WTO Trade Agreements

There are more than different 60 agreements overseen by the WTO. Any country which is accessing to WTO must sign and ratify all WTO agreements. So, far we have discussed the main provisions related to GATT that affect the trade in goods in general. In this section, we are discussing the other main agreements as follows:

• The Agreement on Agriculture (AoA)
• Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS)
• Agreement on the Application of Sanitary and Phytosanitary Measures (SPS)
• Agreement on Technical Barriers to Trade (TBT)
• Agreement on Trade Related Investment Measures
• General Agreement on Trade in Services (GATS)

Agreement on Agriculture (AoA)

The Agreement on Agriculture (AoA) was negotiated during the Uruguay Round of the General Agreement on Tariffs and Trade, and entered into force with the establishment of the WTO on January 1, 1995. It aims at reforming trade in agriculture, envisaging a fair and market-oriented system, which improves predictability and stability for both importing and exporting countries.

The Agreement allows governments to support their rural economies, but preferably through policies that cause less trade “distortions”.

The Agreement on Agriculture applies not only basic agricultural products (such as wheat and live animals), but also the products derived from them (such as flour and meat), as well as most processed agricultural products (e.g. chocolate and sausages). The coverage of the Agreement also includes wines, spirits and tobacco products, as well as fibres (such as cotton). Fish and fish products are not included, nor are forestry products. These products are covered by the Non-Agricultural Market Access (NAMA) negotiations of the World Trade Organization, based on the Doha Declaration of 2001. Agreement on Agriculture has three pillars.

Market Access – Tariff Only

The market access rule for agricultural products is “tariffs only”. This means that all non-tariff measures were to be either removed or to be replaced by tariffs, reflecting substantially the same level of protection (this process is called “tariffication”). As per the AoA, the WTO Members committed to set tariff bindings to agricultural products and assumed reduction commitments on tariffs, which are contained in each Member’s WTO Schedule of concessions on goods (Article 4).

• Different reduction commitments applied to developing and developed Members. At the same time, please note that the LDCs were not required to reduce their tariffs.

Domestic support (Subsidies)

This pillar is based upon the assumption that not all subsidies distort trade to the same extent. The Agreement distinguishes between two categories of domestic support:

• Domestic support with no, or minimal, distorting effects on trade – not subject to reduction commitments. These were kept in Green Box and Blue Box Measures.
• Domestic support with distorting effects on trade – subject to limits and reduction commitments. These were kept in Amber Box measures.

The green, Blue and Amber box subsidies are discussed below:

Green Box Subsidies

Green box subsidies are those subsidies which cause no, or at most minimal, trade distorting effects or effects on production. These include the amounts spent on Government services such as research, disease control, and infrastructure and food security. This also includes the subsidies given to the farmers that directly don’t affect international trade badly. Since they are permitted in WTO regime, the most developed countries have kept providing subsidies to their farmers. The Green Box contains fixed payments to producers for environmental programs, so long as the payments are “decoupled” from current production levels.

Blue Box Subsidies

Blue Box contains direct payment subsidies which can be increased without limit, so long as payments are linked to production-limiting programs

Amber Box Subsidies

All domestic support measures considered to distort production and trade (with some exceptions) fall into the amber box The provisions accepts 5% of agricultural production for developed countries, 10% for developing countries.  The Amber box subsidies with conditions designed to reduce distortion are placed in Blue Box. They include the direct payment to the farmers to reduce production. Apart from the above, there are Article 6.2 subsidies for Development Programmes.

Export Competition

Export subsidies are presumed to have trade-distorting effects. They allow exporters, benefited with such subsidies, to sell below the cost of production. In that way, export subsidies reduce world prices, undercutting exporters in other countries. The Agreement on Agriculture prohibits the use of export subsidies for agricultural products, unless a Member has reserved the right to use export subsidies in its WTO Schedules of concessions.

