WTO - World Trade Organisation
Meaning of WTO
WTO – World Trade Organisation, was established in 1995 as
the heir organisation to the GATT (General Agreement on
Trade and Tariff). GATT was founded in 1948 with 23
nations as the global (international) trade organisation to serve
all multilateral trade agreements by giving fair chances to all
nations in the international exchange for trading prospects.
WTO is required to build a rule-based trading government in
which countries cannot place unreasonable constraints on
trade.
In addition, its mission is to increase stock and trade of
services, to assure maximum utilisation of world resources
and to preserve the environment. The WTO deals include
trade in commodities as well as services to promote
international trade (bilateral and multilateral) through the
elimination of the tax as well as non-tariff obstacles and
implementing greater marketplace access to all member
nations.
As an influential member of WTO, India is at the lead of
building fair global laws, statutes and shields and supporting
the concerns of the developing system. India has fulfilled its
promises towards the liberalisation of trade, made in the
WTO, by eliminating quantitative limitations on imports and
decreasing tariff charges.
Objectives of WTO
• To set and execute rules for international trade
• To present a panel for negotiating and controlling
additional trade liberalization
• To solve trade conflicts
• To improve the clarity of decision-making methods
Functions of WTO:
Facilitate • It facilitates international trade
international trade through the removal of tariff and non-
tariff barriers.
• It provides greater market access to all
member countries.
Formulation of rules • It establishes a rule-based trading
regime, in which nations cannot place
arbitrary restrictions on trade.
Protecting the interest • It frames fair global rules, regulations.
of developing • It safeguards and advocates the
countries interests of the developing world.
Optimum utilisation • It is also responsible to increase
of world resources production and trade of services.
• It ensures optimum utilisation of
world resources.
The World Trade Organisation (WTO) is in charge of roughly
60 different agreements that have the character of
international legal texts. The agreements under WTO are
known as the WTO's trade rules, and the WTO is frequently
referred to as a "rules-based" system.
What are Agreements Under WTO?
• Goods, services, and intellectual property are all
covered by WTO agreements.
• They lay forth the liberalization principles as well as
the authorized exceptions.
• Individual country obligations to cut customs
duties and other trade obstacles, as well as to open and
maintain free services markets, are among them.
• They provide methods for resolving disputes.
• They recommend that developing countries receive
preferential consideration.
• They compel states to make their trade policies open by
alerting the WTO about laws in place and actions
enacted, as well as reporting on nations' trade policies on
a regular basis by the secretariat.
General Agreement on Tariffs and Trade (GATT)
• The General Agreement on Tariffs and Trade (GATT),
was a legal agreement that aimed to reduce trade
barriers by abolishing or reducing quotas, tariffs, and
subsidies while retaining considerable restrictions.
• This was signed on October 30, 1947, by 23 countries.
• The GATT was created to help the world economy
recover after WWII by rebuilding and liberalizing
global trade.
General Agreement on Trade in Services (GATS)
• The World Trade Organisation's General Agreement on
Trade in Services came into force in January 1995 as a
result of the Uruguay Round discussions.
• It establishes a framework for controlling services
trade, a system for countries to make promises to
liberalize services trade, and a process for resolving
cross-national disputes.
•
• Trade-Related Aspects of Intellectual Property Rights
(TRIPS)
• Many types of Intellectual Property (IP) regulations are
governed by the Agreement on Trade-Related Aspects of
Intellectual Property Rights, which establishes minimum
requirements.
• In 1994, at the conclusion of the Uruguay Round of the
General Agreement on Tariffs and Trade (GATT), it was
negotiated.
Significance
• They set the rates at which a country pays tariffs on its
exports.
• The lower or eliminate trade barriers.
• They make it easy for countries to do business with each
other.
• They provide consumers with more product.
(1)THE MARRAKESH AGREEMENT ESTABLISHING
WORLD TRADE ORGANIZATION
This is an agreement for implementing the results of the
Uruguay Round and establishing the World Trade
Organization, which will be a framework for future
multilateral trade negotiations. The Agreement comprises
general provisions on the WTO’s organization, membership,
decision-making, etc.
