2009

WORLD TRADE
ORGANISATION
GOODS AND BADS

ASHWANI KUMAR SHUKLA

UNIVERSITY OF LUCKNOW
9/30/2009
ASHWANI KR. SHUKLA

BMS III SEMESTER

IMS, SITAPUR ROAD
UNIVERSITY OF LUCKNOW

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 INTRODUCTION

Formation January 1, 1995

Headquarters Centre William Rappard, Geneva, Switzerland

Membership 153 member states

Official languages English, French, Spanish

Director-General Pascal Lamy

189 million Swiss francs (approx. 182 million

Budget
USD) in 2009.

Staff 625

The world Trade Organization (WTO) is the only international organization dealing with the
global rules of trade between nations.

The WTO has 153 members, representing more than 95% of total world trade and 30
observers, most seeking membership. The WTO is governed by a ministerial conference,
meeting every two years; a general council, which implements the conference's policy decisions
and is responsible for day-to-day administration; and a director-general, who is appointed by
the ministerial conference. The WTO's headquarters is at the Centre William Rappard, Geneva,
Switzerland.

What is the World Trade Organization?

Simply put: the World Trade Organization (WTO) deals with the rules of trade between
nations at a global or near-global level. But there is more to it than that.
There are a number of ways of looking at the WTO. It’s an organization for liberalizing
trade. It’s a forum for governments to negotiate trade agreements. It’s a place for them to
settle trade disputes. It operates a system of trade rules. (But it’s not Superman, just in case
anyone thought it could solve — or cause — all the world’s problems!)
Essentially, the WTO is a place where member governments go, to try to sort out the trade
problems they face with each other. The first step is to talk. The WTO was born out of
negotiations, and everything the WTO does is the result of negotiations. The bulk of the WTO’s
current work comes from the 1986–94 negotiations called the Uruguay Round and earlier
negotiations under the General Agreement on Tariffs and Trade (GATT). The WTO is currently
the host to new negotiations, under the “Doha Development Agenda” launched in 2001.
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 1. HISTORY

The World Trade Organization came into being in 1995. One of the youngest of the
international organizations, the WTO is the successor to the General Agreement on Tariffs and
Trade (GATT) established in the wake of the Second World War.
So while the WTO is still young, the multilateral trading system that was originally set up under
GATT is well over 50 years old.
The past 50 years have seen an exceptional growth in world trade. Merchandise exports
grew on average by 6% annually. Total trade in 2000 was 22-times the level of 1950. GATT and
the WTO have helped to create a strong and prosperous trading system contributing to
unprecedented growth.
Harry Dexter White (l) and John Maynard Keynes at the Bretton Woods Conference – Both
economists had been strong advocates of a liberal international trade environment, and
recommended the establishment of three institutions: the IMF (fiscal and monetary issues), the
World Bank (financial and structural issues), and the ITO (international economic cooperation).

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 United States and a few
other signatories and never went into effect.

I. Uruguay Round

During the Doha Round, the US government blamed Brazil and India for being inflexible, and
the EU for impeding agricultural imports.[16] The President of Brazil, Luiz Inácio Lula da Silva,
responded to the criticisms by arguing that progress would only be achieved if the richest
countries (especially the US and countries in the EU) make deeper cuts in their agricultural
subsidies, and further open their markets for agricultural goods.

Well before GATT's 40th anniversary, its members concluded that the GATT system was
straining to adapt to a new globalizing world economy. In response to the problems identified in
the 1982 Ministerial Declaration (structural deficiencies, spill-over impacts of certain countries'
policies on world trade GATT could not manage etc.), the eighth GATT round — known as the
Uruguay Round — was launched in September 1986, in Punta del Este, Uruguay. It was the
biggest negotiating mandate on trade ever agreed: the talks were going to extend the trading
system into several new areas, notably trade in services and intellectual property, and to reform
trade in the sensitive sectors of agriculture and textiles; all the original GATT articles were up
for review.

