Consequences of the WTO-agreements for Developing Countries

287 Pages·2004·2.64 MB·English

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Consequences of the WTO Agreements for Developing Countries u
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Critics of the WTO have long insisted on an evaluation of the effects of n
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the WTO agreements on developing countries. In 2003, the Swedish
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Parliament instructed the Swedish Government to commission such s

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of the WTO Agreements for developing countries”, is a synthesis of
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the most up-to-date research and analysis, including the National h
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Board of Trade’s own body of experience in this field.

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KOMMERSKOLLEGIUM 1-9
BOX 6803, S-113 86 STOCKHOLM, SWEDEN 396-
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PHONE: [phone] FAX: [phone]
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E-MAIL: [email protected] N: 91 00
www.kommers.se SB 4
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WEDEN
The National Board of Trade
The National Board of Trade is a governmental agency
and the central administrative body in Sweden dealing
with foreign trade and trade policy. The Board provides
the Government with analyses and recommendations.
Within the framework of the European Union, the Board
works for an effective Internal Market, an open trade
policy in the EU and a strengthened multilateral trading
system within the WTO. The Board also acts as ombuds-
man for free trade and free movement within the EU as
partners of the SOLVIT network. This connects
governmental agencies across Europe helping
companies and individuals caught between differing
regulatory systems.
www.kommers.se
Cover picture: Liba Taylor/Silver Bildbyrå
Preface
The World Trade Organization was established in 1995 as a result of the Uruguay
Round of trade negotiations, within the framework of the General Agreement on
Tariffs and Trade (GATT). In the following years, organizations critical of the WTO
have called for an assessment of the consequences of its agreements for developing
countries before the launching of the next round of trade negotiations.
In this report, the National Board of Trade contributes with its view of the
consequences of the WTO agreements for developing countries, based on existing
research and analysis. The report has been written at the request of the Swedish
Parliament.
The report is for the greatest part retrospective in its focus. The purpose of the
assignment has been to compile and analyse how developing countries have been
affected by the WTO thus far. Accordingly, the report focuses on evaluating the
consequences of existing provisions in the WTO, such as trade in goods, services,
intellectual property rights and dispute settlement, while issues concerning the
present round of negotiations - the Doha Development Agenda - are not addressed
directly.
Stockholm, March 2004
Peter Kleen
Director General
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The Research Group
This report is the result of a team effort to which the majority of staff dealing with
WTO issues at the National Board of Trade have contributed.
Peter Kleen led the steering committee, which also included Elisabeth Dahlin and
Gunnar Fors. Ingrid Jegou was the project leader. Together with Per Altenberg, Jegou
was also the editor of the report. Annika Widell, Maria Liungman and Ingrid Linde-
berg performed sub-editing roles during the research phase.
The following staff participated in the research:
Per Altenberg (Bilateral and Regional Trade Agreements), Christer Arvius (the TBT
Agreement), Mattias Björklid Chu (the Agreement on Government Procurement),
Agnès Courades Allebeck (the TRIPS Agreement), Helena Detlof (the Agreement on
Safeguards), Elisabeth Florell (Tariff reductions for non agricultural goods), Hans
Flykt (the Agreement on Information Technology), Hilda Fridh (the Agreement on
Antidumping), Marcus Hellqvist (the Agreement on Preshipment Inspection), Henrik
Isakson (the Agreement on Textiles and Clothing, the Agreement on Import
Licensing Procedures), Anna Jansson (the Agreement on Rules of Origin), Andrew
Jenks (Bilateral and Regional Trade Agreements), Maria Johem (the Agreement on
Customs Valuation), Maria Liungman (Tariff Reductions for Non-Agricultural
Goods), Ulrika Lyckman Alnered (the Agreement on Rules of Origin), Bo Magnus-
son (the Agreement on Agriculture, the SPS Agreement), Magnus Nikkarinen (the
Agreement on Agriculture), Håkan Nordström (the Multilateral Trade System, Tariff
Reductions for Non-Agricultural Goods), Magnus Rentzhog (the GATS), Carl
Michael Simon (the Dispute Settlement Understanding, the TRIPS Agreement),
Annika Widell, (the Agreement on Subsidies and Countervailing Measures, the
Agreement on Trade in Civil Aircraft), and Gunvor Åkerblom (the Agreement on
Subsidies and Countervailing Measures, the Agreement on Trade in Civil Aircraft).
Finally, a large number of people and institutions, both within Sweden as well as
internationally, contributed with valuable information and points of view during the
research work.
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Executive Summary
At the request of the Swedish Parliament, the National Board of Trade has analysed
the effects of the existing WTO agreements and how the WTO system has worked
thus far from the perspective of developing countries.
The overall judgement of the National Board of Trade is that several of the
agreements signed within the framework of GATT and the WTO have contributed
to improving market access for developing countries and increasing their trade. As
members of the WTO, developing countries have greater opportunities for partici-
pating in world trade and for integrating into the world economy. The WTO has also
created a framework for world trade that is more predictable and less arbitrary,
characteristics which are of great benefit to developing countries.
