The World Trade Organization (WTO) is an intergovernmental organization that regulates international trade and resolves trade disputes between member nations. It was established in 1995 as a successor to the General Agreement on Tariffs and Trade (GATT) and aims to liberalize international trade through negotiations to reduce trade barriers like tariffs. The WTO currently has 164 member countries and seeks to promote open trade for the benefit of global economic growth and development.
3. “ LUCK IS WHAT HAPPENS WHEN PREPARATION
MEETS OPPORTUNITY ”
4.
5. • World Trade Organization (WTO) is the
multilateral trading system created with the
purpose of supervising and liberalizing
international trade.
• WTO regulation of trade between member
countries.
• It is also responsible for enforcing trade laws,
agreements and resolving disputes
6. Formation - 1 January 1995
Headquarters - Geneva, Switzerland
Membership – 164 Countries (April -2017)
Official language – English, French, Spanish
Budget - 209 million US$ (2011)
Staff- 640
D. G. Roberto Azevedo
Fundamental Legal Document- Marakkesh Agreement
Profile of WTO
8. “ WE ARE NOT MAKERS OF HISTORY. WE ARE
MADE BY HISTORY ”
9. • The Bretton Wood Conference, formally
known as the United Nations Monetary and
Financial Conference.
• The conference was held from July 1–22,
1944. The agreements were signed to
established the:
10. • General Agreement on Trade and Tariff (GATT)
- Temporary Agreement on multilateral tariff
reductions until the ITO was formed.
- It was signed by 23 countries in January 1948.
- This Temporary agreement provided the basis for the
international trading system for 47 years.
- Limited to removal of Tariff in the trade of Goods.
- Trade in Agriculture and Textile was excluded from
GATT.
11.
12. • WTO was born with the conclusion of
Marrakesh Agreement in the Uruguay Round
of Multilateral Trade Negotiations in 1994.
• The WTO came into existence on 1 January
1995, with a membership of 128 countries.
13. • GATT dealt with only Tariff barriers but by 1970s
Non-Tariff Barriers has also started increasing.
• GATT dealt with trade in Goods. But by 1980s
Developed countries started having comparative
advantage in trade in services.
14. Grand Bargain (WTO)
Developed Countries
Agreed to include Trade in
Agriculture and Textile under
WTO with some exceptions
Developing Countries
Allowed inclusion of Service
and Intellectual Property
Right Under WTO
15. • Reciprocity (Mutual lowering of trade barriers)
• Most Favored Nation (MFN) –No discrimination.
• National Treatment
17. • Singapore, 9-13 December 1996
• Geneva 18-20 May 1998
• Seattle, Nov 30- Dec 3, 1999
• Doha, 9-13 November 2001
• Cancun, 10-14 September 2003
• Hong Kong, 13-18 December 2005
• Geneva, 30 November - 2 December 2009
• Geneva, 15-17 December 2011
• Bali, 3-6 December 2013
• Nairobi, 15-19 December 2015
• Buenos Aires, 11-14 December 2017
18. • Apply for membership
• Work Individually with WTO
• Drafts Membership Terms
• Finally the Decision
19.
20. • The transition from GATT to WTO basically represents
the transition in interests of developed world.
• WTO Dictates policies
• It is the pool of powerful lobbies.
• The WTO crushes over labor and human rights.
• WTO policies are widening the gap between the rich
and poor.
• The WTO is anti-environment.
• The WTO rules undermine public health.
21. • The WTO helps promote peace.
• The WTO allows disputes to be handled
constructively.
• A WTO based on rules rather than power .
• Makes life easier for all.
• Freer trade cuts the cost of living.
• It gives consumers more choice and a broader range of
qualities to choose from.
• Trade raises incomes.
• Trade stimulates economic growth and that can be
good news for employment
• The basic principles make the system economically
more efficient, and they cut costs.
22. Difference between WTO and GATT
GATT
Agreement
Provisional Basis
Tariff Barriers in trade of
Good
Week dispute settlement
WTO
Organization
No Provisional Application
Tariff and Non-Tariff
Barriers in goods and
services
Strong dispute settlement
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It also provides a framework for negotiations and formalizations of trade agreements.
The Marrakesh Agreement, manifested by the Marrakesh Declaration, was an agreement signed in Marrakesh, Morocco, by 124 nations on 15 April 1994, marking the culmination of the 12-year-long Uruguay Round and establishing the World Trade Organization, which officially came into being on January 1, 1995.
D.G Roberto Azevedo is Brazilian, from sept-2013.
