A TERM PAPER ON WORLD TRADE ORGANISATION

Submitted to: SIR L.A. SHAH LAW COLLEGE

Submitted By: CHAUHAN BRIJESH R LL.M SEMESTER I GROUP: C (BUSINESS LAW) BATCH: (2011-2012) ROLL NO: 07 SUBJECT: EXPORT AND IMPORT LAW

[A]. GENERAL AGREEMENT ON TARIFFS AND TRADE [GATT] : [1]. ORIGIN OF GATT:
The expansion of international trade in globalization era is actually responsible for the origin of world institution like IMF, World Bank, GATT, and WTO. Inspite from the success of Agreement of International Monetary Co-operation reflected in the formation of IMF, similar co-operation in international trade was desired by many trading nations for expansion of international trade. So, it was thought that an attempt must be made to relax the existing trade restriction, such as tariffs. Some of the countries took up the matter of trade restrictions by incorporating it into a General Agreement on Tariffs and Trade [GATT]. GATT [General Agreement on Tariffs and Trade] was signed in 1948 by 23 major trading nations, including India. It is a multilateral arrangement aimed at reducing barriers to tariff and trade. Later many countries joined GATT. Its membership has not gone up to more than 64. Under the GATT, member countries meet regularly to negotiate agreements to reduce quotas, tariffs and such other restrictions on international trade. It is a treaty that is collectively administered by the contracting nations. However, it has become permanent international trade and an institution for multilateral expansion of trade.

[2]. MAIN OBJECTIVES :

The GATT agreement is basically aimed at expansion of the international trade by reducing tariff barriers and eliminating discrimination in international trade. It focuses on the following objectives; Expansion of international trade; [ii]. Increase of world production by ensuring full employment in participating nations, particularly the developing countries. [iii]. Ensuring the development and full utilization of world resources; and [iv]. Raising standard of living of the world community as a whole.
[i].

However, the articles of the GATT do not provide directives for attaining these objectives. They are to be indirectly achieved by the GATT through the production of free and multilateral international trade. Moreover, the rules adopted by GATT are based on the following fundamental principles;
[i]. [ii]. [iii].

To encourage non-discriminative trade, To oppose the use of quantitative restrictions, and To resolve any dispute or disagreement through consultation. In short, members of GATT agree to reduce trade barriers and to eliminate discrimination in international trade so that the gate of wider dimension of world trade and prosperity can be opened, ultimately leading to promotion of multilateral and free trade. [Dunkel Draft of Dunkel Text is another name of GATT].

[3]. GATT IN THE CONTEXT OF INDIAN EXPERIENCE :

India is a member of GATT and it has been an important signatory. By virtue of its membership, India is automatically entitled to enjoy the benefits of Most Favoured Nation [MFN] treatment from all the other participating members. Even then, she could not have assured the same what she has been yielding [generated] through the GATT. Today, even a country like China has been keen on joining the GATT. In all, there have been eight GATT rounds including the Uruguay Round. The various rounds of GATT conferences are: First 1947 Geneva [Switzerland], Second 1949 Annecy [France], Third 1950-51 Torquay [England], Fourth 1956 Geneva [Switzerland], Fifth 1960-61 Geneva [Switzerland], Sixth 1964-67 Geneva [Switzerland], Seventh 1973-79 Tokyo [Japan], and Eighth 1986-93 Punta Del Este [Uruguay/Geneva]. The major areas of negotiations through GATT conferences had been on multilateral trade by encouraging economic liberalization.

INDIAS ROLE AND STA ND IN GATT : In the bargaining process of the Uruguay Round, the Indian Government, tried to ensure that no clauses of the negotiations are harmful to the interest of the country. Following are the likely outcomes of the new treaty: Under the new treaty, member countries have to reduce their agriculture subsidies over the six years, if they exceed 10 per cent of the value of agricultural production. India need not fear about this clause, because our product and non-product agrosubsidies are already below 10 percent of the total agro-output value. The member countries have agreed to reduce import duties on agricultural products by 36 percent. Further, the developed countries will have to import at least three percent of their agro-output. These provisions will give a boost to Indias agro-exports when European farm exports will tend to be more expensive in the world market. There is also the possibility of a rise in rice imports from Japan and Korea. India has to try its best to grab the opportunity and exploit its growth potential and enlarged agro-exports including margined products. Though, India is basically an agrarian economy, paradoxically she is a dwarf [small] player in the agro-trade world market. It is necessary to strengthen the countrys agricultural sector for quantitative improvement and high productivity. Unless there is a definite improvement in the quality of agro-products and sufficient marketable surplus is generated at competitive prices, Indian agricultural exports will remain a grey area in the emerging world economic order.