Agreement on the Application of Sanitary and Phytosanitary Measures (SPS)

The SPS agreement was negotiated during the Uruguay Round. Under the SPS agreement, the WTO sets constraints on member-states’ policies relating to food safety (bacterial contaminants, pesticides, inspection and labelling) as well as animal and plant health (phytosanitation) with respect to imported pests and diseases.

Sanitary and Phytosanitary measures, as well as products’ technical regulations, may result in restrictions to trade. It is recognized that such measures may be necessary to serve legitimate objectives, such as to ensure food safety or to protect human, animal or plat life or health. However, these measures may sometimes go beyond what is needed to protect such objectives and be used to shield domestic producers from foreign competition. Some believe that the use of such types of measures for protectionist purposes is likely to increase whenever import tariffs on goods are reduced.

Sanitary and phytosanitary measures can take many forms such as requiring products to come from a disease free area, safety inspection or setting of allowable maximum levels of pesticides residues. They apply to domestically produced food or local animal and plant diseases, as well as to products coming from other countries. Please note that under SPS agreement, burden of proof is on members to demonstrate scientifically that something is dangerous before it can be regulated. If there is no scientific proof, WTO would override the right of the country to impose such restrictions.

Agreement on Technical Barriers to Trade (TBT)

The Agreement on Technical Barriers to Trade was last renegotiated during the Uruguay Round. TBT exists to ensure that technical regulations, standards, testing, and certification procedures do not create unnecessary obstacles to trade. The agreement prohibits technical requirements created in order to limit trade, as opposed to technical requirements created for legitimate purposes such as consumer or environmental protection. The TBT agreement is closely linked to the SPS agreement.

The TBT Agreement covers technical regulations on quality, packaging and labelling also. If a producer in country A wants to export to country B, it will be obliged to satisfy the technical requirements that apply in country B, with all the financial consequences this entails. Having many different regulations and standards involves significant costs for producers and exporters. In addition, in the absence of international disciplines, a risk remains that TBT measures could be used as an excuse for protectionism.

The TBT Agreement recognizes that no Member shall be prevented from taking measures necessary to fulfil a legitimate objective, including the protection of human, animal or plant life or health, the protection of the environment or the prevention of deceptive practices. WTO Members may protect other legitimate objectives (e.g. ensure quality of products), provided they comply with the TBT Agreement.

Agreement on Trade-Related Investment Measures (TRIMS)

Agreement on Trade Related Investment Measures (TRIMS), resulting from the Uruguay Round, recognizes that certain investment measures may cause restrictive effects on international trade in goods. Policies such as local content requirements and trade balancing rules that have traditionally been used to both promote the interests of domestic industries and combat restrictive business practices were major focus.

The main obligation contained in Agreement is that Members shall not apply any trade-related investment measure that is inconsistent with Article III (national treatment) or Article XI (general elimination of quantitative restrictions) of the GATT.  The following have been explicitly Prohibited by the TRIMs Agreement:

• Local content requirement: Measures requiring the purchase or use by an enterprise of domestic products.
• Trade balancing requirements: Measures requiring that an enterprise’s purchases or use of imported products be limited to an amount related to the volume or value of local products that it exports
• Foreign exchange restrictions: Measures restricting the importation by restrcting access to foreign exchange
• Domestic sales requirements: Measures restricting the export in proportion of volume or value of its local production.

Please note that Developing countries are permitted to retain TRIMs by virtue of the economic development needs of developing countries.

Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS)

Today, the intangible assets are becoming increasingly important. These assets which are the result of human intellectual creative activity such as invention, design, know-how, and artistic creation are known as “intellectual property.”

Among the forms of intellectual property specifically entitled to legal protection are inventions, trademarks, designs, literary works, layout-designs of integrated circuits and trade secrets. As the volume of trade in goods and services involving intellectual property has increased greatly in recent years, the importance of the protection of intellectual property for the world economy has grown enormously. Inappropriate and insufficient protection of intellectual property can distort free trade.

