Accession to the WTO for developing countries. Strategies for gaining maximum benefits


Term Paper, 2019
37 Pages, Grade: A

Excerpt

Contents

ABSTRACT

1. INTRODUCTION
1.1. Overview of Important Concepts
1.1.1. What is World Trade Organization (WTO)?
1.1.2. Developing Countries
1.2. The Justifications and Consequences of Protectionism and of the Trade Liberalization
1.2.1. Arguments Against Trade Liberalization: Protectionism
1.2.2. The Benefit of Trade Liberalization and Integration to International Trade Organizations

2. OPPORTUNITIES AND CHALLENGES OF WTO MEMBERSHIP
2.1. Opportunities of WTO Membership to Developing Countries in General
2.2. Specific Opportunities of Accession to WTO to the Developing Countries
2.2.1. Protection against Discriminatory Regulatory Measures
2.2.2. The Generalized System of Preferences (GSP)
2.2.3. Dispute Settlement
2.3. Challenges of WTO Membership to Developing Countries
2.4. Necessary Precautions Before Joining the WTO
2.4.1. The Role of the WTO in Economic Development in Developing Countries
2.4.2. The Level of Development Required to be Achieved Before Joining the WTO
2.5. The Necessary Precautions to Be Taken by Developing Countries During the Negotiation for Joining the WTO

3. WTO ACCESSION: ETHIOPIA’S PERSPECTIVE
3.1. Overview
3.2. Ethiopian accession so far
3.2.1. Preparation and Submission of the Memorandum on the Foreign-Trade Regime of Ethiopia
3.2.2. A Roadmap for Ethiopia's WTO Accession
3.2.3. The Diagnostic Trade Integration Study (DTIS)
3.2.4 Capacity-Building Activities
3.2.5. Impact-Assessment Studies
3.3. Challenges of WTO membership

4. EXPERIENCES OF LDCs ACCEDED TO THE WTO
4.1. Duration of Accession Process
4.2. Commitments of Acceded LDCs
4.2.1 Tariff Bindings in Trade in Goods
4.2.2. Transition Periods
4.2.3. Commitments on Trade in Services
4.2.4. Trade Related Aspects of Intellectual Property Rights (TRIPS)
4.2.5. Special and Differential Treatment
4.3. Implementation of WTO Accession Commitments

CONCLUSION AND WAYS FORWARD: LESSONS FOR ETHIOPIA

REFERENCES

ABSTRACT

The objective of this paper is to present a survey of trade issues in WTO membership from the perspective of developing countries putting Ethiopia in focus. Developing countries are a large percentage of the World Trade Organization (WTO) membership, in which Ethiopia is on process of acquiring membership.

I examines the experiences of least developing countries (LDCs) acceded to World Trade Organization (WTO) in relation to their accession process, terms of accession and implementation of commitments with a view to drawing lessons which could be relevant to Ethiopia to devise successful strategies and avoid mistakes in an effort to gain maximum benefits from its WTO membership.

Since accession to the WTO is not an end in itself, Ethiopia should carefully and strategically negotiate to reap the potential benefits of membership in light of its long-term development strategies.

Key Words: Accession, WTO, Ethiopia, LDCs.

1. INTRODUCTION

Trade liberalization may be unilateral, bilateral, sub-regional or multilateral. The end of the cold war has witnessed an increasingly growing wave of unilateral trade liberalization accompanied by a regulatory framework that facilitates and enhances the momentum. Although the impact of unilateral trade liberalization undertaken in many countries including Ethiopia deserves discussion, the theme of this article has necessitated focus on multilateral trade liberalization under the WTO system.

As LDC, Ethiopia is likely to be given some flexibility in assuming liberalization commitments. However, it will be asked to agree to some threshold of liberalization, and it is important for Ethiopia to be prepared to undertake commitments and develop a negotiation strategy that protects its interests. In addition, to respond effectively to the requests of WTO members, it is indispensable for the government of Ethiopia to have thorough information and analyze the potential consequences of liberalization.[1]

This term paper has three main parts in which the first part will discuss about trade liberalization with its justification and protectionism and its effects on economic development.

The second part of the paper will focus on the opportunities and challenges of WTO membership to developing countries. In this part the consequences of the WTO membership of the developing countries will be analyzed in terms of its benefits and harms.

