What is the WTO and what is it eaten with?



After the Great Patriotic War, the General Agreement on Tariffs and Trade (hereinafter referred to as GATT) was concluded to regulate trade between countries. The agreement has become a mechanism for curbing unilateral actions in multilateral trade. Since the agreement has stood the test of time and served to boost global trade, the World Trade Organization (hereinafter referred to as the WTO) was created in the Uruguay Round in 1994.


The WTO is not only an organization, but also a package of legal documents, which is a multilateral treaty in the field of trade in goods and services. General agreements on trade in goods (GATT), on trade in services (GATS), in the field of intellectual property (TRIPS) form the basis of the WTO. All participating countries (currently their 153) have ratified these agreements.

Each participating country receives guarantees of fair treatment of its exports to the markets of other countries and undertakes to provide the same conditions for imports into its market.

The WTO trading system has both its advantages and disadvantages.

The advantages of the WTO are:

- obtaining economic benefits by reducing barriers to barter;
- lowering the cost of living of citizens, by reducing the price of goods and services;
- reduction of trade duties leads to increased trade and, as a consequence, an increase in government revenues and every citizen of the country;
- reduction of internal political lobbying of interests of individual sectors of the economy;
- the system equalizes in the rights of all countries included in the WTO, regardless of their level of economic development;
- there is a preferential mechanism for the participation of developing countries in the WTO system;
- availability of an effective dispute resolution mechanism.

WTO flaws:

- reduction of customs barriers provides an opportunity for cheaper and high-quality goods of WTO member countries to enter the domestic market, which leads to the ruin of domestic producers, and, consequently, to an increase in unemployment;
- developed countries provide state support for industries important to economic security, while at the same time prohibiting new WTO members from doing so;
- multilateral agreements violate the basic principle of the WTO - equal rights and duties to regulate customs duties, as a regulator of prices for goods and services.

Russia he is in no hurry to join the WTO, because he does not want membership in a society to infringe upon the interests of Russian industries.


For example, during negotiations on customs duties on passenger cars, Russia agreed to gradually reduce the amount of duty. But in the conditions of the beginning of the crisis, in order to protect its producers, unilaterally raised the duty from 25% to 35%.

A positive result was obtained under the agreement on industrial assembly concluded by Russia. This agreement allowed large companies to import car components into Russia at zero rates of customs duties. As a result, foreign companies created production facilities for the production of passenger cars of the best world brands in Russia.

Also in the interests of the Russian aviation industry, duties on aircraft imports have been reduced, since airlines need to update their fleet.

Russia's agriculture will be protected if, in the results of the negotiations, the parties come to an agreement to reduce duties only on those products of the Agricultural Industry that do not affect the basic products grown and consumed by the country's population.

What is happening with the economies of the post-Soviet states that have already become members of the WTO.

So, Ukraine became a member of the WTO in 2008 year. The result of a three-year membership are:

- loss of ten thousand jobs;
- dozens of large factories and hundreds of smaller industries ceased to exist;
- profit from the reduction of duties on the supply of Ukrainian goods to the markets of the WTO countries is two times less than the losses from the import of goods and services (negative balance);
- Ukraine's GDP decreased by more than 15%;
- the level of competitiveness of domestic goods has significantly decreased;
- affected the production sector.

All this happened due to the fact that Ukraine joined the WTO on very unfavorable conditions. At that time, no strategy was developed for the development of the country's economy. The political ambitions of the country's leadership over sober calculation and skillful negotiation about the conditions for joining the Agreements took over.

Since according to WTO rules, once in three years, you can change the conditions for a country's participation in the WTO, Ukraine has the opportunity to adjust the Agreement.

The automotive industry has become one of the affected industries in Ukraine. At the request of the WTO, the import duty on imported machines has been reduced from 25% to 10%. The result was a sixfold reduction in the production of the domestic auto industry and a twofold decrease in those working in the industry. Investor interest has moved from the manufacturing sector to imported finished products. This was the reason for the transition of domestic industry from the production of high-tech engineering products to the secondary.

The agro-industrial complex has also significantly lost its position. For example, the reduction of duties on the import of raw sugar has led to a halt in fifty sugar refineries in the country. Suspended sugar exports by a country that has long been a leader in the production and sale of sugar.

Experts believe that Ukraine will retain the leading position in the processing of meat, grain, and other agricultural products.

