World trage organization and its predecessor

1. Analyzing the significance of GATT,
WTO and International Trade in
driving economic growth in Nepal
Subin Aryal
027362-20
Development Economics-2
BECON: 3rd Sem/ 1st Semester

2. EVOLUTION OF GATT
• GATT stands for General Agreement on
Tariffs and Trade.
• It is the precursor of WTO.
• GATT's founding members agreed on a draft charter for
an International Trade Organization.

3. EVOLUTION OF GATT
• 1947, October 30: GATT came into existence until ITO to be formed
• 1948, January 1: GATT contracting Parties:
- 23 founding Members nations ( Australia, Belgium, China, Cuba,
Czechoslovakia, France, India, Lebanon, Luxemburg, Netherlands,
New Zealand, Norway, Pakistan, Southern Rhodesia, Syria, South
Africa, UK, US)
Between 1st January 1948-1st January 1995: GATT worked as the
facilitator for multilateral trade system and monitoring body.
1948, June 30: Tariff subsidy regulations came into existence.

4. Evolution of GATT
• GATT's founding members agreed on a draft charter for an
International Trade Organization (ITO).
• ITO charter also agreed by UN Conference on Trade and
Employment of the UN Economic and Social Council.
• GATT remained the only multilateral instrument governing
international trade.

5. PRINCIPLE OF GATT
• Non-Discrimination:
- goods, once lawfully imported, will be treated in the same manner as
domestic goods.
- must not be treated any less favorably such as in relation to tax, consumer
laws, regulations and requirements
• Most favored Nation:
- State parties must apply the same duties and charges on the import of goods
between GATT parties, regardless of its origin.
• Tariff Only:
- Trade restraints should be by way of tariffs
- Referable to a percentage of the value of the goods

6. Continued:
• States must respect the principle of transparency
• States must disclose their rules, regulations and practices
internationally to allow exporters comply.
• States may apply sales and consumption taxes, regulation and
regulatory requirements
• must not be intended nor have the effect of creating a greater burden
on imported goods relative to domestic goods

8. EVOLUTION OF WTO
• WTO stands for World Trade Organization.
• The ministers of member countries signed the final Act of WTO at a
meeting in Marrakesh, Morocco in April 1994.
• WTO replaced GATT on 1st January 1995 with successful completion of the
Uruguay negotiations.
• There are 159 membership nation on January 2022
• WTO is located in Geneva, Switzerland.

9. GATT & Nepal
- Nepal applied for GATT membership on
16th May 1989
- With the transformation of GATT into
WTO, Nepal had likewise transferred the
membership application and became an
observer in WTO on December 1995.
- 2004 April 23: Nepal got membership with
WTO.

10. WTO Secretariat
Geneva, Switzerland

11. WTO Structure

12. Principles of WTO
1. Non-discrimination
(a) Most Favored Nation (MFN) – no discrimination among the countries,
except
• Enabling Clause (Developing, LDC)
• Free Trade Areas (SAFTA, BIMSTEC)
• Government Procurement
• Public Morale/Health Hazard/ Environment
• Security Exception
• Measure permitted by WTO Agreements
(b) National Treatment – no discrimination between domestic and
imported, except
• Subsidies to Domestic Producers
• Government Procurement
2. Tariff only regime - Protection only by tariff, with ceiling bindings
3. Transparency – No rule should be a surprise.

13. WTO Agreements
• Final Act
• Marrakesh Agreement
• Annex 1A: Multilateral Agreements on Trade in Goods
• General Agreements on Tariffs and Trade (GATT)
• Agreement on Agriculture (AoA)
• Agreement on Application of Sanitary and Phytosanitary Measures (SPS)x
• Agreement on Technical Barriers to Trade (TBT)
• Agreement on Textiles and Clothing
• Agreement on Trade Related Investment Measures (TRIM)
• Agreement on Customs Valuations
• Agreement on Rules of Origin
• Agreement on Import Licensing Procedures
• Agreement on Subsidies and Countervailing Measures
• Agreement on Safeguards
• Agreement on Pre-shipment Inspection
• Marrakesh Protocol on Understandings to GATT

