The World Trade Organization (WTO) is the only international
organization that deals with global rules of trade between nations. It
provides a framework for conduct of international trade in goods and
services. It lays down the rights and obligations of governments in the set of multilateral agreements.
In addition to goods and services, it also covers a wide range of issues related to international trade, such as protection of intellectual property rights and dispute settlement, and prescribes disciplines for governments in formulation of rules, procedures, and practices in these areas. Moreover, it also imposes discipline at the firm level in certain areas, such as export pricing at unusually low prices.
The basic objective of the rule-based system of international trade under the WTO is to ensure that international markets remain open and their access is not disrupted by the sudden and arbitrary imposition of import restrictions.
Under the Uruguay Round, the national governments of all the member countries have negotiated improved access to the markets of the member countries so as to enable business enterprises to convert trade concessions into new business opportunities.
The emerging legal systems not only confer benefits on manufacturing industries and business enterprises but also create rights in their favour. The WTO also covers areas of interest to international business firms, such as customs valuation, pre-shipment inspection services, and import licensing procedures, wherein the emphasis has been laid on transparency of the procedures so as to restrain their use as non-tariff barriers.
The agreements also stipulate rights of exporters and domestic procedures to initiate actions against dumping of foreign goods. An international business manager needs to develop a thorough understanding of the new opportunities and challenges of the multilateral trading system under the WTO.
The WTO came into existence on 1 January 1995 as a successor to the General Agreements on Tariffs and Trade (GATT). Its genesis goes back to the post-Second- World-War period in the late 1940s when economies of most European countries and the US were greatly disrupted following the war and the great depression of the 1930s.
Consequently a United Nations Conference on Trade and Employment was convened at Havana in November 1947.
It led to an international agreement called Havana Charter to create an International Trade Organization (ITO), a specialized agency of the United Nations to handle the trade side of international economic cooperation.
The draft ITO charter was ambitious and extended beyond world trade discipline to rules on employment, commodity agreements, restrictive business practices, international investment, and services. However, the attempt to create the ITO was aborted as the US did not ratify it and other countries found it difficult to make it operational without US support.
The combined package of trade rules and tariff concessions negotiated and agreed by 23 countries out of 50 participating countries became known as General Agreement on Tariffs and Trade (GATT): an effort to salvage from the aborted attempt to create the ITO.
It was only during the Kennedy
round of negotiations in 1964-67, that an anti-dumping agreement and a
section of development under the GATT were introduced. The first major
attempt to tackle non-tariff barriers was made during the Tokyo round.
The eighth round of negotiations known as the Uruguay Round of 1986-94
was the most comprehensive of all and led to the creation of the WTO
with a new set up of agreements.
The major function of the WTO is to ensure the flow of international trade as smoothly, predictably, and freely as possible. This is a multilateral trade organization aimed at evolving a liberalized trade regime under a rule-based system.
The basic functions of WTO are:
i. To facilitate the implementation, administration, and operation of trade agreements.
ii. To provide a forum for further negotiations among member countries on matters covered by the agreements as well as on new issues falling within its mandate.
iii. Settlement of differences and disputes among its member countries.
iv. To carry out periodic reviews of the trade policies of its member countries.
v. To assist developing countries in trade policy issues, through technical assistance and training programmes.
vi. To cooperate with other international organizations.
The organizational structure of WTO as summarized in Fig. 5.1, consists of the Ministerial Conference, General Council, council for each broad area, and subsidiary bodies.
i. The General Council
ii. The Dispute Settlement Body
iii. The Trade Policy Review Body
In fact, all these three bodies consist of all WTO members and report to the Ministerial Conference, although they meet under different terms of reference.
i. The Council for Trade in Goods (Goods Council)
ii. The Council for Trade in Services (Services Council)
iii. The Council for Trade Related Aspects of Intellectual Property Rights (TRIPS Council)
Each of these councils consists of all WTO members and is responsible for the working of the WTO agreements dealing with their respective areas of trade. These three also have subsidiary bodies. Six other bodies, called committees, also report to the General Council, since their scope is smaller.
