The document provides an overview of the World Trade Organization (WTO), including its genesis from GATT, functions, structure, principles, agreements and areas covered, and dispute settlement system. Some key points covered include: - The WTO provides a framework for international trade rules and resolving disputes between member nations. It was created to replace GATT and permanently enshrine commitments. - The WTO system aims to liberalize trade, increase predictability, and promote fair competition through consensus-based decision making between member countries. - Major agreements cover goods, services, intellectual property, agriculture, textiles, anti-dumping measures and subsidies. - The dispute settlement system aims to more efficiently

1. 1
International Business
Rakesh Mohan Joshi
Professor & Chairperson, IIFT New Delhi
Copyright @ Oxford University Press
International Business
R. M. Joshi
Chapter 5: World Trade
Organization

2. Chapter 5
WORLD TRADE
ORGANIZATION
Copyright @ Oxford University Press
International Business
R. M. Joshi
Chapter 5: World Trade
Organization

3. Learning Objectives

To elucidate the significance of WTO and its genesis

To briefly explain the functions and structure of WTO

To describe the principles of multilateral trading system under
WTO

To provide an overview of WTO agreements

To explicate the dispute settlement system under WTO

To discuss the ministerial conferences and emerging issues

To evaluate the WTO system in context of developing
countries
Copyright @ Oxford University Press
International Business
R. M. Joshi
Chapter 5: World Trade
Organization

4. Significance of WTO
The World Trade Organization (WTO) is the only
international organization that deals with global rules of
trade between nations. It provides a framework for
conduct of international trade in goods and services. It
lays down the rights and obligations of governments in
the set of multilateral agreements.
Copyright @ Oxford University Press
International Business
R. M. Joshi
Chapter 5: World Trade
Organization

5. WTO vs. GATT

GATT remained a
‘provisional’ agreement and organization
whereas WTO commitments are permanent.

GATT rules mainly applied to trade in goods whereas the WTO
covers other areas, such as services, intellectual property, etc.

GATT had contracting parties whereas the WTO has members.

GATT was essentially a set of rules of the multilateral treaty with
no institutional foundation whereas the WTO is a permanent
institution with its own Secretariat.
Copyright @ Oxford University Press
International Business
R. M. Joshi
Chapter 5: World Trade
Organization

6. 
A country could essentially follow domestic legislation even if
it violated a provision of the GATT agreement which is not
allowed by the WTO.

In WTO, almost all the agreements are multilateral in nature
involving commitment of the entire membership whereas a
number of GATT provisions were plurilateral and therefore
selective.

The WTO also covers certain grey areas, such as agriculture,
textiles and clothing, not covered under the GATT.

The dispute settlement system under the WTO is much more
efficient, speedy, and transparent unlike the GATT system
which was highly susceptible to blockages.
Copyright @ Oxford University Press
International Business
R. M. Joshi
Chapter 5: World Trade
Organization

7. Functions of WTO






To facilitate the implementation, administration, and
operation of trade agreements
To provide a forum for further negotiations among
member countries
Settlement of differences and disputes among its
member countries
To carry out periodic reviews of the trade policies of
its member countries
To assist developing countries in trade policy issues,
through technical assistance and training programs
To cooperate with other international organizations
Copyright @ Oxford University Press
International Business
R. M. Joshi
Chapter 5: World Trade
Organization

8. Decision-making
WTO is a member-driven consensus-based organization
where all major decisions are made by its members as a
whole. The WTO’s agreements have been ratified in all
members’ parliaments.
Unlike other international organizations, such as the
World Bank and the IMF, in WTO the power is not
delegated to the board of directors or the organization’s
head.
Copyright @ Oxford University Press
International Business
R. M. Joshi
Chapter 5: World Trade
Organization

9. Organizational Structure of the WTO

Highest authority
: The Ministerial Conference

Second level
: General Council

Third level
: Councils for each broad area
of trade

Fourth level
Copyright @ Oxford University Press
International Business
R. M. Joshi
: Subsidiary bodies
Chapter 5: World Trade
Organization

10. Principles of the Multilateral Trading
System under the WTO

Trade without discrimination

Gradual move towards freer markets through negotiations

Increased predictability of international business
environment

Promoting fair competition
Copyright @ Oxford University Press
International Business
R. M. Joshi
Chapter 5: World Trade
Organization

11. WTO AGREEMENTS: AN OVERVIEW

An umbrella agreement establishing WTO

Agreements for each of the three broad areas of trade
covered by WTO
• Goods
• Services
• Intellectual Property

Dispute settlement

Reviews of governments’ trade policies
Copyright @ Oxford University Press
International Business
R. M. Joshi
Chapter 5: World Trade
Organization

