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INTRODUCTION

What is the WTO? The World Trade Organization (WTO) is the only global international organization dealing with the rules of trade between nations. At its heart are the WTO agreements, negotiated and signed by the bulk of the worlds trading nations and ratified in their parliaments. The goal is to help producers of goods and services, exporters, and importers conduct their business. The World Trade Organization (WTO) is the only international organization dealing with the global rules of trade between nations. Its main function is to ensure that trade flows as smoothly, predictably and freely as possible The result is assurance. Consumers and producers know that they can enjoy secure supplies and greater choice of the finished products, components, raw materials and services that they use. Producers and exporters know that foreign markets will remain open to them. The result is also a more prosperous, peaceful and accountable economic world. Decisions in the WTO are typically taken by consensus among all member countries and they are ratified by members parliaments. Trade friction is channelled into the WTOs dispute settlement process where the focus is on interpreting agreements and commitments, and how to ensure that countries trade policies conform with them. That way, the risk of disputes spilling over into political or military conflict is reduced. By lowering trade barriers, the WTOs system also breaks down other barriers between peoples and nations. At the heart of the system known as the multilateral trading system are the WTOs agreements, negotiated and signed by a large majority of the worlds trading nations, and ratified in their parliaments. These agreements are the legal ground-rules for international commerce. Essentially, they are contracts, guaranteeing member countries important trade rights. They also bind governments to keep their trade policies within agreed limits to everybodys benefit.

The agreements were negotiated and signed by governments. But their purpose is to help producers of goods and services, exporters, and importers conduct their business. The goal is to improve the welfare of the peoples of the member countries.

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) established in the wake of the Second World War. So while the WTO is still young, the multilateral trading system that was originally set up under GATT is already 50 years old. The system celebrated its golden jubilee in Geneva on 19 May 1998, with many heads of state and government leaders attending. The past 50 years have seen an exceptional growth in world trade. Merchandise exports grew on average by 6% annually. Total trade in 1997 was 14-times the level of 1950. GATT and the WTO have helped to create a strong and prosperous trading system contributing to unprecedented growth. The system was developed through a series of trade negotiations, or rounds, held under GATT. The first rounds dealt mainly with tariff reductions but later negotiations included other areas such as anti-dumping and non-tariff measures. The latest round the 198694 Uruguay Round led to the WTOs creation. The negotiations did not end there. Some continued after the end of the Uruguay Round. In February 1997 agreement was reached on telecommunications services, with 69 governments agreeing to wide-ranging liberalization measures that went beyond those agreed in the Uruguay Round. In the same year 40 governments successfully concluded negotiations for tariff-free trade in information technology products,and 70 members concluded a financial services deal covering more than 95% of trade in banking, insurance, securities and financial information. At the May 1998 ministerial meeting in Geneva, WTO members agreed to study trade issues arising from global electronic commerce. The next ministerial conference is due to be held in the United States in late 1999. In 2000, new talks are due to start on agriculture and services and possibly a range of other issues.

