WTO

What is WTO
WTO is the only international organization dealing with the global rules of trade between nations. It’s
function is to ensure that trade flows as smoothly, predictably and freely as possible.
The way to achieve that: tariff and non-tariff barriers.

Agreements:
- Negotiated and signed by the majority of the world’s trading nation and ratified in their
parliaments(nghị viện).
- Legal ground rules for international commerce
- Are essentially contracts, ensuring important trade rights to members.
- Bind governments to keep their trade policies within agreed limits to everyone’s benefits.

Multilateral(agreed by >=3 parties) trading system – past, present & future

- Came into being in 1955
- Successor to General Agreement on Tariff and Trade (GATT)
- First rounds of GATT mainly dealt with tariffs reductions
- Later includes anti-dumping & NTM
- Last round (Uruguay Round) -> WTO was born

Activities:
- Handle trade agreements
- A forum for trade negotiations
- Settling disputes
- Review national trade policies
- Assist developing countries in trade policy issues.
- Cooperate with other international organizations

Structure:
- Ministrerial Conference
+ top level decision-making body.
+ Meets at least once every 2 years
+ Decision made by entire membership. Typically by consensus
+ Majority vote is possible but never used in WTO.

General Council
- + Meets several times a year at Geneva headquarters
 - + Also meets as the Trade Policy Review Body and Dispute Settlement Body.

The Council: the Goods Council, Services Council & Intellectual Property Council (TRIPS) report
to the General Council.

The Committees, working groups and working parties: deals with the individual agreements and other
areas (environment, development, membership applications, regional trade agreements).

Secretariat:
- Provide legal assistance in dispute settlement process
- Advises countries that wants to join WTO
- Supply technical support for councils and committees and ministerial conferences.
- Provided technical support for developing countries
- Analyze world trade
- Explain WTO affairs to the public and media
Dispute Settlement
What does the Dispute Settlement system aim to achieve?
Enforce rules, ensure that trade flows smoothly.

How does the dispute settlement process work?

A country brings the dispute to the WTO once they think that their rights under the Agreement is being
infringed. Judgements by specially-appointed experts are based on the implications of the Agreement
and commitments of countries.

Policy Review
What is the aim of the Trade Policy Review Mechanism
To improve transparency, provide more understanding of the policies that countries adapt, and to
assess their impact. Many countries see this as a way of constructive feedback.

What do each countries have to undergo? And what is in each review?

Each countries need to undergo periodic inspection/review. In each review contains a report of the
countries concerned and the WTO Secretariat.

WTO and Vietnam’s trade policy: Only gives consultation but doesn’t get deeply involved.

GATT (Goods – General Agreement on Tariff and Trade)

What was GATT from 1947 – 1994?
A forum for negotiating lower custom duty rates?

Which rule did the General Agreement emphasize on?

Non-discrimination

What happens to GATT after the formation of WTO?

After 1995, GATT became the umbrella agreement for trade in goods

What does the annexes of the GATT concerns?

It concerns fields such as agriculture and textiles. And specific issues such as state trading, product
standards, subsidies and anti-dumping.

GATS (Service – General Agreement on Trade in Services)

Which sectors can experience fairer and freer trade under GATS?
Banks, insurance firms, telecommunications, tour operators, hotel chains, transport companies.
Before these sectors, which sectors also received this priviledge?
Trade in goods.

As a result of this, what commitments do countries make?

Individual commitments are made by countries to decide certain service sectors to be open for foreign
competition, and how open these markets will be.

TRIPS (Intellectual Property – Agreement on Trade Related Aspects on

Intellectual Property)
What are the rules of TRIPS? And what are the rules used for?
Rules of trade and investment in ideas and creativity. Rules are used to identify products, industrial
designs, integrated circuit designs, undisclosed information to protect intellectual property when there
is trade.
 IMPORT – EXPORT
DUTIES
Tax objects
- Goods exported or imported through Vietnamese border gates or border
- Goods brought from domestic markets to non-tariff zones and vice versa

Non-tax objects
- Goods transited and transported by mode of border gate transshipment through Vietnam’s
border gate or border gates under the provisions of custom law
- Humanitarian aid goods or non-refundable aid goods
- Goods exported from non-tariff zones to abroad, goods imported from abroad to non-tariff
zones and consumed therein, goods brought from one non-taiff zones to another
- Exported Petrolium beloing to the State’s natural resources.

Tax rates
How is export tax rate calculated?
Export tax rates for each goods are specified in the Export Tax

How is import tax rates calculated?

Based on origin of the goods

How many types of tax rates? List them

3 types
1. Preferential tax rates: Based on the MFN treatment
2. Special preferential tax rates: Based on VN international commitments.
3. Oridinary tax rates: 150% of preferential tax rates of items specified in the Preferential Import
Tax.

