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WORLD

TRADE ORGANIZATION

For all small and medium sized trading nations, conducting trade according to multilaterally agreed concepts, principles and rules rather than resort to bilateral negotiating power is of paramount importance. For developing countries, one of the most important outcomes of the Uruguay Round is the substantial strengthening of the rules based multilateral trading system and its extension to new areas of activity. Existing disciplines have been tightened in a number of areas including those involving the use of subsidies, countervailing and anti-dumping duties and safeguard measures.

This will have important implications for developing countries. For example, "grey area measures" such as voluntary export restraints will be eliminated and there will be tighter disciplines on the use of anti-dumping measures. Developing countries have frequently found themselves on the receiving end of such measures. Besides, the extension of the rules of the multilateral trading system to new areas will serve to further increase the importance of the rules-based system for developing countries. However, tightened disciplines covering a wider area of international commerce are only effective if there exists an efficient and equitable means to settle disputes in the event of a breach of obligations. The Uruguay Round will bring considerable improvements in the dispute settlement mechanism.

The General Agreement on Trade on Services (GATS) extends the rules based multilateral trading system to the wide area of services. Similar advantages should accrue to developing countries from the operation of a rules based system in services as has been the case for merchandise trade.

While many developing countries are not presently well placed to take advantage of some of the improved market access opportunities which the Agreement will provide, they will be in a position to do so in the future as their domestic supply capacity increases. However, a number of areas of export interest to developing countries (for example the movement of natural persons) have already been committed to liberalization by major importing countries or are the subject of ongoing negotiations to improve market access. Further, the GATS is unique in that it permits Member countries, including developing countries, to negotiate the conditions under which foreign services suppliers may establish in their countries.

These terms and conditions are bound in the schedules of the Members concerned. The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) offers potential benefits for developing countries by creating a framework which is conducive to technology transfer and foreign direct investment. Its main disciplines include non-discrimination (i.e. most-favoured-nation and national treatment) and the equal application by all Members of minimum standards of protection in relation to all categories of intellectual property rights.

Evidence on the relationship between an outward orientation in government policies and growth points to the fact that if trade is to be a positive stimulus to achieving sustainable development in the coming decade, the conditions affecting supply in developing countries, including competitiveness at the domestic level, play a critical role. Consequently, many developing countries have undertaken autonomous trade liberalization as part of wider programmes of economic reform and chosen to bind in GATT their recent trade liberalization. In this respect, the Uruguay Round has proven particularly timely, as these countries have been able to participate fully in the Round and actively promote and consolidate their own economic reforms. Adoption by developing countries of binding commitments in the Uruguay Round is a manifestation of their contribution to operating a transparent, open and predictable trade regime. This represents an important change in the relationship for many developing countries with the multilateral trading system. As a result of the Uruguay Round, developing countries will in general assume the same disciplines as their developed country trading partners, but in some instances benefit from greater flexibility in their implementation. Under certain circumstances developing countries can, for example, use quantitative restrictions and export subsidies that are not available for their developed counterparts. Further, they have been required to bind fewer tariffs than the developed countries, open fewer service sectors and have a longer time-frame for the implementation of their TRIPS obligations.

In any multilateral trade negotiations - in particular those as complex as the Uruguay Round negotiations - not all countries can expect to achieve what they consider to be positive results in each area of interest to them.

However, with broadbased and significant reductions in border restrictions, all countries benefit positively even if there are, on occasions, temporary negative side effects. While the results of the Uruguay Round offer benefits for all developing countries, various aspects have been identified as having potential negative implications. In the main body of this document, these concerns are addressed with a view to providing a balanced view of the outcome of the negotiations for developing countries.

The vast results of the Uruguay Round require an institution to facilitate the implementation, administration, operation and furthering of the objectives of the Agreement Establishing the World Trade Organization (WTO). Thus, a common institutional framework encompassing the GATT as modified by the Uruguay Round (i.e. the GATT 1994), alongside with all Agreements and Arrangements concluded under GATT auspices and other Agreements and Ministerial Decisions/Declarations resulting from the Uruguay Round is envisaged. This will serve as a vehicle to ensure a "single undertaking approach" to the results of the Uruguay Round: membership in the WTO will automatically entail accepting all the results of the Uruguay Round without exception.

One of the functions of the WTO will be to cooperate with the International Monetary Fund, the International Bank for Reconstruction and Development and its affiliated agencies. In this respect, a Ministerial Declaration emanating from the Uruguay Round on the contribution of the WTO to achieving greater coherence in global economic policy-making is important.

It sets out concepts and proposals with respect to increasing the contribution of the WTO to achieving greater coherence in global economic policy-making. The Declaration recognizes the need for an adequate and timely flow of concessional and non-concessional financial and real investment resources to developing country Members, and for further efforts to address debt problems, to help ensure economic growth and development.

There is also a recognition that trade liberalization forms an increasingly important component in the success of the adjustment programmes that many Members are undertaking, and that this often involves significant transitional social costs. The Director-General of the WTO is called upon to review, with his opposite numbers in the World Bank and the International Monetary Fund, the implications of the WTO's future responsibilities for its cooperation with the Bretton Woods institutions.

Principal Elements of the Uruguay Round Agreemen

The World Trade Organization (WTO) is a single institutional framework encompassing the GATT and all the agreements and legal instruments negotiated in the Uruguay Round: the General Agreement on Tariffs and Trade or GATT 1994 and other agreements covering trade in goods; the General Agreement on Trade in Services or GATS; the Agreement on Trade-Related Aspects of Intellectual Property Protection or TRIPs; the Understanding on the Dispute Settlement (DSU); and the Trade Policy Review Mechanism (TPRM).

In addition, there are a number of Ministerial Decisions and Declarations that supplement the agreements reached.

The WTO will be headed by a Ministerial Conference meeting at least once every two years. A General Council will be established to oversee the operation of the WTO between meetings of the Ministerial Conference, including acting as a Dispute Settlement Body and administering the Trade Policy Review Mechanism. The General Council will have three principal subsidiary bodies: the Council for Trade in Goods, the Council for Trade in Services and the Council for TRIPs; these bodies can, on their side, establish subsidiary bodies. The Ministerial Conference will establish a Committee on Trade and Development. Unless otherwise provided for, decisions will be taken by consensus, continuing the GATT practice.

While the WTO is not a successor organization to the GATT, contracting parties to the GATT 1947 will automatically become Members of the WTO if they assume the obligations provided for in the agreements on goods, services and intellectual property protection, and submit schedules of concessions covering trade in goods (including both market access and subsidy commitments in the case of agricultural products) and services.

This ensures a "single undertaking" approach to the results of the Uruguay Round, since membership in the WTO will entail accepting all the results of the Round without exception. The WTO will also provide a forum for future trade negotiations.

The special status of developing countries in the GATT will continue to receive recognition in the WTO. The preamble of the Agreement Establishing the WTO states that "there is a need for positive efforts designed to ensure that developing countries, and especially the least developed among them, secure a share in the growth of international trade commensurate with the needs of their economic development". In addition to retaining the provisions that concerned developing countries in GATT 1947, the new agreements generally contain provisions for developing countries and least-developed countries, often consisting of longer transition periods for the full implementation of some obligations and various exemptions from obligations, particularly for the latter group of countries. Also, in some instances, the exports of developing countries benefit from a better treatment with respect to measures taken by other WTO Members. Technical assistance is to be provided to developing countries to assist them in assuming their obligations and more effectively realizing the benefits of the multilateral trading system.