The organization
The WTOs overriding objective is to help trade flow smoothly, freely, fairly and predictably. It does this by: Administering trade agreements Acting as a forum for trade negotiations Settling trade disputes Reviewing national trade policies Assisting developing countries in trade policy issues, through technical assistance and training programmes Cooperating with other international organizations Structure The WTO has more than 130 members, accounting for over 90% of world trade. Over 30 others are negotiating membership. Decisions are made by the entire membership. This is typically by consensus. A majority vote is also possible but it has never been used in the WTO, and was extremely rare under the WTOs predecessor, GATT. The WTOs agreements have been ratified in all members parliaments. The WTOs top level decision-making body is the Ministerial Conference which meets at least once every two years. Below this is the General Council (normally ambassadors and heads of delegation in Geneva, but sometimes officials sent from members capitals) which meets several times a year in the Geneva headquarters. The General Council also meets as the Trade Policy Review Body and the Dispute Settlement Body. At the next level, 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 such as the environment, development, membership applications and regional trade agreements. The first Ministerial Conference in Singapore in 1996 added three new working groups to this structure. They deal with the relationship between trade and investment, the interaction between trade and competition policy and transparency in government procurement. At the second Ministerial Conference in Geneva in 1998 ministers decided that the WTO would also study the area of electronic commerce, a task to be shared out among existing councils and committees. Secretariat The WTO Secretariat, based in Geneva, has around 500 staff and is headed by a director-general. It does not have branch offices outside Geneva. Since decisions are taken by the members themselves, the Secretariat does not have the decision-making role that other international bureaucracies are given. The Secretariats main duties are to supply technical support for the various councils and committees and the ministerial conferences, to provide technical assistance for developing countries, to analyzeworld trade, and to explain WTO affairs to the public and media. The Secretariat also provides some forms of legal assistance in the dispute settlement process and advises governments wishing to become members of the WTO. The annual budget is roughly 117 million Swiss francs. The WTO is run by its member governments. All major decisions are made by the membership as a whole, either by ministers (who meet every two years) or by officials (who meet regularly in Geneva). Decisions are normally taken by consensus. The highest authority is the ministerial conference which meets at least once every two years. More routine work is supervised by the General Council (in three guises). Numerous other councils, committees, working parties and negotiating groups cover the wide range of WTO issues.

Membership, alliances and bureaucracy New members enjoy the privileges that other member-countries give to them and the security that the trading rules provide. In return, they had to make commitments to open their markets and to abide by the rules those commitments were the result of the membership (or accession) negotiations. Once they are members, countries increasingly find themselves in groups, some regional (such as the EU or ASEAN), some dealing with specific issues (such as the Cairns Group). Members activities are supported by a 500-strong WTO Secretariat with a director general at the head. Special policies Special focus is given to five policies supporting the WTOs main functions: assisting developing and transition economies; specialized help for export promotion (through the International Trade Centre); regional trading arrangments; cooperation in global economic policy-making; reviews of members trade policies; routine notification when members introduce new trade measures or alter old ones.

The WTO agreements.


How can you ensure that trade is as fair as possible, and as free as is practical? By negotiating rules and abiding by them. The WTOs rules the agreements are the result of negotiations between the members. The current set were the outcome of the 198694 Uruguay Round negotiations which included a major revision of the original General Agreement on Tariffs and Trade (GATT). GATT is now the WTOs principal rule-book for trade in goods. The Uruguay Round also created new rules for dealing with trade in services, relevant aspects of intellectual property, dispute settlement, and trade policy reviews. The complete set runs to some 30,000 pages consisting of about 60 agreements and separate commitments (called schedules), made by individual members in specific areas such as lower customs duty rates and services market-opening. Through these agreements, WTO members operate a non-discriminatory trading system that spells out their rights and their obligations. Each country receives guarantees that its exports will be treated fairly and consistently in other countries markets. Each promises to do the same for imports into its own market. The system also gives developing countries some flexibility in implementing their commitments. Goods It all began with trade in goods. From 1947 to 1994, GATT was the forum for negotiating lower customs duty rates and other trade barriers; the text of General Agreement spelt out important rules, particularly nondiscrimination. Since 1995, the updated GATT has become the WTOs umbrella agreement for trade in goods. It has annexes dealing with specific sectors such as agriculture and textiles, and with specific issues such as state trading, product standards, subsidies and actions taken against dumping. Services Banks, insurance firms, telecommunications companies, tour operators, hotel chains and transport companies looking to do business abroad can now

enjoy the same principles of freer and fairer trade that originally only applied to trade in goods. These principles appear in the new 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 open those markets are. Intellectual property The WTOs intellectual property agreement amounts to rules for trade and investment in ideas and creativity. The rules state how copyrights, trademarks, geographical names used to identify products, industrial designs, integrated circuit layout-designs and undisclosed information such as trade secrets "intellectual property" should be protected when trade is involved. Dispute settlement The WTOs procedure for resolving trade quarrels under the Dispute Settlement Understanding is vital for enforcing the rules and therefore for ensuring that trade flows smoothly. Countries bring disputes to the WTO if they think their rights under the agreements are being infringed. Judgements 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. Failing that, they can follow a carefully mapped out, stage-bystage procedure that includes the possibility of a ruling by a panel of experts, and the chance to appeal the ruling on legal grounds. Confidence in the system is borne out by the number of cases brought to the WTO 167 cases by March 1999 compared to some 300 disputes dealt with during the entire life of GATT (194794).

