UNIVERSITY OF MUMBAI
PROJECT ON
"PROJECT ON A STUDY OF WTO"
MASTER OF COMMERCE (BANKING & FINANCE)
SUBJECT: INTERNATIONAL FINANCE
SEMESTER IІI
2015-2016
In Partial Fulfillment of the Requirement under Semester Based Credit
and Grading System for Post Graduated (PG)
Programmme under Faculty of Commerce
SUBMITTED BY
PARSHURAM OMKAR
ROLL NO: 38
PROJECT GUIDE
Prof. SHEETAL MODI
K.P.B Hinduja College of Commerce, 315 New Charni Road,
Mumbai 400004.
Page 1 of 33
ACKNOWLEDGEMENT
With great pleasure I than Mrs. MRILANILI RAVALEKAR Professor of
K.P.B.HINDUJA college of Commerce for being an inspiration in the
completion of this project. I thank for her invaluable help provided during the
completion of this project. I also thank her for providing me guidance and
numerous suggestions throughout entire duration of the project. I am thankful
for invaluable help without which this project would not have materialized.
I express my deep gratitude to my entire college friend and my family members
whose efforts and creativity helped us in giving the final structure to the project
work.
I am also thankful to all those seen and unseen hands and hands, which have
been of help in the completion of this project work.
Page 2 of 33
CERTIFICATE
This is certify that Mr. PARSHURAM.BABU.OMKAR of M.Com. Banking &
Finance 2nd Semester (2015-2016) has successfully completed the Project on
"PROJECT ON STUDY OF WTO".
Under the guidance of Mrs. SHEETAL MODI
Project Guide ________________________
Course Coordinator ________________________
Internal Examiner ________________________
External Examiner ________________________
Principal ________________________
Date________________
Place: Mumbai
Page 3 of 33
M.Com (Banking and Finance)
3rd SEMESTER
"PROJECT ON STUDY OF WTO"
SUBMITTED BY
PARSHURAM.BABU.OMKAR
ROLL NO: 44
Page 4 of 33
DECLARATION
I Mr. PARSHURAM.BABU.OMKAR the student of M.com (Banking and
Finance), 2nd Semester (2015-2016), hereby declares that I have completed the
project on "PROJECT ON STUDY OF WTO"
The information submitted is true and original to the best of my knowledge.
PARSHURAM.BABU.OMKAR
(Signature)
Page 5 of 33
INDEX
SR NO CHAPTER PAGE NO
CH 1 INTRODUCTION OF WTO
CH 2 HISTORY
CH 3 OBJECTIVES OF WTO
CH 4 FUNCTIONS OF WTO
CH 5 PRINCIPLES OF THE TRADING SYSTEM
CH 6 ORGANIZATIONAL STRUCTURE
CH 7 MEMBERS AND OBSERVERS
CH 8 AGREEMENTS
CH 9 DISPUTE SETTLEMENT
CH 10 INDIA’S ROLE IN FORMING WTO
Page 6 of 33
CHAPTER 1: INTRODUCTION
The World Trade Organization (WTO) is an organization that intends to supervise and
liberalize international trade. The organization officially commenced on January 1, 1995
under the Marrakech Agreement, replacing the General Agreement on Tariffs and Trade
(GATT), which commenced in 1948. The organization deals with regulation of trade between
participating countries; it provides a framework for negotiating and formalizing trade
agreements, and a dispute resolution process aimed at enforcing participants adherence to
WTO agreements which are signed by representatives of member governments and ratified
by their parliaments. Most of the issues that the WTO focuses on derive from previous trade
negotiations, especially from the Uruguay Round (1986–1994).
The organization is attempting to complete negotiations on the Doha Development Round,
which was launched in 2001 with an explicit focus on addressing the needs of developing
countries. As of June 2012, the future of the Doha Round remains uncertain: The work
programme lists 21 subjects in which the original deadline of 1 January 2005 was missed (So
was the next unofficial target of the end of 2006.) The further imposition of free trade on
industrial goods and services and the protectionism on farm subsidies to domestic agricultural
sector requested from the developed countries, and the substantiation of the international
liberalization of fair trade on agricultural products from developing countries remain the
major obstacles. These points of contention have hindered any progress to launch new WTO
negotiation beyond the Doha Development Round. As a result of this impasse, there has been
an increasing amount of bilateral free trade agreements.
