World Trade Organization | WTO UPSC Notes

About WTO

The World Trade Organization is an intergovernmental organization that regulates international trade. The World Trade Organization was officially commenced on 1 January 1995 under the Marrakesh Agreement, signed by 123 nations on 15 April 1994, replacing the General Agreement on Tariffs and Trade (GATT), which commenced in 1948. The WTO deals with regulation of trade between participating countries by providing a framework for negotiating trade agreements and a dispute resolution process aimed at enforcing participants’ adherence to World Trade Organization agreements, which are signed by representatives of member governments and ratified by their parliaments.

Location: Geneva, Switzerland
Established:  1 January 1995
Membership: 164 countries on 29 July 2016 

 The WTO’s main activities are:

  • Negotiating the reduction or elimination of obstacles to trade (import tariffs, other barriers to trade) and agreeing on rules governing the conduct of international trade (e.g. antidumping, subsidies, product standards, etc.)
  • Administering and monitoring the application of the WTO’s agreed rules for trade in goods, trade in services, and trade-related intellectual property right.
  • Monitoring and reviewing the trade policies of our members, as well as ensuring transparency of regional and bilateral trade agreements.
  • Settling disputes among our members regarding the interpretation and application of the agreements .
  • Building capacity of developing country government officials in international trade matters
    assisting the process of accession of some 30 countries who are not yet members of the organization .
  • Conducting economic research and collecting and disseminating trade data in support of the WTO’s other main activities.
  • Explaining to and educating the public about the WTO, its mission and its activities.

Principles of Trading System Non-discrimination:  It has two major components: the Most Favoured Nation (MFN) rule, and the national treatment policy. 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 favourable 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. This 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.

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.

Binding and enforceable commitments:  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.

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.

Criticism of WTO

  • Rich countries are able to maintain high import duties and quotas in certain products, blocking imports from developing countries (e.g., clothing).
  • The increase in non-tariff barriers such as anti-dumping measures allowed against developing countries.
  • The maintenance of high protection of agriculture in developed countries, while developing ones are pressed to open their markets.
  • Many developing countries do not have the capacity to follow the negotiations and participate actively in the Uruguay Round.
  • The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs) agreement, which limits developing countries from utilizing some technology that originates from abroad in their local systems (including medicines and agricultural products).
  • It does not resolve the problem of “informal meetings” whereby industrialized countries negotiate the most important decisions.
  • It does not reduce the de facto inequality which exists between countries with regards to effective and efficient participation in all activities within all WTO bodies.
  • It does not rectify the multiple violations of the general principles of law which affect the dispute settlement mechanism.

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