Introduction: -

○ Location: Geneva, Switzerland

○ Established: 1 January 1995
○ Created by: Uruguay Round negotiations (1986–94)
○ Membership :153 countries (on 23 July 2008)
○ Budget : 185 million Swiss francs for 2008
○ 2007 Secretariat Staff : 625
○ Head: Pascal Lamy (director-general)

History: -
○ The WTO began life on 1 January 1995, but its trading system is half a century older.
○ Since 1948, the General Agreement on Tariffs and Trade (GATT) had provided the rules for the system.
○ It did not take long for the General Agreement to give birth to an unofficial, de facto international organization, also
known informally as GATT.
○ Over the years GATT evolved through several rounds of negotiations.
○ The last and largest GATT round, was the Uruguay Round which lasted from 1986 to 1994 and led to the WTO’s creation.
○ Whereas GATT had mainly dealt with trade in goods,
○ the WTO and its agreements now cover trade in services,
○ and in traded inventions, creations and designs (intellectual property).

About WTO: -
○ The World Trade Organization (WTO) is the only global international organization dealing with the rules of trade between
nations.
○ The World Trade Organization (WTO) deals with the rules of trade between nations at a global or near-global level.
○ It’s an organization for liberalizing trade.
○ Designed to strengthen the trade rules by providing a stronger set of institutions for resolving disputes and enforcing
agreements
○ Above all, it’s a negotiating forum:-WTO is a place where member governments go, to try to sort out the trade problems
they face with each other.
○ It’s a set of rules: - These documents provide the legal ground-rules for international commerce. They are essentially
contracts, binding governments to keep their trade policies within agreed limits.
○ And it helps to settle disputes: - Settle the differences are through some neutral procedure based on an agreed legal
foundation.

Functions:
○ Administering and Implementing the multilateral and plurilateral trade agreements
○ Acting as a forum for multilateral trade negotiations .
○ Seeking to resolve trade disputes.
○ Overseeing national trade policies.
○ Cooperating with other international institutions.
○ Maintaining trade related database
○ Acting as a watchdog of international trade
○ Technical assistance and training for developing countries.

Objectives: -
○ The WTO reiterates the objectives of GATT
○ Raising standard of living and income
○ Introduce sustainable development.
○ Taking positive steps to ensure that developing countries.

The Mission of the WTO

○ Raise standards of living
○ Ensure full employment
○ Growing volume of real income and effective demand through trade
○ Seeking to protect and preserve the environment
○ Secure for developing countries (especially LDC‘s) a share in the growth of international trade that is commensurate with
the needs of their development
○ The WTO facilitates the implementation, administration and operation, and furthers the objectives, of this Agreement and
the Multilateral Trade Agreements, and also provide framework for the implementation, administration and operation of
the Plurilateral Trade Agreements
○ The WTO provides the forum for negotiations among its members concerning their multilateral trade relations in matters
dealt with under the agreements and a framework for the implementation of the results of such negotiations, as may be
decided by the Ministerial Conference

○ The WTO administers the Understandings on Rules and Procedures governing the Settlement of Disputes.
○ The WTO administers the Trade Policy Review Mechanism (TPRM).
○ With a view to achieving greater coherence in global economic policy-making, the WTO cooperates as appropriate, with
the International Monetary Fund (IMF) and with the International Bank for Reconstruction and Development (World
Bank) and its affiliate agencies.
Four Basic Rules
1. Protection to Domestic Industry Through Tariffs:
a. The General Agreement on Tariffs and Trade (GATT) covers international trade in goods. The workings of the GATT
agreement are the responsibility of the Council for Trade in Goods (Goods Council) which is made up of representatives from
all WTO member countries. GATT requires the member countries to protect their domestic industry/production through tariffs
only.
b. It prohibits the use of quantitative restrictions, except in a limited number of situations.

2. Binding of Tariffs: The member countries are urged to

○ Eliminate protection to domestic industry/ production by reducing tariffs and removing other barriers to trade in
multilateral trade negotiations.
○ The reduced tariffs are bound against further increases by listing them in each country's national schedule.
○ The schedules are an integrated part of the GATT legal system
Most Favoured-Nation(MFN) Treatment:
○ The rule lays down the principles of non-discrimination amongst member countries.
○ Tariff and other regulations should be applied to imported or exported goods without discrimination among countries.
○ Exceptions to the rules i.e., regional arrangements subjected to preferential or duty free trade agreements, Generalized
System of Preferences (GSP) where developed countries apply preferential or duty free rates to imports from developing
countries.
4. National Treatment Rule:
The rule prohibits member countries from discriminating between imported products and domestically produced like goods in
the matter of internal taxes and in the application of internal regulations.
The main functions of the WTO can be described in very simple terms. These are:
• To oversee implementing and administering WTO agreements;
• To provide a forum for negotiations; and
• To provide a dispute settlement mechanism.
The goals behind these functions are set out in the preamble to the Marrakech Agreement. These include:
• Raising standards of living;
• Ensuring full employment;
• Ensuring large and steadily growing real incomes and demand; and
• Expanding the production of and trade in goods and services.

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),

3. 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.

It 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.

4. Binding and enforceable commitments: -

The tariff commitments made by WTO members in a multilateral trade negotiation and, on agreement are specify 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.

5. 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.

Promising not to raise a trade barrier can be as important as lowering one, because the promise gives businesses a
clearer view of their future opportunities. With stability and predictability, investment is encouraged, jobs are
created and consumers can fully enjoy the benefits of competition — choice and lower prices. The multilateral
trading system is an attempt by governments to make the business environment stable and predictable

1. 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 non economic 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.

1. Promoting fair competition: -

The WTO is sometimes described as a “free trade” institution, but that is not entirely accurate. The system does
allow tariffs and, in limited circumstances, other forms of protection. More accurately, it is a system of rules
dedicated to open, fair and undistorted competition.
The rules on non-discrimination — MFN and national treatment — are designed to secure fair conditions of trade.
So too are those on dumping (exporting at below cost to gain market share) and subsidies.