WTO's current Director-General is Pascal Lamy, who leads a staff of over 600 people in
Geneva, Switzerland.
Page 7 of 33
CHAPTER 2: HISTORY
The WTO's predecessor, the General Agreement on Tariffs and Trade (GATT), was
established after World War II in the wake of other new multilateral institutions dedicated to
international economic cooperation notably the Bretton Woods institutions known as the
World Bank and the International Monetary Fund. A comparable international institution for
trade, named the International Trade Organization was successfully negotiated. The ITO was
to be a United Nations specialized agency and would address not only trade barriers but other
issues indirectly related to trade, including employment, investment, restrictive business
practices, and commodity agreements. But the ITO treaty was not approved by the U.S. and a
few other signatories and never went into effect.
In the absence of an international organization for trade, the GATT would over the years
"transform itself" into a de facto international organization.
GATT rounds of negotiations
The GATT was the only multilateral instrument governing international trade from 1946 until
the WTO was established on January 1, 1995. Despite attempts in the mid-1950s and 1960s
to create some form of institutional mechanism for international trade, the GATT continued
to operate for almost half a century as a semi-institutionalized multilateral treaty regime on a
provisional basis.
General Agreement on Tariffs and Trade (GATT)
The General Agreement on Tariffs and Trade (GATT) is a multilateral agreement regulating
international trade. According to its preamble, its purpose is the "substantial reduction of
tariffs and other trade barriers and the elimination of preferences, on a reciprocal and
mutually advantageous basis."
It was negotiated during the UN Conference on Trade and Employment and was the outcome
of the failure of negotiating governments to create the International Trade Organization
(ITO). GATT was signed in 1947 and lasted until 1993, when it was replaced by the World
Trade Organization in 1995. The original GATT text (GATT 1947) is still in effect under the
WTO framework, subject to the modifications of GATT 1994.
Page 8 of 33
GATT and the World Trade Organization
In 1993, the GATT was updated (GATT 1994) to include new obligations upon its
signatories. One of the most significant changes was the creation of the World Trade
Organization (WTO). The 75 existing GATT members and the European Communities
became the founding members of the WTO on 1 January 1995. The other 52 GATT members
rejoined the WTO in the following two years (the last being Congo in 1997). Since the
founding of the WTO, 21 new non-GATT members have joined and 29 are currently
negotiating membership.
There are a total of 155 member countries in the WTO, with Montenegro and Samoa being
new members as of 2012.
Of the original GATT members, Syria and the SFR Yugoslavia has not rejoined the WTO.
Since FR Yugoslavia, (renamed to Serbia and Montenegro and with membership negotiations
later split in two), is not recognised as a direct SFRY successor state; therefore, its
application is considered a new (non-GATT) one. The General Council of WTO, on 4 May
2010, agreed to establish a working party to examine the request of Syria for WTO
membership. The contracting parties who founded the WTO ended official agreement of the
"GATT 1947" terms on 31 December 1995. Serbia and Montenegro are in the decision stage
of the negotiations and are expected to become the newest members of the WTO in 2012 or
in near future.
Whilst GATT was a set of rules agreed upon by nations, the WTO is an institutional body.
The WTO expanded its scope from traded goods to include trade within the service sector
and intellectual property rights. Although it was designed to serve multilateral agreements,
during several rounds of GATT negotiations (particularly the Tokyo Round) plurilateral
agreements created selective trading and caused fragmentation among members. WTO
arrangements are generally a multilateral agreement settlement mechanism of GATT.
Page 9 of 33
CHAPTER 3: Objectives and operation
The WTO has six key objectives:
1. to set and enforce rules for international trade,
2. to provide a forum for negotiating and monitoring further trade liberalization,
3. to resolve trade disputes,
4. to increase the transparency of decision-making processes,
5. to cooperate with other major international economic institutions involved in global
economic management, and
6. to help developing countries benefit fully from the global trading system. Although
shared by the GATT, in practice these goals have been pursued more
comprehensively by the WTO. For example, whereas the GATT focused almost
exclusively on goods—though much of agriculture and textiles were excluded—the
WTO encompasses all goods, services, and intellectual property, as well as some
investment policies.
In addition, the permanent WTO Secretariat, which replaced the interim GATT Secretariat,
has strengthened and formalized mechanisms for reviewing trade policies and settling
disputes. Because many more products are covered under the WTO than under the GATT and
because the number of member countries and the extent of their participation has grown
steadily—the combined share of international trade of WTO members now exceeds 90
percent of the global total—open access to markets has increased substantially.