Least-developed countries are singled out in the Final Act as requiring special attention. This is reflected in the agreements through a number of provisions which provide the most favourable treatment for this group in terms of rights as well as lower levels of obligations. In addition, the Decision on Measures in Favour of Least-Developed Countries makes provision for measures of special assistance, including technical assistance "in the development, strengthening and diversification of their production and export bases including those of services, as well as in trade promotion, to enable them to maximize the benefits from liberalized access to markets".

As part of its functions, the Committee on Trade and Development (a subsidiary body of the General Council) will periodically review the special provisions in favour of least-developed countries and report to the General Council of the WTO for appropriate action.

The Declaration on the Contribution of the WTO to Achieving Greater Coherence in Global Economic Policy-making identifies the need for strengthening the relationship between the activities of the WTO, the International Monetary Fund (IMF) and the World Bank (IBRD) as a way of ensuring greater coherence in global economic policy-making. It notes, amongst other things, that progress in the trade area is linked to greater exchange rate stability, to an adequate and timely flow of concessional and non-concessional financial and real investment resources to developing countries, and further efforts to address debt problems. It also recognizes that while difficulties whose origins lie outside the trade field cannot be redressed through measures taken in the trade field alone, there are nevertheless interlinkages between the different aspects of economic policy. The Declaration provides guidelines on how the cooperation between the three organizations could be developed; in particular, it calls on the Director-General of the WTO to review, with his opposite numbers of the IBRD and the IMF, the implications of WTO's future responsibilities for its cooperation with the Bretton Woods Institutions. The fact that such interlinkages and, further, that the relation between economic adjustment and social costs have been explicitly recognized within the WTO context has been considered of considerable importance by developing countries. As underlined during the Uruguay Round negotiations, Ministers expect that such greater coherence will result not only in reinforced surveillance of national policies, but also, inter alia - and according to the working relations that will be established between the three institutions - ensure that developing countries which join multilateral efforts to liberalize trade can count on support to overcome financial pressures arising during the adjustment process, and help in reducing a perceived lack of consistency, in certain instances, between trade policy recommendations made in the context of lending programmes to developing countries and GATT/WTO requirements.

The World Trade Organization (WTO) is the only international organization dealing with the global rules of trade between nations . Its main function is to ensure that trade flows as smoothly , predictably and freely as possible.

The WTO is the legal and institutional foundation of the multilateral trading system . It provides the principal contractual obligations determining how governments frame and implement domestic trade legislation and regulations . It is the platform on which trade relations among countries evolve through collective debate , negotiation and adjudication.

The WTO was established on January 1,1995.Governments concluded the Uruguay Round negotiations on December 15,1993 and Ministers gave their political backing to the results by signing the Final Act at a meeting in Marrakesh ,Morocco in April 1994.The ‘Marrakesh Declaration’ of April 15,1994,affirmed that the results of the Uruguay Round ,the eighth trade round held under the auspices of the General Agreement on Tariffs and Trade (GATT),would ‘strengthen the world economy and lead to more trade, investment , employment and income growth throughout the world.’ The WTO is the embodiment of the Uruguay Round results and the successor to the GATT.

· Not only does the WTO have a larger membership than GATT(140 countries by February 2001 versus 128 for GATT),it also has a much broader scope in terms of the commercial activity and trade policies it applies .

· The WTO covers trade in goods services and ‘trade in ideas’ or intellectual property.

· The WTO is not a simple extension of GATT; on the contrary ,it completely replaces its predecessor and has a very different character. Among the principal differences are the following:

· The GATT was a set of rules ,a multilateral agreement ,with no institutional foundation only a small associated secretariat which had its origins in the attempt to establish an International Trade Organization in the 1940s.The WTO is a permanent institution with its own secretariat.

· The GATT was applied on a ‘provisional basis’ even if, after more than 40years ,governments chose to treat it as a permanent commitment. The WTO commitments are full and permanent.

· The GATT rules applied to trade in merchandise goods. In addition to goods ,the WTO covers trade in services and trade-related aspects of intellectual property.

· While GATT was a multilateral instrument, by the 1980s many new agreements had been added of a plurilateral ,and therefore selective, nature. The agreements which constitute the WTO are almost all multilateral and, thus involve commitments entire membership.

· The WTO dispute settlement system is faster , more automatic ,and thus much less susceptible blockages, than the old GATT system. The implementation of WTO dispute findings will also be more easily assured.

· The GATT continues as ‘GATT 1994’, The amended and up-dated version of GATT 1947, which is an integral part of the WTO Agreement and which continues to provide the key disciplines affecting international trade in goods.

· The WTO continues GATT’s tradition of seeking to make decisions not by voting but by consensus .This procedure allows members to ensure their interests are properly considered even though ,on occasion ,they may decide to join a consensus in the overall interests of the multilateral trading system. Where consensus is not possible ,the WTO agreement allows for voting. In such circumstances, decisions are taken by a majority of the votes cast and on the basis of ‘one country, one vote.’

· administer and implement the multilateral and plurilateral trade agreements which together make up the WTO

· act as a forum for multilateral trade negotiations seek to resolve trade disputes

· cooperate with other international institutions involved in global economic policy-making.

The WTO agreement contains some 29 individual legal texts-covering everything from agriculture to textiles and clothing , and from services to government procurement , rules of origin and intellectual property . Added to these are more than 25 additional Ministerial declarations ,decisions and understandings which spell out further obligations and commitments to WTO members.

WTO rules now extend to such traditionally sensitive sectors as trade in agriculture products and textiles and clothing . For agriculture , the rules cover market access conditions , domestic support measures , export subsidy restrictions and food safety , plant and animal health regulations . For trade in textiles and clothing ,new rules call for a 10-year phase out of the Multi-fibre Arrangement and a complete integration of this sector into WTO rules.

Key provisions of the WTO rules outflow discrimination among members and between imported and domestically-produced merchandise . A non-discrimination form known as ‘national treatment’ , requires that once goods have entered a market , they must be treated no less favorably than the equivalent domestically produced goods.

The result of WTO is assurance . Consumers and producers know that they can enjoy secure supplies and greater choice of the finished products , components , raw materials and services that they use . Producers and exporters know that foreign markets will remain open to them.

The result is also a more prosperous , peaceful and accountable economic world.Decisions in the WTO are typically taken by consensus among all member countries and they are ratified by members’ parliaments .Trade friction is channelled into the WTO’s dispute settlement process where the focus is on interpreting agreements and commitments , and how to ensure that countries’ trade policies conform with them . That way , the risk of disputes spilling over into political or military conflict is reduced.

By lowering trade barriers , the WTO’s system also breaks down other barriers between peoples and nations.

At the heart of the system -known as the multilateral trading system- are the WTO’s agreements , negotiated and signed by a large majority of the world’s trading nations , and ratified in their parliaments . These agreements are the legal ground-rules for the international commerce . Essentially , they are contracts , guaranteeing member countries important trade rights .They also bind governments to keep their trade policies within agreed limits to everybody’s benefit.

The agreements were negotiated and signed by governments . But their purpose is to help producers of goods and services , exporters, and importers conduct their business.

The WTO is a rules-based , member-driven organization _all decisions are made by the member governments , and the rules are the outcome of negotiations among members. The goal is to improve the welfare of the peoples of the member countries.

