Introduction
The World Trade Organization (WTO) is an intergovernmental
organization that regulates and facilitates international trade
between nations.
It officially commenced operations on 1 January 1995,
pursuant to the 1994 Marrakesh Agreement, thus replacing
the General Agreement on Tariffs and Trade (GATT) that
had been established in 1948
The WTO is the world’s largest international economic
organization, with 164 member states representing over 98%
of global trade and global GDP
o Also, WTO is the only global international
organization dealing with the rules of trade between
nations
Why WTO replaced GATT?
o There were certain limitations of GATT, like
It lacked institutional structure. GATT by itself was
only the set of rules and multilateral agreements.
It didn’t cover trade in services, Intellectual Property
Rights etc. Its main focus was on Textiles and
agriculture sector.
A strong Dispute Resolution Mechanism was absent.
By developing countries it was seen as a body meant
for promoting interests of wests. This was because
Geneva Treaty of 1946, where GATT was signed had
no representation from newly independent states
and socialist states.
Under GATT countries failed to curb quantitative
restrictions on trade. (Non-Tariff barriers)
Principles that are of importance to WTO :
o Non-discrimination
It has two major components:
1. The most 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
2. The national treatment policy
National treatment means that imported
goods should be treated no less favorably
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)
o 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
o Binding and enforceable commitments
The tariff commitments made by WTO members in
multilateral trade negotiation and on accession are
enumerated in a legal instrument known as a
schedule (list) of concession.
o 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)
o 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
Organizational structure
The highest authority of the WTO is the Ministerial
Conference, which must meet at least every two years
In between each Ministerial Conference, the daily work is
handled by three bodies whose membership is the same; they
only differ by the terms of reference under which each body is
constituted
o The General Council
o
This is the WTO’s highest-level decision-making body
in Geneva, meeting regularly to carry out the
functions of the WTO
It has representatives (usually ambassadors or
equivalent) from all member governments and has
the authority to act on behalf of the ministerial
conference which only meets about every two years
The Dispute Settlement Body
o Dispute settlement is the central pillar of the multilateral
trading system, and the WTO’s unique contribution to the
stability of the global economy.
Without a means of settling disputes, the rules-based
system would be less effective because the rules
could not be enforced
o The operation of the WTO dispute settlement
process involves case-specific panels appointed by the
Dispute Settlement Body (DSB), the Appellate Body, The
Director-General and the WTO Secretariat, arbitrators, and
advisory experts
o The priority is to settle disputes, preferably through a
mutually agreed solution, and provision has been made for
the process to be conducted in an efficient and timely
manner
The Trade Policy Review Body (TPRB)
o The WTO General Council meets as the TPRB to undertake
trade policy reviews of Members under the TPRM and to
consider the Director-General’s regular reports on trade
policy development.
WTO & INDIA
India is one of the twenty-three original contracting
parties to the General Agreement on Tariffs and Trade (GATT).
o India, thus automatically became a member of the World
Trade Organization (WTO), which replaced GATT on 1
January 1995, following the completion of the Uruguay
Round of negotiations in 1994
In the post-WTO era, India continues to be an important voice
in discussions to launch a new round of multilateral trade
negotiations
o The thrust of India’s position has been to ensure a fair
distribution of rights and obligations between
developed and developing countries and to address the
developmental concerns of poor countries
Earlier, India’s strategy was largely defensive, in line with its
import substitution policies.
o But the initiation of economic reforms following the
balance of payments crisis of 1991 altered India’s views
on the opportunities, benefits, and threats of engaging in
the multilateral trading system and has led to the
adoption of a more forward-looking negotiating
strategy
Tracing the relations
o The WTO entered into force in 1995 with a binding dispute
settlement mechanism and with agreements going well
beyond goods, to include services and intellectual
property rights (IPRs)
While there were some gains for developing
countries such as India in the field of textiles and
clothing, the outcome was unfair to these
countries and far more favourable to the US, EU and
other developed countries
As a result, in India’s case, this led to “negotiation
resentment,” which persisted far beyond the
Uruguay Round
o Yet, India enthusiastically joined the WTO in 1995. India
had taken on onerous obligations, evident from the fact
that it had to change its domestic law completely to bring
itself in line with the Trade-Related Aspects of
Intellectual Property Rights (TRIPS) Agreement
o Doha Development Agenda
The Doha Ministerial Declaration makes clear that
the majority of WTO members are developing
countries and that their needs and interests will be
placed at the heart of the work programme adopted
in the declaration
However, the Doha Rounds of
negotiations failed due to systemic problems,
It was linked to rule and regulations of the
global financial bodies
The strong opposition led by G20 then, stalled
negotiations
There was a lack of agreement on the Special
Safeguard Mechanism (SSM), which was an
important element of Agriculture negotiations
The Doha Development Round became just
another mercantilist round of concessions being
exchanged between the developed and developing
countries
As a result, India did not go ahead with negotiations
in areas such as investment, competition policy,
government procurement and trade facilitation (also
known as Singapore Issues), and were put off for a
future date
o WTO ministerial conference in Bali (2013)
This was perhaps the last opportunity to save the
Doha Round. It was becoming increasingly difficult to
justify that not a single multilateral agreement had
been agreed on 18 years after the WTO’s
establishment
In Bali, the fact that members were able to agree to a
multilateral agreement on trade facilitation was greeted with
enthusiasm and relief.
The Trade Facilitation Agreement is remarkable as it fulfilled the
fundamental objective of cutting down red tape and diminishing
the costs of trading, and it also reflects in full the S&DT(Special
and differential treatment ) applicable for developing and least-
developed countries.
But agriculture continued to be a sticking point in Bali as well.
o India, supported by the G33 coalition of countries, wanted
public stockholding to be moved to the ‘green box’
(subsidies that are permissible).
o The developed countries led by the US opposed this. In the
end, the compromise was that there would be a peace
clause — India and others who avail of public stockholding
will not be dragged to dispute settlement until a
permanent solution is found
