• Economic integration is a new reality
in the international business market.
• Business and governments have
created a range of institutions,
treaties, and agreements that help to
– Overcome trade differences
– Boost the free movement of trade,
investment, and services across national
Development of the World
• Intellectual arguments for free trade:
– Adam Smith and David Ricardo.
• Free trade as government policy:
– Britain’s (1846) repeal of the Corn
• Britain continued free trade policy.
– Fear of trade war.
World War I to World War II
1918 - 1939
• Great Depression
– US stock market collapse
– Smoot-Hawley Act (1930)
• US had positive trade balance with world
• Act imposes tariffs to protect U.S. firms.
• Foreign response was to impose own
• US exports tumbled
The General Agreement on Tariffs and
Trade remained in existence for a
period of 46 years it came into force on
1 Jan 1948, as a result of Bretton
Woods Conference 1944. GATT started
as a agreement for trade concessions
among 23 nations, including India. Its
membership increased to 117 countries
as on 31st Dec 1994 - the day it ceased
to exist. GATT was a multilateral treaty
which provided a forum to discuss
trade problems faced by member
countries known as contacting parties.
Ever since the beginning of 1980,
the economy has been passing
through a new phase of transition.
The essential feature of this
transition has been the opening up of
their economies by developed and
developing countries. Over the past
50 years ever since formation of
GATT in 1948, trade has been
powerful engine for growth. The
policy of trade liberalization was
underlined by multi-lateral trading
system governed by GATT till 31st
Dec 1994 and now by WTO since
1st Jan 1995.
S.N Round Place Year Features
1. . First Geneva 1947 Tariff cuts for 45000 products worth $10 billion
(Switzerland) of trade on an annual basis .
2. Secon Annecy 1949 Custom duty were reduced for another 5000
d (France) items of goods.
3. Third Torquay 1950-5 Adopted 8700 tariff reduction.
4. Fourth Geneva 1955-5 To further cut duties for goods worth $2.5
(Switzerland) 6 billion.
5. Fifth Geneva 1960-6 It was known as Dillon Round. Custom duties
(Switzerland) 2 charged for 4000 items worth $5 billion.
6. Sixth Geneva 1964-6 It was known as Kennedy Round. Cut tariffs
(Switzerland) 7 for industrial goods upto 50%.
7. Seven Tokyo 1973-7 Ended at Geneva. Participants cut custom
th (Japan) 9 duties by 20-30% for goods traded.
8. Eight Uruguay 1986-9 This was known as Uruguay Round. Lead to
3 the formation of WTO.
The World Trade Organization (WTO)
Multilateral negotiations under GATT
Annual Growth Under
GATT AND WTO
WTO is more global in its membership
GATT was adhoc and provisional,
WTO and its agreements are permanent.
WTO has members , GATT had
GATT dealt in trade in goods, WTO
also includes services and intellectual
WTO dispute settlement system is
faster, than the old GATT system based
on consensus of all members.
Principles Of The Trading
Without Discrimination – (MFN and National treatment to
Freer – With barriers coming down through negotiation;
Predictable – Bound tariffs
More Competitive – By discouraging “unfair” practices such
as export subsidies and dumping products at below cost to
gain market share;
More Beneficial for Less Developed Countries – By giving
them more time to adjust, greater flexibility, and special
Voting Principles in WTO
Principle One member, one vote
Primary aim Consensus
No consensus Majority vote
Interpretation of ¾ in favor
Amendment to 2/3 in favor
Propose amendments Countries and
Highest Level: Ministerial Conference
Second level: General Council
Third level: Councils for Trade
Fourth level: Subsidiary Bodies
Technical Barriers to Trade
• Standard and Technical regulation
• Right to adopt standards
• Sanitary and Phytosanitary Measures
Sanitary and Phyto-
Sanitary (SPS) Agreement
Under the SPS agreement, the WTO sets
constraints on member-states policies relating to
food safety (bacterial contaminants, pesticides,
inspection and labelling) as well as animal and
plant health (imported pests and diseases).
SPS agreement was negotiated during the
Uruguay Round of the General Agreement on
Tariffs and Trade, and entered into force with the
establishment of the WTO at the beginning of
WTO provisions explicitly prohibits
TRIM’s the following Trade restrictive and
Trade distortive measure:
• Local content
• Foreign exchange
Trade and Environment
Trade and Development
(Subcommittee on Least-Developed
Regional Trade Agreements
Balance of Payments Restrictions
Budget, Finance and Administration
Working parties on Accession
Sixth Ministerial Conference
• The sixth WTO Conference Ministerial was
held in Hong Kong from December 13 -
December 18, 2005.
• The main issues discussed included
reduction of domestic support and
elimination of export subsidies by developed
countries, development package for Least
Developed Countries (LCDs).
In this meeting, countries agreed to phase out
all their agricultural export subsidies by the
end of 2013, and terminate any cotton export
subsidies by the end of 2006.
concessions to developing countries included
an agreement to introduce duty free, tariff free
access for goods from the Least Developed
• Resolved to complete the Doha Work
Programme fully and conclude negotiations
• Amendment to WTO TRIPS Agreement
reaffirmed to address public health concerns
of developing countries
• Establish modalities in agriculture and non-
agriculture market access (NAMA).
WTO experience for developing
Tariff Peaks (high import duties on certain products) remain
No gains yet from the supposed phasing-out of textiles quotas.
Increase in non-tariff barriers (AD, SPS, TBT)
Continued high protection in Agriculture (USA- Sugar 244%,
Peanuts 174%; Japan- Wheat 353%) up to 36% reduction?
Implementation Problems faced by developing countries