CHAPTER

2 WTO and International

Integration

1
 Textbook & Reference Books
◼ Textbook: Miroslav N. Jovanovic (2015),
Economics of International Integration, Second
edition, Edward Edgar Publisher.

◼ Reference books:
◼ Ngô Thị Tuyết Mai & Nguyễn Như Bình (2019), Hội nhập kinh tế
quốc tế, NXB Đại học Kinh tế Quốc dân
◼ Peter Robson (1998), The Economics of International Integration,
4th edition, Routledge
References
1. The WTO https://www.wto.org/english/thewto_e/thewto_e.htm

2. Trade Policy Review: Viet Nam

https://www.wto.org/english/tratop_e/tpr_e/tp387_e.htm

3. World Trade Organization, World trade report 201..

https://www.wto.org/english/res_e/publications_e/wtr19_e.htm
4. World Trade Organization, Regional trade agreements
https://www.wto.org/english/tratop_e/region_e/region_e.htm
5. Handbook of the European Union’s Trade Policy - Sổ tay Tổng quan chính
sách thương mại của Liên minh châu Âu, EU-VN MUTRAP
http://www.wtocenter.vn/download/16273/So%20tay%20Tong%20quan%20CS
%20TM%20cua%20Lien%20minh%20Chau%20Au.pdf
6. Guide to the EU-Vietnam Trade and Investment Agreements
https://trade.ec.europa.eu/doclib/docs/2016/june/tradoc_154622.pdf

3
Outline
◼ Introduction
◼ WTO & Regional Economic
Integration
◼ Multinational Trading System:
Challenges
◼ Regionalism: Building or stumbling
blocks

4
What is the WTO?

◼ is the only international organization dealing with the

global rules of trade between nations.
◼ its main function is to ensure that trade flows as
smoothly, predictably and freely as possible
◼ Is a forum for governments to negotiate trade
agreements
◼ is a rules- based, member –driven organization – all
decision are made by the member governments, and
the rules are the outcome of negotiations among
members.

5
History of WTO
◼ GATT (General Agreement on Tariffs and Trade) was
signed by 23 countries in 1947 and became law in
1948.
◼ The purpose of the GATT was to make international
trade easier.
◼ GATT was replaced by the WTO in 1995
◼ Before the WTO was created:
◼ ITO took place – an intellectual precursor of the WTO
◼ But the ITO failure.
=> Why GATT was replaced by the WTO?

6
Facts about WTO
◼ Intergovernmental Organization
◼ Location: Geneva, Switzerland
◼ Established: 1 January 1995 under the Marrakesh
Agreement, signed by 123 nations
◼ Created by: UR negotiations (1986-1994)
◼ Membership (2023): 164 members (98% of world trade)
◼ Budget (2019): 197 million Swiss francs ($209 million)
◼ Secretariat staff: 625 (Director-General: Roberto
Azevêdo from Brazil)
◼ Website: www.wto.org

7
WTO members

Belarus
Algeria Uzbekistan
Libya Iran
Sudan Ethiopia
Somalia

8
WTO – Members
1. Malaysia: 1/1/1995
2. Myanmar: 1/1/1995
3. Philippines : 1/1/1995
4. Thailand: 1/1/1995
5. Indonesia: 1/1/1995
6. Brunei Darussalam: 1/1/1995
7. Singapore: 1/1/1995
8. Laos: 2/2/2013
9. Cambodia: 13/10/2004 China: 11/12/2001
10. Vietnam:???
Observer: 1 January 1995
Member: 11 January 2007 Cuba: 20/4/1995 9
 Steps involved in becoming a
WTO member
▪ Submitting a formal application to the WTO
▪ Conducting bilateral negotiations with
interested WTO members
▪ Drafting a final package of commitments and
scheduling working party meetings
▪ Approval of the accession package by the
General Council or Ministerial Conference
▪ Ratification of the WTO Agreement at home

https://testbook.com/objective-questions/mcq-on-world-trade-organisation-wto--5fad0ca2fbebe1634af3b13b 10
 Vietnam & WTO
◼ Vietnam became the 150th member of the
WTO in January 2007
◼ Vietnam applied to join the WTO in 1995
◼ On 31 Jan. 1995, the WORKING PARTY was
established to examine the application of VN
◼ As a WTO member, VN will benefit from the
removal of tariff and non-tariff barriers
◼ Industries will also lose subsidies and tax
breaks/reduction

