World Trade Organization (WTO) and Major Agreements
As regards IMF and the World Bank, it was decided originally at the Bretton Woods conference to establish the International Trade Organisation (ITO) to encourage and facilitate foreign trade amid the member countries and to surmount different limitations and discriminations that were in use at that time. But it was not possible to put it to practice due to strict hostility from the US. Instead of totally discarding the idea, the countries that used to participate at the Bretton Woods conference decided on having some kind of agreement amid themselves in order to slacken the world from high customs rates and other different types of limitations in trend at that time. This agreement was called the General Agreement for Tariffs and Trade (GATT). GATT came into practice from 1st January 1948 and was in force till December 1994. Numerous rounds of discussions and talks were conducted under the support of GATT to reduce tariff and non-tariff hurdle. The last one, called the Uruguay Round, was the most widespread one with regards to coverage of issues, and also the longest one with regards to the view of period of discussions and talks which went for over a period of seven years from 1986 to 1994. One of the major accomplishments of the Uruguay Round of GATT discussions was the judgment to establish a stable institution for looking after the advancement of free and fair trade amid countries. As a result of this agreement, with effect from 1st January 1995, the GATT was changed to World Trade Organisation (WTO). Geneva, Switzerland is the head quarters of WTO. Setting up of WTO, hence, symbolizes the execution of the initial proposition of establishing the ITO has emerged nearly five decades ago. Though, WTO is a successor to GATT, it is an even more powerful organization than GATT. It regulates trade not only in goods, but also in services and intellectual property rights. Unlike GATT, the WTO is a stable body shaped by an international treaty sanctioned by the governments and legislatures of member states. It is indeed a member-driven rule-based body which means that all the decisions are taken by the member governments based on a general agreement. As the primary foreign body dealing with solving trade issues between nations and offering a forum for multilateral trade discussions, it has a universal position like that of the IMF and the World Bank. India is a pioneer member of WTO. There were 149 members in WTO as on 11th December 2005.
Objectives of WTO
The basic aims of WTO are the same as that of GATT, i.e., improving the quality of living and incomes, fulfill employment requirements, increase manufacture and trade, and fair use of the global resources. The main difference between the aims and principles of GATT and WTO is that those of WTO are more precise and exact and also extend the scope of WTO to cover trade in services. In addition, WTO objectives, talk of the idea of 'sustainable development' in relation to the fair use of the global resources in order to ensure safety and conservation of the environment. With the above discussion in mind, we can say more openly that the following are the main objectives of WTO:
- To ensure reduction of tariffs and other trade hurdles forced by different countries;
- To involve in those activities that raise the standards of living, increase income, create employment, and effective demand and facilitate higher production and trade;
- To facilitate the fair use of the global resources for sustainable growth; and
- To encourage an integrated, more practical and stronger trading system.
Functions of WTO
The main tasks of WTO comprise:
- Encouraging an environment that promotes its member countries to approach WTO in justifying their objections;
- Setting up a generally accepted code of conduct in order to reduce trade hurdles including tariffs and bring an end to discriminations in foreign trade affairs;
- Acting as a dispute settlement organisation;
- Ensuring that all the rules and regulations mentioned in the Act are followed promptly by the member countries for solving their issues;
- Raising consultations with IMF and IBRD and its associated agencies in order to bring an understanding and mutual cooperation in making international economic policy; and
- Managing on a regular basis the processes of the amended Agreements and Ministerial declarations pertaining to goods, services and Trade Related Intellectual Property Rights (TRIPS).
Benefits of WTORight from its start in 1995, WTO has traveled a long way in forming the legal and institutional base of the present day multilateral trading system. It has been influential in not only smoothing the progress of trade, but also in increasing living standards and cooperation amid member nations. Some of the main advantages of WTO are listed below:
- WTO encourages international peace and smoothens overseas business.
- All issues amongst member countries are solved with mutual discussions.
- International trade and relations are made very smooth and predictable by Rules.
- Free trade upgrades the living standard of the people by raising the income level.
- Free trade offers plenty of scopes of getting a wide range of qualitative products.
- Economic growth has been secured because of free trade.
- The system promotes good government.
- WTO provides developing countries with special and preferential treatment in trade related matters thereby fostering their growth.
GATT covered only rules pertaining to trade in goods, whereas WTO agreements protect trade in goods, services as well as intellectual property. The agreements include the procedure for solving issues and also facilitate special treatment to upcoming nations. The agreements command the governments to make their trade policies clear by information the WTO office about the rules and regulations adopted towards trade liberalization. Major WTO agreements are outlined below:
Agreements Forming Part of GATT: After its substantial modification in 1994 (effected as part of the Uruguay Round of negotiations), the previous General Agreement on Tariffs and Trade (GATT) is very much part of the WTO agreements. GATT also includes certain special arrangement developed to deal with certain non-tariff hurdles, besides the general policies of trade liberalization. A few of the specific agreements involved in the GATT are listed in the bank on GATT 1994 major agreements.
Agreement on Textile and Clothing (ATC): This agreement was developed under WTO to point out the quota limitations that were forced by the developed countries on exports of textiles and clothing from the developing nations. The developed nations were striking various kinds of quota limitations under the Multi- Fiber Arrangement (MFA) which was in it a major deviation from the GATT's basic policy of free trade in goods. Under the ATC, the developed nations, decided to take off the quota limitations in a periodic manner over a period of ten years beginning from 1995. ATC is believed to be a landmark accomplishment of the WTO. It is because of the ATC that the world trade in textile and clothing has become almost free from quota since 1st January 2005, thereby, hugely benefiting the developing nations to increase their textiles and clothing exports.
Agreement on Agriculture (AoA): It is an arrangement to guarantee free and fair trade in agriculture. The farmers suffered from certain dodgy circumstances like exception to member nations to use some no tariff measures such as customs tariffs, import quotas and subsidies to secure the welfare of the farmers in the home country in spite of original GATT rules being applicable to trade in agriculture. Trade in agriculture became vastly indistinct primarily because of the use of subsidies by some of the developed nations. AoA is an important step towards an organised and fair trade in agricultural products. The developed nations have decided to cut down the customs duties on their imports and subsidies to the exports of agricultural products. Due to their increased reliance on agriculture, the developing nations have been accepted from making likely reciprocal offers.
General Agreement on Trade in Services (GATS): Services means acts or performances that are basically indefinable and cannot be felt or smelt as goods. GATS are considered as a significant accomplishment of the Uruguay Round as it provides multilateral rules and disciplines to services. The basic rules governing 'trade in goods' have become applicable to 'trade in services' is because of GATS. Three main requirements of GATS governing trade in services is listed below:
- All member countries are required to take off their limitations on trade in services in a periodic manner. The developing nations, on the other hand, have been given much more freedom to make a decision about the period by which they would slacken and also the services they would like to relax by that timeframe.
- GATS requires that trade in services is governed by 'Most Favored Nations' (MFN) obligation that stops nations from differentiating among foreign suppliers and services.
- Each member nation shall promptly issue all its relevant rules and regulations relating to services comprising international agreements relating to trade and services to which the member is a signatory.
Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS): The WTO's agreement on Trade Related Aspects of GATT 1994: Major Agreements.
|GATT 1994: Major Agreements