The third part of the paper deals with the necessary precautions the developing countries are required to take before joining the WTO. In this part, the role of the WTO in helping the developing countries not to be affected negatively by becoming a member; necessary development level countries are required to attain before joining the WTO; and necessary measures to be undertaken during negotiation process not to take a commitment which will be against the national interest of the country. The forth part deals on the Ethiopia WTO accession and assess the experience of WTO accessed least developing countries.

Finally, the conclusion and recommendation with lessen to Ethiopia addressed.

1.1. Overview of Important Concepts

1.1.1. What is World Trade Organization (WTO)?

The WTO is an international organization established in 1994 for the purpose of supervising and liberalizing international trade. The organization officially entered into force on January 1, 1995 under the Marrakech Agreement, (the WTO constitution). WTO deals with the regulation of trade between member countries. The establishment of the World Trade Organization (WTO) as an international body dealing with international trade rules is aimed at facilitating trade among countries. By encouraging countries to enter into negotiations for the reduction of tariffs and for the removal of other barriers to trade, the WTO is envisaged to create competitive conditions on the global market.

The major advantage of the WTO system to exporters is the market-access security that it guarantees. In trade in goods, the Uruguay Round of negotiations has enabled to bind the tariffs of almost all developed countries and a good proportion of those of the developing and transitional economies from further increase, thereby ensuring an improved market access. In the services trade, on the other hand, countries have made commitments not to restrict access to service products and foreign-services suppliers, although there are no tariff-binding arrangements.

Once countries join the WTO, they are obligated to ensure that their rules for determining dutiable value for customs purposes, for inspecting products to ascertain conformity to mandatory standards, or for the issue of import licenses, conform to the provisions of the set pertinent standards. This is believed to provide a stable access to export markets, thus contributing to the stability of export earnings (the major concern of a commodity-exporting developing country like Ethiopia).

Ethiopia has already applied for accession to the WTO, and a draft memorandum of its foreign-trade regime document has been prepared. The memorandum, having been finalized and subsequently approved by the Council of Ministers, was submitted to the WTO in December of 2006.

1.1.2. Developing Countries

The categorization of countries as developed, developing, and least developed has no clear cut demarcation or specific objective criteria of differentiation. The multilateral treaty on the regulation of international trade, GATT 1947, has tried to identify developed and developing countries for the purpose of providing special treatment to those countries which are backward in economic development. The treaty under Art XVIII provides that members whose economies „can only support low standards of living and is in the early stages of development may invoke the defenses available and benefits offered to developing countries. However, the Article is hardly precise since it does not provide how low the standards of living should be and almost all members can claim that they are in the early stages of development.[2]

When we come to the WTO agreement, we got no definition for developing and developed countries, even though we have several special treatment packages to developing countries under the system. These special treatments can be claimed by many member states due to lack of precise definition of the term under the WTO instruments. However, other members can challenge the decision of a member to make use of provisions available to developing countries.

The current trend in categorization of countries as developed, developing, and least developed is that each country will declare or designate itself as attaining one of the development categorizations. Under the WTO system „self-designation‟ is considered to be the basic method of designating developing country Members. However, developed countries which provide the SDT to developing countries may use other methods in addition to the self-designation for determination of eligibility for the special treatment package, since they are more powerful to determine this, even though it is contrary to the very purpose of the WTO. Sometimes however, it will be unfair to treat equally all self-designated countries as developing one since there is a great difference of level of development among them.[3]

In addition to the WTO and GATT, the international organization which deals with the evaluation of the level of development of countries across the world is the UN. The UN committee for development policy (CDP) under the ECOSOC reviews and categorizes countries based on the level of development.[4]

In all cases the criteria used to identify countries as developed, developing, and least developed is the country’s GDP per capita. It is the only basis necessary to achieve a valid, objective definition, and that definition upon this basis is a necessary preliminary to the introduction of distributive justice into the WTO regime.[5]

