|W T O|
page last updated 2022 Nov 21
this web page is refered to in the text
Global Human Resource Management
Global Business Today
Hill, McKaig ... and Richardson
|2nd Edition||3rd Edition||4th Edition|
Canada - WTO problems with
Canada and the WTO on the
DFAIT website (June 2015)
During the 4th week of July 2008 (July 30th) Richardson was interviewed live on CBC Newsworld by Andrew Nichols for a segment on the WTO and the collapse of the Doha round. Richardson explained the position that Canada had on subsidies in the agricultural sector and Canada's intentions to develop further bilateral relations for trade with countries.
In Sept 2010 Richardson made some additional commentary and subtitles on this clip and loaded it up to YouTube
|During the 2nd week of Sept 2010 Prof. Richardson was interviewed by Mary Gazze of CP about Ontario being challenged by Japan. The challenge was that the Japanese government said they would take Ontario to the WTO because Ontario is unfairly subsidizing companies that make products and services for the "green energy policy".|
|INTRODUCTION||The IMF, World
Bank, WTO, are NGOs Non-government organizations that have grown in importance
in the late 1990's and early 2000's to take on a significant role in influencing
the trade and commerce between nations.
Sometimes the rules and regulations and assistance provided by these NGOs has been helpful, sometimes it has been disruptive.
In this section we will look at the role of the WTO - sort of an int'l trade referee. We will discuss actual examples of WTO rulings involving specific countries and specific industries so that you may be able to form your own opinions as to the merits of this organization.
It is also helpful to understand the role and effect of the WTO as it applies to being involved in International Business Management - meaning: having to make decisions in consideration of a WTO ruling or requirement and how it can effect (positively or negatively) the international business of a company you might be working with.
Some of the WTO topics covered
|KEY POINTS||Both the IMF
and the World Bank have become increasingly popular in the business media
as people recognize the power and influence of these organizations. There
are many many articles in the mainstream newspapers and magazines covering
contemporary issues that the WTO is dealing with - we will refer to a limited
number of these issues, but, before we do that, it would be useful to go
straight to the origin of much of the information; namely, the WTO itself.
The WTO, World Bank and the IMF have had websites up for a some time now
and there is a wealth of information on these pages. However in reading
through some of the links on the WTO pages, students are encouraged to
be discriminating and keep in mind that the WTO does have an "agenda" which
skews its stance on some key topics.
If you were a diligent student and took the time to read several of the links on the WTO site you could probably skip all the following material - basically - go to www.wto.org and click around !
click on http://www.wto.org/english/news_e/news_e.htm
"Gatt's most important activity was sponsoring rounds, or sessions [at which country trade representatives met]. These [rounds] led to a number of bilateral and multilateral reductions tariffs and nontariff barriers"
WTO is essentially a world trade referee for countries wanting to grieve
that parties to trade agreements have broken the agreements. Some
people have commented that the participants in the WTO have behaved as
extreme and sensational as that other international organization with three
initials that also begins with the letter "w".
. . .
of the WTO
to dispute settlement in the WTO
From the WTO site
"Dispute settlement is the central pillar of the multilateral trading system, and the WTOís unique contribution to the stability of the global economy. "
"Disputes in the WTO are essentially about broken promises. WTO members have agreed that if they believe fellow-members are violating trade rules, they will use the multilateral system of settling disputes instead of taking action unilaterally. That means abiding by the agreed procedures, and respecting judgments. A dispute arises when one country adopts a trade policy measure or takes some action that one or more fellow-WTO members considers to be breaking the WTO agreements, or to be a failure to live up to obligations."
rulings are made by a panel
|The process for settling disputes can be time consuming, and it is done only by a national government - individual companies are not involved, though they may be effected by the outcome|
Each appeal is heard by three
members of a permanent seven-member Appellate Body set up by the Dispute
Settlement Body and broadly representing the range of WTO membership.
Members of the Appellate Body have four-year terms. They have
to be individuals with recognized standing in the field of law and
international trade, not affiliated with any government. The appeal can
uphold, modify or reverse the panelís legal findings and conclusions."
. . .
out WTO strategy"
"Reveals list of service sectors that it plans to negotiate"
"Canada can expand its economy and boost its knowledge-based companies by increasing the export of services such as banking and telecommunications through a new set of trade talks under the World Trade Organization, senior government officials said...Canada yesterday [2002 July 8] released a list of a dozen service sectors over which it plans to negotiate with 40 countries. However, officials won't say which nations they are targeting for improved market access under the current round of WTO trade negotiations, slated to conclude by 2005."
"But while the export of goods has grown rapidly over the past decade, the sale of services internationally has lagged, suggesting there are large gains to be made in expanding WTO trade rules to the service sector, a senior official said."
