WTO

Pankaj JainFaculty – Lovely Professional University

Introduction The World Trade Organization (WTO), is an international organization

designed to supervise and liberalize international trade. The WTO came into

being on January 1, 1995, and is the successor to the General Agreement on

Tariffs and Trade (GATT), which was created in 1947, and continued to

operate for almost five decades as a de facto international organization.

The World Trade Organization deals with the rules of trade between nations

at a near-global level; it is responsible for negotiating and implementing

new trade agreements, and is in charge of policing member countries'

adherence to all the WTO agreements, signed by the bulk of the world's

trading nations and ratified in their parliaments.

Introduction.. Most of the WTO's current work comes from the 1986-94 negotiations called

the Uruguay Round, and earlier negotiations under the GATT. The

organization is currently the host to new negotiations, under the Doha

Development Agenda (DDA) launched in 2001.

The WTO is governed by a Ministerial Conference, which meets every two

years; a General Council, which implements the conference's policy

decisions and is responsible for day-to-day administration; and a director-

general, who is appointed by the Ministerial Conference. The WTO's

headquarters are in Geneva, Switzerland.

History : ITO and GATT 1947 The WTO's predecessor, the General Agreement on Tariffs and

Trade (GATT), was established after World War II in the wake of other new multilateral institutions dedicated to international economic cooperation - notably the Bretton Woods institutions now known as the World Bank and the International Monetary Fund.

A Preparatory Committee was established in February 1946, and worked until November 1947 on the charter of an international organization for trade. By October 1947 an agreement on the GATT was reached in Geneva, and on October 30, 1947 twenty three countries signed the "Protocol of Provisional Application of the General Agreement on Tariffs and Trade".

History : GATT Rounds of Negotiations

From Geneva to Tokyo Seven rounds of negotiations occurred under the GATT. The first

GATT trade rounds concentrated on further reducing tariffs. Then,

the Kennedy Round in the mid-sixties brought about a GATT anti-

dumping Agreement and a section on development.

The Tokyo Round during the seventies was the first major attempt

to tackle trade barriers that do not take the form of tariffs, and to

improve the system, adopting a series of agreements on non-tariff

barriers, which in some cases interpreted existing GATT rules, and

in others broke entirely new ground.

History : GATT Rounds of Negotiations

Uruguay Round The eighth GATT round — known as the Uruguay Round — was launched in

September 1986, in Punta del Este, Uruguay. All the original GATT articles were up for review.

The GATT 1994 is not however the only legally binding agreement included in the Final Act; a long list of about 60 agreements, annexes, decisions and understandings was adopted. In fact, the agreements fall into a simple structure with six main parts: An umbrella agreement (the Agreement Establishing the WTO); Agreements for each of the three broad areas of trade that the WTO covers:

Goods and Investment (the Multilateral Agreements on Trade in Goods including the GATT 1994 and the TRIMS (Trade Related Investment Measures)

General Agreement on trade in Services (GATS), Trade Related Aspects of Intellectual Property Rights (TRIPS);

Dispute Settlement Understanding (DSU); and Trade Policy Reviews Mechanism (TPRM).

History : GATT Rounds of Negotiations

Doha Round The WTO launched the current round of negotiations, the Doha

Development Agenda (DDA) or Doha Round, at the Fourth

Ministerial Conference in Doha, Qatar in November 2001. The

Doha round was to be an ambitious effort to make

globalization more inclusive and help the world's poor,

particularly by slashing barriers and subsidies in farming.

The initial agenda comprised both further trade liberalization

and new rule-making, underpinned by commitments to

strengthen substantially assistance to developing countries.

Mission The WTO's stated goal is to improve the welfare of the

peoples of its member countries, specifically by lowering trade barriers and providing a platform for negotiation of trade.

Its main mission is "to ensure that trade flows as smoothly, predictably and freely as possible". This main mission is further specified in certain core functions serving and safeguarding five fundamental principles, which are the foundation of the multilateral trading system.

Functions

Among the various functions of the WTO, these are regarded by

analysts as the most important To oversee the implementation, administration and operation of the covered

agreements.

To provide a forum for negotiations and for settling disputes.

To review the national trade policies, and to ensure the coherence and

transparency of trade policies through surveillance in global economic policy-

making.