12. General Agreement on Tariffs and Trade
(GATT)
Opening up of the industrial sector

Reduction in tariffs

Tariff bindings
Copyright @ Oxford University Press
International Business
R. M. Joshi
Chapter 5: World Trade
Organization

13. Creating Fairer Markets in Agriculture Sector
Although earlier rules of GATT did apply to agriculture
trade they contained loopholes. As a result, international
trade in agriculture became highly ‘distorted’,
especially with the use of export subsidies which would
not normally have been allowed for industrial products.
The Uruguay Round produced the first multilateral
agreement dedicated to the agriculture sector. The
objective of the agreement on agriculture was to reform
trade in agriculture and to make policies more market
oriented.
Copyright @ Oxford University Press
International Business
R. M. Joshi
Chapter 5: World Trade
Organization

14. Elimination of Non-tariff Measures through the
‘Tariffication’ Process
Subsequent to the Uruguay Round, quotas and other
types of trade restrictive measures were to be
replaced by tariffs that provide more or less
equivalent levels of protection.
This process of converting quotas and other types of
non-tariff measures to tariffs that represent about the
same level of protection, is termed ‘tariffication’.
Copyright @ Oxford University Press
International Business
R. M. Joshi
Chapter 5: World Trade
Organization

15. Binding Against Further Increase of Tariffs
In addition to elimination of all non-tariff measures by
tariffication, all countries have bound all tariffs
applicable to agricultural products. In most cases,
developing countries have given binding at rates that
are higher than their current applied or reduced rates.
Copyright @ Oxford University Press
International Business
R. M. Joshi
Chapter 5: World Trade
Organization

16. Domestic Support
Under the Agreement on Agriculture, domestic policies
that have a direct effect on production and trade have to
be cut back. The domestic support in the agriculture
sector is categorized under Green, Amber, and Blue
boxes.
Copyright @ Oxford University Press
International Business
R. M. Joshi
Chapter 5: World Trade
Organization

17. 
Green Box: All subsidies that have little or all most least
trade distorting effects are exempted from commitments
towards reduction.

Amber Box: It is a maximum on the total domestic support
that a government may provide to domestic producers.

Blue Box: Certain categories of direct payment to farmers are
also permitted where farmers are required to limit production.
This also includes government assistance programmes to
encourage agricultural and rural development in developing
countries
Copyright @ Oxford University Press
International Business
R. M. Joshi
Chapter 5: World Trade
Organization

18. Export Subsidies
The agreement on agriculture prohibits export subsidies
on agricultural products unless the subsidies are
specified in a member’s lists of commitments. Where
they are listed, the agreement requires WTO members
to cut both the amount of money they spend on export
subsidies and the quantities of exports that receive
subsidies.
Copyright @ Oxford University Press
International Business
R. M. Joshi
Chapter 5: World Trade
Organization

19. Standards and Safety Measures
Article 20 of the GATT allows governments to act on
trade in order to protect human, animal, or plant life or
health, provided no discrimination is made and this is
not used as disguised protectionism.
Copyright @ Oxford University Press
International Business
R. M. Joshi
Chapter 5: World Trade
Organization

20. Agreement on Sanitary and Phytosanitary (SPS)
Measures
The SPS measures sets out the basic rules on food
safety and plant health standards. This allows countries
to set their own standards which have to be based on
science and should not arbitrarily or unjustifiably
discriminate between countries where identical or
similar conditions prevail.
Copyright @ Oxford University Press
International Business
R. M. Joshi
Chapter 5: World Trade
Organization

21. Agreement on Technical Barriers to Trade (TBT)
This agreement complements with SPS measures and
attempts to ensure that regulations, standards, testing,
and certification procedures do no create unnecessary
obstacles to trade.
Copyright @ Oxford University Press
International Business
R. M. Joshi
Chapter 5: World Trade
Organization

22. Opening Up International Business
Opportunities in Textiles
From 1974, until the end of the Uruguay Round, the
international trade in textiles was governed by the
Multi-fibre Arrangement (MFA).
This was a
framework for bilateral agreements or unilateral actions
that established quotas limiting imports into countries
whose domestic industries were facing serious damage
from rapidly increasing imports.
Copyright @ Oxford University Press
International Business
R. M. Joshi
Chapter 5: World Trade
Organization

23. Post-MFN Textile and Clothing Scenario
On full integration into GATT and final elimination of quotas,
the Agreement on Textiles and Clothing ceased to exist on 1
January, 2005. This has opened immense opportunities and
challenges for the developing countries.
Copyright @ Oxford University Press
International Business
R. M. Joshi
Chapter 5: World Trade
Organization