[i]. AGRICULTURE IS A MAJ OR SUBJECT OF THE URT.

[ii]. TEXTILES:

Textiles is considered as a green area of the GATT agreement. Out of total textile exports of India, 52 percent of the total cotton textile exports and 77 percent of readymade garments exports are to the quota countries. So, with the dismantling of the quota system, apparently, India will have a better access to the quota-countries markets for her textile exports, especially cotton piece goods knitted fabrics and ready-made garments. Indeed, under the liberalized environment of both domestics

and external sectors, with abundant supplies of cotton, skilled labour force, improved technology and due modernization, Indian should be in a position to emerge as a major force in the global textile markets, despite the stiff competition from countries like China, Malaysia, Taiwan and even Pakistan.
[iii]. PROVISION FOR INTELL ECTUAL PROPERTY RIGH TS [TRIPS]:

Provision for intellectual property rights (TRIPs) is a crucial area of the URT with farreaching implications for developing countries including India. Until now only the process patent was protected. Under the new agreement, inventors rights widely cover patents, copyright, industrial design, trade marks as well as performing art. The phasing-out period is specified as 10 years for drugs and agro-chemicals and 5 years for the rest. In the years to come, software packages will tend to become more expensive for our country. Indias software industry may become stagnant, unless the government modifies the present duty structure on software and Indian companies are encouraged to develop specialized software packages. After TRIPs, the software piracy is expected to come down throughout the world. This would also provide more opportunities for the Indian Professionals to develop new original software packages to sell in the global markets. Of course, with the growing R & D everywhere, competition will be intensified and only the best will survive. Official claims put Indian benefits from skilled manpower exports to go up from $ 1.2 billion at present to $ 5 billion per annum by the end of this century.
[iv]. PHARMACEUTICAL INDUS TRY:

The TRIPs are likely to create some adverse effect on pharmaceutical industry in India, because the new discoveries will be available at very heavy cost. Indian drugs also need to have their focus in finding new chemical molecules useful for treatment of tropical diseases like malaria, cholera and typhoid. Indian pharmacists should try to develop Ayurvedic drugs as an alternative form of medicine. Under the GATT agreement then India can hope to increase her exports of generic, tropical and Ayurvedic drugs to many countries. This obviously calls for a rational and pragmatic drug policy on the part of the government.
[v]. FOODGRAINS :

Under the TRIPs, seeds will be patented. Indian farmers inputs costs will increase due to royalties on seeds. Similarly, agro-chemicals of patented manufacture will be more expensive. As a result, food grain prices will go up and the average Indian consumer will be adversely affected. Effective and subsidized public distribution system (PDS) can only rescue the poor. But, this would pose an added fiscal burden on the government.
[vi]. SERVICES:

The new treaty provides for fair trade and non-discrimination, and reducing entry restrictions on specialized & skilled labour. This will help India to some extent, as her consultancy exports will raise.

CONCLUDING REMARKS : In the post war era, under the disguise of GATT, both economics and politics are at war in determining the future of global economy. The GATT, in theory, only makes a tall claim of treating all contracting parties as equal.

In practice, however, the poor and small countries are ignored and never allowed to succeed in asserting themselves. The last Uruguay Round was essentially a game played by the rich countries in sustaining the interests of their multinational firms. This was clearly witnessed in the process and final results of the Uruguay Round. The truth of the matter is that the big bosses of the world economy have adopted double standards in matters of theory and practice of free trade. They preach liberalization and free trade to increase their access to foreign markets in LDCs. But, at home, they introduce high degree of protectionism and government intervention with regard to their new products, industries and technologies.

[B]. WORLD TRADE ORGANISATION [WTO] :

The World Trade Organization [WTO] was established on 1st January, 1995 [basis for WTO was laid on April 15, 1994]. It has completely replaced GATT [General Agreement on Tariffs and Trade]. It has been established as a part of the Uruguay Round Agreement of the GATT. It also incorporated Dunkel Proposals, better described as Dunkel Draft, in respect of international trade and trade related matters, which were made by Arthur Dunkel, Director General of GATT [now retired] in December 1991, By April 2003, there were nearly 146 members. WTO has rapidly accumulated its strength in international trade. The WTO has been formed on the basis of trade in manufactured commodities [GATT], trade in services and agricultural products [Dunkel Draft], and other related matters. WTO simply deals with the rules of the trade between nations.

