World Trade Organization (WTO) Part- I

Progressive trade liberalization 
  • The World Trade Organization (WTO) is the only global international organization dealing with the rules of trade between nations. 
  • The goal is to ensure that trade flows as smoothly, predictably and freely as possible. 
  • 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. 
  • An organization that intends to supervise and liberalize international trade 
  • HQ – Geneva, Switzerland 

Official language – English, French, Spanish  

Goals of WTO 

  • The WTO’s global system lowers trade barriers through negotiation and operates under the principle of non-discrimination.  
  • The result is reduced costs of production (because imports used in production are cheaper), reduced prices of finished goods and services, more choice and ultimately a lower cost of living. 
  • The WTO’s system deals with these in two ways.  
  • One is by talking: countries negotiate rules that are acceptable to all. 
  • The other is by settling disputes about whether countries are playing by those agreed rules. 
  • The WTO can stimulate economic growth and employment. 
  • The WTO can cut the cost of doing business internationally. 
  • The WTO can encourage good governance. Transparency — shared information and knowledge  — levels the playing field.  
  • Rules reduce arbitrariness and opportunities for corruption. 

Key Functions of WTO 

  • Reduce above stated barriers to international trade – both tariff barriers and non-tariff barriers  & Get the members to enter into multilateral trade agreements. 
  • Provide a forum for negotiation & dispute settlement for members, if agreements are violated. 
  • Ensure the developing countries benefit from world trade, especially the least developed countries 
  • Cooperate with UN, World and IMF for a global economic policy that improves livelihood protects the environment and promotes sustainable development. 

History 

From the early days of the Silk Road to the creation of the General Agreement on Tariffs and Trade (GATT) and the birth of the WTO, trade has played an important role in supporting economic development and promoting peaceful relations among nations. 

The General Agreement on Tariffs and Trade (GATT) 

  • Signed by 23 countries in Geneva in 1947 came into force on Jan 1, 1948. 

PURPOSE OF GATT: 

  • to phase out the use of import quotas  
  • to reduce tariffs on merchandise trade 

The GATT became the only multilateral instrument (not an institution) governing international trade from 1948 until the WTO was established in 1995. 

The Uruguay Round, conducted from 1987 to 1994, culminated in the Marrakesh Agreement, which established the World Trade Organization (WTO). 

The WTO incorporates the principles of the GATT and provides a more enduring institutional framework for implementing and extending them. 

The GATT was concluded in 1947 and is now referred to as the GATT 1947. The GATT 1947 was terminated in 1996 and WTO integrated its provisions into GATT 1994.  

The GATT 1994 is an international treaty binding upon all WTO Members. It is only concerned with trade in goods. 

Why WTO replaced the GATT 

  • The GATT was only a set of rules and multilateral agreements and lacked institutional structure.  

o The GATT 1947 was terminated and WTO preserved its provisions in form of GATT 1994 and continues to govern trade in goods. 

  • The trade-in services and intellectual property rights were not covered by regular GATT rules
  • The GATT provided for consultations and dispute resolution, allowing a GATT Party to invoke GATT dispute settlement articles if it believes that another Party’s measure caused it trade injury.  

o The GATT did not set out a dispute procedure with great specificity resulting in lack of deadlines, laxity in the establishment of a dispute panel and the adoption of a panel report by the GATT Parties. 

o It made the GATT a weak Dispute Settlement mechanism.

The WTO and the United Nations (UN) 

  • Although the WTO is not a UN specialized agency, it has maintained strong relations with the  UN and its agencies since its establishment. 
  • The WTO-UN relations are governed by the “Arrangements for Effective Cooperation with other Intergovernmental Organizations-Relations between the WTO and the United Nations” signed on 15 November 1995. 
  • The WTO Director-General participates in the Chief Executive Board which is the organ of coordination within the UN system. 

WTO Structure 

Ministerial Conference 
  • Supreme Decision Making body 
  • 160 members, Latest member → Yemen (Capital: Sanaa) 
  • Meets once every two years, 
  • Deliberates on trade agreements 
  • Appoints Director-General 
General Council 
  • Day to day Decision-Making body 
  • Meets regularly at Geneva. 
  • Implements decision of ministerial conferences
  • Has Representative from each member state. 
  • Has two bodies, with separate chairmen 
  • Dispute settlement body
  • Trade policy review body 
Director-General 
  • Appointed by the ministerial conference 
  • Has four years term. 
  • Heads Secretariat at Geneva 

The Trade Policy Review Body (TPRB) 

  • 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. 
  • The TPRB is thus open to all WTO Members. 

