WTO Waiver is Needed for the Extension of AGOA Come 2015

The African Growth and Opportunity Act (AGOA) will expire in September 2015. AGOA extension requires another World Trade Organisation (WTO) waiver because it is inconsistent with the Most Favoured Nation obligation. Programs such as the Generalized System of Preferences (GSP), under which developed countries grant preferential tariff rates to developing country products, such as the African Growth and Opportunity Act (AGOA) require a waiver by the World Trade Organization (WTO) .Such programs are inconsistent with the Most Favoured National obligation because they accord some countries more favourable tariff treatment to selected countries than is accorded to other WTO Members.

Read more on why a WTO Waiver is Needed for the Extension of AGOA beyond 2015

Benefits of COMESA Customs Union to the region

The COMESA Customs Union was launched by the Heads of State and Government on 7 June 2009 in Victoria Falls, Zimbabwe. A transitional period of three years was provided for during which time the Member States would align their national tariffs with the COMESA CET. The Common external tariff of the COMESA Customs Union is based on categorisation of goods into raw materials, capital goods, intermediate goods and finished goods.

The Common External Tariff structure which is meant to promote value addition in the COMESA region and is such that the tariff rate for raw materials and capital goods is 0%; that of intermediate goods is 10%; and that of finished goods is 25%. The COMESA Council of Ministers adopted the structure of the CET in May 2007 and provided for flexibilities according to which Member States can designate some products to be sensitive. Sensitive products will be given differential treatment in terms of application of the CET.

The three-year transitional period which started from June 2009 when the Customs Union was launched, was granted to allow Member States to identify and submit their sensitive products and tariff alignment schedules. In addition, the transitional period was granted to allow for countries to align their national tariffs with the COMESA Common Tariff Nomenclature (CTN) and the COMESA CET.

The COMESA Customs Union builds on the Free Trade Area which COMESA successfully launched in 2000.

The benefits of COMESA Customs Union  to the region include the following:

a)                Producers will get a large and wider market and can thus produce more goods;

b)               A large single market will encourage mass production of goods and services thereby lowering the cost of production by taking advantage of economies of scale.

c)               The COMESA Customs Union, through the CET, offers equal protection to all manufacturers against third country imports and minimises the possibility of transhipment or trade deflection.

d)               Through the CET, COMESA Customs Union will level the economic environment and promotes fair competition by reducing disparities in production costs for manufacturers in the various countries with regard to taxes on imported raw materials and intermediate goods from third countries.

e)               By offering a large market with harmonised trade policy, COMESA Customs Union has the potential to attract foreign investment seeking to exploit a large market.

f)                Traders will get wider choice of goods from the countries in the COMESA Customs Union;

g)               Traders will experience lower transactions costs and fewer delays at the borders due to the harmonised customs and other procedures.

h)               The countries by joining forces and having harmonised trade policy with a COMESA Customs Union against third parties will have a stronger voice in international forums.

Asia Leading in New Preferential Trade Integration Agreements-WTO Report

According to the WTO report, Asia is leading in new preferenatial trade integration agreements. The World Trade Report 2011, which was presented to United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP) members on 27 July 2011 in Bangkok, observes that Asia is leading in new trade integration agreements. Asian countries have become some of the most active in signing preferential trade agreements (PTAs). They have been party to almost half the preferential trade agreements concluded in the last 10 years. This has contributed to the increased concentration of trade within the region — second only to Europe in 2009.

Burgeoning bilateral and regional trade agreements meet the need to regulate global production and can benefit non-members, but the WTO’s multilateral system also has a role in reducing the resulting complexity, according to the latest edition of the organization’s flagship publication released on 20 July 2011 in Geneva.

Although Asia is leading in preferential trade integration agreements, it seems that most of the countries are also in pursuit of deeper integration by going beyond tariffs and other measures at national borders. Preferential trade integration agreements increasingly are including domestic policies such as regulations on services and investment, intellectual property protection and competition policy, which the report calls “deep PTAs”. “These trends raise vital questions about the focus and reach of the WTO, and the value assigned by governments to globally-based trade relations,” Director-General Pascal Lamy said.

