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Global Trading & WTO

•

Earlier bilateral agreements now multilateralagreements

• Agreements at WTO platform are applicable to all153 nations (2011)

•

WTO replaced GATT on 1/1/1995• WTO promotes free trade among member

nations

• WTO aims at eliminating tariff and non tariff

barriers• WTO agreements covers services also (travel,

banking, insurance, telecom, IT, IT enabledservices)



WTO

• Established on 1 Jan 1995 with 124 members

• Till 2011 there were 153 nations as member

•

It aims at promoting free trade amongmembers

• It is steadily working towards removing tariff

and non tariff barriers like removing importquota, import licensing etc



• WTO is international trade organisation having

set of rules and principles to promote free

trade

• WTO along with IMF and World Bank together

influence world trade

• Eighth ministerial meet of WTO was held in

Dec 2011 at Geneva, Switzerland.



Feature of WTO

•

It aims to promote multilateral trade• It has replaced GATT

• It works for the removal of tariff and non tariff barriers

• It has its own set of rules and regulations andit has a legal status

• Its rules and regulations are applicable to all

its members. If any member doesn’t followthen its complaint can be lodged with disputessettlement body of WTO



• It includes trade in goods, trade in services,

protection of intellectual property rights,

foreign investment etc.

• Unlike IMF and World Bank WTO is not an

agent of United Nations

• All WTO members have equal voting rights

(one country, one vote)

• WTO has huge organizational set up



Objectives of WTO• To implement new world trade agreements

•

To promote multilateral trade• To abolish tariff and non tariff barriers

• To promote world trade in such a manner that it

benefits every member country

• To ensure better share for developing countries

• To remove hurdles in free trading

• To enhance competitiveness among all trading

partners

• To increase level of production and productivity

• Optimum utilization of world resources

• To take steps for the development of poorest nations



Functions of WTO

• Laying down code of conduct for member nationsfor reducing tariff & non tariff barriers

• Implementing its agreements

• Cooperating with IMF and World Bank forformulating world trade policies

• Settlement of trade related disputes amongmember nations

• Reviewing trade related economic policies of member nations

• Acting as forum for trade liberalization



Organizational Structure of WTO

Ministerial

Conference

Committees/Working

Group

Council forTrade in

Goods

Council forTRIPs

Council fortrade in

Services

Council forTRIMs

Tradenegotiation

Committee

Ministerial

Conference

Committees/Working

Group

Council forTrade in

Goods

Council forTRIPs

Council fortrade in

Services

Council forTRIMs

Tradenegotiation

Committee

Trade Policy

Review Body

Disputes

Settlement Body



A) Trade in Agriculture

• Reduction in domestic subsidies

– Subsidy on inputs (Seed, fertilizers, pesticides)

– Subsidy on output (minimum support price)

– WTO has urged member nations to reduce both

subsidies

– Developing nations can give maximum 10% of the

market price of crop as subsidy



Reduction in Export Subsidy

• WTO has asked its member countries to

reduce export subsidy in phased manner

• In 2001 WTO urged its members to abolish all

forms of export subsidy

• In 2005 ministerial conference agreed to

phase out export subsidies by 2013



Improvement in Market Access

•

Reduction in tariff on agricultural products.• WTO has fixed the top limit of tariff on

agricultural produce

•

Country can charge lesser tariff • Non tariff barriers like quota and licensing will

be removed

•Underdeveloped and developing nations canimpose tariff and non tariff barriers if their

balance of payment situation is unfavorable



Public Distribution System

• Distributing food grains by govt. at

concessional rates

• PDS is aimed at people living below the

poverty line

• WTO urged developed nations to abolish

subsidy on food grains in their PDS

• Developing nations can give this subsidy in

order to provide food security to poor people



Safeguard Mechanism

• The interest of developing countries has been

kept safe under safeguard mechanism

• This mechanism can be applied for three years

• Developing nations are allowed to impose

tariff and non tariff measures if imports are

threat to domestic industry



TRIPs (Trade Related Intellectual Property Rights)

• Related to copyrights, trade marks, patents

• This is to protect the rights of original inventor

•

Anyone who wants to use patent can do it bypaying royalty

• Underdeveloped countries who don’t have

patent rules must enact by 2005

• Plants can not be patented



• Sui Generis system

– Plants breeders have exclusive rights over the new

plant breeds – It allows farmer to retain the seed from their

cultivated crop for using as seed in their own farm

– Commercial sale of these seeds can be done by

only the plant breeders – Life of Patents has been fixed as follows

General Patents 20 yrs

Copyrights 50 yrs

Trademarks 7 yrs

Industrial Designs 10 yrs

Medicines 10 yrs



TRIMs (Trade Related Investment Measures)

• It tries to ensure free flow of investment all overthe world

• It will help underdeveloped nations by providingnecessary capital through foreign investment

• It aims at

– Fair treatment to all foreign investors at par withdomestic investors

–

To remove restriction on repatriation of dividend,interest and royalty to the parent country

– To allow 100% foreign equity participation in certaincases



General agreement on

Trade in Services

• First multilateral agreements in services

• It provides for free flow of services throughout

member nations

• The agreement covers all type of services like

Insurance, Travel & tourism, hotel, banking,

shipping, telecom, media, business

outsourcing etc• Treatment of foreign services at par with

domestic services



Dispute Settlement

• WTO has setup dispute settlement body (DSB)

• DSB consults parties under dispute

• Director General of WTO acts as mediator for the

settlement of dispute

• DSB can constitute a panel to listen to all parties

• Panel has to give its report within 6 months

• In case of urgency report can be asked for in 3

months

• DSB will take final decision on the basis of report

within 30 days



Agreement on Export Subsidies

• WTO prohibits export subsidies to promote

free and fair global competition

• Export subsidies will be eliminated by 2013

• Developing nations can give export subsidies

till 2018

• Only those countries can give export subsidy

whose share in world trade is less than 3.25 %



Anti Dumping Agreements

• Dumping is a practice exporting product at

unreasonably low price• Intention of the exporter is to damage the domestic

industry and later charge higher prices

• No country is allowed to dump its surplus output in

other nation

• If volume of dumped imports from a particular

country is less than 1% of domestic market sale of

that product, then this dumping will be treated asinsignificant

• In seventh ministerial meet in 2009 various safeguard

mechanism have been provided to check dumping



Reviewing Trade Policies of

Member Nations

• WTO provides for a Trade Policy Review Body

• It regularly examines the economic and tradepolicies of member nations

• Trade policy for four major traders (EuropeanUnion, US, Japan and Canada) is reviewedevery 2 years

•Every member has to report to TPRB regularlyabout the trade policies and practices pursuedby it.

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