Notes

1. GENERAL AGREEMENT ON TARIFF
AND TRADE
And
WORLD TRADE ORGANISATION

2. BACKGROUND

3. PRINCIPLES ADOPTED BY GATT

4. Between 1947 and the last year of GATT there were 8 rounds of
negotiations between the participating countries.
Between 1947 and the last year of GATT there were 8 rounds of
negotiations between the participating countries.
The first 6 rounds were related to curtailing tariff rates. 7th round
included the non tariff obstacles.
The first 6 rounds were related to curtailing tariff rates. 7th round
included the non tariff obstacles.
The 8th round was entirely different from the previous rounds because it
included a number of new subjects for consideration. This 8th round was
known as “URUGUAY ROUND”.
The 8th round was entirely different from the previous rounds because it
included a number of new subjects for consideration. This 8th round was
known as “URUGUAY ROUND”.
The discussions at this round only gave birth to WORLD TRADE
ORGANISATION (WTO).
The discussions at this round only gave birth to WORLD TRADE
ORGANISATION (WTO).
ROUNDS OF GATT NEGOTIATION

5. Following the UR agreement, GATT was converted from a
provisional agreement into a formal international
organization called World Trade Organization (WTO), with
effect from January 1, 1995
FROM GATT TO WTO

6. World Trade Organization (WTO)
• The World Trade Organization (WTO) deals with the global
rules of trade between nations. Its main function is to ensure
that trade flows as smoothly, predictably and freely as
possible.
• WTO is an organisation for liberalising trade, a forum for
governments to negotiate trade agreements and a place for
them to settle trade disputes
• At the heart of the system — known as the multilateral
trading system — are the WTO’s agreements, negotiated and
signed by a large majority of the world’s trading nations, and
ratified in their parliaments.
• The WTO has larger membership than GATT, with the
numbers being 153. India is one of the founder members of
GATT.

7. Functions of WTO:
WTO is based in Geneva, Switzerland. Its functions
are:
Administering the multilateral trade agreements
which together make up the WTO
Acting as a forum for multilateral trade
negotiations
Seeking to resolve trade disputes
WTO is not a “Free trade” institution. It permits
tariffs and other forms of protection but only in
limited circumstances.

8. Principles of WTO
• Non discrimination
• Free Trade: Promote free trade between nations
through negotiations.
• Stability in the trading system: Member countries
are committed not to raise tariff and non tariffs
barriers arbitrarily.
• Promotion of Fair Competition: WTO provides for
transparent, fair and undistorted competition.
• It discourages unfair competitive practices such as
export subsidies and dumping.

9. TRIPS (Trade Related Intellectual Property Rights
Agreement)
• The agreement requires member countries to provide
patent protection to all products or processes in all
fields. The protection is granted subject to the
following three conditions:
– The product or process is a new one.
– It contains an inventive step.
– It is capable of industrial application for 20 years
from the grant of the patent

10. TRIPS (Trade Related Intellectual
Property Rights Agreement)
• TRIPS agreement covers the following seven
intellectual properties:
– Patents
– Copyright and other related Rights
– Geographical Indications
– Industrial Designs
– Trade marks
– Layout design of integrated circuits
– Undisclosed information including trade secrets

11. GATS (General Agreement on Trade in Services)
The GATS agreement covers four modes of supply for the delivery of services in cross-
border trade:
Criteria Supplier Presence
Mode 1: Cross-
border supply
Service delivered within the territory of the
Member, from the territory of another Member.
Eg: transborder data flows
Mode 2:
Consumption
abroad
Service delivered outside the territory of the
Member, in the territory of another Member, to
a service consumer of the Member. Eg :
Tourism
Service supplier not
present within the
territory of the
member
Mode 3:
Commercial
presence
Service delivered within the territory of the
Member, through the commercial presence of
the supplier (provision of services abroad
through FDI or representative offices).
Mode 4: Presence
of a natural person
Service delivered within the territory of the
Member, with supplier present as a natural
person (entry and temporary stay of foreign
consultants)
Service supplier
present within the
territory of the
Member

12. TRIMS (Trade Related Investment
Measures)
• TRIMS refers to certain conditions or restrictions
imposed by a government in respect of foreign
investment in the country.
• In the late 1980's, there was a significant increase in
foreign direct investment throughout the world.
• TRIMS are widely employed by developing countries.
The Agreement on TRIMs provides that no contracting
party shall apply any TRIM which is inconsistent with
the WTO articles

13. Anti Dumping Measures:
• The WTO Agreement provides clarity in the method of
determining that a product is dumped.
• A product is regarded as dumped when its export price is less
than the normal price in the exporting country or its cost of
production plus a reasonable amount of administrative, selling
and any other costs.
• Anti-dumping duties are to be imposed on goods that are
deemed to be dumped and causing injury to producers of
competing products in the importing country. These duties are
equal to the difference between the goods’ export price and
their normal value, if dumping causes injury.
• Countervailing measures - Action taken by the importing
country, usually in the form of increased duties to offset
subsidies given to producers or exporters in the exporting

14. Evaluation of WTO
• The WTO members now account for over 97% of the
international trade indicating the potential of bringing
about an orderly development of international trade.
Benefits of WTO:
• GATT / WTO has made significant achievements in
reducing tariff and non tariff barriers to trade. Developing
countries too have been benefiting significantly.
• Liberalization of investments has been fostering economic
growth of a number of countries.
• It has a system in place to settle trade disputes between
nations.
• It has a mechanism to deal with violation of trade
agreements.

15. Drawbacks:
• Negotiations and decision making in the WTO
are dominated by the developed countries.
• Many developing countries do not have the
financial and knowledge resources to
effectively participate in WTO discussions and
negotiations.
• Due to the dependence of developing
countries on the developed ones, the
developed countries are able to resort to arms
twisting tactics.

16. Tariff: A tariff is a tax. It adds to the cost of imported
goods and is one of several trade policies that a
country can enact.
Non-tariff barriers to trade (NTBs) are trade
barriers that restrict imports but are not in the usual
form of a tariff. Some common examples of NTB's
are anti- dumping measures and countervailing
duties.
sanitary and phytosanitary measures (SPS):
• SPS measures refer to any measure, procedure,
requirement, or regulation, taken by governments to
protect human, animal, or plant life or health from
the risks arising from the spread of pests, diseases,
disease causing organisms, or from additives, toxins,‑
or contaminants found in food, beverages, or

17. • Specific Tariffs : A fixed fee levied on one unit of an
imported good is referred to as a specific tariff. For
example, a country could levy a $15 tariff on each pair
of shoes imported, but levy a $300 tariff on each
computer imported.
Ad Valorem Tariffs this type of tariff is levied on a good
based on a percentage of that good's value. An example
of an ad valorem tariff would be a 15% tariff levied by
Japan on U.S. automobiles.
Import Quotas : An import quota is a restriction placed
on the amount of a particular good that can be
imported.
• free trade area : Trade within the group is duty free but
members set their own tariffs on imports from non-
members (e.g. NAFTA).