WORLD TRADE
ORGANISATION (WTO )
Prof. Nizamuddin Khan D/O Geography,
AMU, Aligarh
What is WTO?
■ 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.
■ 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.
Contd…….
■ The World Trade Organization (WTO) is an intergovernmental organization that is concerned with the regulation
of international trade between nations. The WTO officially
commenced on 1 January 1995 under the Marrakesh Agreement , signed by 123 nations on 15 April 1994, replacing the General Agreement on Tariffs and Trade (GATT), which commenced in 1948. It is the largest international economic organization in the world.
Green—Members Blue: Members dually represented by EU Yellow : Observers Red : Non Participants
WTO
Historical Development of Formation of WTO
■ WTO is the modified and updated form of General Agreement on Tariff and Trade (GATT), was established by a multilateral
treaty of 23 countries in 1947 .
■ After World War II in the wake of other new multilateral
institutions dedicated to international economic cooperation—
such as the World Bank (founded 1944) and the International Monetary Fund (founded 1944 or 1945). A comparable
international institution for trade, named the International Trade Organization never started as the U.S. and other signatories did not ratify the establishment treaty,[ and so GATT slowly became a de facto international organization.
Uruguay Round: 1986–1994
■ Well before GATT's 40th anniversary, its members concluded that the GATT system was straining to adapt to a new globalizing world economy. In response to the problems identified in the 1982
Ministerial Declaration (structural deficiencies, spill-over impacts of certain countries' policies on world trade GATT could not manage, etc.), the eighth GATT round—known as the Uruguay Round—was launched in September 1986, in Punta del Este Uruguay.
■ It was the biggest negotiating mandate on trade ever agreed: the talks aimed to extend the trading system into several new areas, notably trade in services and intellectual property, and to reform trade in the sensitive sectors of agriculture and textiles; all the
original GATT articles were up for review. The Final Act concluding the Uruguay Round and officially establishing the WTO regime was signed 15 April 1994, during the ministerial meeting at Marrakesh , Morocco, and hence is known as the Marrakesh Agreement .
Objectives of WTO
■ 1-To ensure the reduction of tariffs and other barriers to trade.
■ 2. To eliminate discriminatory treatment in international trade relations.
■ 3. To facilitate higher standards of living, full employment, a growing volume of real income and effective demand, and an increase in production and trade in goods and services of the member nations.
■ 4. To make positive effect, which ensures developing countries, especially the least developed secure a level of share in the
growth of international trade that reflects the needs of their economic development.
Contd…..
■ 5. To facilitate the optimal use of the world’s resources for sustainable development.
■ 6. To promote an integrated, more viable and durable trading system incorporating all the resolutions of the Uruguay Round’s multilateral trade negotiations.
■ Above all, to ensure that linkages trade policies, environmental policies with sustainable growth and development are taken care of by the member countries in evolving a new economic order.
The distinctive features of the WTO
■ Unlike the GATT, it is a legal entity.
■ ii. Unlike the International Monetary Fund (IMF) and the World Bank (WB) it is not an agent of the United Nations.
■ iii. Unlike the IMF and the World Bank, there is no weighted voting, but all the WTO members have equal rights.
■ iv. Unlike the GATT, the agreements under the WTO are permanent and binding to the member countri
■ Unlike the GATT, the WTO dispute settlement system is based not on dilatory but automatic mechanism. It is also quicker and binding on the members. As such, the WTO is a powerful bod
Contd…..
■ vi. Unlike the GATT, the WTOs approach is rule- based and time-bound.
■ vii. Unlike the GATT, the WTOs have a wider coverage.
It covers trade in goods as well as services.
■ viii. Unlike the GATT, the WTOs have a focus on trade- related aspects of intellectual property rights and
several other issues of agreements.
■ ix. Above all, the WTO is a huge organisational body
with a large secretariat
Agreement under negotiation of WTO
■ The agreements fall into Eight main parts, though they are 60
■ the Agreement Establishing the WTO
■ the Multilateral Agreements on Trade in Goods.
■ the General Agreement on Trade in Services.
■ the Agreement on Trade-Related Aspects of Intellectual Property Rights.
■ dispute settlement.
■ reviews of governments' trade policies.
