What is the WTO ?

• The World Trade Organization (WTO) is the only global

international organization dealing with the rules of trade
between nations.
• The WTO agreements, negotiation.
• The goal of WTO.
 ITO

• International Trade Organization (ITO)

• Rules on employment, commodity agreements, restrictive
business practices, international investment, and services.
• The combined package of trade rules and tariff concessions
became known as the General Agreement on Tariffs and Trade.
• The most serious opposition was in the US Congress
 ITO,GATT & WTO

• ITO was effectively dead

• The GATT remained the only multilateral instrument governing
international trade from 1948 until the WTO was established in
1995.
The Multilateral Trading System-- Past,
Present and Future
• The World Trade Organization came into being in 1995.
• One of the youngest of the international organizations,
• The WTO is the successor to the General Agreement on Tariffs
and Trade (GATT).
 Development in world
• WTO is still young
• GATT is 50 years old.
• The past 50 years have seen an exceptional growth in world trade.
• GATT and the WTO have helped to create a strong and
prosperous trading system contributing to exceptional growth.
• The WTO was established on the basis of GATT customary
practice
 Development Era
• The GATT trade rounds concentrated on further reducing tariffs.
• The Kennedy Round in the mid-sixties brought about a GATT
Anti-Dumping Agreement and a section on development.
• The Tokyo Round during the seventies was the first major attempt
to tackle trade barriers that do not take the form of tariffs, and to
improve the system.
• The eighth, the Uruguay Round of 1986-94, was the last and most
extensive of all.
 WTO
Structure and Decision Making
• 150 members, accounting for over 97% of world trade.
• Around 30 others are negotiating membership.
• Decisions are made by the entire membership.
 By consensus
• Ratified in all members’ parliaments.
• The WTO’s top level decision-making body is the Ministerial
Conference
• Below this is the General Council which meets several times in
Geneva headquarters.
 Structure and Decision Making
• The General Council also meets as the Trade Policy Review Body
and the Dispute Settlement Body.
• The Goods Council, Services Council and Intellectual Property
(TRIPS) Council report to the General Council.
• Numerous specialized committees, working groups and working
parties deal with the individual agreements and other areas
 Secretariat

• The WTO Secretariat,

• In Geneva
• Around 600 staff and is headed by a director-general.
• Its annual budget is roughly 160 million Swiss francs.
• The Secretariat does not have the decision-making role
 Duties of Secretariats
• To supply technical support for the various councils and
committees and the ministerial conferences
• To provide technical assistance for developing countries,
• To analyze world trade
• To explain WTO affairs to the public and media.
• Providing legal assistance in the dispute settlement process and
advises governments wishing to become members of the WTO.
 Creation of New Rules

• The Uruguay Round also created new rules for dealing with trade
• In services
• Relevant aspects of intellectual property
• Dispute settlement
• Trade policy reviews
• Schedules/separate commitments made by individual members in
specific areas such as lower customs duty rates and services
market-opening.
 Goods
• From 1947 to 1994
• GATT was the forum for negotiating lower customs duty rates and
other trade barriers
• The text of the General Agreement spelt out important rules.
• It has annexes dealing with specific sectors such as agriculture and
textiles
• Specific issues are considered
• State trading, product standards, subsidies and actions taken
against dumping.
 Services
• Freer and fairer trade principles
φ Banks
φ insurance firms
φ telecommunications companies
φ tour operators
φ hotel chains
φ transport companies
• General Agreement on Trade in Services (GATS).
• WTO members have also made individual commitments under
GATS stating which of their services sectors they are willing to
open to foreign competition, and how to open those markets
 Intellectual Property

• The WTO’s intellectual property agreement amounts to rules for

trade and investment in ideas and creativity.
• Copyrights, patents, trademarks, geographical names used to
identify products, industrial designs, integrated circuit layout-
designs etc.
• Protection of undisclosed information such as trade secrets —
“intellectual property”
 Types of Intellectual Property
• The areas covered by the TRIPS Agreement
φ Copyright and related rights
φ Trademarks,
φ Service marks
φ Geographical indications
φ Industrial designs
φ Patents
φ Layout-designs of integrated circuits
 Dispute Settlement

• Resolving trade quarrels in case of any dispute in rules

enforcement.
• Countries bring disputes to the WTO if they think their rights
under the agreements are being infringed.
• Judgments by specially-appointed independent experts are based
on interpretations of the agreements and individual countries’
commitments.
• The system encourages countries to settle their differences
through consultation.
• Confidence in the system is borne out by the number of cases
brought to the WTO.
 National Treatment, Balanced Protection

