The World Trade Organization (WTO), established on January 1, 1995, oversees international trade rules among its 149 member countries, evolving from the General Agreement on Tariffs and Trade (GATT). Its functions include administering trade agreements, facilitating negotiations, and resolving disputes, while adhering to principles like non-discrimination and fair competition to promote trade. The document details the historical context, principles of the WTO, its structure, benefits, misunderstandings, and key negotiations, especially the Doha and Bali rounds, illustrating the complexities of global trade dynamics.

1. Understanding WTO and
International Trade
R S Deshpande
National Fellow ICSSR
Former Director ISEC
E-mail:rs.kalbandi@gmail.com

2. A. What is the WTO?
 The World Trade Organisation (WTO)
Established on 1st January 1995
As a result of the Uruguay Round negotiations (1986-
1994)
Located in Geneva, Switzerland
Members: 149 countries
 At its simplest:
“A global organisation dealing with rules of
trade between nations”.
(source: WTO)

3. Evolution of the WTOPredecessor of the WTO – The GATT ‘47
 The General Agreement on Tariffs and Trade (GATT) 1947 -the
first major effort to establish international rules governing
trade in goods. Though initially conceived as a provisional
legal instrument, it endured for almost 50 years.
 It functioned without a formal organisational framework to
oversee its implementation as the proposed International
Trade Organisation (ITO) never came into being and the ITO
Charter (aka the Havana Charter) of which GATT was only to
be a part, never came into effect.
 GATT’s primary focus was the reciprocal reduction of tariffs
which later expanded to other trade related areas. In the
years leading up to the Uruguay Round, GATT expanded its
competence through several rounds of trade negotiations
which witnessed the formulation of complex legal instruments
on specific aspects of trade, particularly disciplines on the use
of non tariff barriers.

4. The Uruguay Round (1986-
1994)
 The results of the Uruguay Round (UR) were signed in
Marrakech, Morocco on 15 April 1994 .The WTO came into
being on 1 January 1995 by virtue of the Agreement
establishing the WTO.
 The scope of the multilateral trading system was
broadened from trade in goods (GATT) to encompass trade
in services (GATS) and trade related aspects of intellectual
property rights (TRIPS). It was a rule-based global trading
system complete with its own dispute resolution procedures
.
 The “Single Undertaking” concept
The multilateral trade agreements under the WTO system
are treated as a single undertaking which means that every
member state of the WTO is a party to every one of these
agreements and must implement them accordingly.

5. The WTO’s functions
 Administers the WTO Agreements and facilitates their
operation and implementation
 Provides a forum for trade negotiations among member
states on matters covered by the Agreements and for
further liberalisation of trade amongst members
 Responsible for the settlement of differences and
disputes between members
 Responsible for periodic reviews of the trade policies of
members
 Also provides technical assistance and training for
developing countries
 Cooperates with other international organisations on
subjects of mutual interest

6. Principles of the world trading
system under the WTO
 Non discrimination- Most Favoured Nation (MFN) and
National Treatment obligations
 Freer trade – negotiations aimed at lowering trade barriers
 Predictability and transparency - binding commitments,
restrictions on the use of barriers to trade and transparent
trade policies and regulatory frameworks (e.g. transparency
obligations in the major trade agreements and the Trade
Policy Review Mechanism)
 The promotion of fair competition- MFN, national treatment
and rules against unfair trade practices (e.g. anti dumping)
 Encouragement of development and economic reform
 Two Principles : Developed –Developing and Under-
Developed Nations; Differential Time Treatments

7. Organisational structure of the WTO
 Ministerial Conference- The apex body for decision making
(meets every 2 years). Composition:-ministerial
representatives.
 General Council- performs the functions of the Conference
between meetings and has specific duties assigned to it by the
WTO agreements. Composition:- governmental representatives.
 The General Council also meets as the Dispute Settlement Body
and the Trade Policy Review Body.
 Councils for Trade in Goods (oversees GATT), Trade in Services
(oversees GATS) and TRIPS which report to and assist the
General Council.
 Committees on special subjects, Committees functioning under
the Councils and Committees for the Plurilateral Agreements.
Decision making is by consensus. If consensus is not possible
decisions will be taken by a majority vote.