"Services represent the biggest part of the Canadian domestic economy, encompassing everything from phone operators to flower shops. Services account for nearly 70% of Canadian gross domestic product, and three-quarters of jobs. Observers say any demands to open up foreign markets may mean Canada will have to liberalize its rules, such as in ownership of banks and telecom companies."
"Canada has taken the unusual step of releasing the areas it wants to negotiate in advance of the talks as a way of providing greater transparency in the negotiation process," said Pierre Pettigrew, Minister for International Trade. "We are going one step further by giving Canadians a clear, sector-specific, detailed description of what we hope to achieve in services negotiations ongoing at the WTO," he said."
|In the 2nd week of December
2000, the major Canadian newspapers reported the WTO ruling that
backed Canada in its argument with Brazil over aircraft subsidies.
Many Canadians know that Bombardier of Quebec has been building snowmobiles for decades and that the company branched out into personal watercraft, subway cars and light aircraft.
A large number of Canadians may not know that through a combination of growth and acquisition (eg. they bought Lear Jet) Bombardier has become the third largest aircraft manufacturer in the world.
A large number of Canadians may not know that Brazil has a vibrant automotive and aircraft manufacturing sector and is now competing with Canada for the international aircraft market.
C A N A D A
Canada the green light to impose sanctions against Brazilw
"The WTO has given Canada the green light to impose sanctions worth $2 billion against Brazil ... the approval followed an arbitrator's ruling that the sum was worth the amount Canada was losing because of Brazil's ProEx export subsidies program to aircraft maker Embraer SA. ...Bombardier says it lost international sales because of the subsidies program"
explained in a Toronto
Star story in Dec 2000 by Madhavi Acharya business reporter
commentary on Canada / Brazil aircraft dispute
|In the second
week of December 2000, the subject of WTO backing Canada in the aircraft
subsidy challenge with Brazil, was noted on the front page of the WTO website.
"Canadaís retaliation against Brazil approved in aircraft case"
"The WTO Dispute Settlement Body on 12 December 2000 approved Canadian trade sanctions in retaliation for Brazilís failure to implement a ruling on aircraft export subsidies. "
The use of the word retaliation means that as a result of finding that Brazil broke the rules in subsidizing aircraft production (which negatively effected Canadian aircraft producers), Canada will be authorized to impose high tariffs on Brazilian products being imported into Canada.
The consequences are daunting for Canadian importers who wish to continue importing products from Brazil because any price advantage they might have previously enjoyed (importing from a low production cost Latin American country) will be lost since the newly imposed tariffs will make it too costly to profitably import some consumer products and processed food products from Brazil.
"The WTO Dispute Settlement
Body on 12 December 2000 agreed to let Canada impose trade sanctions
of up to C$344.2 million per year on imports from Brazil in retaliation
for Brazilís failure to implement a ruling on aircraft export subsidies."
C A N A D A
too many trade barriers, WTO says"
was the title of a Dec 2000 story in the Toronto Star
"Canada received top marks for its liberal trade policy on Friday but the World Trade Organization said there are still a few persistent import barriers that make Canadian consumers pay more for certain goods"
"the report criticizes Canada
for its ''persistent barriers in a few important areas.''
C A N A D A
|When we looked at the Canada-Brazil
WTO issue in Dec 2000, it appeared as if Canada had "won" and this served
as a good example of how an international NGO could facilitate "good trade"
relationships. Since that time, the WTO has ruled against Canada and you
are encouraged to click on the cropped view above, and read an update on
The bottom line is, the Canadian government disputes the ruling and continues to pledge support for Bombardier - this is partly for business and political reasons.
C A N A D A
This story explains some of the current problems with WTO negotiations on farm subsidies
In July 2003 meetings regarding WTO subsidies were held in Montreal. The meetings received press coverage since the topic of farm subsidies greatly effects Canada, and also because the meetings were the target of protests.
|The PRC has
been, for some time, trying to gain admittance to the WTO.
American trade officials have been publicly making efforts to block China becoming a WTO member until China makes a more concerted and serious effort to stop producing illegally copied clothing products, computer software and moves and music.
The American government accuses the Chinese government of being a partner in the pirated film, and software production and says that Chinese efforts have not been sustained at stopping these activities which American consumer products companies claim costs them millions and millions of dollars in lost sales each year.
|In a 2000 story
in the Toronto Star, it is reported by the Associated Press reporter in
Shanghai, that illegally pirated copies of Jim Carey's "Dr Seuss' How The
Grinch Stole Christmas" are selling in China for as little as $1 USD.
