CHAPTER 1: INTRODUCTION

INTRODUCTION OF WTO:
The World Trade Organization (WTO) is an international organization
designed by its founders to supervise and liberalize international trade. The
organization officially commenced on January 1, 1995 under the Marrakech
Agreement, replacing the General Agreement on Tariffs and Trade(GATT), which
commenced in 1947.
The World Trade Organization deals with regulation of trade between
participating countries; it provides a framework for negotiating and formalizing
trade agreements, and a dispute resolution process aimed at enforcing participants'
adherence to WTO agreements which are signed by representatives of member
governments and ratified by their parliaments. Most of the issues that the WTO
focuses on derive from previous trade negotiations, especially from the Uruguay
Round (1986-1994).
The Uruguay Round was the 8th round of multilateral trade negotiations
(MTN) conducted within the framework of the General Agreement on Tariffs and
Trade(GATT), spanning from 1986-1994 and embracing 110countries as
contracting parties. The Round transformed the GATT into the World Trade
Organization.
The WTO has 153 members, representing more than 97% of total world
trade and 30 observers, most seeking membership. The WTO is governed by a
ministerial conference, meeting 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, WTO is appointed by the ministerial
conference. The WTO's headquarters is at the Centre William Rappard, Geneva,
Switzerland.

MISSION STATEMENT OF WTO:

The World Trade Organization - the WTO - is the international
organization whose primary purpose is to open trade for the benefit of all.

Who WTO are

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.

What WTO do
The WTO is run by its member governments. All major decisions are
made by the membership as a whole, either by ministers (who usually meet at
least once every two years) or by their ambassadors or delegates (who meet
regularly in Geneva).While the WTO is driven by its member states, it could not
function without its Secretariat to coordinate the activities. The Secretariat
employs over 600 staff, and its experts lawyers, economists, statisticians and
communications experts assist WTO members on a daily basis to ensure,
among other things, that negotiations progress smoothly, and that the rules of
international trade are correctly applied and enforced.
Trade negotiations:
The WTO agreements cover goods, services and intellectual property.
They spell out the principles of liberalization, and the permitted exceptions. They
include individual countries commitments to lower customs tariffs and other
trade barriers, and to open and keep open services markets. They set procedures
for settling disputes.

Implementation and monitoring:

WTO agreements require governments to make their trade policies
transparent by notifying the WTO about laws in force and measures adopted.
Various WTO councils and committees seek to ensure that these requirements are
being followed and that WTO agreements are being properly implemented.
Dispute settlement:
The WTOs procedure for resolving trade quarrels under the Dispute
Settlement Understanding is vital for enforcing the rules and therefore for
ensuring that trade flows smoothly. Countries bring disputes to the WTO if they
think their rights under the agreements are being infringed. Judgements by
specially appointed independent experts are based on interpretations of the
agreements and individual countries commitments.
Building trade capacity:
WTO agreements contain special provision for developing countries,
including longer time periods to implement agreements and commitments,
measures to increase their trading opportunities, and support to help them build
their trade capacity, to handle disputes and to implement technical standards. The
WTO organizes hundreds of technical cooperation missions to developing
countries annually.
Outreach:
The

WTO

maintains

regular

dialogue

with

non-governmental

organizations, parliamentarians, other international organizations, the media and

the general public on various aspects of the WTO and the ongoing Doha
negotiations, with the aim of enhancing cooperation and increasing awareness of
WTO activities.

HISTORY :
The past 50 years have seen an exceptional growth in world trade.
Merchandise exports grew on average by 6% annually. Total trade in 2000 was
22-times the level of 1950. GATT and the WTO have helped to create a strong
and prosperous trading system contributing to unprecedented growth.
Harry Dexter White(l) and John Maynard Keynes at the Bretton Woods
Conference Both economists had been strong advocates of a liberal international
trade environment, and recommended the establishment of three institutions: the
IMF(fiscal and monetary issues), the World Bank (financial and structural issues),
and the ITO (international economic cooperation).
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 known as the World Bank and the International Monetary
Fund. A comparable international institution for trade, named the International
Trade Organization was successfully negotiated. The ITO was to be a United
Nations specialized agency and would address not only trade barriers but other
issues indirectly related to trade, including employment, investment, restrictive
business practices, and commodity agreements. But the ITO treaty was not
approved by the United States and a few other signatories and never went into
effect. In the absence of an international organization for trade, the GATT would
over the years "transform itself" into defector international organization.

