Economic Paper

2310-1385 (online)
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This series examines current economic issues from a Commonwealth perspective. The titles in the series are technical papers of topical interest to specialists concerned with trade, micro and macroeconomics, development economics and related subjects.

Paying the Price for Joining the WTO

Paying the Price for Joining the WTO

A Comparative Assessment of Services Sector Commitments by WTO Members and Acceding Countries You do not have access to this content

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Roman Grynberg, Victor Ognivtsev
01 Jan 2002
9781848598119 (PDF)

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This paper focuses on the accession process for new WTO membership. The basic premise is that the commitments demanded are too onerous for new members. It argues that the whole process is fundamentally flawed and, in fact, forces applicant countries to accept demands that are not required under WTO agreements. Section 2 is a brief discussion of the process of accession and highlights the inherent flaws. Section 3 focuses on one of the crucial international trade agreements, the General Agreement in Trade and Services (GATS) and provides sectorspecific commitments by countries. Section 4 uses a series of statistical tests to verify whether acceding countries have made a significantly higher number of specific commitments than existing WTO members. Section 5 makes some concluding observations. The paper uses a strong body of econometric evidence to support its claim that acceding countries undertake greater commitments than those made by WTO members of a similar development status.

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  • Executive Summary

    The relevant provisions (Article XII of the Marrakesh Agreement) and practices that govern he process of accession to the WTO are fundamentally flawed at each stage. In the first stage, known as the multilateral stage, self-interested WTO members review the trading practices of an applicant to determine their compatibility with WTO rules, a process which in effect allows complainants to act as judge and jury on the trade regimes of acceding countries. During the second stage, or bilateral track, WTO members ‘negotiate’ bound tariffs, agricultural schedules and service sector commitments, but since the applicant may make no demands it can impose no marginal cost on the demandeur.

  • Introduction

    When the General Agreement on Tariffs and Trade (GATT) was replaced by the World Trade Organisation (WTO) on 1 January 1995 as the institution overseeing the multilateral trading system, a landmark achievement was accomplished that would influence world trade in goods and services in an unprecedented way. Unlike the GATT, the WTO dispute settlement mechanism's reverse consensus rule has meant that the legal system of rules and procedures can be enforced through a system of punitive sanctions. With this newly incorporated mandate, there has been a profound change in the nature of the institution; among other aspects, it has meant a change in the practice of accession to the new rule-based system.

  • The Process of Accession to the WTO

    Although there were only 23 members at the initial stage of the GATT, when it was considered as a forum promoting the interests of the developed countries alone (UNCTAD, 1967), things changed remarkably in the Uruguay Round of Multilateral Trade Negotiations (MTNs), which was marked by the participation of many developing and least developed countries for the first time in the history of trade talks, resulting in 128 GATT signatories at the end of 1994. Governments that had signed GATT were known as ‘GATT contracting parties’ and upon signing the new WTO agreements (known as GATT 1994), they officially became recognised as ‘WTO members’.

  • GATS and Sector Specific Services Commitments

    One of the most remarkable features of the Uruguay Round of MTNs was the creation of the General Agreement on Trade in Services (GATS). Over the past decades the importance of services trade has increased rapidly; an estimate suggests that services trade accounted for 20 percent of global trade in 1995 (Hoekman and Primo Braga, 1997). Most trade is concentrated in developed countries.

  • Comparison of Specific Commitments

    Data presented in Tables 2–4 suggest that at each level of services classification the acceding countries have made large numbers of commitments. In fact, even a casual observation lends credence to the hypothesis that the average commitments of these countries are likely to be higher than those of the original WTO members. By employing a simple analysis of variance (ANOVA) model it is possible to formally estimate the average number of commitments made by members and by acceding countries and to determine whether the difference between these two is statistically significant.

  • Concluding Observations

    The relevant provisions (Article XII of the Marrakesh Agreement) and practices that govern the process of accession to the WTO are fundamentally flawed. There are two stages of the WTO accession process: the multilateral track where WTO members examine the trade regime of the applicant; and the bilateral track where acceding countries ‘negotiate’ with WTO members over their bound tariffs, agricultural schedules and service sector commitments. The current practice in both stages of the accession process is flawed in different ways.

  • References and Appendices
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