. 11
 WTO members’ contributions to the
consolidated budget - 2019
(in Swiss Francs with a minimum contribution of 0.015%)
Member 2019 Contribution CHF 2019 Contribution %
US 22,660,405 11.591%
China 19,737,680 10.096%
Japan 7,896,245 4.039%
Germany 13,882,455 7.101%
UK 7,446,595 3.809%
France 7,440,730 3.806%
Netherlands 5,745,745 2.939%
Hong Kong, China 5,427,080 2.776%
Italy 5,096,685 2.607%
Singapore 4,774,110 2.442%
Thailand 2,404,650 1.230%
Malaysia 1,966,730 1.006%
12
Viet Nam 1,401,735 0.717%
 WTO members’ contributions to the
consolidated budget - 2021
(in Swiss Francs with a minimum contribution of 0.015%)
Member 2021Contribution CHF 2021 Contribution %
US 23,149,155 11.841%
China 20,593,970 10.534%
Japan 7,487,650 3.830%
Germany 13,997,800 7.160%
UK 7,380,125 3.775%
France 7,464,190 3.818%
Netherlands 5,739,880 2.936%
Hong Kong, China 5,561,975 2.845%
Italy 4,991,115 2.553%
Singapore 4,824,940 2.468%
Thailand 2,420,290 1.238%
Malaysia 1,859,205 0.951%
Russia Federation 3,235,525 1.655% 13
Falling tariffs: VN’s lower tariffs will be phased
in over several years
2005 tariff WTO WTO final WTO
rates initial bound rate implementatio
bound rate n
Simple Average 18.5 17.4 13.6 Up to 12 years

Agricultural Products 29.4 27.3 21.7 Up to 5 years

Nonagricultural products 17 16 12.5 Up to 12 years
Steel 9.7 17.7 13 Up to 2 years
Petroleum 14.6 27.2 27.1 Up to 2 years
Textiles and Clothing 36.6 13.6 13.5 Upon accession
Footwear 45 35.8 27.2 Upon accession
Cars 63.6 84.8 58.7 Up to 12 years
Motorbikes 100 100 74.3 Up to 12years
Number of lines 10,689 10,444 10,444
Maximum tariff 150 150 85 14
The basic principles of the GATT
◼ Non-discrimination (MFN clause-Article I)
◼ National Treatment (Article III)
◼ Reciprocity (Article XXWIII)
◼ Transparent and foreseeable tariffs (Article X)
◼ The impartial settlement of disputes (Article
XXVIII); and Enforcement

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WTO vs. GATT
◼ GATT remained a “provisional” agreement and
organization whereas WTO commitments are permanent
◼ GATT rules mainly applied to trade in goods whereas
the WTO covers other areas, such as services,
intellectual property, etc.
◼ GATT had contracting parties whereas the WTO has
members
◼ GATT was essentially a set of rules of the multilateral
treaty with no institutional foundation whereas the
WTO is a permanent institution with its own Secretariat

16
 GATT vs. WTO
◼ A country could essentially follow domestic legislation
even if it violated a provision of the GATT agreement
which is not allowed by the WTO
◼ In WTO, almost all the agreements are multilateral in
nature involving commitment of the entire membership
whereas a number of GATT provisions were plurilateral
and therefore selective
◼ The WTO also covers certain grey areas, such as
agriculture, textiles and clothing, not covered under the
GATT
◼ The dispute settlement system under the WTO is much
more efficient, speedy, and transparent unlike the GATT
system which was highly susceptible to blockages
17
WTO Objectives
◼ Raising standards of living
◼ Ensuring full employment
◼ Ensuring growth of real income and demand
◼ Expanding production and trade
◼ Sustainable development
◼ Protection of the environment