Last country join WTO is Yemen — 26 June 2014
Pakistan Join WTO 1 Jan 1995
It is designed to play the role of a watchdog in the spheres of trade in goods, trade in services, foreign investment, intellectual property rights, etc. Article III has set out the following five functions of WTO;
Trade Negotiations: Setting up a platform to reach consensus on rules of international trade.
Implementation and Monitoring: It requires countries to make their trade policies more transparent and in cohesion with the international agreements. It puts mechanisms in place to ensure compliance.
Dispute Settlement: It acts as a neutral body which would act as an dispute settlement institution to resolve conflicts between nations.
Building Trade Capacity: WTO uses its considerable resources to build trade capacity of developing countries.
Outreach: Maintains communication with NGOs and other organizations to receive inputs and disseminate information regarding its workings.
EXTRA
To set and enforce rules for international trade,
To provide a forum for negotiating and monitoring further trade liberalization
To resolve trade disputes
To cooperate with other major international economic institutions involved in global economic management,
To help developing countries benefit fully from the global trading system.
To expand and utilize world resources to the best;
the General Agreement on Tariffs and Trade (GATT), was established afterWorld War II in the wake of other new multilateral institutions dedicated to international economic cooperation – such as the World Bank and the International Monetary Fund. A comparable international institution for trade, named the International Trade Organization never started as the treaty was not approved by the U.S. and other signatories,[17][18][19] and so GATT slowly became a de facto international organization.[
It was the gathering of 730 delegates from all 44 Allied nations at the Mount Washington Hotel, situated in Bretton Woods, New Hampshire, United States, to regulate the international monetary and financial order after the conclusion of World War II.
The conference was held from July 1–22, 1944. Agreements were signed that, after legislative ratification by member governments, established the International Bank for Reconstruction and Development (IBRD) and the International Monetary Fund (IMF), and also there was proposal of Multilateral organization by name International Trade Organization (ITO).
A draft agreement was prepared at Havana Conference in 1948 for the establishment of ITO , this was called Havana Charter it was signed by 53 out of 56 countries.
In order to get implemented. Havana charter was required to ratified by American Congress (Parliament ).
In 1950 America made it clear that it will not ratify the agreement. So ITO could not implemented.
The GATT was created when the ITO was in process.
It was not an organization but an agreement.
It was continued till the formation WTO and its participating countries were not called members but “Contracting Parties”.
Tariff : a tax or duty to be paid on a particular class of imports or exports.
Trade in Agriculture and Textile was excluded from GATT, it was the strategy to make remain the developing countries in the area of developing countries, because these two (Agriculture and Textile) were the production house of the developing countries, that’s they exclude it from GATT.
Service Trade example i.e. revolution of IT occur in 1980, Internet, that’s why the developed countries tried to include service in international trade because it there comparative advantage.
Suppose developed countries providing internet service, may be developing countries halt that service or impose too much tax, that's why they include services in international trade.
The WTO is also called grand bargain.
Bargain is settlement of transaction between parties.
Reciprocity- Mutual lowering of trade barriers, thus countries that lowered their tariffs could expect their trading partners to do the same. If one country is reducing its tariff for other country so that country must reduce the tariff for that country. Example; If Pakistan reduces its trade barriers (both tariff and non tariff barriers) for China, then China must do the same. Its called reciprocity.
MFN- The MFN principles holds that the tariff preference granted to one state must be granted to all others in other words there could be no “favored nation” among members. If a country declare any country in their trade policy that it is her “Most Favored Nation” lets suppose Pakistan declare India as its MFN and said that any goods from India will be tariff imposed maximum 20%. So if any country gives status of MFN to any country. So she must behave as same with all the members. So Pakistan has to do with all.
National Treatment- National treatment means that foreign goods are treated equally with domestic goods, and that countries are not able to enact such policies that give their domestic product any advantage over foreign product. It means if in any country the foreign good is imported and like same good is also in the their domestic market so it country has treat foreign good as its domestic good.
The Ministerial Conference (MC) is at the top of the structural organisation of the WTO. It is the supreme governing body which takes ultimate decisions on all matters. It is constituted by representatives of (usually, Ministers of Trade) all the member countries. It requires to meet once in two years.
The General Council (GC) is composed of the representatives of all the members. It is the real engine of the WTO which acts on behalf of the MC. It also acts as the Dispute Settlement Body as well as the Trade Policy Review Body, which constantly reviews the trade policies of each member county. The General Council Delegates divided in to three other bodies.
