Bilateral Commodity Agreements

Bilateral & commodity agreements
REPORT ON BILATERAL & COMMODITY AGREEMENT
PREPARED BY:
KARISHMA DHANGADHARYA (11008)
DEVYANI GAMIT (11009)
NISHITA NAYAK (11019)

INTRODUCTIONS
Bilateral trade: The exchange of goods between two countries. Bilateral trade
agreements give preference to certain countries in commercial relationships,
facilitating trade and investment between the home country and the foreign country
by reducing or eliminating tariffs, import quotas, export restraints and other trade
barriers. Bilateral trade agreements can also help minimize trade deficits
Commodity trade: Commodities trading is a sophisticated form of investing. It is
similar to stock trading but instead of buying and selling shares of companies, an
investor buys and sells commodities. Like stocks, commodities are traded on
exchanges where buyers and sellers can work together to either get the products
they need or to make a profit from the fluctuating prices.
CHAPTER NO : 1GATS (General Agreement on Trade in Services)

The General Agreement on Trade in Services (GATS) is a treaty of
the World Trade Organization (WTO) that entered into force in January 1995
as a result of the Uruguay Round negotiations. The treaty was created to
extend the multilateral trading system to service sector, in the same way
the General Agreement on Tariffs and Trade (GATT) provides such a system
for merchandise trade.
All members of the WTO are signatories to the GATS. The basic WTO
principle of most flavored nation (MFN) applies to GATS as well. However,
upon accession, Members may introduce temporary exemptions to this rule.
Principles and Obligations:
The general principles and obligations of GATS are very similar to those for
trade in goods. Examples include MFN treatment National treatment, as well as
transparency obligations and commitments, like the tariff schedules under
GATT, are an integral part of the agreement.
Scope:
The scope of the GATS agreements very broad and it covers all measures
affecting internationally traded services. It is important in practical terms for
negotiators to define what is meant by the term trade in services.
Under GATS,trade includes all the different ways of providing an
international services.

GATS defined four methods of providing an international services-it calls
them MODES OF DELIVERY, these all are defined in the table:
Modes
Mode
1:cross
Criteria
Examples
Services supplied from
International telephone calls
border
one country to another
Mode
To make use of a
2:consumption
service of one country
abroad
in
another
Tourism, movement of patients
member
country
Mode
To set up subsidiaries or
Banks operating in foreign
3:Commercial
branches
to
provide
countries,investment in foreign
presence
services
in
another
countries firm
country
Mode 4:Presence
Individuals
of natural persons
from their country to

supply
traveling
services
Fashion models,CA,Doctors
in
another country
Key rules associated with GATS

MFN treatment:
If you favor one, you favour them all.The MFN treatment means treating
trading partners equally.
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National treatment:
An equal treatment or national treatment for foreigners and nationals.
Transparency:
The government must setup enquiry points within their bureaucracy.
Regulations:
The government should regulate the services reasonably, objectively and
impartially.

CHAPTER NO:2Intellectual Property: Protection and Enforcement
of Rights
Importance of ideas:
Ideas and knowledge are an increasingly important part of trade. Most of the
value of new medicines and other high technology products lies in the amount of
invention, innovation, research, design and testing involved. Films, music
recordings, books, computer software and on-line services are bought and sold
because of the information and creativity they contain, not usually because of the
plastic, metal or paper used to make them. Many products that used to be traded as
low-technology goods or commodities now contain a higher proportion of
invention and design in their value for example brand named clothing or new
varieties of plants. As usual greater importance is given to ideas, inventions,
innovations, R & D.
Values is in the Idea:
Creators have right to draw advantage from their inventions, designs and
other creations. These rights are known as intellectual property rights. These
inventions can be patented; and brand names and product logos can be registered
as trademarks. They take a number of forms. For example books, paintings and
films come under copyright; inventions can be patented; brand names and product
logos can be registered as trademarks; and so on. Governments and parliaments
have given creators these rights as an incentive to produce ideas that will benefit
society as a whole.
CHAPTER NO : 3 Different Levels of Protection