CHAPTER 2: DATA COLLECTION AND ANALYSIS

GATT rounds of negotiations:

The GATT was the only multilateral instrument governing international
trade from 1948 until the WTO was established in 1995.Despite attempts in the
mid 1950s and 1960s to create some form of institutional mechanism for
international trade; the GATT continued to operate for almost half a century as a
semi-institutionalized multilateral treaty regime on a provisional basis.
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.
Because these plurilateral agreements were not accepted by the full GATT
membership, they were often informally called "codes".
Several of these codes were amended in the Uruguay Round, and turned
into multilateral commitments accepted by all WTO members. Only four
remained plurilateral (those on government procurement, bovine meat, civil
aircraft and dairy products), but in 1997 WTO Members agreed to terminate the
bovine meat and dairy agreements, leaving only two.
URUGUAY ROUND:
During the Doha Round, the US government blamed Brazil and India for
being inflexible, and the EU for impeding agricultural imports. The President of
Brazil, LuizInacio Lula da Silva, responded to the criticisms by arguing that
progress would only be achieved if the richest countries (especially the US and

countries in the EU) make deeper cuts in their agricultural subsidies, and further
open their markets for agricultural goods.
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 were
going 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.[19]The
Final Act concluding the Uruguay Round and officially establishing the WTO
regime was signed during the April 1994 ministerial meeting at Marrakech,
Morocco, and hence is known as the Marrakech Agreement. The GATT still exists
as the WTO's umbrella treaty for trade in goods, updated as a result of the
Uruguay Round negotiations (a distinction is made between GATT 1994, the
updated parts of GATT, and GATT 1947, the original agreement which is still the
heart of GATT1994).
The agreements fall into a structure with six main parts:
1) The Agreement Establishing the WTO
2) Goods and investment the Multilateral Agreements on Trade in Goods
including the GATT 1994 and the Trade Related Investment Measures
3) Services the General Agreement on Trade in Services
4) Intellectual property the Agreement on Trade-Related

Aspects of

Intellectual Property Rights(TRIPS)-Dispute settlement (DSU)

5) Reviews of governments' trade policies (TPRM)

MINISTERAL CONFERENCE:
1) First ministerial conference:
The inaugural ministerial conference was held in Singaporean 1996.
Disagreements between largely developed and developing economies emerged
during this conference over four issues initiated by this conference, which led to
them being collectively referred to as the Singapore issues".
2) Second ministerial conference:
The second ministerial conference was held in Geneva in Switzerland
1998.
3) Third ministerial conference:
The third conference in Seattle, Washington 1999, ended in failure, with
massive demonstrations and police and National Guard crowd control efforts
drawing worldwide attention.
4) Fourth ministerial conference:
The fourth ministerial conference was held in Doha in Persian Gulf nation
of Qatar, 2001. The Doha Development Round was launched at the conference.
The conference also approved the joining of China, which became the 143rd
member to join.
5) Fifth ministerial conference :
The ministerial conference was held in Cancun, Mexico, 2003 aiming at
forging agreement on the Doha round. An alliance of 22 southern states, the G20
developing nations(led by India, China and Brazil), resisted demands from the
North for agreements on the so-called "Singapore issues" and called for an end to
agricultural subsidies within the EU and the US. The talks broke down without
progress.
6) Sixth ministerial conference:
The sixth WTO ministerial conference was held in Hong Kong from
13December 18 December 2005. It was considered vital if the four-year-old
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Doha Development Agenda negotiations were to move forward sufficiently to

conclude the round in 2006. In this meeting, countries agreed to phase out all their
agricultural export subsidies by the end of 2013, and terminate any cotton export
subsidies by the end of 2006.Further concessions to developing countries included
an agreement to introduce duty free, tariff free access for goods from the Least
Developed Countries.
7) Seventh ministerial conference:
The WTO General Council, on 26 May 2009, agreed to hold a seventh
WTO ministerial conference session in Geneva from 30 November3December
2009. A statement by chairman Amb. Mario Matus acknowledged that the prime
purpose was to remedy a breach of protocol requiring two-yearly "regular"
meetings, which had lapsed with the Doha Round failure in 2005, and that the
"scaled-down" meeting would not be negotiating session, but "emphasis will be
on transparency and open discussion rather than on small group processes and
informal negotiating structures".

DOHA ROUND:
The Doha Development Round started in 2001 and continues today. The
WTO launched the current round of negotiations, the Doha Development Agenda
(DDA) or Doha Round, at the fourth ministerial conferencing Doha, Qatar in
November 2001. The Doha round was to be an ambitious effort to make
globalization more inclusive and help the worlds 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
substantial assistance to developing countries.
The negotiations have been highly contentious and agreement has not been
reached, despite the intense negotiations at several ministerial conferences and at
other sessions. Disagreements still continue over several key areas including
agriculture subsidies

Objectives of WTO:
Important objectives of WTO are mentioned below:
a) To implement the new world trade system as visualised in the Agreement
b) To promote World Trade in a manner that benefits every country
c) To ensure that developing countries secure a better balance in the sharing of
the advantages resulting from the expansion of international trade
corresponding to their developmental needs
d) To demolish all hurdles to an open world trading system and usher in
international economic renaissance because the world trade is an effective
instrument to foster economic growth
e) To enhance competitiveness among all trading partners so as to benefit
consumers and help in global integration
f) To increase the level of production and productivity with a view to ensuring
level of employment in the world
g) To expand and utilize world resources to the best
h) To improve the level of living for the global population and speed up
economic development of the member nations.
The Objective of WTO is to establish an orderly and transparent frame
work within which barriers to trade could gradually be reduced. To facilitate this
goal, import restrictions are to be reduced and non-discrimination to be practiced.
It deals with rules of trade between nations at a global level.
PURPOSE:
1. The WTO began life on 1 January 1995, but its trading system is half a
century older.
2. Since 1948, the General Agreement on Tariffs and Trade (GATT) had
provided the rules for the system.
3. WTO agreements provide the legal ground-rules for international commerce.