Following the establishment of the GATT in 1948 , average tariff levels fell progressively through a series of seven trade rounds. The Uruguay Round added to that success , cutting tariffs substantially , sometimes to zero, while raising the overall level of bound tariffs significantly .At a higher end of the tariff structure , the proportion of imports into developed countries from all sources that encounter tariffs above 15 percent will decline from 7 to 5 percent and from 9 to 5 percent for imports from developing countries.

The dispute settlement system of the WTO is a central element in providing security and predictability to the multilateral trading system and WTO members commit themselves not to take unilateral action against perceived violations of the trade rules but to seek recourse in the multilateral dispute settlement system and to abide by its rules and findings.

The WTO also examines the links between trade and environment. A committee on this subject was established in early 1995 to explore issues such as :multilateral environmental agreements; the sustainable developments; environment and trade interface; trade in domestically prohibited goods; packaging ,labelling and cycling requirements and the transparency of trade related environmental measures.

The WTO has 140 members.Some of them are:Argentina, Brazil,Cyprus,Turkey, United States, United Kingdom ,United Arab Emirates, Hong Kong, Japan, Switzerland, Cuba,Canada, Central African Republic, Malta, Finland,Peru,Nigeria,Portugal, Morocco,Kenya,Tunisia,France….

The WTO’s overriding objective is to help trade flow smoothly, freely, fairly and predictably.It does this by:

The WTO has more than 130 members, accounting for over 90% of world trade. Over 30 others are negotiating membership.

Decisions are made by the entire membership. This is typically by consensus. A majority vote is also possible but it has never been used in the WTO, and was extremely rare under the WTO’s predecessor, GATT. The WTO’s agreements have been ratified in all members’ parliaments.

The WTO’s top level decision-making body is the Ministerial Conference which meets at least once every two years.

Below this is the General Council which meets several times a year in the Geneva headquarters. The General Council also meets as the Trade Policy Review Body and the Dispute Settlement Body.

At the next level, the Goods Council, Services Council and Intellectual Property (TRIPS) Council report to the General Council.

Numerous specialized committees, working groups and working parties deal with the individual agreements and other areas such as the environment, development, membership applications and regional trade agreements.

Three more councils, each handling a different broad area of trade, report to the General Council:

· The Council for Trade-Related Aspects of Intellectual Property (TRIPS Council)

Six other bodies report to the General Council. The scope of their coverage is smaller, so they are “committees”. But they still consist of all WTO members. They cover issues such as trade and development, the environment, regional trading arrangements, and administrative issues. The Singapore Ministerial Conference in December 1996 decided to create new working groups to look at investment and competition policy, transparency in government procurement, and trade facilitation. Four more subsidiary bodies dealing with the plurilateral agreements (which are not signed by all WTO members) keep the General Council informed of their activities regularly.

The WTO Secretariat, based in Geneva, has around 500 staff and is headed by a director-general. It does not have branch offices outside Geneva. Since decisions are taken by the members themselves, the Secretariat does not have the decision-making role that other international bureaucracies are given.

The Secretariat’s main duties are to supply technical support for the various councils and committees and the ministerial conferences, to provide technical assistance for developing countries, to analyze world trade, and to explain WTO affairs to the public and media.

The Secretariat also provides some forms of legal assistance in the dispute settlement process and advises governments wishing to become members of the WTO. The annual budget is roughly 117 million Swiss francs.

The WTO Secretariat is located in Geneva. It has around 500 staff and is headed by a director general. Its responsibilities:

Administrative and technical support for WTO delegate bodies (councils, committees, working parties, negotiating groups) for negotiations and the implementation of agreements.

Trade performance and trade policy analyses by WTO economists and statisticians.

Assistance from legal staff in the resolution of trade disputes involving the interpretation of WTO rules and precedents.

Dealing with accession negotiations for new members and providing advice to governments considering membership.

4) 10 BENEFITS OF THE WTO TRADING SYSTEM

There are many reasons why we’re better off with the system than we would be without it. Here are some benefits of the WTO’s "multilateral" trading system, but it doesn’t mean that everything is perfect; otherwise there would be no need for further negotiations and for the rules to be revised.

Peace is partly an outcome of two of the most fundamental principles of the trading system: helping trade to flow smoothly, and providing countries with a constructive and fair outlet for dealing with disputes over trade issues. It is also an outcome of the international confidence and cooperation that the system creates and reinforces.

The history is full of examples of trade disputes turning to wars. At 1930s when countries started to raise trade barriers in order to protect their domestic producers and retaliate against each others’ barriers. This worsened the Great Depression and eventually played a part in the outbreak of World War 2.

After the Second World War two developments helped to avoid a repeat of these disputes turning into world wars. In Europe, international cooperation developed in coal, and in iron and steel. Globally, the General Agreement on Tariffs and Trade (GATT) was created.

Both have proved successful, so much so that they are now considerably expanded — one has become the European Union, the other the World Trade Organization (WTO).

To protect a sector is not always the best way.One country can easily lead to retaliation from other countries, a loss of confidence in freer trade, and a slide into serious economic trouble for all — including the sectors that were originally protected. Everyone loses.

Confidence is the most important key to avoid this loss! When governments are confident that others will not raise their trade barriers, they will not be tempted to do the same. They will also be in a much better frame of mind to cooperate with each other.

More trade means more opportunities for disputes to arise.There is a possibility that these disputes can lead to serious conflicts. But in reality, a lot of international trade tension is reduced because countries can turn to organizations, in particular the WTO, to settle their trade disputes.

When countries bring their disputes to the WTO,Wto focuses their attention on the rules. Once a ruling has been made, countries concentrate on trying to comply with the rules, and perhaps later renegotiating the rules — not on declaring war on each other.

The increasing number of disputes brought to GATT and its successor, the WTO, does not reflect increasing tension in the world. Rather it reflects the closer economic ties throughout the world, the GATT/WTO’s expanding membership and the fact that countries have faith in the system to solve their differences

The WTO cannot claim to make all countries equal. But it reduces some inequalities, giving smaller countries more voice, and at the same time freeing the major powers from the complexity of having to negotiate trade agreements with each of their numerous trading partners.

Without the WTO’s system, the more powerful countries would be freer to impose their will unilaterally on their smaller trading partners. Smaller countries would have to deal with each of the major economic powers individually and it would be more difficult for them to avoid such a pressure.

Trade becomes simple for the bigger countries because they can use the single forum of the WTO to negotiate with most of their trade partners at the same time.

The prices of all commodities are effected by trade policies.Protectionism is expensive because it raises prices.The WTO Trading system aims to lower these trade barriers and create a freer trade area with reduced costs of production.This reduces the prices of finished goods and sevies,and an the end it provides a lower cost of living.All studies have proved this idea.

When you protect your agriculture, the cost of your food goes up. Governments are still debating the roles agricultural policies play in a range of issues from food security to environmental protection. But WTO members are now reducing the subsidies and the trade barriers that are the worst offenders. In 2000, new talks started on agriculture.

The textiles and clothing trade is going through a major reform — under the WTO — that will be completed in 2005. The programme includes eliminating restrictions on quantities of imports. If customs duties were also to be eliminated, economists calculate the result could be a gain to the world of around $23 billion.

*….AND SERVİCES

Nowadays trade barriers around the world are lower than they have ever been in modern trading history. They continue to fall, and everbody benefits.

5.It gives consumers more choice, and a broader range of qualities to choose from.

