World Trade Organisation (WTO) : International Relations | UPSC Notes

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• The World Trade Organisation (WTO) is the only world organisation that deals with trade rules between countries.

• The WTO agreements, which were negotiated and signed by most of the world’s trading countries and then approved by their parliaments, are at the centre of it.

• The WTO has 164 members, including the European Union, and 23 observer countries, such as Iran, Iraq, Bhutan, Libya, etc.

WTO’s goals

• The WTO’s global system works on the concept of non-discrimination and lowers trade barriers through negotiation.

As a result, production costs go down (because imports used in production are cheaper), prices of produced goods and services go down, there are more options, and the cost of living goes down overall.

• These are dealt with in two ways by the WTO system.

One way is to talk: countries can discuss rules that everyone can agree on.

The other way is by resolving disagreements about whether or not countries are following the rules that were agreed upon.

• The WTO can help the economy grow and create jobs.

• The WTO can make it cheaper to do business around the world.

• The WTO can promote good management. Sharing information and experience makes everyone on the same level.

Rules cut down on randomness and chances for abuse.

• The WTO can help countries grow. Its trading system is based on the idea that more open trade can boost economic growth and help countries grow.

In this way, business and growth are good for each other.

Also, the WTO agreements are full of rules that take the needs of emerging countries into account.

• The WTO can give small countries a bigger voice. Without the WTO, small countries would have less power. By coming to an agreement on rules, making decisions by compromise, and building coalitions, the differences in negotiating power are lessened.

Coalitions make it easier for developing countries to be heard during talks.

The deals that were made mean that every country, even the most powerful ones, have to follow the rules. Might-makes-right is no longer the way things work.

• The WTO can help the environment and people’s health. Trade is just a way to reach a goal. The WTO agreements try to make sure that trade helps us get what we really want, like a clean and safe environment, and to stop countries from using these goals as an excuse to put in place protectionist measures.

• The WTO can help keep peace and security in the world. When the world economy is in chaos, the multilateral trading system can help keep things steady.

Trade rules keep the world economy stable by making policy less likely to change quickly and by making policy more reliable. They discourage nationalism and make things more sure. They give you more confidence.

How did the WTO get started?

From the early days of the Silk Road to the creation of the General Agreement on Tariffs and Trade (GATT) and the WTO, trade has been a big part of helping the economy grow and keeping peace between countries.

• The General Agreement on Tariffs and Trade (GATT) has its roots in the 1944 Bretton Woods Conference. This conference set up the financial system for the years after World War II and created the International Monetary Fund (IMF) and the World Bank, two important organisations.

The people at the meeting also said that a new organisation called the International Trade Organisation (ITO), which they saw as the third leg of the system, should be set up.

In 1948, at the UN Conference on Trade and jobs in Havana, Cuba, they came up with a draught charter for the ITO. It was called the Havana Charter, and it would have had a lot of rules about trade, investment, services, business, and jobs.

The Havana Charter was never put into effect, mostly because the U.S. Senate did not pass it. So, the ITO never got off the ground.

In the meantime, 23 countries signed the GATT in Geneva in 1947. It went into effect on January 1, 1948, with the following goals:

o to stop using import limits over time

o and to lower taxes on trade in goods,

• From 1948 until the WTO was set up in 1995, the GATT was the only multilateral tool (not an organisation) that controlled international trade.

• Even though it didn’t have the right kind of institutions, the GATT was able to work as a de facto international organisation. It sponsored eight rounds of multilateral trade talks.

• Because of this, the GATT was the only global agreement that governed international trade from 1948 until 1995, when the WTO was set up.

• The Uruguay Round, which took place from 1987 to 1994, ended with the Marrakesh Agreement, which created the World Trade Organisation (WTO).

The WTO takes the ideals of the GATT and gives them a more stable institutional framework for putting them into action and making them bigger.

