Presentation on WTO

1. International Trade and Business
WTO
(Classroom Deliberations)
CA. Dr. Prithvi Ranjan Parhi
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703- INTERNATIONAL TRADE AND BUSINESS
MODULE- I
International Trade: Concept, Importance, Benefits of International Trade, international
Marking vs. Domestic Marking (differences).
Theory of International Trade: theory of comparative Cost, factor proportion Theory.
MODULE-II
Multinational corporations (MNCs): Definition, Role of MNCs in International marking.
International Trade barriers: Meaning, tariff and non-Tariff Barriers, Impact of Non-tariff
barriers.
MODULE-III
Organizational and Agreements: WTO (Functions, Principle, agreements), IMF (Purposes,
Facilities Provided by IMF), World Bank (Purpose, Principle, Policies).
MODULE-IV
Foreign Trade of India: Organizational Setup (Autonomous Bodies, Attached and
subordinate offices), Major Export and Imports, Concept of Export House, EXIM Policy
(2002-2007) of India (Features and Objectives of the Policy).
MODULE-V
Foreign Exchange market: Concept, Functions, Methods of international Payment, concept
of Balance of Payment, Concept of Fixed and Flexible Exchange Rate and Convertibility of
Rupee.
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WTO
• It is an organization for trade opening.
• It is a forum for governments to negotiate trade
agreements.
• It is a place for them to settle trade disputes. It
operates a system of trade rules.
• Essentially, the WTO is a place where member
governments try to sort out the trade problems
they face with each other.
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WTO Facts
• Location: Geneva, Switzerland
• Established: 1 January 1995
• Created by : Uruguay Round negotiations (1986-94)
• Membership: 164 countries since 2016
• Budget : 197.2 million Swiss francs for 2020
• Secretariat staff : 623
• Head : Ngozi Okonjo Iweala (Director-General)
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WTO Functions:
• Administering WTO trade agreements
• Forum for trade negotiations
• Handling trade disputes
• Monitoring national trade policies
•Technical assistance and training for developing countries
• Cooperation with other international organizations
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The principles of WTO
• The trading system should be ...
• Without discrimination — a country should not discriminate between its
trading partners (giving them equally “most-favoured-nation” or MFN status);
and it should not discriminate between its own and foreign products, services
or nationals (giving them “national treatment”);
• Freer — barriers coming down through negotiation;
• Predictable — foreign companies, investors and governments should be
confident that trade barriers (including tariffs and non-tariff barriers) should
not be raised arbitrarily; tariff rates and market-opening commitments are
“bound” in the WTO;
• More competitive — discouraging “unfair” practices such as export subsidies
and dumping products at below cost to gain market share;
• More beneficial for less developed countries — giving them more time to
adjust, greater flexibility, and special privileges.
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Multilateral Arrangements & WTO
• Refers to rules/regulations /arrangements between various countries for international trade
• One of the most important reasons for having the system is to serve as a forum of countries for
resolving their differences on trade issues.
• Multilateral regulation of trade began with GATT which come in to being in 1947 and was substituted
by WTO in 1995.
• WTO was formed in 1995, with the general agreement on trade and tariffs (GATT) as its basis.
• WTO is the only global international organization dealing with rules of trade between nations.
• WTO agreements are negotiated and signed by bulk of the world’s trading nations and ratified by
their parliaments.
• The objective is to help the producers of goods services , exporters and importers to conduct their
biz .
• GATT/WTO believes in multilateral trading system, which is based on the principle of non-
discrimination, reciprocity full market access and fair competition.
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Advantages of WTO system
(i-e WTO’s multilateral trading system)
• The system helps to promote peace.
• Disputes are handled constructively.
• Rules make life easier for all.
• Freer trade cuts cost of living.
• It provides more choice of products qualities.
• Trade rises incomes.
• Trade stimulates economic growth.
• The basic principles make life more efficient.
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Criticisms against the system
• WTO dictates policy.
• WTO is for free trade at any cost.
• Commercial interests take priority over development .
• Commercial interests take priority over environment.
• Commercial interests take priority over health and safety
.
• WTO destroys jobs ,worsens poverty.
