Final Projet Sem3

UNIVERSITY OF MUMBAI

PROJECT ON

"PROJECT ON A STUDY OF WTO"

MASTER OF COMMERCE (BANKING & FINANCE)

SUBJECT: INTERNATIONAL FINANCE

SEMESTER IІI

2015-2016

In Partial Fulfillment of the Requirement under Semester Based Credit

and Grading System for Post Graduated (PG)

Programmme under Faculty of Commerce

SUBMITTED BY

PARSHURAM OMKAR

ROLL NO: 38

PROJECT GUIDE

Prof. SHEETAL MODI

K.P.B Hinduja College of Commerce, 315 New Charni Road,

Mumbai 400004.

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ACKNOWLEDGEMENT

With great pleasure I than Mrs. MRILANILI RAVALEKAR Professor of

K.P.B.HINDUJA college of Commerce for being an inspiration in the

completion of this project. I thank for her invaluable help provided during the

completion of this project. I also thank her for providing me guidance and

numerous suggestions throughout entire duration of the project. I am thankful

for invaluable help without which this project would not have materialized.

I express my deep gratitude to my entire college friend and my family members

whose efforts and creativity helped us in giving the final structure to the project

work.

I am also thankful to all those seen and unseen hands and hands, which have

been of help in the completion of this project work.

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CERTIFICATE

This is certify that Mr. PARSHURAM.BABU.OMKAR of M.Com. Banking &

Finance 2nd Semester (2015-2016) has successfully completed the Project on

"PROJECT ON STUDY OF WTO".

Under the guidance of Mrs. SHEETAL MODI

Project Guide ________________________

Course Coordinator ________________________

Internal Examiner ________________________

External Examiner ________________________

Principal ________________________

Date________________

Place: Mumbai

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M.Com (Banking and Finance)

3rd SEMESTER

"PROJECT ON STUDY OF WTO"

SUBMITTED BY

PARSHURAM.BABU.OMKAR

ROLL NO: 44

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DECLARATION

I Mr. PARSHURAM.BABU.OMKAR the student of M.com (Banking and

Finance), 2nd Semester (2015-2016), hereby declares that I have completed the

project on "PROJECT ON STUDY OF WTO"

The information submitted is true and original to the best of my knowledge.

PARSHURAM.BABU.OMKAR

(Signature)

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INDEX

SR NO CHAPTER PAGE NO

CH 1 INTRODUCTION OF WTO

CH 2 HISTORY

CH 3 OBJECTIVES OF WTO

CH 4 FUNCTIONS OF WTO

CH 5 PRINCIPLES OF THE TRADING SYSTEM

CH 6 ORGANIZATIONAL STRUCTURE

CH 7 MEMBERS AND OBSERVERS

CH 8 AGREEMENTS

CH 9 DISPUTE SETTLEMENT

CH 10 INDIA’S ROLE IN FORMING WTO

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CHAPTER 1: INTRODUCTION

The World Trade Organization (WTO) is an organization that intends to supervise and

liberalize international trade. The organization officially commenced on January 1, 1995

under the Marrakech Agreement, replacing the General Agreement on Tariffs and Trade

(GATT), which commenced in 1948. The organization deals with regulation of trade between

participating countries; it provides a framework for negotiating and formalizing 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. Most of the issues that the WTO focuses on derive from previous trade

negotiations, especially from the Uruguay Round (1986–1994).

The organization is attempting to complete negotiations on the Doha Development Round,

which was launched in 2001 with an explicit focus on addressing the needs of developing

countries. As of June 2012, the future of the Doha Round remains uncertain: The work

programme lists 21 subjects in which the original deadline of 1 January 2005 was missed (So

was the next unofficial target of the end of 2006.) The further imposition of free trade on

industrial goods and services and the protectionism on farm subsidies to domestic agricultural

sector requested from the developed countries, and the substantiation of the international

liberalization of fair trade on agricultural products from developing countries remain the

major obstacles. These points of contention have hindered any progress to launch new WTO

negotiation beyond the Doha Development Round. As a result of this impasse, there has been

an increasing amount of bilateral free trade agreements.

