wto project final 1

8/10/2019 Wto Project Final 1

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A STUDY OF FORWARD

EXCHANGE MARKET

THEORY AND

PRACTICE


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CHAPTER NO: - 1. INTRODUCTION

1.1 Back-Ground

Definition of 'F orward Market'

An over-the-counter marketplace that sets the price of a financial

instrument or asset for future delivery. Contracts entered into in the

forward market are binding on the parties involved. Forward

markets are used for trading a range of instruments including

currencies and interest rates, as well as assets such as commodities

and securities.

I nvestopedia explains 'Forward Market'

While forward contracts, like futures contracts, may be may be used

for both hedging and speculation, there are some notable differences

between the two. Forward contracts can be customized to fit a

customer's requirements, while futures contracts have standardized

features in terms of their contract size and maturity.


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The lack of standard features means that forward contracts seldom

trade on exchanges, whereas futures contracts are generally exchange-

listed. Since forward contracts generally tend to be large in size, the

forward market is dominated by financial institutions, government

bodies and large corporations.

Meaning

In the foreign exchange market, forward exchange market

functions side by side with the spot exchange market. The

transactions of spot exchange market are known as spot exchange

and those of the forward exchange market are known as forward

exchange.

The rates at which the foreign exchange is bought and sold in the

spot market are called spot rates and the rates at which the foreign

exchange is bought and sold in the forward market are called

forward rates.


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The spot exchange refers to the foreign exchange transactions

which require immediate delivery or exchange of currencies on the

spot. Normally, the settlement takes place within two days.

A forward exchange involves a purchase or sale of foreign

currency to be delivered at some future date. The rate at which the

transaction is to take place is determined at the time of sale, but the

payment is not made until the exchange is not delivered by the

seller.

The spot rate refers to the rate prevailing at a particular time for

spot delivery of a specified type of foreign exchange.

The forward exchange rate is the rate at which the future contract

for foreign currency is made. With reference to its relationship

with the spot rate, the forward rate may be at par, at a premium or

at a discount.


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(i)When the exchange rate is quoted exactly equivalent to the spot

rate at the time of making the contract, the forward exchange rate

is said to be at par.

(ii)The forward rate is said to be at a premium over the spot rate

when it is quoted higher than the spot rate. Premium implies that

the foreign currency is expensive. One dollar buys more units of

other currency in the forward than in the spot market. The

premium is usually expressed as a percentage deviation from the

spot rate on a per annum basis.

(iii) The forward rate is said to be at a discount with respect to the

spot rate when it is quoted lower than the spot rate. Discount

implies that the foreign currency is cheaper. One dollar buys less

units of other currency in the forward than in the spot market. The

discount is also expressed as a percentage deviation from the spot

rate on a per annum basis.

The forward exchange rate is mostly determined by the demand for

and supply of forward exchange. When the demand for forward


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exchange exceeds its supply, the forward rate will be quoted at a

premium.

When the supply of forward exchange exceeds the demand for it,

the forward rate will be quoted at a discount. When the supply and

demand for forward exchange are equal, the forward rate will tend

to be at par.

1.1 Objective Of The Study

To Get A Knowledge

To Increase a Knowledge

The help full to the economy

And also profitable to indian country

.

1.2 Significant Of the Study

. To increase my Knowledge

. To know the Indian people about wto

. And Indian country political are also know about WTO

. Thats after economic are know about WTO

. And this is very profitable to economic.


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1.4 Problem of Study

. This is secundary data

. This very difficult to put right information

. And this information are ready but very difficult to find out

.And this not sutable to studies

1.5Research of Desire

The study of secondary data

Book, News Paper, Articles, etc, are referred to get the relevant

information.

Data obtain to various sources observation are made and

accordingly conclusion is derived

This study is base on the information available for the time period

etc.


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1.6 Chapter Schemes

Chapter No 1.In this chapter full information about WTO

Chapter No 2.In this chapter efforts are made to review

various research articles of research on WTO.

Chapter No 3.Function and Objective of WTO & Its

various members.

Chapter No 4.Dispute settlement under WTO & Procedure

steps of solve the WTO disputes.