• As in the two other agreements, non-discrimination features

prominently:
φ National treatment.
φ Most-favored-nation treatment

• The TRIPS Agreement has an additional important principle:

φ Intellectual property protection should contribute to technical
innovation and the transfer of technology. Both producers and
users should benefit, and economic and social welfare should be
enhanced.
 WTO A Bill Of Rights for Multinational
Corporations
• Trade has in the past been considered a mysterious subject
relevant only to commercial interests
• No apparent awareness that other societal values might be at stake
• But “A truly astonishing assessment about an agreement that dealt
explicitly with energy, agriculture, environmental standards,
forests and fisheries. “
 Millennium round
• To reflect a rowing awareness of the inter-linkages among all
issues
• Not only to pretend that the trading systems has to find an answer
to each and every one of them
• To ensure that at the highest level they will be brought within an
inclusive global architecture.
 New Issues

φ Industrial tariff and non-tariff barriers.

φ biotechnology,
φ trade and labor,
φ electronic commerce,
φ trade and the environment,
φ competition policy,
φ investment policy and bribery.

On each of these, the key issues are deciding

φ whether the WTO is an appropriate forum?
φ what sort of role the WTO should play?
φ whether new agreements are needed or the issues can be incorporated in
existing agreements?
 Need of the Round
• Poor countries get some favorable changes to that earlier round's
commitments. It could go a long way, particularly for the textiles and
agricultural products that matter most to poor countries.
• The draft also commits the WTO to look at other "implementation" issues
that stem from the Uruguay round.
• World Bank forecast the impact of global trade liberalization. Once impact
is of greater openness for poor countries
• On productivity is taken into account, the Bank considers that the
elimination of import tariffs, export subsidies and domestic production
subsidies would increase global income by $2.8 trillion over ten years
 Obstacles
Europe and Japan are dragging their feet on freeing up agricultural trade;
Europe is balking at any commitment to end export subsidies.
The Europeans also claim the draft text is too weak on environmental
concerns, but others see Europe's emphasis on the environment as a back-
door way of reintroducing agricultural protection.
America, meanwhile, is resisting any efforts to accelerate textile
Liberalization as part of the "implementation" concessions offered to poor
countries
It is against to renegotiate anti-dumping rules.
 Goals of new round
It must move the WTO agenda forward on an accelerated basis,
focusing on such key issues as further opening trade in services and
agriculture,and address new issues such as electronic components and
biotechnology
We must strive toward increased cooperation and coordination
between the WTO and other important international institutions, such
as the IMF and the World Banks.
Uruguay Round established the WTO as a forum for on-going
liberalization and consultation. For a new Round to be credible, it
must enhance the WTO's ability to deliver market opening results as
negotiations in tile Round proceed.
 Trade Policy Review Mechanism

The Trade Policy Review Mechanism’s purpose is

• To increase the transparency

• To create a greater understanding of the policies that countries are adopting,,
through regular monitoring
• To assess their impact.
• To improve the quality of public and intergovernmental debate on the issues
• To enable a multilateral assessment of the effects of policies on the world
trading system.
 Requirement for Review

All WTO members must undergo periodic inspection, each

review containing reports by the country concerned and the
WTO Secretariat.

It is therefore fundamentally important that regulations and policies

are transparent.
 Ways to Review

This is achieved in two ways:

 Governments have to inform the WTO and fellow-members
through regular “notifications”
 The WTO conducts regular reviews of individual countries’ trade
policies
 Frequency of Review
The frequency of the reviews depends on the country’s size:

• The four biggest traders — the European Union, the United

States, Japan and Canada— are examined approximately once
every two years.
• The next 16 countries are reviewed every four years.
• The remaining countries are reviewed every six years, with the
possibility of a longer temporary period for the least-developed
countries.
 Members of WTO

• About two thirds members are from developing countries.