2 TYPES OF TAX
Ad-valorem tax: tax levied depending on the value of the goods
Example: Product assessed value is 1000, tax is 10% -> Pay 100 in tax to the government

Specific tax: tax levied based on the quantity of the goods (very straightforward)
Example: Import 1000 cars, specific tax is 10$/car -> Pay 10000$ in tax to the government

Dutiable Value
What is dutiable value of exports?
The selling price at the border gate, excluding insurance and freight

What is the dutiable value of imports?

Actual price payable calculated to the first import border gate

How is Custom Valuation decided?

When custom officials have suspicion of the declared value of an imported goods, they can ask the
importer for more info. After additional info is given and there is still doubt, the value will not be
based on the declared value but on the value under the provisions of custom law.

How many ways to calculate dutiable value? List them.

6 ways
1. Determining dutiable value on the basis of transaction of imports
2. Determining dutiable value on the basis of transaction of identical imports
3. Determining dutiable value on the basis of transaction of similar imports
4. Determining dutiable value on the basis of deductible value
5. Determining dutiable value on the basis of computed value
6. Deductive method of determining dutiable value
Tax incentives
How many? List them
2 tax incentives. Tax exemptions and Tax refund.

NTMs
What are NTMs?
Any methods to distort or restrict international trade without using tariffs.

How many Agreements are there? List them.

5 Agreements
1. Technical Barriers to Trade
2. Sanitary and Phytosanitary
3. Custom Valuation
4. Preshipment Inspection
5. Import licensing

TBT
What does TBT cover?
The technical regulations and standards to regulate the entry of traded goods

Differentiate between unilateral, bilateral, multilateral and plurilateral agreements?

Unilateral : One party is involved
Bilateral: Two parties are involved
Plurilateral: Some parties are involved but not all
Multilateral: All members are involved

What is conformity assessment? Who pays?

Conformity assessment are technical procedures (testing – verification – inspection – certification)
undertaken to ensure that products fulfill technical regulations and standards.
Exporter pays the cost of Conformity assessment.

What are the legitimate objective of the TBT?

- Protection of human safety or health
- Protection of animal and plant life or health
 - Protection of the environment
- Prevention of deceptive practices

What does the TBT recognizes?

The need to have regulations and standards and provides flexibility.

What is flexibility limited by?

By the requirements that technical regulations do not aim to create an obstacle to trade.

What are the principles of the TBT?

- Avoidance of unnecessary obstacles to trade
- Non-discrimination and national treatment
- Harmonization
- Equivalence of technical regulations
- Mutual recognition of the conformity assessment procedure
- Transparency

Special and differential treatment

Who receives such treatment?

Developing countries.

SPS
What does SPS deal with?
Sanitary deals with human and animal safety and health
Phytosanitary deals with plant life and its protection

Coverage
Besides agricultural products, what does SPS also cover?
Forest and fish products.

Which one covers boarder range of health protection and trade measure? SPS or TBT?
The SPS covers a boarder range of health protection and trade measures
Clarity and Transparency
What role does SPS play in clarity and transparency
To reduct arbitrariness in government’s SPS decisions and regulations.

How does SPS achieve that?

By clarifying the factors related when imposing such measures
Characteristics

SPS

What are regulations based on?

Scientific principles and risk assessment

What can SPS be based on?

How a product is produced.

Features of SPS?
- Equivalence
- Harmonization
- Special treatment towards developing countries.
- Transparency
- Disease free areas

Custom Valuation (CVA)

When is custom valuation used?

When ad-valorem tax is used. Because it’s calculated according to the price of goods. -> Valuation is
needed to determine the price.

(Custom valuation is NOT needed in specific tax because price is irrelevant)

CVA aims to?

Ensures uniformity when applying evaluation rules so importers can assess accurately the amount of
duties payable on importation.

Who can negotiate?

Developing countries.
How many methods? List them.
6 methods:
Transaction value
Transaction value of identical goods
Transaction value of similar goods
Deductive method
Computed method
Fall-back method

CVA Special Treatment

Who is this for?
Developing countries

How many? List them.

- Allowed to delay Application for 5 years.
- Computed value method can be delayed for another 3 years
- Can retain existing system on minimal values
- Technical Assistance

Preshipment Inspection (PSI)

What is it used for?

Ensuring the quality and quantity of the goods in a contract.

What was the situation before PSI?

- Increase in volumes creates a need for constant regulation
- Lack of transparency
- No procedures to appeal
- Delay

Import Licensing (IL)

Definition?
The administrative procedures which includes handling required documents to administrative body
prior to the importation of goods.