Goods Council it deals with goods related trade
Intellectual Property Council it deals with intellectual property
Services Council deals with services
Goods Council
How to join the WTO: the accession process Any state or customs territory having full autonomy in the conduct of its trade policies may join (“accede to”) the WTO, but WTO members must agree on the terms. Broadly speaking the application goes through four stages:
First, “tell us about yourself”. The government applying for membership has to describe all aspects of its trade and economic policies that have a bearing on WTO agreements. This is submitted to the WTO in a memorandum which is examined by the working party dealing with the country’s application. These working parties are open to all WTO members.
Second, “work out with us individually what you have to offer ”. When the working party has made sufficient progress on principles and policies, parallel bilateral talks begin between the prospective new member and individual countries. They are bilateral because different countries have different trading interests. These talks cover tariff rates and specific market access commitments, and other policies in goods and services. The new member’s commitments are to apply equally to all WTO members under normal non-discrimination rules, even though they are negotiated bilaterally. In other words, the talks determine the benefits (in the form of export opportunities and guarantees) other WTO members can expect when the new member joins. (The talks can be highly complicated. It has been said that in some cases the negotiations are almost as large as an entire round of multilateral trade negotiations.)
Third, “let’s draft membership terms”. Once the working party has completed its examination of the applicant’s trade regime, and the parallel bilateral market access negotiations are complete, the working party finalizes the terms of accession. These appear in a report, a draft membership treaty (“protocol of accession”) and lists (“schedules”) of the member-to-be’s commitments.
Finally, “the decision”. The final package, consisting of the report, protocol and lists of commitments, is presented to the WTO General Council or the Ministerial Conference. If a two-thirds majority of WTO members vote in favour, the applicant is free to sign the protocol and to accede to the organization. In many cases, the country’s own parliament or legislature has to ratify the agreement before membership is complete.
The WTO tramples over labor and human rights. WTO agreements forbid the regulation of a product based on the way it is produced, regardless if the product was made with child labor or by workers exposed to toxic chemicals. A Government Accounting Office study found that the U.S. law banning products made with forced labor violates WTO rules.
WTO policies are widening the gap between the rich and poor. The UN Development Program's Human Development Report for 1999 states: "The top fifth of the world's people in the richest countries enjoy 82% of the expanding export trade and 68% of foreign direct investment, while the bottom fifth get barely more than 1 percent. These trends reinforce economic stagnation and low human development."
The WTO is anti-environment. The WTO is being used by corporations to dismantle hard won environmental protections. In 1993, the very first WTO panel ruled against a regulation of the U.S. Clean Air Act, which had required both domestic and foreign producers alike to produce cleaner gasoline.
The WTO rules undermine public health. The WTO's fierce defense of intellectual property rights (patents, copyrights and trademarks) comes at the expense of health and human lives. The WTO's support of pharmaceutical companies against governments seeking to protect people's health has serious implications for places like sub-Saharan Africa, where 80 percent of the world's new AIDS cases are found.
Advantages, such as:
Lower prices for consumers. Removing tariffs enables us to buy cheaper imports
Free trade encourages greater competitiveness. Firms face a higher incentive to cut costs. For example, a domestic monopoly may now face competition from foreign firms.
Law of comparative advantage states that free trade will enable an increase in economic welfare. This is because countries can specialize in producing goods where they have a lower opportunity cost.
Economies of scale. By encouraging free trade, firms can specialize and produce a higher quantity. This enables more economies of scale, this is important for industries with high fixed costs, such as car and airplane manufacture.
Free trade can help increase global economic growth.
Disadvantages of WTO
However, the WTO has often been criticized for ignoring the plight of the developing world.
It is argued the benefits of free trade accrue mostly to the developed world.
Free trade may prevent developing economies develop their infant industries. For example, if a developing economy was trying to diversify their economy to develop a new manufacturing industry, they may be unable to do it without some tariff protection.
GATT
Just a multilateral treaty, an agreement.
Contracting parties
Applied on provisional basis Protocol for provisional application means different provisions for different countries . If any provision violates that country law then it can be flexible according their law, GATT give grandfather’s right to its parties (countries). Every country has freedom to not implement any provision in his country if it violates any law of that country.
GATT concerned with Tariff Barriers in trade of Goods.
Very weak dispute settlement Mechanism
WTO
An Organization
WTO has members
No Provisional Application, No Grandfather’s Right. All the principles are followed by all there members if it violates their law or not, change your law.
Non-Tariff Barriers, trade in service, Intellectual Property Rights (Intangible goods).
Strong Dispute Settlement Mechanism.