![Non Tariff Barrier [Subsidies]
National government sometimes grant subsidies to
domestic producers to help improve their trade position.
Such devices are indirect form of protection provided to
domestic businesses, whether they may be import
competing producers or exporters.
Two types of subsidies can be distinguished: a domestic
subsidy , which is sometimes granted to producers of
import-competing goods,and an export subsidy, which
goes to producers of goods that are to be sold overseas.](https://image.slidesharecdn.com/priyankagatt1-130527072213-phpapp01/85/Priyanka-GATT-23-320.jpg)
Priyanka GATT
- 2. General Agreement on Tariffs and Trade (GATT) Outcome of the failure of negotiating governments to create the International Trade Organization (ITO) Negotiated during the UN Conference on Trade and Employment Formed in 1947 and transformed to World Trade Organization (WTO) in 1995
- 3. GATT GATT's main objective Reduction of barriers to international trade Achieved through reduction of tariff barriers, quantitative restrictions and subsidies on trade through a series of agreements It was a treaty, not an organization A small secretariat occupied what is today the Centre William Rappard in Geneva, Switzerland
- 4. Inception Efforts to negotiate international trade agreements began in 1927 at the League of Nations but were unsuccessful. Precursor organization to GATT, ITO, was first proposed in February 1945 by the United Nations Economic and Social Council (UNESCO). Owing to the United States failing to implement the ITO, GATT was the only organization left. On 1 January, 1948 the agreement was signed by 23 countries: Australia, Belgium, Brazil, Burma, Canada, Ceylon, Chile, China, Cuba, the Czechoslovak Republic, France, India, Lebanon, Luxembourg, Netherlands, New Zealand, Norway, Pakistan, Southern Rhodesia, Syria, South Africa, the United Kingdom, and the United States. According to GATT's own estimates, the negotiations created 123 agreements that covered 45,000 tariff items that related to approximately one-half of world trade
- 5. General Agreement on Tariffs and Trade
- 6. The General Agreement on Tariffs and Trade (GATT) was first signed in 1947. Was designed To provide an international forum That encouraged free trade between member states By regulating and reducing tariffs on traded goods Providing a common mechanism for resolving trade disputes.
- 7. GATT ?? Was the outcome of the failure of negotiating governments to create the ITO The Bretton Woods Conference introduced the idea for an organization to regulate trade as part of a larger plan for economic recovery after World War II As governments negotiated the ITO, 15 negotiating states began parallel negotiations for the GATT as a way to attain early tariff reductions Once the ITO failed in 1950, only the GATT agreement was left. A Treaty, not an Organization
- 8. Objective The GATT's main objective was the “Reduction of Barriers to International Trade” This was achieved through the Reduction of Tariff barriers Quantitative Restrictions Subsidies on trade through a series of agreements
- 9. History Divided into 3 phases: First: From 1947 until the Torquay Round Largely concerned which commodities would be covered by the agreement Freezing existing tariff levels Second: From 1959 to 1979 Focused on reducing tariffs Third: Consists only of the Uruguay Round from 1986 to 1994 It extended the agreement to new areas such as intellectual property, services, capital, and agriculture Final outcome was creation of WTO
- 10. History (Contd...) GATT signatories occasionally negotiated new trade agreements that all countries would enter into Each set of agreements was called a round In general, each agreement bound members to reduce certain tariffs. Usually this would include many special-case treatments of individual products, with exceptions or modifications for each country.
- 11. First Phase Commodities which would be covered by the agreement and freezing existing tariff levels Year Place/name Subjects covered 1947 Geneva Tariffs 1949 Annecy Tariffs 1951 Torquay Tariffs
- 12. Second Phase Focused on reducing tariffs Year Place/name Subjects covered 1960-1961 Geneva Dillon Round Tariffs 1964-1967 Geneva Kennedy Round Tariffs and anti-dumping measures 1973-1979 Geneva Tokyo Round Tariffs, non-tariff measures, “framework” agreements
- 13. Third Phase Year Place/name Subjects covered 1986-1994 Geneva Uruguay Round Tariffs, non-tariff measures, rules, services, intellectual property, dispute settlement, textiles, agriculture, creation of WTO, etc Extended the agreement fully to new areas such as intellectual property, services, capital, and agriculture. Out of this round the WTO was born.