The rules embodied in both the GATT and the WTO serves at least three purposes. First, they
attempt to protect the interests of small and weak countries against discriminatory trade
practices of large and powerful countries. The WTO’s most-favoured-nation and national-
treatment articles stipulate that each WTO member must grant equal market access to all
other members and that both domestic and foreign suppliers must be treated equally. Second,
the rules require members to limit trade only through tariffs and to provide market access not
less favourable than that specified in their schedules (i.e., the commitments that they agreed
to when they were granted WTO membership or subsequently). Third, the rules are designed
to help governments resist lobbying efforts by domestic interest groups seeking special
favours.
Page 10 of 33
Although some exceptions to the rules have been made, their presence and replication in the
core WTO agreements were intended to ensure that the worst excesses would be avoided. By
thus bringing greater certainty and predictability to international markets, it was thought; the
WTO would enhance economic welfare and reduce political tensions.
Page 11 of 33
CHAPTER 4: Functions
Among the various functions of the WTO, these are regarded by analysts as the most
important:
It oversees the implementation, administration and operation of the covered
agreements.
It provides a forum for negotiations and for settling disputes.
Additionally, it is the WTO's duty to review and propagate the national trade policies, and to
ensure the coherence and transparency of trade policies through surveillance in global
economic policy-making. Another priority of the WTO is the assistance of developing, least-
developed and low-income countries in transition to adjust to WTO rules and disciplines
through technical cooperation and training.
The WTO is also a center of economic research and analysis: regular assessments of the
global trade picture in its annual publications and research reports on specific topics are
produced by the organization. Finally, the WTO cooperates closely with the two other
components of the Bretton Woods system, the IMF and the World Bank.
Page 12 of 33
CHAPTER 5: Principles of the trading system
The WTO establishes a framework for trade policies; it does not define or specify outcomes.
That is, it is concerned with setting the rules of the trade policy games. Five principles are of
particular importance in understanding both the pre-1994 GATT and the WTO:
Non-discrimination: It has two major components: the most favoured nation (MFN) rule,
and the national treatment policy. Both are embedded in the main WTO rules on goods,
services, and intellectual property, but their precise scope and nature differ across these areas.
The MFN rule requires that a WTO member must apply the same conditions on all trade with
other WTO members, i.e. a WTO member has to grant the most favorable conditions under
which it allows trade in a certain product type to all other WTO members. "Grant someone a
special favour and you have to do the same for all other WTO members." National treatment
means that imported goods should be treated no less favorably than domestically produced
goods (at least after the foreign goods have entered the market) and was introduced to tackle
non-tariff barriers to trade (e.g. technical standards, security standards et al. discriminating
against imported goods).
Reciprocity: It reflects both a desire to limit the scope of free-riding that may arise because
of the MFN rule, and a desire to obtain better access to foreign markets. A related point is
that for a nation to negotiate, it is necessary that the gain from doing so be greater than the
gain available from unilateral liberalization; reciprocal concessions intend to ensure that such
gains will materialise.
Binding and enforceable commitments: The tariff commitments made by WTO members
in a multilateral trade negotiation and on accession are enumerated in a schedule (list) of
concessions. These schedules establish "ceiling bindings": a country can change its bindings,
but only after negotiating with its trading partners, which could mean compensating them for
loss of trade. If satisfaction is not obtained, the complaining country may invoke the WTO
dispute settlement procedures.
Transparency: The WTO members are required to publish their trade regulations, to
maintain institutions allowing for the review of administrative decisions affecting trade, to
respond to requests for information by other members, and to notify changes in trade policies
to the WTO. These internal transparency requirements are supplemented and facilitated by
periodic country-specific reports (trade policy reviews) through the Trade Policy Review
Page 13 of 33
Mechanism (TPRM). The WTO system tries also to improve predictability and stability,
discouraging the use of quotas and other measures used to set limits on quantities of imports.
Safety valves: In specific circumstances, governments are able to restrict trade. The WTO’s
agreements permit members to take measures to protect not only the environment but also
public health, animal health and plant health.
There are three types of provision in this direction:
articles allowing for the use of trade measures to attain non-economic objectives;
articles aimed at ensuring "fair competition"; members must not use environmental
protection measures as a means of disguising protectionist policies.
provisions permitting intervention in trade for economic reasons.