Chapter No 5.Real Dispute Case Study

Chapter No 6.Finding, Conclusion, Suggestion .


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CHAPTER NO:- 2 ARTICLES ON FORWARD

EXCHANGE MARKET

This Articles are take from Economics Times News paper 8-

articles I noted In this project , this are related to FORWARD

EXCHANGE MARKET


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CHAPTER NO:- 3.FUNCTION & OBJECTIVE OF

WTO

Functions of WTO

The former GATT was not really an organisation; it was merely a

legal arrangement. On the other hand, the WTO is a new

international organisation set up as a permanent body. It is

designed to play the role of a watchdog in the spheres of trade in

goods, trade in services, foreign investment, intellectual property

rights, etc. Article III has set out the following five functions of

WTO;

(i) The WTO shall facilitate the implementation, administration

and operation and further the objectives of this Agreement and of

the Multilateral Trade Agreements, and shall also provide theframe work for the implementation, administration and operation

of the plurilateral Trade Agreements.

(ii) The WTO shall provide the forum for negotiations among its

members concerning their multilateral trade relations in matters

dealt with under the Agreement in the Annexes to this Agreement.

(iii) The WTO shall administer the Understanding on Rules and

Procedures Governing the Settlement of Disputes.


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(iv) The WTO shall administer Trade Policy Review Mechanism.

(v) With a view to achieving greater coherence in global economic

policy making, the WTO shall cooperate, as appropriate, with the

international Monetary Fund (IMF) and with the International

Bank for Reconstruction and Development (IBRD) and its

affiliated agencies.

DecisionmakingMost decisionmaking in the WTO follows GATT practices and is

based on consultation and consensus. The consensus practice is of

value to smaller countries, as it enhances their negotiating leverage

in the informal consultations and bargaining that precede

decisionmaking, especially if they are able to form coalitions.

Although recourse to voting may be had if a consensus cannot be

reached, in practice voting occurs only very rarely. If a vote is

needed, it is based on the principle of one member, one vote.

Unanimity is required for amendments relating

to general principles such as MFN or national treatment.

Interpretation of the provisions of the WTO agreements and

decisions on waivers of a members obligations require approval

by a threequarters majority vote A two-thirds majority vote is

sufficient for amendments relating to issues other than the general

principles mentioned above. Where not otherwise specified, and

where consensus cannot be reached, a simple majority vote is, in


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principle, sufficient. In practice, voting does not occur. Indeed, in

1995 WTO members decided not to apply provisions allowing for

a vote in the case of accessions and requests for waivers but to

continue to proceed on the basis of consensus (WT/L/93).

Legislative amendments are also likely to be quite rare, as, in

practice, changes to the various agreements occur as part of

broader multilateral rounds.

Management of the Secretariat and Daily Operations

Unlike the World Bank and the IMF, the WTO does not have an

executive body or a board comprising a subset of members some

of whom represent a number of countries. Such executive boards

facilitate decisionmaking by concentrating discussions within a

smaller but representative group of members.

The closest the GATT ever came to such a forum was the

Consultative Group of Eighteen (CG18), established in 1975. Itceased meeting in 1985 and never substituted for the GATT

Council of Representatives (Blackhurst 1998). As of January 1,

2002, the WTO had a membership of 144. Achieving consensus

among such a large number of members is not a simple matter, and

mechanisms have therefore been developed over the years to

reduce the number of members that are active participants in WTO

deliberations. The first and most important device is to involve

only principals, at least initially. To some extent


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this is a natural process; a country that has no agricultural sector is

unlikely to be interested in discussions

centering on the reduction of agricultural trade barriers. In general

the Quad economiesCanada, the European Union, Japan, and

the United Statesare part of any group that forms to discuss any

topic. They are supplemented by countries that have a principal

supplying interest in a product and by the major (potential)

importers whose policies are the subject of interest. Finally, a

number of countries that have established a reputation as

spokespersons tend to be involved in most major meetings.

Historically, such countries have included Egypt, India, and

Yugoslavia.