24. General Agreement on Trade in Services
(GATS)
GATS is the first and the only set of multilateral
rules governing international trade in services.
Negotiated in the Uruguay Round, it was developed
in response to the strong growth of the services
economy and the greater potential for marketing
services internationally.
Copyright @ Oxford University Press
International Business
R. M. Joshi
Chapter 5: World Trade
Organization

25. General Obligations and Disciplines
Mode 1:
Mode 2:
Mode 3:
Mode 4:
Services supplied from one country to
another.
Consumers or firms making use of a
service in another country
A foreign company setting up subsidiaries
or branches to provide services in another
country, i.e. ‘commercial presence’
Individuals travelling from their own
country to supply services in another,
i.e. ‘presence of natural persons’
Copyright @ Oxford University Press
International Business
R. M. Joshi
Chapter 5: World Trade
Organization

26. Salient Features of GATS

Most-favoured-nation (MFN) treatment

Commitments on market access and national
treatment

Transparency

Objectivity and reasonability of regulations

Recognition

International payments and transfers

Progressive liberalization
Copyright @ Oxford University Press
International Business
R. M. Joshi
Chapter 5: World Trade
Organization

27. Protection and Enforcement of IPRs
The WTO’s agreement on Trade-Related Aspects of Intellectual
Property Rights (TRIPS), introduced intellectual property rules in
the multilateral trading system for the first time. TRIPS lays
down minimum standards for the protection of IPRs as well as
the procedures and remedies for their enforcement.
It also
establishes a mechanism for consultations and surveillance at the
international level to ensure compliance with these standards by
member countries at the national level.
Copyright @ Oxford University Press
International Business
R. M. Joshi
Chapter 5: World Trade
Organization

28. Curbing Unfair Marketing Practices
International market competitions get distorted mainly by unfair
trade practices, as:

If the exported goods benefit from the subsidies

If exported goods are dumped in overseas markets
The agreements on Anti-Dumping Practices (ADP) and on
Subsidies and Countervailing Measures (SCM) authorize importing
countries to levy compensatory duties on import of products.
Copyright @ Oxford University Press
International Business
R. M. Joshi
Chapter 5: World Trade
Organization

29. Dumping
A product is considered to be dumped if

The export price is less than the price charged for the same
product in the exporting country, or it is sold for less than
its cost of production and

Dumping is causing injury to domestic industry in the
importing country.
Copyright @ Oxford University Press
International Business
R. M. Joshi
Chapter 5: World Trade
Organization

30. Agreements on Anti-dumping Practices (ADP)
The WTO agreement on anti-dumping allows governments to act
against dumping where there is genuine (‘material’) injury to the
competing domestic industry.
Copyright @ Oxford University Press
International Business
R. M. Joshi
Chapter 5: World Trade
Organization

31. The Agreement on Subsidies and Countervailing
Measures (SCM)
This agreement disciplines the use of subsidies and
regulates the actions countries can take to counter the
effects of subsidies by other countries.
It can launch its own investigations and ultimately
charge extra duty (known as ‘countervailing duty’) on
subsidized imports that are found to be hurting domestic
producers.
Copyright @ Oxford University Press
International Business
R. M. Joshi
Chapter 5: World Trade
Organization

32. Category of Subsidies included under SCM
Prohibited Subsidies: Those subsidies that require recipients to
meet certain export targets, or to use domestic goods instead of
imported goods.
Actionable Subsidies: Subsidy has an adverse effect on its
interest such as :
• Hurts domestic industry of importing country
• Hurts rival exporters from another country when the two compete in
third market
• Hurt exporters’ trying to compete in the subsidized country’s domestic
market.
Copyright @ Oxford University Press
International Business
R. M. Joshi
Chapter 5: World Trade
Organization

33. Emergency Protection from Imports
A WTO member may restrict imports of a product
temporarily (take ‘safeguard” actions) if its domestic
industry is seriously injured or threatened with injury
caused by a surge in imports.
Copyright @ Oxford University Press
International Business
R. M. Joshi
Chapter 5: World Trade
Organization

34. Attempting to Reduce Non-Tariff Barriers
Growing use of unconventional Non-Tariff Measures
(NTMs), such as health and safety measures, technical
regulations, environmental controls, customs valuation
procedures, and labour laws by developed countries has
become a major barrier to market access to exports from
developing countries.
Copyright @ Oxford University Press
International Business
R. M. Joshi
Chapter 5: World Trade
Organization