WTO's current Director-General is Pascal Lamy, who leads a staff of over 600 people in

Geneva, Switzerland.

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CHAPTER 2: 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 notably the Bretton Woods institutions known as the

World Bank and the International Monetary Fund. A comparable international institution for

trade, named the International Trade Organization was successfully negotiated. The ITO was

to be a United Nations specialized agency and would address not only trade barriers but other

issues indirectly related to trade, including employment, investment, restrictive business

practices, and commodity agreements. But the ITO treaty was not approved by the U.S. and a

few other signatories and never went into effect.

In the absence of an international organization for trade, the GATT would over the years

"transform itself" into a de facto international organization.

GATT rounds of negotiations

The GATT was the only multilateral instrument governing international trade from 1946 until

the WTO was established on January 1, 1995. Despite attempts in the mid-1950s and 1960s

to create some form of institutional mechanism for international trade, the GATT continued

to operate for almost half a century as a semi-institutionalized multilateral treaty regime on a

provisional basis.

General Agreement on Tariffs and Trade (GATT)

The General Agreement on Tariffs and Trade (GATT) is a multilateral agreement regulating

international trade. According to its preamble, its purpose is the "substantial reduction of

tariffs and other trade barriers and the elimination of preferences, on a reciprocal and

mutually advantageous basis."

It was negotiated during the UN Conference on Trade and Employment and was the outcome

of the failure of negotiating governments to create the International Trade Organization

(ITO). GATT was signed in 1947 and lasted until 1993, when it was replaced by the World

Trade Organization in 1995. The original GATT text (GATT 1947) is still in effect under the

WTO framework, subject to the modifications of GATT 1994.

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GATT and the World Trade Organization

In 1993, the GATT was updated (GATT 1994) to include new obligations upon its

signatories. One of the most significant changes was the creation of the World Trade

Organization (WTO). The 75 existing GATT members and the European Communities

became the founding members of the WTO on 1 January 1995. The other 52 GATT members

rejoined the WTO in the following two years (the last being Congo in 1997). Since the

founding of the WTO, 21 new non-GATT members have joined and 29 are currently

negotiating membership.

There are a total of 155 member countries in the WTO, with Montenegro and Samoa being

new members as of 2012.

Of the original GATT members, Syria and the SFR Yugoslavia has not rejoined the WTO.

Since FR Yugoslavia, (renamed to Serbia and Montenegro and with membership negotiations

later split in two), is not recognised as a direct SFRY successor state; therefore, its

application is considered a new (non-GATT) one. The General Council of WTO, on 4 May

2010, agreed to establish a working party to examine the request of Syria for WTO

membership. The contracting parties who founded the WTO ended official agreement of the

"GATT 1947" terms on 31 December 1995. Serbia and Montenegro are in the decision stage

of the negotiations and are expected to become the newest members of the WTO in 2012 or

in near future.

Whilst GATT was a set of rules agreed upon by nations, the WTO is an institutional body.

The WTO expanded its scope from traded goods to include trade within the service sector

and intellectual property rights. Although it was designed to serve multilateral agreements,

during several rounds of GATT negotiations (particularly the Tokyo Round) plurilateral

agreements created selective trading and caused fragmentation among members. WTO

arrangements are generally a multilateral agreement settlement mechanism of GATT.

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CHAPTER 3: Objectives and operation

The WTO has six key objectives:

1. to set and enforce rules for international trade,

2. to provide a forum for negotiating and monitoring further trade liberalization,

3. to resolve trade disputes,

4. to increase the transparency of decision-making processes,

5. to cooperate with other major international economic institutions involved in global

economic management, and

6. to help developing countries benefit fully from the global trading system. Although

shared by the GATT, in practice these goals have been pursued more

comprehensively by the WTO. For example, whereas the GATT focused almost

exclusively on goods—though much of agriculture and textiles were excluded—the

WTO encompasses all goods, services, and intellectual property, as well as some

investment policies.