(2) Agreement on Agriculture
The Agreement on Agriculture includes specific and binding
commitments made by WTO Member governments in the
three areas of market access, domestic support and export
subsidization for strengthening GATT disciplines and
improving agricultural trade. These commitments were
implemented over a six-year period. The Agreement also
includes provisions on the implementation of these
commitments
(3) Agreement on the Application of Sanitary and
Phytosanitary (SPS) Measures
This agreement establishes multilateral frameworks for the
planning, adoption and implementation of sanitary and
phytosanitary measures to prevent such measures from being
used for arbitrary or unjustifiable discrimination or for
camouflaged restraint on international trade and to minimize
their adverse effects on trade
(4) Agreement on Textiles and Clothing
Textile trade was governed by the Multi-Fiber Arrangement
(MFA) since 1974. However, the GATT principles had been
undermined by import protection policies, etc. The agreement
provides that textile trade should be deregulated by gradually
integrating it into GATT disciplines over a 10-year transition
period, which expired at the end of 2004.
(5) Agreement on Technical Barriers to Trade
(TBT) Standards and conformity assessment systems, such as
industrial standards and safety/environment regulations, may
become trade barriers if they are excessive or abused. This
agreement aims to prevent such systems from becoming
unnecessary trade barriers by securing their transparency and
harmonization with international standards
(6) Agreement on Trade-Related Investment Measures
(TRIMs)
In relation to cross-border investment, countries receiving
foreign investment may take various measures, including
imposing requirements, conditions and 315 restrictions
(investment measures) on investing corporations. In the
Uruguay Round, negotiations were initially conducted with an
eye toward expanding disciplines governing investment
measures. However, the Agreement on Trade-Related
Measures, which was the result of the negotiations, banned
only those investment measures inconsistent with the
provisions of ArticleⅢ (principle of national treatment) and
Article XI (general elimination of quantitative restrictions)
which have direct adverse effects on trade in goods. As
examples, the Agreement cited local content requirements
(which require that certain components be domestically
manufactured) and trade balancing requirements.
(7) (Anti-Dumping Agreement)
This agreement aims to tighten and codify disciplines for
calculating dumping margins and conducting dumping
investigations, etc. in order to prevent anti-dumping measures
from being abused or misused to protect domestic industries
(8) (Customs Valuation Agreement)
In order to implement GATT Article VII (customs valuation)
in a more consistent and reliable manner, this agreement
specifies rules for the application of the article and aims to
harmonize customs valuation systems on an international
basis by eliminating arbitrary valuation systems
(9) Agreement on Pre-shipment Inspection (PSI)
This agreement aims to secure transparency of PSI and to
provide a mechanism for the solution of disputes between PSI
agencies and exporters.
Note: Pre-shipment Inspection is a system under which a pre-
shipment inspection company designated by the importing
country (mostly developing countries) conducts inspection of
the quality, volume, price, tariff classification, customs
valuation, etc. of merchandise in the territory of the exporting
country on behalf of the importing country’s custom office
and issues certificates
(10) Agreement on Rules of Origin
This agreement provides a program for the harmonization of
rules of origin for application to all non-preferential
commercial policy instruments. It also establishes disciplines
that must be observed in instituting or operating rules and
provides for dispute settlement procedures and creates the
rules of origin committee.
(11) Agreement on Import Licensing Procedures
In order to prevent import licensing procedures of different
countries from becoming unnecessary trade barriers, this
agreement aims to simplify administrative procedures and
ensure their fair operation.
(12) Agreement on Subsidies and Countervailing
Measures
This agreement aims to clarify definitions of subsidies,
strengthen disciplines by subsidy type (extension of the range
of prohibited subsidies, etc.), and to strengthen and clarify
procedures for adopting countervailing tariffs.
(13) Agreement on Government Procurement
This agreement requires national treatment and non-
discriminatory treatment in the area of government
procurement (purchase or lease of goods and services by
governments) and calls for fair and transparent procurement
procedures. It also stipulates complaint and dispute settlement
procedures. The new Government Procurement Agreement is
based on the Agreement of 1979 (an agreement from the
Tokyo Round), but expands its scope. The new Agreement
covers the procurement of services (in addition to goods) and
the procurement by sub-central government entities and
government-related agencies (in addition to central
government).