Imports allow us more choice — both more goods and services to choose from, and a wider range of qualities. Even the quality of locally-produced goods can improve because of the competition from imports.

Because imports are used as materials, components and equipment for local production; they affect the finished products costs and qualities.This expands the range of final products and services that are made by domestic producers, and it increases the range of technologies they can use.

If trade allows us to import more, it also allows others to buy more of our exports. It increases our incomes, providing us with the means of enjoying the increased choice

Lowering trade barriers allows trade to increase, which adds to incomes,such as national incomes and personal incomes. While doing this some adjustments ara necessary.

Additional income means that ,resources are available for governments to redistribute them.

There are some examples which show us that an increase in trade raises income. WTO’s estimations about impact of the Uruguay Round trade deal in 1994 was between $109 billion and $510 billion added to world income. Other economists have produced similar figures.

Trade also poses challenges as domestic producers face competiton from imports. In order to be competitive,domestic producers adopt by becoming more productive and effective in what they were already doing.

7. Trade stimulates economic growth, and that can be good news for employment

Trade clearly has the potential to create jobs,in practice we see that lowering trade barriers have been good for employment through increasing job opportunities. But things in practice are not some with the theories. Absolute protectionisim is not the way to decrease unemployment.

This is a difficult subject to be written in simple words. There is strong eveidence that trade boost economic growth, and the economic growth means more jobs. Besides these there are some jobs which are lost with the econıomy growing.

a) Tecnological improvement has strong impact on employment and productivity,while benefiting some jobs,hurting others.

b) While trade clearly boosts national incomes,this is not always translated into new employment for workers who lost their jobs as a result of competition from imports.

Of course the picture is varied around the world. The average length of time a worker takes to find a new job can be much longer in one country. In other words some countries are better at making the adjustments than others. This is partly because some countries have more effective adjustment policies.

Often job prospects are better in countries involved in trade. In the United States,12 million people owe therir jobs to exports Between 1987 and 1992, employment growth in companies involved in exporting was around 18% higher than in other comparable companies.

Sometimes it is seen that protectionism also hurts employment. US jobs by restricting imports from japan ended up making cars more expensive in the US, so fewer cars were sold and jobs were lost. In other words,as attempt to tackle a problem in the short term by restricting trade turned into a bigger problem in the longer term.

8. The basic principles make the system economically more efficient, and they cut costs.

Many of the benefits of the trading system are more difficult to summarize in numbers,but they are still important. They make life simplier for the enterprises directly involved in trade and for the producers of goods and services.

Trade allows division of labor between countries. It allows resources to be used more appropriately and effectively for production. But the WTO’s trading system offers more than that. It helps to increase efficiency and to cut costs even more because of important principles admitted in the system. Imagine a situation where each country sets different rules and different customs duty rates for imports coming from different trading partners. Imagine that a company in one country wants to import raw materials or components, for it’s own production.

This is the problem of discrimination.Everything will be better in a situation that a government announces it will charge the same duty rates on imports from all countries, and it will use the same regulations for all products, no matter where they come from, whether imported or locally produced. Sourcing components would become more efficient and would cost less.

Non-discrimination is just one of the key principles of the WTO’s trading system. Others include:

Together they make trade simpler. In turn means that more jobs and better goods and services for customers.

The GATT-WTO system which evolved in the second half of the 20th Century helps governments take a more balanced view of trade policy. Governments are better-placed to defend themselves against lobbying from narrow interest groups by focusing on trade-offs that are made in the interests of everyone in the economy.

Superficially, restricting imports looks like an effective way of supporting an economic sector. But it biases the economy against other sectors which shouldn’t be penalized — if you protect your clothing industry, everyone else has to pay for more expensive clothes, which puts pressure on wages in all sectors, for example.

Protectionism can also escalate as other countries retaliate by raising their own trade barriers. That’s exactly what happened in the 1920s and 30s with disastrous effects. Even the sectors demanding protection ended up losing.

So, if during a GATT-WTO trade negotiation one pressure group lobbies its government to be considered as a special case in need of protection, the government can reject the protectionist pressure by arguing that it needs a broad-ranging agreement that will benefit all sectors of the economy.

Under WTO rules, once a commitment has been made to liberalize a sector of trade, it is difficult to reverse. The rules also discourage a range of unwise policies. For businesses, that means greater certainty and clarity about trading conditions. For governments it can often mean good discipline.

One kind of trade barrier that the WTO’s rules try to tackle is the quota, for example restricting imports or exports to no more than a specific amount each year.

Because quotas limit supply, they artificially raise prices, creating abnormally large profits That profit can be used to influence policies because more money is available for lobbying.

In other words, quotas are a particularly bad way of restricting trade. Governments have agreed through the WTO’s rules that their use should be discouraged.

Nevertheless, quotas of various types remain in use in most countries, and governments argue strongly that they are needed. But they are controlled by WTO agreements and there are commitments to reduce or eliminate many of them, particularly in textiles.

Many other areas of the WTO’s agreements can also help reduce corruption and bad government.

Transparency, clearer criteria for regulations dealing with the safety and standards of products, and non-discrimination also help by reducing the scope for arbitrary decision-making and cheating .Quite often, governments use the WTO as a welcome external constraint on their policies

Not true: The WTO does not tell governments how to conduct their trade policies. Rather it’s a “member-driven” organization.The WTO is member-driven which means the rules of the WTO system are agreements resulting from negotiations among member governments, the rules are ratified by all members’ parliaments and decisions taken in the WTO are generally made by consensus among all members.

We can also say it like that; decisions taken in the WTO are negotiated which are all accountable and democratic.The only situation when WTO has an effect on a government’s policies is a dispute or disagreement. The WTO has a Dispute Settlement Body which makes a ruling by adopting the findings of a panel of experts or an appeal report. But again the scope of the ruling is narrow.

For example, if a government infringe the rules of the agreement which it had accepted then the WTO has the right to judge. But again if a government has broken a commitment it has to conform, the WTO doesn’t dictate to governments to adopt or drop certain policies. As for the WTO Secretariat , it simply provides administrative and technical support for the WTO and its members. In fact it’s the governments who dictate to the WTO.

Not true: It’s really a question of what countries are willing to bargain with each other. It all depends on what countries want to bargain. One of the aims of the WTO system is for countries to lower their trade barriers and to allow trade to flow more freely. After all, countries benefit from the increased trade results from lower trade barriers. But what the level of barriers should be is the subject of countries bargaining with each other. Their negotiating positions depend on how ready they feel they are to lower the barriers, and on what they want to obtain from other members in return. It also provides the rules for how liberalization can take place. The rules of the agreements allow barriers to be lowered gradually so that domestic producers can adjust. They have special provisions that take into account the situations that developing countries face. They also mention when and how governments can protect their domestic producers. Maybe you can ask what is or how is protected. Protection from imports that are considered to have unfairly low prices because of “dumping”. Here, the objective is fair trade. Non-discrimination, stable conditions for trade, predictability and transparenty are other principles of the WTO system.

3.The WTO is only concerned about commercial interests. This takes priority over development.

Not true: The WTO agreements agreements are full of provisions taking the interests of the development into account. Here, the main objective is sustainable development. Underlying the WTO’s trading system is the fact that freer trade supports economic growth and development. In that sense, commerce and development are good for each other. It is still a continuing debate whether or not developing countries gain enough from the system. But of course that doesn’t mean to say the system offers nothing for these countries. The agreements include many important provisions that specifically take developing countries’ interests into account.