1.2. The Justifications and Consequences of Protectionism and of the Trade Liberalization

1.2.1. Arguments Against Trade Liberalization: Protectionism

Protectionism is an economic policy which restrains a trade between countries through different methods. It may be implemented through tariffs, quotas and other quantitative restrictions, and other restrictive government regulatory measures which are imposed for the purpose of discouraging imports, and preventing foreign takeover of domestic enterprises. This kind of policy is categorized as anti-globalization by economists, but countries which are undertaking such kinds of measures have their own justification.[6] It is justified by different factors which are supposed to be for the interest of the country which imposes it. Some of these justifications are:[7] 1) Wealth accumulation by restricting imports and increasing exports. This will help the country to have surplus in international trade, which means when there is more export than import the country will accumulate more wealth at the expense of other countries. 2) Infant industries‟ protection by creating monopoly in the domestic market and shielding them from foreign competition. 3) Strategic trade policy, i.e. protectionism takes place in many ways. It may be a total ban of import from abroad, or selective ban based on a product or the origin of the product. Therefore, the country may ban the import of products based on its own trade strategy. 4) National security:- national security is also a justification for protectionism. It is thought that openness to trade is a threat to the national security. 5) Job protection, i.e. openness to trade will drove domestic producers out of the market due to lack of capacities to withstand foreign competition. As a result of this employees who depend on the domestic producers will lose their job. And other justifications such as differences in Environmental Standards, human rights, etc.

Even though we have different justifications for restriction of international trade most of the time the measure taken by a given state will backfire and endanger the economic interest of the country. The study conducted under the OECD found some negative effects of protectionism.[8] These findings indicate that: rise in domestic price stifle economic growth and depress investment; drop in imports is accompanied by drop in exports; jobs saved are offset by job losses in export-oriented industries; overall employment does not increase by protectionism; and the jobs saved are publicized and the jobs lost are not; hence, the public is left with the impression than protectionist policies benefit employment.

1.2.2. The Benefit of Trade Liberalization and Integration to International Trade Organizations

Domestic liberalization of trade and international integration serves as a means for economic transformation and development in today’s world. No state is self-sufficient to produce all its needs in the domestic market and there are many factors which negatively influence the capacity of a given state to produce what it needs domestically. In addition to scarcity of factors of production there are many factors which necessitate international trade.[9] Some of these factors are discussed below briefly.

First, international trade is justified by uneven resource distribution in the world geography. Nature has not endowed everyone with the same kind of resources with equal distribution. One nation may have some resources in abundance while others have less and other may totally deprived of resources of such nature. Trade (international trade) becomes the best solution for the problem of scarcity or uneven distribution of resources; for, it provides access to resources anywhere from everywhere.[10]

Second, trade is an instrument by which different individuals meet one another and exchange their values among themselves. It helps to know one another and enable them to develop a culture of tolerance and understanding of different ways of life.

Finally, trade is a way of weaving the world together. It creates more interactive world and strength a relationship among different nations, which in turn ensure peaceful coexistence. The economic tie is a powerful instrument in ensuring lasting solution for conflicts among different countries and ensuring global peace. Other benefits of international trade are, increase in sales, improve profit, traders or the country will have short term and long term securities through trade, increased innovation, economies of scale, education, and interdependence among governments.[11] International trade may be justified economically as absolute and comparative advantages for countries trading internationally.

Three main benefits of international trade are identified by Suhail Abboushi as follows:[12] a)The expanded market and subsequent growth of production reduces cost per unit and elevates and spreads efficiency; b) International competition reduces monopoly power by domestic producers and compels them to design and achieve higher production efficiencies; and c) Consumers gain wide varieties of products at lower prices and enjoy increased purchasing power for their limited income.

2. OPPORTUNITIES AND CHALLENGES OF WTO MEMBERSHIP

2.1. Opportunities of WTO Membership to Developing Countries in General

The WTO membership helps for liberalization of trade. Countries while signing the WTO accession protocol undertake commitments to reform trade related laws and policies. This is the main requirement for membership to the organization. Trade liberalization on the other hand encourage trade competition and as a result helps consumers to access goods and services with high quality but with lower price. This in turn encourages economic development and improves the standards of living of citizens.[13]

On the other hand membership to the WTO enables developing countries to access technical assistances from developing countries. This technical assistance helps developing countries during the accession process in order to enable them to comply with membership requirements. The other advantage of becoming WTO member is that it helps to withstand pressures from developed countries in which it provides legal basis for each and every trade activities conducted internationally. The WTO system provides legal basis for business activities and predictable dispute resolution mechanisms in case dispute arises among member states. Therefore, the WTO system protects developing countries from market abuse by developed countries.[14]