Dispute Settlement Body (DSU) 

  • The General Council convenes as the Dispute Settlement Body (DSB) to deal with disputes between WTO members. 
  • Such disputes may arise with respect to any agreement contained in the Final Act of the Uruguay Round that is subject to the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU). 
  • The DSB has authority to:  
  • establish dispute settlement panels, 
  • refer matters to arbitration, 
  • adopt panel, Appellate Body and arbitration reports, 
  • maintain surveillance over the implementation of recommendations and rulings  contained in such reports, 
  • And authorize the suspension of concessions in the event of non-compliance with those recommendations and rulings. 

Appellate Body 

  • The Appellate Body was established in 1995 under Article 17 of the Understanding on Rules and  Procedures Governing the Settlement of Disputes (DSU). 
  • The DSB shall appoint persons to serve on the Appellate Body for a four-year term. 
  • It is a standing body of seven persons that hears appeals from reports issued by panels in disputes brought by WTO Members. 
  • The Appellate Body can uphold, modify or reverse the legal findings and conclusions of a  panel, and Appellate Body Reports, once adopted by the Dispute Settlement Body (DSB), must be accepted by the parties to the dispute. 
  • The Appellate Body has its seat in Geneva, Switzerland.

The Council for Trade in Goods (Goods Council) 

  • The General Agreement on Tariffs and Trade (GATT) covers international trade in goods.  

o The workings of the GATT agreement are the responsibility of the Council for Trade in Goods (Goods Council) which is made up of representatives from all WTO member countries. 

  • The Goods Council has the following committees dealing with specific subjects: 

(1) Agriculture, 

(2)  Market access, 

(3) Sanitary and Phytosanitary (measures for the control of plant diseases especially in agricultural crops) Measures, 

(4) Technical barriers to trade, 

(5) Subsidies and countervailing measures, 

(6) Rule of origin, 

(7) Anti-dumping measures, 

(8) Importing licensing,  

(9)Trade-related Investment Measures, 

(10) Safeguards, 

(11) Trade facilitation, 

(12) Customs valuation.  

  • These committees consist of all member countries. 

The Council for Trade in Services (Services Council) 

  • It operates under the guidance of the General Council and is responsible for facilitating the operation of the General Agreement on Trade in Services (GATS) and for furthering its objectives.  
  • It is open to all WTO members and can create subsidiary bodies as required. 
  • Presently, the Council oversees the work of four such subsidiary bodies:  
  • the Committee on Trade in Financial Services:  

o It carries out discussions on matters relating to trade in financial services and formulates proposals or recommendations for consideration by the Council. 

  • the Committee on Specific Commitments, 
  • the Working Party on Domestic Regulation, 
  • the Working Party on GATS Rules 

The Council for Trade-Related Aspects of Intellectual Property Rights (TRIPS Council) 

  • It monitors implementation of the Agreement on Trade-Related Aspects of Intellectual Property  Rights (the TRIPS Agreement)
  • It provides a forum in which WTO Members can consult on intellectual property matters, and carries out the specific responsibilities assigned to the Council in the TRIPS Agreement. 
  • The TRIPS Agreement: 
  • Sets the minimum standards of protection for copyrights and related rights,  trademarks, geographical indications (GIs), industrial designs, patents, integrated circuit layout designs, and undisclosed information. 
  • establishes minimum standards for the enforcement of intellectual property rights  (IPRs) through civil actions for infringement, actions at the border,  
  • And at least in regard to copyright piracy and trademark counterfeiting, in criminal actions.

Doha Declaration 

The Doha Declaration is the November 2001 declaration that came out of the 4th Ministerial  Conference of the WTO that took place in Doha, Qatar. 

  • This declaration gives the mandate for negotiations on an array of topics including issues concerning the implementation of the previous agreements. 
  • This is called the Doha Declaration on the TRIPS Agreement and Public Health. 
  • There were disagreements between developed and developing countries. 
  • The major bones of contention were agriculture, non-tariff trade barriers, industrial tariffs, services and trade remedies. 
  • The Bali Ministerial Declaration was achieved in 2013 which is the first agreement under the Doha  Round, and also the first unanimous agreement under WTO. 

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Blog Post written by:
Anurag Trivedi
UPSC Mentor