At the same time, the National Board of Trade notes that there are difficulties in
drawing general conclusions when it comes to determining the effects of the WTO
agreements for developing countries. Developing countries constitute a large,
heterogeneous group, at different stages of development, and with different needs
and interests. Moreover, when considering the trade and development relationship,
there are many factors which play a role, such as political, economic and social
stability, the rule of law, infrastructure, geographical location, the health situation,
level of education, and the redistribution policy of governments.
Non-agricultural goods– GATT and other agreements
Developing countries have gained improved access to the markets of the developed
countries and of other developing countries through tariff reductions within the
framework of GATT and the WTO. The WTO’s core principle of equal treatment
(enshrined in the “Most Favoured Nation” principle), has meant that, in some
sectors, developing country members of the WTO have automatically gained access
to the markets of other countries, without reciprocity being required. However, tariff
reductions have been considerably smaller in sectors of particular interest to
developing countries, meaning that exporters from developing countries face, in
effect, higher levels of tariffs than exporters from developed countries. Furthermore,
tariffs are in general higher in developing countries than in developed countries,
something that further inhibits trade growth, not least between developing countries.
Supplementary agreements of GATT
There are a number of supplementary agreements to GATT which regulate inter alia
customs valuation, technical barriers to trade, subsidies, measures for food safety
and animal and plant health, and safeguard measures. According to the National
Board of Trade’s assessment, these agreements improve the security of market access
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and counteract arbitrary protectionism. However, the report underlines the
difficulties in empirically determining the effects of the supplementary agreements.
New agreements
At the same time as the WTO was created in 1995, the multilateral trading frame-
work was supplemented with several new agreements addressing, amongst other
things, trade in services, the trade related aspects of intellectual property rights
(TRIPS), trade in textiles and clothing, and agricultural goods. These agreements
have had mixed results for developing countries:
• There has only been a minor increase in market access for agricultural goods and
for services. The Agreement on Agriculture and the General Agreement on Trade
in Services (GATS) have, however, established a framework for future
negotiations and provide a guaranteed minimum level of market access.
• The deregulation of trade in textiles and clothing is expected to increase total
market access for developing countries from 2005. A number of competitive
exporting developing countries are expected to increase their market shares.
Several of the less competitive countries may, however, lose from the deregulation.
• The TRIPS agreement can benefit those developing countries with a high degree
of technological maturity, but creates a huge financial burden for poor developing
countries with weak public finances. This burden is partly due to the one-off cost
of necessary legislation on intellectual property rights, and partly due to the
recurrent costs incurred for ensuring observance of the legislation.
The WTO dispute settlement system
The National Board of Trade’s view is that the WTO dispute settlement system has
improved the possibility for developing countries to enforce the observance of trade
commitments made by their trading partners. Developing countries initiate more
claims under the WTO than they did under GATT, and pursue them with a higher
degree of success. However, the penalties available under the dispute settlement
system remain limited to threats of trade sanctions, something which disadvantages
developing countries who cannot afford to threaten their imports in such a manner.
However, this has not been a large problem so far, as economically powerful
countries, such as the USA and the EU, have usually complied with decisions in
WTO disputes which have gone against them.
Costs for developing countries of the WTO agreements
The main costs of the WTO agreements for developing countries are those associated
with the requirements of implementation, such as new legislation, increased adminis-
tration, and compliance systems. Therefore, even if the purpose of an agreement is
good, it risks becoming a financial burden for countries with limited resources.
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As the least developed countries (LDCs) are exempted from many of these
requirements, the countries most affected by such costs are the poor developing
countries that do not have LDC status. Furthermore, such costs vary between
agreements. The TRIPS agreement, for example, imposes substantial costs in order
for parties to meet certain minimum legislative and administrative standards. The
agreement on customs valuation necessitates many developing countries to invest in
their customs administrations. The GATS, on the other hand, is a relatively
“inexpensive” agreement, being based on the principle that each country makes only
the commitments it is willing to make.
Conclusion
The National Boards of Trade’s conclusion is that the WTO has contributed to
reducing trade barriers and to stimulating world trade within a number of areas, but
that much remains to be done within sectors where developing countries have strong
interests. This is true especially for trade in services and in agricultural products,
which remain heavily regulated in most countries.
Outline
The report studies each of the WTO agreements individually. For each agreement
there is a short summary. An outline of the conclusions of the National Board of
Trade are found at the end of the report.