In addition, the permanent WTO Secretariat, which replaced the interim GATT Secretariat,

has strengthened and formalized mechanisms for reviewing trade policies and settling

disputes. Because many more products are covered under the WTO than under the GATT and

because the number of member countries and the extent of their participation has grown

steadily—the combined share of international trade of WTO members now exceeds 90

percent of the global total—open access to markets has increased substantially.

The rules embodied in both the GATT and the WTO serves at least three purposes. First, they

attempt to protect the interests of small and weak countries against discriminatory trade

practices of large and powerful countries. The WTO’s most-favoured-nation and national-

treatment articles stipulate that each WTO member must grant equal market access to all

other members and that both domestic and foreign suppliers must be treated equally. Second,

the rules require members to limit trade only through tariffs and to provide market access not

less favourable than that specified in their schedules (i.e., the commitments that they agreed

to when they were granted WTO membership or subsequently). Third, the rules are designed

to help governments resist lobbying efforts by domestic interest groups seeking special

favours.

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Although some exceptions to the rules have been made, their presence and replication in the

core WTO agreements were intended to ensure that the worst excesses would be avoided. By

thus bringing greater certainty and predictability to international markets, it was thought; the

WTO would enhance economic welfare and reduce political tensions.

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CHAPTER 4: Functions

Among the various functions of the WTO, these are regarded by analysts as the most

important:

It oversees the implementation, administration and operation of the covered

agreements.

It provides a forum for negotiations and for settling disputes.

Additionally, it is the WTO's duty to review and propagate the national trade policies, and to

ensure the coherence and transparency of trade policies through surveillance in global

economic policy-making. Another priority of the WTO is the assistance of developing, least-

developed and low-income countries in transition to adjust to WTO rules and disciplines

through technical cooperation and training.

The WTO is also a center of economic research and analysis: regular assessments of the

global trade picture in its annual publications and research reports on specific topics are

produced by the organization. Finally, the WTO cooperates closely with the two other

components of the Bretton Woods system, the IMF and the World Bank.

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CHAPTER 5: Principles of the trading system

The WTO establishes a framework for trade policies; it does not define or specify outcomes.

That is, it is concerned with setting the rules of the trade policy games. Five principles are of

particular importance in understanding both the pre-1994 GATT and the WTO:

Non-discrimination: It has two major components: the most favoured nation (MFN) rule,

and the national treatment policy. Both are embedded in the main WTO rules on goods,

services, and intellectual property, but their precise scope and nature differ across these areas.

The MFN rule requires that a WTO member must apply the same conditions on all trade with

other WTO members, i.e. a WTO member has to grant the most favorable conditions under

which it allows trade in a certain product type to all other WTO members. "Grant someone a

special favour and you have to do the same for all other WTO members." National treatment

means that imported goods should be treated no less favorably than domestically produced

goods (at least after the foreign goods have entered the market) and was introduced to tackle

non-tariff barriers to trade (e.g. technical standards, security standards et al. discriminating

against imported goods).

Reciprocity: It reflects both a desire to limit the scope of free-riding that may arise because

of the MFN rule, and a desire to obtain better access to foreign markets. A related point is

that for a nation to negotiate, it is necessary that the gain from doing so be greater than the

gain available from unilateral liberalization; reciprocal concessions intend to ensure that such

gains will materialise.

Binding and enforceable commitments: The tariff commitments made by WTO members

in a multilateral trade negotiation and on accession are enumerated in a schedule (list) of

concessions. These schedules establish "ceiling bindings": a country can change its bindings,

but only after negotiating with its trading partners, which could mean compensating them for

loss of trade. If satisfaction is not obtained, the complaining country may invoke the WTO

dispute settlement procedures.

Transparency: The WTO members are required to publish their trade regulations, to

maintain institutions allowing for the review of administrative decisions affecting trade, to

respond to requests for information by other members, and to notify changes in trade policies

to the WTO. These internal transparency requirements are supplemented and facilitated by

periodic country-specific reports (trade policy reviews) through the Trade Policy Review

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Mechanism (TPRM). The WTO system tries also to improve predictability and stability,

discouraging the use of quotas and other measures used to set limits on quantities of imports.