Read more on why Asia is leading in new preferential trade integration agreements

Global Production Sharing-Benefits to East Asia-Lessons to Developing Countries

The  slicing of a production process into vertically separated stages that are carried out in different countries otherwise known as Global production sharing—has redefined the dynamics of the world trade over the past few decades. Developing countries aiming at industrializing but ignoring global production sharing or outsourcing system and its related benefits, risk not only failing their policy goals but also being displaced out of the global trading system.  Developing risk losing out skills upgrading associated with international trade in form of global production sharing (Suervey report by Gordon H. Hanson)

According to the study by the Asian Development Bank (Chandra Athukorala and Jayant Menon, 2010) world trade in parts and components increased from about 18.9% to 22.3% of total exports between 1992/93 and 2005/06. Most of this growth reuslting from global production sharing originated from East Asia and as result the share of the subcontinent in total world exports increased from 27% to 39% over the same period. Click for more information on global production sharing and lessons to developing countries.

Global Production Sharing: Implications for Trade and Investment Policy for Developing Countries

Developing countries and particularly African countries need to borrow a leaf from the East Asian countries on how to benefit from Global production sharing. Global production sharing which in itself is the process of ‘splitting of the production process into discrete activities (tasks) which are then allocated across countries’, opens up new opportunities for export-led economies if they strategize and specialize in division of labour. 

A country can benefit from the growth of world demand for automobiles and become competitive in the production of just a single auto part. Economic integration into the global market that developing countries crave cannot be easily achieved if countries continue to aim at completing production domestically. Due to technological advancement resulting in easy, fast and less costly telecommunication and transport, it is no longer important to aim at exploiting the comparative advantage on a product as a whole.  Examples from East Asia can help us understand why global production sharing is an alternative that developing countries should embrace.   

Global production sharing which is sometimes referred to as; international production fragmentation or vertical specialization or slicing the value chain or outsourcing or offshoring can be exemplified in about three products. Read more on how East Asian countries benifit from Global production sharing. 

Significance of Trade Facilitation Negotiations at the WTO

The significance of trade facilitation negotiations at the WTO is inscribed in paragraph 27 of the Doha Ministerial declaration where Members agreed to trade facilitation negotiations so as to; expedite the movement, release and clearance of goods including goods in transit, and enhance technical assistance and capacity building in this area. Members agreed to review and as appropriate, clarify and improve relevant aspects of Articles V, VIII and X of the GATT 1994. Within the framework of trade facilitation negotiations, WTO members agreed to identify needs and priorities of Members, in particular developing and least-developed countries. Noting the significance of trade facilitation, members committed to ensuring adequate technical assistance and support for capacity building in the area of trade facilitation.

Read more on Significance of Trade Facilitation Negotiations at the WTO

The Negative Effects of Special and Differential Treatment to Developing Countries: Case of Sanitary and Phytosanitary and Trade Barriers to Trade

There are negative effects of special and differential treatment to developing Countries. As a trade negotiator, I have been pondering on whether the aspect of special and differential treatment, which we in developing countries clamor for, is always good for us. I believe there are negative effects of special and differential treatment to developing countries. Is it true that developing countries, most especially least developing countries, cannot competitively engage in trade and integrate into the global economy, without having to apply a special and differential treatment in all situations? I ask this because the main objective of trade negotiations is to enable countries to meaningfully and competitively engage in trade at the global market without unnecessary barriers to trade. So is there a posibility that the developing countries may experience negative effects of special and differential treatment?


As a special and deferential treatment, Members of WTO, do not expect developing countries to implement international standards that are not appropriate to their development needs. (Refer to Article 12.4-12.5 of TBT and Article 10 of SPS Agreements). But this right could have negative effects on developing countries.  However, I feel that delaying to implement or failure to comply with international requirements under the guise of special and differential treatment could lead to developing countries and especially least developing countries loosing competitiveness in the global market. More so they risk being displaced in their own market, because even their own citizens do require safe and quality products. If they cannot get home made safe and quality products, they will import. On the whole, they might disintegrate from rather than competitvely engage in trade and integrate into the global market. Read the entire article on the Negative Effects of Special and Differential Treatment.

China's Export Restrictions Inconsistent with Her WTO Accession Commitments -Panel Report

A report by the World Trade Organization (WTO) issued On 5 July 2011,indicates that China's export restrictions were inconsistent with her WTO accession commitments. The the panel examined complaints by the United States, the European Union and Mexico regarding “China's export restrictions in relation to exportation of raw materials”.

The Panel is convinced that China's export restrictions are shielding domestic producers from foreign competition and so they cannot be justified in in the name of environmental conservation.China's export restrictions can create serious disadvantages for foreign producers by artificially increasing China’s export prices and driving up world prices.

