THE WORLD TRADE
Tinaaz Wadia: 56
FLOW OF CONTENT
Formation of the WTO
Objectives of the WTO
Structure of WTO
Members of WTO- member nations and the voting
Principles of trading
Functions of the WTO
The WTO agreements and policies
GATT & WTO trade rounds
Pros and Cons of the WTO
The WTO policies for India and its impact on the Indian
The World Trade Organization (WTO) is an organization that intends to supervise
and liberalize international trade. The 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
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.
The WTO superseded and replaced the GATT which was a provisional,
multilateral agreement governing
international trade from 1947 until Jan 1, 1995.
The WTO has larger membership than GATT,
the number of members stand at 153.
India is one the founding members of the WTO.
Established: 1st January 1995.
Created By: Uruguay Round negotiations (1986-1994)
Headquarter: Geneva, Switzerland
Membership: 153 member states (till 2008)
Secretariat Staff: 625
Head: Pascal Lamy (Director-General)
Budget: 196 million Swiss francs (approx)
Mr. Pascal Lamy
WTO headquarters: Geneva
FORMATION OF THE WTO
The GATT was the only multilateral instrument governing international trade from 1948
until the WTO was established in 1995. The GATT managed to operate for almost half a
century as a semi institutionalized multilateral treaty regime on a provisional basis.
Seven rounds of negotiations occurred under the GATT
The Tokyo round during the 70s was the first major attempt to tackle trade barriers that
do not take the form of tariffs and to improve the system but the agreements were not
accepted by all the member nations of GATT.
These agreements and policies were amended in
URUGUAY ROUND leading to acceptance by the
member nations and formation of WTO.
This final act concluding the Uruguay round and
officially establishing the WTO regime was signed in
1994 at Marrakesh, Morroco and hence known as
OBJECTIVE OF THE WTO
To implement the new world trade system as visualized in the agreement
To promote world trade in a manner that benefits every country
To ensure developing countries secure a better balance in sharing of the
advantages resulting from the expansion of international trade corresponding to
their developmental needs
To enhance competitiveness among all trading nations as to benefit customers
To increase the level of production and productivity
with a view of ensuring level of employment in the world
To demolish all hurdles in to an open world trading
system and usher in international economic renaissance
WTO: THE MEMBERS
The WTO is composed of 153 countries which represents 95% of world trade.
Of these, 123 were signed during the Uruguay round
WTO members do not have to be full-sovereign nation members. Instead, they
must be a custom territory with full autonomy in their external relations.
Over 3/4th of WTO members are developing or least
There are 30 countries that are not members known as
Observers. These countries are currently negotiating
The biggest of these non-members is Russia, however
they are in the process of accession.
Ukraine became the newest member on May 16, 2008
VOTING PRINCIPLES IN WTO
Principle One member, one vote
Primary aim Consensus
No consensus Majority vote
Interpretation of agreements 3/4 in favor
Amendment to agreements 2/3 in favor
Propose amendments Countries and Councils
A CLOSER LOOK AT THESE PRINCIPLES:
Without Discrimination – (MFN and National treatment to all)
Free – With barriers coming down through negotiation;
Predictable – Bound tariffs
More Competitive – By discouraging “unfair” practices such as export subsidies and
dumping products at below cost to gain market share;
More Beneficial for Less Developed Countries – By giving them more time to adjust,
greater flexibility, and special privileges
FUNCTIONS OF WTO
The main function is to ensure that trade flows as
smoothly, predictably and freely as possible.
Administering trade agreements- WTO agreements cover
goods, services, intellectual property.
Acting as a forum for trade negotiations
Settling trade disputes-Importantly WTO set procedures to
Reviewing national trade policies
Assisting developing countries in trade policy issues,
through technical assistance and training programmes.
FUNCTIONS 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.
Assisting the process of accession of some 30 countries who
are not yet members of the organization.
Co-operating with other international organizations- IMF
and The World Bank.
World Trade Organization coordinates with its secretariat,
which employees 500 + staff including Economists,
Statisticians, Lawyers and other experts in related area of
WTO: AGREEMENTS & POLICIES
The WTO‟s 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).
The WTO oversees about 60 different agreements which have
the status of international legal texts.
They deal with: agriculture, textiles and clothing, banking,
telecommunications, government purchases,
industrial standards, product safety
WTO: AGREEMENTS & POLICIES
• It all began with trade in goods. From 1947 to 1994, GATT
was the forum for negotiating lower customs duty rates and
other trade barriers
• These principles appear in the new General
Agreement on Trade in Services (GATS).
• The WTO‟s intellectual property agreement amounts
to rules for trade and investment in ideas and
The system encourages countries to settle their
differences through consultation.
