Issues causing friction among WTO members
Assess which issues in your view are causing friction among members of the World Trade Organization, and evaluate how they are likely to be resolved.
This article is to discuss and evaluate the issues are causing friction among members of the World Trade Organization (WTO), and also evaluate how WTO members are likely to be resolved. As today’s international trade, including trade in goods, trade in services and technology trade, so "trade frictions" are mainly occurred in trade in goods, trade in services and technology trade in international disputes, which reflects the world’s countries regions in the economic and trade development the conflict of interest. Similarly, firms may, under certain circumstances, seek to use private standards as a means of achieving market dominance and, again, when economies of scale are important, this dominance may not be eroded easily. "Strategic dumping" or the capture of private standard setting cannot be regarded as explicit government policy: Indeed it could be regarded as an absence of policy, especially, perhaps, competition policy. Yet the result may be to enhance the monopoly profits of home-based firms as well as home-based technological capabilities.
The Concept of Trade Friction
Generally, theory of international trade sector "trade frictions" is not to make specific definition. Comprehensive comparison of common understanding, "trade friction" means the countries regions between the countries regions between the related industries, countries regions of the industry or business with other countries regions took place between the Government and the trade disputes. As today’s international trade, including trade in goods, trade in services and technology trade, so "trade frictions" are mainly occurred in trade in goods, trade in services and technology trade in international disputes, which reflects the world’s countries regions in the economic and trade development the conflict of interest (Sykes, 2004).
Thus, for example, antidumping policy concerns private action related to price behavior, yet, as many studies have demonstrated, both dumping and antidumping can be used for purposes of corporate strategy, and this is most likely in high-technology sectors with significant dynamic economies of scale and high fixed costs including heavy up-front R&D expenditure (Ostry and Nelson, 1995). Similarly, firms may, under certain circumstances, seek to use private standards as a means of achieving market dominance and, again, when economies of scale are important, this dominance may not be eroded easily. "Strategic dumping" or the capture of private standard setting cannot be regarded as explicit government policy: Indeed it could be regarded as an absence of policy, especially, perhaps, competition policy. Yet the result may be to enhance the monopoly profits of home-based firms as well as home-based technological capabilities. In the case of private strategic R&D alliances, which are now proliferating, the main policy issue, both domestic and international, is market dominance. The above is by way of a warning about the preliminary nature of the matrix that is presented. It is intended to serve primarily as a means of beginning a discussion on a number of complex and interrelated issues, especially relevant to the high-technology sectors that have been neglected or overlooked both in the Uruguay Round and in the ongoing debate about the post-Uruguay agenda.
But it is important to note that, in the case of some of these trade policy instruments (and strategic alliances in the investment box); effective adaptation would also involve competition policy. Because no international competition policy regime exists in the WTO, the only feasible option at present would be to promote bilateral or plurilateral cooperative arrangements. Similarly, in the case of investment, apart from the trade-related investment measures (TRIMs) agreement, no comprehensive set of rules is included in the WTO. But because the OECD negotiations are to be concluded in two years, initiating discussions both in the OECD and the WTO would be timely. Finally, the proposals with respect to structural impediments are intended to launch a discussion rather than propose rules because there is little agreement today even about the legitimacy of the concept, let alone its precise dimensions.
Causes of Friction among WTO Members
The Uruguay Round Agreement on Technical Barriers to Trade shows a marked improvement over the previous Tokyo Round code by covering all signatories, including a strong push for transparency, mutual recognition, and international standards, enjoining countries to participate in international bodies. One issue in private standard setting of particular relevance in the high-technology sector, especially in the fast-changing ICCT, is the capture of private standards by one or a subset of firms. If a proprietary standard becomes a de facto industry standard, enormous market power accrues from network economies of scale and technological tie-ins or, in the case of components, systems economies of scale. This market dominance is not challenged easily because of the costs of conversion known as the "installed base" problem (Sykes, 1995). There is general agreement that "standards capture" is a potential problem, especially in the rapidly changing ICCT area, but there is no agreement among experts on what, if anything, should be done-as the debate over the antitrust actions regarding Microsoft amply demonstrates. Nonetheless, there is a generic issue here that certainly deserves further study and debate, and the OECD is the logical forum to launch such an initiative. In this regard, it is essential to emphasize that this is not only a domestic antitrust issue, but quintessentially an international issue because networks and systems products are globalizing or are global.
