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6.1 URUGUAY ROUND/WTO/UNCTAD

 Entire world is one country for the business. Erasing political &
national boundaries means Globalization. Globalization implies
opening up the economy for foreign direct investment by liberalizing
the rules & regulations by creating favorable & encouraging
industrial climate.

 Indian government globalized economy by announcing economic

liberalization in 1991. Steps taken by government of India helped the
country to integrate Indian economy with the rest of the global
economy.

 Infact the seeds for integrated global economy were sown as early as
1940s when the steps were taken to establish IMF, International
Bank for Reconstruction & Development, GATT and the like. We shall
now discuss briefly GATT & its transformation into WTO.

 Negotiations were held in 1947 between US & 22 other countries in

order to prevent the protectionism policies & to revive the economies
from recession. Then GATT had its origin in 1947 at a conference in
Geneva.

 Objectives of GATT were:

 To raise standards of living.
 To ensure full employment & a large and a steadily
growing volume of real income & effective demand.
 To develop the full use of the resources of the world.
 To expand production & international trade.

 The nature of the negotiation in the rounds during 1947 to

1960 was tariffs. The negotiations in other rounds included anti-dumping
measures. In the round of 1986, the nature of the issues includes bringing
agriculture & protection of intellectual property rights under GATT.

 In the final round of GATT, negotiations covered a wide range

of subjects like subsidies, safeguards, trade-related intellectual property
rights (TRIPs), and trade-related investment measures (TRIMs) & trade

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services. An agreement regarding multilateral trading system was finally
signed in Morocco in 1994. These measures were also called Dunkel
Proposals, after the name of Mr. Arthur Dunkel, the then Director-General
of GATT.

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6.2 URUGUAY ROUND/WTO/UNCTAD (CONTD)

 Members of GATT expressed their political support to the

outcome of the meeting by signing the final act in Morocco on 15 April
1994. According to Marrakech declaration, the results of the Uruguay
round would “strengthen the word economy & lead to more trade,
investment, employment & income growth throughout the world”.

 In order to implement the final act of Uruguay Round of

agreement by GATT, the WTO was established on 01.01.1995.

 India is one of the (out of 104) founder members of WTO.

GATT was not an organization but only a legal agreement., whereas WTO
is designed to play the role of watchdog in the sphere of trade in goods,
trade in services, foreign investment, intellectual property rights etc.,

 WTO’s function as set out in Article III are:

 WTO shall facilitate the implementation, administration

& operation of the agreement.

 WTO shall provide the forum for negotiations among its members
concerning their multilateral trade-relations in matters dealt with
under the agreement.

 WTO shall administer the understanding on Rules & Procedures

governing the settlement of disputes.

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  WTO shall administer the Trade Policy Review Mechanism with a
view to achieving greater coherence in global economic policy-
making.

 The WTO shall co-operate with the IMF & the International Bank
for Reconstruction & Development & its affiliated agencies.

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6.3 HOW IS WTO DIFFERENT FROM GATT?

 WTO is not a simple extension of GATT. On the contrary, it completely

replaces its predecessor & has a very different character.

 The principle differences are the following:

 GATT was a set of rules, a multilateral agreement

with no institutional foundation, only a small associated secretariat
which had its origin in the attempt to establish an International
Trade Organization in1940s.

 WTO is a permanent institution with its secretariat.

GATT was applied on a “provisional basis”, even if, after more than
40 years, governments chose to treat it as a non-permanent
commitment.

 The WTO commitments are full & permanent. GATT

rules applied to trade in merchandise goods. In addition to goods,
WTO covers trade-in-service & trade-related aspects of intellectual
property.

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  While GATT was a multilateral instrument, by the
1980s, many new agreements had been added of selective nature. The
agreements, which constitute WTO, are almost all multilateral &
thus, involve
commitment for entire membership.

 The WTO dispute settlement system is faster, more automatic &

thus much less susceptible to blockages than the old GATT system.
The implementation of WTO dispute findings will also be more easily
assured & committed.

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6.4 FUNCTIONS OF WTO

 WTO administers 28 agreements contained in the Final Act & a

number of plurilateral & government procurement through various
councils & commitments.

 WTO oversees the implementation of the significant tariff cut

(averaging 40%) & also reduction of non-tariff measures agreed to in
the trade negotiations.

 WTO examines regularly the trade regimes of individual

member countries. Thus it acts as a watchdog of
international trade.

 WTO provides the Dispute Settlement Court in order to

adjudicate the trade disputes which could not be solved
through bilateral talks between member countries.

 WTO acts as a management consultant for world trade. The

economists of the WTO observe the pulse of global economy
& provide studies on the main trade issues.

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  Technical co-operation & training division is established in
the WTO’s secretariat in order to help the developing
countries in the implementation of Uruguay Round results.

 Member countries can use WTO as a forum for continuous

negotiation of exchange of trade barriers in the entire
world.

 WTO co-operates with other international institutions like

IMF, IBRD (World Bank) & ILO involved in global
economy policy making.