Safety valves: In specific circumstances, governments are able to restrict trade. The WTO’s

agreements permit members to take measures to protect not only the environment but also

public health, animal health and plant health.

There are three types of provision in this direction:

articles allowing for the use of trade measures to attain non-economic objectives;

articles aimed at ensuring "fair competition"; members must not use environmental

protection measures as a means of disguising protectionist policies.

provisions permitting intervention in trade for economic reasons.

Exceptions to the MFN principle also allow for preferential treatment of developing

countries, regional free trade areas and customs unions.

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CHAPTER 6: Organizational structure

The General Council has the following subsidiary bodies which oversee committees in

different areas:

1. Council for Trade in Goods:

There are 11 committees under the jurisdiction of the Goods Council each with a

specific task. All members of the WTO participate in the committees. The Textiles

Monitoring Body is separate from the other committees but still under the jurisdiction

of Goods Council. The body has its own chairman and only 10 members. The body

also has several groups relating to textiles.

2. Council for Trade-Related Aspects of Intellectual Property Rights:

Information on intellectual property in the WTO, news and official records of the

activities of the TRIPS Council, and details of the WTO's work with other

international organizations in the field.

3. Council for Trade in Services:

The Council for Trade in Services operates under the guidance of the General Council

and is responsible for overseeing the functioning of the General Agreement on Trade

in Services (GATS). It is open to all WTO members, and can create subsidiary bodies

as required.

4. Trade Negotiations Committee:

The Trade Negotiations Committee (TNC) is the committee that deals with the current

trade talks round. The chair is WTO's director-general. As of June 2012 the

committee was tasked with the Doha Development Round.

The Service Council has three subsidiary bodies: financial services, domestic regulations,

GATS rules and specific commitments. The General council has several different

committees, working groups, and working parties. There are committees on the following:

Trade and Environment; Trade and Development (Subcommittee on Least-Developed

Countries); Regional Trade Agreements; Balance of Payments Restrictions; and Budget,

Finance and Administration. There are working parties on the following: Accession. There

are working groups on the following: Trade, debt and finance; and Trade and technology

transfer.

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The Ministerial Conference (MC) is at the top of the structured organization of the WTO. It is

the supreme governing body which takes ultimate decisions on all matters. It is constituted by

representative (usually, Ministers of Trade) all the member countries.

The General Council (GC) is composed of the representatives of all the members. It is the

real engine of WTO which acts on behalf of the MC. It also acts as the Dispute Settlement

Body as well as the Trade Policy Review Body.

There are three councils viz: the Council for Trade Related Aspects of Intellectual Property

Rights (TRIPS) operating under the GC. These councils with their subsidiary bodies carry out

their specific responsibilities.

Further there are three committee, viz, the committee on Balance of Payments Restrictions

(CBOPR) and the committee o Budget, Finance and Administration (CFBA) which execute

the functions assigned to them by the WTO Agreement and the GC.

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The Administration of the WTO is conducted by the Secretariat which is headed by the

Director General (DG) appointed by the MC for the tenure of four years. He is assisted by the

four Deputy Directors from different member countries. The annual budget estimates and

financial statement of the WTO are presented by the DG to the CBFA for reivew and

recommendations for the final approval by the GC.

The Ministerial Conference

The Ministerial Conference is the governing body of the WTO. It has the authority to adopt

final decisions on all WTO matters. It meets at least once every two years for about four

days, and is composed of trade ministers of all Members. Any Member can offer to host the

Ministerial Conference, and Members decide on the venue by consensus. The next

Conference is scheduled to take place in December 2005 in Hong Kong.

The trade minister of the host country usually chairs the Ministerial Conference and can play

a significant role. For example, after the collapse of the Conference in Cancún in 2003, some

participants pointed the finger at the Mexican trade minister (and conference chair) Luis

Ernesto Derbez, saying that he had decided to end the meeting prematurely although there

was still a chance of reaching agreement.