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 The Final Act concluding the Uruguay Round and officially establishing the WTO regime was
signed during the April 1994 ministerial meeting at Marrakesh, Morocco, and hence is known as
the Marrakesh Agreement. The GATT still exists as the WTO's umbrella treaty for trade in
goods, updated as a result of the Uruguay Round negotiations (a distinction is made between
GATT 1994, the updated parts of GATT, and GATT 1947, the original agreement which is still
the heart of GATT 1994). GATT 1994 is not however the only legally binding agreement
included via the Final Act at Marrakesh; a long list of about 60 agreements, annexes, decisions
and understandings was adopted. The agreements fall into a structure with six main parts:

 The Agreement Establishing the WTO

 Goods and investment — the Multilateral Agreements on Trade in Goods including the
GATT 1994 and the Trade Related Investment Measures
 Services — the General Agreement on Trade in Services
 Intellectual property — the Agreement on Trade-Related Aspects of Intellectual Property
Rights (TRIPS)
 Dispute settlement (DSU)
 Reviews of governments' trade policies (TPRM)

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 2. PrinciPles of the trading system
The WTO agreements are lengthy and complex because they are legal texts covering a wide
range of activities. They deal with: agriculture, textiles and clothing, banking,
telecommunications, government purchases, industrial standards and product safety, food
sanitation regulations, intellectual property, and much more. But a number of simple,
fundamental principles run throughout all of these documents. These principles are the
foundation of the multilateral trading system.

A closer look at these principles:

I. Trade without discrimination

1. Most-favored-nation (MFN): treating other people equally

Under the WTO
agreements, countries cannot normally discriminate between their trading partners. Grant
someone a special favor (such as a lower customs duty rate for one of their products) and you
have to do the same for all other WTO members.
This principle is known as most-favored-nation (MFN) treatment. It is so important that it
is the first article of the General Agreement on Tariffs and Trade (GATT), which governs trade
in goods.

2. National treatment: Treating foreigners and locals equally

Imported and locally
produced goods should be treated equally — at least after the foreign goods have entered the
market. The same should apply to foreign and domestic services, and to foreign and local
trademarks, copyrights and patents. This principle of “national treatment” (giving others the
same treatment as one’s own nationals) is also found in all the three main WTO agreements
(Article 3 of GATT, Article 17 of GATS and Article 3 of TRIPS), although once again the principle
is handled slightly differently in each of these.

II. Freer trade: gradually, through negotiation

Lowering trade barriers is one of the most obvious means of encouraging trade. The
barriers concerned include customs duties (or tariffs) and measures such as import bans or
quotas that restrict quantities selectively. From time to time other issues such as red tape and
exchange rate policies have also been discussed.

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 Since GATT’s creation in 1947–48 there have been eight rounds of trade negotiations. A
ninth round, under the Doha Development Agenda, is now underway. At first these focused on
lowering tariffs (customs duties) on imported goods. As a result of the negotiations, by the mid-
1990s industrial countries’ tariff rates on industrial goods had fallen steadily to less than 4%
But by the 1980s, the negotiations had expanded to cover non-tariff barriers on goods, and to
the new areas such as services and intellectual property.
Opening markets can be beneficial, but it also requires adjustment. The WTO agreements
allow countries to introduce changes gradually, through “progressive liberalization”. Developing
countries are usually given longer to fulfill their obligations.

III. 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.

IV. 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 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.

V. Safety Valves

In specific circumstances, governments are able to restrict trade. There are three types of
provisions in this direction: articles allowing for the use of trade measures to attain
noneconomic objectives; articles aimed at ensuring "fair competition"; and 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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 3. WTO AGREEMENTS

The WTO’s rules – the agreements – are the result of negotiations between the members.
The current set were the outcome of the 1986-94 Uruguay Round negotiations which included a
major revision of the original General Agreement on Tariffs and Trade (GATT).

GATT is now the WTO’s principal rule-book for trade in goods. The Uruguay Round also
created new rules for dealing with trade in services, relevant aspects of intellectual property,
dispute settlement, and trade policy reviews. The complete set runs to some
30,000 pages consisting of about 30 agreements and separate commitments (called schedules)
made by individual members in specific areas such as lower customs duty rates and services
market-opening.