The GATT came to an end in 1947, so it is now called the GATT 1947. The GATT 1947 ended in 1996, and its rules were put into the GATT 1994 by the WTO.

o GATT 1994 is an international law that all WTO Members have to follow. It only deals with the trade of things.

Why did WTO take the place of GATT?

• The GATT was just a set of rules and multilateral deals; it didn’t have any institutions.

GATT 1947 was cancelled, but its rules were kept in GATT 1994, which is still used to govern trade in goods.

• Regular GATT rules did not cover the trade in services or intellectual property rights.

• The GATT set up discussions and ways to settle disagreements. A GATT Party could use GATT dispute settlement articles if it thought that a measure taken by another Party hurt its trade.

The GATT did not set up a clear dispute process, so there were no deadlines, it was easy to set up a dispute panel, and the GATT Parties just went along with the panel’s report.

It made the GATT a weak way to solve disagreements.

What about the Cooperation between the WTO and the UN ?

• The WTO is not a UN specialised agency, but it has had good relationships with the UN and its agencies since it was founded.

• The Arrangements for Effective Cooperation with Other Intergovernmental Organizations—Relations between the WTO and the United Nations, which were signed on November 15, 1995, set the rules for how the WTO and the UN work together.

• The Director General of the WTO is a member of the Chief Executive Board, which is the UN’s organising body.

Conference of Ministers

• The Ministerial Conference, which usually meets every two years, is the highest decision-making group in the WTO.

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• It gets together all of the countries or customs unions that are part of the WTO.

• Under any of the multilateral trade agreements, the Ministerial Conference has the power to make choices about everything.

General Council

• The General Council is the highest-level group that makes decisions for the WTO. It is based in Geneva and meets regularly to carry out the WTO’s duties.

• It has representatives (usually ambassadors or the equivalent) from all member countries and has the power to act on behalf of the ministerial conference, which only meets once every two years.

• Under different rules, the General Council also meets as

The Supreme Court,

Trade Policy Review Body,

and the Body for the Settlement of Disputes (DSU)

• Three councils report to the General Council. Each council is in charge of a different broad area of trade:

The Goods Council (Council for Trade in Goods)

The Services Council (Council for Trade in Services)

The TRIPS Council is the Council for Trade-Related Aspects of Intellectual Property Rights.

As their names suggest, these three people are in charge of how the WTO trade deals work in their own areas of trade.

Again, all of the WTO countries make up this group.

Trade Policy Review Body (TPRB)

• The WTO General Council meets as the TPRB to discuss the trade policies of Members under the TPRM and to look at the regular reports on trade policy development from the Director-General.

• In February 2021, Ngozi Okonjo-Iweala of Nigeria was named Director-General of the World Trade Organisation (WTO), which is the most important organisation for international trade.

Ngozi Okonjo-Iweala is the first official from Africa and the first woman to hold the post.

• This means that any WTO member can join the TPRB.

Dispute Settlement Body (DSU)

• When there are disagreements between WTO members, the General Council gets together as the Dispute Settlement Body (DSB).

• These kinds of disagreements can happen about any deal in the Final Act of the Uruguay Round that is covered by the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU).

The DSB has the power to:

 establish dispute settlement groups,

send a dispute to arbitration,

Accept Panel, Appellate Body, and Arbitration Reports,

keep an eye on how the suggestions and decisions in these reports are being carried out,

…and give permission to stop concessions if these suggestions and rulings aren’t followed.

Appellate Body

• Under Article 17 of the Understanding on Rules and Procedures for the Settlement of Disputes (DSU), the Appellate Body was set up in 1995.

• The DSB will choose people for a four-year term on the Appellate Body.

• It is a permanent group of seven people who listen to appeals of reports made by panels in disagreements between WTO members.

• The Appellate Body can uphold, change, or overturn the legal findings and conclusions of a panel, and once the conflict Settlement Body (DSB) approves an Appellate Body Report, the parties to the conflict must accept it.

• The headquarters of the Appellate Body are in Geneva, Switzerland.