4. The goal is to help producers of goods and services, exporters, and importers
conduct their business, while allowing governments to meet social and
environmental objectives.
5. The systems overriding purpose is to help trade flow as freely as possible so
long as there are no undesirable side-effects.
Aims of WTO:
1. Fair and market oriented trading system.
2. Commitments on support and protection.
3. Operationally effective GATT Rules & Disciplines.
4. Equitable Trade Reform process.
5. Greater opportunities and Terms of Access to developing countries.
6. Concern for LDCs and NFIDCs.
7. Concern on Non-trade issues such asFod Security, environment, health , etc..

FUNCTIONS:
Among the various functions of the WTO, these are regarded by analysts
as the most important:
1) It oversees the implementation, administration and operation of the covered
agreements.
2) It provides a forum for negotiations and for settling disputes.
a) additionally, it is the WTO's duty to review and propagate the national trade
policies, and to ensure the coherence and transparency of trade policies
through surveillance in global economic policy-making.
b) another priority of the WTO is the assistance of developing, least-developed
and low-income countries in transition to adjust to WTO rules and disciplines
through technical cooperation and training.

10

c) The WTO is also a center of economic research and analysis: regular

assessments of the global trade picture in its annual publications and research
reports on specific topics are produced by the organization.
d) Finally, the WTO cooperates closely with the two other components of the
Bretton Woods system, the IMF and the World Bank.

PRINCIPLES OF THE TRADING SYSTEM:

The WTO establishes a framework for trade policies; it does not define or
specify outcomes. That is, it is concerned with setting the rules of the trade policy
games. Five principles are of particular importance in understanding both the pre1994 GATT and the WTO:
1) Non-Discrimination:
It has two major components: the most favored 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 favour and you have to do
the same for all other WTO members." 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, etc.
discriminating against imported goods)
2) 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

11

doing so be greater than the gain available from unilateral liberalization;

reciprocal concessions intend to ensure that such gains will materialize.
3) 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.
4) 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.
5) 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 non-economic objectives; articles aimed at ensuring "fair
competition"; and provisions permitting intervention in trade for economic
reasons. Exceptions to the MFN principle also allow for preferential treatment of
developing countries, regional free trade areas and customs unions

12

ORGANIZATIONAL STRUCTURE:
The General Council has multiple bodies which oversee committees
indifferent areas.
1) Council for Trade in Goods:
There are 11 committees under the jurisdiction of the Goods Council each
with a specific task. All members of the WTO participate in the committees. The
Textiles Monitoring Body is separate from the other committees but still under the
jurisdiction of Goods Council. The body has its own chairman and only ten
members. The body also has several groups relating to textiles.
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 WTOs 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 is open to all WTO members, and can
create subsidiary bodies as required. The Service Council has three subsidiary
bodies: financial services, domestic regulations, GATS rules and specific
commitments.
4) Other committees:
The General council has several different committees, working groups,
and working parties.
Committees on:

Trade and Environment

Trade and Development (Subcommittee on Least-Developed Countries)

Regional Trade Agreements

13

Balance of Payments Restrictions

Budget, Finance and Administration

Working parties on:

Accession

Working groups on:

Trade, debt and finance

Trade and technology transfer

Trade Negotiations Committee:

The Trade Negotiations Committee (TNC) is the committee that deals with
the current trade talks round.

14

Dispute Settlement Mechanism:

WTO is an institutional arrangement to facilitate free and transparent
trading system. The credibility and sustainability of any trading system lies in its
ability to settle disputes in a transparent and time bond manner. One of the notable
feature of WTO is its time bound well structured dispute settlement machinery to
settle dispute on trade related issues. Trade dispute arises
1) When member country breaks the rules of trade
2) Misinterpret the rule
3) Adopts any fair trade practices like non tariff barriers
4) Fail to live up to the obligations.
Even in GATT system there was a dispute settlement machinery, but it had no
fixed time frame for settlement of grievances. Rulings were blocked from time
and dragged for years together. In the process the justice was denied to the
effected member.
Objectives of Dispute settlement system:
1) It is necessary to preserve the rights and obligations of WTO members.
2) The DSM believes that mutually agreed solution is the best solution.
3) The DSM also provides clarification on rights and obligations through
interpretation.
4) The DSM keeps a check on unilateral decisions of members.
5) DSM procedure & outcomes are binding on members
Special features of Dispute Settlement process:
1) The dispute settlement is the responsibility of dispute settlement body or
general council.
2) Special panel to look into the dispute and find amicable solution
3) The DSP should not normally take more than one year & if the matter is very
urgent, then the case may be settled within 3 months.
15