Policy review The Trade Policy Review Mechanisms purpose is to improve transparency, to create a greater understanding of the policies that countries are adopting, and to assess their impact. Many members also see the reviews as constructive feedback on their policies. All WTO members must undergo periodic scrutiny, each review containing reports by the country concerned and the WTO Secretariat. Over 45 members have been reviewed since the WTO came into force.

TRADING INTO THE FUTURE: INTRODUCTION TO THE WTO Overview: A navigational guide The WTO agreements cover goods, services and intellectual property. They spell out the principles of liberalization, and the permitted exceptions. They include individual countries commitments to lower customs tariffs and other trade barriers, and to open and keep open services markets. They set procedures for settling disputes. They prescribe special treatment for developing countries. They require governments to make their trade policies transparent. And they share a common three-part structure. Tariffs: more bindings and closer to zero The bulkiest result of Uruguay Round are the 22,500 pages listing individual countries commitments on specific categories of goods and services. These include commitments to cut and bind their customs duty rates on imports of goods. In some cases, tariffs are being cut to zero with zero rates also committed in the 1997 agreement on information technology products. There is also a significant increase in the number of bound tariffs duty rates that are committed in the WTO and are difficult to raise. Agriculture: fairer markets for farmers The original GATT did apply to agricultural trade, but it contained loopholes. For example, it allowed countries to use some non-tariff measures such as import quotas, and to subsidize. Agricultural trade became highly distorted, especially with the use of export subsidies which would not normally have been allowed for industrial products. The Uruguay Round agreement is a significant first step towards order, fair competition and a less distorted sector. It is being implemented over a six year period (10 years for developing countries), that began in 1995. Participants have agreed to initiate negotiations for continuing the reform process one year before the end of the implementation period. The negotiations are now underway. Textiles: back in the mainstream Textiles, like agriculture, is one of the hardest-fought issues in the WTO, as it was in the former GATT system. It is now going through fundamental change under a 10-year schedule agreed in the Uruguay Round. Among the

changes: the system of import quotas that has dominated the trade since the early 1960s is being phased out as products are brought under GATT rules in four steps. Services: rules for growth and investment The General Agreement on Trade in Services (GATS) is the first ever set of multilateral, legally-enforceable rules covering international trade in services. GATS operates on three levels: the main text containing general principles and obligations; annexes dealing with rules for specific sectors; individual countries specific commitments to provide access to their markets. GATS also has a fourth element: lists showing where countries are temporarily not applying the most-favoured-nation principle of nondiscrimination. These commitments like tariff schedules under GATT are an integral part of the agreement. So are the temporary withdrawals of most-favoured-nation treatment. Negotiations on commitments in four sectors have taken place after the Uruguay Round. A full new services round started, as required in GATS, in 2000. Intellectual property: protection and enforcement The Uruguay Round brought intellectual property rights copyrights, trademarks, patents, etc into the GATT-WTO system for the first time. This is an increasingly important part of trade. The new agreement tackles five broad issues: how the trading systems principles should be applied to intellectual property rights, how best to protect intellectual property rights, how to enforce the protection, how to settle disputes, and what should happen while the system is gradually being introduced. Anti-dumping, subsidies, safeguards: contingencies, etc Binding tariffs, and applying them equally to all trading partners (MFN) are key to the smooth flow of trade in goods. The WTO agreements uphold the principles, but they also allow the principles to be broken in some circumstances. Three issues are important: action taken against dumping (selling unfairly at a low price)

subsidies and special countervailing duties to offset the subsidies emergency trade restrictions designed to safeguard domestic industries. Non-tariff barriers: technicalities, red tape, etc Finally, a number of agreements deal with various technical, bureaucratic or legal issues that could involve hindrances to trade. technical regulations and standards import licensing or the valuation of goods at customs pre-shipment inspection: further checks on imports rules of origin: made in where? investment measures For the specialists: the plurilateral agreements Two agreements remain signed by only a few WTO members. They are called plurilateral: civil aircraft government procurement The dairy and bovine meat agreements were terminated at the end of 1997 Trade policy reviews: transparency and feedback The WTO conducts regular reviews of individual countries trade policies the trade policy reviews. This is partly to ensure that individuals and companies involved in trade face transparent regulations and policies. The importance of the process can be seen from the seniority of the Trade Policy Review Body its the WTO General Council in another guise.

