Rules for world trade

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The most important organisation for world trade is the World Trade Organisation (WTO), which has 163 member states. An additional 20 countries have applied for membership, and only a handful of countries have chosen to remain outside the WTO system.

The WTO develops rules for world trade via global agreements that are equal to all members. The objective is free trade via eliminating tariffs and other trade barriers.

Today, 97 percent of all world trade flows between WTO members.

Read more about which countries have applied for membership, visit the WTO’s website

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Prohibition of discrimination

The WTO trade rests on two important principles. One is “Most Favoured Nation” Treatment (MFN), which means that any benefit, such as a tariff reduction, which a country provides to another country must be automatically granted without preconditions to other countries.

The other is National Treatment. Every member state must treat other countries and their companies equally with regard to internal taxes, duties and fees, technical regulations or provisions concerning sales, purchases, distribution, and so on.

In the field of services, national treatment is something that every country, if they so choose, provides to other countries unilaterally or after negotiations.

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Exemption from the prohibition of discrimination

Exemptions from MFN and National Treatment may be made for free trade agreements and customs unions. The EU is a customs union. The EU also has a series of free trade agreements with various countries.

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Important WTO agreements

There are many WTO agreements in various specific areas, such as textiles, agriculture, public procurement, etc. Three of them are referred to as the WTO’s main agreement: GATT for trade in goods, GATS for services and TRIPS for the protection of intellectual property rights.

The General Agreement on Tariffs and Trade (GATT) has reduced tariffs for industrial goods. Therefore in the commodity trade, other barriers to trade are of greater importance. For agricultural products however, export subsidies and protection duties are still allowed.

In the General Agreement on Trade in Services (GATS), services are divided into twelve overall industries, including telecommunications, distribution, transportation and professional services. WTO countries choose themselves the sectors in which and to what extent they want to make commitments.

Trade-Related Aspects of Intellectual Property Rights (TRIPS) governs copyright protection, trademarks, geographical indications, industrial designs, patents, layout-designs of integrated circuits, and undisclosed information including trade secrets.

Read more about the agreement in the National Board of Trade’s digital reference book: Handelspolitisk ABC [Trade Policy ABCs] (in Swedish)

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International classification of goods for customs

The World Customs Organization (WCO), which has 180 members including Sweden and other EU countries, has developed the Harmonised Commodity Description and Coding System (HS).

See which countries are members of WCO, at www.wcoomd.org

Via the HS system, WCO countries classify goods in an identical manner. In TARIC, the integrated Tariff of the European Union, the product codes have ten digits. The first six digits are HS numbers.

Read more about the Common Customs Tariff, on Swedish Customs’ (Tullverket) website (in Swedish)

If you want to trade with another country and want to know what rules apply to your product, the HS Commodity Code facilitates contact with the customs authority in the country in question.

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