4) There is provision for appeal. In case of appeal, the case takes maximum 15
months to settle.
5) The appellate body can uphold, modify or reverse the findings of the panels.
6) The DSB has to accept or reject the decision taken by the appellate body
within 30 days.
7) The DSB monitors the implementation of the rulings & has the power to
authorize retaliation when a country does not comply with the ruling.
Dispute settlement process:
1) Mutual consultation:
Before taking any action, the countries in dispute have to talk to each
other to

see whether they can settle their differences mutually. If that fails, they

may also ask the WTO director-general to mediate or start arbitration procedure.
a) if consultations fail, the complaining country can request for a panel to be
appointed. The DSB has the sole authority to establish panels of experts to
consider the case, and to accept or reject the panels findings or the results of
an appeal the panels final report should normally be given to the parties to the
dispute within six months. In cases of urgency, the deadline is shortened to
three months.
b) The country in the dock can buy some time by blocking the creation of a
panel
c) But when the DSB meets for a second time, the appointment can no longer be
blocked.
d) Before the first hearing both parties in the dispute need to lodge its complaint
in writing
2) First hearing:
The complaining country, the responding country, and those who have
expressed their interest in the dispute, make their case at the panels first hearing.

16

a) All parties need to submit rebuttals in writing and also present oral arguments
at the panels second meeting.
b) If any side3 raises any technical issue on case, the panel may appoint an
expert review group and ask for advisory report.
3) First Draft:
The panel submits the descriptive report to the two sides, giving them two
weeks to respond
a) interim report : the panel then submits the interim report, including its
findings and conclusions, to the two sides, giving them one week to ask for a
review.
4) Final Report:
A final report and findings are given to both sides and three weeks later, it
is circulated to all, WTO members.
5) The report becomes a ruling:
The report becomes the ruling of DSB ruling within 60 days. Both sides
have the right to appeal on the ruling.
6) Appeal against Panel Decision:
Either side can appeal a panel ruling. Appeals have to be based on points of
law or legal interpretation
a) There will be no re-examining of the evidence.
b) Appeal will be heard by three members of a permanent 7-member appellate
body set up by DSB.
c) The appellate body can uphold, modify or reverse the panels legal findings
and conclusions.
d) The DSB has to accept or reject the appeal verdict within 30 days.
e) Rejection is only possible by consensus.
f) Final decision on appeal should not take more than 60 days.
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7) Compliance of the ruling: (Implementation of the ruling of DSB)

If a country has done something wrong, it should immediately correct its fault.
a) The concerned country must express its intention to do so to dispute
settlement body within 30 days of the reports adoption. During this period it
can to enter into negotiations with the complaining country in order to
determine mutually acceptable compensation.
b) Even after 20 days ,no satisfactory compensation is agreed, the complaining
side may ask the dispute settlement body for permission to impose limited
trade sanctions against the other side
c) The dispute settlement body must grant this authorization within 30 days of
the expiry of the reasonable period of time

Time frame for a Dispute Settlement procedure

Total = 1 year 3 months (with appeal)
Time Period

Process & Procedures

60 days

Consultations, mediation, etc

45 days

Panel set up and panellists appointee

6 months

Final panel report to parties

3 weeks

Final panel report to WTO members

60 days

Dispute Settlement Body adopts report

60-90 days

Decision on Appeal

30 days

Dispute Settlement Body adopts appeals report

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Arbitration procedure for settling disputes:

The DSM of WTO also suggests the use of arbitration, as an alternative to
dispute settlement DSB process, allows both the parties reach mutual agreement
to arbitration in case of arbitration the following procedures need to followed:
1) Decision for arbitration must be notified to all members prior to the beginning
of the arbitration process.
2) The parties to the proceeding must agree to abide by the arbitration award.
3) Arbitration awards shall be notified to the DSB and the council or committee
of any relevant agreement where any member may raise any point relating to
it.
4) The DSB monitors how adopted rulings and recommendations are
implemented.
Strengthens and weaknesses of DSB:
1) Time bound and well structured dispute settlement procedure has strengthened
the faith in multilateral trading system.
2) It brings transparency and predictability in trading system.
3) DSB practices have improved progressively over the period of time.
4) DSM also provides clarification on rights and obligations through
interpretation.
Weakness:
1) There is no provision for interim relief to protect the economic and trade
interests of the complainant during the dispute settlement procedure.
2) The DSU does not provide compensation for the loss already suffered by the
complainant or the victims.
3) There no provisions for reimbursement of the legal expenses of the winning
party.

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Accession and membership:

The process of becoming a WTO member is unique to each applicant
country, and the terms of accession are dependent upon the country's stage of
economic development and current trade regime. The process takes about five
years, on average, but it can last more if the country is less than fully committed
to the process or if political issues interfere. The shortest accession negotiation
was that of the Kyrgyz Republic, while the longest was that of Russia, which,
having first applied to join GATT in 1993, was approved for membership in
December 2011 and became a WTO member on 22 August 2012. The second
longest was that of Vanuatu, whose Working Party on the Accession of Vanuatu
was established on 11 July 1995. After a final meeting of the Working Party in
October 2001, Vanuatu requested more time to consider its accession terms. In
2008, it indicated its interest to resume and conclude its WTO accession. The
Working Party on the Accession of Vanuatu was reconvened informally on 4 April
2011 to discuss Vanuatu's future WTO membership. The re-convened Working
Party completed its mandate on 2 May 2011. The General Council formally
approved the Accession Package of Vanuatu on 26 October 2011. On 24 August
2012, the WTO welcomed Vanuatu as its 157th member. An offer of accession is
only given once consensus is reached among interested parties.
Accession process:
A country wishing to accede to the WTO submits an application to the
General Council, and has to describe all aspects of its trade and economic policies
that have a bearing on WTO agreements. The application is submitted to the WTO
in a memorandum which is examined by a working party open to all interested
WTO Members.
After all necessary background information has been acquired, the
working party focuses on issues of discrepancy between the WTO rules and the
applicant's international and domestic trade policies and laws. The working party
determines the terms and conditions of entry into the WTO for the applicant