Accession to WTO helps least developed countries to liberalize their market and get access to foreign market in other member states under special and preferential treatment for certain period. This helps domestic consumer to access goods and services with high quality at lower prices and also helps domestic producers to access global market under special and preferential treatment package.[15]

Finally, accession to WTO enforces governments to review domestic legislations in order to make them more transparent and non-discriminatory, and this in turn helps to attract foreign direct investment, which is crucial for boosting export, ensuring job opportunity, and ensuring economic growth of a country.[16]

2.2. Specific Opportunities of Accession to WTO to the Developing Countries

2.2.1. Protection against Discriminatory Regulatory Measures

The first reason for which states want to join the WTO is for the gain of access to protection against discriminatory regulations by governments in their territory. One of these protections is as provided under Article I: 1 of GATT is the Most Favored Nations (MFN) protection. This principle accords the protection given to businesses from one of the member states to a business from other member states automatically in the given jurisdiction. According to this principle member states cannot discriminate among businesses from different member states. The protection given to businesses from one member state will immediately give to the other member state’s businesses when they undertake similar business activities.[17]

The other scheme of protection is that of the national treatment. This principle is about giving equal treatment to domestic businesses and to those which come from other member states. According to this principle, member states are prohibited from discriminating among businesses by categorizing them as domestic and foreign. They are required to give all treatments they gave to their domestic businesses. Similar to the MFN treatment, NT also prohibit discrimination among businesses where they undertake similar business activities.

2.2.2. The Generalized System of Preferences (GSP)

In the WTO system there is a framework which is meant to encourage the market access for developing countries. This framework is called the Generalized System of Preference (GSP). Under this package developing countries are allowed to export their products at lower tariff to the developed countries. This framework is not an integral part of the WTO system, but it is a commitment taken by developed countries to support the developing countries while they are exporting their products. This framework enables developing countries to export their products at lower level of tariff to the market of the developed countries.[18]

2.2.3. Dispute Settlement

The dispute resolution method under the WTO is a rule based procedure which helps the developing countries as opposed to the power based system of dispute resolution. The rule based system is a security for the protection of the interest of developing countries. The rule based system of dispute resolution means that under the WTO there is independent dispute resolution organ, which undertakes its business of dispute resolution without requiring any external assistance and free of any influence by the powerful member states. The decision of the panel will be effective unless it is opposed by all members of the WTO (negative consensus), which is unattainable.[19] Due to this many developing countries are more successful in their disputes against the developed states. For instance, Costa Rica vs. US in the case on cotton textiles, and Venezuela vs. US on gasoline standards are the best proofs of this fact.[20] Based on these decisions the USA accepted the verdict of the appellate body and changed its policy accordingly. This case encourages the developing countries that they will be able to secure the protection of their interest against the developing countries despite their limited bargaining power. However, sometimes there is a non-compliance with the decision of the WTO’s dispute resolution body. In this case the solution will be limited to authorized retaliation, at which developing countries are not effective.[21]

2.3. Challenges of WTO Membership to Developing Countries

One of the costs of becoming member to the WTO for developing countries is that when they become member to the organization, WTO agreements like GATT, GATS, and TRIPS, get automatic legal force in their jurisdiction. Due to this member states are required to take commitment to implement these agreements in their jurisdiction. However, developing countries, except for GATT, will not have enough products under the rule of GATS and TRIPS to go with in international market. Because, there is no enough supply of internationally competitive service and intellectual property in these jurisdictions. Despite this fact, however, the developing countries members to the WTO take commitment to implement these agreements even though they will get nothing in return. And they incur costs of administration under these agreements mainly for the benefit of businesses from developed countries.[22]

Other factors which will aggravate the costs of becoming member to the WTO to developing countries are: population size, remoteness from major markets as in the case of landlocked states, reliance on a small number of export goods, mostly raw materials, weak administrative capacities, large economic and ecological vulnerability, lack of market oriented institutional infrastructure, and political instability often compounded by civil disorder, supply bottlenecks ... including inadequate transport facilities.[23]

In case of the least developed countries there are even worse challenges they incur as a result of joining the WTO. Some of these challenges are that the limitation on regulatory sovereignty state on trade related issues and costs of legal and policy reform they incur through the accession process, since their laws and policies are mostly incompatible with the requirements of the WTO.

