GENERAL AGREEMENT ON

TARIFF AND TRADE

And
WORLD TRADE
ORGANISATION

BACKGROUND

PRINCIPLES ADOPTED
BY GATT

ROUNDS OF GATT NEGOTIATION

Between 1947 and the last year of GATT there were 8
rounds of negotiations between the participating
countries.
The first 6 rounds were related to curtailing tariff
rates. 7th round included the non tariff obstacles.
The 8th round was entirely different from the
previous rounds because it included a number of new
subjects for consideration. This 8th round was known
as URUGUAY ROUND.
The discussions at this round only gave birth to
WORLD TRADE ORGANISATION (WTO).

FROM GATT TO WTO

Following the UR agreement, GATT was
converted from a provisional agreement into
a formal international organization called
World Trade Organization (WTO), with effect
from January 1, 1995

World Trade
Organization (WTO)
The World Trade Organization (WTO) deals with the global

rules of trade between nations. Its main function is to ensure

that trade flows as smoothly, predictably and freely as
possible.

WTO is an organisation for liberalising trade, a forum for

governments to negotiate trade agreements and a place for
them to settle trade disputes
At the heartof the system known as the multilateral
trading system are the WTOs agreements, negotiated and
signed by a large majority of the worlds trading nations, and
ratified in their parliaments.
The WTO has larger membership than GATT, with the numbers
being 153. India is one of the founder members of GATT.

Functions of WTO:

WTO is based in Geneva, Switzerland.

Its functions are:
Administering the multilateral trade
agreements which together make up
the WTO
Acting as a forum for multilateral
trade negotiations
Seeking to resolve trade disputes
WTO is not a Free trade institution.
It permits tariffs and other forms of
protection but only in limited
circumstances.

Principles of WTO
Non discrimination
Free Trade: Promote free trade
between nations through negotiations.
Stability in the trading system:
Member countries are committed not
to raise tariff and non tariffs barriers
arbitrarily.
Promotion of Fair Competition: WTO
provides for transparent, fair and
undistorted competition.
It discourages unfair competitive
practices such as export subsidies and
dumping.

TRIPS (Trade Related Intellectual

Property Rights Agreement)
The agreement requires member
countries to provide patent protection
to all products or processes in all
fields. The protection is granted
subject to the following three
conditions:
The product or process is a new one.
It contains an inventive step.
It is capable of industrial application
for 20 years from the grant of the
patent

TRIPS (Trade Related Intellectual

Property Rights Agreement)
TRIPS agreement covers the following
seven intellectual properties:

Patents
Copyright and other related Rights
Geographical Indications
Industrial Designs
Trade marks
Layout design of integrated circuits
Undisclosed information including trade secrets

GATS (General Agreement on Trade in

Services)
The GATS agreement covers four
modes of supply for the delivery of services in crossborder trade:
Criteria

Mode 1: Crossborder supply

Service delivered within the territory of the

Member, from the territory of another Member.
Eg: transborder data flows

Mode 2:
Consumption
abroad

Service delivered outside the territory of the

Member, in the territory of another Member, to
a service consumer of the Member. Eg :
Tourism

Mode 3:
Commercial
presence

Supplier Presence

Service supplier not

present within the
territory of the
member

Service delivered within the territory of the

Member, through the commercial presence of
the supplier (provision of services abroad
through FDI or representative offices).

Service delivered within the territory of the

Member, with supplier present as a natural
Mode 4: Presence person (entry and temporary stay of foreign
of a natural person consultants)

Service supplier
present within the
territory of the
Member

TRIMS (Trade Related

Investment Measures)
TRIMS refers to certain conditions or
restrictions imposed by a government in
respect of foreign investment in the
country.
In the late 1980's, there was a significant
increase in foreign direct investment
throughout the world.

TRIMS are widely employed by developing

countries. The Agreement on TRIMs
provides that no contracting party shall
apply any TRIM which is inconsistent with
the WTO articles

Anti Dumping Measures:

The WTO Agreement provides clarity in the method of
determining that a product is dumped.
A product is regarded as dumped when its export price is
less than the normal price in the exporting country or its
cost of production plus a reasonable amount of
administrative, selling and any other costs.
Anti-dumping duties are to be imposed on goods that are
deemed to be dumped and causing injury to producers of
competing products in the importing country. These duties
are equal to the difference between the goods export
price and their normal value, if dumping causes injury.
Countervailing measures - Action taken by the importing
country, usually in the form of increased duties to offset
subsidies given to producers or exporters in the exporting
country.

Evaluation of WTO
The WTO members now account for over 97% of
the international trade indicating the potential
of bringing about an orderly development of
international trade.

Benefits of WTO:
GATT / WTO has made significant achievements
in reducing tariff and non tariff barriers to
trade. Developing countries too have been
benefiting significantly.
Liberalization of investments has been fostering
economic growth of a number of countries.
It has a system in place to settle trade disputes
between nations.
It has a mechanism to deal with violation of
trade agreements.

Drawbacks:
Negotiations and decision making in
the WTO are dominated by the
developed countries.
Many developing countries do not
have the financial and knowledge
resources to effectively participate
in WTO discussions and negotiations.
Due to the dependence of
developing countries on the
developed ones, the developed
countries are able to resort to arms
twisting tactics.

Tarif: A tariff is a tax. It adds to the cost of imported goods

and is one of several trade policies that a country can enact.
Non-tarif barriers to trade(NTBs) aretrade barriersthat
restrict importsbut are not in the usual form of a tariff. Some
common examples of NTB's are anti- dumping measures
andcountervailing duties.
sanitary and phytosanitary measures (SPS):
SPS measures refer to any measure, procedure, requirement,
or regulation, taken by governments to protect human,
animal, or plant life or health from the risks arising from the
spread of pests, diseases, diseasecausing organisms, or
from additives, toxins, or contaminants found in food,
beverages, or feedstuffs.

 Specific Tariffs: A fixed fee levied on one unit of an imported

good is referred to as a specific tariff. For example, a country
could levy a $15 tariff on each pair of shoes imported, but levy
a $300 tariff on each computer imported.
Ad Valorem Tariffs this type of tariff is levied on a good based
on a percentage of that good's value. An example of an ad
valorem tariff would be a 15% tariff levied by Japan on U.S.
automobiles.
Import Quotas: An import quotais a restriction placed on the
amount of a particular good that can be imported.
free trade area : Trade within the group is duty free but
members set their own tariffs on imports from non-members
(e.g. NAFTA).