In other words, it has evolved a set of rules for the conduct of world trade, but WTO can be looked from different angles like it is an organization for liberalizing trade, it helps the governments to negotiate trade agreements, it is a place for the member countries to settle trade disputes, it operates a system of trade rule, and above all, it is a place where member countries try to sort out the trade problems they face with each other. WTO was born out of negotiations and everything done is the result of negotiations.

[1]. FEATURES :
[i]. [ii]. [iii]. [iv]. [v].

[vi]. [vii].

The distinctive features of the WTO are: Unlike the GATT, it is a legal entity. Unlike the International Monetary Fund (IMF) and the World Bank (WB) it is not an agent of the United Nations. Unlike the IMF and the World Bank, there is no weighted voting , but all the WTO members have equal rights. Unlike the GATT, the agreements under the WTO are permanent & binging to the member countries. Unlike the GATT, the WTO dispute settlement system is based not on dilatory but automatic mechanism. It is also quicker and binding on the members. As such, the WTO is a powerful body. Unlike the GATT, the WTOs approach is rule-based and time-bound. Unlike the GATT, the WTOs ahs wider coverage. It covers trade in goods as well as services.

[viii]. Unlike the GATT, the WTOs has a focus on trade-related aspects of intellectual

property rights and several other issues of agreements. Above all, the WTO is a huge organizational body with a large secretariat.

[2]. OBJECTIVES :

[i]. [ii]. [iii].

[iv]. [v]. [vi].

The purposes and objectives of the WTO [Marrakesh Agreement] are as follows To ensure the reduction of tariff and other barriers to trade. To eliminate discriminatory treatment in international trade relations. To facilitate higher standards of living, full employment, a growing volume of real income and effective demand, and an increase in production and trade in goods and services of the member nations. To ensure that least developed countries secure a level of share in the growth of international trade. To facilitate the optimal use of the worlds resources for sustainable development. To promote an integrated, more viable and durable trading system by including all the resolutions of the Uruguay Rounds multilateral trade negotiations. Above all, to ensure that linkages trade policies, environmental policies with sustainable growth and development are taken care of by the member countries in evolving a new economic order.

[3]. FUNCTIONS :
The most important function of the WTO is to implement, administer, direct and further the objective of the Multilateral and Plurilateral Trade Agreements resulting from the Uruguay Round. The major functions of the WTO are as follows To lay down a substantive code of conduct for reducing trade barriers including tariffs and elimination of discrimination in international trade relations. To provide the institutions framework for the administration of the code. To provide an integrated structure of administration to facilitate implementation, administration, and fulfillment of the objectives of the WTO Agreement and other multilateral trade agreement. To ensure the implementation of the substantive (existing) code. To act as a forum for the negotiation of further trade liberalization. To cooperate with the IMF and WB and its associates for establishing coherence [unity or consistency] in trade policy making. To settle the trade related disputes.

[i]. [ii]. [iii].

[iv]. [v]. [vi]. [vii].

[i].

WTO PRINCIPLES : There should not be any discrimination either among trading nations, Most Favoured Nations [MFN] or between national and foreign products and services. This principle gives the concept of national treatment. International trade should be made progressively free through agreements that reduce barriers to foreign goods and services. relations with other countries.

[ii].

[iii]. Government and business should expect predictable conditions when engaged in trade [iv]. International rules for fair economic competition by discouraging unfair trade

practices.
[v]. Rules and conditions should be more beneficial for less developed countries [LDCs].

[4]. WTO CODE/AGREEMENT :

The WTO through its code provides a framework for an integrated approach to deal with trade-related economic issues. The WTO code lies in international instruments, such as, Multilateral Trade Agreements [MTA] and the Plurilateral Trade Agreements [PTA]. In its essence, the WTO agreement is based on the results of the Uruguay Round of negotiations.