Developing countries are allowed more time to apply numerous provisions of the WTO agreements. Least developed countries receive special treatment, including exemption from many provisions.

4. In the WTO, commercial interests take priority over environmental protection

Not true: Many provisions take environmental concerns specifically into account.

The preamble of the Marrakesh Agreement Establishing the World Trade Organization includes among its principles, optimal use of the world’s resources, sustainable development and environmental protection. This is backed up in concrete terms by a range of provisions in the WTO’s rules. Among the most important ones are umbrella clauses which allow countries to take actions to protect human, animal or plant life or health, and to conserve exhaustible natural resources.

Differently from the main aims, specific agreements on specific subjects also take environmental concerns into account. Subsidies are permitted for environmental protection. What are these environmental protection? Product standards, food safety, intellectual property protections.

What’s more, the system and its rules can help countries allocate scarce resources more efficiently and less wastefully. For example, negotiations have led to reductions in industrial and agricultural subsidies, which in turn reduce wasteful over-production.

These principles are reinforced by a ruling on a dispute brought to the WTO. Here, the most important in the WTO’s rules is that measures taken to protect the environment must not be unfair. They must be non-discriminative. Also another important feature is it is not the WTO’s job to set the international rules for environmental protection. That’s the task of the environment agencies and conventions.So far there has been no conflict between the WTO’s agreements and the international environmental agreements.

5. The WTO dictates to governments on issues such as food safety, and human health and safety. Again commercial interests override.

Not true: The agreements were negotiated by WTO member governments, and therefore the agreements reflect their concerns.

Safety concerns are built into the WTO agreements.Key clauses which take part in the agreements specifically allow governments to take actions to protect human, animal or plant life. But these actions are disciplined, for example to prevent them being used as an excuse for protecting domestic producers.

Some of the agreements deal in greater detail with product standards, and with health and safety for food and other products made from animals and plants. The purpose is to defend governments’rights to ensure the safety of their citizens.At the same time, the agreements are also designed to prevent governments setting regulations arbitrarily in a way that discriminates against foreign goods and services. Safety regulations must not be protectionism in disguise.

Other criterion for meeting these objectives is to base regulations on scientific evidence or on internationally recognized standards.

Again the WTO does not set the standards itself. In some cases other international agreements are identified in the WTO’s agreements.One example is CODEX ALIMENTARIUS, which sets recommended standards for food safety and comes under the UN Food and Agricultural Organization (FAO) and World Health Organization (WHO).

But there is no compulsory to comply even with internationally negotiated standards such as those of Codex Alimentarius. Governments are free to set their own standards provided they are consistent, are not arbitrary, and do not discriminate.

Not true: The accusation is inaccurate . Trade can be a powerful force for creating jobs and reducing poverty. Often it does just that. Sometimes adjustments are necessary to deal with job losses, and here the picture is complicated. In any case, the alternative of protectionism is not the solution.

The country that lowers its own trade barriers is the biggest beneficiary. The countries exporting to it also gain, but less. In many cases, workers in export sectors enjoy higher pay and greater job security.

We can also say that; producers and their workers who were previously protected clearly face new competition when trade barriers are lowered. Some survive by becoming more competitive. Others don’t. Some adapt quickly (for example by finding new employment), others take longer.

In particular, some countries are better at making the adjustments than others. This is partly because they have more effective adjustment policies. Those without effective policies are missing an opportunity because the boost that trade gives to the economy creates the resources that help adjustments to be made more easily.

In the WTO, liberalization takes place by a series of small changes over a long period, allowing countries time to make the necessary adjustments. Provisions in the agreements also allow countries to take contingency actions against imports that are particularly damaging, but under strict disciplines.

At the same time the result of negotiations. create liberalization under the WTO . When countries feel the necessary adjustments cannot be made, they can and do resist demands to open the relevant sections of their markets.

There are also many other factors outside the WTO’s responsibility that are behind recent changes in wage levels.

Why for example is there a widening gap in developed countries between the pay of skilled and unskilled workers?

Reporting to the OECD, imports from low-wage countries account for only 10–20% of wage changes in developed countries. Much of the rest is attributable to "skill-based technological change".

In other words, developed economies are naturally adopting more technologies that require labour with higher levels of skill.

The alternative to trade — protection — is expensive because it raises costs and encourages inefficiency.

According to another OECD calculation, imposing a 30% duty on imports from developing countries would actually

At the same time, the focus on goods imports distorts the picture. In developed countries, 70% of economic activity is in services, where the effect of foreign competition on jobs is different — if a foreign telecommunications company sets up business in a country it may employ local people, for example.

Finally, while about 1.5 billion people are still in poverty, trade liberalization since World War II has contributed to lifting an estimated 3 billion people out of poverty.

Not true: Small countries would be weaker without the WTO. The WTO increases their bargaining power.

In the WTO trading system, everyone has to follow the same rules. As a result, in the WTO’s dispute settlement procedure, developing countries have successfully challenged some actions taken by developed countries

If this smaller countries dont join the WTO , these countries would have been powerful trading partners. At the same time, the rules are the result of multilateral negotiations (i.e. negotiations involving all members of GATT, the WTO’s predecessor).

The most recent negotiation, the Uruguay Round (1986–94), was only possible because developed countries agreed to reform trade in textiles and agriculture — both of them were important in the developing countries.
8.The WTO is the tool of powerful lobbies

Not true: The WTO system offers governments a means to reduce the influence of narrow vested interests

The outcome of a trade round has to be a balance of interests. Governments can find it easier to reject pressure from particular lobbying groups by arguing that it had to accept the overall package in the interests of the country as a whole.

The organization of governments is the WTO and the private sector, non-governmental organizations and other lobbying groups do not become involved in WTO activities except in special events such as seminars and symposiums.

WTO’s membership can only apply a quality their influence on WTO decisions through their governments.

Not true: Most countries do feel that it’s better to be in the WTO system than to be outside it. That’s why the list of countries negotiating membership includes both large and small trading nations.

The reasons are positive rather than negative. They lie in the WTO’s key principles, such as non-discrimination and qoality of being transparent.

If this smaller countries join the WTO and then, a small country automatically enjoys the benefits that all WTO members grant to each other.

The alternative would be to negotiate bilateral trade agreements with each trading partner. That could even include regularly negotiating the regular renewal of commitments to treat trading partners as equals.

For this, governments would need more resources, a serious problem for small countries. And in bilateral negotiations smaller countries are weaker.

By joining the WTO, small countries can also increase their bargaining power by forming alliances with other countries that have common interests

Not true: Decisions in the WTO are generally by consensus. In principle, that’s even more democratic than majority rule because everyone has to agree.

Every counry has the same bargaining power that ıt would be wrong to suggest . In spite of this;, the consensus rule means every country has a voice, and before this countries join a consensus every country has to be persuaded. .

Quite often reluctant countries are persuaded by being offered something in return.Every country accepts the decisions that’s means Consensus There are no dissenters.

TRADE POLICY REVIEWS: FIRST PRESS RELEASE, SECRETARIAT AND GOVERNMENT SUMMARIES
Turkey: October 1998

Turkey's trade agreement with the EU leads to improved business environment for all foreign investors and traders

Turkey's far-reaching structural and legislative reforms, undertaken within the framework of the customs union with the European Union, have led to improved market access and a more secure trading environment for all investors and traders. According to a new WTO Secretariat report on Turkey's trade policies and practices, these reforms are expected to yield significant economic benefits. The commitments undertaken in the agreement with the EU go well beyond the basic requirements of a custom union, as well as Turkey's obligations in the Uruguay Round.