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Functions of WTO
1. To facilitate the implementation, administration, and
operation of trade agreements
2. To provide a forum for trade negotiations among
member countries to attain, exchange, secure and
enforce deals that affect world trade
3. To deal with trade disputes among it member
countries
4. To carry out periodic reviews of its members'
national trade policies
5. To assist developing countries in trade policy issues,
through technical assistance and training programs
6. To cooperate with other international organizations
19
Organizational Structural of the
WTO
◼ Decisions are made by the entire membership
- consensus
◼ Highest institutional body: The Ministerial
Conference (meet usually every two years)
◼ Second level: General Council (meet several times
a year)
◼ Third level: Councils for each broad area of
trade (report to the General council)
◼ Fourth level: Each of the higher level councils
has subsidiary bodies
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21
 WTO - Decision
◼ All major decisions are made by the
membership as a whole:
◼ By Ministers (who meet at least once every two
years)
◼ By Ambassadors (who meet regularly in Geneva)
◼ By Delegates (who meet regularly in Geneva)
◼ Decisions are normally taken by CONSENSUS
◼ WTO rules are outcomes of negotiations among
WTO members
◼ WTO is a consensus-based organization

https://www.wto.org/english/thewto_e/whatis_e/tif_e/org1_e.htm 22
Principle of the Multilateral
Trading System under the WTO
1. Trade without discrimination
2. Freer trade: gradually, through negotiation
3. Predictability: though binding and
transparency
4. Promoting fair competition
5. Encouraging development and economic
reform

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Principles of WTO
1. Trade without discrimination

◼ Most – favoured –nation (MFN) rule

◼ National treatment (NT) rule

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Principles of WTO
1. Trade without discrimination
◼ MFN rule: every time a country lowers a
trade barrier or opens up a market, it has
to do so for the same goods or services
from all its trading partners.
◼ Some exceptions are allowed:
◼ Under FTA
◼ GSP (generalized System of Preferences)
◼ Or a country can raise barriers against products that
are considered to be traded unfairly from specific
countries
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Types of Tariffs
▪ Non Most Favored- Nation- Non MFN tariff
▪ Most Favored- Nation – MFN tariff)
▪ Preferential tariffs:
▪ Generalized System of Preferences – GSP
▪ FTA
▪ Bound Tariffs
▪ are specific commitments made by individual WTO
member governments.
▪ is the maximum MFN tariff level for a given
commodity line.
▪ The gap between the bound and applied MFN rates
is called the binding overhang.
26
 Binding overhang principle

https://wits.worldbank.org/wits/wits/witshelp/content/data_retrieval/p/intro/c2.types_of_tariffs.htm. 27
 Bound and MFN applied simple
average tariff for all products

https://wits.worldbank.org/wits/wits/witshelp/content/data_retrieval/p/intro/c2.types_of_tariffs.htm 28
 3 types of tariff for a given product

https://wits.worldbank.org/wits/wits/witshelp/content/data_retrieval/p/intro/c2.types_of_tariffs.htm 29
Non-discrimination - MFN
◼ Eg.
◼ According to WTO, the Vietnamese
government can not impose higher tariffs on
goods imported from one trading coutry and
lower tariffs on goods imported from another
country. The government has to treat them
equally

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Principles of WTO
1. Trade without discrimination
◼ National treatment rule: imported goods
should be treated no less favorably than
domestically produced goods
◼ Imported and locally-produced goods
should be treated equally