Objectives of WTO

Important objectives of WTO are mentioned below:

(i) to implement the new world trade system as visualised in the

Agreement;

(ii) to promote World Trade in a manner that benefits every

country;

(iii) to ensure that developing countries secure a better balance in

the sharing of the advantages resulting from the expansion of

international trade corresponding to their developmental needs;


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(iv) to demolish all hurdles to an open world trading system and

usher in international economic renaissance because the world

trade is an effective instrument to foster economic growth;

(v) to enhance competitiveness among all trading partners so as to

benefit consumers and help in global integration;

(vi) to increase the level of production and productivity with a

view to ensuring level of employment in the world;

(vii) to expand and utilize world resources to the best;

(viii) to improve the level of living for the global population and

speed up economic development of the member nations.


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CHAPTER NO:- 4.DI SPUTE SETTELMENT

UNDER WTO AND ITS STEPS SETTLE THE

DISPUTE.

The WTO Dispute Settlement Mechanism and

Developing Countries

Developing countries need access to foreign markets if they are to

reap the benefits of globalization. Multilateral negotiations underthe World Trade Organization (WTO) play a pivotal role in

facilitating market access. 2 Yet, throughout the global economy,

pressures for protectionism abound, threatening to roll back these

gains.

As a result,the WTOs dispute settlementmechanism is widely

seen as one of the most critical and successful features of the

trade regime. Using this mechanism, WTO member-states can

shine thespotlight of international legal scrutiny on the

protectionist practices of their trading partners. This rule-of-law

system is especially important for developing countries, which

typically lack the market size to exert much influence through

more power-oriented trade diplomacy. Indeed, some poorer

countries have used the WTO dispute settlement system to great

effect, proving the systems worth from a development

perspective.3 Nonetheless, the technical and legal complexity of


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this regime makes it difficult for other developing countries to

effectively use the system, many of which have never filed a WTO

dispute, despite having repeated grounds to do so. In this issues

brief, we elaborate this point by describing: (a) how WTO dispute

settlement works; (b) the prospective benefits and hurdles to

effective use of the regime by developing countries; and (c) some

potential directions for technical assistance and capacity-building,

focusing on WTO dispute settlement, in particular

1. How WTO Dispute Settlement Works

A WTO dispute proceeds through three main stages:

consultation; formal litigation; and, if necessary,

implementation (figure 1). All disputes start with a request for

consultations, in which the member government bringing the

case to the WTO (the complainant) sets out its objections to the

trade measure(s) of another member government (the

defendant). The two sides are then required to consult for 60

days with the goal of negotiating a mutually satisfactory

solution to the dispute. Interestingly, a large proportion of

cases are successfully resolved during consultations; 46% of all

disputes brought to the WTO end at this stage, and three-

quarters of those yield at least partial concessions from the

defendant. 4 If consultations do not result in a mutually

satisfactory solution, the complainant can request a panel


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proceeding, marking the start of the formal litigation stage.

Panels are comprised of three to five persons with a

background in trade law, agreed to by the parties on a case-by-

case basis. There are typically two rounds of testimony,

including from other countries (third parties) that notify the

WTO of a substantial interest in the case. The panel then

circulates an interim report, offering both sides an

opportunity to comment and seek clarification. The

complainant and defendant can still negotiate a settlement at

this point. In fact, another 13% of all cases end at this stage

before a ruling is rendered. If not, the panel issues its final

report, which is then adopted by the WTO, unless one of two

things happens. First, the two sides can agree not to adopt the

panel report for whatever reason, although to date this has not

happened. Second, one or both sides (but not third parties) can

appeal the panels report, which happens frequently (i.e., in

73% of panel rulings).

2

WTO Dispute Settlement from a Development

Perspective

Trade liberalization promises considerable returns, but comes with

risks. One such risk is the possibility that a foreign government

will succumb to lobbying by its own domestic producers and grant

them protection. This can undermine a developing countrys


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interest in reallocating resources to the affected export sector, since

poor countries tend to have fewer alternative export markets, and

fewer export goods. As a result, the mere anticipation of such

protectionism can deter or dilute muchneeded trade reform in

developing countries. The WTO dispute settlement system can

help insure against this risk by maintaining market access once it is

won, thereby encouraging developing countries to embark on an

opentrade growth strategy.

