GENERAL AGREEMENT ON TARIFF AND TRADE And WORLD TRADE ORGANISATION

BACKGROUND
During great depression of 1930s the international trade was badly affected and various countries imposed import restrictions for safeguarding their economies. It resulted in sharp decline in world trade.

1n 1945, USA put forward many proposals for extending international trade and employment.

On October 30th, 1947; 23 countries at Geneva signed an agreement related to tariffs imposed on trade.

PRINCIPLES ADOPTED BY GATT

NON DISCRIMINATION A contracting partys trade policies must treat all GATT members equally. No member country shall discriminate between the members of GATT in the conduct of international trade. Members of GATT agree to apply the principle of most favored nation to all import and export duties. National Treatment : Foreign goods, services, or investment are to be treated no less favorably within a nations domestic markets than competing products or services produced locally.

ROUNDS OF GATT NEGOTIATION

Between 1947 and the last year of GATT there were 8 rounds of negotiations between the participating countries. The first 6 rounds were related to curtailing tariff rates. 7th round included the non tariff obstacles.

The 8th round was entirely different from the previous rounds because it included a number of new subjects for consideration. This 8th round was known as URUGUAY ROUND. The discussions at this round only gave birth to WORLD TRADE ORGANISATION (WTO).

FROM GATT TO WTO

Following the UR agreement, GATT was converted from a provisional agreement into a formal international organization called World Trade Organization (WTO), with effect from January 1, 1995
GATT
GATT was ad hoc and provisional GATT had contracting parties GATT system allowed existing domestic legislation to continue even if it violated a GATT agreement

WTO
WTO and its agreements are permanent WTO has members WTO does not permit this

GATT system was less powerful, dispute settlement system was slow and less efficient, its ruling could easily blocked

WTO is more powerful than GATT, dispute settlement mechanism is faster and more efficient, very difficult to block the rulings.

World Trade Organization (WTO)

WTO is an organisation for liberalising trade, a forum for governments to negotiate trade agreements and a place for them to settle trade disputes There are WTO agreements, negotiated and signed by the bulk of the worlds trading nations. The WTO has larger membership than GATT, with the numbers being 153. India is one of the founder members of GATT.

Functions of WTO:
WTO is based in Geneva, Switzerland. Its functions are: Administering the multilateral trade agreements which together make up the WTO Acting as a forum for multilateral trade negotiations Seeking to resolve trade disputes WTO is not a Free trade institution. It permits tariffs and other forms of protection but only in limited circumstances.

Principles of WTO
Non discrimination Free Trade: Promote free trade between nations through negotiations. Stability in the trading system: Member countries are committed not to raise tariff and non tariffs barriers arbitrarily. Promotion of Fair Competition: WTO provides for transparent, fair and undistorted competition. It discourages unfair competitive practices such as export subsidies and dumping.

TRIPS (Trade Related Intellectual Property Rights Agreement)

The agreement requires member countries to provide patent protection to all products or processes in all fields. The protection is granted subject to the following three conditions: The product or process is a new one. It contains an inventive step. It is capable of industrial application for 20 years from the grant of the patent

TRIPS (Trade Related Intellectual Property Rights Agreement)

TRIPS agreement covers the following seven intellectual properties:
Patents Copyright and other related Rights Geographical Indications Industrial Designs Trade marks Layout design of integrated circuits Undisclosed information including trade secrets

GATS (General Agreement on Trade in Services)

The GATS agreement covers four modes of supply for the delivery of services in crossborder trade: Criteria Supplier Presence

Mode 1: Crossborder supply

Service delivered within the territory of the Member, from the territory of another Member. Eg: transborder data flows

Mode 2: Consumption abroad

Service delivered outside the territory of the Member, in the territory of another Member, to a service consumer of the Member. Eg : Tourism Service delivered within the territory of the Member, through the commercial presence of the supplier (provision of services abroad through FDI or representative offices).

Service supplier not present within the territory of the member

Mode 3: Commercial presence

Service delivered within the territory of the Member, with supplier present as a natural Mode 4: Presence person (entry and temporary stay of foreign of a natural person consultants)

Service supplier present within the territory of the Member

TRIMS (Trade Related Investment Measures)

TRIMS refers to certain conditions or restrictions imposed by a government in respect of foreign investment in the country. In the late 1980's, there was a significant increase in foreign direct investment throughout the world. TRIMS are widely employed by developing countries. The Agreement on TRIMs provides that no contracting party shall apply any TRIM which is inconsistent with the WTO articles

Anti Dumping Measures: The WTO Agreement provides clarity in the method of determining that a product is dumped. A product is regarded as dumped when its export price is less than the normal price in the exporting country or its cost of production plus a reasonable amount of administrative, selling and any other costs. Countervailing duties (CVDs) are trade import duties imposed under WTO Rules to neutralize the negative effects of subsidies.

Evaluation of WTO
The WTO members now account for over 97% of the international trade indicating the potential of bringing about an orderly development of international trade. Benefits of WTO: GATT / WTO has made significant achievements in reducing tariff and non tariff barriers to trade. Developing countries too have been benefiting significantly. Liberalization of investments has been fostering economic growth of a number of countries. It has a system in place to settle trade disputes between nations. It has a mechanism to deal with violation of trade agreements.

Drawbacks: Negotiations and decision making in the WTO are dominated by the developed countries.
Many developing countries do not have the financial and knowledge resources to effectively participate in WTO discussions and negotiations. Due to the dependence of developing countries on the developed ones, the developed countries are able to resort to arms twisting tactics.