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What is the WTO?

The WTO is an organization that deals with rules
of trade between nations
Functions include acting as:
An organization for liberalizing trade
A forum for trade negotiations
A set of rules
A system to settle disputes

An Organization for
Liberalizing Trade
The WTO is an organization which helps in
removal of trade barriers
Goes with the idea that the hands-off approach
to markets is the most efficient in the long-run
WTOs Stated Aim:
Promote Free Trade
Stimulate Economic Growth


in economics refers to an ideology that

supports the individual rights of property and free

A Forum for Trade Negotiations

A place where member governments go to try to
sort out trade problems
Members start by talking it out
WTO acts as a mediating body

The WTO as a Set of Rules

WTO Agreements
Signed by most of the worlds trading nations
The legal framework for international
Contracts for governments to maintain certain
trading policies
Purpose is to help exporters and importers, while
making sure governments meet social objectives
The WTO oversees the implementation,
administration and operation of the covered

A System to Settle Disputes

Conflict of interests exists in trade
Trade agreements need interpreting

WTO is meant to be a neutral party

to help settle trade disputes

Why WTO ?
International peace:- by helping the
trade to flow smoothly and dealing with
disputes over trade issues
Risk reduction:- Confidence to
nations to do more and more trade,
thereby stimulating economic growth

After World War II
many nations had
adopted a
protectionist stance
on trade
Many felt closedprotectionist
positions was a cause
Victor nations set up
economic institutions
to prevent this from
happening again

Bretton Woods System

of 1946
International Monetary
Fund (IMF)
World Bank
International Trade
Organization (ITO)

The General
Agreement on Trade
and Tariffs (GATT) was
signed into place in
The ITO did not fly
The US said it was unfair

History - GATT
GATT: main purpose was to reduce barriers to
international trade
GATT was an agreement, not an organization
Became the de facto organization for international trade

Trade Rounds negotiation meetings

First 6 rounds reduced tariffs from ~50% to ~12%
7th, the Tokyo Round of the early 70s was first major
effort at trade reform
Mainly about non-tariff barriers to trade, such as:

Foreign exchange controls
Import bans
Restrictive licensing

History - GATT
The 1986 Uruguay Rounds of trade
negotiations covered new trade topics
Trade in services and intellectual property
Sensitive subjects, like textiles and

GATT was expanded by adding:

General Agreement on Trade in Services
Agreement on Trade Related Aspects of
Intellectual Property (TRIPS)

Complexities of globalization strained

the effectiveness of GATT

History - WTO
Uruguay Round ended in 1994 with the
formation of the World Trade Organization
Jan. 1, 1995 WTO was born
GATT, GATS and TRIPS still exist as the framework
for the WTOs operations
Current Round Doha Began November 2001
Ambitious agenda to make globalization more inclusive
of the worlds poor
Talks have been contentious
No agreements have been reached
July 2006 talks were suspended by Director General,
Pacel Lamy, but may go forward at anytime

Formal Structure

Formal Structure
Highest Level Ministerial Conference
Meets at least every two years
Brings together all members of WTO
Can make decisions on all matters
under any multilateral trade agreement

Formal Structure
Second Level - General Council
Meets regularly
Made up of representatives from all
member nations
Has the authority to act on behalf of
the Ministerial Conference
Also acts as:
Dispute Settlement Body
Trade Policy Review Body

Formal Structure
Third Level -Councils for Trade Works
under the General Council
Made up of three councils
1. GATT Council
2. TRIPS Council
3. GATS Council

These councils are charged with

overseeing the functioning of their
various trade agreements

Formal Structure
Fourth Level -Subsidiary Bodies
These are sub-councils under the three
councils for trade
Examples include:
Textiles Monitoring Body, under the GATT
Information Technology Agreement
Committee, under the TRIPS Council
The Services Council, under the GATS


The system promotes peace

Disputes are handled constructively
Free trade cuts the costs of living
It provides more choices of products
Trade stimulates economic growth
Governments are shielded from

Dispute Settlement
It is the central pillar of the multilateral
trading system
It is a unique contribution to the stability of
the global economy
It makes the trading system more secure
and predictable

Dispute Settlement
Mutually acceptable
Stages :

Eg:Case of Venezuela
The Complaint of U.S.A. against

India in WTO
Founder member
Ensured more stability and predictability
MFN status and national treatment for its
India is expected to snatch most of the
business deals that are presently catering
the developed nations which includes
major service based industries like
telecom, financial services, infrastructure
services such as transport and power

India in WTO - Agriculture

Reduction in domestic subsidies
Amber box, Green box and Blue box
Total Aggregate Measurement of Support (AMS) is
negative so not required to undertake reduction
commitments in any of its product

Reduction in export subsidies

No direct subsidies except marketing and
transport subsidies

Tariff binding and progressive reduction of

Primary agricultural products 100%
Processed foods at 150% and edible oils at 300%

India in WTO - Textiles

The textile sector remained outside
the GATT disciplines for many decades
1974: MFA
ATC : negotiated during the Uruguay
Accounted for about 36% of total exports
from India
Largest net foreign exchange earner for
the country

India in WTO - Textiles


European Union
Unbleached Cotton Fabrics (UCF)
Cotton Type Bedliner
Polyester Texturised Filament Yarn
Polyester Texturised Yarn (PTY)
South Africa
Printed and dyed bed linen

India in WTO IT & ITes

Key contributor to the Services Sector
accounting for 5.8% of Indias overall GDP
[Source: PWC report for CII]

The increase in availability and reduction in

tariffs has prompted many developed nations
to go for business with India especially in IT
and ITeS industry
Software exports from the Rajiv Gandhi
Chandigarh Technology Park rose from Rs.504
crore in 2007-08 to Rs.750 crore last year.

India in WTO IT & ITes

100% Income Tax exemption on export profits
available to SEZ units for 5 years, 50% for
next 5 years and 50% of ploughed back
profits for 5 years thereafter.
Exemption from Central seal Tax.
Exemption from Service Tax.
Single window clearance for Central and
State level approval.
This scheme has a significant impact on
future exports & employment. About 235 ITITES specific SEZs have been notified by the

India in WTO IT & ITes

India in WTO IPR

Seven types
Geographical indications
Industrial designs
Integrated circuits
Trade secrets

TRIPS in India
TheAgreementon Trade-Related Aspects of Intellectual
Property Rights (TRIPS) is an
internationalagreementadministered by the World Trade
Organization (WTO) that sets down minimum standards for many
forms of intellectual property (IP) regulation as applied to
nationals of other WTO Members.

Indias patent policy allowed very little scope for patents in


Protecting some of the geographical indications of interest to

India e.g. Basmati rice, Darjeeling tea, Mysore Dosa, Alleppey
Green Cardamom, Madurai Malli etc,.

Sanitary and Phytosanitary Measures
and Technical barriers to trade
Protects human, animal and plant life and
health including from pests and diseases of
Size, shape, weight and packaging material
requirements including labeling and
handling safety
Peanuts, Marine products, Mushrooms in EU

Sources /References :