Monika Singh ID 5649246

Homework 1

1. Why would policy-makers sacrifice major international progress of minor domestic policy gains? In terms. Prepare arguments for and against protecting domestic industries.

- International benefits may hard to measure. Some foreign governments are notoriously unreliable in their promises and some are likely to fall making their agreements dubious or useless. 

- The voters may not be as able to understand international gains as easily as they do domestic gain.

- The domestic gains may be more immediate and the international gains farther in the future.

- The international gains may more beneficial to special interests whereas the domestic gains aid a larger group. 

2. Discuss the impact of import restrictions on consumers in both home country and international markets.- Direct financial transfers - grants to consumers, grants to

producers, low-interest or preferential loans and government loan guarantees.

- Better tax treatment - tax credits, tax rebates, exemptions on royalties, duties or tariffs, reduced tax rates, deferred tax liabilities and accelerated depreciation on energy supply equipment.

- Trade restrictions - tariffs, tariff-rate import quotas and non-tariff trade barriers.

- Energy-related services provided directly by government at less than full cost - government-provided energy infrastructure, public research and development.

- Regulation of the energy sector - demand guarantees, mandated deployment rates, price controls, environmental regulations and market-access restrictions.

3. Consider the conflict between industrialized and developing nations. What are its root causes and how might international trade policies alleviate them?- Developing countries experienced various difficulties and had

increasing conflicts with developed countries on different issues like anti-dumping, intellectual property rights protection, market opening in services and in the financial industries and restrictions on subsidies.

Monika Singh ID 5649246

4. In the high-technology sector, governments have provided extensive subsidies to aircraft manufacturers like Boeing and Airbus. The USA has even filed a complaint in the WTO against Airbus and vice versa. Do you think subsidies to high-technology sectors are different from subsidy to agricultural sectors- Yes, in aspect of agriculture. These subsidies have been a source

of distress for developing countries. Although farmers from the effects of the weather and swings in world prices they may have a comparative advantage in agricultural production, they have difficulty competing on the world market against subsidized prices. Developing countries, therefore, have also subsidized their agricultural sectors, further distorting the market and creating the protectionist stand-off that has polarized negotiations on the issue. Reasons that countries may instate export subsidies in the agriculture sector include make sure that enough food is produced to meet the country’s needs; shielding; or preserving rural society.

5. Consider why manufacturer may wish to set up plants in foreign countries. How do their foreign operations enhance their performance in both their own country and the host nations? Research specific examples to support your arguments- They are and have been used by developed and developing

countries together with other policy instruments, such as trade policy, screening mechanisms and incentives, to enhance various development objectives. There are divergent views as regards the effectiveness of performance requirements to achieve this end. While some experts regard them as an essential instrument in a country’s FDI policy package, others tend to argue that their impact on investments is at best limited and at worst costly and counter-productive.

ON THE WEB

1. The WTO Dispute Settlement Gateway (at. www.wto.org) provides access to all the decision made by the Dispute Settlement Body. One-page summaries of each decision are also available. Report on the process of dispute resolution in the WTO and its success or failure, using examples from some of the individual decisions.

Key facts  back   to   top

Monika Singh ID 5649246

Short title:

Complainant:

European Union

Respondent:

Russian Federation

Third Parties:

Australia; China; India; Japan; Korea, Republic of; Norway; Chinese Taipei; United States; Brazil; South Africa

Agreements cited:(as cited in request for consultations)

Sanitary and Phytosanitary Measures (SPS): Art. 2.2, 2.3, 3.1, 3.2, 3.3, 5.1, 5.2, 5.3,5.4, 5.5, 5.6, 5.7, 6.1, 6.2, 6.3, 7, 8, Annex B, Annex CGATT 1994: Art. I:1, III:4, XI:1

Request for Consultationsreceived:

8 April 2014

Summary of the dispute to date  back   to   top

The summary below was up-to-date at 30 October 2014 

Consultations

Complaint by the European Union

On 8 April 2014, the European Union requested consultations with Russia concerning certain measures adopted by Russia affecting the importation of live pigs and their genetic material, pork, pork products and certain other commodities from the European Union, purportedly because of concerns related to cases of African Swine Fever.