They cover issues, such as trade and development, the environment, regional trading arrangements, and administrative issues. The Singapore Ministerial Conference in December 1996 decided to create new working groups to look at investment and competition policy, transparency in government procurement, and trade facilitation.
Goods Council:
It has 11 committees dealing with specific subjects, such as agriculture, market access, subsidies, anti-dumping measures, etc.
Services Council:
The subsidiary bodies of the Services Council deal with financial services, domestic services, GATS rules, and specific commitments.
Dispute settlement body:
It has two subsidiaries, i.e., the dispute settlement ‘panels’ of experts appointed to adjudicate on unresolved disputes, and the Appellate Body that deals with appeals at the General Council level. Formally all of these councils and committees consist of the full membership of the WTO. But that does not mean they are the same, or that the distinctions are purely bureaucratic.
In practice, the people participating in the various councils and committees are different because different levels of seniority and different areas of expertise are needed. Heads of missions in Geneva (usually ambassadors) normally represent their countries at the General Council level.
Some of the committees can be highly specialized and sometimes governments send expert officials from their countries to participate in these meetings. Even at the level of the Goods, Services, and TRIPS councils, many delegations assign different officials to cover different meetings.
All WTO members may participate in all councils, etc., except the Appellate Body, dispute settlement panels, textile monitoring body, and plurilateral committees.
The WTO has a permanent Secretariat based in Geneva, with a staff of around 560 and is headed by the Director-General. It does not have branch offices outside Geneva. Since decisions are taken by the members themselves, the Secretariat does not have the decision-making role those other international bureaucracies are given.
The Secretariat’s main duties are to extend technical support for the various councils and committees and the Ministerial Conferences, to provide technical assistance for developing countries, to analyse world trade, and to explain WTO affairs to the public and media.
The Secretariat also provides some forms of legal assistance in the dispute settlement process and advises governments wishing to become members of the WTO.
In addition to goods and services, it also covers a wide range of issues related to international trade, such as protection of intellectual property rights and dispute settlement, and prescribes disciplines for governments in formulation of rules, procedures, and practices in these areas. Moreover, it also imposes discipline at the firm level in certain areas, such as export pricing at unusually low prices.
The basic objective of the rule-based system of international trade under the WTO is to ensure that international markets remain open and their access is not disrupted by the sudden and arbitrary imposition of import restrictions.
Under the Uruguay Round, the national governments of all the member countries have negotiated improved access to the markets of the member countries so as to enable business enterprises to convert trade concessions into new business opportunities.
The emerging legal systems not only confer benefits on manufacturing industries and business enterprises but also create rights in their favour. The WTO also covers areas of interest to international business firms, such as customs valuation, pre-shipment inspection services, and import licensing procedures, wherein the emphasis has been laid on transparency of the procedures so as to restrain their use as non-tariff barriers.
The agreements also stipulate rights of exporters and domestic procedures to initiate actions against dumping of foreign goods. An international business manager needs to develop a thorough understanding of the new opportunities and challenges of the multilateral trading system under the WTO.
The WTO came into existence on 1 January 1995 as a successor to the General Agreements on Tariffs and Trade (GATT). Its genesis goes back to the post-Second- World-War period in the late 1940s when economies of most European countries and the US were greatly disrupted following the war and the great depression of the 1930s.
Consequently a United Nations Conference on Trade and Employment was convened at Havana in November 1947.
It led to an international agreement called Havana Charter to create an International Trade Organization (ITO), a specialized agency of the United Nations to handle the trade side of international economic cooperation.
The draft ITO charter was ambitious and extended beyond world trade discipline to rules on employment, commodity agreements, restrictive business practices, international investment, and services. However, the attempt to create the ITO was aborted as the US did not ratify it and other countries found it difficult to make it operational without US support.
The combined package of trade rules and tariff concessions negotiated and agreed by 23 countries out of 50 participating countries became known as General Agreement on Tariffs and Trade (GATT): an effort to salvage from the aborted attempt to create the ITO.
India was also a founder member of GATT, a multilateral treaty aimed
at trade liberalization. GATT provided a multilateral forum during
1948-94 to discuss the trade problems and reduction of trade barriers.