31
 Principles of WTO
2. Freer trade: gradually, through negotiation
❑ Lowering trade barriers is one of the most obvious
means of encouraging trade.
❑ Since GATT’s creation in 1947–1948 there have
been eight rounds of trade negotiations.
❑ As a result of the negotiations, by the mid-1990s,
industrial countries’ tariff rates on industrial goods
had fallen steadily to less than 4%.
❑ A ninth round, under the Doha Development
Agenda, is now underway
❑ Developing countries are usually given longer to
fulfil their obligations.
32
 GATT/WTO rounds of trade negotiations
Round Year Participa Tariff cut Subject
ting achieved
countries

1 Geneva 1947 23 21% Tariffs on manufactured goods

2 Annecy 1949 13 2% Tariffs on manufactured goods

3 Torquay 1950-51 38 3% Tariffs on manufactured goods

4 Dillon 1959-62 26 2% Tariffs on manufactured goods

5 Kennedy 1963-67 62 35% Tariffs on manufactured goods, antidumping

6 Tokyo 1973-79 102 33% Tariffs on manufactured goods, NTBs

7 Uruguay 1986-94 125 34% Tariffs on manufactured goods, NTBs, services,

intellectual property, textiles, agriculture,
dispute settlement, creation of WTO

8 Doha 2001-13 159 Initial negotiating subjects included: agriculture, services,

intellectual property rights, trade and investment,
competition rules, public procurement, electronic commerce,
environment. The final deal referred mainly to trade
facilitation.

33
 Principles of WTO
2. Freer trade: gradually, through negotiation
❑ At first these focused on lowering tariffs on
imported goods
❑ By the 1980s, the negotiation had expanded to
cover NTBs on goods, and to the new areas:
services, intellectual property
❑ The WTO agreements allow countries to introduce
changes gradually, through “progressive
liberalization”
❑ Developing countries are usually given longer to
fulfill their obligations, WHY?

34
 Principles of WTO
3. Predictability: though binding and
transparency
❑ With stability and predictability, investment is
encouraged, jobs are created and consumers can
fully enjoy the benefits of competition – choice and
lower prices
❑ The multilateral trading system is an attempt by
governments to make the business environment
stable and predictable.
❑ In the WTO, when countries agree to open their
markets for goods or services, they “bind” their
commitments.
35
Principles of WTO
3. Predictability: though binding and
transparency
❑ The system tries to improve predictability and
stability in other ways as well.
◼ One way is to discourage the use of quotas and
other measures used to set limits on quantities of
imports since administering quotas can lead to
more red-tape and accusations of unfair play.
◼ Another is to make countries’ trade rules as
clear and public (“transparent”) as possible.
◼ Many WTO agreements require governments to
disclose their policies and practices publicly within
the country or by notifying the WTO.
 The Uruguay Round Increased
Bindings
Percentages of tariffs bound before and after the
1986-1994 talks

Before After

Developed countries 78 99

Developing countries 21 73

Transition economies 73 98

(These are tariff lines, so percentages are not weighted according to trade volume or value)

https://www.wto.org/english/thewto_e/whatis_e/tif_e/understanding_e.pdf 37
posted before they come into force or before they are enforced,

Principles of WTO
◼ Transparency:
◼ Governments must publish all relevant laws
and regulations, and set up enquiry points
within their bureaucracies.
◼ Foreign companies and governments can then
use these inquiry points to obtain information
about regulations in any service sector.
◼ And they have to notify the WTO of any
changes in regulations that apply to the
services that come under specific
commitments.
https://www.wto.org/english/thewto_e/whatis_e/tif_e/understanding_e.pdf 38
 WTO- Vietnam

Vietnam is obligated to ensure that all laws,

regulations, decrees, court decisions and administrative
decisions of general application are posted before they
come into force or before they are enforced