Ministerial Conferences are where final decisions, such as whether to launch new

negotiations, are taken. Members begin preparing for Ministerials months in advance. This

often involves intense negotiations in Geneva where delegates discuss numerous draft

Ministerial texts for ministers to decide upon during the Conference, usually leaving the most

contentious issues to be determined at the ministerial level.

In practice, only issues concerning the strategic directions of the WTO are decided there, the

bulk of the WTO’s work being carried out by councils and committees that meet throughout

the year in Geneva.

NGOs who can demonstrate genuine interest in trade are eligible for accreditation to

Ministerials, which is not the case for other WTO bodies. Almost 800 NGOs – including

business groups – were accredited to participate in the Cancún Ministerial Conference.

However,unlike the UN, where the Credentials Committee of ECOSOC has clear procedures

for granting NGOs consultative status, the WTO’s selection criteria are not clearly defined,

and remain ad hoc. Since the Seattle Ministerial Conference in 1999, which saw

unprecedented street protests, the WTO Secretariat has placed increasingly strict controls on

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the number of accredited NGO personnel that may attend. In Doha in 2001, each accredited

NGO was allowed only two passes to enter the Conference site; in Cancún, NGOs were only

allowed one.

WTO Ministerial Conferences

The General Council

The General Council is the highest ruling body of the WTO when the Ministerial Conference

is not in session, and the only one which can make binding decisions outside the Ministerial

Conference. For instance, in July 2004 the General Council adopted a package of agreements,

referred to as the July Framework, which effectively broke months of deadlock following the

collapse of minister-level talks in Cancún in September 2003.

The General Council can meet whenever Members want. In practice its meetings usually take

place every two months, and are attended by the highest rank of trade diplomats in Geneva,

mostly ambassadors. It is common practice for the General Council to elect its chairperson

and those of other WTO bodies during its first meeting of the calendar year. The Council’s

meetings are often preceded by informal sessions that are not announced publicly.

The functions of the General Council are wide-ranging:

it follows up on issues arising from Ministerials

it oversees the operation of WTO agreements, and shares with the Ministerial Council

the

responsibility of adopting interpretations of the WTO Agreement. An example is its

2003

decisions on TRIPS and public health.

it grants and extends waivers from WTO rules, on behalf of the Ministerial

Conference. An example is the ‘Kimberley Process’ waiver, to prevent trade in ‘blood

diamonds’.

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it meets as the Trade Policy Review Body (TPRB) and the Dispute Settlement Body

(DSB); the two bodies and the General Council are considered as ‘second level’

bodies after the Ministerial Conference.

it deals with accession-related matters, including authorizing the accession of new

Members when the Ministerial Conference is not in session. For accession matters,

the General Council decides on the establishment of working parties on accession,

and endorses accession packages upon completion of negotiations.

it supervises the overall conduct of negotiations such as the Doha Work Programme.

Since the Trade Negotiations Committee (TNC) was set up to carry out the Doha

negotiations, the General Council has regularly reviewed its work under a standing

agenda item. The TNC reports to each regular meeting of the General Council on the

activities of its negotiating groups.

The General Council also deals with systemic issues (such as selection of Directors-

General and external transparency), and performs specific tasks assigned to it by the

Ministerial Conference.

Decision-making

The WTO describes itself as "a rules-based, member-driven organization — all decisions are

made by the member governments, and the rules are the outcome of negotiations among

members". The WTO Agreement foresees votes where consensus cannot be reached, but the

practice of consensus dominates the process of decision-making.

Richard Harold Steinberg (2002) argues that although the WTO's consensus governance

model provides law-based initial bargaining, trading rounds close through power-based

bargaining favouring Europe and the U.S., and may not lead to Pareto improvement.

CHAPTER 7: Members and Observers

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The WTO has 157 members and 27 observer governments. In addition to states, the European

Union is a member. WTO members do not have to be full sovereign nation-members.