 WTO oversees the national trade policies of member

governments.
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6.5 ORGANIZATION STRUCTURE OF THE WTO

 The organization structure of the WTO is based on 4

hierarchical levels. The hierarchies from the top to bottom are as follows:

 Ministerial Conference
 General Council
 Councils
 Committees & Management Bodies

 Ministerial Conference: Is the highest hierarchical level in

the organization structure. All the member countries of WTO are the
representatives of the Ministerial Conference. It has the authority to make
decisions on all matters relating to multilateral trade agreements.

 General Council: Is the executive body of the WTO. General

Council reports its decisions & activities to the Ministerial Conference. All
the members of the WTO are also representatives of the General Council.

 Councils: The third level in the hierarchy is Councils.

There are three
Councils viz.,

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  Council for Trade in Goods: This supervises the
implementation & functioning of all agreements
relating to trade in goods.
 Council for Trade in Services: Oversees the
implementation of all the agreements relating to
Trade in Service.
 Council for Trade-Related Aspects of Intellectual Rights:
Oversees the implementation & functioning of all the
agreements relating to this.

 Committees & Management Bodies: Ministerial Conference

constituted 3 committees --- Committee on Trade & Development,
Committee on BOP and Committee on Budget, Finance & Administration.

 Management Bodies: Plurilateral agreements of the WTO have

their management bodies. These management bodies report to the General
Council. Some of the plurilateral agreements having management bodies
include civil aircraft, government procurement, dairy products etc.,

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6.6 WTO & ANTI-DUMPING MEASURES

 In view of the negative effect of dumping, the importing country

imposes anti-dumping measures like tariff-duty, import-quotas, import-
embargo & voluntary export restraints.

 Tariff Duty: Importing countries impose high rates of import-

tariffs on dumping so that the price of the dumped goods would be either
equal to or more than that of the domestic goods.

 Import Quota: The importing countries in addition to tariff

duty restrict the volume of imports, thus reducing quantities.

 Import Embargo: The importing country bans the import of

particular goods or all the goods from the dumping country. This is a
retaliatory measure against dumping.

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 Voluntary Export Restraints: The exporting countries realizing
the negative effects of dumping voluntarily come for bi-lateral
agreements to avoid dumping.

 WTO provides a clear & additional information & criteria for

determining:

 The product that is dumped and

 The injury to an industry of the domestic country by the
dumped product

 WTO also provides procedure to be followed in initiating &

conducting anti-dumping investigations:

 Rules for implementing the anti-dumping measures.

 Duration of anti-dumping measures.
 The clear roles for disputes settlement panels in settling the
disputes relating to anti-dumping actions taken by the member
governments.

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6.7 WTO: THE THIRD PILLAR IN GLOBAL BUSINESS

 WTO is now viewed as the third pillar of the global business

ensuring that IMF providing short-term international finance & IBRD
(International Bank for Reconstruction & Development) providing long-
term finance.

 The 3 main legal instruments of the WTO are 1) GATT along

with associated agreements & jurisprudence, 2) General Agreement on
Trade in Services (GATS) and 3) the Agreement on trade-related
Intellectual Property Rights (TRIPs).

 WTO paved the way for reduction of duties, tariffs, non-tariff

barriers like quotas & controls. WTO enlarged the market access
opportunities & provided efficient rules for undistorted competition

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among the world countries. These aspects would help the developing
countries which have liberalized & globalized their economies to increase
their exports. It is estimated that the increase in world income due to
liberalization of global business in goods would range between $110 and $
510 billion by 2005.

 WTO contributes to the strengthening the institutional

framework for business relations among member countries.

 Though it is expected that WTO would play a significant role in

expanding the world trade, it is also cautioned that WTO has to face
challenges. The WTO had to contend with a number of disputes during
1995-2000. The disputes were related to the appointment of WTO’s chief.

 Constitution of WTO committee that will oversee the demise of

Multi-Fiber arrangement in phases over next 7 years. In addition to this
dispute over trade financial service caused havoc to WTO.

 WTO is now established as an efficient institution for re-

engineering and re-processing the world trade.

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6.8 WTO: MINISTERIAL MEETINGS OF THE WTO

 First Ministerial Meeting of the WTO:

 It was held on 09 Dec 1996 at Singapore. 128 member
countries attended the meeting. The important highlights of the
meeting were 1) Reaffirmation of the working of the ILO 2) Rejected
the use of labor standards for projectionist purposes 3) Increased
credibility of Dispute Settlement system 4) Helping the least developed
countries 5) Trade-Related Investment Measures (TRIMs) to do
continuous job 6) Negotiation on basic telecommunications to become
a priority 7) Establishment of working group top examine the
relationship between trade & investment and 8) Taking account of
national policies.

 Second Ministerial Meeting of the WTO:

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  Was held on 18-20 May 1998 at Geneva. 132 members
attended this meeting. The important decisions reached were 1)
Setting up of a mechanism to ensure a full & faithful implementation
of existing multilateral agreements 2) Accepting open & transparent
rule-based trading system.

 Third Ministerial Meeting of the WTO:

 Was held on 03 DEC 1999 at Seattle. This meeting was a
failure as the developing nations jointly protested against the lack of
transparency & imposition of the views of the rich on the poor
countries in the negotiations. 135 member countries attended this
meeting.