Exceptions to the MFN principle also allow for preferential treatment of developing
countries, regional free trade areas and customs unions.
Page 14 of 33
CHAPTER 6: Organizational structure
The General Council has the following subsidiary bodies which oversee committees in
different areas:
1. Council for Trade in Goods:
There are 11 committees under the jurisdiction of the Goods Council each with a
specific task. All members of the WTO participate in the committees. The Textiles
Monitoring Body is separate from the other committees but still under the jurisdiction
of Goods Council. The body has its own chairman and only 10 members. The body
also has several groups relating to textiles.
2. Council for Trade-Related Aspects of Intellectual Property Rights:
Information on intellectual property in the WTO, news and official records of the
activities of the TRIPS Council, and details of the WTO's work with other
international organizations in the field.
3. Council for Trade in Services:
The Council for Trade in Services operates under the guidance of the General Council
and is responsible for overseeing the functioning of the General Agreement on Trade
in Services (GATS). It is open to all WTO members, and can create subsidiary bodies
as required.
4. Trade Negotiations Committee:
The Trade Negotiations Committee (TNC) is the committee that deals with the current
trade talks round. The chair is WTO's director-general. As of June 2012 the
committee was tasked with the Doha Development Round.
The Service Council has three subsidiary bodies: financial services, domestic regulations,
GATS rules and specific commitments. The General council has several different
committees, working groups, and working parties. There are committees on the following:
Trade and Environment; Trade and Development (Subcommittee on Least-Developed
Countries); Regional Trade Agreements; Balance of Payments Restrictions; and Budget,
Finance and Administration. There are working parties on the following: Accession. There
are working groups on the following: Trade, debt and finance; and Trade and technology
transfer.
Page 15 of 33
The Ministerial Conference (MC) is at the top of the structured organization of the WTO. It is
the supreme governing body which takes ultimate decisions on all matters. It is constituted by
representative (usually, Ministers of Trade) all the member countries.
The General Council (GC) is composed of the representatives of all the members. It is the
real engine of WTO which acts on behalf of the MC. It also acts as the Dispute Settlement
Body as well as the Trade Policy Review Body.
There are three councils viz: the Council for Trade Related Aspects of Intellectual Property
Rights (TRIPS) operating under the GC. These councils with their subsidiary bodies carry out
their specific responsibilities.
Further there are three committee, viz, the committee on Balance of Payments Restrictions
(CBOPR) and the committee o Budget, Finance and Administration (CFBA) which execute
the functions assigned to them by the WTO Agreement and the GC.
Page 16 of 33
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 statement of the WTO are presented by the DG to the CBFA for reivew and
recommendations for the final approval by the GC.
The Ministerial Conference
The Ministerial Conference is the governing body of the WTO. It has the authority to adopt
final decisions on all WTO matters. It meets at least once every two years for about four
days, and is composed of trade ministers of all Members. Any Member can offer to host the
Ministerial Conference, and Members decide on the venue by consensus. The next
Conference is scheduled to take place in December 2005 in Hong Kong.
The trade minister of the host country usually chairs the Ministerial Conference and can play
a significant role. For example, after the collapse of the Conference in Cancún in 2003, some
participants pointed the finger at the Mexican trade minister (and conference chair) Luis
Ernesto Derbez, saying that he had decided to end the meeting prematurely although there
was still a chance of reaching agreement.
Ministerial Conferences are where final decisions, such as whether to launch new
negotiations, are taken. Members begin preparing for Ministerials months in advance. This
often involves intense negotiations in Geneva where delegates discuss numerous draft
Ministerial texts for ministers to decide upon during the Conference, usually leaving the most
contentious issues to be determined at the ministerial level.
In practice, only issues concerning the strategic directions of the WTO are decided there, the
bulk of the WTO’s work being carried out by councils and committees that meet throughout
the year in Geneva.
NGOs who can demonstrate genuine interest in trade are eligible for accreditation to
Ministerials, which is not the case for other WTO bodies. Almost 800 NGOs – including
business groups – were accredited to participate in the Cancún Ministerial Conference.