• Small countries are powerless in WTO.
• WTO is a tool for powerful lobbies .
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Functions of WTO and Uruguay round
• Agreement on agriculture
• The original GATT through apply to agriculture trade has contained loopholes.
•
• It allowed countries to use some non-tariff measures such as import quotas and export subsidies.
•
• However it has been agreed during Uruguay round (1986—94), among participants for continuing
reform .
•
• The least developed countries do not have to make commitments to reduce tariffs or subsidies.
•
• Agreement allows Govts to support their rural economics but preferably through policies that cause
less distortion to trade .
•
• Developing countries do not have to cut their subsidies or lower their tariffs as much as developed
countries they are given extra time to complete their obligations.
•
• Special provisions deal with interests of countries that rely on import of food supplies.
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Functions of WTO
• Is to implement, administer, direct and further the objectives of multilateral and plurilateral trade agreements
concluded during Uruguay round .The functions specifically include
•
• Provides a forum for further negotiations for trade liberalization in the frame work of various agreements
concluded
• Appellate
• Structure of WTO
• Trade Body
• Dispute Settlement Body Body
• General Council
• Council on Trade in goods
• Council on Trade in services
• Council on TRI PS
• -Committees
• -Sub committees
•
• Administers new dispute settlement procedures
• Establishes and directs a trade policy review mechanism so as to examine trade policies and practices of the
member countries and to suggest measures of reform.
• Cooperate on an equal footing with World Bank and the IMF for the purpose of economic policy making.
• Undertakes research and publishes information and studies for the international community.
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Main features of Uruguay round—8th round –GATT
•
• Reforms in safeguard measures, that were adopted by some of the member countries to restrict
import on the pretext of protecting BOP of domestic industries.
•
• Reforms on agriculture that had remained outside the main stream of GATT rules.
•
• Discusses some of the important non-tariff barriers.
•
• Constitution of Trade Policy Review Mechanism (TPRM) for examining the trade policy of member
countries.
•
• Some new aspects related to international trade e.g., Trade- Related Investment Measures (TRIMS)
Trade – Related Intellectual Property Right (TRIPS), General Agreement On Trade In Services (GATS)
were covered .
•
• Establishment of dispute settlement system ~ so as to make it more effective & to provide relief to
the affected members.
• GATT was conferred with a legal starts through the creation of WTO.
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14. WTO(World Trade Organization)
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17. The Bretton-Woods
Conference
June 1944
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18. Founders
• Harry Dexter White -Chief
International Economist at
the U.S. Treasury
• John Maynard Keynes – U.
K. Treasury Advisor
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19. 44 Delegate Nations
Australia India
Belgium Iran
Bolivia Iraq
Brazil Liberia
Canada Luxembourg
Chile Mexico
China Netherlands
Colombia New Zealand
Costa Rica Nicaragua
Cuba Norway
Czechoslovakia Panama
Dominican Republic Paraguay
Ecuador Peru
Egypt Philippines
El Salvador Poland
Ethiopia Union of South Africa
France Union of Soviet Socialist Republics (USSR)
Greece United Kingdom
Guatemala United States
Haiti Uruguay
Honduras Venezuela
Iceland Yugoslavia
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Bretten wood Conference
• Their aims were to help rebuild the shattered postwar
economy and to promote international economic
cooperation.
• The Bretton Woods Institutions are the International Bank
for Reconstruction & Development (World Bank), and the
International Monetary Fund (IMF).
• They were set up at a meeting of 43 countries in Bretton
Woods, New Hampshire, USA in July 1944.
• The original Bretton Woods agreement also included plans
for an International Trade Organisation (ITO) but these lay
dormant until the World Trade Organisation (WTO) was
created in the early 1990s.
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Havana Charter
• The Havana Charter (formally the "Final Act of the United
Nations Conference on Trade and Employment") provided for
the establishment of the ITO, and set out the basic rules for
international trade and other international economic matters.
• It was signed by 56 countries on March 24, 1948.
• The Charter never came into force, in part because in 1950
the United States government announced that it would not
submit the treaty to the United States Senate for ratification.
• Because of the American rejection of the Charter, no other
state ratified the treaty.
