Walter Lewalter, Chairman of the WTO Working Party, comments on the country’s WTO negotiations process and its benefits.
Azerbaijan applied for World Trade Organization (WTO) accession in 1997, and I have chaired the meetings of the Working Party since 2000. As Chairman, I have the unique opportunity to oversee and facilitate the process, which is based on substantive work by the acceding government and the results of negotiations with WTO Members. Azerbaijan is a country rich in natural resources. This is quite an advantage already, as resources could be effectively utilized to foster a virtuous cycle.
Just by engaging in its accession process, Azerbaijan is already signaling to the global economy that it is willing to undertake the necessary reforms and play by the rules. The acceding government is, of course, driving the process. The overall speed will depend on the implementation of a WTO-compatible trading regime and the results of negotiations on market access for goods and services. The process will ensure that the trade-related legislation and practices in Azerbaijan comply with international standards.
The WTO was founded in 1995. However, the multilateral trading system dates back to 1947, when 23 countries signed the General Agreement on Tariffs and Trade (GATT) with the objective of achieving economic recovery and growth after World War II. For the next 47 years, the GATT governed most of world trade. During this period, global trade grew exponentially. This encouraged countries to further liberalize trade through subsequent rounds of negotiations. The first rounds focused on reducing import tariffs. Non-tariff barriers began to be addressed at the Tokyo Round between 1973 and 1979.
The Uruguay Round was the eighth and last under the GATT. It was the most comprehensive, as it addressed topics beyond trade in goods. Its results encompass over 500 pages of rules on goods, services, intellectual property, dispute settlement, trade policy review, and the creation of the WTO, as well as market access commitments for goods and services. The results of the Uruguay Round came into force in 1995.
Since 1995, the WTO has welcomed 25 new Members and 30 governments are in the process of accession. Accession to the WTO is the result of negotiations between the acceding government and WTO Members. The common objective of these negotiations has always been to reach an agreement that would generate mutual trade, increase welfare gains, and strengthen the multilateral rules-based system.
Accessions are considered on a case-by-case basis. They are adapted to the actual needs of each individual acceding government. There is no one-size-fits-all approach. The results of accession negotiations entail a balance of rights and obligations, which include market access commitments for goods and services and the obligation to abide by WTO rules. In turn, new Members benefit from stable and predictable trade relations with WTO Members.
WTO accession has proven to be a “win-win game” for both the acceding governments and WTO Members. WTO accession has served as a tool to increase overall welfare and prosperity. Research has shown that being part of the multilateral rules-based system leads to growth, diversification of the economy, and export markets, and it decreases the dependency on trade in a few commodities with limited trading partners. Being a WTO Member also assists countries to attract foreign capital and encourage local businessmen to invest and create new enterprises. It is a fact that recently acceded Members (RAMs) have performed better and grown faster after acceding to the WTO. RAMs, so far, have also been less vulnerable to external and internal shocks.
Why are countries interested in joining the WTO? Why are countries willing to invest time and resources in a complex process? The answer is simple: because countries can reap actual benefits from WTO Membership. The whole world recognizes that trade is an effective tool for development and poverty reduction. Moreover, the WTO “trademark” sends a positive signal to investors and trading partners worldwide.
Let’s look at the facts: the trade performance of the 25 RAMs has been remarkable. From 1995 to 2009, the trade in goods and services from RAMs grew at rates of 13% and 11%, respectively (much faster than the growth of global trade at 7% for goods and 8% for services). It should also be noted that Albania, China, Georgia, and Lithuania maintained an average annual growth rate of over 20% in the five years following their accessions. Furthermore, recent research has shown that domestic reforms that increase the certainty and predictability of policies, as well as the liberalization of trade in goods and services, have yielded strong positive results for Vietnam.
Indeed, the results are impressive. Trade is a true and effective tool in the quest for economic growth. However, it would not be prudent to assume that these results were achieved only because a country joined the WTO. In parallel to WTO accession, RAMs have also implemented wide-ranging reforms to strengthen their respective development strategies. The synergies between education, health, financial, infrastructure, and economic reforms are essential in achieving tangible results.
Over the past 15 years, accession to the WTO has served as an instrument for domestic reforms, particularly in economies in transition and least-developed countries. WTO Membership has paved the path towards integration into the global economy and given a strong boost to the business environment in RAMs. Clear and predictable rules strengthen the confidence of local and foreign investors and accelerate the creation of new enterprises, job creation, diversification of the economy and exports markets, and trade. This is a virtuous cycle, one worth fostering and reinforcing through sound policies and reforms.
The WTO has a true vocation for universality, and the accession process is at its heart. Each accession strengthens the rules and disciplines of the trading system. Vanuatu, a small archipelago in the South Pacific, is on the verge of becoming the 154th WTO Member. WTO Members are engaged and ready to work with Azerbaijan. They follow developments closely and look forward to welcoming Azerbaijan in the not too distant future. Let’s roll-up our sleeves and work!
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