20

nation, and may consider transitional periods to allow countries some leeway in
complying with the WTO rules.
The final phase of accession involves bilateral negotiations between the
applicant nation and other working party members regarding the concessions and
commitments on tariff levels and market access for goods and services. The new
member's commitments are to apply equally to all WTO members under normal
non-discrimination rules, even though they are negotiated bilaterally.
When the bilateral talks conclude, the working party sends to the general
council or ministerial conference an accession package, which includes a
summary of all the working party meetings, the Protocol of Accession (a draft
membership treaty), and lists ("schedules") of the member-to-be's commitments.
Once the general council or ministerial conference approves of the terms of
accession, the applicant's parliament must ratify the Protocol of Accession before
it can become a member
Membership and observers:
The WTO has 159 members and 25 observer governments. In addition to
states, the European Union is a member. WTO members do not have to be
full sovereign nation-members. Instead, they must be a customs territory with full
autonomy in the conduct of their external commercial relations. Thus Hong Kong
has been a member since 1995 (as "Hong Kong, China" since 1997) predating the
People's Republic of China, which joined in 2001 after 15 years of negotiations.
The Republic of China (Taiwan) acceded to the WTO in 2002 as "Separate
Customs Territory of Taiwan, Penghu, Kinmen and Matsu" (Chinese Taipei)
despite its disputed status. The WTO Secretariat omits the official titles (such as
Counselor, First Secretary, Second Secretary and Third Secretary) of the members
of Chinese Taipei's Permanent Mission to the WTO, except for the titles of the
Permanent Representative and the Deputy Permanent Representative.
Iran is the biggest economy outside the WTO. With the exception of
the Holy See, observers must start accession negotiations within five years of
becoming observers.
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WTO agreements:
The important issues discussed and negotiated in the Uruguay round have
led to WTO agreements. These agreements are the commitments by countries to
lower tariffs and other trade barriers. The important agreements are discussed
briefly below.
1) AGREEMENT ON TRADE RELATED INTELLECTUAL PROPERTY
RIGHTS (TRIPS):
Intellectual property rights (IPRs) seek to protect the interest of inventors
and developers of products and processes from being copied by others. IPRs were
first given importance in the Paris Convention of Industrial Property (1883).
References of IPRs were present in GATT. However, the Uruguay Round
strengthened IPRs through the TRIPs agreement.
TRIPs features:
a) Minimum standards of protection to be provided by each member.
b) Domestic procedures must be put in place for enforcement of IPRs by each
member nation.
c) Dispute settlement between WTO members.
2) AGREEMENT ON TRADE RELATED INVESTMENT MEASURES
(TRIMs):
TRIMs include introduction of measures to be adopted by member
countries to treat foreign investments on par with domestic investments and also
removal of quantitative restrictions on imports. Some investment measures that
discriminate against foreign investments were identified as being inconsistent
with WTO.
Investment Measures:
a) Obligation on foreign investors to use local inputs
b) To produce for exports as a condition to obtain imported inputs

22

c) To meet export obligation

d) Indigenization
e) Employment of local people
f) Remittance restrictions on the profit of foreign firms
g) Technology transfer requirement
h) Local equity requirements
i) Control on the use of imported inputs
j) Use of specific production technology
3) THE GENERAL AGREEMENT ON TRADE IN SERVICES (GATS):
In the Uruguay Round , for the first time, trade in services like banking,
insurance, travel, labour movement, transportation etc. was brought under
negotiations. The General Agreement on Trade in Services (GATS) is the first
multilateral agreement on trade in services. All member nations are bound to open
their services sector to domestic private and foreign competition.
Objective of GATS:
a) To create a multilateral framework of principles and rules for trade in services,
including the elaboration of possible discipline for individual sectors.
b) To expand trade in services under conditions of transparency and progressive
liberalization.
c) To promote economic growth of all trading partners in particular, the
developing countries.
d) No restrictions on international payments an transfers.
4) OTHER AGREEMENTS:
1) Agreement on Manufactured Goods: The developed countries agreed to

reduce tariffs on manufactured goods other than textiles, by 40 %. The tariffs

would now be brought down to an average of 3.8 % from the earlier 6.3 %.