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GATT---------
• General Agreement on Tariffs and Trade (GATT) was a
multilateral agreement regulating international trade.
• According to its preamble, its purpose was the
"substantial reduction of tariffs and other trade barriers
and the elimination of preferences, on a reciprocal and
mutually advantageous basis."
• It was negotiated during the United Nations Conference
on Trade and Employment and was the outcome of the
failure of negotiating governments to create the
International Trade Organization( ITO).
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-------GATT
• GATT was signed by 23 nations in Geneva on October 30, 1947
and took effect on January 1, 1948.
• The General Agreement on Tariffs and Trade (GATT) was never
designed to be a stand-alone agreement. Instead, it was meant
to be just one part of a much broader agreement to establish an
International Trade Organization (ITO).
• It lasted until the signature by 123 nations in Marrakesh on April
14, 1994 of the Uruguay Round Agreements, which established
the World Trade Organization(WTO) on January 1, 1995.
• The original GATT text (GATT 1947) is still in effect under the
WTO framework, subject to the modifications of GATT 1994.
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WTO Vs GATT
GATT WTO
It is a set of rules and multilateral
agreement.
It is a permanent institution.
It was designed with an attempt to
establish international trade organization.
It is established to serve its own purpose.
It was applied on a provisional basis. Its activities are full and permanent.
Its rules are applicable to trade in goods
only.
Its rules are applicable to trade in
goods,sevices,intellectual property.
GAAT was originally a multilateral
instrument, but plurilateral agreements
were added at a later stage.
Its agreements are almost multilateral.
Its dispute settlement system was not
faster and automatic.
Its dispute settlement system was fast and
automatic.
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WTO-MEANING
• The World Trade Organization (WTO) is the only
global international organization dealing with the
rules of trade between nations.
• At its heart are the WTO agreements, negotiated
and signed by the bulk of the world’s trading
nations and ratified in their parliaments.
• The goal is to help producers of goods and
services, exporters, and importers conduct their
business.
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WTO(What it is?)
There are a number of ways of looking at the
World Trade Organization:-
• It is an organization for trade opening.
• It is a forum for governments to negotiate trade
agreements.
• It is a place for them to settle trade disputes.
• It operates a system of trade rules.
• Essentially, the WTO is a place where member
governments try to sort out the trade problems
they face with each other.
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Birth of WTO
• The WTO was born out of negotiations, and
everything the WTO does is the result of
negotiations.
• The bulk of the WTO’s current work comes
from the 1986–94 negotiations called the
Uruguay Round and earlier negotiations under
the General Agreement on Tariffs and Trade
(GATT).
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STRUCTURE OF WTO-----
• The WTO has about 164 members, accounting for about
95% of world trade. Around 25 others are negotiating
membership.
• Decisions are made by the entire membership.
• This is typically by consensus.
• A majority vote is also possible but it has never been used
in the WTO, and was extremely rare under the WTO’s
predecessor, GATT.
• The WTO’s agreements have been ratified in all members’
parliaments.
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-----STRUCTURE OF WTO
• The WTO’s top level decision-making body is the Ministerial
Conference which meets at least once every two years.
• Below this is the General Council (normally ambassadors and
heads of delegation in Geneva, but sometimes officials sent from
members’ capitals) which meets several times a year in the
Geneva headquarters. The General Council also meets as the
Trade Policy Review Body and the Dispute Settlement Body.
• At the next level, the Goods Council, Services Council and
Intellectual Property Council report to the General Council.
• Numerous specialized committees, working groups and working
parties deal with the individual agreements and other areas such
as the environment, development, membership applications and
regional trade agreements.
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Objectives
• The WTO’s overriding objective is to help trade flow
smoothly, freely, fairly and predictably.
It does this by:
• Administering trade agreements
• Acting as a forum for trade negotiations
• Settling trade disputes
• Reviewing national trade policies
• Assisting developing countries in trade policy
issues, through technical assistance and training
programmes
• Cooperating with other international organizations
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Secretariat
• The WTO Secretariat, based in Geneva, has around 640 staff and is
headed by a director-general. Its annual budget is roughly 197
million Swiss francs. It does not have branch offices outside
Geneva. Since decisions are taken by the members themselves,
the Secretariat does not have the decision-making role that other
inter national bureaucracies are given.