14. WTO Agreements
• Annex 1B: General Agreements on Trade in Services (GATS)
• Annex 1C: Trade Related Aspects of Intellectual Property
Rights (TRIPS)
• Annex 2: Understanding on Rules and Procedures Governing
the Settlement of Disputes
• Annex 3: Trade Policy Review Mechanism
• Annex 4: Plurilateral Agreements (optional)
• Agreement on Trade in Civil Aircraft
• Agreement on Government Procurement

15. Tariff only regime for goods trade
• Member countries cannot impose
• any ban,
• quantitative restrictions or
• other restrictions on trade
• (except SPS/TBT ).
• Make market access transparent, predictable and
competitive

16. Market Access: General Provisions
1. Tariffication – converting non-tariff barriers to
tariff
• Special Safeguard measures (SSG)
• Minimum access commitments: 5% of domestic
consumption
• Current access guarantee
2. Ceiling binding of tariff
• Bound tariff (remain fixed) gives ceiling for
applied tariff (can be changed) that matters for
trade.
Bound rates higher (42%) than the applied rate (~13%).

17. Bound tariff of major commodities in Nepal
• Cereal and products 50 –60%
• Dairy products 50% (ex. 40)
• Meat products 40-60% (ex. 30)
• Fruits and fruit products 30–50%
• Vegetables and products 50% (ex. 40)
• Tea, coffee, cardamom, ginger 40 – 50%
• Alcoholic products 100%
• Tobacco and products 200%
• ODC = Existing to zero (in 2 to 10 years)

18. Export Subsidies
Export subsidy is allowed
- only if in the Schedules,
- must be reduced in value and volume, and
- Developing countries - exemption for
transport and marketing
• Phase out by 2013 (2018 for developing)

19. Trade Related Aspects of Intellectual Property
Rights (TRIPS)
• copyright;
• trademarks;
• geographic indications;
• industrial designs;
• undisclosed information/trade secrets/confidential
information;
• layout designs for integrated circuits.
• patents (including plant varieties);
• sui generis laws (Plant variety protection Act)

20. Opportunities from WTO membership
• Nepal was the 1st LDC country to negotiate its accession to WTO
(Wagle et al., 2014)
• Major reasons that was presented before joining the WTO was the
rapid economic growth, poverty reduction and promotion of human
development.
Nepal government was keen to join WTO because WTO membership
provided:

21. 1) Market Access:
- Lead to further investment addressing the constraint of limited
domestic market for economic scale of productive operation.
E.g.: Raise investment, economic production of goods and services,
industrialization process.
- secured extended market opportunities.
- Nepal's excessive reliance on three exports markets—India,
Germany and the United States (US) (Bhatta, 2006)
- WTO membership would provide Nepal the opportunity to explore
other destinations for exports.

22. 2) Special and differentials treatments:
- WTO offers special and differential treatments for LDCs like Nepal.
- Includes longer time periods for implementing agreements,
technical assistance, restrictions on disputes concerning
LDCs, and special considerations during the process of
liberalizing the services industry.
3) Transit Right:
- Nepal joined GATT due to transit problem it encountered during Indo-
Nepal transit stalemate in 1989.
- It was expected that under the GATT/WTO, Nepal would be granted
access to the sea as a right as per Article V of the GATT
- In theory, as a WTO Member, Nepal should benefit from access to
international markets without discrimination.

23. 4) Policy Stability:
- WTO regime provides opportunity for policy stability internally. It
provide an environment of predictability for investment and
industrialization.
- National policy decisions are locked to the framework of WTO
provisions, which enhance the credibility of the country in terms
of economic governance .
5) Attract FDI:
- WTO membership provides credibility to the nation in terms of
economic activities with predictable environment.
- This attracts foreign direct investment (FDI) and technology to
expedite industrialization process in Nepal.

24. Similarly, others are:
• Benefit from liberalization
• Access to dispute settlement body
• Mobilization of trade related technical assistance

28. Source: Ministry of Finance

29. References:
• Ministry of Finance (2009). Nepal’s trade structure 2009
• Wagle, S, Pandey, P.R, & Adhikari, R. (2014). Nepal’s Accession to the
world trade organization: Case study of issues relevant to least developed
countries. Department of economic and social Affairs. Retrieved from:
https://www.un.org/en/development/desa/policy/cdp/cdp_background_
papers/bp2014_23.pdf Accessed on: 27th January 2023
• World Bank. 2021. “World Trade Indicators Database 2021.” Washington,
DC.

30. Thank you