The Panel found that China's export restrictions are inconsistent with the commitments that China had agreed to in its Protocol of Accession. The Panel also found that certain aspects of China's export restrictions limit the export of the raw materials and so are inconsistent with WTO rules and her WTO accession commitments. Read more on China's export restrictions and how they are inconsistent with the her WTO accession commitments

Stages of Economic Integration: Free Trade Area, Customs Union, Common Market..

Stages of economic integration include; The preferential Trade Area(PTA), Free Trade Area (FTA), Customs Union(CU), Common Market (CM), Economic Community or Monitory Union and Economic Union or Political Federation.

Countries engage in economic integration in order to eliminate barriers tointernational trade(Carbaugh,2009),facilitate payments and factor mobility within the the economic bloc.

Issues under consideration vary from stage of economic integration to another. In general however the Free Trade Area includes trade arrangements on preferential terms in accordance with the rules of origin. The Customs Unions involves mainly a common external tariffs, dispute settlement mechanisms, common external policy and common regional institutions. The Common Market includes free movement of factors of production and natural persons. A monitory union involves a common monetary (common currency) and fiscal policies between parties while under a political federation parties agree to implement uniform political institutions and policies between themselves. Political federation is the last of the Stages of economic integration. For details on Stages of economic integration, please visit.Stages of Economic Integration and African Experience

Toolkit for WTO Rules on Regional Trade Integration Agreements or Economic Integration

Compliance to WTO Rules is a major requirement when dealing with regional trade integration agreements or econmic integration agreements. The Preamble to the WTO Agreement highlights “... the elimination of discriminatory treatment in international relations” as an objective of the Multilateral Trading System. The Most-Favoured-Nation (MFN) commitment by WTO Members is a fundamental instrument for achieving that aim. However the MFN treatment changes when dealing with regional economic integration.

When establishing a regional trade integration agreement(RTA), Members of WTO that are parties to the economic integration need some kind of derogation to avoid legal inconsistency with the MFN rule. The WTO Member has always the possibility of seeking a waiver. But, over time, the system itself has developed a series of conditional exceptions which Members can invoke when departing from their MFN commitment: These are in GATT Article XXIV, Enabling Clause, Understanding on GATT Article XXIV and GATS Article V.

Establishment of a regional trade integration requires that common principles of WTO be put into consideration. An economic integration or regional trade agreement  should facilitate trade among the parties, provide for mutual/reciprocal trade concessions and must not result in barriers towards third parties higher than those existing before the formation of the economic integration agreement. Read more about Regional Trade Integration Agreements and Compliance to WTO Rules

Why Countries Engage in International Trade-Analysis based on Trade theories

This article at explaining why countries engage in international trade. Now days it is not uncommon to find that the main objective of a trade policy of almost all countries is to promote international trade. Countries have gone ahead to engage in trade negotiations all in the interest of enabling international trade. But then, why do countries engage in international trade? Why are there global attempts to liberalize international trade rather than promote autarky-a situation of no international trade? Does engaging in international trade contribute to income distribution, factor employment and poverty reduction? In short, must a country engage in international trade in order to develop? This article delves into theories of international trade so as to understand why countries engage in international trade.

Economist believes that if countries engage in international trade, they can mostly benefit under a free international trade environment. To get a clear perspective to this claim, I will glance though five major main theories of international trade-the Ricardian theory of international trade- Comparative advantage Model on gains from specialization and opportunity cost theory, Heckscher-Ohlin model of international trade who believes that factor proficiency differences are the reasons why countries engage in international trade because of the gains from specialization and income distribution effects, the new international trade theory which examines the economies of scale and the Heterogeneous firms theory which explains why countries engage in international trade basing on a firm level perspective.