Although, ideally, antidumping rules should be replaced by international competition policy rules on price discrimination and predatory pricing, that is unlikely to happen in the foreseeable future. In the meantime, there is one aspect of dumping that is especially relevant to capital-and technology-intensive sector. A new initiative could be launched in the WTO (perhaps in cooperation with the OECD on analytics) to tackle strategic dumping. Strategic dumping essentially involves subsidizing exports through higher home prices sustained by collusive price behavior and a protected home market. In industries with significant dynamic economies of scale, high fixed costs would serve to deter entry. Thus the essential dimensions of strategic dumping are the exporting country’s trade policy and competition policy. The injury to the importing country’s firms involves both restriction of exports and loss of dynamic efficiency gains ("learning by doing") that may be cumulative and dispersed over a wide range of products. The best way of dealing with strategic dumping would be to tackle the root causes of the problem: the exporting country’s trade and competition policy. To remove the barriers to access into the exporter’s market, the first step would be to agree to a list of industry characteristics; for example, degree of concentration as measured by the exporting firms’ share of home market, the exporting firms’ share of world market (which would affect alternative third country producers), the extent and nature of barriers to entry of new firms or expansion of existing firms, the degree of import penetration, the prices in the exporting country’s home market relative to prices elsewhere, etc. (the basic analysis could be done in the OECD) (Yuejun and Haixia, 2005). The purpose of selecting specific industries would be to focus the negotiations on eliminating protection for sectors where strategic behavior is feasible. Clearly, these are high-technology industries, for example, sectors with oligopolistic structures, high entry barriers, significant static and dynamic efficiencies, and dominance in global markets. From this agreed-on industry list one could then assemble a group of products and for these compile a list of specific import barriers. This would then form the basis for a "zero-for-zero" negotiation (i.e., the removal of all border restraints on a reciprocal basis). The negotiations could begin with a small group of countries, including the United States, the EU and Japan, and then they could decide whether the agreement should be conditional or full most favored nation. If conditional, the agreement should be open to all countries willing to accede to the zero tariffs. The removal of trade barriers will not, on its own, remove the threat of strategic dumping, which also requires action on competition policy in the exporting market. Because convergence, or agreeing to new international rules, will be a lengthy process, a strong case could be made that, in the absence of a supranational authority, bilateral agreements might be contemplated to ensure a fair hearing of disputes over enforcement where there is a charge of spillover on the trade front.
Take China as example for this major friction point in WTO, enter to WTO from 2002, China’s exportation ability to quota market expands further. During 2002-2004, China’s textiles exported to American and Europe market appear a high speed growth. The average speeding-up are 30.63%, 32.96% respectively. The occupation ratio in American and European market also promoted steadily. As shown in Table 1, in 2004, the occupation ratio achieves 17.57%, 5.82% respectively.
Table 1: The statistics of Chinese textile exported to American and European market
Source: WTO, 2004.
However, China has been suffering because of trade frictions on the one hand China’s export products in the importing Members subjected to anti-dumping and other trade remedy measures and trade barriers caused by affecting the interests of our country’s exports, such as other WTO Members on China’s enterprises in the abuse of anti-dumping investigations non-market economy treatment, on China’s export products, special safeguard measures to investigate: and partly because China has become a WTO member (Peng and Xiong, 2005). The basic situation is as follows:
A high number of trade frictions
China’s accession to WTO, against me the traditional means of trade protection under WTO rules, more and more turned to WTO rules allow members of the trade remedy measures. According to the Ministry of Commerce statistics, the years of 2001 and 2002, before and after accession to WTO, foreign to me initiated anti-dumping, safeguard measures the amount involved in the case were 11.4 and 792 million U.S dollars (Ping and Chuang, 2005). In 2006, a total of 39 countries and regions of anti-dumping and safeguard measures I placed on file 59 cases, involving about 62 billion U.S. dollars, a record high. Many WTO members in accordance with Article VII of China’s WTO accession protocol, China as a "non-market economy" countries, so that China’s enterprises in the anti-dumping-dumping investigation, on the one hand difficult to obtain a separate anti-dumping corporate tax rate, on the other because they chose to "alternative country "prices of production factors such as the dumping margin of Chinese enterprises, resulting in a higher anti-dumping tax rate (Asian Research Service, 2007).
Two special safeguard measures against China’s investigation of spreading
Join the WTO, successively South Korea, Japan, Canada, the United States, India, Turkey, the European Union and Peru, eight WTO members to join the WTO, "Transitional Product-Specific Safeguard Mechanism" as an excuse to develop its domestic legislation and to safeguard against Chinese products to prepare for the investigation. Since August 13, 2002 India’s export of industrial sewing machine needles initiated since the first cases of safeguard investigations, as of the end of December 2006, there have been India, the United States, Turkey, the European Union and Peru to launch Chinese products since 21 special safeguard investigations , involving 1.427 billion U.S. dollars (Asian Research Service, 2007).
