WTO - World Trade Organization

In between 1929 and the end of second world war, was in halt. But after the second
world war, USA took over the power as it’s industries saw economic boom. USA
tried to reorganize the world trade policies in order to prevent polarization in trading
war.

Organizations helped USA to made that happen were-

1. IMF - Balance of Payment Problem
2. WB - Regulating international investment
3. ITO - regulating international trade and dissolve trade barriers

1947 is the year on which 25 governments signed on a negotiation agreement named

GATT aka General Agreement on Trade and tariffs. Main purpose of GATT was to
protect domestic industries and lowering customs tariffs. Eventually they created ITO
through HAVANA Charter in 1948. in order to achieve it’s purpose, GATT
introduced the mechanism of restoration of most favoured nation treatment (MFN
Principle), National Treatment (NT), Elimination of Quota Restriction on Imports
(QRS), Elimination of Preferential Trading Arrangements, Protection of Domestic
Industries against Export Dumping, State trading & Subsidies.

MFN Principle- If Bangladesh reduces tariffs for India by 5%, tariffs for Pakistan has
to be also reduced by 5% under MFN Principle.

National Treatment (NT)- One state has to treat a foreign company the same way it
treats a domestic company on the matter of trade and tariff.

Elimination of Quota Restrictions on Imports (QRS)- Example of quota restriction is

when one state fixates a quota for the amount of import for a specific product. But
sometimes QRS is allowed on the reasoning that a certain Developing State has to
develop it’s own economical industries. United Nations Conference on Trade and
Development (UNCTAD) was established in 1964 in order to assist Developing
States in the matter of QRS.

Elimination of Preferential Trading Arrangements- When 2 or more nations makes

agreements regarding trades and tariffs, it’s hard for other nations to enter into that
market. GATT says this has to be reduced.

Protection of Domestic Industries against Export Dumping- When a specific product

is being sold in a nation produced and imported by another nation at a price lower
than the production cost and selling price of that producer nation, is called Dumping.
GATT says that nations can take anti-dumping measures such as increasing custom
tariffs.

State Trading- In many context, State itself sells or buys products. GATT dictates that
no State Government should sell all of it’s products not keeping in mind it’s peoples
demand, or no State Government should buy any nation’s products by which it’s own
industries gets destroyed.
Subsidies- In 1955, GATT directed that, government may provides subsidies in order
to protect it’s own domestic industries.