8. The Ten benefits
1.The system helps promote peace
2. Disputes are handled constructively
3. Rules make life easier for all
4. Freer trade cuts the costs of living
5. It provides more choice of products and
qualities
6. Trade raises incomes
7. Trade stimulates economic growth
8. The basic principles make life more
efficient
9. Governments are shielded from lobbying
10.The system encourages good governments

9. THE 10 MISUNDERSTANDINGS
1. WTO dictates
2. Blindly for trade
3. Ignores development
4. Anti-green
5. Anti-health
6. Wrecks jobs
7. Small left out
8. Tool of lobbies
9. Weak forced to join
10. Undemocratic

10. Four main Principles
 Most Favoured Nation –
 National Treatment;
 Tarrification;
 Tariff Concession
 MFN: Art. 1 of GATT embodies the MFN rule. At its simplest,
it requires any favourable treatment granted to a product
originating in or destined for any other country, to be
accorded immediately and unconditionally to the like
product originating in or destined for the territories of all
other member states.
E.g. Spanish coffee case: Spain applied a higher duty on the
types of coffee imported from Brazil while applying a lower
duty on other coffees considered to be ‘like products’. The
Panel considered this to be a breach of its GATT MFN
obligation.
 There are permitted exceptions to the MFN rule:
for e.g. free trade areas/customs unions and preferential
systems.
[The principle of MFN is also found in GATS(Art.2) and TRIPS (Art.4)]

11. Principles (Cont.)
 National Treatment –
The national treatment rule in Art. 3 of GATT provides
that internal taxes, charges, laws and regulations must
not be applied so as to afford protection to domestic
production. The imported product must not be subject
directly or indirectly to internal taxes in excess of
those applied directly or indirectly to the like domestic
product.
E.g. Japan- Alcoholic beverages case (1996)
Imported vodka (and other alcoholic beverages) vs.
local shochu (a distilled white spirit) and excessive
taxes on the former.
[The national treatment principle is also found in GATS (Art.17) and
TRIPS (Art.3).]

12. Principles (Cont.)
 Tarrification
- Protection of the domestic industry by tariffs only.
- Reinforced through rules which prohibit use of
quantitative restrictions
(Art 11 GATT).
Limited exceptions are allowed e.g. for BOP reasons (Art
12 GATT).
 Tariff Concessions- negotiations shall be aimed at
reducing tariffs (Preamble and Art. 28bis GATT). Tariffs
shall also be bound against further increases [Art 2.1(b)
GATT].
(Tariff concessions are recorded in schedules of concessions)

13. General Obligations
MFN (Art.2)
“With respect to any measure covered by this Agreement, each Member
shall accord immediately and unconditionally to services and service
suppliers of any other Member treatment no less favorable than that it
accords to like services and service suppliers of any other country.”
Note qualifications to the MFN rule via Art. 2 exemptions and RTAs (Art.5)
Transparency (Art.3)
Art. 3 is mainly concerned with the provision of information. The rule
requires the “prompt” publication of general measures, notification of
changes to/introduction of measures that affect sectors covered by
specific commitments to the Services Council. Also requires the
establishment of national enquiry points.

14. Specific obligations
Market Access Art. 16
“With respect to market access through the modes of supply identified in
Article 1, each Member shall accord services and service suppliers of any
other Member treatment no less favorable than that provided for under the
terms, limitations and conditions agreed and specified in its Schedule.”
Art. 16 contains a prohibition of a list of measures (mostly quantitative)
which Members cannot maintain unless they specify them in their
Schedules as limitations on market access. These measures include:
- limitations on the number of suppliers (e.g. quotas)
- limitations on the quantity of service out put (e.g. limited broadcasting
time for foreign films)
- limitations on the participation of foreign capital or restrictions on the
type of legal entity (e.g. joint venture)

15. Cont.
Domestic regulations Art. 6
Article 6 addresses domestic regulations as these may act as barriers to
trade even if they are non-discriminatory. E.g. professional qualifications,
licensing procedures and technical regulations.
Certain Art. 6 obligations apply only to service sectors in which
commitments have been undertaken. They include:
- obligations to ensure that general measures are administered in “a
reasonable, objective and impartial manner”.
- obligations aimed at preventing licensing and qualification
requirements and technical standards from being unnecessary barriers
to trade.

16. WTO: Benefits for business
 Creation of a stable, rule based, multilateral trading regime
 Market access translates into market opportunities
 The rule based system creates certain rights of access
- Security of access
tariff bindings and disciplines on barriers to trade whether tariff or non tariff.
It also provides non discriminatory treatment of products and services.
- Stability of access
the application of uniform rules in key areas of the trading process e.g.
customs valuation, import licenses etc.
- Rights against unfair trade practices for
 Domestic industry
 Export industry
 Import industry

17. History of Negotiations
# Date Host City
1st 9 - 13 December 1996 Singapore
2nd 18 - 20 May 1998 Geneva , Switzerland
3rd
30 November - 3 December
1999
Seattle , United
States
4th 10 - 14 November 2001 Doha , Qatar
5th 10 - 14 September 2003 Cancun , Mexico
6th 13 - 18 December 2005 Hong Kong
7th
30 November - 3 December
2009
Geneva , Switzerland
8th
15 December - 17
December 2011
Geneva , Switzerland
9th
December
2013
[1] Bali, Indonesia