Despite these concerns, the greater good of having the PRC part of a rules and regulations structure was considered more advantageous than the disadvantages of having it outside the WTO.
|What it means for China to join the WTO !||As a result
of the negotiations, China has agreed to undertake a series of important
commitments to open and liberalize its regime in order to better
integrate in the world economy and offer a more predictable environment
for trade and foreign investment in accordance with WTO rules. Among some
of the commitments undertaken by China are the following:
|The situation of the WTO
is ongoing and there are constantly events, and activities involving the
WTO which have consequences for Canada's international business circumstances
- on a national level, and on an individual business level.
Some may also say that solving some of the world's trade problems will also help deal with the risk and threat situations we face globally in 2001 - which is in part manifest in the events of 911.
- commentary and analysis by leading Canadians
wrote a piece in the Toronto Star about the WTO in October 2001
in which he discusses the importance of the upcoming trade minister's meetings
and how there are some significant issues on the table.
Crane's Oct 23rd article
is based in part on a trade seminar at which Dr. Sylvia Ostry - a well
known U of T academic, delivered some important remarks.
" Sylvia Ostry, distinguished research fellow at the University of Toronto's Munk Centre for International Studies, told the trade seminar yesterday, the developing countries thought they had struck ``a grand bargain'' with the rich countries in the Uruguay Round of trade negotiations in 1994-95. But that ``grand bargain'' turned out to be ``a bum deal and left enormous anger in the developing countries,'' she said. While developing countries were forced into a wide range of difficult and costly concessions to benefit multinational companies from rich countries, they gained very little in improved access for their products and services. But if we want a more peaceful and stable world, that cannot continue. The global divide has to be narrowed. This is also a matter of building better global institutions. Despite its size and importance, the WTO's budget is smaller than the travel budget of the IMF and, Ostry argued, ``cannot survive without significant strengthening. The WTO lacks the resources to help poorer countries participate effectively in the global trading and investment system, to do serious research or to act as forum for discussion of global issues. Continuing its current emphasis on litigation and rule-making, Ostry said, ``is a recipe for disaster'' because it will become a source of ongoing conflict."
that Ostry advises
"We also need less dogmatic institutions. Dogma can get us into quite serious trouble. An example of this is the ideological advice that the International Monetary Fund imposed on the world's poor countries in the 1980s and much of the 1990s, forcing them into policies that made little sense but which reflected the rigid neoclassical mentality of the IMF's economists. A striking example is the pressure from the IMF on developing countries to liberalize their financial markets. ``This misdirected financial liberalization played an important role in the East Asian crisis'' in 1997-1998, as Joseph Stiglitz, the former chief economist of the World Bank and one of three winners of this year's Nobel prize in economics, has argued. This devastated much of the emerging middle class in the region and, in the case of Indonesia, led to riots and religious conflict costing thousands of lives."
Dr. Ostry emailed TR June 27th, 2005 to give permission to use these long quotes. Copies of emails are kept in the permissions binder.
In the July 2003 meetings
in Montreal, the events were the target of protests - which has become
more and more the "new normal" at int'l NGO events.
|This 2003 pic from Toronto
shows that the protests against the WTO are gathering a lot of attention and some people have very negative views towards the WTO.
|This 2003 pic from the Toronto
shows that the protests against the WTO are becoming very aggressive with the participants "seriously prepared" for violence.
click on the image to read the story
|People working in International
Business in the 1980's and early 1990's rarely discussed the WTO - and
it was not a featured topic in the curriculum for International Business
Courses (beyond a few paragraphs) - however, since the end of the 1990's,
and particular in the first 2 years of the millennium, the WTO has been
"getting a lot of ink".
The following articles will illustrate some of the negative "ink" the WTO has been getting and highlight some of the issues people, and organizations are having problems with.
|Criticism of the WTO||Cameron Smith
wrote a piece in Dec 2001 in the Toronto Star titled
"WTO is a monster and Canada is complicit"
Smith opens by saying
Smith reminds us that
Some of the criticisms pointed out by Smith - which are also points made by others around the world, include
|Criticism of the WTO||This information comes from
a web site promoting a book on the WTO written by a former WTO insider
- in the process of flogging the promoting the book, it also serves as
a good coverage of some of the contentious issues..
Prof. Gary Sampson is Visiting Academic at the London School of Economics. For 12 years
he served in a number of GATT/WTO divisions, most recently as Director of the WTO's Trade and Environment Division.
|Criticism of the WTO||Jim Travers
wrote a well balanced article about the WTO in the summer of 2003 that
should be read by students in order to understand the "big picture" within
which the WTO opposition is placed.
|Students studying international
NGO's (non governmental organizations) like the IMF, WTO, OECD etc, often
find it challenging to understand how knowing about these organizations
can have any real consequences on day2day activities of Canadian companies
involved in international business.
