What is the

World Trade Organization?

 “The World Trade Organization is ‘member-driven’, with
decisions taken by General agreement among all member of
governments and it deals with the rules of trade between
nations at a global or near-global level. But there is more to
it than that.”
 They deal with: agriculture, textiles and clothing, banking,
telecommunications, government purchases, industrial
standards and product safety, food sanitation regulations,
intellectual property, and much more.
 WTO is an international trade organization having set of
rules & principles, mutually designed & agreed upon to
promote international trade in general & reduction of tariffs
barriers & removal of import restrictions in particular.
 A Forum where member countries met from time to time to
discuss & solve world trade problems .
 It Enjoys identical legal status, privileges, Immunities that
the world bank & IMF get.
 OBJECTIVES OF WTO
 The primary aim of WTO is to implement the new world trade
agreement.
 To promote multilateral trade.

 To promote free trade by abolishing tariff & non-tariff barriers.

 To enhance competitiveness among all trading partners so as to

benefit consumers.
 To increase the level of production & productivity with a view to
increase the level of employment in the world.
 To expand & utilise world resources in the most optimum manner.

 To improve the level of living for the global population & speed up
economic development of the member nations.
 To take special steps for the development of poorest nations.
 FUNCTIONS OF W.T.O
 Implementing WTO agreements & administering the international trade.
 Cooperating with IMF & World Bank & its associates for establishing
coordination in Global Trade Policy-Making.
 Settling trade related disputes among member nations with the help of its
Dispute Settlement
 Reviewing trade related economic policies of member countries with help of
its Trade Policy Review Body (TPRB).
 Providing technical assistance & guidance related to management of foreign
trade & fiscal policy to its member nations.
 Acting as forum for trade liberalisation.
 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.
 Assisting the process of accession of some 30 countries who are not yet
members of the organization.
 PRINCIPLES OF WTO

The basic principles of the WTO (according to the WTO):

. Trade Without Discrimination

1. Most-favoured-nation (MFN): treating other
people equally - Under the WTO agreements, countries
cannot normally discriminate between their trading
partners. Grant someone a special favour (such as a
lower customs duty rate for one of their products) and
you have to do the same for all other WTO members.
2. National treatment: Treating foreigners and
locals equally - Imported and locally-produced goods
should be treated equally — at least after the foreign
goods have entered the market. The same should apply
to foreign and domestic services, and to foreign and
local trademarks, copyrights and patents.
 PRINCIPLES OF WTO (CONTD..)
• Freer trade: gradually, through negotiation
Lowering trade barriers is one of the most obvious
means of encouraging trade. The barriers concerned
include customs duties (or tariffs) and measures such as
import bans or quotas that restrict quantities selectively
• Predictability: through binding and transparency
Sometimes, promising not to raise a trade barrier can
be as important as lowering one, because the promise
gives businesses a clearer view of their future
opportunities. With stability and predictability,
investment is encouraged, jobs are created and
consumers can fully enjoy the benefits of competition —
choice and lower prices. The multilateral trading system
is an attempt by governments to make the business
environment stable and predictable.
 PRINCIPLES OF WTO (CONTD..)
• Promoting fair competition
The WTO is sometimes described as a “free trade”
institution, but that is not entirely accurate. The system
does allow tariffs and, in limited circumstances, other
forms of protection. More accurately, it is a system of
rules dedicated to open, fair and undistorted
competition.
• Encouraging development and economic reform
The WTO system contributes to development. On the
other hand, developing countries need flexibility in the
time they take to implement the system’s agreements.
And the agreements themselves inherit the earlier
provisions of GATT that allow for special assistance and
trade concessions for developing countries.
 VOTING PRINCIPLES IN WTO
Voting

Principle One member, one vote

Primary aim Consensus

No consensus Majority vote

Interpretation of agreements 3/4 in favour

Amendment to agreements 2/3 in favour

Propose amendments Countries and Councils

CORE PRINCIPLES OF WTO
Without Discrimination : (MFN and National
treatment to all)

Free : With barriers coming down through

negotiation;

Predictable : Bound tariffs

More Competitive : By discouraging “unfair”

practices such as export subsidies and dumping
products at below cost to gain market share;

More Beneficial for Less Developed Countries:

By giving them more time to adjust, greater
flexibility, and special privileges
WTO: AGREEMENTS & POLICIES
Goods 
• It all began with trade in goods. From 1947 to 1994, GATT was
the forum for negotiating lower customs duty rates and other
trade barriers

Services
• These principles appear in the new General Agreement on
Trade in Services (GATS).

Intellectual property 
• The WTO’s intellectual property agreement amounts to rules for
trade and investment in ideas and creativity.

Dispute settlement
• The system encourages countries to settle their
differences through consultation.
 TRIPS (WTO AGREEMENT)
 It is the GATT Uruguay Round Agreement on Trade Related Intellectual
Property.
 It deals with the protection & enforcement of “Trade-Related” intellectual
property “rights".

DEALS IN :

 How to give adequate protection to intellectual property rights?

 How countries should enforce those rights adequately in their own
territories?
 How to settle disputes on intellectual property between members of the
WTO?
 Special transitional arrangements during the period when the new system is
being introduced.