18. The Uruguay Round
 The Agreement establishing the WTO Its Annexes
 Annex
1A - GATT 1994 , related agreements (e.g. Agreements
on Agriculture, Subsidies etc.) and texts
1B- General Agreement on Trade in Services (GATS) and
Annexes
1C- Agreement on Trade Related Aspects of Intellectual
Property Rights (TRIPS)
 Annex 2 Understanding on the Rules and Procedures
Governing the Settlement of Disputes (aka Dispute
Settlement Understanding /DSU)
 Annex 3 Trade Policy Review Mechanism
 Annex 4 Plurilateral Agreements (e.g. Agreement on
Trade in Civil Aircraft)

19. Important Aspects of Agreement on
Agriculture
.Sl.
No
Components Specific Recommendations
1. Market Access i. Tarrification- change from non-tariff
to tariff, thereby rationalising the
access.
ii. Negotiable restrictions on tariff and
binding lines drawn for tariffs.
iii. Guaranteed access at a pre-decided
share of domestic market.
iv. Special safeguard measures for
importers.
v. Safeguards against eventualities like-
import surge, world price fluctuations
and developing economies.

20. Contd
2. Export-
Competition
i. Defined limits on budget
expenditure on existing
export subsidies. Phased
programme to reduce it.
ii. Ban on introducing new
export subsidies.
iii. Adherence to food aid rules.
Genuine food aid to be
exempted from trade
restrictions.
iv. Other subsidies should not
be applied that would
undermine the cut in export
subsidies..

21.  Contd.
v. Export credit and credit
guarantees to be covered
under a separate agreement.
3. Domestic
Support
Policies
i. Reduction in total trade
distorting domestic
subsidies.
ii. Separate treatment for
developing countries.
iii. Exemption for
developing countries
based on Aggregate
Measure of Support.
iv. Direct payments under
production reduction
programme not subject
to reduction.
v. “Green Box” defined
for allowable subsidies.

22.  Domestic Support: Encourages further shift away
from trade-distorting measures and policies.
However certain subsidies are allowed under the
agreement- the Green Box and Amber Box
Measures.
Green Box includes expenditures on:
 Support for research
 Control of Pests and Diseases
 Training, Extension & Advisory services
 Public stock for Food Security
 Direct Payment to Producers
 Farm Income Insurance
 Safety Nets & Disaster Management
 Investment Subsidies and Agricultural
input services to Resource Poor Farmers

23. Amber Box Measures excluded from
exemption measures:
 “de minimis” support; support not exceeding 5%
of the value of production of individual products
of the value of total agricultural production. For
developing countries, the level is 10%.
 Certain measures to encourage agricultural and
rural development in developing countries,
including generally available investment
subsidies, subsidies to low-income producers,
and support to diversification away from
growing illegal narcotic crops; and
 certain direct payments under production-
limiting programmes. (Blue Box).

24. Doha Round In Brief
 Launched in Dec.2001 in ministerial level meeting in Doha
 List 21 subjects; original deadline Jan 2005; extended up to Dec 2006
 Round included several Meetings-
 Ministerial : Cancun (2003); Hong Kong (2005);
 Other: Geneva (2004,2006,2008); Paris (2005); Potsdam (2007)
 Formation of different interest groups
 Developed nations ( US; EU; Japan)
 Developing nations (India, Brazil, China, South Africa & South Korea)
 Differences between interest groups
 Between US & EU (over agricultural subsidies as trade barrier)
 Between Developed and Developing Nations
 Between Developing Nations (Exporters vis -a- vis Importers)
 The talk collapsed in Dec. 2008 over
 Agricultural subsidies
 Reduction of industrial tariffs and non-tariff barriers
 Services and trade remedies

25. Key Issues in Doha Round
 Market Access and Agriculture
 Rules on export subsidies, domestic support, and Tariff cuts.
 Hong Kong Meeting (2005)- consensus on elimination of farm export
subsidies by 2013 (2006 for cotton export subsidies), and modalities for
tariff cuts, with four ranges of tariffs, each being subjected to a different
percentage cut.
 Non-Agricultural Market Access
 Considerable asymmetry in tariff levels between countries and across
sectors within countries. Tariffs are quite high in developed countries.
 included provision of bound tariffs; settlement mechanism in which
developed countries would offer more in agriculture, services, and rules;
flexible provisions to take in to account the special needs & interests of
developing countries.
 Services
 Market access to services like financial services, telecoms, energy services,
express delivery and distribution services. But, decision left to the state to
decide which sectors it wants to open to foreign companies and to what
extent.
 To open, improve and clarify the rules on regulations, the poorest
countries and flexibilities.

