• home

    Why Business Needs to Know More About WTO Rules


    © International Trade Centre, International Trade Forum - Issue 3/2002

    WTO rules are increasingly being adapted as national trade laws. Businesses can help shape the rules as they develop - if they are committed to dialogue. Below, ITC answers some frequent questions it receives on the subject.

    Q Why is it important for business in the developing world to know about the WTO rules?

    A There are two main reasons. First, in a globalizing economy, the WTO agreements determine more and more national trade rules. For business, it is vital to be familiar with the present and future trade rules in their markets. Just one example: the WTO Agreement on Textiles and Clothing sends a clear message that from 1 January 2005 such trade will be free of quotas. The new trading environment will provide definite advantages to more efficient producers, who will increase their market share at the expense of less efficient ones. Knowing what is in the Agreement will facilitate business decisions regarding investments, structural adjustments and export strategy. I could also have mentioned the examples of the WTO Agreement on Agriculture or the General Agreement on Trade in Services.

    Q And what is the other reason?

    A The other reason is more general but equally important. The history of trade negotiations shows that only a well-informed business community can provide a partnership for governments in international rule-making. In developed countries, business is routinely very active in influencing government positions in multilateral or bilateral trade negotiations. If a government of a developed country neglects substantial business interests, it may face serious difficulties in its parliament or elsewhere.

    In many developing countries and transition economies, there is no systematic dialogue between business and government in trade matters. This is partly due to historical reasons, such as weak economic structures and legal and institutional underdevelopment. But a contributing factor is that businesses in that part of the world do not know the rules of the game and therefore are not in a position to participate in a meaningful dialogue with the government. As a result, multilateral trading system rules are alien to them; businesses do not feel that they can have an impact on them, however small it may be. This strengthens the already widespread anti-globalization feelings.

    Q What are the main concerns of business in developing countries right now about the world trading system and the WTO negotiations?

    A As we have seen, it was not easy to agree on the Doha Development Agenda. Businesses in many developing countries were not satisfied with the results of the Uruguay Round. They felt that their governments went too far in liberalizing their domestic market. At the same time, their access to foreign markets in traditional export items - agricultural products, textile and clothing, not to mention labour - remained subject to serious restrictions. Greater liberalization led to strong competition in the domestic market which, in many cases, put domestic industries' existence in danger.

    In addition, implementation of the Uruguay Round agreements was far from satisfactory. Developed countries have been slow in eliminating restrictions in textile and clothing, for example, while developing countries had difficulties in implementing obligations due to institutional problems and lack of a substantive dialogue between business and government during the Uruguay Round. Because some developing country governments failed to hold meaningful dialogue with the business community, they have accepted some obligations that are difficult to meet in the specified time frames.

    See the problems, for example, with regard to the Agreement on Trade-Related Investment Measures or the Agreement on Subsidies and Countervailing Measures. This explains why developing countries insisted on including so many development and technical assistance elements in the Doha Development Agenda.

    Q How can ITC help?

    A ITC has developed programmes to provide technical assistance to the business community in developing countries and transition economies in multilateral trading system-related matters. The World Tr@de Net programme is the largest one in this category. Business interests drive the programme, which operates only in countries where both the business community and the government are interested in participating. The World Tr@de Net is an informal network of major players in trade matters. Members include businesses, government, trade specialists, training institutions and universities. The main emphasis is on explaining to businesses the implications of the WTO agreements and promoting meaningful dialogue between business and government in trade matters. This is of special importance now.

    World Tr@de Net members adopt country action plans after they assess their needs. ITC provides support such as training materials, case studies, issue papers and a newsletter reporting on events in WTO, most of which are available from the World Tr@de Net web site (http://www.intracen.org/worldtradenet). ITC also organizes events, such as workshops and virtual conferences, on issues of special interest to members and encourages networking among members. This year the World Tr@de Net programme produced guides on trade remedy regimes in the United States, the European Community and Canada and organized workshops on the subject for Asian and Central and Eastern European members. The programme is planning other regional workshops on trade remedies, textiles and clothing and technical barriers to trade. At present, World Tr@de Net has 44 member countries.

    This year, ITC started a major programme for central Asian countries with an important multilateral trading system component. ITC also implements the Joint Integrated Technical Assistance Programme (JITAP) for African countries with UNCTAD and WTO, where multilateral trading system issues play a prominent role.

    Q What does the business community need to influence negotiations more effectively?

    A The business community needs information. Business wants to know what are the issues on the negotiating table and how they might influence the outcome. Our experience is that our clients know very little about the WTO negotiations. If they do not understand what bound tariffs mean and how are they negotiated, or are ignorant about the request-and-offer procedures in tariff and non-tariff negotiations or negotiations in services, they cannot become partners to their governments in working out negotiating strategies. Through its activities, ITC hopes to contribute to a better integration of developing countries and transition economies into the multilateral trading system.

    Peter Naray is ITC Senior Advisor on the Multilateral Trading System. He was formerly the permanent representative of Hungary to the UN and other international organizations in Geneva and has also served as a WTO staff member. He can be contacted at naray@intracen.org