• They play an increasingly important and active role in the WTO
because of their numbers, because they are becoming more
important in the global economy, and because they increasingly
look to trade as a vital tool in their development efforts
• Among these are provisions that allow developed countries to be
treated more favorably than other WTO members
 Dealing Ways
 Dealing with the special needs of developing countries in three
ways:
– The WTO agreements contain special provisions on
developing countries
– The Committee on Trade and Development with some others
dealing about specific topics such as trade and debt, and
technology transfer
– The WTO Secretariat provides technical assistance
 Measures of WTO
Other measures concerning developing countries in the
WTO agreements include:

φ Extra time to fulfill their commitments in many of the

WTO agreements
φ Trading opportunities through greater market access (e.g. in
textiles, services, technical barriers to trade)
φ Safeguard the interests when adopting some domestic or
international measures (e.g. in anti-dumping, safeguards,
technical barriers to trade)
φ Means of helping (e.g. to deal with commitments on animal
and plant health standards, technical standards, and in
strengthening their domestic telecommunications sectors).
 Legal Assistance

• Has special legal advisers for assisting developing countries in

any WTO dispute and for giving them legal counsel
• In 2001, 32 WTO governments set up an Advisory Centre on
WTO law
 Awareness of WTO in Pakistan
• Government is primarily responsible
• Training courses aiming at enhancing the efficiency, productivity and
competitiveness of the industry should be initiated.
• Companies should allocate budget for training, research and development to
enhance skills of manpower, to reduce/eliminate wastage and to improve
competitiveness and quality of their products.
• Problems of the local industry should be addressed for increasing the exports of
their products and enhancing their competitiveness in the international markets.
• High rates of duties, taxes and surcharges on raw materials are one of the major
problems, which should be brought to zero or minimized.
 Awareness of WTO in Pakistan
• Seminars and studies should be conducted aimed at finding ways of
cost reduction.
• Prices of utilities should be reduced for the industry to compete with
the cheap imports.
• The wastage in the industry should be minimized using modern
methods and technologies.
• Wastage in public organizations like line losses of WAPDA should be
minimized to reduce the prices of utilities.
• The industrialists should get authentic certification to make their
exports acceptable and competitive in the international markets.
• WTO agreements on Anti-dumping, Subsidies & Countervailing and
Safeguard Measures have the provisions, which can be used to protect
the local industry and safeguard the interests of exporters in the
international as well as local markets.
 WTO Watch Group
• WTO Watch Group (WWG) is an initiative by civil society organizations
to develop critical awareness and pressure regarding Pakistan’s
engagement with the World Trade Organization (WTO) and its
implications through research, monitoring and advocacy.
• The overall objective of the WWG is to protect people’s rights in this era
of trade liberalization and to ensure that vision of WTO i.e. sustainable
development, employment generation and technology transfer etc. guide
trade
• At the domestic level, the WWG aims to help transform the relevant
national policies into ones those are sensitive to people’s basic rights,
protect their livelihoods, and promote their competitiveness.
 The WTO And The Global Economy

• The WTO represents a watershed in the process of establishing a

truly global economic order
• Because it lays out a comprehensive set of rules intended to guide
all aspects of global economic activity
• The WTO will undoubtedly exert a profound influence over the
future course of human affairs
 Multinationals
• Multinational corporations control more than one third of the
world's productive assets, and the organization of their production
and distribution systems has little to do with national or even
regional boundaries.
• Decisions about locating factories, sourcing materials, processing
information or raising capital are made on a global basis, and any
particular product may include components from several
countries.
• To consolidate these processes of globalization, the rules upon
which it depends needed to be codified in binding international
agreements - hence the WTO.
 Trade agreements and WTO

Historically, trade agreements were concerned with the trade of

goods - for example manufactured goods and natural resource
products - across international borders. But under the WTO,
international trade agreements have been dramatically extended to
include investment measures, intellectual property rights,
domestic regulations of all kinds, and services.
 Trade agreements and WTO
• But arguably the most important source of WTO authority and
influence stems from the powerful enforcement tools it has
available to ensure that all governments respect the limits on their
authority imposed by its trade rules
• For example, in the first trade complaint to be resolved under the
WTO, US Clean Air Act Regulations were deemed to violate
WTO rules. In consequence, the US was given two options -
remove the offending provisions of its environmental statute or
face retaliatory trade sanctions to the order of $150 million a year.
 WTO SWOT Analysis
Strengths
• Dispute resolution mechanism – allows small or developing
economies the opportunity to obtain a fair hearing without being a
subject to threats from bigger countries
• Intellectual property rights which were included in TRIPS and
were not included in GATT – in a lot of countries it is something
that doesn’t exist, but if the country is willing to join WTO it must
accept the TRIPS
• Focus on trade to the exclusion of non-trade matters
 WTO SWOT Analysis
Opportunities
• Integration of the former Soviet states, the PRC and the countries
of Eastern Europe into the framework of open international trade
• Expansion of telecommunications sector and electronic trade
• Opportunity to bring international industrial espionage to the end