23

2) Agreement on Agriculture (AoA):

The objective of this agreement is to increase market orientation in
agriculture in the member nations. The members are required to transform their
non-tariff barriers like quotas into equivalent tariff measures. The tariffs resulting
from such transformation and other tariffs on agricultural products are to be
reduced on an average by 36 % over a period of 6 years in case of developed
countries, and by 24 % over a period of 10 years in case of developing countries.
No such commitments were necessary in case of least developed countries.
The AoA covers the following aspects of agriculture:
a) Tariff reduction
b) Increase in market access
c) Reduction in export subsidies
d) Reduction in domestic subsidies
3) Agreement on Textiles and Clothing (Multi-Fibre Arrangement):
The Multi-Fibre Arrangement (MFA) is in force since 1973. In the
Uruguay Round it was agreed that the import quotas on textile and clothing in
force under the MFA, would be phased out over a span of 10 years, by the end of
transition period on January 1, 2005.
4) Agreement on Subsidies and Countervailing Measures (SCM):
Subsidies given to domestic producers by national governments reduce
cost of production. This enables producers to sell products at low prices in the
international market. As a result these producers have an advantage over other
producers who are not given as much subsidies by their national governments.
a) Red: Subsidies that have high trade distorting effects are prohibited by the
WTO. Examples-subsidies on exports and subsidies that favour the use of
domestic goods over imported goods.
b) Green: Subsidies that are not specific to an enterprise or industry are nonactionable under WTO.
24

c) Amber: These are actionable by trading partners if their interests are

adversely affected. The affected country can appeal to the dispute settlement
body of WTO and go for countervailing measures.

WTO's main activities:

1) Negotiating the reduction or elimination of obstacles to trade (import tariffs,
other barriers to trade) and agreeing on rules governing the conduct of
international trade (e.g. antidumping, subsidies, product standards, etc.)
2) Administering and monitoring the application of the WTO's agreed rules for
trade in goods, trade in services, and trade-related intellectual property rights
3) Monitoring and reviewing the trade policies of our members, as well as
ensuring transparency of regional and bilateral trade agreements
4) Settling disputes among our members regarding the interpretation and
application of the agreements building capacity of developing country
government officials in international trade matters
5) Assisting the process of accession of some 30 countries who are not yet
members of the organization
6) Conducting economic research and collecting and disseminating trade data in
support of the WTO's other main activitiesexplaining to and educating the
public about the WTO, its mission and its activities.
a) The system was developed through a series of trade negotiations, or rounds,
held under GATT. The first rounds dealt mainly with tariff reductions but later
negotiations included other areas such as anti-dumping and non-tariff
measures. The last round the 1986-94 Uruguay Round led to the WTOs
creation.
b) The negotiations did not end there. Some continued after the end of the
Uruguay Round.

25

c) In February 1997 an agreement was reached on telecommunications services,

with 69 governments agreeing to wide-ranging liberalization measures that
went beyond those agreed in the Uruguay Round.
d) In the same year, 40 governments successfully concluded negotiations for
tariff-free trade in information technology products, and 70 members
concluded a financial services deal covering more than 95% of trade in
banking, insurance, securities and financial information. In 2000, new talks
started on agriculture and services. These have now been incorporated into a
broader work programme, the Doha Development Agenda (DDA), launched at
the fourth WTO Ministerial Conference in Doha, Qatar, in November 2001.
e) The agenda adds negotiations and other work on non-agricultural tariffs, trade
and environment, WTO rules such as anti-dumping and subsidies, investment,
competition

policy,

trade

facilitation,

transparency

in

government

procurement, intellectual property, and arrange of issues raised by developing

countries as difficulties they face in implementing the present WTO
agreements.
f) The WTOs rules the agreements are the result of negotiations between the
members.
g) The current set were the outcome of the 1986-94 Uruguay Round negotiations
which included a major revision of the original General Agreement on Tariffs
and Trade (GATT).
h) GATT is now the WTOs principal rule-book for trade in goods. The Uruguay
Round also created new rules for dealing with trade in services, relevant
aspects of intellectual property, dispute settlement, and trade policy reviews.
The complete set runs to some 30,000 pages consisting of about 30
agreements and separate
i) Commitments (called schedules) made by individual members in specific
areas such as lower customs duty rates and services market-opening.

26

The WTO's founding and guiding principles remain the pursuit of open
borders, the guarantee of most-favored-nation principle and non-discriminatory
treatment by and among members, and a commitment to transparency in the
conduct of its activities. The opening of national markets to international trade,
with justifiable exceptions or with adequate flexibilities, will encourage and
contribute to sustainable development, raise people's welfare, reduce poverty, and
foster peace and stability. At the same time, such market opening must be
accompanied by sound domestic and international policies that contribute to
economic growth and development according to each member's needs and
aspirations.

BENEFITS OF THE WTO TRADING SYSTEM:

1) The system helps to keep the peace:
Peace is partly an outcome of two of the most fundamental principles of
the trading system: helping trade to flow smoothly and providing countries with a
constructive and fairoutlet for dealing with disputes over trade issues. It is also an
outcome of the international confidence and cooperation that the system creates
and reinforces.
History is littered with examples of trade disputes turning into war. One of
the most vivid is the trade war of the 1930s when countries competed to raise
trade barriers in order to protect domestic producers and retaliate against each
others barriers. This worsened the Great Depression and eventually played a part
in the outbreak of World War.
Two developments immediately after the Second World War helped to
avoid arepeat of the pre-war trade tensions. In Europe, international cooperation
developed in coal, and in iron and steel. Globally, the General Agreement on
Tariffs and Trade (GATT) was created.