Developing countries.
Over three-quarters of WTO members are developing or least-developed countries. Special provisions for these members are included in all the WTO agreements. The special provisions include: longer time periods for implementing agreements and commitments, measures to increase trading opportunities for these countries, provisions requiring all WTO members to safeguard the trade interests of developing countries, and support to help developing countries build the infrastructure for WTO work, handle disputes, and implement technical standards. In 1997, a high-level meeting on trade initiatives and technical assistance for least-developed countries brought their concerns to centre stage. The meeting involved six intergovernmental agencies and resulted in an integrated framework to help least-developed countries increase their ability to trade, and some additional preferential market access agreements. A committee on trade and development, assisted by a sub-committee on least-developed countries, looks at developing countries special needs. Its responsibility includes implementation of the agreements, technical cooperation, and the increased participation of developing countries in the global trading system. Technical assistance and training The WTO organizes around 100 technical cooperation missions to developing countries annually. It holds on average three trade policy courses each year in Geneva for government officials. Regional seminars are held regularly in all regions of the world with a special emphasis on African countries. Training courses are also organized in Geneva for officials from countries in transition from central planning to market economies. In 1997/98, the WTO set up reference centres in almost 40 trade ministries in capitals of least-developed countries, providing computers and internet access to enable ministry officials to keep abreast of events in the WTO in Geneva through online access to the WTOs immense database of official documents and other material.

TRADING INTO THE FUTURE: INTRODUCTION TO THE WTO Overview About 100 of the WTOs over 130 members are developing countries. They are expected to play an increasingly important role in the WTO because of their numbers and because they are becoming more important in the global economy. The WTO agreements take account of these countries interests in a number of ways. Committees The WTO Committee on Trade and Development has a wide-ranging mandate. Among the broad areas of topics it has tackled as priorities are: how provisions favouring developing countries are being implemented, guidelines for technical cooperation, increased participation of developing countries in the trading system, and the position of least developed countries. The Subcommittee on Least Developed Countries follows a number of initiatives for the WTOs poorest members. Technical Cooperation Technical cooperation is an area of WTO work that is devoted entirely to helping developing countries (and countries in transition from centrallyplanned economies) operate successfully in the multilateral trading system. The objective is to help developing countries create the capacity to build the necessary institutions and to train officials. The subjects covered deal both with trade policies and with effective negotiation. Issues Current issues relevant to developing countries and under discussion in the WTO include participation in the trading system, erosion of preferences, and the ability to adjust to new opportunities the supply side.

10 benefits of the WTO trading system


From the money in our pockets and the goods and services that we use, to a more peaceful world the WTO and the trading system offer a range of benefits, some well-known, others not so obvious. The world is complex. This text highlights some of the benefits of the WTOs "multilateral" trading system, but it doesnt claim that everything is perfect otherwise there would be no need for further negotiations and for the rules to be revised. Nor does it claim that everyone agrees with everything in the WTO. Thats one of the most important reasons for having the system: its a forum for countries to thrash out their differences on trade issues. That said, there are many over-riding reasons why were better off with the system than we would be without it. Here are 10 of them. The ten benefits 1.The system helps promote peace 2. Disputes are handled constructively 3. Rules make life easier for all 4. Freer trade cuts the costs of living 5. It provides more choice of products and qualities 6. Trade raises incomes 7. Trade stimulates economic growth 8. The basic principles make life more efficient 9. Governments are shielded from lobbying 10. The system encourages good government

WORLD TRADE ORGANIZATION

Project Submission by:

KUNAL MAKHIJA
Roll No. 26 PGPM 2000-2003 IMI