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What is the Goods Council (Council for Trade in Goods)?

• International trade in goods is covered by the General Agreement on Tariffs and Trade (GATT).

The Council for Trade in Goods (Goods Council), which is made up of officials from all WTO member countries, is in charge of how the GATT works.

• The Goods Council has committees that deal with specific issues: agriculture, market access, sanitary and phytosanitary (measures to control plant diseases, especially in agricultural crops) measures, technical barriers to trade, subsidies and countervailing measures, rule of origin, anti-dumping measures, importing licencing, trade-related investment measures, safeguards, trade facilitation, and customs valuation.

All of the member countries are on these panels.

What is the Services Council (Council for Trade in Services)?

• It works under the direction of the General Council and is in charge of making the General Agreement on Trade in Services (GATS) run smoothly and advancing its goals.

• It is open to all WTO members, and if needed, it can set up smaller groups to help it work.

• Right now, the Council is in charge of four of these smaller groups:

Committee on Trade in Financial Services:

o It talks about issues related to trade in financial services and comes up with suggestions or ideas for the Council to think about.

Committee on Specific Commitments,

the Domestic Regulation Working Group,

and the GATS Rules Working Group

What is the TRIPS Council, or Council for Trade-Related Aspects of Intellectual Property Rights?

• It keeps an eye on how the TRIPS Agreement (Agreement on Trade-Related Aspects of Intellectual Property Rights) is put into place.

• It gives WTO members a place to talk about intellectual property issues and works out the specific tasks that the TRIPS Agreement gives to the Council.

• The TRIPS Accord:

sets the basic standards for protecting copyrights and related rights, trademarks, geographical indications (GIs), industrial designs, patents, integrated circuit layout designs, and secret information.

sets the basic requirements for enforcing intellectual property rights (IPRs) through civil actions for infringement, actions at the border, and other means.

o and in criminal acts, at least when it comes to copyright theft and trademark counterfeiting.

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What is the WTO’s Doha Round?

• The Doha Round is the most recent round of trade talks between countries that are part of the WTO. Its goal is to make big changes to the way international trade works by lowering trade barriers and changing trade rules.

• The Round is also sometimes called the Doha Development Agenda, because one of its main goals is to make it easier for poor countries to trade.

• In November 2001, the Round was officially started at the Fourth Ministerial Conference (MC4) of the WTO in Doha, Qatar.

• The Doha Ministerial Declaration gave the talks their mission, which included the following topics:

Agriculture: Giving farmers more access to markets, getting rid of export subsidies, cutting back on home support that distorts markets, solving a number of problems in developing countries, and taking care of things that don’t have to do with trade, like food security and rural development.

Non-agricultural market access (NAMA): To reduce or get rid of tariffs, including high tariffs, tariff peaks, and tariff escalation (higher tariffs to protect processing, lower tariffs on raw materials), as well as non-tariff barriers, especially on products that developing countries want to export.

Services: To make it easier to get into the business and make the rules stronger.

o Each government has the right to decide which areas it wants to open to foreign companies and how much, as well as any restrictions on foreign ownership.

o Unlike in agriculture and NAMA, there is no “modalities” text for the services talks. They are mostly going in two different directions:

o (a) Negotiations that are private and/or multilateral (with only some WTO members)

o(b) Multilateral talks between all WTO members to set up any rules and regulations that are needed

Trade facilitation: To make customs processes easier and to make it easier for goods to move, be released, and be cleared.

o This is an important part of the negotiations as a whole because it would cut down on red tape and corruption in customs processes, speed up trade, and make it cheaper.

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Rules cover anti-dumping, subsidies and countervailing measures, fisheries subsidies, and regional trade deals.

“Clarifying and improving disciplines” under the Anti-Dumping and Subsidies agreements,

o and to “clarify and improve WTO rules on fisheries subsidies, taking into account how important this sector is to developing countries.”

