Definition of 'World Trade Organization - WTO

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An 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.

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to what extent ? When the Uruguay Round of talks was on. there was no harm in agreeing to the Uruguay Round agreements in 1995. Indian businesses have only become more efficient and competitive. and if so. misgovernance and corruption. we are still in the transition period. services. We did all this because of our own compulsions. Regarding other agreements such as General Agreement on Trade in Services (GATS). And the rule-based trading system helped us push it through. Regarding the issue of intellectual property rights (IPR). There will be difficulties ahead but we must learn to cope with them. The abolition of QR was warranted in our own interest. The export growth is enough testimony to bolster the view that the WTO has helped us by opening up global markets. besides religious bigotry and social injustice. we maintain the rates at the present levels in spite of the WTO allowing us to maintain higher levels of import duties. Indian businesses have made gains in the last few years due to lower trade barriers in other countries. The agenda demanded we abolish import licensing. Very soon. WTO agreements provide enough defence mechanisms against unbridled imports and we use them to the hilt. . lower import duties. they are on the negotiating table. This is not to say the agenda on reforms in agriculture. thanks to the WTO. eliminate export subsidies and so on. allow foreign investment and technology. The imbalances in economic development exist among countries because of the colonial past. The fears have been proved false. Many hold the view that we dismantled quantitative restrictions (QR) in 2001 under WTO pressures. Yet. We still maintain the highest rates of import duties in the world. And we may see more Indians filing patent applications and benefiting from them and more Indian firms working under licence agreements from patent holders. textiles and other sectors are proceeding at the desired pace or direction. they spread the fears that Indian businesses will be wiped out when we open our doors to foreign firms. So. In fact.How wto deals helped India Have any of the World Trade Organisation (WTO) agreements hit Indian businesses. the US trade deficit powers the economies of many poorer countries. WTO has little to do with any of these causes. In other words. including India. The assumptions that we gave away too much at the Uruguay Round or that WTO agreements created imbalances have little basis. Indeed. These are still. we will be compelled to lower these duties further to cope with the inflow of foreign currency and the consequent rupee appreciation. we have selectively liberalised only those sectors where we saw an advantage. India had embarked on its own economic reforms programme. far below the ‘bound rates’ we had committed at the WTO. rationalisation and globalisation. The programme called for liberalisation.

1.g. Introduction 1. the World Bank. data from published sources have been used.  To study cross-country experiences. and Government of India.1 Objective of the Study The specific objectives of the study are as follow:  To study the genesis and the provisions of the WTO and the GAATs in general.the Reserve Bank of India (RBI).  To examine. the provisions of and commitments in the GATT in respect of the financial sector. the Bank for International Settlements (BIS).2 Source of Information Basically. some libraries have been sourced collecting information. in detail. publications of the WTO. In addition to the Internet. which has been intensively used. Chapter1. the International Monetary Fund (IMF). . e.

Chapter2. It has also been demonstrated that liberalized trade and a trade regime based on multilateral negotiations are equally important for smooth and profitable conduct of trade. is the only international institution hat embodies multilateral agreements with a view to conducting trade between nations smoothly. especially from the Uruguay Round (1986-1994) . The members of the WTO now account for well over 90% of the global trade and virtually all of its investment.and it can be comparable to the IMF or the World Bank.1995. it provides a framework for negotiating and formulizing trade agreement. The WTO is a legal entity-unlike its predecessor. and a dispute resolution process aimed at enforcing participants adherence to WTO agreements which are signed by representatives of member governments and ratified by their parliaments. 2.1 Introduction ToWTO Trade promotes development. the General Agreement on Tariffs and Trade (GATT). The WTO. The membership of the organization has increased to 146 as on April 4. 2003 from 76 founding members of 1995. The organization deals with regulation of trade between participating countries. which came into existence on January 1. Most of the issues that the WTO focuses on derives from previous trade negotiations. Theory and empirical studies corroborate this.

2 Objectives of WTO  Important objectives of WTO are mentioned below:  (i) to implement the new world trade system as visualized in the Agreement.  (ii) to promote World Trade in a manner that benefits every country. .2.  (v) to enhance competitiveness among all trading partners so as to benefit consumers and help in global integration.  (vii) to expand and utilize world resources to the best.  (iii) to ensure that developing countries secure a better balance in the sharing of the advantages resulting from the expansion of international trade corresponding to their developmental needs.  (iv) to demolish all hurdles to an open world trading system and usher in international economic renaissance because the world trade is an effective instrument to foster economic growth.  (viii) to improve the level of living for the global population and speed up economic development of the member nations.  (vi) to increase the level of production and productivity with a view to ensuring level of employment in the world.

