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Chapter 12: An Overview of WTO

Preview

1) WTO’s general information

2) WTO’s history and GATT’s commencement
3) WTO’s structure
4) WTO’s principles
5) WTO’s main functions
6) Dispute Settlement Process
7) Vietnam’s participation in WTO

Financial University under the Government of the Russian Federation

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Headquarter of WTO in Geneva

The World Trade Organization (WTO) deals with regulation

of trade in goods, services and intellectual property
between participating countries

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Type: Purpose:
International Regulate Members:
trade international 164 members
organization trade

Official
language: English, French,
Spanish

Headquarters: Region served: Budget:

Centre William Worldwide 196 million Swiss
Rappard, francs
Geneva,
Switzerland
Financial University under the Government of the Russian Federation

General Director

Roberto Azevêdo
(born 3 October 1957)

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Map of World Trade Organization

Members Observers
Members, dually represented by
Non-members
the European Union

The history of the WTO

World War II Bretton Wood conference

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The history of the WTO

International
Trade
Organization

Financial University under the Government of the Russian Federation

General Agreement on Tariffs and Trade

(GATT)
• The WTO's predecessor, GATT, was established by a multilateral
treaty of 23 countries in 1947 after World War II in Bretton Wood
• In the wake of other new multilateral institutions dedicated to
international economic cooperation—such as the World Bank
(founded 1944) and the International Monetary Fund (founded
1944 or 1945)
• A comparable international institution for trade, named the
International Trade Organization never started as the U.S. and other
signatories did not ratify the establishment treaty

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GATT was signed by 23 nations in Geneva

on October 30, 1947.

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General Agreement on Tariffs and Trade

(GATT)
• Until WTO’s establishment, GATT was signed by 124
countries and on the process of 25 application packages
• GATT helped to reduce the average tariff level from
40% in 1948 to 15% for developing countries and just
4% for developed countries in 1995

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WTO’s formation

Before GATT’s 40th anniversary, its members concluded that the GATT
system was straining to adapt to a new globalizing world economy
(structural deficiencies, spill-over impacts of certain countries' policies on
world trade GATT could not manage, etc.)
=> The eighth GATT round—known as the Uruguay Round, discussed
about WTO’s establishment in 1/1/1995
=> 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

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Ministerial Conference

•The Ministerial Conference, which usually meets every two

years, is highest decision-making body of the WTO,.
•It brings together all members of the WTO, all of which are
countries or customs unions.
•The Ministerial Conference can take decisions on all matters
under any of the multilateral trade agreements.

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Principles of WTO

Non-discrimination (Most Favored Nation (MFN) and

the National treatment policy)
Reciprocity
Binding and enforceable commitments
Trade liberalization by negotiation
Fair trade encouragement

Financial University under the Government of the Russian Federation

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Principles of WTO

u The number of WTO members is developing countries and

countries in the process of economic transition accounts for
more than 3/4
u Therefore, the WTO provides these countries with certain
flexibility and incentives in implementing WTO agreements
(more technical assistance, longer implementation time for
them to adjust policies)
u https://www.wto.org/english/res_e/webcas_e/webcas_e.htm

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Main functions of the WTO

to provide a to provide a dispute

framework for settlement mechanism
negotiations

to oversee implementing and

administering WTO
agreements

Financial University under the Government of the Russian Federation

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Framework for trade negotiations

u Countries must negotiate to resolve disputes arising

from their trade relations
u The WTO has held many new negotiations under the
"Doha Development Program" initiated in 2001
u https://www.wto.org/english/res_e/webcas_e/webcas_e.
htm

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Oversee WTO’s agreements

u Members must strictly follow the WTO's trade

agreements
u Governments of countries member must notify
applicable trade regulations to individual and enterprises
in that countries; and ensure that there is no sudden
change in the applied policies.

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Functions of WTO’s negotiations

The WTO negotiations addresses trade restrictions in at least 3 ways:

1. Reduction of tariff rates: through multilateral negotiations.
2. Binding: a tariff is “bound” by having the imposing country agree not to
raise it in the future.
3. 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.