The environment: These are the first important talks in the GATT/WTO about trade and the environment. They have two main parts:

o Freer trade in environmental goods. Wind turbines, carbon capture and storage technologies, and solar panels are some of the products that WTO members have suggested.

o Environmental agreements: working better with the secretariats of international environmental agreements and making sure that trade rules and environmental rules are more in line with each other.

Geographical indicators (GI): a global database for wines and spirits

Geographical indications are place names or, in some countries, words associated with a place. They are used to identify goods that come from these places and have certain qualities, like “Champagne,” “Tequila,” or “Roquefort.” Article 22 of the TRIPS Agreement says that all regional indications must be protected so that the public is not misled and unfair competition is not allowed.

o This is the only problem about intellectual property that is definitely part of the Doha talks.

o The goal is to “facilitate” the protection of wines and drinks in countries that take part. The talks started in 1997 and led to the Doha Round, which started in 2001.

Other problems related to intellectual property: Some members want to talk about two other things and link them to the register for wines and spirits. Other members differ. After these two things are talked about:

o GI “extension”: Giving geographical indications other than wines and spirits the same level of protection as wines and spirits.

o Biopiracy, the sharing of benefits, and traditional knowledge

Dispute settlement: To improve and explain the Dispute Settlement Understanding, which is an agreement between the WTO and its members about how to handle legal disputes.

o The Dispute Settlement Body (DSB) holds special meetings where these talks take place.

• The Doha Round seemed to have no direction, and the Great Recession, which started in the second half of 2008, made people worry that the WTO wouldn’t be able to stop a wave of protectionism. After the global financial crisis of 2008, negotiations went on with low hopes.

• The 2013 Ministerial Conference (MC9) in Bali, Indonesia, was an important event because it led to the first multilateral deal since the WTO was created.

This was the Trade Facilitation Agreement (TFA), which is meant to speed up customs processes and make trade easier, faster, and cheaper.

o The TFA was only a small part of the bigger Doha plan, but the fact that a deal was reached is a reason to be hopeful.

During the talks, an interim agreement (called a “peace clause”) was made on “public stockholding” exceptions that allow developing countries to stockpile agricultural goods in case of food shortages.

• The 2015 Ministerial Conference in Nairobi, Kenya (MC10) was mostly about a few topics from the Doha Development Agenda (DDA). On the following DDA problems, a deal was made:

Stopping the use of subsidies and other programmes that help farming exports in an unfair way

Making sure that food help for developing countries doesn’t mess up the local markets

Trying to make it easier for exporters from the poorest countries to meet the rules of origin so that their goods can benefit from trade deals. Giving businesses from the poorest countries more chances to offer services in the 164 WTO member countries.

• However, many people saw Nairobi as the end of the Doha talks. This feeling grew stronger after Trump was elected in 2016.

When he left the 12-country Trans-Pacific Partnership (TPP) soon after taking office, President Trump made it clear that he prefers trade between two countries.

• At the 2017 Ministerial Conference in Buenos Aires (MC11), the USA showed how sceptical it is of multilateralism by blocking agreement on a draught ministerial declaration that would have “reaffirmed the centrality of the multilateral trading system and the development dimension of the organization’s work.”

India, meanwhile, has frequently threatened to block WTO agreements (including the Trade Facilitation Agreement) if WTO members don’t give in to its demands on public stockholding for food security. India also took a stronger stance on new problems, such as e-commerce and making it easier for businesses to invest.

In the end, many people were glad that the US did not try to openly break up the WTO, as some had feared. But letting go of its usual role as leader could lead to the same thing, just more slowly.

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WTO’s Contribution to the World:

• The WTO is one of three international organisations (the other two are the International Monetary Fund (IMF) and the World Bank Group) that set and coordinate world economic strategy. It is very important for international trade, global economics, and the political and legal problems that come up in international business because of globalisation.

• It has become the most powerful organisation in the world when it comes to lowering trade hurdles between countries and opening up new markets.