The table of contents of “The Results of the Uruguay Round of Multilateral Trade
Negotiations: The Legal Texts” is a daunting list of about 60 agreements, annexes, decisions
and understandings. In fact, the agreements fall into a simple structure with six main parts: an
umbrella agreement (the Agreement Establishing the WTO); agreements for each of the three
broad areas of trade that the WTO covers (goods, services and intellectual property); dispute
settlement; and reviews of governments’ trade policies.
The agreements for the two largest areas — goods and services — share a common three-
part outline, even though the detail is sometimes quite different.

• They start with broad principles: the General Agreement on Tariffs and trade (GATT) (for
goods), and the General Agreement on Trade in Services (GATT) (The third area, Trade-Related
Aspects of Intellectual Property Rights (TRIPS), also falls into this category although at present
it has no additional parts.)

• Then come extra agreements and annexes dealing with the special requirements of specific
sectors or issues.

• Finally, there are the detailed and lengthy schedules (or lists) of commitments made by
individual countries allowing specific foreign products or service providers access to their
markets. For GATT, these take the form of binding commitments on tariffs for goods in general,
and combinations of tariffs and quotas for some agricultural goods. For GATS, the commitments
state how much access foreign service providers are allowed for specific sectors, and they
include lists of types of services where individual countries say they are not applying the “most-
favored-nation” principle of non-discrimination.

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A. Tariffs: more bindings and closer to zero

The bulkiest results of Uruguay Round are the 22,500 pages listing individual countries’
commitments on specific categories of goods and services. These include commitments to cut
and “bind” their customs duty rates on imports of goods. In some cases, tariffs are being cut to
zero. There is also a significant increase in the number of “bound” tariffs — duty rates that are
committed in the WTO and are difficult to rise.
Developed countries’ tariff cuts were for the most part phased in over five years from 1
January 1995. The result is a 40% cut in their tariffs on industrial products, from an average of
6.3% to 3.8%. The value of imported industrial products that receive duty-free treatment in
developed countries will jump from 20% to 44%.
There will also be fewer products charged high duty rates. The proportion of imports into
developed countries from all sources facing tariffs rates of more than 15% will decline from 7%
to 5%. The proportion of developing country exports facing tariffs above 15% in industrial
countries will fall from 9% to 5%.
The Uruguay Round package has been improved. On 26 March 1997, 40 countries
accounting for more than 92% of world trade in information technology products, agreed to
eliminate import duties and other charges on these products by 2000 (by 2005 in a handful of
cases). As with other tariff commitments, each participating country is applying its
commitments equally to exports from all WTO members (i.e. on a most favored - nation basis),
even from members that did not make commitments.

B. Agriculture: fairer markets for farmers

The original GATT did apply to agricultural trade, but it contained loopholes. For example, it
allowed countries to use some non-tariff measures such as import quotas, and to subsidize.
Agricultural trade became highly distorted, especially with the use of export subsidies which
would not normally have been allowed for industrial products. The Uruguay Round produced
the first multilateral agreement dedicated to the sector. It was a significant first step towards
order, fair competition and a less distorted sector. It was implemented over a six-year period
(and is still being implemented by developing countries under their 10-year period), that began
in 1995. The Uruguay Round agreement included a commitment to continue the reform through
new negotiations. These were launched in 2000, as required by the Agriculture Agreement.

C. Standards and safety

General Agreement on Tariffs and Trade (GATT) allows governments to act on trade in
order to protect human, animal or plant life or health, provided they do not discriminate or use
this as disguised protectionism. In addition, there are two specific WTO agreements dealing
with food safety and animal and plant health and safety and with product standards in general.
Both try to identify how to meet the need to apply standards and at the same time avoid
protectionism in disguise. These issues are becoming more important as tariff barriers fall —
some compare this to seabed rocks appearing when the tide goes down. In both cases, if a
country applies international standards, it is less likely to be challenged legally in the WTO than
if it sets its own standards.