However,unlike the UN, where the Credentials Committee of ECOSOC has clear procedures
for granting NGOs consultative status, the WTO’s selection criteria are not clearly defined,
and remain ad hoc. Since the Seattle Ministerial Conference in 1999, which saw
unprecedented street protests, the WTO Secretariat has placed increasingly strict controls on
Page 17 of 33
the number of accredited NGO personnel that may attend. In Doha in 2001, each accredited
NGO was allowed only two passes to enter the Conference site; in Cancún, NGOs were only
allowed one.
WTO Ministerial Conferences
The General Council
The General Council is the highest ruling body of the WTO when the Ministerial Conference
is not in session, and the only one which can make binding decisions outside the Ministerial
Conference. For instance, in July 2004 the General Council adopted a package of agreements,
referred to as the July Framework, which effectively broke months of deadlock following the
collapse of minister-level talks in Cancún in September 2003.
The General Council can meet whenever Members want. In practice its meetings usually take
place every two months, and are attended by the highest rank of trade diplomats in Geneva,
mostly ambassadors. It is common practice for the General Council to elect its chairperson
and those of other WTO bodies during its first meeting of the calendar year. The Council’s
meetings are often preceded by informal sessions that are not announced publicly.
The functions of the General Council are wide-ranging:
it follows up on issues arising from Ministerials
it oversees the operation of WTO agreements, and shares with the Ministerial Council
the
responsibility of adopting interpretations of the WTO Agreement. An example is its
2003
decisions on TRIPS and public health.
it grants and extends waivers from WTO rules, on behalf of the Ministerial
Conference. An example is the ‘Kimberley Process’ waiver, to prevent trade in ‘blood
diamonds’.
Page 18 of 33
it meets as the Trade Policy Review Body (TPRB) and the Dispute Settlement Body
(DSB); the two bodies and the General Council are considered as ‘second level’
bodies after the Ministerial Conference.
it deals with accession-related matters, including authorizing the accession of new
Members when the Ministerial Conference is not in session. For accession matters,
the General Council decides on the establishment of working parties on accession,
and endorses accession packages upon completion of negotiations.
it supervises the overall conduct of negotiations such as the Doha Work Programme.
Since the Trade Negotiations Committee (TNC) was set up to carry out the Doha
negotiations, the General Council has regularly reviewed its work under a standing
agenda item. The TNC reports to each regular meeting of the General Council on the
activities of its negotiating groups.
The General Council also deals with systemic issues (such as selection of Directors-
General and external transparency), and performs specific tasks assigned to it by the
Ministerial Conference.
Decision-making
The WTO describes itself as "a rules-based, member-driven organization — all decisions are
made by the member governments, and the rules are the outcome of negotiations among
members". The WTO Agreement foresees votes where consensus cannot be reached, but the
practice of consensus dominates the process of decision-making.
Richard Harold Steinberg (2002) argues that although the WTO's consensus governance
model provides law-based initial bargaining, trading rounds close through power-based
bargaining favouring Europe and the U.S., and may not lead to Pareto improvement.
CHAPTER 7: Members and Observers
Page 19 of 33
The WTO has 157 members and 27 observer governments. In addition to states, the European
Union is a member. WTO members do not have to be full sovereign nation-members.
Instead, they must be a customs territory with full autonomy in the conduct of their external
commercial relations. Thus Hong Kong (as "Hong Kong, China" since 1997) became a
GATT contracting party, and the Republic of China (Taiwan) acceded to the WTO in 2002 as
"Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu" (Chinese Taipei)
despite its disputed status. The WTO Secretariat omits the official titles (such as Counselor,
First Secretary, Second Secretary and Third Secretary) of the members of Chinese Taipei's
Permanent Mission to the WTO, except for the titles of the Permanent Representative and the
Deputy Permanent Representative.
Iran is the biggest economy outside the WTO. With the exception of the Holy See, observers
must start accession negotiations within five years of becoming observers. A number of
international intergovernmental organizations have also been granted observer status to WTO
bodies. 14 states and two territories so far have no official interaction with the WTO.