Read more on Ricardian Comparative advantage and Gains from Specialization and how it relates to why countries engage in international trade

Or Continue and find out what Heckscher-Ohlin says factor proficiency and how the model explains the reasons why countries engage in international trade

Or read how economies of scale according to New Trade Theory explain why Countries Engage in international trade

EAC Economic Integration Priorities: Minimising trade diversion and maximising trade creation

EAC economic integration priorities should be focused on minimising trade diversion and maximising trade creation through a single Customs territory, Monetary Union and infrastructure development.
While addressing his maiden press conference at the EAC Secretariat headquarters on May 10th 2011 in Arusha, the new Secretary General of the EAC Amb. Dr. Richard Sezibera identified the realization of a single Customs territory, making the Common Market work, achieving a Monetary Union, infrastructure development and industrialization as the priorities for his term. These priorities for EAC economic integration appear appealing on the face value. They are any not farfetched; they actually reflect the ambition of the Community. However, Amb Richard Sezibera will have to solve the challenges ahead of him if he is to achieve the listed priorities.Read more about EAC priorities on economic integration and trade in respect to maximising trade creation and minimising trade diversion

EAC and World Bank Sign $16m Grant for integration of the financial services sector

On 14 February 2011, the East African Community (EAC) and the World Bank signed a grant agreement worth USD 16 million to support a project that will transform the EAC integration of the financial services sector.

The EAC-World Bank supported project has six components on Financial Inclusion and Strengthening Market Participants, Harmonization of EAC Financial Laws and Regulations, Mutual Recognition of Supervisory Agencies, EAC Integration of Financial Market Infrastructure, Development of the Regional Bond Market and Capacity Building. Read more on EAC-World Bank, 16 million project support

Geographical indications-Negotiation text now has a second section on “Registration”

The second of six key areas has been added to an emerging single draft negotiating text on a geographical indications register for wines and spirits, and circulated to WTO intellectual property negotiators.
The section on “registration” has been added to a revised one on “notification” so as to have a more-or-less complete single text towards the end of March. It will contain opposing opinions but a single text, rather than having rival documents, so as tool to allow negotiators narrow down their differences more practically.
The latest addition was produced from drafting consultations he held earlier in the week involving representatives of the three groups that have submitted proposals in the talks.

Like the first draft text only on “notification”, which was circulated in the previous meeting on 13 January, this four-page draft reflects all three positions, leaving most of their differences unresolved.

The current chairperson of the 13-year-old negotiations on setting up the multilateral register, Zambia’s ambassador Darlington Mwape, while circulating the draft, said that the drafting “continues to be fragile and delicate,” with the consultations running “into a number of roadblocks”. He warned that the next issue, the legal effects or consequences of a term being registered could be doubly difficult when the drafting group resumes in the week of 8 February.

In order to help the drafting consultations progress smoothly, he set out some “rules of the road”, including deadlines for the participants to submit their drafts and an assurance that if the deadlines are missed participants can propose additions to the “composite” text during the consultations.

He also assured the whole membership that they would all have an opportunity to work on the draft “once sufficient substance is on the table”.

The new section on “registration” deals with the next steps after notification: how registration would proceed after a geographical indication has been notified, including what would be recorded or appear on the register and how the register would be updated to take account of changes to notifications or registrations — for example if a geographical indication is no longer used.


Meanwhile options in square brackets continue to reflect the different proposals of “W/52 coalition” (the EU, Switzerland and their allies), the “joint proposal group” (US, Australia, Canada, Chile, New Zealand, Japan, Argentina and others), and Hong Kong, China (whose proposal attempts to bridge the differences) — see “current proposals” below.

Some of the major differences reflected in square brackets are about the legal implications in other countries when a member registers a term, the subject that will be discussed next.

Members also differ over whether the register should only be for wines and spirits as prescribed under the present mandate, or whether the system should cover geographical indications for all products.

The chairperson told negotiators that their time “could be spent more usefully on issues that lie clearly within the mandate. In other words — and since we are in road metaphors anyway — in our group we should concentrate on building the road from Doha to Geneva as instructed by Members through the TNC, rather than worry about how many lanes the road is going to have.”

He also urged them to save time by working among themselves — both within and between their groups — to prepare for his consultations and to try and bridge their differences.


Negotiations on the proposed multilateral register for wines and spirits began in 1997, under Art.23.4 of the WTO intellectual property agreement (TRIPS) and were included in the Doha Round when it was launched in 2001.

The six main areas to be covered are:

 notification — eg, how a term would be notified and which member would do it (also related to “participation”)

 registration — eg, how the system would be run and the WTO Secretariat’s role

 legal effects/consequences of registration, in particular any commitments or obligations on members arising from a term’s registration (also related to “participation”)

 fees and costs — including who would bear these burdens

 special treatment for developing countries (officially, “special and differential treatment”)

 participation — whether the system is entirely voluntary, or whether a term’s registration would have some implications for all WTO members.


Source: WTO news items