland China, not
include Taiwan, Macau and Hong Kong) joining at 2001 for after 15 years of negotiations, and the
Republic of China (Taiwan) acceded to the WTO in 2002 as "Separate Customs Territory of Taiwan,
Penghu, Kinmen and Matsu" (Chinese Taipei) despite its disputed status The WTO Secretariat omits
the official titles (such as Counselor, First Secretary, Second Secretary and Third Secretary) of the
members of Chinese Taipei's Permanent Mission to the WTO, except for the titles of the Permanent
Representative and the Deputy Permanent Representative.

Agreements -> The WTO oversees about 60 different agreements which have the status of
international legal texts. Member countries must sign and ratify all WTO agreements on accession. A
discussion of some of the most important agreements follows. The Agreement on Agriculture came
into effect with the establishment of the WTO at the beginning of 1995. The AoA has three central
concepts, or "pillars": domestic support, market access and export subsidies. The General Agreement
on Trade in Services was created to extend the multilateral trading system to service sector, in the
same way as the General Agreement on Tariffs and Trade (GATT) provided such a system for
merchandise trade. The agreement entered into force in January 1995. The Agreement on Trade-
Related Aspects of Intellectual Property Rights sets down minimum standards for many forms of
intellectual property (IP) regulation. It was negotiated at the end of the Uruguay Round of the
General Agreement on Tariffs and Trade (GATT) in 1994.The Agreement on the Application of Sanitary
and Phytosanitary Measures—also known as the SPS Agreement—was negotiated during the
Uruguay Round of GATT, and entered into force with the establishment of the WTO at the beginning
of 1995. Under the SPS agreement, the WTO sets constraints on members' policies relating to food
safety (bacterial contaminants, pesticides, inspection and labeling) as well as animal and plant health
(imported pests and diseases). The Agreement on Technical Barriers to Trade is an international
treaty of the World Trade Organization. It was negotiated during the Uruguay Round of the General
Agreement on Tariffs and Trade and entered into force with the establishment of the WTO at the end
of 1994.

Principles of the Trading System -> The WTO establishes a framework for trade policies; it does not
define or specify outcomes. That is, it is concerned with setting the rules of the trade policy games.
Five principles are of particular importance in understanding both the pre-1994 GATT and the WTO:

Non-discrimination. It has two major components: the most favored nation (MFN) rule, and the
national treatment policy. Both are embedded in the main WTO rules on goods, services, and
intellectual property, but their precise scope and nature differ across these areas. The MFN rule
requires that a WTO member must apply the same conditions on all trade with other WTO members,
i.e. a WTO member has to grant the most favorable conditions under which it allows trade in a
certain product type to all other WTO members. "Grant someone a special favor and you have to do
the same for all other WTO members." National treatment means that imported goods should be
treated no less favorably than domestically produced goods (at least after the foreign goods have
entered the market) and was introduced to tackle non-tariff barriers to trade (e.g. technical
standards, security standards et al. discriminating against imported goods).
1. Reciprocity . It reflects both a desire to limit the scope of free-riding that may arise because of the
MFN rule, and a desire to obtain better access to foreign markets. A related point is that for a nation
to negotiate, it is necessary that the gain from doing so be greater than the gain available from
unilateral liberalization; reciprocal concessions intend to ensure that such gains will materialize.
2. Binding and enforceable commitments. The tariff commitments made by WTO members in a
multilateral trade negotiation and on accession are enumerated in a schedule (list) of concessions.
These schedules establish "ceiling bindings": a country can change its bindings, but only after
negotiating with its trading partners, which could mean compensating them for loss of trade
3. Transparency. The WTO members are required to publish their trade regulations, to maintain
institutions allowing for the review of administrative decisions affecting trade, to respond to requests
for information by other members, and to notify changes in trade policies to the WTO. These internal
transparency requirements are supplemented and facilitated by periodic country-specific reports
(trade policy reviews) through the Trade Policy Review Mechanism (TPRM). The WTO system tries
also to improve predictability and stability, discouraging the use of quotas and other measures used
to set limits on quantities of imports. 4.
Safety valves. In specific circumstances, governments are able to restrict trade. The WTO‘s
agreements permit members to take measures to protect not only the environment but also public
health, animal health and plant health. There are three types of provision in this direction:

Tariffs and Trade Barriers -> International trade increases the number of goods that domestic
consumers can choose from, decreases the cost of those goods through increased competition, and
allows domestic industries to ship their products abroad. While all of these seem beneficial, free
trade isn't widely accepted as completely beneficial to all parties. This article will examine why this is
the case, and look at how countries react to the variety of factors that attempt to influence trade. In
simplest terms, a tariff is a tax. It adds to the cost of imported goods and is one of several trade
policies that a country can enact. Tariffs are often created to protect infant industries and developing
economies, but are also used by more advanced economies with developed industries. Here are five
of the top reasons for tariffs are used:

