WTO, NAMA and GSP

SEQUENCE
• Impact of Trade

• Introduction to WTO

• Non-Agricultural Market access (NAMA)

• Generalized System of Preferences (GSP) and

GSP+
2
 IMPACT OF TRADE
Trade policy trade-off among competing interests
– Within and between nations
– No trade policy benefits every one
– Changes in level of incomes and employment
– Job losses & gains in sectors
– Exports reduce consumer welfare and benefits producers
– Imports benefit consumer and reduce producers’ welfare

3
 IMPACT OF TRADE
– Restrictive Trade policy
• benefits domestic industries
• harms export sector and consumers
– Trade liberalization
• benefits export sector and consumers
• harms inefficient domestic sectors

4
 IMPACT OF TRADE
Socio-cultural impact
– Diffusion of ideas
– Labour standards & child labour
– Human rights
– Environment standards
– Changes in lifestyles

5
 IMPACT OF TRADE
Political impact
– Current account deficit leads to borrowing
– Current account surplus makes for lending
– Changes in relative powers of various groups
– Loss of policy space
– Gains in policy space

6
PATHS TO TRADE LIBERALIZATION

Trade
Liberalization

Autonomous Bilateral Plurilateral Multilateral

7
 WHAT WTO IS
• Institutional framework of multilateral trading system
• Created by Marrakesh Agreement
o concluded in December 1993
o signed in April 2004
o Came into force on January 1, 1995
• Provides for system of rights and obligations
o Trade in goods
o Trade in services
o Trade related aspects of intellectual property rights (IPRs)

8
 PRINCIPLES OF WTO
• Non-discrimination
– MFN treatment
– National Treatment
• Trade liberalization/Freer trade
• Predictability & Transparency
• Fair trade
• S&D treatment for developing countries
• Single undertaking

9
NON-AGRICULTURAL MARKET ACCESS (NAMA)

10
 WHAT MARKET ACCESS IS

General meaning WTO Meaning

Extent to which a good Totality of govt-imposed
or service can compete conditions under which
with locally-made product may enter a
products in another country under
market non-discriminatory
conditions

11
MARKET ACCESS: WTO SCOPE
Market
Access

Goods Services

Agricultural Non Agri

products Products

12
GOVT MEASURES WHICH MAY
RESTRICT MARKET ACCESS

Customs
Tariffs Import ban
procedures

Import Internal
Subsidies
restrictions taxes

Trade
Standards Licensing
defence

13
 TYPES OF TARIFFS
AD VALOREM TARIFFS SPECIFIC TARIFFS
• Expressed as percentage of • Related to weight/volume of
value of imported goods imported goods

Value of an auto US$ 100 Kg rice consignment

10,000/- Tariff $50 per kg
Tariffs 50%
Tariff collected Tariff collected
US$ 5,000 US$ 5,000

14
 TARIFF ESCALATION
• Tariffs increase with level of processing of goods.

40

35
35
30

25

20
20
15

10
10
5

0
0

cotton Yarn Fabric garments

15
 TARIFF PEAKS
• Tariffs which are higher than average tariffs
• Aim at protecting ‘sensitive’ sectors

120

100
100

80

60

40

20 15 15 16
10 10
0
metals agri products labour mechanical electronic autos
intensive appliances goods
manufactures
16
APPROACHES TO TARIFF CUTS

Non-Linear/
Linear
Formula
• Doesn’t address • Addresses tariff
tariff peaks peaks

17
 SWISS FORMULA
• Makes deeper cuts on higher tariffs :
Z=AX/A+X
• X=initial tariff
• A=coefficient to be agreed
• Z= resulting tariff

• Higher coefficient, lower tariff cut and higher resulting

tariff
• Lower coefficient, higher tariff cut and lower resulting
tariff
18
 SWISS FORMULA

Z = AX/(A+X) Z = AX/(A+X)
X = 10 X = 10
A=5 A = 10
Z= 50/15 Z = 100/20
Z = 3.33 Z=5

19
 NAMA: SCOPE IN WTO
• NAMA about products not covered by Agreement on
Agriculture
– manufacturing products
– fuels and mining products
– fish and fish products
– forestry products.
• They are also called industrial products
NAMA coverage
• Fish Products
• HS Chapters 25-97 (excluding agricultural
products)
20
 NAMA NEGOTIATIONS:
BACKGROUND
• During Uruguay Round (1986–94) reforms agreed in
three areas.
– Trade in Goods
– Trade in Services
– TRIPs

• Negotiations began subsequently and are in progress

21
DOHA MANDATE FOR NAMA
• Cut or eliminate tariffs
– tariff peaks, high tariffs, and tariff escalation
• NTBs
• Comprehensive product coverage without a
priori exclusions
• S&D Principle
– Special needs/interests of developing economies
– Less than full reciprocity

