WORLD TRADE ORGANIZATION

Faculty:

Kushal Kataria

WTO Genesis

The General Agreement on Trade and Tariff (GATT) came into existence in 1947 It sought substantial reduction in tariff and other barriers to trade and to eliminate discriminatory treatment in international commerce. India signatory to GATT 1947 along with twenty two countries other

Eight rounds of negotiations had taken place during five decades of its existence

Questioning the Effectiveness of GATT

GATT lacked clear enforcement powers.
It suffered from an inefficient dispute settlement mechanism that lacked the power to bind offending countries to its ruling. Entirely dependent on the goodwill and commitment of participating nations. Under GATT, sanctions could only be imposed if all members, including the offending party, joined in agreement.

Not effective in addressing issues related to Non-Tariff Barriers and Dumping / Anti-Dumping Duties. Areas of trade beyond GATT jurisdiction
Transport Insurance Banking

Important GATT Principles

Most Favored Nation (MFN) Principle:
Required non-discrimination among GATT signatories. This principle ensured that tariff concessions granted by one GATT member to another would always be made available to all members.

Principle of National Treatment:

Prevented nations from taxing or regulating imported goods differently from domestic goods, once the imported goods had cleared customs.

Binding of Tariff Rates:

Nations commit not to raise their tariff rates above the bound level.

Discouraging the Use of Quotas

GATT to WTO The Uruguay Round

General Agreement on Trade in Services (GATS)
First ever set of rules multilateral, legally-enforceable rules covering international trade in services. Covered nearly every form of tangible services like banking, consulting, data transmission, tourism.

Trade Related Intellectual Rights (TRIPS)

A common set of principles and rules to help guide the enforcement of copyrights, patents, trademarks and other forms of intellectual property within the context of international trade. Introduced specific international standards to facilitate trade in services.
Ex: Inventions be eligible for patent protection for no less than 20 years. Software receive the same copyright protection as books.

GATT to WTO The Uruguay Round

Agreement on Sanitary and Phytosanitary Measures (SPS)
Introduced to prevent member nations from employing safety and sanitary regulations as unfair impediments to trade. Specified under what conditions countries could legitimately employ such regulations to ban food, animal or plant imports.

Agreement on Trade-Related Investment Measures (TRIMs)

Aimed to limit the use of foreign investment rules (such as local content requirements) that create impediments to trade. Addressed other issues as well:
Technical Barriers to Trade Pre-shipping Inspection Rules of Origin Import Licensing Procedures

GATT to WTO The Uruguay Round

Agreement on Textiles and Clothing (ATC)
Phased out quotas, which had long been permitted under the MFA, and To bring textile and clothing under standard GATT rules.
Agricultural quotas to be replaced by tariffs providing comparable protection.

Agreement on Agriculture

Committed all members to a process of TARRIFICATION. Followed by a steady reduction of tariff rates. Required members to undertake substantial cuts in most production-related agricultural subsidies.

Agreement on Subsidies and Countervailing Duties Agreement on Safeguards A New Institution to Govern all the Agreements

Principles of the WTO Trading System

Trade without discrimination
Most-favored-nation (MFN) National treatment

Freer trade: gradually, through negotiation Predictability: through binding and transparency Promoting fair competition Encouraging development and economic reform

Three New GATS Related Protocols

Protocol on Basic Telecommunication Services (BTS)
US and UK committed to nearly complete opening of their domestic telecom market. Indonesia made several concessions but allowed only 35% foreign equity.

Financial Services Agreement (FSA)

Bound signatories to various levels of liberalization.

Protocol on Movement of Natural Persons (Fourth Mode)

Identifies 4 modes of international service provision: Cross-border Supply (ex: architectural design transmitted across national border through
fax or email)

Consumption Abroad (ex: tourism) Commercial Presence (ex: foreign subsidiaries of banks) Presence of Natural Persons (ex: doctors or teachers working abroad)

Exceptions from GATT rules

Government Procurement Civil Aviation Textiles (Multi-Fiber Agreement (MFA)) Agriculture (Waived restrictions on quotas & subsidies) Regional Trading Agreements (RTAs)
Allowed countries to form regional trade zones and to reduce in-zone tariffs below the MFN rates.

Generalized System of Preferences (GSP)

Permitted developed countries to extend at their discretion lowerthan-normal tariffs to developing countries