All members of the WTO participate in the committees. It is open to all WTO members.2.3 Organizational Structure The General Council has the following subsidiary bodies which oversee committees in different areas:  Council for Trade in Good There are 11 committees under the jurisdiction of the Goods Council each with a specific task. and can create subsidiary bodies as required.  Trade Negotiations Committee . and details of the WTO's work with other international organizations in the field. news and official records of the activities of the TRIPS Council. The Textiles Monitoring Body is separate from the other committees but still under the jurisdiction of Goods Council. The body also has several groups relating to textiles  Council for Trade-Related Aspects of Intellectual Property Rights Information on intellectual property in the WTO.  Council for Trade in Services The Council for Trade in Services operates under the guidance of the General Council and is responsible for overseeing the functioning of the General Agreement on Trade in Services (GATS). The body has its own chairman and only 10 members.

The Trade Negotiations Committee (TNC) is the committee that deals with the current trade talks round. etc. as appropriate. .  (v) With a view to achieving greater coherence in global economic policy making.  (iv) The WTO shall administer Trade Policy Review Mechanism. with the international Monetary Fund (IMF) and with the International Bank for Reconstruction and Development (IBRD) and its affiliated agencies. It is designed to play the role of a watchdog in the spheres of trade in goods.  (iii) The WTO shall administer the Understanding on Rules and Procedures Governing the Settlement of Disputes. the WTO is a new international organisation set up as a permanent body. and shall also provide the frame work for the implementation.4 Functions of WTO The former GATT was not really an organisation.  (ii) The WTO shall provide the forum for negotiations among its members concerning their multilateral trade relations in matters dealt with under the Agreement in the Annexes to this Agreement. foreign investment. administration and operation of the plurilateral Trade Agreements. intellectual property rights. administration and operation and further the objectives of this Agreement and of the Multilateral Trade Agreements. The chair is WTO's director-general. As of June 2012 the committee was tasked with the Doha Development Round. 2. the WTO shall cooperate. Article III has set out the following five functions of WTO.  (i) The WTO shall facilitate the implementation. it was merely a legal arrangement. On the other hand. trade in services.

3. it has to do the same to all other WTO members. 4.Promoting Fair Competition . in turn.  Countries entering into regional free trade agreements do not need to extend the preferences negotiated in this context on an MFN basis. This is called the most favoured nation (MFN) principle. If it grants a special favour to someone. encourages market security and investment.2. Trade Sans Discrimination Under the WTO Agreements.Predictability The WTO attempts to make the trading system stable and predictable. These principles are as under: 1. which are fundamental to multilateral trading system. Some exceptions permitted under strict conditions are:  Developed countries can give tariff preference to developing countries. National Treatment Another form of trade without discrimination under the WTO rules is that a country should not treat the imported and domestically produced goods unequally-at least after the foreign goods have come into the domestic market. promotes employment and benefits commitments. 2. which. a country is not permitted to discriminate between its trading partners.5 Principles of WTO Trading System The WTO agreements are based on a few simple principles.

Single Undertaking The WTO members must accept all of the obligations of the GATT. to maintain institutions allowing for the review of administrative decisions affecting trade. governments are able to restrict trade. 6. In specific circumstances. which under the old GATT could receive the benefits of some trade concessions without having to join in and undertake their full obligations. . greater flexibility and special privileges. animal health and plant health.Encouraging Development and Economic Reform Over 75% of the WTO members are developing countries and countries in transition to market economies. This ends the ‘free ride’ of some developing countries.Safety valves. be it MFN or national treatment or anti-dumping and subsidies rules. The objective of the WTO is to secure fair conditions for trade.Transparency. TRIPS and any other corollary agreements. 8. 5. to respond to requests for information by other members. The WTO’s agreements permit members to take measures to protect not only the environment but also public health. The WTO tries to give more benefits to these economies by allowing them more time to adjust. The WTO members are required to publish their trade regulations. 7. Since the issues are too complex and several governments are involved rule-based approach ensures fairness in trade. and to notify changes in trade policies to the WTO.

services and technical barriers to trade).  The work in this area is overseen by the Committee on Trade and Development of the WTO. are met by the following ways:  The WTO agreements have special provisions on developing countries.6 WTO And Developing Countries Of the 146 members of the WTO. the GATT includes a special section (part 4) on Trade and Development. Special Provisions in the Agreements The WTO agreements contain several provisions aimed at developing and least developed countries. recognized as special by the WTO.  The WTO Secretariat provides technical assistance for developing countries. textiles.(e. almost two-thirds are from developing countries (WTO.  Provisions for several means of supporting developing countries . The requirements of these countries.2. The developing countries are of importance to the WTO not only because they are large in number but also because they are emerging as significant players in the global economy. Other areas where the WTO agreement show special concern for the developing countries are:  Extra time for developing countries to fulfill their commitment.g.  Provisions for increasing developing countries trading opportunities through greater market access. which has provision on the concept of non-reciprocity in trade negotiations between developing and developed countries-when developed countries grant trade concessions to developing countries they should not expect the developing countries to reciprocate by granting similar concessions. For example. .2001).

