Wto and oil

The World Trade Organisation and Oil

Andrea Jiménez-Guerra

Oxford Institute for Energy Studies

August 2001

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Glossary

ACP: ASEAN: CPs CTE: DSB ESCWA: GATT: GASCM: GCC: IGOs: ITO: MC: MEAs: MFN MTS: NT OPEC PADD: PDO: PPA: SDO: SELA: SINOPEC: TBT: TRIMs: UNCTAD: UR: USA: WTO:

African, Caribbean and Pacific Group Association of South East Asian Nations Contacting PartiesCommittee on Trade and Environment Dispute Settlement Body Economic and Social Commission for Western Asia General Agreement on Trade and Tariffs General Agreement on Subsidies and Countervailing Measures Gulf Cooperation Council International Governmental Organisations International Trade Organisation Ministerial Conference Multilateral Environment Agreements Most Favoured Nation Multilateral TradingSystem National Treatment Organisation of Petroleum Exporter Countries Petroleum Administration for Defence Districts Petroleum Development Oman Protocol of Provisional Application Committee to Save Domestic Oil Latin American Economic System China Petrochemical Corp Agreement on Technical Barriers to Trade Agreement on Trade-Related Investment Measures United Nations Commission for Trade andDevelopment Uruguay Round United States of America World Trade Organisation

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1. INTRODUCTION

The development of the international economy has created a system of interdependent nations, ultimately pointing at one world economy. This process of globalisation has strengthened the role of international economic organisations and treaties, creating new sets of rules, procedures, and principles.It is in this context that the World Trade Organisation (WTO) was created in January 1995, as a conclusion to the Uruguay Round, replacing GATT 1947. The scope of the new organisation has been broadened, and it tries to extend all main principles of GATT (most favoured nation, national treatment, and prohibition of quantitative restrictions) to services and intellectual property rights.Furthermore, WTO provides institutional/constitutional procedures (decision-making, disputes settlement) that will facilitate the effective implementation of its substantive rules. Some people consider that WTO has a more carefully constructed architecture than its predecessor. This reflects the fact that much attention has been given to important questions of allocation of powers concerning delicateissues of governance and sovereignty. As “the central international economic institution”, as WTO has been described1, it seems reasonable to believe that it will have an effect on the oil sector, and more so as several oil-exporting countries have become members of the WTO, and others are already negotiating their membership. There is a common assumption that the oil trade is excluded from WTO,because oil was not included in GATT 1947. Crude oil has been exempted from or subjected to low tariff in most of the world’s crude-importing countries, and even though customs duties on refined products and petrochemicals are higher than on crude oil, they are still considered to be relatively low and not to hamper trade in petroleum. However, there is no provision in the old GATT, or in any of the WTOagreements, that stipulates the non-application of its rules to the oil sector. In fact, the oil trade is governed by the general trade rules set by the WTO treaty and its annexes. And even though oil was not directly addressed in GATT round negotiations, many rules that impact on the oil sector were settled in that forum, and many others will be negotiated at the WTO.

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Jackson, John: TheWorld Trade Organisation, 1998, p.1.

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This paper centres on the effect of WTO on the oil sector. Its purpose is to analyse how the new organisation and its institutional/constitutional procedures may influence and constrain the national policies of oil-exporting countries. These countries will have to face the fact that their traditional developing policies might need to be revised and...