In the past, the extent of protection and enforcement of these rights varied
widely around the world. But as intellectual property became more important in
trade, this difference became a source of tension in economic relations. New
internationally agreed trade rules for intellectual property rights were seen as a way
to introduce more order and predictability, and for disputes to be settled more
systematically.
Entry of TRIPS Agreement
The WTOs TRIPS Agreement is an attempt to narrow the gaps in the way these
rights are protected around the world, and to bring them under common
international rules. It establishes minimum levels of protection that each
government has to give to the intellectual property of fellow WTO members. In
doing so, it strikes a balance between the long term benefits and possible short
term costs to society. Society benefits in the long term when intellectual property
protection encourages creation and invention, especially when the period of
protection expires and the creations and inventions enter the public domain.
Governments are allowed to reduce any short term costs through various
exceptions, for example to tackle public health problems. And, when there are
trade disputes over intellectual property rights, the WTOs dispute settlement
system is now available.
The TRIPS Agreement was construed as an attempt to narrow the gaps in the
way intellectual property rights are protected around the world, and to bring

them under common international rules. This agreements covers five areas
as follows:
1. How basic principles of the trading system and other international,
intellectual property agreements should be applied,
2. How to give adequate protection to intellectual property rights,
3. How countries should enforce those rights,
4. How to settle disputes on intellectual property among members of the WTO,
5. Special transitional agreements during the period when the new system is
being introduced.
Basic principles of intellectual property agreement
As in GATT and GATS, the starting point of the intellectual property
agreements is its basic principles and as in the other two agreements nondiscrimination features prominently: national treatment & MFN treatment.
Protecting intellectual property: The TRIPS Agreement ensures that
adequate standards of protection exist in all member countries. In addition,
TRIPS Agreements adds a significant number of new or higher standards.
Enforcement: Intellectual property laws should be enforced properly.
According to the agreement, the government has to ensure that these rights
can be enforced under their national laws, and that the penalties for
infringement are tough enough to deter further violation. The procedures
must be fair and equitable, and not unnecessarily complicated or costly.
Liberalizing trade in Goods
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1. Industrial goods: Tariffs
WTO negotiations produce general rules that apply to all members and
specific commitments made by the individual member government. The specific
commitments are listed in schedules of concessions.
2. Tariffs and developed countries:
With the implementations of the Uruguay Round results, the tariffs on
industrial products imported by the developed countries were reduced by 40 % on
an average, from 6.3 to 3.8%, and this tariff reductions are now fully implemented.
The proportion of industrial products which enter the markets of developed
countries and face zero MFN duties more than doubled from 20 per cent to 44 per
cent of the industrial imports. The share of industrial imports facing duties of 15
per cent or more decreased from 7 per cent before the Uruguay round to 5 per cent
after the full implementation. Tariff picks, that is, high tariffs on individual items,
continue to be of concern mainly in textiles, clothing, leather, rubber, footwear, and
travelled goods.
3. Tariffs and developing countries:
As far as the developing countries are concerned, the tariff levels and the
continuing process of negotiated reductions varies considerably. For an ex.
India have reduced its average tariff on industrial goods from 71% to 32%
Korea has reduced its average tariff from 18% to 8%.
4. Binding of tariffs:
Market access schedules are not simply announcement of reduced tariff rates
but they are also commitments of not to increase tariffs above the listed bound
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rates. For DEVELOPED COUNTRIES, the bound rates are generally the rates
which are actually charged and for DEVELOPING COUNTRIES, the bound rates
are somewhat higher than the actual rates.
Countries can break the commitment of not to raise a tariff above the bound rate
but only in the situation of difficulty. To do so they have to negotiate with the
countr most affected.
CHAPTER NO: 4 Multi Fibre Arrangement