The WTO agreement, thus, covers the following Multilateral Agreements on Trade in goods, General Agreements on Trade in services, Agreements on TRIPS, Rules and procedures of dispute settlement, Plurilateral Trade Agreements [PTA] Trade Policy Review Mechanism [TPRM] Among all the above, agreement on Agriculture deserves greater attention of most of the developing agrarian countries. The WTO agreement seeks to deal with nontariff measures affecting global competition. The agreement specifically aims at reducing domestic and export subsidies on agricultural goods. It has become a burning issue from the agrarian economic point of view. WTO wants agricultural subsidies on exports should be reduced and should not exceed more than 10% of the annual value of total agricultural product measured at international price. Another aspect is Green Box polices which are related to domestic support measures and have minimum impact on free trade, are not subject to such reduction commitments. Besides this, the WTO agreement also recommend that trade in Textiles and Clothing should be governed under General Rules of GATT [as against the Multi-Fiber Agreement]. The WTO agreement on Anti-dumping sets out new and more detailed rules and the criteria, anti-dumping measures, and disputes settlement. It also includes all internationally traded services, which have to be promoted with liberal approach of the service sector. The TRIPs agreement gives protection in the following categories;

[i]. [ii]. [iii]. [iv]. [v]. [vi].

These categories are copyright, trademarks, geographical indications, industrial designs, patents, integrated circuits, and trade secrets. For example, the owner of registered trademark possesses exclusive right for use.
[i]. [ii]. [iii]. [iv].

Plurilateral Trading Agreements [PTA] consists of Agreement on Trade in Civil Aircrafts, Agreement on Government Procurement, International Bovine Meat Agreement and International Dairy Agreement.

[5]. STRUCTURE OF WTO:

The organizational structure of the WTO is outlined in the given chart MINISTERIAL CONFEREN CE [MC] General Council [GC]

Dispute Settlement Body [DSB]

Trade Policy Review Body [TPRB]

Councils [I], [II], [III]

Director General [DG]

Committees [I], [II], [III]

[I] = Council for trade in goods

[I]. Committee on trade and development

[II] = Council for trade in services

Secretariat of the WTO

[II].Committee on BOP restrictions

[III] = Council for TRIPs

[III].Committee on Budget, Finance and Administration

The Ministerial Conference [MC] is at the top of the structural organization of the WTO. It is the supreme governing body, which takes ultimate decisions on all matters. It is scheduled to meet every two years with the first meeting held in Singapore in December 1996.

The MC consists of a representative from each member country and has full authority to take decisions on any matter arising from the Multilateral Trade Agreements. It is the chief policy making body of the WTO and major policy changes require approval. The General Council [GC] is composed of the representatives of all the members. It is the real engine of the WTO which acts on behalf of the MC. The GC is responsible for managing the WTO between Ministerial Conference meetings. It has authority to act in all areas. The GC is not free to initiate discussion for change and carry out all the necessary preparatory work. It also acts as the Dispute Settlement Body [DSB] as well as the Trade Policy Review Board [TPRB].
[i]. [ii].

The principal functions of GC are To act as a Dispute Settlement Body [DSB] under the Terms of Understanding on Rules and Procedures governing the Settlement of Disputes. To administer the Trade Policy Review Mechanism, and Services and Trade-related Aspects of Intellectual Property Rights as well as all Trade committees.

[iii]. To supervise and ensure the smooth running of the Councils for Trade in Goods,

For the day to day running of the WTO, the General council delegates responsibility to three major bodies

[a]. The Council for Trade in Goods; [b]. The Council for Trade in Services; and [c]. The Council for Trade-related aspects of Intellectual Property Rights.

Dispute Settlement Body [DSB] functions when any member country believes that another country has violated trade rule. The WTO convenes [set up] a judicial panel and discusses the issue when two trading countries fail to resolve the dispute. DSB constitutes three expert trade lawyers from neutral member countries. Any dispute is to be settled within 16 months. [Case: USA filed case against European Union (1995)]

Council for Trade in Goods includes specific sectors such as state trading, product standards, subsidies and action against dumping. Council for Trade in Services includes services like Banking, Insurance, Hotel, telecommunication and transport. Trade related aspects of intellectual property rights [TRIPs] relates to rules for trade and investment in ideas and creativity. A significant and ever increasing volume of world trade is now regulated by intellectual property rights in one form or another. The TRIPs agreement attempts to regulate and standardize international IPR in order to prevent copying and piracy and to create a fairer trade market. Trade Policy Review Body [TPRB] improves transparency and creates greater understanding of the policy among the member countries. There are three committee viz., the committee on Trade and Development [CTD], the Committee on Balance of Payments Restrictions [CBOPR], and the Committee on Budget, Finance and

Administration [CBFA]. These committees execute the functions assigned to them by the WTO and the GC. The administration of the WTO is conducted by the Secretariat which is headed by the Director General [DG] appointed by the MC for the tenure of four years. He is assisted by the four Deputy Directors from different member countries. The annual budget estimates and financial statements of the WTO are presented by the DG to the CBFA for review and recommendations for the final approval by the GC.