(14) Understanding on Rules and Procedures Governing
the Settlement of Disputes (DSU)
This “agreement” provides the common rules and procedures
for the settlement of disputes related to the WTO Agreements.
It aims to strengthen dispute settlement procedures by
prohibiting unilateral measures, establishing dispute
settlement panels whose reports are automatically adopted,
setting time frames for dispute settlement, establishing the
Appellate Body, etc.
The World Trade Organization (WTO) has been the
cornerstone of the multilateral rules-based global trading
system since its inception in 1995.
However, even before the Covid-19 pandemic, all three of the
organization’s functions – providing a negotiation forum to
liberalize trade and establish new rules, monitoring trade
policies, and resolving disputes between its 164 members are
facing challenges.
Moreover, with trade tensions increasingly politicized and
Covid-19 creating huge economic challenges, a modernized
and fully functioning WTO is more essential than ever.
Issues Related to WTO
▪ China’s State Capitalism: The nature of China’s
economic system, combined with the size and growth of
its economy, has created tensions in the global trading
system.
o China’s state-owned enterprises present a major
challenge to the free-market global trading system.
o However, a critical part of the problem is that the
rulebook of the WTO is inadequate for addressing the
challenges that China presents in respect of intellectual
property, state-owned enterprises and industrial
subsidies.
o It is due to this US-China are engaged in Trade war.
▪ Institutional Issues: The Appellate Body’s
operations have effectively been suspended since
December 2019, as the US’s blocking of appointments has
left the body without a quorum of adjudicators needed to
hear appeals.
o The crisis with the dispute settlement function of the
WTO is closely linked to the breakdown in its
negotiation function.
▪ Lack of Transparency: There is a problem in WTO
negotiations as there is no agreed definition of what
constitutes a developed or developing country at the
WTO.
o Members can currently self-designate as developing
countries to receive ‘special and differential treatment’
– a practice that is the subject of much contention.
▪ E-commerce & Digital Trade: While the global trade
landscape has changed significantly over the past 25 years,
WTO rules have not kept pace.
o In 1998, realizing that e-commerce would play a
growing role in the global economy, WTO members
established a WTO e-commerce moratorium to
examine all trade-related issues relating to global
electronic commerce.
o Recently, however, the moratorium has been called
into question by developing countries because of its
implications for collecting revenue.
o Moreover, as the Covid-19 pandemic accelerates the
shift to e-commerce, rules to regulate online trade will
be more important than ever. But in contrast to trade in
goods and services, few international rules govern
cross-border e-commerce.
▪ Agriculture and Development: The WTO Agreement
on Agriculture, which came into force in 1995, was an
important milestone.
o Agreement on Agriculture targets reform of subsidies
and high trade barriers, which distort agricultural trade.
o However, agreement on agriculture is facing issues
due to food security and development requirements for
developing countries like India.
Way Forward
▪ New Set of Rules: Modernizing the WTO will necessitate
the development of a new set of rules for dealing with
digital trade and e-commerce.
o WTO members will also have to deal more effectively
with China’s trade policies and practices, including
how to better handle state-owned enterprises and
industrial subsidies.
▪ Environmental Sustainability: Given the pressing issues
around climate change, increased efforts to align trade and
environmental sustainability could help to both tackle
climate change and reinvigorate the WTO.
o Trade and the WTO have key roles to play in efforts to
achieve the UN Sustainable Development Goals
(SDGs) and the Paris Agreement climate goals.
o Also, the WTO can play a role in reforming fossil fuel
subsidies.
o For example, at the Buenos Aires Ministerial
Conference in 2017, a coalition of 12 WTO members
led by New Zealand called on the WTO ‘to achieve
ambitious and effective disciplines on inefficient fossil
fuel subsidies that encourage wasteful consumption’.
Conclusion
In future, WTO members will have to strike a balance between
moving forward with negotiations on 21st-century issues and
keeping sight of the unresolved ‘old trade issues’ such as
agriculture and development.