World
Trade Organization membership increased from 23 countries in 1947 to
123 countries by 1994. GATT remained a provisional agreement and
organization throughout these 47 years and facilitated considerably,
tariff reduction. During its existence from 1948 to 1994, average
tariffs on manufactured goods in developed countries declined from about
40 per cent to a mere 4 per cent.
The major function of the WTO is to ensure the flow of international trade as smoothly, predictably, and freely as possible. This is a multilateral trade organization aimed at evolving a liberalized trade regime under a rule-based system.
The basic functions of WTO are:
i. To facilitate the implementation, administration, and operation of trade agreements.
ii. To provide a forum for further negotiations among member countries on matters covered by the agreements as well as on new issues falling within its mandate.
iii. Settlement of differences and disputes among its member countries.
iv. To carry out periodic reviews of the trade policies of its member countries.
v. To assist developing countries in trade policy issues, through technical assistance and training programmes.
vi. To cooperate with other international organizations.
The organizational structure of WTO as summarized in Fig. 5.1, consists of the Ministerial Conference, General Council, council for each broad area, and subsidiary bodies.
First level – The Ministerial Conference:
The Ministerial Conference is the topmost decision-making body of the WTO, which has to meet at least once every two years.Second level – General Council:
Day-to-day work in between the Ministerial Conferences is handled by the following three bodies:i. The General Council
ii. The Dispute Settlement Body
iii. The Trade Policy Review Body
In fact, all these three bodies consist of all WTO members and report to the Ministerial Conference, although they meet under different terms of reference.
Third level – Councils for each broad area of trade:
There are three more councils, each handling a different broad area of trade, reporting to the General Council.i. The Council for Trade in Goods (Goods Council)
ii. The Council for Trade in Services (Services Council)
iii. The Council for Trade Related Aspects of Intellectual Property Rights (TRIPS Council)
Each of these councils consists of all WTO members and is responsible for the working of the WTO agreements dealing with their respective areas of trade. These three also have subsidiary bodies. Six other bodies, called committees, also report to the General Council, since their scope is smaller.
They cover issues, such as trade and development, the environment, regional trading arrangements, and administrative issues. The Singapore Ministerial Conference in December 1996 decided to create new working groups to look at investment and competition policy, transparency in government procurement, and trade facilitation.
Fourth level – Subsidiary bodies:
Each of the higher councils has subsidiary bodies that consist of all member countries.Goods Council:
It has 11 committees dealing with specific subjects, such as agriculture, market access, subsidies, anti-dumping measures, etc.
Services Council:
The subsidiary bodies of the Services Council deal with financial services, domestic services, GATS rules, and specific commitments.
Dispute settlement body:
It has two subsidiaries, i.e., the dispute settlement ‘panels’ of experts appointed to adjudicate on unresolved disputes, and the Appellate Body that deals with appeals at the General Council level. Formally all of these councils and committees consist of the full membership of the WTO. But that does not mean they are the same, or that the distinctions are purely bureaucratic.
In practice, the people participating in the various councils and committees are different because different levels of seniority and different areas of expertise are needed. Heads of missions in Geneva (usually ambassadors) normally represent their countries at the General Council level.
Some of the committees can be highly specialized and sometimes governments send expert officials from their countries to participate in these meetings. Even at the level of the Goods, Services, and TRIPS councils, many delegations assign different officials to cover different meetings.
All WTO members may participate in all councils, etc., except the Appellate Body, dispute settlement panels, textile monitoring body, and plurilateral committees.
The WTO has a permanent Secretariat based in Geneva, with a staff of around 560 and is headed by the Director-General. It does not have branch offices outside Geneva. Since decisions are taken by the members themselves, the Secretariat does not have the decision-making role those other international bureaucracies are given.
The Secretariat’s main duties are to extend technical support for the various councils and committees and the Ministerial Conferences, to provide technical assistance for developing countries, to analyse world trade, and to explain WTO affairs to the public and media.
The Secretariat also provides some forms of legal assistance in the dispute settlement process and advises governments wishing to become members of the WTO.
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