STEPS IN DISPUTE SETTLEMENT PROCESS

Dispute settlement is the central pillar of the multilateral trading

system, and the WTOs unique contribution to the stability of the

global economy. Without a means of settling disputes, the rules-

based system would be less effective because the rules could not

be enforced. The WTOs procedure underscores the rule of law,

and it makes the trading system more secure and predictable. The

system is based on clearly-defined rules, with timetables for

completing a case. First rulings are made by a panel and endorsed

(or rejected) by the WTOs full membership. Appeals based on

points of law are possible. However, the point is not to pass

judgement. The priority is to settle disputes, through consultations

if possible. By January 2008, only about 136 of the 369 cases hadreached the full panel process. Most of the rest have either been


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notified as settled out of court or remain in a prolonged

consultation phasesome since 1995.

Principles:

Equitable, fast, effective, mutually acceptable

Disputes in the WTO are essentially about broken promises. WTO

members have agreed that if they believe fellow-members areviolating trade rules, they will use the multilateral system of

settling disputes instead of taking action unilaterally. That means

abiding by the agreed procedures, and respecting judgements. A

dispute arises when one country adopts a trade policy measure or

takes some action that one or more fellow-WTO members

considers to be breaking the WTO agreements, or to be a failure to

live up to obligations. A third group of countries can declare that

they have an interest in the case and enjoy some rights.

A procedure for settling disputes existed under the old GATT, but

it had no fixed timetables, rulings were easier to block, and many

cases dragged on for a long time process with more clearly defined

stages in the procedure. It introduced greater discipline for the

length of time a case should take to be settled, with flexible

deadlines set in various stages of the procedure. The agreement

emphasizes that prompt settlement is essential if the WTO is to


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function effectively. It sets out in considerable detail the

procedures and the timetable to be followed in resolving disputes.

If a case runs its full course to a first ruling, it should not normally

take more than about one year 15 months if the case is

appealed. The agreed time limits are flexible, and if the case is

considered urgent (e.g. if perishable goods are involved), it is

accelerated as much as possible.

The Uruguay Round agreement also made it impossible for the

country losing a case to block the adoption of the ruling. Under the

previous GATT procedure, rulings could only be adopted by

consensus, meaning that a single objection could block the ruling.

Now, rulings are automatically adopted unless there is a consensus

to reject a ruling any country wanting to block a ruling has to

persuade all other WTO members (including its adversary in the

case) to share its view.Although much of the procedure does

resemble a court or tribunal, the preferred

solution is for the countries concerned to discuss their problems

and settle the dispute by themselves. The first stage is therefore

consultations between the governments concerned, and even when

the case has progressed


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These approximate periods for each stage of a dispute settlement

procedure are target figures the agreement is flexible. In

addition, the countries can settle their dispute themselves at any

stage. Totals are also approximate.

60 day

Consultations,

mediation, etc

45 day

Panel set up and

panellists appointed

6 month

Final panel report

to parties

3 week

Final panel report

to WTO members

60 day

Dispute Settlement

Body adopts report

(if no appeal)

Total = 1 year

(without appeal)

6090 dayAppeals report


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30 day

Dispute Settlement

Body adopts appeals

Report

Total = 1y 3 (with appeal)

1.

CONSULTATION (UP TO 60 DAYS)

Before taking any other actions, the countries in a dispute have to

talk to each other to see if they can settle their differences by

themselves. If that fails, they can also ask the WTO director-

general to mediate or try to help in any other way (so called good

offices). The consultations also offer a country an opportunity to

assess the merits of the other countrys case and sometimes submit

written questions that it wants the defending country to answer

during the consultation if they find the process informative or if

they think they may be able to reach a settlement.

Consultations are not always followed by a request for a panel.

Since sometimes the threat of action is more potent than the action

itself, consultations may provide information and leverage for

negotiations that to a successful resolution of the dispute. On

occasion, a complaining party may learn from the consultation

process about weaknesses in its arguments or damaging facts;

either situation could lead to a decision not to press the matter.


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To complaining party may request the formation of panel, if the

parties to the dispute jointly consider that the good offices,

conciliation or mediation process has failed to settle the dispute.