 Agendas for the next Round:

 The agenda for this meeting included 1) Reviewing the
implementation of the commitments of the Uruguay Round Agreements
2) To reduce tariff up to a level & not to increase the level in future 3)
Developing countries to demand for modifications of industrial tariffs 4)
Developing countries to raise concerns about greater access to
technology for them in the context of TRIPs (Trade Related Intellectual
Property Rights) 5) Trade facilitation & E-Commerce and 6)
Environmental & Labor Standards

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6.9 WTO: INDIA AND WTO

 Despite heated discussions & arguments, India was one of the

76 countries that became founder-members of WTO.
 Benefits to India

 India to obtain large benefits from exports of clothing,

agriculture, forestry, fishery products, processed food & beverages,
 India’s textile & clothing exports will increase.
 Reduction of subsidies/barriers will help India’s
agricultural exports.

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 Rules relating to anti-dumping, subsidies, countervailing
measures,
safeguards & dispute settlement will help India .
 India has the market access to a number of advanced
countries.

 Disadvantages to India

 Protection of intellectual property rights (patents,

copyrights, trademarks etc.,) have been made stringent
 Introduction of products’ patents will lead to a hike in
drug prices of
MNCs, which India can ill-afford.
 MNCs will get control over our generic resources &
as such the control over food production would be jeopardized.
 Patenting has also been extended to a large area of
micro-organisms.
 Application of TRIM agreements undermines any
plan of self-reliant growth based on local technology.
 Service sector like Insurance, Banking, Telecom,
Transportation is backward in India & inclusion of trade in service is
detrimental to the interest of India.
 India’s role in WTO

 India has always been a part of Green Room (a closed

affair) discussions & negotiations.
 Several developing countries look to India for leadership.
 India will have lion’s share in the growing world economic
output consequent upon new round of trade liberalization.
 India is on its way to becoming the next economic
superpower.

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6.10 WTO: DIFFERENCES BETWEEN GATT AND WTO

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  GATT

• It was a set of rules & multi-lateral agreements.

• It was designed with an attempt to establish
International Trade Organization.
• It was applied on a provisional-basis.
• Its rules were applicable to trade in merchandize
goods
• It was originally a multilateral instrument but
plurilateral agreements were added at a later stage.
• Its dispute settlement system was not faster &
automatic.

 WTO

• It is a permanent institution.
• It was established to serve its own purpose.
• Its activities are full & permanent.
• Its rules are applicable to trade in merchandize,
services & in related aspects of intellectual property.
• Its agreements are almost multi-lateral.
• Its dispute settlement system was fast & automatic.

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6.11: ORGANIZATIONAL STRUCTURE OF WTO

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 Ministerial Conference

General Council

Director General

Dispute Settlement Body Trade Policy Review Body

Committees
Committee on
Trade &
Development
Secretariats of WTO
Council on
BOP Restrictions

Council on
Budget, Finance
& Admin

Councils

Council for Council for Related Aspects

Trade in Services Trade of Intellectual Rights

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6.12: UNCTAD

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 The widening trade gap between the
developed & developing countries, the general dissatisfaction of the
developing countries with the GATT & the need for a new organization
for international economic cooperation in the field of trade & aid,
designed to reduce the trade gap of developing countries, encouraged the
establishment of the United Nations Conference on Trade & Development
(UNCTAD) in 1964 as a permanent organ of the UN general assembly.

 The UNCTAD was designed to serve as a

forum in which trade-related development issues could be discussed &
analyzed to lead to the negotiations of international understanding on
issues that were in dispute.

 The Conference, which is a plenary body of a

large number of countries, meets normally at intervals of 4 years.

 The principle functions of the UNCTAD are:

• To promote international trade with a

view to accelerating economic development.
• To formulate principles of & policies
on international trade & related problems of economic development.

• To negotiate international trade

agreements.
• To make proposals for putting its
principles & policies into effect.

 The major activities of UNCTAD

include research & support of negotiations for community agreements,
technical elaboration of new trade activities designed to assist developing
countries in the areas of trade & capital.

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 MODULE 2 GLOBAL MARKETING ENVIRONMENT

6.13: UNCTAD (CONTD)

 UNCTAD’s action program & priorities

have been laid down in the various recommendations adopted by the first
conference in 1964. These recommendations are based on the following
principles:

• Every country has the sovereign right

freely to dispose of its natural resources in the interest of the economic
development & well-being of its own people & freely to trade with other
countries.

• Economic relations between countries,

including trade relations, shall be based on respect for the principles of
sovereign equality of states, self-determination of people & non-
interference in the internal affairs of other countries.

• There shall be no discrimination on the

basis of differences in socio-economic systems & the adoption of various
trading methods & trading policies shall be consistent with this principle.

 Despite the debates & disagreements

over the years, UNCTAD played a key role in the emergence of

• The Generalized System of

Preferences (GSP).

• A maritime shipping code.

• Special international programs

to help the least developed countries.

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• International aid targets.

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