World trading system
The WTO agreements are lengthy and complex because they are legal texts covering a wide range of activities. But a number of simple, fundamental principles run throughout all of these documents. These principles are the foundation of the multilateral trading system.
Grant someone a special favour such as a lower customs duty rate for one of their products and you have to do the same for all other WTO members. World trading system principle is known as most-favoured-nation MFN treatment see box. Together, those three agreements cover all three main areas of trade handled by the WTO. Some exceptions are allowed. Or they can give developing countries special access to their markets.
Or a country can raise barriers against products world trading system are considered to be traded unfairly from specific countries. And in services, countries are allowed, in limited circumstances, to discriminate. But the agreements only permit these exceptions under strict conditions.
The same should apply to foreign and domestic services, and to foreign and local trademarks, copyrights and patents. National treatment only applies once a product, service or item of intellectual property has entered the market. Therefore, charging customs world trading system on an import is not a violation of national treatment even if locally-produced products are not charged an equivalent tax.
Lowering trade barriers is one of the most obvious means of encouraging trade. The barriers concerned include customs duties or tariffs and measures such as import bans or quotas that restrict quantities selectively. From time to time other issues such as red tape and exchange rate policies have also been discussed. A ninth round, under the Doha Development Agenda, is now underway. At first these focused on lowering tariffs customs duties on imported goods.
But by the s, the negotiations had expanded to cover non-tariff barriers world trading system goods, and to the new areas such as services and intellectual property. Opening markets can be beneficial, but it also world trading system adjustment. Developing countries are usually given longer to fulfil their obligations.
Sometimes, promising not to raise a trade barrier can be as important as lowering one, because the promise gives businesses a clearer view of their future opportunities. The multilateral trading system is an attempt by governments to make the business environment stable and predictable.
The Uruguay Round increased bindings. Percentages of tariffs bound before and after the talks. These are tariff lines, so percentages are not weighted according to trade volume or value. For goods, these bindings amount to ceilings on customs tariff rates. Sometimes countries tax world trading system at rates that are lower than the bound rates. Frequently this is the case in world trading system countries. In developed countries the rates actually charged and the bound rates tend to be the same.
A country can change its bindings, but only after negotiating with its trading partners, which could mean compensating them for loss of trade.
One of the achievements of the Uruguay Round of multilateral trade talks world trading system to increase the amount of trade under binding commitments see table. The result of all this: The system tries to improve predictability and stability in other ways as well.
Many WTO agreements require governments to disclose their policies and practices publicly within the country or by notifying the WTO.
The regular surveillance of national trade policies through the Trade Policy Review Mechanism provides a further means of encouraging transparency both domestically and at the multilateral level. The system does allow tariffs and, in limited circumstances, other forms of protection. More accurately, it is a system of rules dedicated to open, fair and undistorted competition.
So too are those on dumping exporting at below cost to gain market share and subsidies. The issues are complex, and the rules try to establish what is fair or unfair, and how governments can respond, in particular by charging additional import duties calculated to compensate for damage caused by unfair trade.
Many of the other WTO agreements aim to support fair competition: The WTO system contributes to development. And the agreements themselves inherit the earlier provisions of GATT that allow for special assistance and trade concessions for developing countries. Over three quarters of WTO members are developing countries and countries in transition to market economies. During the seven and a half years of the Uruguay Round, over 60 of these countries implemented trade liberalization programmes autonomously.
At the world trading system time, developing countries and transition economies were much more active and influential in the Uruguay Round negotiations than in any previous round, and they are even more so in the current Doha Development Agenda.
World trading system the end of the Uruguay Round, developing countries were prepared to world trading system on most of the obligations that are required of developed countries. A ministerial decision adopted at the end of the round says better-off countries should accelerate implementing market access commitments on goods world trading system by the least-developed countries, and it seeks increased technical assistance for them.
More recently, developed countries have started to allow duty-free and quota-free imports for almost all products from least-developed countries. On all of this, the WTO and its members are still going through a learning process.
The Uruguay Round world trading system bindings Percentages of tariffs bound before and after the talks Before After Developed countries 78 99 Developing countries 21 73 Transition economies 73 The principles The trading system should be