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D. Textiles: back in the mainstream

Textiles, like agriculture, were one of the hardest-fought issues in the WTO, as it was in the
former GATT system. It has now completed fundamental change under a 10-year schedule
agreed in the Uruguay Round. The system of import quotas that dominated the trade since the
early 1960s has now been phased out.
From 1974 until the end of the Uruguay Round, the trade was governed by the Multifibre
Arrangement (MFA). This was a framework for bilateral agreements or unilateral actions that
established quotas limiting imports into countries whose domestic industries were facing serious
damage from rapidly increasing imports.
Since 1995, the WTO’s Agreement on Textiles and Clothing (ATC) took over from the
Multifibre Arrangement. By 1 January 2005, the sector was fully integrated into normal GATT
rules. In particular, the quotas came to an end, and importing countries are no longer able to
discriminate between exporters. The Agreement on Textiles and Clothing no longer exists: it’s
the only WTO agreement that had self-destruction built in.

E. Services: rules for growth and investment

Services represent the fastest growing sector of the global economy and account for two
thirds of global output, one third of global employment and nearly 20% of global trade. When
the idea of bringing rules on services into the multilateral trading system was floated in the
early to mid 1980s, a number of countries were skeptical and even opposed. They believed
such an agreement could undermine governments’ ability to pursue national policy objectives
and constrain their regulatory powers. The agreement that was developed, however, allows a
high degree of flexibility, both within the framework of rules and also in terms of the market
access commitments.

F. Intellectual property: protection and enforcement

The WTO’s Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS),

negotiated in the 1986 –94 Uruguay Round, introduced intellectual property rules into the
multilateral trading system for the first time.
The WTO’s TRIPS Agreement is an attempt to narrow the gaps in the way these rights are
protected around the world, and to bring them under common international rules. It establishes
minimum levels of protection that each government has to give to the intellectual property of
fellow WTO members. In doing so, it strikes a balance between the long term benefits and
possible short term costs to society. Society benefits in the long term when intellectual property
protection encourages creation and invention, especially when the period of protection expires
and the creations and inventions enter the public domain. Governments are allowed to reduce
any short term costs through various exceptions.
The agreement covers five broad issues:
• How basic principles of the trading system and other international intellectual property
agreements should be applied,
• How to give adequate protection to intellectual property rights,
• How countries should enforce those rights adequately in their own territories,
• How to settle disputes on intellectual property between members of the WTO,
• Special transitional arrangements during the period when the new system is being introduced.

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 1. How to protect intellectual property: common ground-rules:

The second part of the TRIPS agreement looks at different kinds of intellectual property
rights and how to protect them. The purpose is to ensure that adequate standards of protection
exist in all member countries. Here the starting point is the obligations of the main international
agreements of the World Intellectual Property Organization (WIPO) that already existed before
the WTO was created:
 The Paris Convention for the Protection of Industrial Property (patents, industrial
designs, etc)
 The Berne Convention for the Protection of Literary and Artistic Works (copyright).

Some areas are not covered by these conventions. In some cases, the standards of protection
prescribed were thought inadequate. So the TRIPS agreement adds a significant number of new
or higher standards.

I. Copyright :
The TRIPS agreement ensures that computer programs will be protected as
literary works under the Berne Convention and outlines how databases should be protected. It
also expands international copyright rules to cover rental rights. Authors of computer programs
and producers of sound recordings must have the right to prohibit the commercial rental of
their works to the public. A similar exclusive right applies to films where commercial rental has
led to widespread copying, affecting copyright owners’ potential earnings from their films.
The agreement says performers must also have the right to prevent unauthorized recording,
reproduction and broadcast of live performances (bootlegging) for no less than 50 years.
Producers of sound recordings must have the right to prevent the unauthorized reproduction of
recordings for a period of 50 years.