Instead, they must be a customs territory with full autonomy in the conduct of their external

commercial relations. Thus Hong Kong (as "Hong Kong, China" since 1997) became a

GATT contracting party, and the Republic of China (Taiwan) acceded to the WTO in 2002 as

"Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu" (Chinese Taipei)

despite its disputed status. The WTO Secretariat omits the official titles (such as Counselor,

First Secretary, Second Secretary and Third Secretary) of the members of Chinese Taipei's

Permanent Mission to the WTO, except for the titles of the Permanent Representative and the

Deputy Permanent Representative.

Iran is the biggest economy outside the WTO. With the exception of the Holy See, observers

must start accession negotiations within five years of becoming observers. A number of

international intergovernmental organizations have also been granted observer status to WTO

bodies. 14 states and two territories so far have no official interaction with the WTO.

WTO accession progress:

Members (including dual-representation with the European Union)

Draft Working Party Report or Factual Summary adopted

Goods and/or Services offers submitted

Memorandum on Foreign Trade Regime (FTR) submitted

Observer, negotiations to start later or no Memorandum on FTR submitted

Frozen procedures or no negotiations in the last 3 years

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No official interaction with the WTO

7.1 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 labelling) 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.

CHAPTER 8: DISPUTE SETTLEMENT

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In 1994, the WTO members agreed on the Understanding on Rules and Procedures

Governing the Settlement of Disputes (DSU) annexed to the "Final Act" signed in Marrakesh

in 1994. Dispute settlement is regarded by the WTO as the central pillar of the multilateral

trading system, and as a "unique contribution to the stability of the global economy". WTO

members have agreed that, if they believe fellow-members are violating trade rules, they will

use the multilateral system of settling disputes instead of taking action unilaterally.

The operation of the WTO dispute settlement process involves the DSB panels, the Appellate

Body, the WTO Secretariat, arbitrators, independent experts and several specialized

institutions. Bodies involved in the dispute settlement process, World Trade Organization.

The Dispute Settlement Mechanism

The Dispute Settlement Mechanism (DSM) is a quasi-judicial system for resolving trade

disputes. The Dispute Settlement Body (DSB) can authorize trade retaliation measures, or

‘suspension of concessions’ in WTO jargon if Members do not comply with DSM panel or

Appellate Body rulings. This particular enforcement mechanism of the WTO regime, though

a last resort, remains unique among international tribunals.

The DSB is composed of all WTO Members. Its functions are:

to establish panels which examine the case in dispute

to appoint the members of the standing Appellate Body

to adopt reports of panels and the Appellate Body (the body which deals with appeals)

to monitor implementation of rulings and recommendations

to authorize sanctions or retaliation measures under the WTO agreements

to adjudicate cases on textiles and clothing if they are not resolved by the Textiles

Monitoring Body (TMB), the only other WTO body dealing with disputes

The WTO dispute settlement mechanism is arguably more efficient and effective than almost

any other international tribunal dealing with non-criminal matters. The DSM sets clear

timeframes for different stages in resolving trade disputes among Members, which avoids

cases dragging on for a long time. It usually takes between 12 to 18 months to settle a

dispute, but the application of rulings often takes longer.

The system nevertheless seems slow to traders, especially when the disputed measures are

temporary in nature. For example, the US decision to impose temporary (for three years)

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higher tariffs on certain steel products triggered a dispute case in March 2002. By the time

the DSB made a final decision in December 2003 that the measures were illegal, the higher

tariffs had been in place for 19 months, long enough for significant harm to have been caused

to countries and companies exporting steel to the US. It is also worth noting that dispute

complaints are typically filed at the request of business interests, who usually seek their own

– expensive – legal advice before turning to their government to request it to take up their

case.

The mechanism applies to all WTO agreements, and can cover plurilateral agreements as

well, should parties to these agreements so decide. It applies only to WTO agreements: a

Member can only turn to the DSM for resolution of a dispute concerning a WTO rule. The

DSM will therefore only rule on other matters, such as environmental policy, human rights or

social questions, if these arise in a dispute concerning a WTO rule, as was the case in the

Shrimp-Turtle dispute.

The Shrimp-Turtle Case

Nevertheless, the concern remains that the broad reach of WTO rules and their implications

for a wide array of domestic policies makes the DSM a particular threat because it ensures

strong enforcement of rules designed to favour trade liberalization, rather than to promote

well-being or respect for human rights.