The new WTO Secretariat report and a policy statement prepared by the government of Turkey will provide the basis for a review of Turkey's trade policies and practices on 12 and 13 October 1998.

Since the Turkey-EU customs union entered into force on 1 January 1996, Turkey has adopted the EU common external tariff on most industrial imports and on the industrial component of processed agricultural goods. In addition, import surcharges have been virtually eliminated, thereby simplifying the calculation of taxes payable on imports. As a result of these policies, the average tariff has been cut from 27% in 1993 to 13% in 1998. Turkey has also harmonized much of its legislation with that of the EU in the areas of customs provision, duty concessions, officially supported export credits, competition policy, state aid, intellectual property rights, standards, and sanitary and phytosanitary measures.

According to the report, imports into Turkey from the EU increased from US$17 billion in 1995 to US$25 billion 1997, amounting to about half of Turkey's imports. The report states, however, that exports to the EU
increased only marginally, as most manufactured exports have been traded duty-free since the early 1970s and agriculture is yet to be liberalized. While there may be concern about possible trade diversion resulting from the
customs union, the report notes that third countries should altogether benefit from the alignment of Turkey's tariffs with those of the EU and that reforms are improving the business environment for all foreign investors and
traders.

The report notes that agriculture, largely excluded from the customs union, continues to be subject to extensive and costly government intervention. It points out important policy imbalances between manufacturing and agriculture and states that while the manufacturing sector has experienced substantial liberalization, transfers to the already heavily supported agricultural sector have increased. According to OECD estimates, total transfers to agriculture almost doubled in the period 1994 to 1997, reaching the equivalent of 7.5% of GDP. With the increase of the MFN tariff from 35% in 1993 to 43% in 1998, tariff protection in the agriculture sector constitutes a significant barrier to imports. In contrast, Turkey's average MFN tariff on imports of manufactures more than halved during the same period from 27% to 12%.

The report observes that the overall economic situation remains fragile in Turkey, mainly because of the slow progress in the implementation of key structural reforms. Turkey suffers from high fiscal deficits and high inflation. The costly social security system needs to be restructured along with the banking sector which suffers from a number of weaknesses, such as preferential lending to favoured sectors, weak supervision and accounting standards, and cross-ownership. While the Turkish government passed a comprehensive law on privatization in 1994, the report notes that implementation has been slow. Privatization of dominant state economic
enterprises in areas such as air transport and basic telecommunications has been initiated but has yet to be completed.

Several service sectors are beginning to open up but in certain sectors, particularly finance and banking, investors still require special government approval before being allowed to enter the market. Turkey did, however, undertake commitments in each of the three major negotiations concluded in the WTO in 1997, mainly the information technology agreement and the financial and telecommunications services agreements.

The report concludes that while Turkey's overall economic performance is strong, the efficiency of the economy would benefit from the privatization of state economic enterprises and a reform of the financial sector. Changes induced by the customs union, however, are expected to have significant economic benefits, especially in terms of restructuring and modernization of the manufacturing sectors. Other countries should also benefit from the market-opening in manufactures and greater security in the trade regime and business environment. However, the current trend of increasing support in agriculture is contrary to the liberalization seen elsewhere in the economy.

This sectoral imbalance, states the report, could be a tax not just on consumer welfare but also implicitly on manufacturing and services that compete with agriculture for production factors.

The WTO's Secretariat report, together with a policy statement prepared by the Turkish Government, will be discussed by the WTO Trade Policy Review Body (TPRB) on 12 and 13 October 1998. The WTO's TPRB conducts a collective evaluation of the full range of trade policies and practices of each WTO member at regular periodic intervals and monitors significant trends and developments which may have an impact on the global trading system. The Secretariat report covers the development of all aspects of each of Turkey's trade policies, including domestic laws and regulations, the institutional framework, trade policies by measure and by sector. Since the WTO came into force, the new "areas" of services and trade-related aspects of intellectual property rights are also covered.

The Secretariat's report:
TRADE POLICY REVIEW BODY: TURKEY
Report by the Secretariat - Summary Observations

Since the previous Trade Policy Review in 1994, Turkey has implemented a wide range of reforms within the framework of the customs union between Turkey and the EU, taking it significantly beyond its Uruguay Round
commitments as well as generating improved and more secure trading opportunities for third countries. In addition to halving its manufacturing tariffs to the levels of the EU common external tariff (CET), Turkey has also harmonized much of its legislation with that of the EU in areas such as competition policy, customs provisions, intellectual property rights and standards. While the Customs Union Decision (CUD) has clearly resulted in an overall liberalization, some new trade measures were introduced as a result of the customs union (quantitative restrictions on textiles and clothing, and tariff quotas). Another area of concern is the policy imbalance between manufacturing and agriculture: over the past four years, the manufacturing sector has experienced substantial liberalization while transfers to the already heavily supported agricultural sector have increased. In addition, macroeconomic imbalances (high fiscal deficits and inflation) and slow progress in the implementation of key structural reforms (including in the social security system, the privatization programme and in banking) may threaten the sustainability of Turkey's strong, but variable, growth performance.

In 1994, the Turkish economy experienced a severe recession, following growth of 8% in 1993. A severe budget deficit and real currency appreciation triggered a financial and foreign exchange crisis at the beginning of 1994, leading to a contraction of 6% in GNP for the year. However, the economy quickly recovered, aided by the customs union between Turkey and the EU and deregulation in general: annual average growth between 1995 and 1997 was 7.7%. Over the same period, the current account deficit widened somewhat but was generally kept at a manageable level. Gross international reserves accumulated to a record high of nearly five months of merchandise imports and the real exchange rate remained relatively stable.

Historically, expenditures on state economic enterprises were a major source of Turkey's fiscal imbalances. These have largely been brought under control; however, social security spending and interest payments have now
become major causes of the deficit. In the past, monetization of deficits contributed to high inflation, but the new Banking Act has greatly limited the Central Bank's ability to do so. The Government has, instead, resorted
to domestic borrowing on the open market. As a result, the public sector borrowing requirement almost doubled between 1995 and 1997, reaching 8% of GNP. This has driven up real interest rates, threatening to crowd out private investment.

Despite the recovery, the overall economic situation remains fragile, particularly in respect of price inflation. Macroeconomic imbalances and slow progress in the implementation of key structural reforms (including in the social security system, the privatization programme, and banking) may threaten the sustainability of the strong growth performance.

Far-reaching structural and legislative reforms have been undertaken by Turkey in connection with its customs union with the European Union. Exposure to foreign competition has increased as trade barriers have been lowered on an MFN basis, and many trade-related reforms have been implemented while others are in the pipeline. Over the past four years, Turkey has also enacted a comprehensive law on privatization and simplified its already relatively liberal foreign direct investment regime. However, the restructuring of the costly social security system, the implementation of the privatization programme and reform of the banking sector are areas where much remains to be done. The adoption of the CUD has improved market access conditions for third countries to most sectors of the Turkish market, and the implementation of many of the trade-related reforms will improve the
business environment for foreign investors and traders. The Decision, however, has also obliged Turkey to introduce some new external trade measures to achieve harmonization with those of the EU.