II. Trademarks :
The agreement defines what types of signs must be eligible for
protection as trademarks, and what the minimum rights conferred on their owners must be. It
says that service marks must be protected in the same way as trademarks used for goods.
Marks that have become well-known in a particular country enjoy additional protection.

III. Geographical indications :

A place name is sometimes used to identify a product.
This “geographical indication” does not only say where the product was made. More importantly
it identifies the products special characteristics, which are the result of the product’s origins.
Well-known examples include “Champagne”, “Scotch”, “Tequila”, and “Roquefort” cheese.
Wine and spirits makers are particularly concerned about the use of place names to identify
products, and the TRIPS Agreement contains special provisions for these products. But the
issue is also important for other types of goods.
Using the place name when the product was made elsewhere or when it does not have the
usual characteristics can mislead consumers, and it can lead to unfair competition. The TRIPS
Agreement says countries have to prevent this misuse of place names.

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IV. Industrial designs :
Under the TRIPS Agreement, industrial designs must be protected for
at least 10 years. Owners of protected designs must be able to prevent the manufacture,
sale or importation of articles bearing or embodying a design which is a copy of the
protected design.

V. Patents :
The agreement says patent protection must be available for inventions for at least 20
years. Patent protection must be available for both products and processes, in almost all fields
of technology. Governments can refuse to issue a patent for an invention if its commercial
exploitation is prohibited for reasons of public order or morality. They can also exclude
diagnostic, therapeutic and surgical methods, plants and animals (other than microorganisms),
and biological processes for the production of plants or animals (other than microbiological
processes).

G. Anti-dumping, subsidies, safeguards: contingencies, etc

Binding tariffs and applying them equally to all trading partners (most-favored nation
treatment, or MFN) are key to the smooth flow of trade in goods. The WTO agreements uphold
the principles, but they also allow exceptions — in some circumstances.

Three of these issues are:

• Actions taken against dumping (selling at an unfairly low price)
• Subsidies and special “countervailing” duties to offset the subsidies
• Emergency measures to limit imports temporarily, designed to “safeguard” domestic
industries.

H. Non-tariff barriers: red tape, etc

A number of agreements deal with various bureaucratic or legal issues that could
involve hindrances to trade.
• Import licensing
• Rules for the valuation of goods at customs
• Preshipment inspection: further checks on imports
• Rules of origin: made in ... where?
• Investment measures

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 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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 5. 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. The committee is currently tasked with the
Doha Development Round.

A. Voting system

WTO negotiations proceed not by consensus of all members, but by a process of

informal negotiations between small groups of countries. Such negotiations are often called
"Green Room" negotiations (after the colour of the WTO Director-General's Office in Geneva),
or "Mini-Ministerial", when they occur in other countries. These processes have been regularly
criticized by many of the WTO's developing country members which are often totally excluded
from the negotiations.

B. Members and observers

The WTO has 153 members (almost all of the 123 nations participating in the Uruguay
Round signed on at its foundation, and the rest had to get membership). The 27 states of the
European Union are represented also as the European Communities. 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 (ROC)
(commonly known as Taiwan, whose sovereignty has been disputed by the People's Republic of
China) acceded to the WTO in 2002 under the name of "Separate Customs Territory of Taiwan,
Penghu, Kinmen and Matsu" (Chinese Taipei). A number of non-members (30) are observers at
WTO proceedings and are currently negotiating their membership. As observers, Iran, Iraq and
Russia are not yet members. With the exception of the Holy See, observers must start
accession negotiations within five years of becoming observers. Some international
intergovernmental organizations are also granted observer status to WTO bodies. 14 states and
2 territories so far have no official interaction with the WTO.

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C. Ministerial conferences

a. The inaugural ministerial conference was held in Singapore in 1996.