8 import duties on meat to Ukraine are less than the export duties of Ukrainian meat to other countries. Imported lard from Poland, the Netherlands, Germany flooded the Ukrainian market.

Another disadvantageous condition for Ukraine of the Agreement is Ukraine’s commitment not to stimulate its agriculture, while the United States and the WTO European countries are helping their agricultural producers.

The import of agricultural machinery is carried out from the WTO countries at a zero rate of duty, which actually destroys domestic agricultural machinery.

Also, the established zero duty on the import of furniture (before joining the WTO, it was 40%), was the reason for the decrease in the volume of furniture produced by Ukrainian manufacturers. The furniture market of Ukraine has filled furniture made in China, Italy and the Baltic countries.

In a difficult situation was light industry. The decline in production was 45%, while imports of light industry goods increased by 46%.

The negative consequences of Ukraine’s participation in the WTO system are noted in the wine-making, food, dairy, aviation industry.

Only in the field of sunflower oil imports has Ukraine managed to occupy a leading position in the world in these three years. An important success factor was the timely modernization of the production capacity of the industry before the country's accession to the WTO.

Ukraine is not the only country that wants to change the conditions of previously concluded WTO agreements. For example, Argentina, Chile and India have managed to significantly increase import duties on sugar in order to protect their domestic market.

Ukraine at the negotiations is not an easy task - to adjust the conditions of the country's participation in the WTO in the direction of creating equal conditions for competition and changing the legislation in the field of product certification to eliminate the situation that currently exists with Ukraine’s export of wine products to the foreign market. Access of Ukrainian wine is closed due to stringent certification conditions for the product, established by the countries participating in the WTO. At the same time, wine imports to Ukraine increased to 30%.

The result of joining the WTO Kyrgyzstan became:

- a slight increase in exports for the most part due to trade with the CIS countries;
- proved to be unprotected from external interference in the most important sectors of the Kyrgyz economy: agriculture, financial sector, processing industry and telecommunications;
- a huge stream of inexpensive goods of foreign production supplanted domestic products, agriculture was particularly affected;
- Kyrgyzstan’s export goods, for which WTO countries have reduced duties, cannot compete in foreign markets;
- the expected inflow of investments for the development of industries in Kyrgyzstan did not come true - investors were not interested in the domestic market of the country.

Georgia joined the WTO in 2000 year. Hasty negotiation has led to the need to fulfill commitments that are detrimental to the country's economy.

Therefore, Georgia has not fulfilled the conditions for introducing special duties on raw materials, computer equipment, agricultural equipment, pharmaceuticals and civil aviation.

Also, Georgia did not fulfill the country's transition to the system of international standards of reporting and certification, did not carry out anti-dumping measures. Investors are in no hurry to invest in the Georgian economy. Trade balance remains negative.

Moldavia is a member of the WTO since 2001. Discussion of the conditions was long due to the fact that Moldovan businessmen opposed the country's membership in the WTO. As a result of the negotiations, Moldova managed to defend the right of fiscal support for agriculture. We also managed to defend the furniture business and the alcoholic beverages market from external interference.

In the sphere of banking services, the country has established a strict requirement for foreign banks - obtaining a license from the national bank of Moldova.

Also the undoubted success of the Moldovan negotiators was the zero duty on all goods supplied to the EU countries. This allowed Moldova to significantly increase the export of its products.

After long and difficult negotiations Armenia joined the WTO in 2003 year. Armenia has achieved preferential customs duties and delaying the opening of its telecommunication services market. Membership in the WTO did not attract investment in the country's economy. Export volume has not changed. The resulting trade balance was negative, therefore, imports significantly exceeded exports. This is due to the fact that the goods of Armenia do not withstand competition in the foreign market. The country expects to get out of this failure through the availability of cheap labor and low production costs.

The experience of the countries of the former union is not decisive for Russia to make a decision on joining the WTO, but the Russian authorities will try to avoid haste in concluding agreements that will infringe the interests of the country. Being a member of the WTO is having access to the markets of member countries. But this does not mean an increase in investment in the country's economy and the fact that goods and services in Russia will be able to conquer the foreign market. For this, it is necessary to have competitive sectors of the economy and the preservation of economic and political independence in matters relating to the security of the country and each of its citizens.
Author:
Valery Boval
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