- 14. ROUNDS NAME START DURA TION COUNT RIES SUB. COVERED ACHIVEMENTS 1.GENEVA APRIL 1947 7 MONTH S 23 TARIFFS SIGNING OF GATT, 45,000 TARIFF CONCESSIONS AFFECTING $10 BILLION OF TRADE. 2. ANNECY APRIL 1949 5 MONTH S 13 TARIFFS COUNTRIES EXCHANGED SOME 5000 TARIFF CONCESSIONS.
- 15. ROUNDS CONT… NAME STAR T DURATIO N COUNT RIES SUB. COVERED ACHEVEMENTS 3. TORQUAY SEPT. 1950 8 MONTHS 38 TARIFFS COUNTRIES EXCHANGED SOME 8700 TARIFF CONCESSIONS, CUTTING THE TARIFFS BY 25% 4. GENEVA II JAN. 1956 5 MONTHS 26 TARIFFS, ADMISSION OF JAPAN $2.5 BILLION IN TARIFF REDUCTION 5. DILLON SEPT. 1960 11 MONTHS 26 TARIFFS TARIFF CONCESSION WORTH $4.9 BILLION OF WORLD TRADE.
- 16. ROUNDS CONT… NAME STAR T DURATIO N COUN TRIES SUB. COVERED ACHIVEMENTS 6. KENNEDY MAY 1964 37 MONTHS 62 TARIFFS & ANTIDUMPING TARIFF CONCESSION WORTH $40 BILLION OF WORLD TRADE 7. TOKYO SEPT. 1973 74 MONTHS 102 TARIFF, NON TARIFF MEASURES, “FRAMEWORK” AGREEMENTS TARIFF REDUCTION WORTH $190 BILLION ACHIEVED. 8. URUGUAY SEPT. 1986 87 MONTHS 123 TARIFFS,NON TARIFFS,RULES, SERVICES,IP,DIS PUTE SETTLEMENT,TE XTILES,AGRI. CREATION OF WTO, & EXTENDED THE RANGE OF TRADE NEGOTIATION,LEADING TO THE REDUCTION IN TARIFFS(ABOUT 40%).
- 17. TRADE BARRIERS Tariff and Non-Tariff Barriers While free-trade maximizes world welfare, most nations impose some trade restrictions that benefit special groups in the nation. The most important type of trade restriction historically is the tariff. This is a tax or duty on the imports or exports. When a small nation imposes an import tariff, the domestic price of the importable commodity rises by the full amount of the tariff for individuals in nation. As a result, domestic production of the importable commodity expands while domestic consumption and imports fall. However, the nation as a whole faces the unchanged world price since the nation itself collects the tariff.
- 18. Tariffs Tariffs can be ad-Valorem, specific, or compound. Ad-Valorem tariff is expressed as a fixed percentage of the value of the traded commodity. Specific tariff is expressed as a fixed sum per physical unit of the traded commodity. A compound tariff is a combination of an Ad Valorem and a specific tariff.
- 19. Trade Restrictions /Trade Barriers An import tariff is a duty on the imported commodity, while an export tariff is a duty on the exported commodity. Export tariffs are prohibited by the U.S. Constitution but are often applied by developing countries on their traditional exports (such as Ghana on it’s cocoa and Brazil on it’s coffee) to get better prices and revenues. Developing nations rely heavy on export tariff to raise revenues because of their ease of collection. On the other hand, industrial countries invariably impose tariffs or other trade restrictions to protect some(usually labor-intensive)industry, while using mostly income taxes to raise revenues.
- 20. Trade Barriers (Contd) According to Stolper-Samuelson theorem , an increase in the relative price of a commodity (for example, as a result of a tariff) raises the return or earnings of the factor used intensively in it’s production. For example, if a capital-abundant nation imposes an import tariff on the labor intensive commodity, wages in the nation will rise. However, since the nation’s benefit comes at the expense of other nations, latter are likely to retaliate, so that in the end all nations usually lose.
- 21. Trade Barriers (Contd) Two arguments are that protection is needed to reduce domestic unemployment and a deficit balance of payments. A more valid argument for protection is the infant-industry argument. However, what trade protection can do, direct subsidies and taxes can do better in overcoming purely domestic distortions.The same is true for industries important for national defense.The closest we come to a valid economic argument for protection is the optimal tariff (which,however, invites retaliation). Trade protection in the United States is usually given to low- wage workers and to large, well organized industries producing consumer products.