• The Secretariat’s main duties are to supply technical support for
the various councils and committees and the ministerial
conferences, to provide technical assistance for developing
countries, to analyze world trade, and to explain WTO affairs to
the public and media.
• The Secretariat also provides some forms of legal assistance in the
dispute settlement process and advises governments wishing to
become members of the WTO.
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Ministerial Conferences at WTO
Ministerial Conferences back to top
• Nairobi, 15-19 December 2015
• Bali, 3-6 December 2013
• Geneva, 15-17 December 2011
• Geneva, 30 November - 2 December 2009
• Hong Kong, 13-18 December 2005
• Cancun, 10-14 September 2003
• Doha, 9-13 November 2001
• Seattle, November 30 – December 3, 1999
• Geneva, 18-20 May 1998
• Singapore, 9-13 December 1996
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Main Activities/Function of WTO----
• Negotiating the reduction or elimination of obstacles to trade
(import tariffs, other barriers to trade) and agreeing on rules
governing the conduct of international trade (e.g. antidumping,
subsidies, product standards, etc.)
• Administering and monitoring the application of the WTO's agreed
rules for trade in goods, trade in services, and trade-related
intellectual property rights.
• Monitoring and reviewing the trade policies of members, as well as
ensuring transparency of regional and bilateral trade agreements
• Settling disputes among our members regarding the interpretation
and application of the agreements
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----Main Activities/Functions of WTO
• Building capacity of developing country government
officials in international trade matters
• Assisting the process of accession of some 30 countries
who are not yet members of the organization.
• Conducting economic research and collecting and
disseminating trade data in support of the WTO's other
main activities
• Explaining to and educating the public about the WTO, its
mission and its activities.
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Guiding Principle of WTO
• The WTO's founding and guiding principles remain the pursuit of open
borders, the guarantee of most-favoured-nation principle and non-
discriminatory treatment by and among members, and a commitment
to transparency in the conduct of its activities.
• The opening of national markets to international trade, with justifiable
exceptions or with adequate flexibilities, will encourage and contribute
to sustainable development, raise people's welfare, reduce poverty,
and foster peace and stability.
• At the same time, such market opening must be accompanied by
sound domestic and international policies that contribute to economic
growth and development according to each member's needs and
aspirations.
• Exception-1.Regional Integration2.Import from third world
countries3.Antidumping measures4.Banning import of a product after
scientific study
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WTO-Rules
• Through these agreements, WTO members operate a
non-discriminatory trading system that spells out their
rights and their obligations.
• Each country receives guarantees that its exports will be
treated fairly and consistently in other countries’ markets.
• Each promises to do the same for imports into its own
market.
• The system also gives developing countries some
flexibility in implementing their commitments.
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------WTO-Rules
• The WTO’s rules — the agreements — are the result of
negotiations between the members.
• The current set were the outcome of the 1986–94
Uruguay Round negotiations which included a major
revision of the original General Agreement on Tariffs and
Trade (GATT).
• GATT is now the WTO’s principal rule-book for trade in
goods.
• The Uruguay Round also created new rules for dealing
with trade in services, relevant aspects of intellectual
property, dispute settlement, and trade policy reviews.
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-------WTO-Rules
• The complete set runs to some 30,000 pages
consisting of about 30 agreements and
separate commitments (called schedules)
made by individual members in specific areas
such as lower customs duty rates and services
market-opening.
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Four principal legal agreements of the World Trade
Organization
1. GATT 1994 (General Agreement on Tariff &
Trade)
2. GATS (General Agreement on Trade in Services)
3. TRIPS (Trade-Related Aspects of Intellectual
Property Rights)
4. TRIMs (Trade Related Investment Measures)
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GATT 1994
• GATT 1994 is constituted with Parts I, II, III and IV.
• Part I of GATT 1994 is made up of Articles I and II.
• Article I, the Most Favored Nation Clause, sets
forth the concept of non-discrimination.
• Article II states the obligations applicable to the
schedules of concessions of each WTO Member.