To assist developing, least-developed and low-income countries in transition to

adjust to WTO rules and disciplines through technical cooperation and training.

The WTO is also a center of economic research and analysis.

Finally, the WTO cooperates closely with the two other components of the Bretton

Woods system, the IMF and the World Bank.

Principles of Trading System Non Discrimination

It has two major components: the most favoured nation (MFN) rule, and the national treatment policy. Both are embedded in the main WTO rules on goods, services, and intellectual property, but their precise scope and nature differ across these areas.

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 favorable conditions under which it allows trade in a certain product type to all other WTO members. "Grant someone a special favor and you have to do the same for all other WTO members.

"National treatment means that imported and locally-produced goods should be treated equally (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).

Principles of Trading System 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.

Principles of Trading System Binding and Enforcable Commitments

The tariff commitments made by WTO members in a multilateral trade negotiation and on accession are enumerated in a schedules (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.

Principles of Trading System 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.

Principles of Trading System Safety Valves

In specific circumstances, governments are able to restrict trade. There are three types of provisions in this direction: articles allowing for the use of trade

measures to attain noneconomical objectives;

articles aimed at ensuring "fair competition"; an

provisions permitting intervention in trade for economic reasons.

Formal Structure Highest level: Ministerial Conference

“The topmost decision-making body of the WTO is

the Ministerial Conference, which has to meet at

least every two years. It brings together all

members of the WTO, all of which are countries or

separate customs territories. The Ministerial

Conference can make decisions on all matters

under any of the multilateral trade agreements.”

Formal Structure Second level: General Council: The daily work of the

ministerial conference is handled by three groups: 1. The General Council: The WTO’s highest-level decision-making body in Geneva,

meets 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 council acts on behalf on the Ministerial Council on all of the

WTO affairs. The current chairman is Amb. Muhamad Noor Yacob (Malaysia).

2. The Dispute Settlement Body is made up of all member governments, usually

represented by ambassadors or equivalent. The current chairperson is H.E. Mr.

Bruce Gosper (Australia).

3. The WTO General Council meets as the Trade Policy Review Body (TPRB) to

undertake trade policy reviews of Members under the TRPM. The TPRB is thus open

to all WTO Members. The current chairperson is H.E. Ms. Claudia Uribe (Colombia).

Formal Structure Third level: Councils for Trade :

There are three councils. Apart from these three councils, six other bodies report to the General Council reporting on issues such as trade and development, the environment, regional trading arrangements and administrative issues.

1. Council for Trade in Goods - The workings of the General Agreement on Tariffs and

Trade (GATT) which covers international trade in goods, are the responsibility of the

Council for Trade in Goods. It is made up of representatives from all WTO member

countries. The current chairperson is Amb. Yonov Frederick Agah (Nigeria).

2. Council for Trade-Related Aspects of Intellectual Property Rights - Information on

intellectual property in the WTO, news and official records of the activities of the TRIPS

Council, and details of the WTO’s work with other international organizations in the field.

3. Council for Trade in Services - The Council for Trade in Services operates under the

guidance of the General Council and is responsible for overseeing the functioning of the

General Agreement on Trade in Services (GATS). It’s open to all WTO members, and can

create subsidiary bodies as required.

Formal Structure Fourth level: Subsidiary Bodies

There are subsidiary bodies under each of the three councils.

The Goods Council - subsidiary under the Council for Trade in Goods. It has 11 committees

consisting of all member countries, dealing with specific subjects such as agriculture,

market access, subsidies, anti-dumping measures and so on. Committees include the

following

Information Technology Agreement (ITA) Committee

State Trading Enterprises

Textiles Monitoring Body - Consists of a chairman and 10 members acting under it.

Groups dealing with notifications - process by which governments inform the WTO about new

policies and measures in their countries.

The Services Council - subsidiary under the Council for Trade in Services which deals with

financial services, domestic regulations and other specific commitments.

Dispute Settlement panels and Appellate Body - subsidiary under the Dispute Settlement

Body to resolve disputes and the Appellate Body to deal with appeals.

Formal Structure Other committees on

Trade and Environment Trade and Development (Subcommittee on

Least-Developed Countries) Regional Trade Agreements Balance of Payments Restrictions Budget, Finance and Administration

Working parties on Accession Working groups on

Trade, debt and finance Trade and technology transfer