In the developing countries, the protection of intellectual property rights has been often insufficient. Developing countries often limit protection to a very narrow subject area, or provide protection for only a short period of time, or lack strict enforcement. In contrast, the developed countries have problematic intellectual property regimes that, for example, openly discriminated against foreign nations, provide excessive protection or otherwise have regimes so different from those employed by the rest of the world that its effect is discriminatory.

The WTO sought to establish an appropriate framework for the protection of intellectual property in order to bring greater order to international trade. A number of international treaties already form a common legal framework for the protection of intellectual property, including the Paris Convention (1883) and covers patents, trademarks and other industrial property rights, the Berne Convention (1886) and covers copyrights.

Recently, however, as countries pay more attention to the trade related aspects of this subject, they have frequently placed intellectual property protection on the agenda of trade negotiations. Countries recognized that as many governments as possible should take part in framing an international agreement establishing standards for the trade aspects protecting intellectual property. As a result, GATT negotiators instituted negotiations on the Trade-Related Aspects of Intellectual Property Rights (TRIPS) one of the most important new areas included in the Uruguay Round negotiations. A final consensus on the TRIPS Agreement was reached in Marrakesh in April 1994 and took effect on 1 January 1995.

Some important Notes on TRIPS are as follows:

• TRIPS covers all legally-recognized intellectual property rights (copyright and related rights, patents, industrial designs, trademarks, geographical indications, layout-designs of integrated circuits and undisclosed information)
• The TRIPS Agreement incorporates and improves upon protection levels of the Paris Convention (industrial property rights) and the Berne Convention (copyright).
• In the area of copyrights and related rights, the TRIPS Agreement specifies the protection of computer programmes (protected as literary works under the Berne Convention) and rental rights.
• The TRIPS Agreement contains provisions governing the protection of trademarks, geographical indications, industrial designs, layout-designs of integrated circuits, and undisclosed information. It also contains rules on anti-competitive practices in contractual licenses.
• Developed countries were given a transition period of one year from the date of entry into force of the WTO Agreement; developing countries and transformation countries were given five years (until January 2000); and least-developed countries were given 11 years (until January 2006).
• TRIPS Agreement is to date the most comprehensive multilateral agreement on intellectual property (IP).
• The TRIPS Agreement is based on the main conventions of the World Intellectual Property Organization (WIPO). Most of the provisions of these conventions have been incorporated into the TRIPS. The TRIPS Agreement includes however, a number of additional obligations where the pre-existing conventions are silent or inadequate.

General Agreement on Trade in Services (GATS)

The General Agreement on Trade in Services (GATS) requires most-favoured-nation Treatment, market access commitments and national treatment. GATS was agreed upon at the end of the Uruguay Round negotiations with the participation of all Member nations including developing countries. The GATS covers a wide range of service industries such as financial services, transport and shipping, communications, construction, and distribution. The GATS distinguishes between four modes of supplying services: cross-border trade, consumption abroad, commercial presence, and presence of natural persons. They have been defined as follows:

Mode 1: Cross-border supply

• Cross-border supply is defined to cover services flows from the territory of one Member into the territory of another Member
• Example: Banking or architectural services transmitted via telecommunications or mail

Mode 2: Consumption abroad

• Consumption abroad refers to situations where a service consumer (e.g. tourist or patient) moves into another Member’s territory to obtain a service
• Example : Various kinds of tourism activities

Mode 3: Commercial presence

• Commercial presence implies that a service supplier of one Member establishes a territorial presence, including through ownership or lease of premises, in another Member’s territory to provide a service
• Example: Domestic subsidiaries of foreign insurance companies or hotel chains

Mode 4: Presence of a natural person

• Presence of natural persons consists of persons of one Member entering the territory of another Member to supply a service
• Movement of skilled persons such as accountants, doctors or teachers