22
IMPORTANT DEVELOPMENTS

Geneva 2004

Hong Kong 2005

July 2008 package

Bali 2013

Convergences & Differences

Deal Awaited
23
 CONVERGENCES
• Tariffs to be cut by a formula
• Swiss formula to be used
• S&D Treatment for developing economies
– Longer implementation period
– Lower tariff cuts than developed economies
– Higher coefficients than developed economies
– Less than formula cuts for certain No. of products
– Some of tariff lines (TLs) to be unbound

24
 CONVERGENCES
• Special + treatment for LDCs
– Exempting LDCs from tariff cuts
– Zero tariffs by developed countries on lasting basis
• All duties shall be bound on an ad valorem basis
• Implementation period:
• Developed: 10 years
• Developing 5 years

25
 CONVERGENCE
• Sectoral tariff cuts
– To address tariff Peaks/escalation
– Over and above formula cuts
– Optional

26
 DIFFERENCES
• Developing countries
– Product coverage for less than formula cuts?
– Number of TLs to be unbound?
• Coefficient for both groups?
• Proposed coefficients (I)
– developed countries within the range of 5 to 10
– Developing Members: within the range of 15 to 30

27
 DIFFERENCES
• Proposed coefficients (II)
– Developed countries 8
– Developing Members: X (20), Y (22), (Z) 25

Coefficient Condition
X Less than formula cuts for 14% of NA
TLs
Y Less than formula cuts for 10% of NA
TLs
Z No less than formula cuts

28
 OTHER ISSUES
• Preference erosion

• Duty free treatment for LDCs

• Increased weight of developing countries

• Economic slowdown

• Regionalism
29
 PAK: TARIFF DISTRIBUTION NON-AGRI PRODUCTS
Tariff distribution Bound Applied
% %
Duty free 0 0
Greater than zero & equal to 5 1.8 42.4
Greater than 5& equal to 10 0 14.9

Greater than 10 & equal to 15 1.9 6.8

Greater than 15 & equal to 25 14.3 33.3

Greater than 25 & equal to 50 18.2 2.3

Greater than 50 & equal to 100 62.7 0.3

Greater than 100 0 0

Source: WTO 30
GENERALIZED SYSTEM OF
PREFERENCES (GSP)

31
 GENERALIZED SYSTEM OF
PREFERENCES (GSP)
• Preferential tariffs by developed countries on less
developed countries’ imports.
• Unilateral
• Conceived in 1969 to encourage export-oriented policies
• Each developed country has its own GSP Scheme
– Different product coverage
– Margin of preference (MoP)
– Conditionality
• European Union (EU): oldest, most comprehensive GSP

32
 EU GSP SCHEME
Sub arrangement Beneficiaries MoP
General Arrangement All developing countries 3.5
except high income or percentage
upper middle income points
20-30%
Special Incentive Select group of countries 100%
Arrangement for (presently 14)
Sustainable Development
and Good Governance
(GSP +)
Special Arrangement for Least Developed countries 100%
LDCs (49 LDCs)

Low income: $1025 or less. Lower Middle $1026-4035.

Upper Middle $4036-12,475. Upper income More than &12,475 33
 GSP + CRITERIA
• GSP + beneficiary country must
– not be high income or upper middle income
– be a vulnerable economy
• Imports to EU less than 2% of total EU GSP imports
• 7 sections make up over 75% of exports to EU
– ratify and effectively implement 27 international
conventions on good governance & sustainable
development.

34
 THE CONVENTIONS:
EXAMPLES
• International Covenant on Civil & Political Rights
• Convention Against Torture and other Cruel,
Inhuman or Degrading Treatment or Punishment
• Convention on Elimination of All Forms of
Discrimination Against Women
• Convention on Rights of the Child
• United Nations Framework Convention on Climate
Change

35
 PAKISTAN & GSP+
• Pakistan admitted to GSP+ on January 1, 2014

• Pakistan’s share in EU’s GSP covered imports was

1.4%

• GSP + is for 10 years

• To be reviewed every three years

36
 EXPORTS ELIGIBLE FOR GSP +
• 6000 products covering over 80% of Pakistan’s
exports to EU
– Textiles & clothing
– Leather & footwear
– Medical equipment
– Sports goods Rice a notable exclusion
– Cutlery
– Fruits & vegetables
– Articles of plastics

37
 Billion
PAK EXPORTS TO EU
GSP+
9US$ GSP+

8 8.3
7 7.49
6.87
6
5.92 6.09
5
4 7.75
3
2
1
0
2010 2011 2012 2013 2014 2015

United Nations Comtrade Data 38

 EXPORT INCREASE/DECREASE (%)
30
26
21
20 17
13
10
Pak global exports
2.1 Pak exports to EU
0
2011 2012
-2 2013 2014
-1.6 2015

-10 -6.6
-10.9
-20 -18

-30

United Nations Comtrade Data

39