Since 1974, world trade in textiles and apparel has been governed by the Multi
Fibre Arrangement (MFA) which provided the basis on which industrialized
countries restricted imports from developing countries. Every year quotas-the
quantities of specified items which can be traded between trading partners-have
been negotiated on a country by country basis. The MFA does not apply to trade
between rich industrialized countries themselves.
Why was the MFA introduced?
The MFA was designed to be a short-term measure primarily to give industrialized
countries time to adjust to competition from imports from developing countries.
Producers from the industrialized world have been protected against competition
from producers in the developing countries.
How has the MFA impacted developing countries?
Although negotiations to determine yearly quota for a developing country have
favored the industrialized countries, apparel factories have located in countries to
take advantage of the quota. This is one of the reasons apparel and textile supplier
factories have located in certain countries (along with low wage costs, supply of
materials, infrastructure for transport and marketing and nearness to market) For
example, Bangladesh has benefited from MFA because of its sizable quotas. The
apparel and textile sector has expanded and it has become a major supplier to both
the US market and European markets.
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The MFA has not prevented a massive shift in production of textiles and apparel to
developing countries. Asia has become the world's foremost exporter. However the
shift would likely have been greater without the restrictions of MFA. It is estimated
that some developing countries have lost billions of dollars of foreign exchange
due to the imposition of MFA trade restrictions.
What is the Agreement on Textiles and Clothing (ATC)?
During the Uruguay Round negotiations related to the World Trade Organization,
an agreement was reached to phase out the MFA through the implementation of the
Agreement on Textiles and Clothing (ATC). The ATC is an attempt to put an end to
the constant extensions of the MFA by agreeing to a phase out plan after which the
textiles an apparel sectors will no longer be subject to quotas. The ATC set a
timetable for phasing out the MFA in four stages beginning in January 1995, with
full phase out in January 2005. There are two aspects of the process: 1) the
integration of products into the world trading system and 2) the progressive raising
of quotas. The ATC has been viewed as operating in the interests of developing
countries, since it is supposed to increase their access to the previously protected
markets of industrialized countries.
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CHAPTER NO : 5 Impact of Multi Fiber Arrangement

The Overseas Development Institute has estimated that developing countries stand
to gain around $40 to $50 billion from the abolition of restrictions on textile and
apparel imports. However, there is strong criticism of the manner in which the ATC
is being interpreted. The US and European countries are seen as deliberately
holding back on the process in order to protect their own industries.
It is difficult to predict what the effects of the MFA phase-out will be once
completed. But is clear that the removal of quotas will mean changes in the
location of the textile and apparel industry factories. Some observers predict that
by 2005-2006 major textile and clothing buyers will reduce by half the number of
countries they source from and by another third by 2010. A recent survey by the
US Commerce Department, based on talks with firms that currently source from 40
to 50 countries, reveals that these companies are likely to consolidate sourcing in
12 to 15 countries.
The MFA has had the effect of guaranteeing a Northern market to a wide range of
poor countries. Without the MFA there will be a more open market and the overall
result is likely to be a concentration of the industry in a smaller number of low cost
locations. The biggest changes are expected in the distribution of production in
Asia.
Bangladesh is expected to lose. It developed a apparel industry as a direct result of
the MFA and other trade agreements. Once quotas are removed, Bangladesh is
expected to suffer from its lack of textile industry and poorly developed
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infrastructure. Thailand, Sri Lanka and the Philippines may also lose since all three
depend on imported fabric and on marketing/buying groups over which they have
little control. Some predict that they will be unable to compete with even lower
cost producers like Vietnam.
China is expected to be a big winner with supplier factories relocating from other
countries to China. China has a large low cost labor force, its own textile industry
and the financial and marketing expertise of firms from Hong Kong. China has
already emerged as a dominant supplier in spite of high quota restrictions.
According to Women's Wear Daily, "China accounted for 96 percent of the textile
and apparel import growth [to the US market] during July, with Vietnam posting
the second-largest growth of 22.4 percent"
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CHAPTER NO : 6 WTO AGREEMENT ON AGRICULTURE:

The WTOs Agriculture Agreement was negotiated in the 198694 Uruguay Round
and is a significant first step towards fairer competition and a less distorted sector.
WTO member governments agreed to improve market access and reduce tradedistorting subsidies in agriculture. In general, these commitments were phased in
over a six years from 1995 (10 years for developing countries). The agriculture
committee oversees the agreements implementation.
Meanwhile, members also agreed to continue the reform. Further talks, which are
separate from the committees regular work, began in 2000. They were included in
the broader negotiating agenda set at the 2001 Ministerial Conference in Doha,
Qatar.
After over 7 years of negotiations the Uruguay Round multilateral trade
negotiations were concluded on December 15, 1993 and were formally ratified in
April 1994 at Marrakesh, Morocco. The WTO Agreement on Agriculture was one
of the many agreements which were negotiated during the Uruguay Round.
The implementation of the Agreement on Agriculture started with effect from
January 1, 1995. As per the provisions of the Agreement, the developed countries
would complete their reduction commitments within 6 years, i.e., by the year 2000,
whereas the commitments of the developing countries would be completed within
10 years, i.e., by the year 2004. The least developed countries are not required to
make any reductions.
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The products, which are included within the purview of this agreement, are what
are normally considered as part of agriculture except that it excludes fishery and
forestry products as well as rubber, jute, sisal, abaca and coir.
The WTO Agreement on Agriculture contains provisions in 3 broad areas of
agriculture and trade policy: market access, domestic support and export subsidies.
Market Access
This includes tariffication, tariff reduction and access opportunities. Tariffication
means that all non-tariff barriers such as quotas, variable levies, minimum import
prices, discretionary licensing, state trading measures, voluntary restraint
agreements etc. need to be abolished and converted into an equivalent tariff.
Ordinary tariffs including those resulting from their tariffication are to be reduced
by an average of 36% with minimum rate of reduction of 15% for each tariff item
over a 6 year period. Developing countries are required to reduce tariffs by 24% in
10 years. Developing countries as were maintaining Quantitative Restrictions due
to balance of payment problems, were allowed to offer ceiling bindings instead of
tariffication.
Special safeguard provision allows the imposition of additional duties when there
are either import surges above a particular level or particularly low import prices as
compared to 1986-88 levels.
It has also been stipulated that minimum access equal to 3% of domestic
consumption in 1986-88 will have to be established for the year 1995 rising to 5%
at end of the implementation period.
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CHAPTER NO : 7 Domestic support
For domestic support policies, subject to reduction commitments, the total support
given in 1986-88,measured by the total Aggregate Measurement of Support (AMS)
should be reduced by 20% in developed countries (13.3% in developing countries).
Reduction commitments refer to total levels of support and not to individual
commodities. Policies which amount to domestic support both under the product
specific and non-product specific categories at less than 5% of the value of
production for developed countries and less than 10% for developing countries are
also excluded from any reduction commitments. Polices which have no or at most
minimal trade distorting effects on production are excluded from any reduction
commitments (Green Box-Annex 2 of the Agreement on Agriculture http://www.wto.org). The list of exempted green box policies includes such
policies which provide services or benefits to agriculture or the rural community,
public stock holding for food security purposes, domestic food aid and certain decoupled payments to producers including direct payments to production limiting
programmes, provided certain conditions are met.
Special and Differential Treatment provisions are also available for developing
country members. These include purchases for and sales from food security stocks
at administered prices provided that the subsidy to producers is included in
calculation of AMS. Developing countries are permitted untargeted subsidised food
distribution to meet requirements of the urban and rural poor. Also excluded for
developing countries are investment subsidies that are generally available to
agriculture and agricultural input subsidies generally available to low income and
resource poor farmers in these countries.
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CHAPTER NO : 7 Export Subsidies
The Agreement contains provisions regarding member's commitment to reduce
Export Subsidies. Developed countries are required to reduce their export subsidy
expenditure by 36% and volume by 21% in 6 years, in equal instalment (from
1986-1990 levels). For developing countries the percentage cuts are 24% and 14%
respectively in equal annual installment over 10 years. The Agreement also
specifies that for products not subject to export subsidy reduction commitments, no
such subsidies can be granted in the future.
TRADE REMEDIES:
Under the WTO Agreements, members have the right to apply trade
remedies in the form of anti-dumping, countervailing or safeguard measures
subject to specific rules.
The rules, under certain conditions, permit members to take trade remedy
measures when it is established that foreign producers are resorting to unfair
practices by charging low prices in the importing markets. Such low prices
may be the result of: dumping by foreign firms, permitting countries to levy
anti-dumping duties; or, subsidization by governments allowing the
importing countries to levy countervailing duties to offset the element of
subsidy in the price.
Furthermore, safeguard actions may be taken when the domestic industry
faces problems due to its inability to meet increased import competition
following the reduction of tariffs or removal of other restrictions.
17