Intellectual property comprises 2 distinct forms:

 Literary & Artistic Works: Books, paintings, musical compositions, plays,

operas, movies, radio/ TV programs, performances, & other artistic works
 Industrial Property: Patented objects, trade secrets, geographical indications.
 TRIMS (WTO AGREEMENT)
Trade Related Investment Measures does not provide any new
language, but It concentrates on 2 major articles. Article III & Article
XI which talks about National Treatment and Trade Restrictions
respectively.

No. ARTICLE - III ARTICLE - XI

1 National treatment of imported
product, unless specified in
other
agreements.
2 Subjects the purchase or use by
an enterprise of imported
products to less
favorable conditions than the
purchase or use of domestic
products.
Prohibition of
quantitative restrictions
on imports and exports.
Part of the general trend
in textiles and agriculture
to phase out the use of
quantitative restrictions.
 PROVISIONS
Local content requirements (LCRs): Impose the use of a certain
amount of local inputs in production.

Trade-balancing requirements: Oblige imports to be equivalent to

a certain proportion of exports.

Foreign exchange balancing requirements: Stipulate that the

foreign exchange made available for imports should be a certain
proportion of the value of foreign exchange brought in by the firm
from exports and other sources.

Exchange restrictions: Restrict access to foreign exchange and

hence restrict imports. 

Licensing requirements: Oblige the investor to license technologies

similar or unrelated to those it uses in the home country to host
country firms.
 PROVISIONS (Contd.)
Remittance restrictions: Restrict the right of a foreign investor to
repatriate returns from an investment.

Local equity requirements: Specify that a certain percentage of a

firm’s equity should be held by local investors.

Domestic sales requirements: Require a company to sell a certain

proportion of its output locally, which amounts to a restriction on
exportation.

Manufacturing requirements: Require certain products to be

manufactured locally.

Export performance requirements (EPRs): Stipulate that a certain

proportion of production should be exported.

Product mandating requirements: Oblige an investor to supply

certain markets with a designated product or products manufactured
from a specified facility or operation.
 PROVISIONS (Contd.)
Manufacturing limitations: Prevent companies from
manufacturing certain products or product lines in the host
country.

Technology transfer requirements: Require specified technologies

to be transferred on non-commercial terms and/or specific levels
and types of research and development (R & D) to be conducted
locally.

Local equity requirements: Specify that a certain percentage of a

firm’s equity should be held by local investors.

Domestic sales requirements: Require a company to sell a certain

proportion of its output locally, which amounts to a restriction on
exportation.

Manufacturing requirements: Require certain products to be

manufactured locally.
 GATS (WTO AGREEMENT)
General Agreement on Trade in Services, is the first and the only
comprehensive multilateral discipline covering international trade in
Services. It was negotiated during Uruguay Round and came into force
along with other WTO agreements in January 1995.

A simple definition of services is that services are the tradable, which are
intangible, invisible, and incapable of storage and, therefore, requiring
simultaneous production and consumption. This description does have its
limitations as technical advancements have made it possible for the
services to be visible and capable of storage (for example, a foreign
consultant prepares a documentary film for a local company and sends it to
that company in the form of a video cassette)

As per WTO services are divided into 12 areas and sub divided into 164
areas. They are

Business Services, Communication Services, Construction and Engineering

  Services, Distribution Services, Education Services, Environmental
Services, Financial Services, Health Services, Tourism and travel Services,
Recreation, cultural and sporting  Services, Transport Services, Other
Services not included   elsewhere.
 Modes of supply of services

Cross - Border Movement of

Consumption Commercial
Supply Natural
Abroad Presence
persons
 MODES OF SUPPLY OF SERVICES
Cross - Border Supply - This refers to the delivery of service from the
territory of one country to the territory of the other country by
crossing international border. examples : financial trading, maritime
transport and telecommunication services.

Consumption Abroad - In this method, consumer moves to a foreign

country to get services, such as tourism, education, medical treatment
etc. Examples : such as repair and maintenance of aircrafts.

Commercial Presence - In this method, foreign service-providing

companies establish their local subsidiary offices (affiliates) to supply
services in the domestic market. Establishment of local branches of
foreign banks or insurance companies is example of services provided
through this mode.

Movement of Natural persons - In this mode, the service supplying

foreign person moves to the host territory on temporary basis.
Examples: business consultants, engineers and I.T. experts traveling to
some country for a short period of time.
 The important principles falling in this category are Most Favoured
Nation principle (MFN), Domestic Regulations and Transparency.
 MFN is the first principle and key instrument to prevent
discrimination amongst the trading partners and it is included in all
the agreements of the WTO. 

1. "Most Favoured Nation“ :

It means that if a country grants a favour (tariff concession,
favourable rules, formalities etc.) to any other country, the
same favour shall have to be granted to all the member
countries of the WTO (there are few exceptions also to this
rule).

2. “Transparency” which means that the information relevant

to Trade in Services regarding domestic policies, procedures,
laws and regulations should be notified to the WTO Secretariat
to be circulated amongst all other member countries.

3. Related to the right of each member to “regulate on the

supply of services within her territory”.