Disagreements between largely developed and developing economies emerged
during this conference over four issues initiated by this conference, which led to
them being collectively referred to as the "Singapore issues".
b. The second ministerial conference Was held in Geneva in Switzerland.
c. The third conference in Seattle, Washington ended in failure, with massive
demonstrations and police and National Guard crowd control efforts drawing
worldwide attention.
d. Fourth ministerial conference was held in Doha in Persian Gulf nation of
Qatar. The Doha Development Round was launched at the conference. The
conference also approved the joining of China, which became the 143rd member
to join.
e. The Fifth ministerial conference was held in Cancún, Mexico, aiming at
forging agreement on the Doha round. An alliance of 22 southern states, the G20
developing nations (led by India, China and Brazil), resisted demands from the
North for agreements on the so-called "Singapore issues" and called for an end
to agricultural subsidies within the EU and the US. The talks broke down without
progress.
f. The sixth WTO ministerial conference was held in Hong Kong from 13
December – 18 December 2005. It was considered vital if the four-year-old Doha
Development Agenda negotiations were to move forward sufficiently to conclude
the round in 2006. In this meeting, countries agreed to phase out all their
agricultural export subsidies by the end of 2013, and terminate any cotton export
subsidies by the end of 2006. Further concessions to developing countries
included an agreement to introduce duty free, tariff free access for goods from
the Least Developed Countries, following the Everything But Arms initiative of
the European Union — but with up to 3% of tariff lines exempted. Other major
issues were left for further negotiation to be completed by the end of 2010
g. The WTO General Council, on 26 May 2009, agreed to hold a seventh WTO
ministerial conference session in Geneva from 30 November–December 2009.
A statement by chairman Amb. Mario Matus acknowledged that the prime
purpose was to remedy a breach of protocol requiring two-yearly "regular"
meetings, which had lapsed with the Doha Round failure in 2005, and that the
"scaled-down" meeting would not be a negotiating session, but "emphasis will be
on transparency and open discussion rather than on small group processes and
informal negotiating structures"

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 6. BENEFITS OF THE WTO TRADING SYSTEM

1. The system helps to keep the peace

Peace is partly an outcome of two of the most fundamental principles of the trading
system: helping trade to flow smoothly and providing countries with a constructive and fair
outlet for dealing with disputes over trade issues. It is also an outcome of the international
confidence and cooperation that the system creates and reinforces.

History is littered with examples of trade disputes turning into war. One of the most
vivid is the trade war of the 1930s when countries competed to raise trade barriers in order to
protect domestic producers and retaliate against each others’ barriers. This worsened the Great
Depression and eventually played a part in the outbreak of World War 2.

Two developments immediately after the Second World War helped to avoid a
repeat of the pre-war trade tensions. In Europe, international cooperation developed in coal,
and in iron and steel. Globally, the General Agreement on Tariffs and Trade (GATT) was
created.

The GATT/WTO system is an important confidence builder. The trade wars in the
1930s are proof of how protectionism can easily plunge countries into a situation where no one
wins and everyone loses.
Confidence is the key to avoiding that kind of no-win scenario. When
governments are confident that others will not raise their trade barriers, they will not be
tempted to do the same. They will also be in a much better frame of mind to cooperate with
each other.
The WTO trading system plays a vital role in creating and reinforcing that confidence.
Particularly important are negotiations that lead to agreement by consensus and a focus on
abiding by the rules.

2. The system allows disputes to be handled constructively

There could be a down side to trade liberalization and expansion. More trade means
more opportunities for disputes to arise. Left to themselves, those disputes could lead to serious
conflict. But in reality, a lot of international trade tension is reduced because countries can turn
to organizations, in particular the WTO, to settle their trade disputes.
When they bring disputes to the WTO, the WTO’s procedure focuses their attention
on the rules. Once a ruling has been made, countries concentrate on trying to comply with the
rules, and perhaps later renegotiating the rules—not on declaring war on each other.
Around 300 disputes have been brought to the WTO since it was set up in 1995.
Without a means of tackling these constructively and harmoniously, some could have led to
more serious political conflict.

