Global Trading & WTO

Earlier bilateral agreements now multilateral agreements Agreements at WTO platform are applicable to all 153 nations (2011) WTO replaced GATT on 1/1/1995 WTO promotes free trade among member nations WTO aims at eliminating tariff and non tariff barriers WTO agreements covers services also (travel, banking, insurance, telecom, IT, IT enabled services)

WTO
Established on 1 Jan 1995 with 124 members Till 2011 there were 153 nations as member It aims at promoting free trade among members It is steadily working towards removing tariff and non tariff barriers like removing import quota, import licensing etc

 WTO is international trade organisation having set of rules and principles to promote free trade WTO along with IMF and World Bank together influence world trade Eighth ministerial meet of WTO was held in Dec 2011 at Geneva, Switzerland.

Feature of WTO
It aims to promote multilateral trade It has replaced GATT It works for the removal of tariff and non tariff barriers It has its own set of rules and regulations and it has a legal status Its rules and regulations are applicable to all its members. If any member doesnt follow then its complaint can be lodged with disputes settlement body of WTO

 It includes trade in goods, trade in services, protection of intellectual property rights, foreign investment etc. Unlike IMF and World Bank WTO is not an agent of United Nations All WTO members have equal voting rights (one country, one vote) WTO has huge organizational set up

Objectives of WTO
To implement new world trade agreements To promote multilateral trade To abolish tariff and non tariff barriers To promote world trade in such a manner that it benefits every member country To ensure better share for developing countries To remove hurdles in free trading To enhance competitiveness among all trading partners To increase level of production and productivity Optimum utilization of world resources To take steps for the development of poorest nations

Functions of WTO
Laying down code of conduct for member nations for reducing tariff & non tariff barriers Implementing its agreements Cooperating with IMF and World Bank for formulating world trade policies Settlement of trade related disputes among member nations Reviewing trade related economic policies of member nations Acting as forum for trade liberalization

Organizational Structure of WTO

Ministerial Ministerial Conference Conference

Trade Policy Review Body

Disputes Settlement Body

Committees/ Committees/ Working Working Group Group

Council Councilfor for Trade in Trade in Goods Goods

Council Council for for TRIPs TRIPs

Council for for Council trade in in trade Services Services

Council for Council for TRIMs TRIMs

Trade Trade negotiation negotiation Committee Committee

A) Trade in Agriculture
Reduction in domestic subsidies
Subsidy on inputs (Seed, fertilizers, pesticides) Subsidy on output (minimum support price) WTO has urged member nations to reduce both subsidies Developing nations can give maximum 10% of the market price of crop as subsidy

Reduction in Export Subsidy

WTO has asked its member countries to reduce export subsidy in phased manner In 2001 WTO urged its members to abolish all forms of export subsidy In 2005 ministerial conference agreed to phase out export subsidies by 2013

Improvement in Market Access

Reduction in tariff on agricultural products. WTO has fixed the top limit of tariff on agricultural produce Country can charge lesser tariff Non tariff barriers like quota and licensing will be removed Underdeveloped and developing nations can impose tariff and non tariff barriers if their balance of payment situation is unfavorable

Public Distribution System

Distributing food grains by govt. at concessional rates PDS is aimed at people living below the poverty line WTO urged developed nations to abolish subsidy on food grains in their PDS Developing nations can give this subsidy in order to provide food security to poor people

B) Trade in Textile and Clothing

Developed countries used quantitative restrictions on import of textile , Multi-Fiber Arrangement (MFA) Elimination of MFA Reduction of tariff on textiles & clothing
16% import were made tariff free on 1/1/1995 Further 17% of imports were made tariff free on 1/1/1998 Further 18% of imports were made tariff free on 1/1/2002 Remaining 49% of imports were made on 1/1/2005

Safeguard Mechanism
The interest of developing countries has been kept safe under safeguard mechanism This mechanism can be applied for three years Developing nations are allowed to impose tariff and non tariff measures if imports are threat to domestic industry

TRIPs (Trade Related Intellectual Property Rights)

Related to copyrights, trade marks, patents This is to protect the rights of original inventor Anyone who wants to use patent can do it by paying royalty Underdeveloped countries who dont have patent rules must enact by 2005 Plants can not be patented

 Sui Generis system

Plants breeders have exclusive rights over the new plant breeds It allows farmer to retain the seed from their cultivated crop for using as seed in their own farm Commercial sale of these seeds can be done by only the plant breeders Life of Patents has been fixed as follows
General Patents Copyrights Trademarks Industrial Designs Medicines 20 yrs 50 yrs 7 yrs 10 yrs 10 yrs

TRIMs (Trade Related Investment Measures)

It tries to ensure free flow of investment all over the world It will help underdeveloped nations by providing necessary capital through foreign investment It aims at
Fair treatment to all foreign investors at par with domestic investors To remove restriction on repatriation of dividend, interest and royalty to the parent country To allow 100% foreign equity participation in certain cases

General agreement on Trade in Services

First multilateral agreements in services It provides for free flow of services throughout member nations The agreement covers all type of services like Insurance, Travel & tourism, hotel, banking, shipping, telecom, media, business outsourcing etc Treatment of foreign services at par with domestic services

Dispute Settlement
WTO has setup dispute settlement body (DSB) DSB consults parties under dispute Director General of WTO acts as mediator for the settlement of dispute DSB can constitute a panel to listen to all parties Panel has to give its report within 6 months In case of urgency report can be asked for in 3 months DSB will take final decision on the basis of report within 30 days

Agreement on Export Subsidies

WTO prohibits export subsidies to promote free and fair global competition Export subsidies will be eliminated by 2013 Developing nations can give export subsidies till 2018 Only those countries can give export subsidy whose share in world trade is less than 3.25 %

Anti Dumping Agreements

Dumping is a practice exporting product at unreasonably low price Intention of the exporter is to damage the domestic industry and later charge higher prices No country is allowed to dump its surplus output in other nation If volume of dumped imports from a particular country is less than 1% of domestic market sale of that product, then this dumping will be treated as insignificant In seventh ministerial meet in 2009 various safeguard mechanism have been provided to check dumping

Reviewing Trade Policies of Member Nations

WTO provides for a Trade Policy Review Body It regularly examines the economic and trade policies of member nations Trade policy for four major traders (European Union, US, Japan and Canada) is reviewed every 2 years Every member has to report to TPRB regularly about the trade policies and practices pursued by it.