Threats
• Nationalism
• Regionalism in the form of trade blocks – groups such as NAFTA
or E.U have regulations that conflict with those of the WTO
 WTO SWOT Analysis

Weaknesses
• No mechanism for weighting the influence of a member
proportionally to the size of the member’s economy
• Insensitivity of Director-General to the fears held by many
member regarding the loss of national sovereignty under the WTO
• The fact that Russia, though is willing to join the WTO, is unable
to meet the requirements for membership
• Insistence on food self-sufficiency in developing country members
• Insufficient liberalization of foreign direct investment
 Major Lessons

Five major lessons for successful global trade management emerge

from the first fifty years of the GATT/WTO system.
They need to
• Need of momentum
• Big scale is Beneficial.
• Building Blocks, Not Stumbling Blocs.
• Money is Central
• Leadership is Essential
 Need of Momentum

• The lesson for 1998 and beyond is clear: launch a new liberalizing
initiative in the WTO to restart the bicycle as soon as possible. As
noted, the sectoral follow-ups to the Uruguay Round-in
telecommunications services, financial services and information
technology products-maintained a degree of momentum after its
conclusion
• And the Uruguay Round wrap up was extremely wise to
incorporate a "built-in agenda" for the future, including such
major topics as agriculture and overall services.
 Large Scale is Beneficial
• The history of the GATT/WTO, and especially trade policy in the
United States, clearly reveals that large-scale initiatives fare better
than modest ones.
• Application of that lesson to the period ahead is of crucial
importance because of the severe threat to the open trading system
from opponents of globalization in the United States, Europe and
some key developing countries
 Rounds Policies

• The Kennedy Round sharply increased the amount of multilateral

cuts in tariffs, which remained an important obstacle to trade at
that time.
• The Tokyo Round began the process of extending the GATT
system to no tariff measures.
• The Uruguay Round brought agriculture and textiles into the
system, seriously addressed services and intellectual property
rights, and dramatically improved the dispute settlement
mechanism. "Bigger was better" in attracting sufficient political
support to bring each succeeding negotiation to a successful
conclusion, despite the bigger battles that had to be taken on to do
so.
 Round Policies

• The prescribed course of action is, in any event, the earliest

possible launch of a Millennium Round within the context of
setting a policy objective of achieving global free trade by 2010 or
2020.
 Regional Free Trade Arrangements

• Regional Free Trade Arrangements Share of

World Trade, 1998
• EU
EUROMED
NAFTA
MERCOSUR
FTAA
AFTA
AUSTRALIA-NEW ZEALAND
APEC
 Building Blocks, Not Stumbling Blocks
• Some observers fear that regional participants, once having
liberalized regionally, will not want to give up their preferential
arrangements and/or will have "used up" their liberalization
potential and/or trade attention
• There are, indeed, a few disquieting signs. NAFTA employs rules
of origin in the textile/apparel sector that discriminate sharply
against nonmembers. Mercosur raised its common external tariff
in late 1997 and sometimes expresses doubts about extending its
liberalization to broader groupings.
• The dimension of the prior rounds aimed primarily to reduce the
discriminatory impact of the European Union. Similarly NAFTA,
• Mercosur, and several other regional groupings that have become
economically significant in the 1990s.
• Now try to promote WTO
 Money is Central

• Monetary and macroeconomic imbalances trigger a need for new

global negotiations, to contain the protectionist impulses
generated by large trade deficits;
• New regional arrangements, which create new trade
discrimination and thus motivate outsiders to negotiate globally in
response, also trigger such a need
• The Tokyo Round was in fact launched as part of the agreement,
insisted upon by the United States, to restore fixed exchange rates
among the major countries and terminate the import surcharge that
it had instituted in August 1971
 Leadership

• The new bipolar power structure will still require joint US-EU
leadership to launch the Millennium Round and all other global
trade initiatives for the foreseeable future.
• United States and the European Union, it is thus even more
important to provide leadership for the WTO system.
• APEC too lead world at time of Uruguay Round
 The Benefits

. The system helps promote peace

. Disputes are handled constructively
. Rules make life easier for all
. Freer trade cuts the costs of living
. It provides more choice of products and qualities
. Trade raises incomes
. Trade stimulates economic growth
. The basic principles make life more efficient
. The system encourages good government