■ The Agreement on Agriculture came into effect with the establishment of the WTO at the beginning of 1995
■ The Agreement on the Application of Sanitary and Phytosanitary Measures also known as the SPS Agreemen
Functions of World Trade Organization
■ The major functions of the WTO are as follows
:■ 1. To lay-down a substantive code of conduct aiming at reducing trade barriers including tariffs and eliminating discrimination in international trade relations.
■ 2. To provide the institutional framework for the administration of the substantive code which encompasses a spectrum of norms governing the conduct of member countries in the arena of global trade.
■ 3. To provide an integrated structure of the administration, thus, to facilitate the implementation, administration and fulfillment of the objectives of the WTO Agreement and other Multilateral Trade
Agreements.
Contd……
4-To ensure the implementation of the substantive code.
5. To act as a forum for the negotiation of further trade liberalisation.
6. To cooperate with the IMF and WB and its associates for establishing a coherence in trade policy-making.
7. To settle the trade-related disputes
Principles of the trading system
■ There are following principles to deal with implementation of rules of trade policy of WTO.
■ Non-discrimination.
It has two major components:
theMost favoured nation (MFN) rule. The MFN rule requires that a WTO member must apply the same conditions on all trade with other WTO members, i.e. a WTO member has to grant the most favourable conditions under which it allows trade in a certain product type to all other WTO members.[Grant someone a special favour and you have to do the same for all other WTO members.
National treatment means that imported goods should be treated no less favourably than domestically produced goods (at least after the foreign goods have entered the market) and was introduced to tackle non-tariff barriers to trade (e.g. technical
standards, security standards et al. discriminating against imported goods).
Reciprocity
Reciprocity. It reflects both a desire to limit the scope of free- riding that may arise because of the MFN rule, and a desire to obtain better access to foreign markets. A related point is that for a nation to negotiate, it is necessary that the gain from doing so be greater than the gain available
from unilateral liberalization; reciprocal concessions intend to ensure that such gains will materialize.
Bagwell and Staiger (2002) explain that "the principle
of reciprocity in the GATT/WTO refers to the ideal of mutual
changes in trade policy that bring about changes in the volume of each country's imports that are of equal value to changes in the volume of its exports." Thus, concessions are balanced or reciprocated ...
Binding and enforceable commitments
■ .
The tariff commitments made by WTO members in a multilateral trade negotiation and on accession are
enumerated in a schedule (list) of concessions. These
schedules establish "ceiling bindings": a country can
change its bindings, but only after negotiating with
its trading partners, which could mean compensating
them for loss of trade. If satisfaction is not obtained,
the complaining country may invoke the WTO dispute
settlement procedures
Transparency
The WTO members are required to publish their trade regulations, to maintain institutions allowing for the review of
administrative decisions affecting trade, to respond to requests for information by other members, and to notify changes in trade
policies to the WTO. These internal transparency requirements are supplemented and facilitated by periodic country-specific reports (trade policy reviews) through the Trade Policy Review Mechanism (TPRM).The WTO system tries also to improve predictability and stability, discouraging the use of quotas and other measures used to set limits on quantities of imports
Safety values.
In specific circumstances, governments are able to restrict trade.
The WTO's agreements permit members to take measures to protect not only the environment but also public health, animal health and plant health.
There are three types of provision in this direction:
■ articles allowing for the use of trade measures to attain non- economic objectives;
■ articles aimed at ensuring "fair competition"; members must not use environmental protection measures as a means of disguising protectionist policies.
■ provisions permitting intervention in trade for economic reasons.[
Organisation Structure of WTO
■ The organisational structure of the WTO is outlined in the Chart given on next slide.
■ The Ministerial Conference (MC) is at the top of the structural organisation of the WTO. It is the supreme governing body which takes ultimate decisions on all matters. It is constituted by
representatives of (usually, Ministers of Trade) all the member countries.
■ The General Council (GC) is composed of the representatives of all the members. It is the real engine of the WTO which acts on behalf of the MC. It also acts as the Dispute Settlement Body as well as the Trade Policy Review Body.
Councils and Committees
■ There are three councils, viz.:
■ Council for Trade in Services
■ Council for Trade in Goods
■ and Council for Trade-Related Aspects of Intellectual Property Rights (TRIPS
■ Further, there are three committees, viz.,
■ the Committee on Trade and Development (CTD),
■ the Committee on Balance of Payments Restrictions (CBOPR),
■ and the Committee on Budget, Finance and Administration (CF A)