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--------GAAT 1994
• Part II covers Articles III through XXIII of the
General Agreement.
• Article III deals with the concept of National
Treatment.
• Articles IV to XIX cover a wide variety of
subjects which can all broadly be regarded as
non-tariff measures.
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--------GAAT 1994
• Provisions in this group cover unfair trade practices such as
dumping and export subsidies, quantitative restrictions,
restrictions for balance-of-payments reasons (and related
cooperation with the International Monetary Fund), state-
trading enterprises, government assistance to economic
development, and emergency safeguard measures, as well as
a number of technical issues related to the application of
border measures (screen quotas for cinema films, freedom of
transit, customs valuation, fees and formalities, marks of
origin and transparency of trade regulations).
• General and national security exceptions are provided for in
Articles XX and XXI, respectively. Provisions on consultations
and dispute settlement in Articles XXII and XXIII are
elaborated in the WTO dispute settlement rules.
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--------GAAT 1994
• Part III comprises Articles XXIV through XXXV. Article XXIV deals
with customs unions and free trade areas, as well as with territorial
application, frontier traffic, and the responsibilities of Members for
actions by their regional and local governments.
• Articles XXVIII and XXVIII cover the negotiation and renegotiation
of tariffs.
• Article XXIX spells out the relationship between GATT 1994 and the
Havana Charter, and Article XXXIV makes the annexes an integral
part of GATT 1994. Other articles dealing with joint action, entry
into force, accession, amendments, withdrawal, non-application,
etc., are no longer valid as they have been overridden by
corresponding provisions in the WTO Agreement.
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--------GAAT 1994
• Three articles were added to the General Agreement in 1965
in the form of Part IV, Trade and Development, providing
special rules and benefits for developing countries.
• Article XXXVI stipulates specifics about contributions to the
advancement of developing countries.
• Article XXXVII (Commitments) outlines measures that
developed country Members might, on a best endeavor basis,
undertake in the trade area to promote development.
• Article XXXVIII (Joint action) provides for joint collaboration of
the Members to further the objectives set out in Article XXXVI.
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GATS-------
• The General Agreement on Trade in Services (GATS) is
the first set of multilateral rules covering international
trade in services.
• It came into effect in 1995 and is being negotiated
under the auspices of World Trade Organization (WTO).
• GATS has three main parts: the main text with general
principles and obligations; annexes with rules for
specific sectors; and Member countries' specific
commitments to provide access to their markets. The
WTO provides links to the GATS text.
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--------GATS
• GATS considers education as a tradable service.
• GATS covers 12 service sectors (Business;
Communication; Construction and Engineering;
Distribution; Education; Environment; Financial;
Health; Tourism and Travel; Recreation, Cultural,
and Sporting; Transport; "Other".).
• Two exceptions are services in the exercise of
governmental authority and air traffic rights.
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--------GATS
• GATS applies to all measures affecting trade in
services.
• GATS defines measures as all laws, regulations
and practices from national, regional or local
government or non-governmental bodies
exercising powers delegated to them by
government that may affect trade.
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--------GATS
GATS defines 4 ways that all services can be traded based on
modes of supply:
1. Consumption abroad of service by consumers travelling to
supplier country (e.g. students studying abroad);
2. Cross border supply of a service to consumer country
without the supplier (e.g. open and distance education);
3. Commercial presence of a supplier in consumer country
(e.g. offshore foreign universities); and
4. Presence of Natural Persons from supplying country in
consuming country (e.g. professors, researcher working
outside their home country).
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--------GATS
• GATS has two broad categories of rules.
1. The first category are general rules which apply, for the
most part, to trade in all services.
2. The second category are rules applicable to national
commitments in specific service sectors.
• General Rules –
• Most Favored Nation Treatment (MFN)
The most significant general rule is that of 'Most
Favored Nation Treatment' (MFN).
• MFN means that countries must give equal and
consistent treatment to all foreign trading partners.
WTO describes this as 'favour one, favour all'.
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--------GATS
• Rules for national commitments - Market Access & National
Treatment:
• Market Access refers to the degree to which market access is
granted to foreign providers in specific sectors. GATS sets 6
ways of limiting free market access. These limitations may not
be applied unless their use is clearly provided for in the
schedule of commitments.