2.The panel (up to 45 days for a panel to be

appointed, plus 6 months for the panel to conclude)

If consultations fail, the complaining country can ask for a panelto be appointed. The country in the dock can block the creation

of a panel once, but when the Dispute Settlement Body meets for a

second time, the appointment can no longer be blocked (unless

there is a consensus against appointing the panel). Officially, the

panel is helping the Dispute Settlement Body make rulings or

recommendations. But because the panels report can only be

rejected by consensus in the Dispute Settlement Body, its

conclusions are difficult to overturn. The panels findings have to

be based on the agreements cited.

The panels final report should normally be given to the parties to

the dispute within six months. In cases of urgency, including those

concerning perishable goods, the deadline is shortened to three

months.o other stages, consultation and mediation are still always

possible.

The main stages are in Panel:


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Before the first hearing: each side in the dispute presents its case

in writing to the panel.

First hearing: the case for the complaining country and defence:

the complaining country (or countries), the responding country,

and those that have announced they have an interest in the dispute,

make their case at the panels first hearing.

Rebuttals: the countries involved submit written rebuttals and

present oral arguments at the panels second meeting.

Experts: if one side raises scientific or other technical matters, the

panel may consult experts or appoint an expert review group to

prepare an advisory report.

First draft: the panel submits the descriptive (factual and

argument) sections of its report to the two sides, giving them two

weeks to comment. This report does not include findings and

conclusions.

Interim report: The panel then submits an interim report,

including its findings and conclusions, to the two sides, giving

them one week to ask for a review.

Review: The period of review must not exceed two weeks.

During that time, the panel may hold additional meetings with the

two sides.


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Final report: A final report is submitted to the two sides and three

weeks later, it is circulated to all WTO members. If the panel

decides that the disputed trade measure does break a WTO

agreement or an obligation, it recommends that the measure be

made to conform with WTO rules. The panel may suggest how this

could be done.

The report becomes a ruling: The report becomes the Dispute

Settlement Bodys ruling or recommendation within 60 days unless

a consensus rejects it. Both sides can appeal the report (and in

some cases both sides do).

3.Appealing

Either side can appeal a panels ruling . Sometimes both sides do

so. Appeals have to be based on points of law such as legal

interpretation they cannot request reexamination of existing

evidence or examination of new evidence . Each appeal is heard by

three members of a permanent seven-member Appellate Body set

up by the DSB. Members of the Appellate Body have four-year

terms. They have to be individuals with recognized standing in the

field of law and international trade, not affiliated with any

government.


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The appeal can uphold, modify or reverse any of the panels legal

findings and conclusions. Normally appeals should not last more

than 60 days, with an absolute maximum of 90 days. In other

words, the Appellate Body should normally issue a report within

60 days from the date the notice of appeal is field.

The DSB has to accept (i.e., adopt) the report, as modified by the

ruling of the Appellate Bodys report unless there is a consensus to

reject it.

4.COMPLIANCE :-

After DSB adoption of a report in which a countrys trade measure

has been found to violate its WTO obligation, the country is

required to act on the recommendations in the report and bring the

measure into compliance with its obligations. The country must

state its intention to comply at a DSB meeting held within 30 days

of the reports adoption to. If complying with the recommendations

immediately proves impractical, the member will be given a

reasonable period of time to do so. To date in most WTO

disputes the losing party has brought its measure into compliance.

If a losing party fails to act within a reasonable period of time, it

has to enter into negotiations with the complaining country (or


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countries) in order to determine mutually acceptable complaining

country

5.ARBITRATION

Members may seek arbitration within the WTO as an alternative

means of dispute settlement to facilitate the solution of certain

disputes that concern issues that are clearly defined by both parties.

Those parties must reach mutual agreement to arbitration and the

procedures to be followed. Agreed arbitration must be notified to

all members prior to the beginning of the arbitration process. Third

parties may become party to the arbitration only upon the

agreement of the parties that have agreed to have agreed to have

recourse to arbitraton.