. WTO-Vietnam 39
https://www.moj.gov.vn/UserControls/News/pFormPrint.aspx?UrlListProcess=/qt/tintuc/Lists/ThongTinKhac&ListId=4c6dbf3e-0473-40ca-94e4-
 Principles of WTO
4. Promoting fair competition
◼ The WTO is sometimes described as a
“free trade” institution, but that is not
entirely accurate.
◼ 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.
Principles of WTO
5. Encouraging development and economic
reform
❑ Over three-quarters of WTO members are
developing or least-developed economies
❑ Special provisions for DCs & LDCs:
◼ longer time periods for implementing Agreements and commitments,
◼ measures to increase trading opportunities for developing countries,
◼ provisions requiring all WTO members to safeguard the trade interests
of developing countries,
◼ support to help developing countries build the capacity to carry out
WTO work, handle disputes, and implement technical standards, and
◼ provisions related to least-developed country (LDC) Members.
41
WTO Agreements
◼ The WTO’s rules – the agreements – are the
result of negotiations between the members
◼ The current set is largely the outcome of the
1986-94 UR negotiations
◼ 30 agreements and separate commitments
(called schedules) made by individual
members in specific areas
◼ Through these agreements, WTO members
operate a non- discriminatory trading system
that spells out their rights and their
obligations.
42
WTO Agreements
◼ The UR created rules for dealing with:
◼ Goods

◼ Services

◼ Intellectual Property

◼ Dispute settlement

◼ Reviews of governments’ trade policies

=>Visit:https://www.wto.org/english/the
wto_e/whatis_e/inbrief_e/inbr_e.htm

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WTO & RTAs
◼ Questions:
1. Whether these regional groups support or
hinder the WTO’s multilateral trading system
2. Is the multinational trading system falling apart?

44
WTO & RTAs
❑ RTAs actually support the WTO?
◼ GATT (Article 24&5) allow WTO members
to conclude RTAs, as a special exception,
provided certain strict criteria are met
◼ In the WTO, RTAs are defined as reciprocal
trade agreements between two or more
partners. They include FTAs & CUs
◼ In turn, some of these rules have paved the way
for agreement in the WTO
=> Agreements should help trade flow more freely
among the countries in the RTA without barriers
being raised on trade with the outside world. 45
WTO & RTAs
❑ RTAs seem to violate the WTO’s principle?
◼ The WTO agreements recognize that under some
circumstances, setting up a CU or FTA would
violate the WTO’s principle of non-
discrimination for all WTO members
❑ All WTO members now have an RTA in
force
❑ Over the last two decades, the number of
regional trade agreements has been on the rise,
WHY?
46
 RTAs currently in force
(by year of entry into force), 1948-2020

302
RTAs

Source: WTO, http://rtais.wto.org/UI/PublicMaintainRTAHome.aspx

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Reasons for Regional Integration
▪ Economic enhancement of the member states
➢ Free trade & FDI
▪ A desire to jog the multilateral system into faster and
deeper action than the GATT/WTO in selected areas
▪ Political Reasons
➢ Linkages of economies create interdependencies
that reduce the potential for violent conflict
➢ Grouping gives countries more political clout
world-wide
▪ Impediments
➢ Painful adjustments in certain segments of
economy
➢ Threat to national sovereignty
 Building or Stumbling Blocks
◼ Regional trading blocks
◼ Regional trading arrangements are good or
bad for world welfare???
◼ Regional economic integration is to help
(building block) or a hindrance (stumbling block)
to a the multilateral trading system?

https://books.google.com.vn/books?id=dd0WCQAAQBAJ&pg=PR16&lpg=PR16&dq=Miroslav+N.+Jovanovi%C4%87,+chapter+2:+the+WTO+and+internati
onal+Institutions&source=bl&ots=rheqJncHac&sig=ACfU3U0MOk8x6WSaiI9rs4aVMoJW11nPfA&hl=en&sa=X&ved=2ahUKEwiaybfQ0s7yAhW063MBH
Building Blocks
Stumbling Blocks
Q&A

56
The end

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