• It works with the IMF and the World Bank to make global economic policies that work well together.

• The WTO has the ability to keep world peace and good relations between its member countries by resolving trade-related disputes through negotiations, consultations, and mediations.

• Rules for global trade: Most decisions in the WTO are made by all members coming to an agreement, and those decisions are then approved by the parliaments of all members. This makes the world’s economy stronger, more peaceful, and more responsible.

• Trade talks: The GATT and the WTO have helped build a strong and prosperous trade system that has led to growth that has never been seen before.

The system was made through a set of trade talks, or “rounds,” that were part of the GATT. The WTO was made because of the Uruguay Round, which took place from 1986 to 1994.

In 1997, 69 governments came to an understanding about telecommunications services. They agreed to a wide range of liberalisation measures that went beyond those agreed to in the Uruguay Round.

Also in 1997, 40 governments reached an agreement on tariff-free trade in IT goods, and 70 members reached an agreement on financial services that covers more than 95% of the trade in banking, insurance, securities, and financial information.

In the year 2000, there were new talks about crops and services. The fourth WTO Ministerial Conference (MC4), which took place in Doha, Qatar, in November 2001, was the place where these ideas were added to a larger work plan called the Doha Development Agenda.

At the 9th Ministerial Conference (MC9) in Bali, Indonesia, in 2013, WTO members came up with the Agreement on Trade Facilitation. This agreement aims to cut down on delays at borders by cutting down on paperwork.

At the 10th Ministerial Conference (MC10) in Nairobi, Kenya, in 2015, the Information Technology Agreement was expanded. This got rid of tariffs on an extra 200 IT goods worth over US$ 1.3 trillion per year.

In 2017, a change to the WTO’s Intellectual Property Agreement went into effect. This made it easier for people in poor countries to get cheap medicines.

o The Trade Facilitation Agreement went into effect the same year.

• WTO agreements: The rules of the WTO, which are called “agreements,” come from talks between the members.

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o The current set is mostly the result of the 1986–1994 Uruguay Round talks, which included a big change to the original General Agreement on Tariffs and Trade (GATT).

Goods: From 1947 to 1994, the GATT was the place where lower taxes and other trade barriers were negotiated. The text of the GATT spelt out important rules, especially the one about not discriminating against anyone. After 1994, the WTO approved a new, more complete, and more integrated GATT, called GATT 1994.

Cooperation between WTO and India

• India joined the General Agreement on Tariffs and Trade (GATT) in 1947 and its replacement, the World Trade Organisation (WTO), in 1995.

India’s involvement in an international trade system that is becoming more based on rules is meant to make trade more stable and predictable, which would lead to more trade and prosperity in the long run.

• About 40% of all the things and services that India exports are services. More than 55% of India’s GDP is made up of services.

About 28% of the country’s workforce, or 142 million people, work in the field, which includes both domestic and international trade.

India’s exports are mostly in the Travel and Transport, Financial, and Information Technology (IT) industries.

The US (33%), the EU (15%), and other wealthy countries are where most of the goods go.

India has a clear interest in the opening of trade in services, and it wants the developed countries to give it access that is good for business.

Since the Uruguay Round, India has made all of its trade rules for services more open on its own.

• Making sure people have food and a way to make a living is very important, especially in a big agricultural economy like India.

India keeps asking the WTO for a permanent answer to the subsidies for public stockholding.

o At the 2013 Ministerial Conference (MC9) in Bali, an interim deal (a peace clause) was made on “public stockholding” continuing exceptions that allow developing countries to stockpile agricultural goods to protect against food shortages.

• India strongly supports giving Basmati rice, Darjeeling tea, and Alphonso mangoes the same level of protection for their geographical indications as wines and spirits do under the Trade-Related Aspects of Intellectual Property Rights (TRIPS) deal.

• Developed countries have been pushing for non-trade problems like labour standards, environmental protection, human rights, investment rules, and competition policy to be included in the WTO agreements.