WTO accession progress:
Members (including dual-representation with the European Union)
Draft Working Party Report or Factual Summary adopted
Goods and/or Services offers submitted
Memorandum on Foreign Trade Regime (FTR) submitted
Observer, negotiations to start later or no Memorandum on FTR submitted
Frozen procedures or no negotiations in the last 3 years
Page 20 of 33
No official interaction with the WTO
7.1 Agreements
The WTO oversees about 60 different agreements which have the status of international legal
texts. Member countries must sign and ratify all WTO agreements on accession. A discussion
of some of the most important agreements follows. The Agreement on Agriculture came into
effect with the establishment of the WTO at the beginning of 1995. The AoA has three
central concepts, or "pillars": domestic support, market access and export subsidies. The
General Agreement on Trade in Services was created to extend the multilateral trading
system to service sector, in the same way as the General Agreement on Tariffs and Trade
(GATT) provided such a system for merchandise trade. The agreement entered into force in
January 1995. The Agreement on Trade-Related Aspects of Intellectual Property Rights sets
down minimum standards for many forms of intellectual property (IP) regulation. It was
negotiated at the end of the Uruguay Round of the General Agreement on Tariffs and Trade
(GATT) in 1994.
The Agreement on the Application of Sanitary and Phytosanitary Measures—also known as
the SPS Agreement—was negotiated during the Uruguay Round of GATT, and entered into
force with the establishment of the WTO at the beginning of 1995. Under the SPS agreement,
the WTO sets constraints on members' policies relating to food safety (bacterial
contaminants, pesticides, inspection and labelling) as well as animal and plant health
(imported pests and diseases). The Agreement on Technical Barriers to Trade is an
international treaty of the World Trade Organization. It was negotiated during the Uruguay
Round of the General Agreement on Tariffs and Trade, and entered into force with the
establishment of the WTO at the end of 1994. The object ensures that technical negotiations
and standards, as well as testing and certification procedures, do not create unnecessary
obstacles to trade". The Agreement on Customs Valuation, formally known as the Agreement
on Implementation of Article VII of GATT, prescribes methods of customs valuation that
Members are to follow. Chiefly, it adopts the "transaction value" approach.
CHAPTER 8: DISPUTE SETTLEMENT
Page 21 of 33
In 1994, the WTO members agreed on the Understanding on Rules and Procedures
Governing the Settlement of Disputes (DSU) annexed to the "Final Act" signed in Marrakesh
in 1994. Dispute settlement is regarded by the WTO as the central pillar of the multilateral
trading system, and as a "unique contribution to the stability of the global economy". WTO
members have agreed that, if they believe fellow-members are violating trade rules, they will
use the multilateral system of settling disputes instead of taking action unilaterally.
The operation of the WTO dispute settlement process involves the DSB panels, the Appellate
Body, the WTO Secretariat, arbitrators, independent experts and several specialized
institutions. Bodies involved in the dispute settlement process, World Trade Organization.
The Dispute Settlement Mechanism
The Dispute Settlement Mechanism (DSM) is a quasi-judicial system for resolving trade
disputes. The Dispute Settlement Body (DSB) can authorize trade retaliation measures, or
‘suspension of concessions’ in WTO jargon if Members do not comply with DSM panel or
Appellate Body rulings. This particular enforcement mechanism of the WTO regime, though
a last resort, remains unique among international tribunals.
The DSB is composed of all WTO Members. Its functions are:
to establish panels which examine the case in dispute
to appoint the members of the standing Appellate Body
to adopt reports of panels and the Appellate Body (the body which deals with appeals)
to monitor implementation of rulings and recommendations
to authorize sanctions or retaliation measures under the WTO agreements
to adjudicate cases on textiles and clothing if they are not resolved by the Textiles
Monitoring Body (TMB), the only other WTO body dealing with disputes
The WTO dispute settlement mechanism is arguably more efficient and effective than almost
any other international tribunal dealing with non-criminal matters. The DSM sets clear
timeframes for different stages in resolving trade disputes among Members, which avoids
cases dragging on for a long time. It usually takes between 12 to 18 months to settle a
dispute, but the application of rulings often takes longer.
The system nevertheless seems slow to traders, especially when the disputed measures are
temporary in nature. For example, the US decision to impose temporary (for three years)
Page 22 of 33
higher tariffs on certain steel products triggered a dispute case in March 2002. By the time
the DSB made a final decision in December 2003 that the measures were illegal, the higher
tariffs had been in place for 19 months, long enough for significant harm to have been caused
to countries and companies exporting steel to the US. It is also worth noting that dispute
complaints are typically filed at the request of business interests, who usually seek their own
– expensive – legal advice before turning to their government to request it to take up their
case.
