MODULE II

TRADE REGULATORY SYSTEM AND WTO

(Units 2.1 to 2.40)
Objectives
i) Understand the governments role in IB as Global Trade Negotiator.
ii) Advantage of negotiations includes (a)mutual agreement helps
mobilize support for free trade

DR. R. L. CHAWLA

negotiated agreements on trade can help

govts. avoid getting caught in trade wars.
iii)Also to analyse how IB strategies are
influenced by Trade organizations (GATT1948-1995) and (WTO since 1995)
iv)At firms level, one needs to analyse the
impact of trade barriers on firms strategy;
and also the role firms can play in
promoting free trade or avoiding barriers.

BACKGROUND
Two World Wars: Trade Flows Disruptions; high
shipping and insurance costs; supply shortages.
GREAT DEPRESSION (1929-33): Trade restrictions;
competitive currencies devaluation; high
import duties and QRs. US average tariff 59% in
1932 compared to 25% in 1948. Bilateral deals
.

 Bretton Woods conference (1944) in USA :

IMF and World Bank emerged
i) to establish and supervise the
international monetary system,
ii)to assist war-damaged Western
economies and Japan and launch
development process of the
underdeveloped world; respectively

 International Trade Organisation was

conceived to regulate the world trading
system under Havana Charter but could not
be ratified by several countries. Rather GATT
was established to usher in multilateral
trading regime for the contracting parties.
Move from bilateralism to multilateralism

LONG VOYAGE OF MULTILATERALISM:

GATT (1947) TO WTO (1995)
Does it remain Richmens Club??
PRINCIPLES OF WORLD TRADING REGIME:
MFN
NON-RECIPROCITY

From GATT to WTO

GATT nicknamed Richmans club; sort of
provisional agreement; focus on trading in
goods; ineffective dispute settlement
mechanism.

 WTO replaced GATT in January 1995.

It is an inter-governmental organization,
and has GATT(1994),GATS,TRIPs and DSB.

 The Ministerial Conference is the apex decisionmaking body and the General Council led by DG is the
executive body. It is assisted by specialized
committees. The first Ministerial was held at
Singapore (1996), is famously known for raising
Singapore issues related to Investment, competition
policy, government procurement and trade
facilitation measures .Subsequently, Seattle, Doha,
Cancun, Hong Kong ministerial have taken place.

DOHA ROUND (9th):

AGR. COMMODITIES
MARKET ACCESS FOR NON-FARM GOODS
IPR REGIME & SINGAPORE ISSUES.
Who has mostly gained from these rounds?

MAJOR ISSUES
AGRICULTURE
EXPORT SUBSIDIES
MARKET ACCESS
DOMESTIC SUPPORT

MAJOR ISSUES
MARKET ACCESS
(NON-FARM GOODS)
PROCESS OF DEINDUSTRALISATION
HALT TO FLOW OF TECHNOLOGY
REVENUE LOSS ON ZERO DUTY

MAJOR ISSUES
TRIPS AND PUBLIC HEALTH
GEOGRAPHICAL INDICATION
BIO-DIVERSITY AND TRADITIONAL KNOWLEDGE

MAJOR ISSUES
SINGAPORE ISSUES
INVESTMENT
COMPETITION POLICY
TRADE FACILITATION
GOVT. PROCUREMENT

GATS
AUDIO-VISUAL, COMPUTER RELATED,
DISTRIBUTION, EDUCATION & TRAINING,
ENVIRONMENT, FINANCIAL, TELECOM, TOURISM,
TRANSPORT, POSTAL, ACCOUNTING & BOOKKEEPING AND RECREATIONAL

GATS
SLOW NEGOTIATION
RESISTANCE TO MODE 1 & 4 BY DCs
SUPPORT FOR GATS VISA

Dispute Settlement Procedure

Before WTO, International tribunals resolved trade
disputes but mostly ineffective in enforcement.
WTO has a formal and effective procedure
Panels of experts to hear dispute cases
Reach final conclusion in a year with pending appeal
in not more than 15 months.
No enforcement power with WTO but gives right to
complaining country to retaliate.

Cases: Some Highlights

Banana Dispute Case: EU and USA:
Highlights
Gasoline Dispute between USA and
Venezuela
US cotton subsidy and Brazil

TRADE RULES
ANTI-DUMPING
SUBSIDIES
RTAs

RTAs
Multilateral trading regime supported tariff
reduction on MFN basis and national
treatment. GATT and then WTO forbids
preferential trading agreements in general,
as a violation of the MNF principle, but
allows them if they lead to free trade
between the agreeing countries.

Forms of RTAs

Free Trade Area

Customs Union
Common Market
Economic Union
Political Union

 Effects of RTAs: Trade Creation And Trade

Diversion : Meaning and some cases
highlightss

FUTURE AGENDA
FORMATION OF RTAs
ASYMMETRIES & IMBALANCES IN TRADING
REGIME
RECIPROCITY BETWEEN NORTH - SOUTH
DIVIDE & RULE POLICY FOR LDCs

 ROLE OF NGOs : TRADE UNIONIST FOR LDCs

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SERVICES EXPORT POTENTIAL
FOR INDIA