In the Doha Ministerial Conference, Ministers agreed to launch
negotiations aimed at clarifying and improving disciplines under the
Agreements on Implementation of Article VI of the GATT 1994 (AntiDumping) and on Subsidies and Countervailing Measures, while preserving
the basic concepts, principles and effectiveness of these Agreements and
their instruments and objectives, and taking into account the needs of
developing and least-developed participants.
In the context of these negotiations, participants shall also aim to clarify and
improve WTO disciplines on fisheries subsidies, taking into account the
importance
of
this
sector
to
developing
countries.
Anti dumping actions

If a company exports a product at a price lower than the price it normally charges
on its own home market, it is said to be dumping the product. Is this unfair
competition? Opinions differ, but many governments take action against dumping
in order to defend their domestic industries. The WTO agreement does not pass
judgement. Its focus is on how governments can or cannot react to dumping it
disciplines anti-dumping actions, and it is often called the Anti-Dumping
Agreement. (This focus only on the reaction to dumping contrasts with the
approach of the Subsidies and Countervailing Measures Agreement.)
The legal definitions are more precise, but broadly speaking the WTO agreement
allows governments to act against dumping where there is genuine (material)
injury to the competing domestic industry. In order to do that the government has
to be able to show that dumping is taking place, calculate the extent of dumping
18

(how much lower the export price is compared to the exporters home market
price), and show that the dumping is causing injury or threatening to do so.
GATT (Article 6) allows countries to take action against dumping. The AntiDumping Agreement clarifies and expands Article 6, and the two operate together.
They allow countries to act in a way that would normally break the GATT
principles of binding a tariff and not discriminating between trading partners.
There are many different ways of calculating whether a particular product is being
dumped heavily or only lightly. The agreement narrows down the range of possible
options. It provides three methods to calculate a products normal value. The
main one is based on the price in the exporters domestic market. When this cannot
be used, two alternatives are available the price charged by the exporter in
another country, or a calculation based on the combination of the exporters
production costs, other expenses and normal profit margins. And the agreement
also specifies how a fair comparison can be made between the export price and
what would be a normal price.
Calculating the extent of dumping on a product is not enough. Anti-dumping
measures can only be applied if the dumping is hurting the industry in the
importing country.
Anti-dumping investigations are to end immediately in cases where the authorities
determine that the margin of dumping is insignificantly small (defined as less than
2% of the export price of the product). Other conditions are also set. For example,
the investigations also have to end if the volume of dumped imports is negligible
(i.e. if the volume from one country is less than 3% of total imports of that product
19