WTO AGREEMENTS: GATS
General Agreement on Trade in Services, is the first and the only
comprehensive multilateral discipline covering international trade in
WTO services are divided into 12 areas and sub divided into 164 areas:
Business Services, Communication Services, Construction and
Engineering Services, Distribution Services, Education Services, Environmental
Services, Financial Services, Health Services, Tourism and travel Services,
Recreation, cultural and sporting Services, Transport Services.
Modes of supply of
The important principles falling in this category are:
•Most Favoured Nation principle (MFN)
WTO AGREEMENTS: TRIPS
It is the GATT Uruguay Round Agreement on Trade Related Intellectual Property.
It deals with the protection & enforcement of “Trade-Related” intellectual property
DEALS IN :
●How to give adequate protection to
intellectual property rights
●How countries should enforce those rights adequately in their own territories
●How to settle disputes on intellectual property between members of the WTO
●Special transitional arrangements during the period when the new system is being
Intellectual property comprises 2 distinct forms:
Literary & Artistic Works- Books, paintings, musical
plays, operas, movies, radio/ TV programs, performances, & other
Industrial Property- Patented objects, trade secrets,
WTO AGREEMENTS: TRIMS
Trade related Investment Measures does not provide any new language ,
but It concentrates on 2 major articles. Article III & Article IX which talks
about National Treatment and Trade Restrictions respectively.
DEALS IN :
●National treatment of imported
product, unless specified in other
●Subjects the purchase or use by
an enterprise of imported products to less
favorable conditions than the purchase or
use of domestic products.
●Prohibition of quantitative
restrictions on imports and exports.
●Part of the general trend in
textiles and agriculture to phase
out the use of quantitative
WTO AGREEMENTS: SANITARY AND
PHYTO-SANITARY (SPS) AGREEMENT
SPS agreement was negotiated during the Uruguay Round,
and entered into force with the establishment of the WTO
The WTO sets constraints on member-
states policies relating to food safety
(bacterial contaminants, pesticides,
inspection and labeling) as well as animal
and plant health (imported pests and
WTO AGREEMENTS: AOA
The most important agreement follows. The Agreement on
Agriculture came into effect with the establishment of the
WTO at the beginning of 1995
The AoA has three central concepts, or "PILLARS":
• Domestic support
• Market access
• Export subsidies
To reform trade in agriculture and to make policies more market
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.
The WTO agreement on anti-dumping allows governments to act
against dumping where there is genuine („material‟) injury to the
competing domestic industry.
WTO AGREEMENTS: ANTI-DUMPING PRACTICES
WTO AGREEMENTS: ANTI-DUMPING PRACTICES
ANTI DUMPING: INCREASE OVER THE YEARS.
GATT & WTO TRADE ROUNDS
Round Place Year Features
1. First Geneva
1947 Tariff cuts for 45000 products worth $10 billion
of trade on an annual basis .
2. Second Annecy
1949 Custom duty were reduced for another 5000
items of goods.
3. Third Torquay
1950-51 Adopted 8700 tariff reduction.
4. Fourth Geneva
1955-56 To further cut duties for goods worth $2.5
5. Fifth Geneva
It was known as Dillon Round. Custom duties
charged for 4000 items worth $5 billion.
6. Sixth Geneva
1964-67 It was known as Kennedy Round. Cut tariffs for
industrial goods upto 50 .
1973-79 Ended at Geneva. Participants cut custom
duties by 20-30 for goods traded.
8. Eight Uruguay 1986-93 This was known as Uruguay Round. Lead to
the formation of WTO.
• After Marrakesh Agreement, India joined WTO since inception in 1995.
• Developing countries like India availed of greater trade opportunities
and also challenged a certain policies of developed countries.
• For India, exposure to volatile international market would affect not
only domestic prices but also incomes of poor.
• Aim to participate in WTO rule based system with greater stability,
transparency and predictability in governance of international trade.
THE WTO AND INDIA
ARTICLES IN INDIAN EXPRESS: IMPACT OF WTO
POSITIVE IMPACT ON INDIAN
• Increase in export earnings
• Agricultural exports
• Export of textile and clothing
• Multilateral rules and discipline
• Growth to service exports
• Foreign investment
• Promotes free-er trade
• Raises world output levels via specialisation
• Establishes a standard rule by law and terms of trade for greater
• Updates all participating countries and banks to international
standards and efficiency in terms of trade and commerce.
• Industrialised countries benefit more than poor countries
• Don‟t allow the participaion of developing countries
• Although the stated aim of the WTO is to promote free
trade and stimulate economic growth, some believe
that globally free trade results in rich (both people and
countries) becoming richer awhile the poor getting
• It will be able to help weak and poor
countries if it frames rules accordingly