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3. A system based on rules rather than power Makes life easier for all

Decisions in the WTO are made by consensus. The WTO agreements were
negotiated by all members, were approved by consensus and were ratified in all members’
parliaments. The agreements apply to everyone. Rich and poor countries alike have an equal
right to challenge each other in the WTO’s dispute settlement procedures.
This makes life easier for all, in several different ways. Smaller countries can enjoy
some increased bargaining power. Without a multilateral regime such as the WTO’s system, the
more powerful countries would be freer to impose their will unilaterally on their smaller trading
partners. Smaller countries would have to deal with each of the major economic powers
individually, and would be much less able to resist unwanted pressure.

4. It gives consumers more choice, and a broader range of qualities to choose

from
Think also of the things people in other countries can have because they buy exports
from us and elsewhere. Look around and consider all the things that would disappear if all our
imports were taken away from us. Imports allow us more choice—both more goods and
services to choose from, and a wider range of qualities. Even the quality of locally-produced
goods can improve because of the competition from imports.
The wider choice isn’t simply a question of consumers buying foreign finished products.
Imports are used as materials, components and equipment for local production.
This expands the range of final products and services that are made by domestic
producers, and it increases the range of technologies they can use. When mobile telephone
equipment became available, services sprang up even in the countries that did not make the
equipment, for example.

5. Trade raises incomes

The WTO’s own estimates for the impact of the 1994 Uruguay Round trade deal
were between $109 billion and $510 billion added to world income (depending on the
assumptions of the calculations and allowing for margins of error).
More recent research has produced similar figures. Economists estimate that
cutting trade barriers in agriculture, manufacturing and services by one third would boost the
world economy by $613 billion — equivalent to adding an economy the size of Canada to the
world economy.
So trade clearly boosts incomes. Trade also poses challenges as domestic
producers face competition from imports. But the fact that there is additional income means
that resources are available for governments to redistribute the benefits from those who gain
the most.

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 7. CritiCism
The stated aim of the WTO is to promote free trade and stimulate economic growth. Critics
argue that free trade leads to a divergence instead of convergence of income levels within rich
and poor countries (the rich get richer and the poor get poorer). Martin Khor, Director of the
Third World Network, argues that the WTO does not manage the global economy impartially,
but in its operation has a systematic bias toward rich countries and multinational corporations,
harming smaller countries which have less negotiation power. He argues that developing
countries have not benefited from the WTO agreements of the Uruguay Round because, among
other reasons, market access in industry has not improved; these countries have had no gains
yet from the phasing-out of textile quotas; non-tariff barriers such as anti-dumping measures
have increased; and domestic support and export subsidies for agricultural products in the rich
countries remain high. Jagdish Bhagwati asserts, however, that there is greater tariff protection
on manufacturers in the poor countries, which are also overtaking the rich nations in the
number of anti-dumping filings.

Other critics claim that the issues of labor relations and environment are steadfastly
ignored. Steve Charnovitz, former director of the Global Environment and Trade Study (GETS),
believes that the WTO "should begin to address the link between trade and labor and
environmental concerns." Further, labor unions condemn the labor rights record of developing
countries, arguing that, to the extent the WTO succeeds at promoting globalization, the
environment and labor rights suffer in equal measure. On the other side, Khor responds that "if
environment and labor were to enter the WTO system [...] it would be conceptually difficult to
argue why other social and cultural issues should also not enter." Bhagwati is also critical
towards "rich-country lobbies seeking on imposing their unrelated agendas on trade
agreements." Therefore, both Bhagwati and Arvind Panagariya of Columbia University have
criticized the introduction of TRIPs into the WTO framework, fearing that such non-trade
agendas might overwhelm the organization's function. Other critics have characterized the
decision making in the WTO as complicated, ineffective, unrepresentative and non-inclusive,
and they have proposed the establishment of a small, informal steering committee (a
"consultative board") that can be delegated responsibility for developing consensus on trade
issues among the member countries. The Third World Network has called the WTO "the most
non-transparent of international organizations", because "the vast majority of developing
countries have very little real say in the WTO system"; the Network stresses that "civil society
groups and institutions must be given genuine opportunities to express their views and to
influence the outcome of policies and decisions." Certain non-governmental organizations, such
as the World Federalist Movement, argue that democratic participation in the WTO could be
enhanced through the creation of a parliamentary assembly, although other analysts have
characterized this proposal as ineffective.