Moreover, the developed country uses the high customs duty, the subsidy, the bilateral agreement and so on many kinds of methods to achieve the goal of limiting importing the textile and the clothing from developing country such as Vietnam, China and come other developing countries. According to the statistic of WTO (2003), the average tariff of goods imported from America, European countries is 5.2-6.9%, but the average tariff of textiles and clothing is 7-10%. Even the highest tariff is over 30% in the textiles and clothing in America, almost the highest tariff in all goods. And, the tariff of textiles would rise along with the degree of processing, greatly higher than the tariff level of other goods except food, beverage and wine. According to the analysis of International Textiles and Clothing Bureau’s statistics data, in 2001, 42% of the United States goods import tariff income come from textiles and clothing (WTO, 2003). In addition, US, European Union and Canada also give Africa and the Caribbean countries as well as the most undeveloped countries trade preference treatment through the bilateral treaty, like exempting from the customs duty, exempting from the quota. This kind of trade preference treatment distorted the production and trade pattern of the international textiles and clothing purposively and supported some country’s textile industry lacking competitive advantage. On the other hand, this kind of trade arrangement also is a method to expand developed countries’ fabric exportation, subsidize their textile industry in disguised form (Ping, 2005; Martin, 2007). Because China does not belong to any group or the organization, therefore, China has not been able to enjoy any favorable treatment which the importing country gives, instead, received the strictest limit from developed importing countries, which made their textile industry and the national economy suffered the serious loss.
Intellectual Property Rights (IPRs)
The Uruguay Round achieved a major breakthrough in establishing trade rules for the protection of intellectual property rights (IPRs). The trade-related intellectual property rights (TRIPs) agreement, however, provided little by way of harmonization. Now the main conflicts will arise among the developed countries where there is still a significant divergence between the United States on the one hand and the EU and Japan on the other. This divergence is especially clear, and especially contentious in patents, where the U.S. system favors creation of intellectual property over its diffusion and the others tilt in the opposite direction. The compromise negotiated in TRIPs did not resolve the matter. Hence, bilateral or plurilateral negotiations to achieve harmonization in selected types of IPRs should be undertaken as a first step before moving to further multilateral negotiations in the WTO. Although a push to harmonization is an important policy issue to mitigate further friction, in a sense it deals only with the status quo. Rapid and ongoing technological change in ICCT and biotechnology are raising a host of new issues that will require major adaptation of the existing IPR architecture (Asian Research Service, 2007). One obvious example concerns copyright protection on the Internet, or more broadly, copyright protection in a world of digital distribution. Although some countries are already grappling with the issue, it is, again, quintessentially a global issue and merits international discussion, to begin in the OECD. In the same vein, patents for satellites or genes can no longer be regarded as national policies. Thus, establishing an international forum for discussion is the only sensible way to go. Perhaps cooperative arrangements between the OECD, the World Intellectual Property Organization (WIPO), and the WTO could be explored. Although new rules will be difficult to achieve, exchange of information and analysis of issues would be a useful first step. Technology Flows Improving the balance of technology flows is, as noted above, a high priority for a growing number of countries. But just as in trade, every country cannot achieve a surplus. Efforts to induce inflows and reduce outflows are bound to lead to disputes and also will reduce global welfare. Two policy initiatives can be launched to mitigate this friction. On the inflow side, a key issue concerns the proliferation of investment incentives, often designed to attract "good" investment involving significant technology transfer. A recent report from the Commission on International Investment and Transnational Corporations (UNCTAD) documents the increase in both the number and range of incentives for MNEs since the mid-1 980s in both developing and OECD countries. The report noted that "an increasing number of countries target. The U.S. patent system is based on first-to-invent rather than first-to-file in other OECD countries. The TRIPs agreement involved superimposing on the U.S. system an extension of patent rights to 20 years from filing data. There is no discrimination against foreign applicants, but the evidentiary costs of inventor-ship outside the United States will likely be extremely high (Da, 2005).
In addition, in the WTO it would be useful to launch discussions to expand the TRIMs to cover mandatory technology transfers, which was dropped from the Uruguay Round negotiations. On the technology outflow side, an increasingly contentious issue concerns participation by foreign subsidiaries in research consortia jointly funded by government and the private sector. In an effort to limit or slow diffusion (and hence capture the benefits for the domestic economy), foreign subsidiaries are treated differently from domestic firms in a number of countries: hence the new term "conditional national treatment." Also, specific reciprocity rather than nondiscrimination may be required as one of the conditions; particularly in the United States. To begin discussions on the consortia issue it is essential to secure a better information base. For example, in the EU there are no formal guidelines for participation in projects governed by the Commission Framework Program, and membership is negotiated on a case-by-case basis or through bilateral treaties. But "unofficial" conditions are usually standard and include a number of performance requirements. In the United States the situation is even murkier, with different rather general criteria in different pieces of legislation, mostly focused on aspects of reciprocity. An OECD project to document the rules for foreign participation in consortia should be followed by collecting information on actual foreign participation so we know the numbers as well. But the information base, however useful in defusing the strident charges and countercharges now so prevalent, is clearly not sufficient. The need to reach agreement on common rules would have to confront at least three issues: criteria for participation in consortia, treatment of foreign subsidiaries, and IPRs. The domestic criteria are important for governmental evaluation of the program. Common criteria, if agreed on, would facilitate adoption of national treatment, an essential element in a new MAI. Finally, there should be clear agreedon rules on the treatment of IPRs governing the consortia arrangement. Strategic technology alliances (STAs), a new form of investment, as they are sometimes termed, have exploded in the 1980s and 1990s from near zero in the 1970s, especially in the three most significant current technologies: information, biotechnology, and new materials (Steinberg, 1997).
