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S – A 2ND SEMESTER MANAGERIAL ECONOMICS PRESENTATION ON WORLD TRADE ORGANIZATION ASSIGNED BY PROFESSOR : - AJGAONKAR
TOPIC OF DISCUSSION
INTRODUCTION GATT & its objectives GATT & its eight round Key principles of WTO. Functions of WTO Organizational structure Ministerial conference Criticism on WTO India's commitment to WTO Impact of WTO Positive Negative Acknowledgement
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Dedhia Asdan Lopez 49 Poonam Mane Vikas Mane Yukti Marvah Sanket Mazgaonkar
is the only global international organization dealing with the rules of trade between nations. It sets global rules for trade & provides a forum for trade negotiations & resolving trade disputes between member countries. There are currently 151 member countries out of which developing countries account for more than 2/3 of the membership. The WTO was established on 1st NOV, 1995 as a successor to the GATT.
GATT ( GENERAL AGREEMENT ON TARIFFS & TRADE )
is a set of multilateral trade agreements aimed at the abolition of quotas & tariff duties among member nation. It was originally signed by 23 countries at GENEVA on 1st Jan,1947.
OBJECTIVES OF GATT Abolishment of quotas & favouritism among contracting parties To prohibit the use of quantitative restrictions on import & export Promote the trade of developing countries & other provisions to introduce transparency in trading system. Raising the standard of living ensuring full employment & a large & steadily growing volume of real income Expansion of production of goods & services
GATT & ITS EIGHT ROUNDS
sponsored 8 negotiation rounds, the last of which was the URUGUAY round. In 1986, during the Uruguay round, GATT became a springboard for economic liberalization on agreement in agriculture, services etc. It was decided by the contracting parties to form WTO in 1994 There was a constant feeling of lack of enforcement mechanism & a compelling & systematic methodology for increasing free trade. By the end of Uruguay round, a 15000- page document was completed & it resulted in the formation of WTO.
Duration 7 months
Subjects covered Tariffs
Signing of GATT, 45,000 tariff concessions affecting $10 billion of trade
5 months 8 months
Countries exchanged some 5,000 tariff concessions Countries exchanged some 8,700 tariff concessions, cutting the 1948 tariff levels by 25% $2.5 billion in tariff reductions
Tariffs, admission of Japan
11 months 37 months
Tariffs Tariffs, ANTI-DUMPING
Tariff concessions worth $4.9 billion of world trade Tariff concessions worth $40 billion of world trade
Tariffs, non-tariff measures, "framework" agreements
Tariff reductions worth more than $300 billion dollars achieved
Tariffs, non-tariff measures, rules, services, intellectual property, dispute settlement, textiles, agriculture, creation of WTO, etc
The round led to the creation of WTO, and extended the range of trade negotiations, leading to major reductions in tariffs (about 40%) and agricultural subsidies, an agreement to allow full access for textiles and clothing from developing countries, and an extension of intellectual property rights.
WTO REPLACED GATT AS THE WORLD’S GLOBAL TRADING BODY IN 1995 AND CURRENT SET OF GOVERNING RULES STEMS FROM THE URUGUAY ROUND OF GATT ( 1986-1994) On 1 January 2008, the multilateral trading system celebrated its 60th anniversary.