A) Protecting Domestic Employment : The levying of tariffs is often highly politicized. The possibility
of increased competition from imported goods can threaten domestic industries. These domestic
companies may fire workers or shift production abroad to cut costs, which means higher
unemployment and a less happy electorate. The unemployment argument often shifts to domestic
industries complaining about cheap foreign labor, and how poor working conditions and lack of
regulation allow foreign companies to produce goods more cheaply. In economics, however,
countries will continue to produce goods until they no longer have a comparative advantage.
b) Protecting Consumers A government may levy a tariff on products that it feels could endanger its
population. For example, South Korea may place a tariff on imported beef from the United States if it
thinks that the goods could be tainted with disease.
c) National Security Barriers are also employed by developed countries to protect certain industries
that are deemed strategically important, such as those supporting national security. Defense
industries are often viewed as vital to state interests, and often enjoy significant levels of protection.
For example, while both Western Europe and the United States are industrialized, both are very
protective of defense-oriented companies.
D)Retaliation Countries may also set tariffs as a retaliation technique if they think that a trading
partner has not played by the rules. For example, if France believes that the United States has
allowed its wine producers to call its domestically produced sparkling wines "Champagne" (a name
specific to the Champagne region of France) for too long, it may levy a tariff on imported meat from
the United States.
Types of Tariffs and Trade Barriers
There are several types of tariffs and barriers that a government can employ:
Specific Tariffs A fixed fee levied on one unit of an imported good is referred to as a specific tariff.
This tariff can vary according to the type of good imported. For example, a country could levy a $15
tariff on each pair of shoes imported, but levy a $300 tariff on each computer imported.
AdValorem Tariffs The phrase ad valorem is Latin for "according to value", and this type of tariff is
levied on a good based on a percentage of that good's value. An example of an ad valorem tariff
would be a 15% tariff levied by Japan on U.S. automobiles. The 15% is a price increase on the value
of the automobile, so a $10,000 vehicle now costs $11,500 to Japanese consumers. This price
increase protects domestic producers from being undercut, but also keeps prices artificially high for
Japanese car shoppers. Non-tariff barriers Licenses to trade include:
License A license is granted to a business by the government, and allows the business to import a
certain type of good into the country. For example, there could be a restriction on imported cheese,
and licenses would be granted to certain companies allowing them to act as importers. This creates a
restriction on competition, and increases prices faced by consumers.
Import Quotas An import quota is a restriction placed on the amount of a particular good that can
be imported. This sort of barrier is often associated with the issuance of licenses. For example,
country may place a quota on the volume Voluntary of imported Export citrus fruit that Restraints is
allowed.
Voluntary Export Restraints (VER) This type of trade barrier is "voluntary" in that it is created by the
exporting country rather than the importing one. A voluntary export restraint is usually levied at the
behest of the importing country, and could be accompanied by a reciprocal VER. For example, Brazil
could place a VER on the exportation of sugar to Canada, based on a request by Canada. Canada
could then place a VER on the exportation of coal to Brazil. This increases the price of both coal and
sugar, but protects the domestic industries.

WhoBenefits? price of goods. The benefits of tariffs are uneven. Because a tariff is a tax, the
government will see increased revenue as imports enter the domestic market. Domestic industries
also benefit from a reduction in competition, since import prices are artificially inflated.
Unfortunately for consumers - both individual consumers and businesses - higher import prices
mean higher prices for goods..

Tariff and Non-Tariff Barriers to Trade - > In the Uruguay round of the GATT/WTO negotiations,
members agreed to drop the use of import quotas and other non-tariff barriers in favor of tariff rate
quotas. Countries also agreed to gradually lower each tariff rate and raise the quantity to which the
low tariff applied. Thus, over time, trade would be taxed at a lower rate and trade flows would
increase. Given current U.S. commitments under the WTO on market access, options are limited for
U.S. policy innovations in the 2002 Farm Bill vis a vis tariffs on agricultural imports from other
countries. Providing higher prices to domestic producers by increasing tariffs on agricultural imports
is not permitted. In addition, particularly because the U.S. is a net exporter of many agricultural
commodities, successive U.S. governments have generally taken a strong position within the WTO
that tariff and TRQ barriers need to be reduced.
Non-Tariff Trade Barriers -> Countries use many mechanisms to restrict imports. A critical objective
of the Uruguay Round of GATT negotiations, shared by the U.S., was the elimination of non-tariff
barriers to trade in agricultural commodities (including quotas) and, where necessary, to replace
them with tariffs – a process called tarrification. Tarrification of agricultural commodities was largely
achieved and Viewed as a major success of the 1994 GATT agreement. Thus, if the U.S. honors its
GATT commitments, the utilization of new non-tariff barriers to trade is not really an option for the
2002 Farm Bill.
Technical Barriers to Trade -> All countries impose technical rules about packaging, product
definitions, labeling, etc. In the context of international trade, such rules may also be used as non-
tariff trade barriers. For example, imagine if Korea were to require that oranges sold in the country
be less than two inches in diameter. Oranges grown in Korea happen to be much smaller than Navel
oranges grown in California, so this type of ―technical‖ rule would effectively ban the sales of
California oranges and protect the market for Korean oranges. Such rules violate WTO provisions that
require countries to treat imports and domestic products equivalently and not to advantage products
from one source over another, even in indirect ways. Again, however, these issues will likely be dealt
with through bilateral and multilateral trade negotiations rather than through domestic Farm Bill
policy initiatives.