As bilateral barriers have been lifted, trade between Turkey and the EU has grown. Imports from the EU increased from US$17 billion in 1995 to US$25 billion in 1997, amounting to about half of Turkey's imports. However, exports to the EU increased only marginally, as most manufactured exports have been traded duty-free since the early 1970s and agriculture is yet to be liberalized. While there may be concern about trade diversion, third countries should generally benefit from the alignment of Turkey's tariffs with the EU CET. Since 1 January 1996, Turkey has been applying the same rules of origin as the EU with respect to imports from third countries, in
terms of both preferential and non-preferential rules.

In most areas, Turkey's commitments towards the EU involve obligations exceeding those of the WTO Agreements. However, some legislative changes introduced since the previous Review have also been induced by WTO commitments including on trade-related aspects of intellectual property rights (TRIPS) and safeguards. As a result of the Uruguay Round, the share of bound tariff lines increased from 31 to 46%, with all agricultural lines
bound. While nominal bindings in industry are generally well above applied rates, the CUD obliges Turkey not to impose higher tariffs than the EU common external tariff (except in areas where the CUD does not apply, mainly
in agriculture) with the consequence that Turkey's tariff is, in practical terms, bound at EU rates.

Specific Trade and Trade-Related Measures :
Tariff and non-tariff border measures

Since the previous Trade Policy Review in 1994, Turkey has further opened its economy to foreign competition. The Mass Housing Fund (MHF) levy has been virtually eliminated, thus simplifying taxes payable on imports and improving transparency. In 1998 the levy covered 3% of the tariff lines, compared with 87% in 1993. In addition, in January 1996, Turkey adopted the EU common external tariff (CET) on most industrial imports (except for 290 "sensitive" items at the twelve-digit level on which tariffs will remain above the CET until 1 January 2001) and on the industrial component of processed agricultural goods. As a result of these actions, the average level of border taxation (including the MHF) was cut by more than half from 27% in 1993 to 13% in 1998. On the other hand, substantial tariff dispersion continues to exist and there is a large number of tariff rates (242 distinct rates, excluding ad valorem equivalents) with the greatest variations seen in agriculture. Turkey ranks sixth among WTO Members for the number of final anti-dumping measures imposed between 1989 and 1996; however, the number of new cases initiated has declined in recent years and no new final measures have been introduced since 1995. Turkey is not obliged under the CUD to adopt the EU's anti-dumping measures, and the two parties retain their
mutual rights in this area. Import certificates were abolished in 1996, but a number of goods remain subject to prior import licensing, partly related to the enforcement of standards.

Turkey's state-aid system of tax exemptions and concessional credit is complex, non-transparent and generous, amounting to 7.5% of GDP in agriculture alone. The wide range of factors determining the value of incentives poses difficulties in evaluating the impact of the schemes. State economic enterprises increased their share of GDP (at constant prices) from 8% in 1991 to 11% in 1994 (latest available data), but evidence suggests
that this role may have diminished since then. Moreover, the financial position of the enterprises has improved, largely because of the adoption of more realistic, market-based pricing policies. Nevertheless, the demarcation
between the private and the public sector is not always clearly defined. In this regard, the comprehensive privatization law of 1994 provides a framework for progress, but the privatization process has so far been slow
and marred by legal disputes. The private sector environment has improved with the enactment of a modern and comprehensive legal framework in the area of intellectual property and the establishment of a competition board. However, enforcement capacity is lagging behind the legislative progress.

While Turkey's overall economic performance is strong, the budget deficit continues to be a drag on the economy, causing high inflation and elevated real interest rates to the detriment of private investment. Moreover, the
slow progress in the implementation of key structural reforms, such as reform of the social security system, may hinder improvement of the fiscal position. The efficiency of the economy would also benefit from moving ahead
with the privatization of state economic enterprises and reform of the financial sector. The reforms induced by the customs union between EU and Turkey are expected to have significant economic benefits, especially in
terms of restructuring and modernization of the manufacturing sector; by and large, other countries should also benefit from the market-opening in manufactures and greater security in the trade regime and business environment. However, the agreement with the EU does not cover agricultural products, and the current trend of increasing support in this sector is contrary to the liberalization seen elsewhere in the economy. This sectoral
imbalance could be a tax not just on consumer welfare but also implicitly on manufacturing and services that compete with agriculture for production factors.

The Trade Policy Review Body of the World Trade Organization (WTO) concluded its second review of Turkey's trade policies on 12 and 13 October 1998. The text of the Chairperson's concluding remarks is attached as a summary of the salient points which emerged during the discussion. The review enables the TPRB to conduct a collective examination of the full range of trade policies and practices of each WTO member country at regular periodic intervals to monitor significant trends and developments which may have an impact on the global trading system.The review is based on two reports which are prepared respectively by the WTO Secretariat and the government under review and which cover all aspects of the country's trade policies, including its domestic laws and regulations, the institutional framework, bilateral, regional and other preferential agreements, the wider economic needs and the external environment.

TRADE POLICY REVIEW BODY: REVIEW OF TURKEY CONCLUDING REMARKS BY THE CHAIRPERSON

The second Trade Policy Review of Turkey was conducted by the TPR Body on 12-13 October 1998. These remarks, prepared on my own responsibility, are intended to summarize the main points of the discussion; they are not intended as a full report. Details of the discussion will be reflected in the minutes. The representative of Turkey provided replies in the context of the meeting and undertook to supply further written replies within one month.

(i) economic background;(ii) trade and investment regime; (iii) specific trade measures; and (iv)
sectoral issues.

Members commended Turkey for its implementation of far-reaching structural and legislative reforms since its previous review. These reforms had contributed to the economy's sound annual average growth of almost 8% in the past three years. However, some members questioned the sustainability of this growth performance in the present macroeconomic and external framework, in which the large fiscal deficit had led to rapid inflation and high real interest rates. In response, the representative of Turkey said that the slowdown in economic growth in 1999, resulting principally from the three-year economic stabilization programme, would help rectify macroeconomic imbalances and reduce inflation. On the fiscal side, the primary budget surplus in the period January-August 1998 was six times higher than a year earlier and tax reforms, to be introduced from January 1999, would further increase revenues in the future. Wholesale price increases in 1998 were expected to be around 50%, as projected. Increases in workers' remittances had more than offset growth in the trade deficit, leading to a continuing improvement in the current account of the balance of payments.

As Turkey's trade with the Asian region was small, the current crisis had only a slight adverse effect on exports. Moreover, since exports to the Russian Federation, a much more important trade partner, were mostly basic commodities (food and textiles), the negative effects on Turkey of the devaluation of the rouble were expected to be slight; but there would probably be an increase in shuttle trade. The turmoil in financial markets
and the consequent outflow of capital from developing countries had had few effects beyond a rise in Turkey's interest rates.