although investigations can proceed if several countries, each supplying less
than 3% of the imports, together account for 7% or more of total imports).
The agreement says member countries must inform the Committee on AntiDumping Practices about all preliminary and final anti-dumping actions, promptly
and in detail. They must also report on all investigations twice a year. When
differences arise, members are encouraged to consult each other. They can also use
the WTOs dispute settlement procedure.
Subsidies and countervailing measures:
The WTO Agreement on Subsidies and Countervailing Measures disciplines
the use of subsidies, and it regulates the actions countries can take to counter
the effects of subsidies. Under the agreement, a country can use the WTOs
dispute-settlement procedure to seek the withdrawal of the subsidy or the
removal of its adverse effects. Or the country can launch its own investigation
and ultimately charge extra duty (countervailing duty) on subsidized imports
that are found to be hurting domestic producers.
In the agreement Part I provides that the SCM Agreement applies only to
subsidies that are specifically provided to an enterprise or industry or group of
enterprises or industries, and defines both the term subsidy and the concept
of specificity. Parts II and III divide all specific subsidies into one of two
categories: prohibited and actionable and establish certain rules and procedures
with respect to each category. Part V establishes the substantive and procedural
requirements that must be fulfilled before a Member may apply a
countervailing measure against subsidized imports. Parts VI and VII establish
the institutional structure and notification/surveillance modalities for
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implementation of the SCM Agreement. Part VIII contains special and
differential treatment rules for various categories of developing country
Members. Part IX contains transition rules for developed country and former
centrally-planned economy Members. Parts X and XI contain dispute
settlement and final provisions.
21

CHAPTER NO : 8 SAFE GUARDING PRODUCERS
The Agreement on Safeguards (SG Agreement) sets forth the rules for
application of safeguard measures pursuant to Article XIX of GATT 1994.
Safeguard measures are defined as emergency actions with respect to increased
imports of particular products, where such imports have caused or threaten to
cause serious injury to the importing Member's domestic industry. Such
measures, which in broad terms take the form of suspension of concessions or
obligations, can consist of quantitative import restrictions or of duty increases to
higher than bound rates.
The SG Agreement was negotiated in large part because GATT Contracting Parties
increasingly had been applying a variety of so-called grey area measures
(bilateral voluntary export restraints, orderly marketing agreements, and similar
measures) to limit imports of certain products. These measures were not imposed
pursuant to Article XIX, and thus were not subject to multilateral discipline
through the GATT, and the legality of such measures under the GATT was
doubtful. The Agreement now clearly prohibits such measures, and has specific
provisions for eliminating those that were in place at the time the WTO Agreement
entered into force.
In its own words, the SG Agreement, which explicitly applies equally to all
Members, aims to: (1) clarify and reinforce GATT disciplines, particularly those of
Article XIX;
(2) Re-establish multilateral control over safeguards and eliminate measures that
escape such control; and
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(3) encourage structural adjustment on the part of industries adversely affected by
increased imports, thereby enhancing competition in international markets.
23
CHAPTER NO : 9 Commodity Agreements

India has bilateral trade agreements with the following countries and regional
blocs:
1. SAFTA (Bangladesh, Bhutan, the Maldives, Nepal, Pakistan, Sri Lanka and
Afghanistan)
2. ASEAN (ASEAN- India Free Trade Area)
3. European Union
4. Sri Lanka
5. Singapore
6. Thailand (separate from FTA agreement with ASEAN)
7. Malaysia (separate from FTA agreement with ASEAN)
8. Japan
9. European Free Trade Association (EFTA) (negotiation ongoing)
10.Canada (negotiation ongoing)
11.South Korea (India Korea CEPA)
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CONCLUSION
The exchange of goods between two countries. Bilateral trade agreements give
preference to certain countries in commercial relationships, facilitating trade and
investment between the home country and the foreign country.
Commodities trading is a sophisticated form of investing. It is similar to stock
trading but instead of buying and selling shares of companies, an investor buys and
sells commodities.
The General Agreement on Trade in Services (GATS) is a treaty of the World Trade
Organization (WTO) that entered into force in January 1995 as a result of
the Uruguay Round negotiations. The treaty was created to extend the multilateral
trading system to service sector, in the same way the General Agreement on Tariffs
and Trade (GATT) provides such a system for merchandise trade.
25
Bibliography
en.wikipedia.org/wiki/International_commodity_agreement.
www.worldcustomsjournal.org.
link.springer.com/article.
www.encyclopedia.com
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