• These limitations include : limitations on the number of
service suppliers, limitations on the value of transactions,
service operations or employees in the sector.
• National Treatment means equal treatment for foreign and
domestic services or service suppliers.
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TRIPS-----
• TRIPS was negotiated at the end of the Uruguay Round of the
General Agreement on Tariffs and Trade (GATT) in 1994.
• Its inclusion was the culmination of a program of intense
lobbying by the United States, supported by the European
Union, Japan and other developed nations.
• Campaigns of unilateral economic encouragement under the
Generalized System of Preferences and coercion under Section
301 of the Trade Act played an important role in defeating
competing policy positions that were favored by developing
countries, most notably Korea and Brazil, but also including
Thailand, India and Caribbean Basin states.
• After the Uruguay round, the GATT became the basis for the
establishment of the World Trade Organization.
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--------TRIPS
• Because ratification of TRIPS is a compulsory requirement of
World Trade Organization membership, any country seeking to
obtain hard access to the numerous international markets
opened by the World Trade Organization must enact the strict
intellectual property laws mandated by TRIPS.
• For this reason, TRIPS is the most important multilateral
instrument for the globalization of intellectual property laws.
States like Russia and China that were very unlikely to join the
Berne Convention have found the prospect of WTO
membership a powerful enticement.
• Furthermore, unlike other agreements on intellectual property,
TRIPS has a powerful enforcement mechanism. States can be
disciplined through the WTO's dispute settlement mechanism.
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-----TRIMS
• Trade-Related Investment Measures is the name of one of the
four principal legal agreements of the World Trade Organization
(WTO), trade treaty.
• TRIMs are rules that restrict preference of domestic firms and
thereby enable international firms to operate more easily within
foreign markets.
• The TRIMs Agreement prohibits certain measures that violate the
national treatment and quantitative restrictions requirements of
the General Agreement on Tariffs and Trade (GATT).
• The Agreement on Trade-Related Investment Measures (TRIMs)
are rules that apply to the domestic regulations a country applies
to foreign investors, often as part of an industrial policy.
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TRIMS-----
• The agreement was agreed upon by all members of the World Trade
Organization. The agreement was concluded in 1994 and came into force in
1995. (The WTO was not established at that time, it was negotiated under
the WTO's predecessor, the General Agreement on Tariffs and Trade) (GATT).
• Policies such as local content requirements and trade balancing rules that
have traditionally been used to both promote the interests of domestic
industries and combat restrictive business practices are now banned.
• Trade-Related Investment Measures is the name of one of the four principal
legal agreements of the WTO trade treaty.
• TRIMs are rules that restrict preference of domestic firms and thereby
enable international firms to operate more easily within foreign markets.
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-----TRIMS
• The agreement on the Trade Related Investment measures
(TRIMS) calls for introducing national treatment of foreign
investment and removal of quantities restrictions.
• It identifies five investment measures which are inconsistent
with the General Agreement on Trade and Tariff (GATT) on
according national treatment and on general elimination of
quantitative restrictions.
• These are measure which are imposed on the foreign investors
the obligation to use local inputs, to produce for export as a
condition to obtain imported goods as inputs, to balance
foreign exchange outgo on importing inputs with foreign
exchange earnings through export and not to export more than
a specified proportion of the local production.
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------TRIMS
• TRIMs may include requirements to:
i. Achieve a certain level of local content;
ii. Produce locally;
iii. Export a given level/percentage of goods;
iv. Balance the amount/percentage of imports with the
amount/percentage of exports;
v. Transfer of technology or proprietary business information to
local persons;
• These requirements may be mandatory conditions for
investment, or can be attached to fiscal or other incentives.
• The TRIMs Agreement does not cover services.
• All WTO member countries (offsite link) are parties to this
Agreement.
• This Agreement went into effect on January 1, 1995. It has
no expiration date.
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Thanx.
CA. Prithvi R Parhi
7008246670,8763434746
prithvi.baps@gmail.com
© CA. Dr Prithvi R Parhi