27

The GATT/WTO system is an important confidence builder. The trade

wars in the1930s are proof of how protectionism can easily plunge countries into
a situation where no one wins and everyone loses.
Confidence is the key to avoiding that kind of no-win scenario. When
governments are confident that others will not raise their trade barriers, they will
not be tempted to do the same. They will also be in a much better frame of mind
to cooperate with each other.
The WTO trading system plays a vital role in creating and reinforcing that
confidence. Particularly important are negotiations that lead to agreement by
consensus and a focus on abiding by the rules.
2) The system allows disputes to be handled constructively:
There could be a down side to trade liberalization and expansion. More
trade means more opportunities for disputes to arise. Left to themselves, those
disputes could lead to serious conflict. But in reality, a lot of international trade
tension is reduced because countries can turn to organizations, in particular the
WTO, to settle their trade disputes.
When they bring disputes to the WTO, the WTOs procedure focuses their
attention on the rules. Once a ruling has been made, countries concentrate on
trying to comply with the rules, and perhaps later renegotiating the rulesnot on
declaring war on each other.
Around 300 disputes have been brought to the WTO since it was set up in
1995.Without a means of tackling these constructively and harmoniously, some
could have led to more serious political conflict.
3) A system based on rules rather than power Makes life easier for all:
Decisions in the WTO are made by consensus. The WTO agreements were
negotiated by all members, were approved by consensus and were ratified in all
members parliaments. The agreements apply to everyone. Rich and poor
countries alike have an equal right to challenge each other in the WTOs dispute
settlement procedures.
28

This makes life easier for all, in several different ways. Smaller countries
can enjoy some increased bargaining power. Without a multilateral regime such as
the WTOs system,
the more powerful countries would be freer to impose their will unilaterally on
their smaller trading partners. Smaller countries would have to deal with each of
the major economic powers individually, and would be much less able to resist
unwanted pressure.
4) It gives consumers more choice, and a broader range of qualities to
choose from:
Think also of the things people in other countries can have because they
buy exports from us and elsewhere. Look around and consider all the things that
would disappear if all our imports were taken away from us. Imports allow us
more choiceboth more goods and services to choose from, and a wider range of
qualities. Even the quality of locally-produced goods can improve because of the
competition from imports.
The wider choice isnt simply a question of consumers buying foreign
finished products. Imports are used as materials, components and equipment for
local production.
This expands the range of final products and services that are made by
domestic producers, and it increases the range of technologies they can use. When
mobile telephone equipment became available, services sprang up even in the
countries that did not make the equipment, for example.
5) Trade raises incomes:
The WTOs own estimates for the impact of the 1994 Uruguay Round
trade deal were between $109 billion and $510 billion added to world income
(depending on the assumptions of the calculations and allowing for margins of
error).
More recent research has produced similar figures. Economists estimate
that cutting trade barriers in agriculture, manufacturing and services by one third
29

would boost the world economy by $613 billion equivalent to adding an

economy the size of Canada to the world economy.
So trade clearly boosts incomes. Trade also poses challenges as domestic
producers face competition from imports. But the fact that there is additional
income means that resources are available for governments to redistribute the
benefits from those who gain the most.

Criticism:
The stated aim of the WTO is to promote free trade and stimulate
economic growth. Critics argue that free trade leads to a divergence instead of
convergence of income levels within rich and poor countries (the rich get richer
and the poor get poorer). Martin Khor, Director of the Third World Network,
argues that the WTO does not manage the global economy impartially, but in its
operation has a systematic bias toward rich countries and multinational
corporations, harming smaller countries which have less negotiation power. He
argues that developing countries have not benefited from the WTO agreements of
the Uruguay Round because, among other reasons, market access in industry has
not improved; these countries have had no gains yet from the phasing-out of
textile quotas; non-tariff barriers such as anti-dumping measures have increased;
and domestic support and export subsidies for agricultural products in the rich
countries remain high. Jagdish Bhagwati asserts, however, that there is greater
tariff protection on manufacturers in the poor countries, which are also overtaking
the rich nations in the number of anti-dumping filings.
Other critics claim that the issues of labor relations and environment are
steadfastly ignored. Steve Charnovitz, former director of the Global Environment
and Trade Study (GETS), believes that the WTO "should begin to address the link
between trade and labor and environmental concerns." Further, labor unions
condemn the labor rights record of developing countries, arguing that, to the
extent the WTO succeeds at promoting globalization, the environment and labor
rights suffer in equal measure. On the other side, Khor responds that "if
30

environment and labor were to enter the WTO system. it would be conceptually
difficult to argue why other social and cultural issues should also not enter."
Bhagwati is also critical towards "rich-country lobbies seeking on imposing their
unrelated
agendas on trade agreements." Therefore, both Bhagwati and Arvind Panagariya
of Columbia University have criticized the introduction of TRIPs into the WTO
framework, fearing that such non-trade agendas might overwhelm the
organization's function. Other critics have characterized the decision making in
the WTO as complicated, ineffective, unrepresentative and non-inclusive, and
they have proposed the establishment of a small, informal steering committee
(a"consultative board") that can be delegated responsibility for developing
consensus on trade issues among the member countries. The Third World
Network has called the WTO "the most on-transparent of international
organizations", because "the vast majority of developing countries have very little
real say in the WTO system"; the Network stresses that "civil society groups and
institutions must be given genuine opportunities to express their views and to
influence the outcome of policies and decisions." Certain non-governmental
organizations, such as the World Federalist Movement, argue that democratic
participation in the WTO could be enhanced through the creation of a
parliamentary assembly, although other analysts have characterized this proposal
as ineffective.