CHAPTER 9:India’s role in forming WTO

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When the Uruguay round of GATT talks was in progress during early 1990s, Indian economy

was ailing and was totally out of track. Under this compelling situation, India adopted new

economic reforms (NERS) in 1991 based on Rao-Manmohan Model as a crisis driven

strategy. Macro Economic Stabilization (MES) which covered reforms in monetary policy,

fiscal policy and external sector was brought to provide immediate relief to ailing economy.

But, structural reforms, also called SAP(Structural Adjustment Programmes), was meant for

long term reform process which covered components of industrial policy reform, PSU

reform, financial sector reform and trade & capital flow reforms. Then crisis-driven reforms

has now reached to consensus driven under second generation of our reform policies. These

changes in Indian economy based on LPG gave rise to a new market economy that brought

growth and development in India. In this context, the emergence of WTO as multilateral trade

body to make trade friendly environment at the global level and Indian attachment to this

body could be understood.

India one of the founder member of WTO, had its own expectations as well as reservations

about the new economic order. While it unleashed great opportunities for agriculture and

textiles sectors by improving their access to developed countries (as provided by AoA-

Agreement on Agriculture and phasing out of MFA- Multi Fiber Agreement), it has some

grey areas in the form of provisions for patent regime and services sector. As the events

gradually unfolded, India, like other developing countries recognized that the rules of the

game were not favorable to them and they must play on active role within the permissible

limits to minimize the damage. In the last decade, our economic agenda and the policies to be

pursued have been largely shaped by the WTO commitments.

India adopted the process of globalization and WTO rulings as a facet of structural reforms. It

brought devaluation in currency in 1991 and also adopted convertibility system in Indian

rupees in different stages. Trade and current account have been made fully convertibility

regime, though cautious and as a long term objective. Various steps have been taken towards

import liberalization in India, for example, de-licensing, de-canalization &expansion of OGL

(open general license),removing quantitative restriction, lowering peak custom rate, etc,.

India has also adopted a very liberal policy towards foreign capital to attract direct foreign

investment and portfolio investment. Insurance and print media have been opened for private

competition. India has made following changes in the economy as mandated by WTO.

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Quantitative restrictions have been completely phased out in 2000-01 and only the

tariff structure remains which itself has been lowered considerably, with 67% of the

tariff lines being bound.

Patent law has been reformed with amendment of Patent act (2006). It provides for

product patent in pharmaceutical and farm products.

Under the TRIMS agreement, restrictions on entry of foreign investment and

conditions upon various aspects have been removed and relaxed. Except a few

sectors, FDI is being allowed upto 100% though automatic route and Indian

companies are also free to invest abroad.

Under the GATS (General Agreement on Trade in Services), India has made

commitment in 33 activities where Foreign Service providers are allowed to enter

keeping in view national interests.

India’s legislation on Custom Valuation rules, 1998 has been amended to bring it in

conformity with the provisions of WTO agreements on implementation of article VII

of GATT 1994 and the Customs Valuation Agreement.

A survey of last 15 years since adoption of new economic reforms and especially after

joining WTO, it is now clear that we have done well and still a lot of scope remained for

further development. The process of globalization and the provision of WTO have had, no

doubt, some important positive implications. Under this process, a platform has been created

for different types of multilateral agreements. Multilateral regulation and discipline have been

established & imposed and up to certain extent, trade friendly environment has been created.

Disputes are being solved & managed and trading activities are getting protection. India is

also getting the benefits of this emerging trade friendly environment.

Indian exports, especially exports of agricultural good, have been increased. The Doha

development Agenda, though passing through hard times; is built on the long term objective

of the AOA to establish a fair and a market oriented trading system. India could be highly

advantaged with DDA. During the ongoing negotiations, India and other developing

countries have sought a special safeguard mechanism (SSM) for addressing situations of

import surges or swings in international prices of agricultural products. Other measures

concerning developing countries in the WTO agreements include:

Extra time for developing countries to fulfill their commitments (in many of the WTO

agreements)

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Provisions designed to increase developing countries’ trading opportunities through

greater market access (e.g. in textiles, services, technical barriers to trade)

Provisions requiring WTO members to safeguard the interests of developing countries

when adopting some domestic or international measures (e.g. in anti-dumping,

safeguards, technical barriers to trade)

Provisions for various means of helping developing countries (e.g. to deal with

commitments on animal and plant health standards, technical standards, and in

strengthening their domestic telecommunications sectors).