The mechanism applies to all WTO agreements, and can cover plurilateral agreements as
well, should parties to these agreements so decide. It applies only to WTO agreements: a
Member can only turn to the DSM for resolution of a dispute concerning a WTO rule. The
DSM will therefore only rule on other matters, such as environmental policy, human rights or
social questions, if these arise in a dispute concerning a WTO rule, as was the case in the
Shrimp-Turtle dispute.
The Shrimp-Turtle Case
Nevertheless, the concern remains that the broad reach of WTO rules and their implications
for a wide array of domestic policies makes the DSM a particular threat because it ensures
strong enforcement of rules designed to favour trade liberalization, rather than to promote
well-being or respect for human rights.
CHAPTER 9:India’s role in forming WTO
Page 23 of 33
When the Uruguay round of GATT talks was in progress during early 1990s, Indian economy
was ailing and was totally out of track. Under this compelling situation, India adopted new
economic reforms (NERS) in 1991 based on Rao-Manmohan Model as a crisis driven
strategy. Macro Economic Stabilization (MES) which covered reforms in monetary policy,
fiscal policy and external sector was brought to provide immediate relief to ailing economy.
But, structural reforms, also called SAP(Structural Adjustment Programmes), was meant for
long term reform process which covered components of industrial policy reform, PSU
reform, financial sector reform and trade & capital flow reforms. Then crisis-driven reforms
has now reached to consensus driven under second generation of our reform policies. These
changes in Indian economy based on LPG gave rise to a new market economy that brought
growth and development in India. In this context, the emergence of WTO as multilateral trade
body to make trade friendly environment at the global level and Indian attachment to this
body could be understood.
India one of the founder member of WTO, had its own expectations as well as reservations
about the new economic order. While it unleashed great opportunities for agriculture and
textiles sectors by improving their access to developed countries (as provided by AoA-
Agreement on Agriculture and phasing out of MFA- Multi Fiber Agreement), it has some
grey areas in the form of provisions for patent regime and services sector. As the events
gradually unfolded, India, like other developing countries recognized that the rules of the
game were not favorable to them and they must play on active role within the permissible
limits to minimize the damage. In the last decade, our economic agenda and the policies to be
pursued have been largely shaped by the WTO commitments.
India adopted the process of globalization and WTO rulings as a facet of structural reforms. It
brought devaluation in currency in 1991 and also adopted convertibility system in Indian
rupees in different stages. Trade and current account have been made fully convertibility
regime, though cautious and as a long term objective. Various steps have been taken towards
import liberalization in India, for example, de-licensing, de-canalization &expansion of OGL
(open general license),removing quantitative restriction, lowering peak custom rate, etc,.
India has also adopted a very liberal policy towards foreign capital to attract direct foreign
investment and portfolio investment. Insurance and print media have been opened for private
competition. India has made following changes in the economy as mandated by WTO.
Page 24 of 33
Quantitative restrictions have been completely phased out in 2000-01 and only the
tariff structure remains which itself has been lowered considerably, with 67% of the
tariff lines being bound.
Patent law has been reformed with amendment of Patent act (2006). It provides for
product patent in pharmaceutical and farm products.
Under the TRIMS agreement, restrictions on entry of foreign investment and
conditions upon various aspects have been removed and relaxed. Except a few
sectors, FDI is being allowed upto 100% though automatic route and Indian
companies are also free to invest abroad.
Under the GATS (General Agreement on Trade in Services), India has made
commitment in 33 activities where Foreign Service providers are allowed to enter
keeping in view national interests.
India’s legislation on Custom Valuation rules, 1998 has been amended to bring it in
conformity with the provisions of WTO agreements on implementation of article VII
of GATT 1994 and the Customs Valuation Agreement.
A survey of last 15 years since adoption of new economic reforms and especially after
joining WTO, it is now clear that we have done well and still a lot of scope remained for
further development. The process of globalization and the provision of WTO have had, no
doubt, some important positive implications. Under this process, a platform has been created
for different types of multilateral agreements. Multilateral regulation and discipline have been
established & imposed and up to certain extent, trade friendly environment has been created.
Disputes are being solved & managed and trading activities are getting protection. India is
also getting the benefits of this emerging trade friendly environment.
