The WTO came into existence on 1 January 1995 after agreements negotiated during the Uruguay Rounds (1986 – 1994) of the General Agreement on Tariffs & Trade (GATT), the predecessor of the WTO. The WTO is the international body which deals with the universal trading rules between countries. The organisation’s main function is that of ensuring, as far as possible, the smooth, predictable and free running of trade between nations. The WTO handles a series of agreements on trade, agriculture, services, intellectual property rights and other issues. Structure The WTO has 153 members around the world while 30 countries are negotiating membership. Decisions in the WTO are typically taken by consensus among all members and they are ratified by members’ parliaments. The WTO also provides for a dispute settlement process which is focused on interpreting agreements and commitments and ensuring that countries’ trade policies conform to them. The Ministerial Conference of the World Trade Organisation is the top level decision making body which usually meets at least once every two years. Then comes the General Council which meets several times a year in the Geneva headquarters. At the next level, the Goods Council, Services Council and the Intellectual Property Council report to the General Council. Agreements Through various negotiations between its members over the years, the WTO has come up with many agreements on all fronts of world trade. One of the major negotiations on trade came through the 1986-94 Uruguay Rounds whereby there was a restructuring of the General Agreement on Tariffs and Trade. The Uruguay Rounds led to agreements on the trade of goods and services, intellectual property, dispute settlement, and trade policy review. These agreements are guidelines for members to know their privileges and responsibilities in view of operating in an even-handed trading system. Imports and exports of each country are intended to be treated in a reasonable and consistent manner on the world market. In addition, the trading system is intended to be flexible with regards to the developing countries’ execution of their obligations. Agreement on Goods From 1947 to 1994, negotiations on lower custom duty rates and other trade barriers were made under the GATT. From 1995 onwards, the WTO dealt with more specific sectors of trade like agriculture and more specific problems such as dumping. Agreement on Services Under the new General Agreement on Trade in Services (GATS), members enjoy fair trade in services on banking and insurance, telecommunication, hotel and transport. Agreement on Intellectual Property The Intellectual Property Agreement governs how copyrights, trademarks, designs, patents and geographical names should be protected during trade between members. Agreement on Dispute Settlement Members can bring cases to the WTO in the event that any country breaches the rules of an agreement. The resolving of disputes under the Dispute Settlement Understanding is very important so as to implement the rules and to ensure the smooth flow of world trade. Independent experts make judgements based on the guidelines of the agreement and each country’s obligation. Agreement on Trade Policy Review The Trade Policy Review Mechanism aim is provide a better understanding about the policies that are being adopted. The mechanism also assesses the impact of adopting such policies.
The Agricultural Agreement of the WTO came into existence following the setting up of the WTO on 1 January 1995. This agreement was negotiated during the Uruguay Rounds of the GATT. ‘The preamble to the Agreement recognizes that the agreed long-term objective of the reform process initiated by the Uruguay Round reform programme is to establish a fair and market-oriented agricultural trading system.’ (The WTO agreements series: Agriculture, 2003) The Agricultural Agreement is made up of three main components: Market Access Domestic Support Export Subsidies
The main objectives of this ‘market access’ area are to: Ensure that the access conditions prevailing in the agricultural trade are more apparent, reasonable and predictive. Enhance the relationship between national and international markets. Ensure that the agricultural market uses scarce resources most efficiently. Non-tariff barriers are replaced by tariffs providing mostly the same protection. Tariff barriers to trade are to be reduced by WTO member-states. The following conditions hold ads per the reduction of tariff barriers: An average reduction of 36% by developed countries with a minimum tariff line reduction of 15 % over six years. An average reduction of 24% by developing countries with a minimum tariff line reduction of 10% over ten years. Least developed countries are not required to reduce their tariff but they have to apply the tariffication process, that is, to convert their non-tariff barriers to tariffs or to bind their tariffs to a certain level that could not be exceeded in the future. Domestic support The Agreement on Agriculture has structured domestic support in favour of agricultural producers. The Agreement has controlled subsidies by using three categories of domestic support: a Green box, an Amber box and a Blue box. Green Box The Green box contains measures having no or limited disrupting effect on trade. Example of Green Box measures could be general government services in peat control or direct payments to producers decoupled from production. Amber Box The Amber box contains policies through which governments agreed to reduce domestic support but not to eliminate them. Amber box policies are viewed as having negative impact on trade. One example of such a measure could be when a government assures to buy at a guaranteed price from agricultural producers. Blue Box The Blue box contains measures whereby support can be increased without limit. However, the payment of these subsidies should be related to programs to limit production. Export Subsidies The third pillar of the Agreement on Agriculture is ‘export subsidies’. This measure required the developed countries to reduce the value of their export subsidies by 36% (taking the 1986-90 as base period). The policy also required the developed countries to reduce the quantity of subsidised export goods by 21% over six years. As regards to the developing countries, the agreement stipulates that their reduction would be two-thirds those of the developed countries over a period of ten years. There are no reductions being applied to the least-developed countries. Criticisms There have been lots of criticisms which have been raised as regards to the Agricultural Agreement. In general, the agreement has been criticised for having favoured the developed countries. The measures of the agreement have been a curse rather than a benefit to developing countries. Dumping Global agricultural businesses based in the United States and the European Union have caused great harm to the global agricultural trade by selling agricultural products below their cost of production. Farmers in developing countries could therefore not compete with those businesses in the US and the EU. The US agriculture is supported by massive and unsustainable expenditures. Through the domestic support programmes from the US government, US agricultural businesses are able to export their products at less than the cost of production. As a result, the farmers from developing countries cannot compete with these dumped products. Another factor that contributes to dumping is export subsidies. Despite reforms, the EU agriculture still relies on export subsidies on products like poultry and beef. The excess production of these products is dumped in world markets creating a surplus which brings down the world price. This causes a lot of damage to producers of the developing countries. Continued protectionism The main developed countries still maintain a high degree of protectionism to their local producers. For example, in the European Community, the tariffication process has led to high tariffs. Some industrialised countries have reduced export subsidies but have replaced them by decoupled direct payments: not a major change. The Agricultural Agreement has been unable to prevent countries like the United States from increasing domestic support. Indeed, in 1998 to 2001 the US has set up four successive packages of market loss aid payments. The use of measures such as decoupled direct payments is a flawed concept. In reality, it is not realistic to argue that payments to agricultural producers have no or minimal effect on production and trade. The Agricultural Agreement did not bring a major change in the trade policies of developing countries. Domestic support and export subsidies were already at a low level in these countries. Erosion of trade preferences The Agreement on Agriculture has undermined a lot of preferences for the developing countries. These countries rely on preferential market access agreements on agricultural trade in order to sustain their exports in the agricultural sector of the economy. The measures of the agreement have led to the erosion of these preferences. Thus, many developing countries have faced tremendous difficulties in agricultural trade and have experienced major economic dislocation. An example is Mauritius. Mauritius has lost its trade preferences which greatly helped the export of its sugar and had to go through major economic reform. Another example is Guyana which greatly relies on its export of rice.
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