World Trade Organization

GATT: Predecessor To The WTO

• General Agreement on Tariffs and Trade (GATT)
• In 1947, 23 countries formed GATT under the auspices of the United
Nations to abolish quotas and reduce tariffs
• WTO replaced GATT in 1995, 125 nations had become members
• principle of GATT was that each member nation must open its markets
equally to every other member nation
• principle of “trade without discrimination” was embodied in GATT’s
most-favored-nation (MFN) clause
• once a country and its trading partners had agreed to reduce a tariff, that
tariff cut was automatically extended to every other member country
Cont..
• GATT tackled with the issue of nontariff barriers in terms of industrial standards,
government procurement, subsidies and countervailing duties, licensing, and
customs valuation
• GATT slowly ran into problems.
• World trade grew more complex
• trade in services—not covered by GATT rules
• GATT the organization, and
• GATT the agreement.
• The second one refers to the agreement between different governments setting out
the rules for trade. GATT, the organization, has been replaced by the establishment
of the WTO. GATT, the agreement, however, exists along with the additional
WTO new agreements
WTO(world Trade Organization)
• WTO is a major body for reciprocal trade negotiations and
enforcement of trade agreement.
• Expanded its mission to include trade in services, investment,
intellectual property, sanitary measures, plant health, agriculture, and
textiles, as well as technical barriers to trade
• Its 164 members collectively account for more than 97 percent of
world trade and include the BRIC countries in 2012
• The entire membership makes significant decisions by consensus
• Agreements then must be ratified by the governments of the member
nations
• WTO new agreements:
• GATT, the agreement
• General Agreement on Trade in Services (GATS), and
• General Agreements on the Trade Related Aspects of Intellectual
Property Rights (TRIPS)
Major functions of WTO
• It shall facilitate the implementation, administration and operation of the
WTO trade agreements, such as multilateral trade agreements,
multilateral trade agreements.
• It shall provide forum for negotiations among its members concerning
their multilateral trade relations.
• It shall administer the ‘Understanding on Rules and Procedures’ so as to
handle trade disputes.
• It shall monitor national trade policies.
• It shall provide technical assistance and training for members of the
developing countries.
• It shall cooperate with various international organisations like the IMF
and the WB with the aim of achieving greater coherence in global
economic policy-making.
• The WTO was founded on certain guiding principles—non-
discrimination, free trade, open, fair and undistorted competition, etc.
In addition, it has special concern for developing countries.
MFN (Most Favored Nation)
• member countries should trade without discrimination, basically
giving foreign products “national treatment.” there are some
exception:
• Developing countries’ manufactured products have been given
preferential treatment
• Concessions granted to members within a regional trading alliance,
such as the EU, have not been extended to countries outside the
alliance.
• Countries can raise barriers against member countries who they feel
are trading unfairly
Dispute Settlement
• countries may bring charges of unfair trade practices to a WTO panel,
and accused countries may appeal.
• If an offending country fails to comply with the panel’s judgment, its
trading partners have the right to compensation
• US and EU for Airbus and Boeing dispute
• Doha round
Major decision making units of WTO
• Ministerial conference: the WTO is headed by the Ministerial
Conference who enjoys absolute authority over the institution. It not
only carries out functions of the WTO but also takes appropriate
measures to administer the new global trade rules.
• General council: oversee the WTO agreement and ministerial
decisions on a regular basis. The Council sits in its headquarters
Geneva, Switzerland usually once a month.
• Goods council
• Service council
• Council on trade related aspects of Intellectual property
Decision-making is made by consensus.