WTO rules have forced developing countries to remove trade barriers. On the other hand.7 Role of WTO in international trade  (i) WTO's aim is to liberalize international trade. .2.  (iv)It is seen that the developed countries have unfairly retained trade barriers.  (ii) WTO establishes rules regarding international trade and sees that these rules are obeyed.  (iii) 153 countries of the world are currently members of the WTO.

Chapter 3.1 WTO Agreements and Dispute Settlement System The WTO Agreements encompass goods. Table 3. They want that governments should make their trade policies transparent by notifying the WTO about laws in force and measures adopted. annexes. services and intellectual property. They contain individual country’s commitments to reduce customs tariffs and trade barriers and to open and continue to keep open service markets. The agreements fall into the following simple structure: . decisions and understandings. and through regular reports by the secretariat on countries trade policies. They spell out procedures for settling disputes. They deal with the principles of liberalization and the allowed exceptions. The table of contents of “ The Result of the Uruguay Round of Multilateral Trade Negotiations: The Legal Texts” is a long list of about 60 agreements. They prescribe special treatment for developing countries.

o They start with broad principles: the GATT and the GATS. Market Countries Countries Access schedules of schedules of commitments. . The goods and services agreements are based on a three-part common outline as follows.1 Structure of WTO Agreements Basis Goods Services Intellectual Disputes Principles Property GATT GATS TRIPS Dispute Settlement Additional Other goods Services Details Agreements Annexes.Table 1. commitments Commitments (and MFN exemptions). o Next are additional agreements and annexes dealing with special needs of specific sectors or issues. The agreement on TRIPS also belongs to this category although it has no additional parts at present. and Annexes.

For the GATS. .o Finally come the detailed and lengthy schedules of commitments made by individual countries allowing specific foreign products or service-providers access to their markets. For the GATT. and they include lists of types of services where individual countries say they are not applying the MFN principles of non-discrimination. the commitments state how much access foreign service-providers are allowed for specific sectors. these mean binding commitments on tariffs for goods and quotas for some agricultural goods.

. The main objective of the WTO dispute settlement mechanism is to contain unilateral imposition of trade sanctions. . if a member fails to implement a WTO ruling there are two temporary measures that can be taken.  The wider range of issues covered by the WTO agreements.Dispute Settlement In general. In such case. the former may choose to use the WTO’s dispute settlement mechanism. not inconformity with the WTO rules.  The wider range of WTO rules and their greater specificity. including services and TRIPS. Dispute settlement procedures of the WTO plays a pivotal role in timely resolution of the trade conflicts in accordance with the WTO’s established rules. The immediate priority is to settle the disputes through consultrations. Once a dispute is notified to the WTO. The long term result of the dispute settlement process must be complete restoration of full compliance with the WTO laws. an established timetable of ‘automatic’ steps is initiated. Otherwise. unilateral retaliation by powerful trading entities is subject to multilateral WTO control. The higher rate of notification of disputes is indicative of:  Greater confidence of members in the efficacy of the new dispute settlement mechanism.e. although trade goes on smoothly there occasions when a member is not happy with the way some other members are conducting trade with it. However. all of which are governed by the same dispute settlement system. i. the members in the WTO’s Dispute Settlement Body (DSB) refer a dispute to a panel of experts.

the agreement. The GATT was never permanent. In other words. intellectual property as well. ratified the WTO agreements. but is no longer the main set of rules for international trade.2 GATT and WTO: A Comparison GATT WTO 1. The GATT’s dispute settlement 4. The GATT. 3. The GATT was ad hoc and 1. As an international ratified in members parliaments. Table 1. The WTO has “members”. the WTO has a sound it contained no provisions for the legal basis because members have creation of an organization. The WTO is the GATT and several other things. The WTO’s dispute settlement . The WTO and its agreements are provisional.The GATT dealt with trade in 3. parties”. still exists. and organization. The GATT as an international institution is dead. The WTO covers services and goods. 3. 4. the WTO is an incremental change from the GATT. and its place has been taken over by the WTO.2 GATT and WTO The GATT and WTO are different. The large number of WTO members increasing levels of trade and the greater importance of trade in the economies of members. 2. The GATT had “contracting 2.

. Its rulings cannot be blocked. system is faster. more automatic than the old GATT system.mechanism was weak.