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 WTOPredecessor of the WTO The GATT 47The 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 functionsAdministers the WTO Agreements and facilitates their operation and implementationProvides a forum for trade negotiations among member states on matters covered by the Agreements and for further liberalisation of trade amongst membersResponsible for the settlement of differences and disputes between membersResponsible for periodic reviews of the trade policies of membersAlso 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 WTONon discrimination- Most Favoured Nation (MFN) and National Treatment obligationsFreer trade negotiations aimed at lowering trade barriersPredictability 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 WTOMinisterial 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 andeconomies in transition.Decision making is by consensus. If consensus is not possible decisionswill 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 bodySettlement of disputes under the DSU1. Consultations, good offices, conciliation and mediation2. Panel proceedings3. 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 WTOThe 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 obligationsTwo main categories of obligationsGeneral 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 ObligationsMFN (Art.2)With respect to any measure covered by this Agreement, each Membershall accord immediately and unconditionally to services and servicesuppliers of any other Member treatment no less favorable than that itaccords 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 rulerequires the prompt publication of general measures, notification ofchanges to/introduction of measures that affect sectors covered byspecific commitments to the Services Council. Also requires theestablishment of national enquiry points.

WTO: Benefits for businessCreation of a stable, rule based, multilateral trading regimeMarket access translates into market opportunitiesThe rule based system creates certain rights of access- Security of accesstariff bindings and disciplines on barriers to trade whether tariff or non tariff. It also provides non discriminatory treatment of products and services.- Stability of accessthe 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 industryExport industryImport industry

The system helps promote peace2. Disputes are handled constructively3. Rules make life easier for all4. Freer trade cuts the costs of living5. It provides more choice of products and qualities6. Trade raises incomes7. Trade stimulates economic growth8. The basic principles make life more efficient9. Governments are shielded from lobbying10. The system encourages good governmentAdvantages of WTO

LIMITATONS

WTOs ChallengesG-7: even with one nation one vote system LDcs have less influenceIncrease in Regional Trade AgreementsDoha Round unresolved Global Recession and Protectionism

For further informationThe WTO Website : www.wto.org

Some related websites of interestOECD www.oecd.orgITC www.intracen.orgWorld Bank www.worldbank.org

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