It was recognized that the customs union between Turkey and the European Union had given a new impetus to the liberalization process in Turkey, going beyond its Uruguay Round commitments. The reforms had led to improved market access and a more secure trading environment for all investors and traders. Members raised questions and clarifications on the following:
a. the consistency between the customs union decision, which excluded agricultural products, and the WTO requirement on removing restrictions on "substantially all trade" between parties to regional agreements;
b. the effects of Turkey's adoption of common regulations in areas such as rules of origin, anti-dumping, SPS, and the introduction of quotas on textiles and clothing; and
c. the possibility of trade diversion as a result of the customs union.
d. Members also sought information on the Government's plans to speed up privatization of state-economic enterprises; and Turkey's intention to remove remaining restrictions on foreign direct investment.
e. agricultural products were covered by the customs union. However, the two parties had agreed to postpone the free movement of agricultural products until Turkey's adoption of the Common Agricultural Policy. As yet, there was
no fixed plan for this, which would be negotiated bilaterally.
f. The representative also acknowledged that although progress on privatization had been slow, the new Government had intensified its efforts since June 1997. 46 state-owned enterprises were slated for privatization,
the proceeds of which would be US$5 billion in 1998. It was Turkey's intention to include telecommunications and oil refineries in privatization.
g. The representative emphasised that Turkey's FDI regime was based on the principle of national treatment. Almost all sectors open to private investors were open to domestic and foreign investors alike. Nevertheless,
restrictions on FDI were applied to some sectors on grounds of national security, public order, health and the maintenance of professional standards. Turkey had already simplified its screening and approval process, eliminating approval requirement for investments over US$150 million.
h. Specific trade measures
i. Members complimented Turkey for its implementation of important trade and trade-related reforms since its previous review. In the tariff area, the average level of border taxation had been cut from 27% in 1993 to 13% in 1998, while the Mass Housing Fund levy had been almost eliminated. Other liberalization measures included elimination of most export subsidies, simplification of customs procedures, the establishment of a competition
authority, and the enactment of comprehensive legislation covering intellectual property rights, going beyond the TRIPs Agreement provisions in some areas. However, members raised concerns and questions on:
j. tariff protection higher than the common external tariff for a number of "sensitive" items; the increasing difference between MFN applied and bound duty rates; the introduction of agricultural tariff quotas; and the Government's plans to simplify the tariff system;
k. the automatic nature of the import licensing system;
l. the anti-dumping procedures applied by Turkey;
m. Turkey's state-aid system, including possible distortionary effects and high cost, and the system's conformity with Turkey's WTO obligations;
n. enforcement of intellectual property rights, and the date when Turkey's legislation will be brought in full compliance with the TRIPs Agreement;
o. Government procurement, including the law's Article on "force account"; treatment granted to foreign and domestic suppliers; channels for unsuccessful bidders to lodge complaints; and Turkey's intention to accede to the WTO Agreement on Government Procurement; and
p. local-content measures in the automobile sector and their consistency with Turkey's obligations under the TRIMs Agreement.
q. In response to these issues, the representative of Turkey said that imports of a limited number of products had been subject to higher duties than the common external tariff (CET). However, Turkey would gradually align
these rates to the CET by 1 January 2001. He also noted that the existence of 242 distinct tariff rates should not be viewed as complex, in light of the large number of tariff lines (19,000) in the 12-digit Turkish tariff nomenclature. The tariff system would be evaluated with a view to simplification
r. The representative of Turkey stated that the import licensing system was in full conformity with the WTO Agreement on Import Licensing and was applicable to imports from all sources. The system was automatic in the
sense that, once applicants met established objective conditions, which were based on security and safety reasons and were intended to protect consumers or the environment, the licence was issued automatically.
s. The representative stated that Turkey's anti-dumping legislation was yet to be fully harmonized with those of the European Union. Once the process was complete, identical practices would be applied to third countries.
Meanwhile, the parties were required to coordinate their actions toward third countries. The five-year "Sunset" clause of the Anti-Dumping Agreement would become valid as from 1995.
t. Turning to state aid, he noted that Turkey's system of subsides as a whole was in line with WTO rules and had been notified in July 1998. The export credit system implemented by Turkish Eximbank was in full conformity with the guidelines under the OECD Consensus. Accordingly, the Turkish Eximbank did not engage in any credit lines with operating losses.
u. On intellectual property rights, a new law covering unresolved copyright issues was being submitted to Parliament. Regarding patents, Turkey would protect pharmaceutical and veterinary products and their production
processes at the latest on 1 January 1999. Regarding the protection of undisclosed test data on pharmaceutical and agricultural chemical products submitted for marketing approval, Turkish law was identical with the TRIPs
Agreement.
v. The representative said that Turkey did not discriminate against foreign suppliers in government procurement. He also noted that unsuccessful bidders may lodge complaints against the application of the procurement procedures and the award of the contract with the procuring entity. Turkey, as an observer to the Committee on Government Procurement would consider acceding to the Agreement. Written answers would be provided to the questions on "force account commission" procedures and tendering by the Electricity and Power Generation Corporation.
w. The representative also noted that Turkish laws and regulations regarding foreign direct investment contained no clauses foreseeing local content requirement. Local content practices had been introduced voluntarily by the joint-venture partners and were therefore consistent with the TRIMs Agreement.
x. Sectoral issues
y. Members noted with concern the increased protection of the agricultural sector, while the manufacturing sector had been opened up to foreign competition. With reference to the Secretariat report, members noted that this sectoral imbalance could be a tax both on consumer welfare and on manufacturing and services that compete with agriculture for production factors. On agriculture, members raised questions on the following:
z. prospects of reversing the levels of tariff protection in agriculture
(which had increased since the previous review from 35% in 1993 to 43% in
1998);
aa. prospects of reducing Government interventions (total transfers amounted to 7.5% of GDP in 1997);
bb. the scientific justification for the ban on imports of live animals and meat, and its consistency with Turkey's WTO obligations; and
cc. the Government's intentions in the future multilateral trade negotiation in agriculture. In reply, the representative of Turkey noted that, in line with the Agreement on Agriculture, Turkey had bound all tariff lines for agricultural products, and had applied customs duties to these products at or below its concessions. He also noted that Turkey had progressively scaled down export subsidies for its agricultural products; domestic support programmes had
been reduced to three products and were in full conformity with their WTO obligations. Turkey was examining the introduction of a direct-income payment system. He noted that the ban on imports of live animals and meat was a temporary measure, related to the spread of foot-and-mouth disease. It was the Government's intention to terminate this measure once the risk of the disease no longer existed.

In contrast to the agricultural sector, the manufacturing sector had been substantially liberalized since the previous review. For example, as a result of the customs union, average border protection in the manufacturing
sector had more than halved from 27% in 1993 to 12% in 1998. On services, members commended Turkey for its contribution during the recent negotiations including the Information Technology Agreement, the Basic Telecommunications Services Agreement, and the Financial Services Agreement. Members asked about the Government's intentions to undertake further commitments with respect to its GATS schedule. Members also asked about the Government's plans to reform the financial sector.

In response to these issues, the representative of Turkey said that the Government was planning to include new sectors, such as research and development, in its new schedule of specific commitments during the next services negotiations in the year 2000. He gave further information on conditions for establishment in professional services and on maritime transport conditions. On the financial sector, he noted that Turkey had
fully implemented its commitments. Over and above its commitments, Turkey had also, inter alia, increased its effectiveness of the supervision of the banking sector through more stringent enforcement of the capital adequacy
requirement and of the ceiling on banks' net open foreign exchange positions.

	Dünya Ticaret Örgütü (WTO)

WORLD

TRADE ORGANIZATION

CONTENTS

Principal Elements of the Uruguay Round Agreemen

4) 10 BENEFITS OF THE WTO TRADING SYSTEM

*….AND SERVİCES

Nowadays trade barriers around the world are lower than they have ever been in modern trading history. They continue to fall, and everbody benefits.