WTO IN CONTEXT OF INDIA:

1. Probable advantages:
A. Increment in export:
Due to be a member of WTO India is now connected with other member
countries. It is expected that as result of being the member of WTO, Indian
contribution in world trade was increased to 5170 million $ during 2002-03,

31

rather than 2633million $ during 1994-95. Indias contribution in world export

was 0.61% in 1995 which increased to 0.86% in 2001.
B. Increment in export of textiles:
From 1974 to 1995(formation of WTO) textiles was operated by Multifibre Arrangement. There was a quota system in this field which has been
abolished by 1995 and textiles is now operated by Agreements on Textiles and
Clothing to help export of clothes and textiles in India.
C. Advantages for services:
According to this agreement Developed Countries will open the service
firms i.e. banks, transports, hotels, etc. in compensation they present a market to
sell Indian products.
D. Availability of foreign products:
GATT agreements provide availability of foreign products in Indian
markets. This helps in buying several foreign products easily and cheaply.
E. Job Chances:
Increment in Indian trade, chances of job has been increased to a great
extent.

2. Probable disadvantages
A. Agriculture:
While India is the member of WTO, there are some disadvantages for
agriculturea) India has to reduce subsidies which will affect poor formers.
b) Reduction in import of many agricultural products by Developed Countries to
pretend environmental conservation.
c) The most important thing is that Indians have to buy costly multinational
products.
32

d) 3% of grain consumption of the country has to import, which affects payment

balance of the country.
B. Disadvantages of TRIPS:
a) There is an extension of patents related to medicines, agriculture, plants and
animals, etc. It will help only Developed Countries having better technologies
and unlimited resources.
b) Foreign outsourcing and royalty of patents etc. payments send Indian money
outside which affects payment balance.
c) In Developing countries, imports of patented raw materials reduce export.
C. Loss from General Agreement on Trade in Services (GATS):
GATS is favorable for developed countries because it gives subsidies to
those services whose advantage go to the Developed Countries. Our Banking,
Insurance Transports, Education and Hotels etc. cant compete with foreign
companies. So our domestic Institutions will find an end and our economical
freedom will be lost.
D. Problems in construction of economical policy:Due to WTO, Developing
Countries have to face problems in construction of free economy and non
economic policies as they have to open their markets for Developed countries.
E. Economical torture:
Freedom to multinational companies for invests in India, will torture
Indian economy. According to GATT agreement MNCs and National Companies
are equal. This agreement will create problem of conservation of industries in our
country.

33

CHAPTER 3: FINDINGS, RECOMMENDATION & CONCLUSION

At the end we can say that WTO agreements are totally failed. The
decision of improvement will be successful when taken by self either it is for
person or for country. But our improvement decisions are those which are
imposed on us by foreign powers on the name of world trade agreement. They are
interested only that the doors of developing markets open for them, they are not
interested in improvement of peoples of country, improvement of agricultural
development and in making a strong base for whole economy. These hopeless
results are due to lesser competition power. Developed Countries i.e. U.S.A. have
latest technologies of information and latest instruments and due to these causes
we cant compete with them where half of the population is illiterate and
believing on old traditions either it is for industries or for agriculture. Only those
agreements will become successful which take place between equal powers. So a
justified agreement cant take place between richer and poorer and cant apply
those things. The total export of India is 0.6% of world export. This is a topic of
concern, who want to listen that country whose total contribution in world income
and world trade are only 1.2 % and 0.6 %.
The stated aim of the WTO is to promote free trade and stimulate
economic growth. Critics argue that free trade leads to a divergence instead of
convergence of income levels within rich and poor countries (the rich get richer
and the poor get poorer). Martin Khor, Director of the Third World Network,
argues that the WTO does not manage the global economy impartially, but in its
operation has a systematic bias toward rich countries and multinational
corporations, harming smaller countries which have less negotiation power. He
argues that developing countries have not benefited from the WTO agreements of
the Uruguay Round because, among other reasons, market access in industry has
not improved; these countries have had no gains yet from the phasing-out of
textile quotas; non-tariff barriers such as anti-dumping measures have increased.

34

BIBLIOGRAPHY:

www.wto.org
en.wikipedia.org/wiki/World_Trade_Organization
www.ustr.gov/trade-agreements/wto-multilateral-affairs
wtocentre.iift.ac.in/
T. Y. B. COM. Economics text book
M.COM-I Economics text book

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