WORLD Trade

Organisation

WTO

 (a) Organisational Structure

The World Trade Organization (WTO) is the

successor organization to the GATT.

It came into effect on 1 January, 1995 as a
result of the conclusion of Uruguay Round of
Multilateral Trade Negotiations.
India is a founder member of both GATT in
1947 and the WTO in 1995.
The membership of the WTO stands at 151.

 The mandate of the WTO includes trade in goods as

well as trade in services.

Trade-related issues like trade-related investment
measures (TRIMS)and trade-related intellectual
property rights (TRIPS) are also covered.
The Ministerial Conference of WTO, represented by
the Trade Ministers of all the Members, is the highest
decision making body of the WTO and is required to
meet at least once every two years.

Difference between GATT and WTO

GATT

WTO

1. GATT was adhoc and provisional

1. WTO and its agreement are permanent

2. GATT had contracting parties

2. WTO has members

3. GATT system allowed existing domestic legislation to

continue even if it violated a GATT agreement.

3. WTO doesnot permit this

4. GATT dealt only with trade in goods

4. WTO also covers Services and intellectual property as

well

5. GATT was less powerful, dispute settlement system was

slow and less efficient, its ruling could be easily
blocked

5. WTO is more powerful than GATT, dispute settlement

mechanism is faster and more efficient , very difficult
to block the rulings.

Functions of WTO
The WTOs overriding objective is to help trade flow

smoothly , freely , fairly and predictably.

It does this by

Administering the WTO trade agreements.

Providing the forum for negotiations among its

members concerning their multilateral trade relations

in matters dealt with under the agreements.
Administering the mechanism for settling trade
disputes between the member countries.

 Monitoring national trade policies

Cooperating with other international organizations like

the IMF and World Bank with a view to achieve

greater coherence in global economic policy making

 WTO A snapshot
The WTO agreements are the outcome of the

1986-1994 Uruguay Round negotiations

which included a major revision of the original
GATT.
The Uruguay round also created new rules for
dealing with trade in services , relevant
aspects of intellectual property and dispute
settlement.
Lets look at each of these aspects

 Goods:

Trade in goods was the concentration of GATT until

the Uruguay round .
From 1948 to 1994 GATT was the forum for
negotiating lower custom duty rates and other trade
barriers.
Since 1995 , the updated GATT has become the
WTOs umbrella agreement for trade in goods.
It has annexures dealing with specific sectors like
agriculture and textiles and with specific issues such
as state trading , product standards , subsidies and
actions taken against dumping.

 Services : Banks, Insurance firms, telecom, tour

operators, hotel chains, airlines etc. companies

looking to do business abroad can now enjoy the
same principles of freer and fairer trade that originally
only applied to trade in goods.
These principles appear in the new General
Agreement on Trade in Services (GATS) .
WTO members have also made individual
commitments under GATS stating which of their
services sectors they are willing to open to foreign
competition etc.

TRIPS :
One of the most controversial outcomes of the UR is the agreement on
Trade Related aspects of Intellectual Property rights.

According to WTO , IPR are the rights given to persons over the creations of
their minds. They usually give the creator an exclusive right over the use of the
creation for a certain period of time.

IPRs are normally divided into two main areas.

A) Copyright and Rights related to copyright

The rights of authors of literary and artistic works (such as books,
musical compositions, paintings, sculptures, computer programs etc. ) are
protected by copyright for a minimum period of 50 years after the death of the
author.
The main purpose of protection of copyright is to encourage and reward creative
work.

 B) Industrial property: can be divided into two areas

1) protection of distinctive signs, like trademarks
2) The other type of industrial property are protected primarily

to stimulate innovation , designs and the creation of technology.

In this category fall inventions (protected by patents) , industrial
designs and trade secrets.
The social purpose is to provide protection for the results of
investment in the development of new technology , thus giving
incentive and means to finance research and development
activities.
The protection is usually for a finite term (20 years for patents)

 TRIMs

(Trade Related Investment Measures) refers to

certain conditions or restrictions imposed by a govt. in respect of
foreign investment in the country.

The agreement on TRIMs provides that no contracting party

shall apply any TRIM which is inconsistent with the WTO

articles. The following TRIMS are inconsistent with WTO norms.
Local content requirement (i.e a certain amount of local
inputs be used in products)
Trade balancing requirement (i.e imports shall not exceed a
certain proportion of exports)
Domestic sales requirement (i.e a company shall sell a
certain proportion of its output locally)

 A number of TRIMs were employed in India

prior to the liberalization ushered in 1991 and

many of them have been phased out since
then .
e.g Insurance sector which was earlier a state
monopoly (LIC), now has been completely
opened up and many foreign players
including Metlife have entered India.