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Index
Preface...........................................................................................................1
The Research Group.....................................................................................2
Executive Summary......................................................................................3
Index...............................................................................................................6
1. Introduction............................................................................................13
1.1 The assignment ....................................................................................13
1.2 Framework of the assignment.................................................................13
1.3 Definitions ...........................................................................................15
1.4 A complicated analysis..........................................................................16
List of references.....................................................................................17
2. The multilateral trade system..............................................................18
2.1 The historical prelude............................................................................19
2.1.1 The period before the First World War ...............................................19
2.1.2 The interwar period.........................................................................20
2.1.3 The post-war economic order takes shape..........................................21
2.2 The GATT epoch....................................................................................22
2.2.1 From agreement to institution ..........................................................23
2.2.2 Central principles............................................................................23
2.2.3 Tariff negotiations...........................................................................26
2.2.4 The rules are extended ....................................................................27
2.2.5 The growing circle of members.........................................................28
2.2.6 Special treatment of developing countries .........................................29
2.2.7 From GATT to WTO..........................................................................30
2.3 The World Trade Organisation (WTO).......................................................31
2.3.1 The WTO agreement........................................................................31
2.3.2 The WTO’s functions .......................................................................33
List of references.....................................................................................35
3. Trade in goods........................................................................................37
Agreements to improve market access....................................................37
3.1 Tariff reductions for non-agricultural goods in GATT..................................37
3.1.1 Background....................................................................................37
3.1.2 Description of rules for tariff reductions in GATT................................38
3.1.3 Negotiations on tariffs on non-agricultural goods in the
Uruguay Round........................................................................................40
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3.1.4 Consequences of the tariff structure for developing countries ..............44
3.1.5 Consequences of tariff reductions for trade and customs
revenues in developing countries...............................................................47
3.1.6 Summary .......................................................................................52
List of references.....................................................................................54
3.2 The Information Technology Agreement (ITA)...........................................56
3.2.1 Background....................................................................................56
3.2.2 Description of the ITA......................................................................56
3.2.3 Consequences for developing countries.............................................57
3.2.4 Summary .......................................................................................58
List of references.....................................................................................58
3.3 Agreement on Textiles and Clothing ........................................................59
3.3.1 Background....................................................................................59
3.3.2 Description of the agreement ...........................................................65
3.3.3 Consequences for developing countries.............................................67
3.3.4 Summary .......................................................................................72
List of references.....................................................................................74
3.4. The Agreement on Agriculture ...............................................................76
3.4.1 Background....................................................................................76
3.4.2 Description of the Agreement on Agriculture......................................78
3.4.3 Consequences for the developing countries........................................81
3.4.4 Summary .....................................................................................100
List of references...................................................................................102
3.5 Agreement on Trade in Civil Aircraft......................................................105
3.5.1 Description of the Agreement.........................................................105
3.5.2 Consequences for developing countries...........................................106
3.5.3 Summary .....................................................................................106
3.6 Agreement on Government Procurement (GPA).......................................107
3.6.1 Background..................................................................................107
3.6.2 Description of the GPA ..................................................................107
3.6.3 Consequences for developing countries...........................................108
3.6.4 Summary .....................................................................................109
List of references...................................................................................109
Supplementary Agreements....................................................................110
3.7 Customs Valuation Agreement (CVA) .....................................................110
3.7.1 Background..................................................................................110
3.7.2 Description of the CVA...................................................................111
3.7.3 Consequences for developing countries...........................................112
3.7.4 Summary .....................................................................................116
List of references...................................................................................117
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3.8 Agreement on Rules of Origin...............................................................119
3.8.1 Background..................................................................................119
3.8.2 Description of the Agreement on Rules of Origin ..............................120
3.8.3 Consequences for developing countries...........................................121
3.8.4 Summary .....................................................................................123
List of references...................................................................................124
3.9 Agreement on Import Licensing Procedures (ILP)...................................125
3.9.1 Background..................................................................................125
3.9.2 Description of the ILP ...................................................................125
3.9.3 Consequences for developing countries...........................................126
3.9.4 Summary .....................................................................................128
List of references...................................................................................128
3.10 Agreement on Preshipment Inspection (the PSI Agreement)..................130
3.10.1 Background................................................................................130
3.10.2 Description of the PSI Agreement.................................................132
3.10.3 Consequences for developing countries.........................................134
3.10.4 Summary ...................................................................................136
List of references...................................................................................136
3.11 Agreement on Technical Barriers to Trade (TBT Agreement)...................138
3.11.1 Background................................................................................138
3.11.2 Description of the TBT Agreement................................................139
3.11.3 Consequences for developing countries.........................................141
3.11.4 Summary ...................................................................................144
List of references...................................................................................145
3.12 Agreement on the Application of Sanitary and Phytosanitary
Measures (SPS Agreement)........................................................................146
3.12.1 Background................................................................................147
3.12.2 Description of the SPS Agreement................................................147
3.12.3 Consequences for developing countries.........................................152
3.12.4 Summary ...................................................................................156
List of references...................................................................................157
3.13 The Agreement on Subsidies and Countervailing Measures
(SCM Agreement)......................................................................................158
3.13.1 Background................................................................................158
3.13.2 Description of the SCM Agreement ...............................................159
3.13.3 Consequences for developing countries.........................................162
3.13.4 Summary ...................................................................................166
List of references...................................................................................167
3.14 Anti-dumping Agreement...................................................................168
3.14.1 Background................................................................................168
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