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Functions of WTO’s negotiations

• The WTO prohibits discrimination between trading partners,

but provides exceptions for environmental protection,
national security, and other important goals

• WTO also supports for developing countries (low and middle

income countries)
http://ncif.gov.vn/Pages/NewsDetail.aspx?newid=2863

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WTO’s 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.
The Agreement on Agriculture
The General Agreement on Trade in Services
The Agreement on Trade-Related Aspects of Intellectual Property Rights
The Agreement on the Application of Sanitary and Phytosanitary Measures
The Agreement on Technical Barriers to Trade
The Agreement on Customs Valuation
Trade related Intellectual Property Rights Agreement (TRIPS)
https://www.wto.org/english/res_e/webcas_e/webcas_e.htm

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Review national trade policies

u To ensure that members fully comply with the laws and

commitments of multilateral trade agreements
u WTO members are subject to trade policy reviews
conducted on the basis of member countries and the
WTO secretariat.

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Co-operation with other international

organizations
u The WTO has close relationships with many other international
organizations, especially the IMF and the World Bank
u There are currently about 140 international organizations with
observers at the WTO and the WTO is also the observer of many
international organizations
u The WTO Secretariat works with more than 200 international
organizations in activities such as statistics, research, benchmarking,
and technical training.

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Dispute Settlement Process

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Dispute Settlement Process

u The dispute settlement mechanism in the WTO is a succession of the

dispute settlement rules of GATT, which had positive effects for nearly
50 years in the history of GATT since 1947
u Objective: achieve a positive solution to the dispute, and prioritize
solutions which are mutually agreed upon by the parties to the dispute
and in accordance with the relevant WTO Agreements
u The dispute settlement mechanism in the WTO is considered to be one
of the basic successes of the Uruguay Negotiating Round.

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Dispute Settlement Process

• The operation of the WTO dispute settlement process involves case-
specific panels[71] appointed by the Dispute Settlement Body (DSB),[72]
the Appellate Body,[73] The Director-General and the WTO
Secretariat,[74] arbitrators,[75] and advisory experts.
• The priority is to settle disputes, preferably through a mutually agreed
solution, and provision has been made for the process to be conducted in
an efficient and timely manner
• If a case is adjudicated, it should normally take no more than one year
for a panel ruling and no more than 16 months if the case is appealed...
If the complainant deems the case urgent, consideration of the case
should take even less time.[77]
• A 2016 study in International Studies Quarterly challenges that the
WTO dispute settlement system leads to greater increases in trade.[80]

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Dispute Settlement Body

• The General Council convenes as the Dispute Settlement Body

(DSB) to deal with disputes between WTO members.
• The DSB has authority to establish dispute settlement panels, refer
matters to arbitration, adopt panel, appellate body and arbitration
reports
• The DSB has to maintain surveillance over the implementation of
recommendations and rulings contained in such reports, and
authorize suspension of concessions in the event of non-
compliance with those recommendations and rules

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Dispute Settlement Process

• However, the dispute settlement system cannot be used to resolve

trade disputes that arise from political disagreements.
• When Qatar requested the establishment of a dispute panel
concerning measures imposed by the UAE, other Gult
Cooperation Countries (GCC countries) and the US were quick to
dismiss its request as a political matter, stating that national
security issues were political and not appropriate for the WTO
dispute system

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Discussing these case studies

US- Mexico US- EU

Import of fish Steel industry

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Case study: Dispute of US and Mexico

• In eastern tropical areas of the Pacific Ocean, schools of yellowfin tuna
often swim beneath schools of dolphins. When tuna is harvested with
purse seine nets, dolphins are trapped in the nets. They often die unless
they are released.
• If a country exporting tuna to the United States cannot prove to US
authorities that it meets the dolphin protection standards set out in US
law, the US government must embargo all imports of the fish from that
country.
• In this dispute, Mexico was the exporting country concerned. Its exports
of tuna to the US were banned. Mexico complained in 1991 under the
GATT dispute settlement procedure.

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Case study: Dispute of US and Mexico

• DSB granted authorization for Mexico to apply punitive duties

on some imports of U.S. goods in retaliation for damages
caused to Mexican trade by U.S. tuna labeling rules.
• The U.S. allows a “dolphin-safe” label on tuna cans that meet a
no-kill standard and has claimed that Mexican fishing methods
do not respect the standard
• Mexico had been contesting American tuna labeling rules,
which are aimed at protecting dolphins from getting ensnared in
fishing nets and killed.

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Case study: Dispute of US and Mexico

• In late April, 1991 a WTO arbitrator concluded that Mexico suffered damage
from the U.S. rule and could request the DSB to authorize Mexico to impose
retaliatory duty on a selection of U.S. goods, to a level which did not exceed
US$ 163.23 million annually. Mexico thus requested authorization to
suspend concessions to the United States up to the amount determined by the
arbitrator.
• DSB agreed to grant Mexico the authorization to impose retaliatory duties up
to the maximum amount and Mexico had to determine which U.S. goods
would be subject to retaliatory duty, and at which rates.