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 8. WTO IN CONTEXT OF INDIA

1. Probable advantages

A. Increment in export:
Due to be a member of WTO India is now connected with
other member countries. It is expected that as result of being the member of WTO, Indian
contribution in world trade was increased to 5170 million $ during 2002-03, rather than 2633
million $ during 1994-95. India’s contribution in world export was 0.61% in 1995 which
increased to 0.86% in 2001.
B. Increment in export of textiles:
From 1974 to 1995(formation of WTO) textiles
was operated by Multifibre Arrangement. There was a quota system in this field which has been
abolished by 1995 and textiles is now operated by Agreements on Textiles and Clothing to help
export of clothes and textiles in India.
C. Advantages for services:

According to this agreement Developed Countries will open

the service firms i.e. banks, transports, hotels, etc. in compensation they present a market to
sell Indian products.

D. Availability of foreign products:

GATT agreements provide availability of foreign

products in Indian markets. This helps in buying several foreign products easily and cheaply.

E. Job Chances:

Increment in Indian trade, chances of job has been increased to a great

extent.

2. Probable disadvantages

A. Agriculture:
While India is the member of WTO, there are some disadvantages for
agriculture-
 India has to reduce subsidies which will affect poor formers.
 Reduction in import of many agricultural products by Developed Countries to pretend
environmental conservation.
 The most important thing is that Indians have to buy costly multinational products.
 3% of grain consumption of the country has to import, which affects payment
balance of the country.

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B. Disadvantages of TRIPS:
 There is an extension of patents related to medicines, agriculture, plants and
animals, etc. It will help only Developed Countries having better technologies and
unlimited resources.
 Foreign outsourcing and royalty of patents etc. payments send Indian money
outside which affects payment balance.
 In Developing countries, imports of patented raw materials reduce export.
C. Loss from General Agreement on Trade in Services(GATS):
GATS is favorable for
developed countries because it gives subsidies to those services whose advantage go to
the Developed Countries. Our Banking, Insurance Transports, Education and Hotels etc.
can’t compete with foreign companies. So our domestic Institutions will find an end
and our economical freedom will be lost.
D. Problems in construction of economical policy:
Due to WTO, Developing Countries
have to face problems in construction of free economy and non economic policies as
they have to open their markets for Developed countries.
E. Economical torture:
Freedom to multinational companies for invests in India, will
torture Indian economy. According to GATT agreement MNCs and National Companies
are equal. This agreement will create problem of conservation of industries in our
country.
F. Environmental Issues:
Developed Countries are creating problems to Developing
Countries about environmental issues. These countries are trying to ban the products
which affect environment and wants compensation of these damages from Developing
Countries. The critics say that the 3/4th part of environmental damages are due to
Developed Countries. Developed Countries are creating pressure on us to use new eco –
friendly technologies.
For example: When Indian skirts became famous in U.S.A., they started to spread
rumors about skirts, “they are made of inflammable materials” and they banned it. But
all the rumors proved wrong and ban was removed.

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 9. ConClusion
At the end we can say that WTO agreements are totally failed. The decision of
improvement will be successful when taken by self either it is for person or for country. But our
improvement decisions are those which are imposed on us by foreign powers on the name of
world trade agreement. They are interested only that the doors of developing markets open for
them, they are not interested in improvement of peoples of country, improvement of
agricultural development and in making a strong base for whole economy.

These hopeless results are due to lesser competition power. Developed Countries i.e.
U.S.A. have latest technologies of information and latest instruments and due to these causes
we can’t compete with them where half of the population is illiterate and believing on old
traditions either it is for industries or for agriculture.

Only those agreements will become successful which take place between equal powers.
So a justified agreement can’t take place between richer and poorer and can’t apply those
things. The total export of India is 0.6% of world export. This is a topic of concern, who want
to listen that country whose total contribution in world income and world trade are only 1.2%
and 0.6%.

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