Aside from large companies like Bombardier, the WTO has an effect on medium sized businesses in Canada also and the following section will provide some examples.
|Many people in large cities
like Toronto don't have much personal experience about farming - but,,,
farming is still and important part of the Canadian economy. Dairy farming
in Ontario and Quebec is still big business and with advances in agricultural
technology, (including genetics) farm production has increased a lot from
the mid 1990's so that there is a lot of farm products exported.
- effect on
|A CANADIAN PRESS
story carried by the Toronto Star
"WTO Ruling costs 62 jobs at Saputo"
Saputo Inc. www.saputo.com
The Toronto Star story is brief so we will quote direct from the press release on Saputo's site.
"Saputo Inc. announces the closing of a plant in its Cheese Division (Canada) located in Cookstown, Ontario, ... 62 employees are affected by this decision. These announcements come in the wake of ... the recent decision by the World Trade Organization  concerning the Canadian system of the supply of milk to be used in products for the export market. In order to comply with that decision, Canadian dairy processors are required to export their products at prices that make the exporting of dairy products from Canada non-competitive. The Cookstown, Ontario, plant, which employs 26 people, will definitively cease its operations on August 1, 2003."
Saputo is the leading cheese producer in Canada - it has 7,000 employees and 47 plants and distribution centres. It would be considered a large company by Canadian standards but medium sized company by global standards.
|- when they [Saputo] say
"make the exporting of dairy products from Canada non-competitive"
it means Dairy companies cannot sell for a low price which might be lower
than what Canadians pay - if you export a product at a price lower than
what you sell to the customers in your own country this is called dumping.
The reason this is bad is because it is presumed the domestic consumers have no choice but to pay the higher price because tariff & non-tariff barriers keep out foreign milk and milk products. In essence the higher prices Canadians pay for dairy products produces a profit for companies like Saputo, which help subsidize their ability to offer lower more competitive prices internationally. This is like Japanese camera companies selling cameras for high prices in Tokyo, but low prices in New York.
Update Oct 2003
|Saputo got around
the WTO restrictions by buying a large dairy company in Argentina. This
company already exports so Saputo can reach its Intl customers by exporting
out of the Argentine company.
see entry for Saputo on www.witiger.com/internationalbusiness/outlineMGTC44c.htm
|Many of the businesses in
small countries are resource based - that is to say based on agriculture,
fishing, forestry or mining. There have been several WTO rulings that make
it "challenging" for the ability of companies, in those countries, to continue
exporting to their customers in North America and Europe.
- effect on
Lucia: Caribbean - exporters of bananas to the EU
The following information
comes from a speech made by the Prime Minister St. Lucia, Hon. Dr.
Kenny D. Anthony, on the Impact of the WTO Ruling on the EU Banana Import
Regime on W.I. Bananas. The Prime Minister made his remarks in the context
of the three countries of Dominica, St. Lucia and St. Vincent.
- effect on
|"Since the establishment
of the EU Single Market for bananas, the small share of the market enjoyed
by Saint Lucia and the other ACP countries has been coveted by the multinationals
and other big suppliers to the market. The Windward's islands' banana export
account for less then 2.5% of the world banana trade and only 5%
of the EU banana market. The comparative figures for all of the ACP are
7% and 17% respectively. On the other hand, the three North American Multinationals,
between them, control about 70% of the world banana trade and almost
over 45% of the EU banana market. Yet, in its greedy pursuit of increased
market share and to deny our producers their measly share of the
market, one US multinational, Chiquita International, was able to persuade
the United States Administration to take up its case and fight the
preferential access arrangements that are in place for our producers. ...My
understanding is that US companies have done well as a result of the EU
banana regime. They have gained substantially from higher average prices
of the bananas but also, in some cases, from increased market share. ...
We will lose everything, but the companies and other suppliers that are
already doing quite well stand to gain more and make bigger profits, at
the expense of our farmers. That seems to be what
the WTO ruling is all about, applying the ideology of "free trade" in its
purest form. regardless of the consequences and if it means
making paupers of thousands of small farmers and entire nations, then so
be it. The WTO is unconcerned that the benefits which have kept
our many farmers in business, earning a decent living through their hard
work, will now go to swell the profits of a few big companies."
Clearisa Leon in the office of the Prime Minister gave permission to quote the speech of the Hon. Dr. Kenny D. Anthony - in an email June 30th, 2003. Copies of emails kept in the permissions binder.
The population of St. Lucia is around 160,000, the island is 27 miles long and has a maximum width of 14 miles.
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