India is against including non-trade issues that, in the long run, are used to enforce protectionist measures, especially against developing countries (based on non-trade issues, developed countries like the USA and European Union are trying to ban the imports of some goods like textiles, processed food, etc.).

• At the 12th MC of the WTO, which just took place, India was against keeping a moratorium on Customs Duties on electronic transmission (E-Transmission) because it only helps developing countries.

India and South Africa have asked the organisation to look into the problem more than once and have pointed out how bad the moratorium is for developing countries.

India wants the WTO to focus more on the e-commerce area of its work programme.

India has also said that the Council for Trade in Goods, the Council for Trade in Services, the Council for TRIPS (Trade Related Aspects of Intellectual Property Rights), and the Committee for Trade and Development should talk about e-commerce as their original jobs required.

Concerns Associated with WTO

• In 2001, the members of the WTO came up with the “Doha Development Agenda,” which was a huge attempt to update the rules for trade. The countries that were involved tried for years but could not come to a deal.

One of the hardest parts of negotiating was getting more than 150 countries to agree on something.

During the last round of talks, from 1987 to 1994 (the “Uruguay Round”), possible holdout countries could have been faced with being kicked out of the new WTO.

Once they were inside, they couldn’t do that trick again.

• The 2017 WTO Ministerial Conference (MC11) in Buenos Aires ended with no real results because the 164-member group couldn’t agree on anything.

The United States stopped a permanent solution to government stockpiling for food security. As a result, India took a tougher stance on new problems like e-commerce and making it easier for businesses to invest.

• Developed countries, led by the US and the European Union, tried to break the deadlock at the WTO talks by forming big pressure groups on e-commerce, investment facilitation, and MSMEs, each with more than 70 members.

Even though the WTO is run by consensus and even a multilateral deal needs approval from all members, the creation of these groups is an attempt to move the WTO away from its focus on multilateralism.

• It fights hard for “Trade Related Intellectual Property” (TRIP) rights, such as patents, copyrights, and logos, even though it hurts health and kills people.

WTO has defended the “right to profit” of pharmaceutical companies against governments that want to protect their people’s health by giving them lifesaving drugs in places like sub-Saharan Africa, where thousands of people die every day from HIV/AIDS.

• Whether on purpose or not, the U.S. ruined the Doha round of trade talks by making too many demands that no other country was ready to meet.

The Obama administration’s top goal was not to bring back a dead WTO deal, but to focus on its new alternative, the TPP (Trans-Pacific Partnership), to keep its competitors, Europe and China, in check.

• The multilateral method for settling trade disputes has been heavily criticised and closely watched for years.

The U.S. has consistently stopped the appointment of new Appellate Body members (also called “judges”), which has slowed down the work of the WTO’s appeal system.

• Chinese mercantilism (trying to control trade and business, especially by encouraging exports and putting limits on imports), the USA’s aggressive use of unilateral tariff measures, and the inability of WTO members to agree on expanding its rules to important new areas of the modern economy all add to the criticism of the WTO.

• Lack of Transparency: There is a problem with WTO talks because there is no agreement on what makes a country developed or developing.

Members can now self-identify as poor countries in order to get “special and differential treatment.” This is a controversial practise that has caused a lot of debate.

For example, China was given “developing country” status at the WTO, which caused a lot of trouble because many countries were unhappy with the ruling.

Ways Forward:

• Because the WTO is built on consensus, it is very hard for all 164 members to agree on reforms. As a way to move forward, a plurilateral deal with a group of countries with similar views on a new set of rules that add to the WTO could be one option.

Conclusion: The global economy is being squeezed by nationalism, trade wars (like the one between the US and China), and Brexit. The role of WTO in the future will be very important to keep the global economy as it has been since the end of the Second World War.

• It is the right time for India and other emerging economies like Brazil, South Africa, and others to provide a strong base for a strong WTO that protects the interests of developing countries.