KEY PRINCIPLES OF WTO
without discrimination No nation must get favourable treatment & equal treatment should be given to imported & locally- produced goods. Predictable & growing access to market Quotas are outlawed & tariff duties are drastically reduced. Promoting fair competition WTO extent previous GATT rules that laid down the basis on which govt could imposed compensating duties on unfair competition
development & economic
reform It intends to favour developing countries & provides for the encouragement of industries in these countries Transparency The WTO members are required to publish there trade regulations so that the other members can take proper decision regarding trade in that country
MAIN FUNCTIONS OF WTO
of trade barriers & other measures that distort competition To administer WTO agreements Handling of trade disputes between member nations Monitoring national trade policies Serves as a platform for trade negotiations Co-operating with other international organizations Overseeing national trade barriers Technical assistant & training to developing countries
is the governing body of the WTO. It has the authority to adopt final decision on all WTO matters. It meets every two Yrs for about 4 days and is composed of trade ministers of all member nations. Following are some of the ministerial conferences held :-
WTO Ministerial Conferences
1st Singapore, December 1996
Geneva, May 1998
Seattle, November-December 1999
Doha, Qatar, November 2001
Cancun, Mexico, September 2003
Hong Kong, December 2005
The General Council
general council is the highest ruling body of WTO, when the ministerial conference is not in session. It is the only one which can make binding decision outside the ministerial conference.
Dispute settlement mechanism
The dispute settlement mechanism (DSM) is a quasi – judicial system for resolving trade disputes between member nations.
To establish panels which examine the case in dispute. To appoint members of the standing Appellate body ( concerned with the appeals ) To adopt reports of panels & the appellate body To monitor implementation of rulings & recommendations
Trade Policy Review Mechanism The WTO agreements stipulate that ensure that its laws, regulations & administrative procedure confirm to its WTO obligations. It reviews the policies & practices of members so that it adheres with the WTO
CRITICISMS ON WTO
Khor, the director of 3rd World Network argues that WTO operation has a systematic bias towards rich countries & multinational corporation which has proved to be harmful for other poor countries. He adds that the developing countries have not benefited from the WTO agreement of Uruguay round because of following reasons
Market Access has not improved No gain from banning of textile quotas No improvement from anti-dumping measures On the other hand domestic support & export subsidies in the rich countries remain high
course of promoting globalization, factors like labour and environment have been ignored by the WTO The UN Development Programme reports that the richest 20% of the worlds population consumes 86% of the worlds resources while the poorest 80% consumes just 40% The EU had banned beef made from artificial growth hormones. The WTO recently ruled that this health law is a barrier to trade & should be abolished Hence, indirectly WTO is bad for health.
INDIA'S COMMITMENT TO WTO
of tariff barriers Phasing out of quantitative restrictions of imports Reduction in tariff on textile & clothing Reduction of export subsidies in case of agricultural goods The govt. of India has allowed foreign firms to provide services in 33 activities such as Transfer of Technology, Capital inflows & creation of environment. India has withdrawn a number of measures that discriminate against foreign investment in the
IMPACT OF WTO ON INDIAN ECONOMY
in merchandise exports
India’s merchandise exports have increased since the starting of WTO in 1995.
Textile & Clothing Agriculture, Forestry & fishery product Processed food & beverage
60% 20% 20%
Growth in services exports
India’s performance in service sector exports is much better than the merchandise exports in terms of percentage share in world exports. The software services accounted for nearly 50% of the total services exports of India.
per the commitments made to the WTO, India has withdrawn a number of measures against foreign investment. As a result of this, foreign investment has increased over the years in India.
is estimated that textile sector would be one of the major beneficiaries of the impact of the Uruguay round. India stands to gain as textile is one of its important export sectors
on Reduction in Tariffs
As per commitments made to WTO, India has begun to reduce import duties. As a result of this, tariffs has been reduced year after year to confirm to WTO provisions & hence Indian industry has to face increasing competition from foreign goods.
on SSI units
As per WTO agreement India has to reduced reservation for SSI units. This has made several SSI units weak during the past couple of years.
on Indian Agriculture
India is one of the largest producers in the world in respect of agricultural goods. The WTO agreement on agriculture has only, in theory, favour the developing countries but in practice, its implication have seriously affected agricultural exports to developed countries.
would like to thank Prof. Ajgaonkar that Sir gave us an opportunity to study various aspects of Managerial Economics through this Project. We are thankful to Prof. Ajgaonkar. Without his willing support & cooperation our project would not have seen light of the day. We have been benefited from his valuable enormous wealth of experience and guidance.