CHAPTER NO:-5.CASE STUDY ON DISPUTE IN

WTO

INDIAPATENTS (US) 1 (DS50)

PARTIES

AGREEMENT

S

TIMELINE

OF THE

DISPUT

Complainan

United

State

TRIPS Art.70.8 and 70.

Establishment of Pane

20

November 199

Responden

India

Circulation

5

Septembe


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of PanelReport

Circulationof AB Repor

Adoptio

r 199

19December

199

16January

199

1. MEASURE AND INTELLECTUAL PROPERTY AT

ISSUE

Measure at issue: (i) India's "mailbox rule" under which patent

applications for pharmaceutical and agricultural chemical products

could be filed; and

(ii) the mechanism for granting exclusive marketing rights to such

products.

Intellectual property at issue: Patent protection for

pharmaceutical and agricultural chemical products, as provided

under TRIPS Art. 27.

2. SUMMARY OF KEY PANEL/AB FINDINGS

TRIPS Art. 70.8: The Appellate Body upheld the Panel's finding

that India's filing system based on "administrative practice" for

patent applications for pharmaceutical and agricultural chemical

products was inconsistent with Art. 70.8. The Appellate Body


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found that the system did not provide the "means" by which

applications for patents for such inventions could be securely filed

within the meaning of Art. 70.8(a), because, in theory, a patent

application filed under the administrative instructions could be

rejected by the court under the contradictory mandatory provisions

of the existing Indian laws: the Patents Act of 1970.

TRIPS Art. 70.9: The Appellate Body agreed with the Panel that

there was no mechanism in place in India for the grant of exclusive

marketing rights for the products covered by Art. 70.8(a) and thus

Art. 70.9 was violated.

2. OTHER ISSUES

Interpretation of the TRIPS Agreement: The Appellate

Body rejected the Panel's use of a "legitimate expectations"

(of Members and private right holders) standard, which

derives from the non-violation concept, as a principle of

interpretation for the TRIPS Agreement. The Appellate

Body based its conclusion on the following:

(i).the protection of "legitimate expectations" is not something that

was used in GATT practice as a principle of interpretation; and

(ii) the Panel's reliance on the VCLT Art. 31 for its "legitimate

expectations" interpretation was not correct because the"legitimate expectations of the parties to a treaty are reflected in


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the language of the treaty itself." Pointing to DSU Arts. 3.2 and

19.2

3, the Appellate Body clarified that the process of treaty

interpretation should not include the "imputation into a treaty

words that are not there or the importation into a treaty of concepts

that were not intended."

CHAPTER NO.6 .CONLCUSION , SUGGESTION,

FINDING.

Suggestion

The Uruguay Round and the establishment of the WTO changed

the character of the trading system. The GATT was very much a

market accessoriented institution: its function was to harness the

dynamics of reciprocity for the global good.Negotiators could be

left to follow mercantilist logic, and the end result would be

beneficial to all contracting parties. This dynamic worked less well


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for developing countries, where the burden of liberalization rested

much more heavily on the shoulders of governments. Even if they

wanted to, their scope to use the GATT was often limited because

exporters had fewer incentives and were less powerful than in

industrial countries. The reciprocal, negotiationdriven dynamic

also worked much less well for issues that were lumpy and

where the terms of the debate revolved around what rules to adopt,

not around how much of a marginal change was appropriate.

Once discussions center on rules, especially on disciplines for

domestic policy and regulations, it is more difficult to define

intraissue compromises that make economic sense. Cross-issue

linkage becomes necessary. Disengagement was not an option

during the Uruguay Round (because of the single undertaking),

so the task was to come up with a balanced package that ensured

gains for all players. One can argue whether the package that

emerged from the round was a balanced one; views on this point

differ widely. Whatever the conclusion, it is clear that the approach

taken toward ensuring and supporting implementation of WTO

agreements by developing countries was not an effective one.

CONCLUSION:-

Limiting recognition of this problem to the setting of uniform

transition periods was clearly inadequate. The case for uniform


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application of agreements that involve reducing trade barriers

tariffs and nontariff barriers is very strong. But in other areas

requiring minimum levels of institutional capacity, such as

customs valuation, a good case can be made that implementation

should be linked to national capacity and international assistance

(Hoekman 2002).

wto project final 1

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