The cost they incur is economic cost they pay for employment of qualified personnel for the negotiation during the accession process and also for the implementation of the agreement since it needs highly qualified workers in the area.[24] The other challenge of joining WTO for least developed countries is that there domestic companies will face strong competition from abroad; because, accession to the WTO allows foreign companies to invest in a member state under protection packages like MFN and national treatment. Due to this businesses for technologically advanced countries come to invest in such least developed countries and as a result they will drive out of the market domestic companies since they cannot compete with them with such level of technological advancement.[25]

[...]


[1] Derk Bienen, What Can LDCs Acceding to the WTO Learn from other Acceded Countries? BKP Development research and consulting discussion paper no. 01, 2014,.pp.12-13

[2] Altaer, Ahmad Shaban Ali Saif, The WTO and Developing Countries: The Missing Link of International Distributive Justice, 73, (2010)

[3] Ravinder Rena, Impact of WTO policies on developing countries: issues and Perspectives, Transnational Corporations Review (Canada) 4(3):77-88, 2012, p. 81

[4] Supra at, 1.

[6] Regine Adele Ngono Fouda, Protectionism and Free Trade: A Country’s Glory or Doom? International Journal of Trade, Economics and Finance, Vol. 3, No. 5, 351- 355, 351, 2012.

[7] https://open.lib.umn.edu/principleseconomics/chapter/17-3-restrictions-on-international-trade/. [ last visited on March 26, 2019]

[8] Suhail Abboushi, Trade protectionism: Reasons and Outcomes, International Business Journal incorporating Journal of Global Competitiveness, 384-394, 390, 2010.

[9] Johan Galtung, Trade as if Peace Matters, Pluto Journals, (World View Political Economy), Vol. 1 No. 2, 197-208, 2010, p. 198,

[10] Ibid

[11] Richard P. Biggs, 10 Reasons to go International, Atlantic International Growth Consultant (Atlantic LLC) Portland, OR, USA, www.atlantric.com. at p.2

[12] Supra at 10.

[13] Supra at 1.

[14] Kleen, Sheila and Peter, Special and Differential Treatment of Developing Countries, in the World Trade Organization, 68, 2005.

[15] Ibid

[16] Anne Bernier, Jeffrey Schlandt, WTO Accession and Economic Growth, USAID Economic Analysis and Data Services, 8, 2018.

[17] G. Arveladze and M. Smeets, Georgia's Post Accession Structural Reform Challenges, World Trade Organization, Economic Research and Statistics Division, WTO Working Paper, 2017, p.5.

[18] Fritz Thomas, Special and Differential Treatment for Developing Countries, Global Issue Paper, Commissioned by German watch and the Heinrich Böll Foundation, 2005, p.11

[19] Johannesson Louise, Supporting Developing Countries in WTO Dispute Settlement, 6 (2016)

[20] Supra at 11

[21] Supra, at 1.

[22] Stebek, Elias N., WTO Accession in the Ethiopian Context: A Bittersweet Paradox, Mizan Law Review Vol. 1 No.1, 91-118, 2007, p. 98.

[23] Ibid

[24] Supra, at 11.

[25] Supra at, 22.

Excerpt out of 37 pages

Details

Title
Accession to the WTO for developing countries. Strategies for gaining maximum benefits
College
Bahria University  (School of Law)
Grade
A
Author
Year
2019
Pages
37
Catalog Number
V510984
ISBN (eBook)
9783346081377
ISBN (Book)
9783346081384
Language
English
Tags
accession, strategies, developing countries, WTO
Quote paper
Tewachew Alem (Author), 2019, Accession to the WTO for developing countries. Strategies for gaining maximum benefits, Munich, GRIN Verlag, https://www.grin.com/document/510984

Comments

  • No comments yet.
Read the ebook
Title: Accession to the WTO for developing countries. Strategies for gaining maximum benefits


Upload papers

Your term paper / thesis:

- Publication as eBook and book
- High royalties for the sales
- Completely free - with ISBN
- It only takes five minutes
- Every paper finds readers

Publish now - it's free