- 22. Non-Tariff Barriers International trade also hampered by numerous Technical, administrative, and other regulations. These include safety regulations for automobile and electrical equipment, health regulations for the hygienic Production and packaging of imported food products, and labeling requirements showing origin and contents.
- 23. Non Tariff Barrier [Subsidies] National government sometimes grant subsidies to domestic producers to help improve their trade position. Such devices are indirect form of protection provided to domestic businesses, whether they may be import competing producers or exporters. Two types of subsidies can be distinguished: a domestic subsidy , which is sometimes granted to producers of import-competing goods,and an export subsidy, which goes to producers of goods that are to be sold overseas.
- 24. GATT & its impact on Indian Pharmaceutical Industry Globally output of Indian pharmaceutical industry 4th rank in terms of volume, 13th rank in terms of value. Out put of Pharmaceuticals In 2001----229 billion In 2002----260 billion(grew by 16%) Bulk drugs – 21% Formulation—79% GATT • Strengthen R&D capabilities during 10 yr transitional period • Strategic alliance with research based companies abroad for setting up joint ventures in India
- 26. Continual reductions in tariffs helped spur very high rates of world trade growth during the 1950s and 1960s — around 8% a year on average Trade growth consistently out-paced production growth The rush of new members during the Uruguay Round demonstrated recognition of multilateral trading system as the anchor for development and an instrument of economic and trade reform.
- 27. GATT’s success in reducing tariffs to a low level, with a series of economic recessions 1970-80’s drove governments to devise other forms of protection for sectors facing increased foreign competition High rates of unemployment and constant factory closures led governments in Western Europe and North America to seek bilateral market-sharing arrangements with competitors and to embark on a subsidies race to maintain their holds on agricultural trade Both these changes undermined GATT’s credibility and effectiveness.
- 28. Factors convinced GATT members that a new effort to reinforce and extend the multilateral system should be attempted. That effort resulted in the Uruguay Round, the Marrakesh Declaration, and the creation of the WTO.
- 29. WTO The World Trade Organization (WTO) was born on 1st January 1995 with the main objective to improve the welfare of the people of the member countries. The main function is to ensure that trade flows as smoothly, predictable and freely as possible.
- 30. How is the WTO different from GATT WTO covers both aspects that is trade in goods as well as trade in services along with most important TRIPs (Trade Related Intellectual Property Rights) agreement. Now GATT agreement is one of the parts of WTO agreement.
- 31. WTO GATT GATS TRIMSTRIPS GATTGATT: GENERAL AGREEMENT ON TARIFF AND TRADE.: GENERAL AGREEMENT ON TARIFF AND TRADE. GATSGATS: GENERAL AGREEMENT ON TRADE IN SERVICES.: GENERAL AGREEMENT ON TRADE IN SERVICES. TRIPSTRIPS: TRADE RELATED INTELECTUAL PROPERTY: TRADE RELATED INTELECTUAL PROPERTY RIGHTSRIGHTS TRIMSTRIMS: TRADE RELATED INVESTMENT MEASURES: TRADE RELATED INVESTMENT MEASURES..
- 32. successes of GATT • huge increases in world trade • new members: 23 to 110 • enormous reductions in tariffs
- 33. References Bagwell K; Staiger R, 1999- An economic theory of GATT, American Economic Review 89, 215-248. GATT, 1979. The Tokyo Round of Multilateral Trade Negotiations: Report of the Director- General of GATT. Geneva. WTO, 1995. Analytical Index: Guide to GATT Law and Practice, Vol 2. WTO, Geneva. Michael Hudson, Super Imperialism: The Origin and Fundamentals of U.S. World Dominance, 2nd ed. (London and Sterling, VA: Pluto Press, 2003), 258.
Editor's Notes
- #3: The General Agreement on Tariffs and Trade (typically abbreviated GATT ) was negotiated during the UN Conference on Trade and Employment and was the outcome of the failure of negotiating governments to create the International Trade Organization (ITO). GATT was formed in 1947 and lasted until 1994, when it was replaced by the World Trade Organization in 1995.