The WTO agreements, which were the outcome of the 1986–94 Uruguay Round of trade

negotiations, provide numerous opportunities for developing countries to make gains. Further

liberalization through the Doha Agenda negotiations aims to improve the opportunities.

Among the gains are export opportunities. They include:

Fundamental reforms in agricultural trade

Phasing out quotas on developing countries’ exports of textiles and clothing

Reductions in customs duties on industrial products

Expanding the number of products whose customs duty rates are “bound” under the

WTO, making the rates difficult to raise

Phasing out bilateral agreements to restrict traded quantities of certain goods—these

“grey area” measures (the so-called voluntary export restraints) are not really

recognized under GATT-WTO.

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World Trade Statistics

The WTO Secretariat and its predecessor – the General Agreement on Tariffs and Trade

(GATT) Secretariat – have been providing trade statistics since 1948. These data have been

regularly published in annual reports, which have changed in design and coverage over the

years to keep up with the changing needs of users of the reports.

Volume of world merchandise exports 1990-2011

Source: WTO Secretariat

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CONCLUSION

The world has changed a good deal over those six decades and so too has the multilateral

trading system. Globalization has brought economic interaction among nations closer than

ever before, thanks in no small part to revolutions in information and transport technology

and growing openness in government policy. The trend towards increased inter-dependency

has rendered international economic co-operation more complex and multi-faceted. Co-

operation among nations has become harder to manage and more influential in shaping the

circumstances in which people live. The subject matter covered by the system has expanded

significantly and many more players are involved in shaping the system. The 23 original

signatories of the GATT have now become the 151 Members of the WTO.

Governments embrace varying objectives at different times, reflecting, among other things,

the relative standing of their economies in the international order, and the priorities imposed

by their level of economic development. By demonstrating the sheer heterogeneity of

interests at stake, the report highlights the fragile and incomplete nature of cooperative

endeavors in a changing and uncertain world – in other words, the continuing challenge of

shaping and maintaining mutually advantageous co-operative arrangements. Effective co-

operation among diverse economies with differing priorities requires clarity of thought and

foresight, as well as a willingness to seek accommodation. A failure to secure co-operative

outcomes may well disadvantage all parties to a potential agreement in one way or another,

but deals can nevertheless prove elusive. An additional requirement for sustainable and stable

co-operation is that governments find ways of addressing adjustment costs and the re-

distributional impact of change – in other words, of managing the challenges of globalization.

Adjustment and income distribution have not been explored here, and they pose challenges

that go well beyond the impact of trade policy changes in an economy.

An historical review of trade relations prior to the establishment of the GATT/WTO strongly

points to the importance of building and sustaining institutional arrangements to underwrite

international trade relations. International institutions can become moribund, with shrinking

relevance, if governments do not take care of them, and institutional decline will likely be

harder to reverse the further it goes. At the same time, it has been repeatedly demonstrated

that if institutions do not adapt to change, they will wither,

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BIBILOGRAPHY

A) Reference Books:-

• AUTHOR'S NAME:-Johnson & Mascarenhas

• TITLE OF BOOK :-Economics of Global Trade and Finance

•PUBLICATION:-Manan Prakashan

B) JOURNALS- Budget news – 1st March 2007

C) E-DATA:-

https://www.google.com/doc/27499678/Fiscal-Policy-of-India

https://doc/47578785/Role-of-Moenetary-and-Fiscal-policies-in-Economic-

DevelopmentBIBLIOGRAPHY

www.wto.org

www.britannica.com

en.wikipedia.org

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http://en.wikipedia.org/

Final Projet Sem3

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