Indian exports, especially exports of agricultural good, have been increased. The Doha
development Agenda, though passing through hard times; is built on the long term objective
of the AOA to establish a fair and a market oriented trading system. India could be highly
advantaged with DDA. During the ongoing negotiations, India and other developing
countries have sought a special safeguard mechanism (SSM) for addressing situations of
import surges or swings in international prices of agricultural products. Other measures
concerning developing countries in the WTO agreements include:
Extra time for developing countries to fulfill their commitments (in many of the WTO
agreements)
Page 25 of 33
Provisions designed to increase developing countries’ trading opportunities through
greater market access (e.g. in textiles, services, technical barriers to trade)
Provisions requiring WTO members to safeguard the interests of developing countries
when adopting some domestic or international measures (e.g. in anti-dumping,
safeguards, technical barriers to trade)
Provisions for various means of helping developing countries (e.g. to deal with
commitments on animal and plant health standards, technical standards, and in
strengthening their domestic telecommunications sectors).
The WTO agreements, which were the outcome of the 1986–94 Uruguay Round of trade
negotiations, provide numerous opportunities for developing countries to make gains. Further
liberalization through the Doha Agenda negotiations aims to improve the opportunities.
Among the gains are export opportunities. They include:
Fundamental reforms in agricultural trade
Phasing out quotas on developing countries’ exports of textiles and clothing
Reductions in customs duties on industrial products
Expanding the number of products whose customs duty rates are “bound” under the
WTO, making the rates difficult to raise
Phasing out bilateral agreements to restrict traded quantities of certain goods—these
“grey area” measures (the so-called voluntary export restraints) are not really
recognized under GATT-WTO.
Page 26 of 33
World Trade Statistics
The WTO Secretariat and its predecessor – the General Agreement on Tariffs and Trade
(GATT) Secretariat – have been providing trade statistics since 1948. These data have been
regularly published in annual reports, which have changed in design and coverage over the
years to keep up with the changing needs of users of the reports.
Volume of world merchandise exports 1990-2011
Source: WTO Secretariat
Page 27 of 33
CONCLUSION
The world has changed a good deal over those six decades and so too has the multilateral
trading system. Globalization has brought economic interaction among nations closer than
ever before, thanks in no small part to revolutions in information and transport technology
and growing openness in government policy. The trend towards increased inter-dependency
has rendered international economic co-operation more complex and multi-faceted. Co-
operation among nations has become harder to manage and more influential in shaping the
circumstances in which people live. The subject matter covered by the system has expanded
significantly and many more players are involved in shaping the system. The 23 original
signatories of the GATT have now become the 151 Members of the WTO.
Governments embrace varying objectives at different times, reflecting, among other things,
the relative standing of their economies in the international order, and the priorities imposed
by their level of economic development. By demonstrating the sheer heterogeneity of
interests at stake, the report highlights the fragile and incomplete nature of cooperative
endeavors in a changing and uncertain world – in other words, the continuing challenge of
shaping and maintaining mutually advantageous co-operative arrangements. Effective co-
operation among diverse economies with differing priorities requires clarity of thought and
foresight, as well as a willingness to seek accommodation. A failure to secure co-operative
outcomes may well disadvantage all parties to a potential agreement in one way or another,
but deals can nevertheless prove elusive. An additional requirement for sustainable and stable
co-operation is that governments find ways of addressing adjustment costs and the re-
distributional impact of change – in other words, of managing the challenges of globalization.
Adjustment and income distribution have not been explored here, and they pose challenges
that go well beyond the impact of trade policy changes in an economy.
An historical review of trade relations prior to the establishment of the GATT/WTO strongly
points to the importance of building and sustaining institutional arrangements to underwrite
international trade relations. International institutions can become moribund, with shrinking
relevance, if governments do not take care of them, and institutional decline will likely be
harder to reverse the further it goes. At the same time, it has been repeatedly demonstrated
that if institutions do not adapt to change, they will wither,
Page 28 of 33
BIBILOGRAPHY
A) Reference Books:-
• AUTHOR'S NAME:-Johnson & Mascarenhas
• TITLE OF BOOK :-Economics of Global Trade and Finance
•PUBLICATION:-Manan Prakashan
B) JOURNALS- Budget news – 1st March 2007
C) E-DATA:-
https://www.google.com/doc/27499678/Fiscal-Policy-of-India
https://doc/47578785/Role-of-Moenetary-and-Fiscal-policies-in-Economic-
DevelopmentBIBLIOGRAPHY
www.wto.org
www.britannica.com
en.wikipedia.org
Page 29 of 33
Page 30 of 33
Page 31 of 33
Page 32 of 33
Page 33 of 33
Recommended