Solutions Against Trade Friction
First, the respondent enterprises need to understand the situation on the ground and within the time limit to complete the questionnaire and the respondent and to export the existence of dumping and whether similar products in the importing country to respond to cause material injury. In this process, you also need the help of foreign importers, in order to understand the ground reality. Shows a single enterprise is difficult even if the respondent would like to complete these tasks in a short time, but once the time exceeds the respondent shall be considered a waiver, the investigating authorities to take anti-dumping measures could be unilateral (Mayer, 2005). The industry association can arrange special department personnel in responding to anti-dumping investigations, responding to defense, trade associations, a time-and personnel advantage.
Second, the anti-dumping case the procedure is lengthy, lasting long, but responding to hire a lawyer and very costly. Once involved in the business, even if successful, the amount of money lost a lot. This also led to some companies hesitant, preferring to convert the market to find another way out (Lehmann and Vollmer, 2007). The industry associations can be members of a common set of corporate fund-raising, to a certain extent, due to shortage of funds to overcome the reluctance of the respondent.
Again, due to lack of knowledge of anti-dumping, often makes some companies had psychological fear difficulties. Many businesses often confused with the anti-dumping investigation procedures of the judicial proceedings in general are worried that a "defendant" and the "court", and assume legal responsibility. What is more even "dumping" of the concepts are not clear to see their products as long as the export price is below the market price of similar products in the importing country, they consider themselves of their exports constituted dumping (Liu and Xiang, 2004). Hence, when firms subject to anti-dumping investigation, the inevitable happened, leading to not respond or do not know how the respondent missed opportunities, and caused considerable economic losses. On behalf of peer companies, including not only trade association in the industry experts in the economic field, but also well-known anti-dumping and WTO rules of the legal profession, knowledge and expertise in such fiscal reserves, the response to anti-dumping policy making should be of considerable strength and viability (Liu and Xiang, 2004).
At last, the current situation is more the individual power companies did not respond. Because the anti-dumping investigation is for a country of a product, rather than a particular company’s products, it involves the entire industry, the public interest. If the respondent victory, the industry did not participate in other companies also benefit from the respondent. In this case, any one business will be carried out input and output ratio of the economic cost estimates, will be found that the respondent’s private income is less than its social benefits, not the respondent is an individual enterprises in the non-cooperative game can be selected only an equilibrium point. Many businesses will have a "free rider" opportunism psychological, an attempt to stand to be taken they do not respond normally able to free-riding on the ride strategy. Because, from the economics of public choice theory point of view, each individual has free access to another body corporate enterprises with the interests of dominant motivation, the respondent itself has large externalities, in a certain sense, can be seen as is a "public good". The author believes that the public nature of public goods should be the organizations, industry associations, although non-governmental organizations, but the entire industry’s point of view but also has a certain degree of public nature. Therefore, as the representative of the entire industry who, in response to the interests of the entire industry involved in anti-dumping, trade associations, should be an appropriate choice. It can collect in the form of contributions to raise funds to establish anti-dumping fund to be devoted to the establishment of information channels, and is equipped with anti-dumping professionals, the lead lawyer responding to organize the enterprises to use the resources of the entire industry to overcome the individual enterprises are weak deficiencies, which can solve the respondent does not timely question. In addition, regardless of benefit or loss of business by industry share, this may solve some enterprises "free rider" problem.
In conclusion, WTO helps the member countries to meet and discuss these issues and evolve generally accepted solutions for conclusion of agreements on the further opening up and liberalization of trading regimes in different countries in a phased manner for smoother transition to greater free trade regimes. It also helps resolve trading disputes and violation of agreements by member countries. Hence, by contributing to the process of multilateral agreements on freer trade in goods, services and technology, the WTO contributes to the process of increasing the globalization and global integration and interdependence of national economies all over the globe.
The WTO’s stated goal is to improve the welfare of the peoples of its member countries, specifically by lowering trade barriers and providing a platform for negotiation of trade. Its main mission is "to ensure that trade flows as smoothly, predictably and freely as possible". This main mission is further specified in certain core functions serving and safeguarding five fundamental principles, which are the foundation of the multilateral trading system.