The European Union claims that the measures at issue are inconsistent with:

Articles 2.2, 2.3, 3.1, 3.2, 3.3, 5.1, 5.2, 5.3, 5.4, 5.5,

Monika Singh ID 5649246

5.6, 5.7, 6.1, 6.2, 6.3, 7, 8, Annex B, and Annex C of the SPS Agreement; and

Articles I: 1, III: 4 and XI: 1 of the GATT 1994.

On 27 June 2014, the European Union requested the establishment of a panel. At its meeting on 10 July 2014, the DSB deferred the establishment of a panel.

 Panel and Appellate Body proceedings

At its meeting on 22 July 2014, the DSB established a panel. Australia, China, India, Japan, Korea, Norway, Chinese Taipei and the United States reserved their third-party rights. Subsequently, Brazil and South Africa reserved their third-party rights. On 13 October 2014, the European Union requested the Director-General to compose the panel. On 23 October 2014, the Director-General composed the panel.

2. Go to the World Bank website (www.worldbank.org) and International Monetary Fund website (www.imf.org) to obtain an overview of these institutions’ purpose and programs. Search for criticism of bank and IMF programs on other websites and prepare a two-page report on key issues.- Criticism of the World Bank and the IMF encompasses a whole

range of issues but they generally center around concern about the approaches adopted by the World Bank and the IMF in formulating their policies, and the way they are governed. This includes the social and economic impact these policies have on the population of countries who avail themselves of financial assistance from these two institutions, and accountability for these impacts.

- Critics of the World Bank and the IMF are concerned about the ‘conditionality’s’ imposed on borrower countries. The World Bank and the IMF often attach loan conditionalities based on what is termed the ‘Washington Consensus’, focusing on liberalization—of trade, investment and the financial sector—, deregulation and privatization of nationalized industries. Often the conditionality’s are attached without due regard for the borrower countries’ individual circumstances and the prescriptive recommendations

Monika Singh ID 5649246

by the World Bank and IMF fail to resolve the economic problems within the countries.(Ref: http://www.brettonwoodsproject.org/2005/08/art-320869/)

Questions

1. Why do many countries negotiate trade agreement outside the World Trade Organization?- The conclusion of preferential trade agreements can create an

incentive for even further discrimination, which eventually will hurt all trading partners. Countries outside an agreement will try to conclude agreements with one of those that are inside to avoid exclusion.

- Bilateral agreements cannot solve systemic issues such as rules of origin, antidumping, agricultural and fisheries subsidies. These issues simply cannot be handled at the bilateral level. Take for instance, negotiations to eliminate or reduce trade distorting agricultural subsidies, or fisheries subsidies.

- The proliferation of regional trade agreements can greatly complicate the trading environment, creating a web of incoherent rules. Take rules of origin: an increasing number of WTO Members are party to ten or more regional trade agreements, most of which for a given Member contain agreement-specific rules of origin which are necessary to ensure that the preferences go to your partner and not to others.

- To many small and weak developing countries, entering into a bilateral agreement with a powerful big country means less leverage and a weaker negotiating position as compared that in the multilateral talks.

2. Is the increase in bilateral and regional trade agreements a threat to the effectiveness of the WTO? Justify your answer.- Bilateral and regional agreements can have a positive, “domino

effect”, encouraging the pace of multilateral cooperation (and vice versa), and where regional and multilateral agreements are becoming coherent, not conflicting, approaches to managing a more complex and integrated world trading order.

3. Why has the agricultural sector traditionally been a major stumbling block in WTO negotiations?- WTO has been trying to reduce these policies over some years

now. However, political pressures from some of the rich

Monika Singh ID 5649246

developed countries have always ensured that sufficient leeway is given to developed countries in reduction of subsidies. Even in this round of negotiations and in spite of steep subsidy reduction commitments, the maximum subsidy limit imposed by WTO on either EU or USA, is much more than these countries plans to spend on their farmers. However, if sector specific commitments on cotton subsidies were discussed, it was possible that it would have required USA to cut down on the money they are spending on cotton farmers now. Therefore, many feel that to avoid such a politically sensitive issue in an election year, the SSM issue has been used by the USA to derail the negotiations.