What are its objectives?

- Simplify procedure
- Improve transparency
- Fair and equitable administration
- Prevent procedures from having restricted or distorting effects.

How many types of Import Licensing are there?

2 types: Automatic and Non-automatic
What are the provisions of each type of Import Licensing?
1. Automatic:
- Approved within 10 working days
- No discrimination
- Removed once the situation that gave rise to the introduction is no more
- No restrictive effects on imports.

2. Non-automatic
- No restrictive or distorting effects
- No discrimination
- Time limit for processing applications
- All relevant information are published
- Validity of a license

QUOTA
Definition
What is Quota?
A government-imposed trade restriction that limits the quantity of goods imported or exported during a
particular time period.

What does Quota aim to achieve?

Control the volume of trade and promote domestic production
Effects of Quota

Price Supply Demand Import

Before Tax & Quota PW Q1 Q2 Q2-Q1
After Tax & Quota P2 Q4 Q3 Q4-q3

Producer surplus: + a
Consumer surplus: - (a+b+c1+c2+d)
Government: + c2
Social: - (b+c1+d)
C1 = Quota rent

Exercise:

1 Quota & Tax on Imports exercise

The production volume will increase/decrease by?

S2 – S1 = +5 -> increase by 5
Consumption will increase/decrease by?
D2 – D1 = -5 -> decrease by 5

Import value will decrease by?

(D1-S1)-(D2-S2) = 5 (decrease by 5)

Government?
C = 5 x 20 = 100 (Always increase because government always collect tax)

Society will sufer??

= B+D (Vì không có c1 c2, nên government =c luôn)
= 5x20/2 + 5x20/2 = 100

Producer Surplus will increase/decrease by?

(20+15) x 20 x ½ = 350 -> increase by 350

Consumer Surplus will increase/decrease by?

-((25+30) x 20 x ½) = -550 -> decrease by 550
Social welfare

Subsidies

CS = - (1+2) = -((12x2) + (3*2/2)) = - (27)

PS = (1+2+3) = 27 + (3+8)*2/2 = 38
Government = - (2+3+4) = 8*2 = -16
Social = - (2+4) = - (3 + (2*2/2) = -5
Anti-dumping
When does anti-dumping occur?
When a company export a product at a lower price that it charges in the home market.
 Gov take action against dumping to protect domestic market

What role does WTO play?

WTO only judge how a country can or cannot react to dumping. The countries must prove that
dumping is taking place, calculate the dumping price and the dumping act is doing harm.

What does anti-dumping do?

It levies further import duty on the goods to bring it closer to the normal price or remove any injury
and damage to the domestic market.

How to calculate the “normal price”

- By calculating the price that was set by the exporter in the home market.
- By calculating the production cost, other expenses and profit margins
- The price charged by the exporter in another country

When can dumping be accepted?

When the difference in price is less than 2% of the normal price
When the dumped volume is no less than 3% of the total imports.

Subsidies
What is defined as “Subsidies”
i. Financial contribution
ii. By the government or any public body
iii. To grant benefits
All three must be satisfied to be considered a subsidy

AOA (Agreement on Agriculture)

What is AOA and it’s aim?
AOA is a WTO Treaty that aims to eliminate “trade distorting” subsidies relating to agriculture.
What does it mean to “distort” trade?
It’s to make a country’s product cheaper than similar products in the global market. Creating an
imbalance in terms of price, the cheaper one would be more likely to export.

What are the boxes for AOA and what does each box mean?

1. Green Box
- Subsidies that do not distort trade or have negligible effect on agriculture trade.
- No limit
- Usually not for specific products

2. Amber Box
- Subsidies that distort trade.
- Limit of 5% (10% for developing countries)
- Distort trade because it creates excessive production (Gov provide subsidy for a product ->
more farmers produce that crop -> excessive)

3. Blue box
- Subsidies that limit the production
- No limit
SCM (Agreement on Subsidies and Countervailing Measures)

What are the 4 specificity of SCM?

Enterprise-specified subsidy: targets companies for subsidization
Industry-specified subsidy: targets certain sectors for subsidization
Regional-specified subsidy: targets producer in a specific part of its territory
Prohibited subsidy: Government target export goods or goods using imports for subsidization

What are the lights? What do they do

1. Red light
- Prohibited Subsidies (subsidies that outright distort trade)
- Export subsidies
- Import substitution subsidies (subsidies that promote use of domestic over imported goods ->
creates imbalance)

2. Yellow light
- Actionable subsidies
- Subsidies that are specific
- Subsidies that causes injuries, harm or impairment.

3. Green light
- Non-actionable subsidies
- No action can be taken against non-specific subsidies (everything is neutral and spread out
evenly)