What is the WTO?

The World Trade

Organisation (WTO)
Established on 1st January 1995
As a result of the Uruguay
Round negotiations (1986-1994)
Located in Geneva, Switzerland
Members: 149 countries (as of
11 Dec. 2005)

At its simplest:

A global organisation
dealing with rules of trade
between nations.

Evolution of the WTO

Predecessor of the WTO The GATT 47

The General Agreement on Tariffs and Trade (GATT)

1947 -the first major effort to establish
international rules governing trade in goods.
Though initially conceived as a provisional legal
instrument, it endured for almost 50 years.
It functioned without a formal organisational
framework to oversee its implementation as the
proposed International Trade Organisation (ITO)
never came into being and the ITO Charter (aka
the Havana Charter) of which GATT was only to be
a part, never came into effect.
GATTs primary focus was the reciprocal reduction
of tariffs which later expanded to other trade
related areas. In the years leading up to the
Uruguay Round, GATT expanded its competence
through several rounds of trade negotiations which
witnessed the formulation of complex legal
instruments on specific aspects of trade,
particularly disciplines on the use of non tariff
barriers.

The WTOs functions

Administers the WTO

Agreements and facilitates

their operation and
implementation
Provides a forum for trade
negotiations among member
states on matters covered by
the Agreements and for
further liberalisation of trade
amongst members
Responsible for the
settlement of differences and
disputes between members
Responsible for periodic
reviews of the trade policies
of members
Also provides technical
assistance and training for
developing countries
Cooperates with other
international organisations
on subjects of mutual
interest

Principles of the world

trading system under the WTO
Non discrimination- Most

Favoured Nation (MFN) and

National Treatment obligations
Freer trade negotiations aimed
at lowering trade barriers
Predictability and transparency binding commitments,
restrictions on the use of
barriers to trade and
transparent trade policies and
regulatory frameworks (e.g.
transparency obligations in the
major trade agreements and the
Trade Policy Review Mechanism)
The promotion of fair
competition- MFN, national
treatment and rules against
unfair trade practices (e.g. anti
dumping)
Encouragement of development
and economic reform

Organisational structure of
the WTO
Ministerial Conference- The apex body for

decision making (meets every 2 years).

Composition:-ministerial representatives.
General Council- performs the functions of the
Conference between meetings and has specific
duties assigned to it by the WTO agreements.
Composition:- governmental representatives.
The General Council also meets as the Dispute
Settlement Body and the Trade Policy
Review Body.
Councils for Trade in Goods (oversees GATT),
Trade in Services (oversees GATS) and TRIPS
which report to and assist the General Council.
Committees on special subjects, Committees
functioning under the Councils and Committees
for the Plurilateral Agreements.

Membership- developed, developing, least

developed countries and
economies in transition.
Decision making is by consensus. If consensus is
not possible decisions
will be taken by a majority vote.
(Refer hand out for details)

Four main principles of

GATT
Most Favoured Nation

Art. 1 of GATT embodies the MFN rule. At its

simplest, it requires any favourable treatment
granted to a product originating in or destined
for any other country, to be accorded
immediately and unconditionally to the like
product originating in or destined for the
territories of all other member states.
E.g. Spanish coffee case: Spain applied a higher
duty on the types of coffee imported from Brazil
while applying a lower duty on other coffees
considered to be like products. The Panel
considered this to be a breach of its GATT MFN
obligation.
There are permitted exceptions to the MFN rule:
for e.g. free trade areas/customs unions and
preferential systems.
[The principle of MFN is also found in GATS(Art.2) and TRIPS (Art.4)]

ROLE OF WTO IN INDIA

The WTO as a dispute

settlement forum and a
monitoring body
Settlement of disputes under the DSU

1. Consultations, good offices, conciliation

and mediation
2. Panel proceedings
3. Appellate Body
4. Consideration and adoption of Panel/AB
reports by the DSB
If the report concludes that a measure is
inconsistent with a covered agreement the
Panel (/AB) must recommend that the
Member concerned bring the measure into
conformity with that agreement.
Adoption of Panel (/AB) reports by the DSB
is automatic.
5. Implementation of reports by members
- Compliance
- Negotiation of compensation (voluntary,
mutually acceptable)
- Authorisation of retaliatory action (suspension
of concessions/obligations)

Trade Policy Review Mechanism-

Periodic review of trade policies

Services and the WTO

The WTO regulates trade in services through

the General Agreement on Trade in Services

(GATS). The GATS is broadly comparable to
the GATT but there are significant differences
in its approach to liberalization.
Services cover a wide range of activities.

Under the GATS, the term services include

any service in any sector except services
supplied in the exercise of governmental
authority.
The GATS applies to all measures by

Members affecting trade in services.

Measures can be laws, regulations,
procedures, decisions, administrative action
etc., of Member governments.

GATS obligations
Two main categories of obligations
General obligations which apply to all service
sectors of all Members.
Specific obligations which apply only to

service sectors specified in the Members

Schedule of specific commitments.

General Obligations
MFN (Art.2)

With respect to any measure covered by this

Agreement, each Member
shall accord immediately and unconditionally
to services and service
suppliers of any other Member treatment no
less favorable than that it
accords to like services and service suppliers
of any other country.
Note qualifications to the MFN rule via Art. 2
exemptions and RTAs (Art.5)

Transparency (Art.3)

Art. 3 is mainly concerned with the provision

of information. The rule
requires the prompt publication of general
measures, notification of
changes to/introduction of measures that
affect sectors covered by
specific commitments to the Services Council.
Also requires the
establishment of national enquiry points.

WTO: Benefits for

business

Creation of a stable, rule based,

multilateral trading regime
Market access translates into
market opportunities
The rule based system creates
certain rights of access
- Security of access
tariff bindings and disciplines on
barriers to trade whether tariff or non
tariff. It also provides non
discriminatory treatment of products
and services.

- Stability of access
the application of uniform rules in key
areas of the trading process e.g.
customs valuation, import licenses etc.

- Rights against unfair trade

practices for

Domestic industry
Export industry
Import industry

Advantages of WTO
The system helps promote peace
2. Disputes are handled constructively
3. Rules make life easier for all
4. Freer trade cuts the costs of living
5. It provides more choice of products and
qualities
6. Trade raises incomes
7. Trade stimulates economic growth
8. The basic principles make life more
efficient
9. Governments are shielded from lobbying
10. The system encourages good
government

LIMITATONS

WTOs Challenges
G-7: even with one nation one vote

system LDcs have less influence

Increase in Regional Trade Agreements
Doha Round unresolved
Global Recession and Protectionism

For further information

The WTO Website : www.wto.org

Some related websites of interest

OECD www.oecd.org
ITC www.intracen.org
World Bank www.worldbank.org