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Dispute cases

u Dispute cases:
https://www.wto.org/english/tratop_e/dispu_e/cases_e/d
s548_e.htm
u Jack Ma and the impact of the trade war:
https://www.wto.org/english/res_e/webcas_e/webcas_e.
htm

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Vietnam’s participation
in WTO

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Accession Process

u 1. Application’s submission
u 2. Negotiations between the applicant nation and other
working party members regarding the concessions and
commitments on tariff levels and market access for
goods and services
u 3. Accession

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Vietnam’s Accession Process

• “Vietnam has undergone 11 years of accession negotiations with

more than 200 negotiations including 11 multilateral negotiations,
in order to make policies transparent and to make macroeconomic
policy commitments consistent with trade agreements (WTO's
Agreement and bilateral negotiations) with 28 partners” -
International trade syllabus - Assoc. Prof. Nguyen Xuan Thien
• Viet Nam became the WTO's 150th member on 11 January 2007.
https://www.wto.org/english/thewto_e/acc_e/a1_vietnam_e.htm

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Vietnam’s Accession Process

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Impact of WTO on Vietnam’s Economy

1. Positive economic growth

• The average growth rate is 6.29% / year
• GDP per capita increased from USD 730 in 2006 to USD 2,228
in 2015 and reached USD 2,445 in 2016.
• The economic structure has shifted in a positive direction,
gradually increasing the proportion of industry and services,
gradually reducing the proportion of agriculture.
https://www.youtube.com/watch?v=X-TAS7W_w2Q

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Impact of WTO on Vietnam’s Economy

u 2. Change of economic, trade and investment policies

• Vietnam has amended over 60 legal documents to reach WTO
commitments.
• The WTO has required Vietnam to gradually shift from the state
management mode of administrative intervention to the state
management method of creating, which respects the right to free trade in
accordance with market rules.
• In 2007 Vietnam's private enterprise sector witnessed a boom with a
record of nearly 60,000 newly established businesses in the year.

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Impact of WTO on Vietnam’s Economy

u 3. Destination of FDI attraction and the increase of import and export

• In 2016, Vietnam's total import-export turnover has quadrupled, surpassing
the US$ 350 billion.
• After 10 years of joining the WTO, the openness of Vietnam's economy has
increased from 144% in 2007 to 173% in 2016.
• Foreign direct investment (FDI) increased sharply. In 2006: USD 10 billion;
in 2007: USD 21.3 billion and 2008: USD 64 billion.
• Vietnam has attracted more than 22,000 FDI projects with a total registered
capital of nearly 300 billion USD, many leading corporations in the world
have chosen Vietnam as a production base such as Samsung, LG, Toyota,
Honda, Canon, …

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Impact of WTO on Vietnam’s Economy

u 4. Be confident in the global market

• There have been 15 multilateral and bilateral FTAs between
Vietnam and major partners in the world that have been officially
signed, or concluded negotiations such as: Vietnam - EU FTA
(EVFTA), Vietnam - Korea FTA (VKFTA ) …
• These include new generation FTAs with a wide range of
commitments and high levels of commitment such as the
Comprehensive Chan-Pacific Economic Partnership Agreement
(CPTPP).

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Impact of WTO on Vietnam’s Economy

• Vietnam is continuing to negotiate 2 more FTAs which is

predicted to be a century FTA, regulating trade activities of the
entire ASEAN region.
https://en.wikipedia.org/wiki/Default_Date_Business_General_Fra
me
• FTAs are opening up space for Vietnam to develop strongly and
have free trade relations with 55 partners around the world,
including G7 countries and 15/20 G20 members.
• Trung tâm WTO và hội nhập

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Summary

• The World Trade Organization (WTO) is the biggest trade

organization in the world, which deals with regulation of trade
in goods, services and intellectual property between
participating countries
• Until WTO’s establishment, the WTO’s predecessor - GATT
was signed by 124 countries, played as role of the biggest trade
regulation system in the world market
• Principle and main functions of WTO

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Summary

• WTO’s dispute settlement process

• Vietnam’s participation in WTO and WTO impact on
Vietnam’s economy after 10 years of becoming a WTO
member

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