35. Import Licensing Procedures
The agreement attempts to simplify and bring
transparency to import procedures.
It requires governments to publish sufficient
information for international traders to know how and
why licences are granted.
Copyright @ Oxford University Press
International Business
R. M. Joshi
Chapter 5: World Trade
Organization

36. Customs Valuation
The WTO agreement aims for a fair, uniform, and
neutral system for the valuation of goods for customs
purposes—a system that conforms to commercial
realities, and which outlaws the use of arbitrary or
fictitious customs values.
Copyright @ Oxford University Press
International Business
R. M. Joshi
Chapter 5: World Trade
Organization

37. Pre-shipment Inspection
The
pre-shipment
inspection
agreement
places
obligations on governments that use pre-shipment
inspection such as non-discrimination, transparency,
protection
of
confidential
business
information,
avoiding unreasonable delay, use of specific guidelines
for conducting price verification, and avoiding conflicts
of interest by the inspection agencies.
Copyright @ Oxford University Press
International Business
R. M. Joshi
Chapter 5: World Trade
Organization

38. Rules of Origin
‘Rules of origin’ are used as the criteria to define where a product
was made. The Rules of Origin Agreement requires WTO
members to ensure that their rules of origin are transparent; that
they do not have restricting, distorting, or disruptive effects on
international trade. The Rules are administered in a consistent,
uniform, impartial, and reasonable manner.
Copyright @ Oxford University Press
International Business
R. M. Joshi
Chapter 5: World Trade
Organization

39. Agreement on Trade Related Investment
Measures (TRIMs)
The TRIMs stipulates that no member shall apply any
measure that discriminates against foreigners or foreign
products. It also outlaws investment measures that lead
to restrictions in quantities and measures requiring
particular levels of local procurement (‘local content
requirements’) by an enterprise.
Copyright @ Oxford University Press
International Business
R. M. Joshi
Chapter 5: World Trade
Organization

40. Plurilaterals Agreements

Fair trade in civil aircraft

Opening up of competition in government procurement
Copyright @ Oxford University Press
International Business
R. M. Joshi
Chapter 5: World Trade
Organization

41. Ensuring Transparency in Trade Policy
WTO’s Trade Policy Review Mechanism (TPRM) aims
to achieve transparency in regulations in the
following ways:

Governments have to inform the WTO and fellowmembers of specific measures, policies, or laws
through regular ‘notifications’.

The WTO conducts regular reviews of individual
countries’ trade policies.
Copyright @ Oxford University Press
International Business
R. M. Joshi
Chapter 5: World Trade
Organization

42. Settlement of International Trade Disputes
Dispute settlement is the WTO’s unique contribution
which provides effectiveness to the rule based
multilateral trading system. The WTO’s procedure for
settling disputes makes the trading system more secure
and predictable.
Copyright @ Oxford University Press
International Business
R. M. Joshi
Chapter 5: World Trade
Organization

43. Dispute Settlement Process
Time Taken
60 days
45 days
6 months
3 weeks
60 days
Total
60–90 days
30 days
Total
Copyright @ Oxford University Press
International Business
R. M. Joshi
Stages
Consultations, mediation, etc.
Panel set up and panellists appointed
Final panel report to parties
Final panel report to WTO members
Dispute Settlement Body adopts report
(if no appeal)
One Year (without appeal)
Appeal report
Dispute Settlement Body adopts
appeals report
One year 3 months (with appeal)
Chapter 5: World Trade
Organization

44. Ministerial Conferences

Singapore Ministerial Conference (9–13 December, 1996)

Geneva Ministerial Conference (18–20 May, 1998)

Seattle Ministerial Conference (30 November - 03 December,
1999

Doha Ministerial Conference ( 9–14 November, 2001)

Cancun Ministerial Conference (10–14 September 2003)

The Hong Kong Ministerial Conference (13–18 December,
2005)
Copyright @ Oxford University Press
International Business
R. M. Joshi
Chapter 5: World Trade
Organization

45. The Deadlock in WTO Negotiations
Doha work programme were suspended in July, 2006.
mainly due to lack of consensus between developing
and developed countries, and the complexity of issues
involved multilateral negotiations other get stalled.
Copyright @ Oxford University Press
International Business
R. M. Joshi
Chapter 5: World Trade
Organization

46. GATT/WTO System and Developing Countries
Although developing countries form a much bigger group
numerically under the WTO, decision-making is significantly
influenced by the developed countries. Therefore over the years,
the divide between the developed and developing countries in the
WTO has widened, leading to deadlocks in the process of
multilateral negotiations.
Copyright @ Oxford University Press
International Business
R. M. Joshi
Chapter 5: World Trade
Organization