26. Continued…
• Developmental Issues
 Access to Patented Medicines – relates to Agreement on Trade-Related
Aspects of Intellectual Property Rights (TRIPS). The issue involves the
balance of interests between the pharmaceutical companies in
developed countries that held patents on medicines and the public
health needs in developing countries.
 Special and Differential Treatments to developing countries -
 Implementation Issues - market access, investment measures,
safeguards, rules of origin, and subsidies and countervailing measures,
among others
 Trade Facilitation- to support the capacity of developing countries to
implement trade liberalization and structural change. It could potentially be
extended to all activities involved in the international movement of goods
and services, such as building transport infrastructure and facilities,
operating trade-related services such as telecommunications, and providing
specialized legal and insurance services.
 Rules Negotiations - clarifying and improving WTO disciplines and
procedures on fisheries subsidies as well as regional trade agreements.
 Dispute Settlement -

27. Failure of Doha Round
 Divergent Interests Groups
 Heterogeneity across the newer group and between old
members
 Belonging to different stages of development;
 different perceptions of trade-off between global markets and
issues of national interest; developed countries for deeper
integration and liberalisation, whereas new participants for
greater special safeguards against import surge.
 Inherent conflict of interest – in negotiation agenda on
elimination of price-distorting policies, harms the interest of net
exporters (low income for farmers) and importers of commodities
(poverty concerns)
 Shifting national priorities –
 structural change in developing countries warranted both
better access to markets (developed country) in
manufacturing and agriculture and safeguards against
vulnerabilities. Whereas, developed countries continued to
insist on greater market access and enforcement of IPRs.

28. Issues in Bali Negotiation
 Trade facilitation –
 Put forward by developed nations (particularly, US and EU with a large
export interest). Smoothening cross-border trade by removing red tape,
improving infrastructure and harmonising customs procedures, is on
their agenda
 Trade and Innovation-
 how open trade and innovation work together and how new
technologies have changed the traditional way of doing business or
whether technological innovation has changed the way we trade, and if
so, how?
 whether trade has helped countries to innovate?
 how innovation can enhance the trading capacities of developing
countries and create trade opportunities.?
 how trade can keep up with the rapid evolution of technology?

29. Contd…
 Innovation and international
competitiveness will be the theme of the
debate on the second day of the Forum.
Exchange views on how open trade and
innovation work together and how new
technologies have changed the traditional
way of doing business.
 A total of 16 sessions on the third day of
the Forum will be dedicated to Bali
Ministerial Conference issues, such as
trade facilitation, development issues,
topics related to small and medium-
sized enterprises, e-commerce, food
security, and future challenges .

30. . Food Security and Issues-
 Proposed by G33 nations (India, China and
Philippines in particular. These countries have many
food security schemes for the poor in place)
 Stock holding & Food Aid- an important measure for
developing countries to assure minimum returns to
their poor farmers and domestic food security. It is
far more crucial for highly populated countries having
significant area under rainfed conditions.
 Expected position of India in Bali - India is likely
to convey that the Peace Clause in Article 13 of
the agreement on agriculture (AOA) that is vogue
since 9 years. India can only go so far as
accepting a Peace Clause as an interim
mechanism till an acceptable final solution is
arrived at.
 India is even prepared to commit non-releasing of
procured food grains for international trade and
the management of public stocks to be done in a
transparent manner.

31. Contd….
 Cotton-4 – Benin, Burkina Faso, Chad, Mali have
proposed to allow cotton from least developed
countries duty-free, quota-free market access into
developed countries and at least some developing
countries by 2015, to eliminate any remaining
export subsidies for cotton in developed countries
immediately. They are also asking for a decision by
the end of 2014 on how to cut domestic support for
cotton.
 Development -
 LDC specific issues:
 Duty and quota free market access
 Operationalisation of waiver on services
 Cotton and preferential rules of origin.

32. Enhanced Integrated Framework
(EIF)
 A non-negotiating subject matter, but of
critical importance to the LDCs in the
context of their trade capacity-building
is the EIF programme which aims to
build institutional and productive
capacity in the LDCs.

 The EIF is also an instrument for the
LDCs to access larger aid-for-trade
resources. In fact, the LDCs could very
well use the occasion of the Bali
Ministerial to further reinforce the aid-
for-trade initiative in the WTO.

33. Let Us Play Intelligently and Get in our Favour
Ye Dharati Apani Hai Apana Ambar Hai Re