World Trade Organisation (WTO)

The World Trade Organization (WTO) is an intergovernmental organization that regulates international trade. The WTO officially commenced on 1 January 1995 under the Marrakesh Agreement, signed by 123 nations on 15 April 1994 (now 164 members), replacing the General Agreement on Tariffs and Trade (GATT), which commenced in 1948. It is the largest international economic organization in the world.

  • The WTO deals with regulation of trade in goods, services and intellectual property between participating countries by providing a framework for negotiating 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.
  • Currently, WTO has 164 members & 23 observers.
  • WTO Headquarters: Geneva, Switzerland

Members in Green, European Union in Blue, Observers in Yellow & Non-members in Red.

BRIEF HISTORY

  • 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 – such as the World Bank and the International Monetary Fund.
  • 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.
  • Uruguay Round 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. The Final Act concluding the Uruguay Round and officially establishing the WTO regime was signed 15 April 1994, during the ministerial meeting at Marrakesh, Morocco, and hence is known as the Marrakesh Agreement.

The agreements fall into six main parts:

  1. The Agreement Establishing the WTO
  2. The Multilateral Agreements on Trade in Goods
  3. The General Agreement on Trade in Services
  4. The Agreement on Trade-Related Aspects of Intellectual Property Rights
  5. Dispute settlement
  6. Reviews of governments’ trade policies

DOHA ROUND (DOHA AGENDA)

  • The WTO launched the current round of negotiations, the Doha Development Round, at the fourth ministerial conference in Doha, Qatar in November 2001.
  • This 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 substantial assistance to developing countries.
  • Its aim is to achieve major reform of the international trading system through the introduction of lower trade barriers and revised trade rules. The work programme covers about 20 areas of trade. The Round is also known semi-officially as the Doha Development Agenda as a fundamental objective is to improve the trading prospects of developing countries.
  • Progress stalled after over differences between developed nations and the major developing countries on issues such as industrial tariffs and non-tariff barriers to trade particularly against and between the EU and the US over their maintenance of agricultural subsidies—seen to operate effectively as trade barriers. Repeated attempts to revive the talks were unsuccessful even though the adoption of the Bali Ministerial Declaration in 2013 addressed bureaucratic barriers to commerce.

WHAT IS TARIFF?

Tariff is a government’s tax on imports & exports.

AGREEMENTS

The WTO oversees about 60 different agreements which have the status of international legal texts. Member countries must sign and ratify all WTO agreements on accession. A discussion of some of the most important agreements follows:

  • The Agreement on Agriculture came into effect with the establishment of the WTO at the beginning of 1995. The AoA has three central concepts, or “pillars”: domestic support, market access and export subsidies.
  • The General Agreement on Trade in Services was created to extend the multilateral trading system to service sector, in the same way as the General Agreement on Tariffs and Trade (GATT) provided such a system for merchandise trade. The agreement entered into force in January 1995.
  • The Agreement on Trade-Related Aspects of Intellectual Property Rights sets down minimum standards for many forms of intellectual property (IP) regulation. It was negotiated at the end of the Uruguay Round of the General Agreement on Tariffs and Trade (GATT) in 1994.
  • The Agreement on the Application of Sanitary and Phytosanitary Measures—also known as the SPS Agreement—was negotiated during the Uruguay Round of GATT, and entered into force with the establishment of the WTO at the beginning of 1995. Under the SPS agreement, the WTO sets constraints on members’ policies relating to food safety (bacterial contaminants, pesticides, inspection and labeling) as well as animal and plant health (imported pests and diseases).
  • The Agreement on Technical Barriers to Trade is an international treaty of the World Trade Organization. It was negotiated during the Uruguay Round of the General Agreement on Tariffs and Trade, and entered into force with the establishment of the WTO at the end of 1994. The object ensures that technical negotiations and standards, as well as testing and certification procedures, do not create unnecessary obstacles to trade”.
  • The Agreement on Customs Valuation, formally known as the Agreement on Implementation of Article VII of GATT, prescribes methods of customs valuation that Members are to follow. Chiefly, it adopts the “transaction value” approach.

NAIROBI PACKAGE

The “Nairobi Package” was adopted at the WTO’s Tenth Ministerial Conference, held in Nairobi, Kenya, from 15 to 19 December 2015. It contains a series of six Ministerial Decisions on agriculture, cotton and issues related to least-developed countries (LDCs).

  1. Agriculture
    Developing country members will have the right to have recourse to a special safeguard mechanism (SSM) for agricultural products.Members shall engage constructively to negotiate and make all concerted efforts to agree and adopt a permanent solution on the issue of public stockholding for food security purposes.

    In relation to agricultural products, developed members shall immediately eliminate their remaining scheduled export subsidy entitlements while developing country members shall eliminate their export subsidy entitlements by the end of 2018.

  2. Cotton
    The decision related to cotton includes three agriculture elements viz., market access, domestic support and export competition.On market access, the decision calls for cotton from LDCs to be given duty-free and quota-free access to the markets of developed countries — and to those of developing countries declaring that they are able to do so — from 1 January 2016.

    The domestic support part of the cotton decision acknowledges members’ reforms in their domestic cotton policies and stresses that more efforts remain to be made.

    On export competition for cotton, the decision mandates that developed countries prohibit cotton export subsidies immediately and developing countries do so at a later date.

  3. LDC Issues
    The Ministerial Conference adopted a decision that will facilitate opportunities for least-developed countries’ export of goods to both developed and developing countries under unilateral preferential trade arrangements in favor of LDCs.On the services front, the conference decided on the implementation of preferential treatment in favor of services and service suppliers of Least Developed Countries and increasing LDC Participation in services trade.
  4. Expanded Information Technology Agreement
    Along with the above decisions, the conference agreed on the timetable for implementing a landmark deal to eliminate tariffs on 201 information technology products valued at over 1.3 trillion US dollars per year.Negotiations on the expanded ITA were conducted by 53 WTO members, including both developed and developing countries, which account for approximately 90 percent of world trade in these products.

INDIA & WTO

  • India got a boom in exports because WTO gradually lowered barriers internationally.
  • India won multilateral dispute settlement against such powerful economies such as the USA.
  • Due to TRIPS, India had to adopt international standards in Intellectual property rights which led to an increase in the flow of Foreign investment & Technology.
  • India has always been in favor of Special Safeguard Mechanism: its a measure designed to protect poor farmers by allowing countries to impose a special tariff on certain agricultural goods in the event of an import surge or price fall. It would help against very cheap prices of exports from developed countries (highly subsidized + big farms + good machinery + technology + seeds/ fertilizers etc).